EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On December 1, 2006, Crocs, Inc. (the “Company”) completed its previously announced acquisition of 100% of the membership interests of Jibbitz, LLC, a Colorado limited liability company (“Jibbitz”), for $10 million in cash. The cash purchase price is subject to adjustment based on the closing date balance sheet of Jibbitz. The Company also paid off approximately $3.2 million in accrued liabilities of Jibbitz at the closing. The membership interests of Jibbitz were acquired pursuant to a membership interest purchase agreement (the “Agreement”) by and among the Company and the members of Jibbitz dated September 29, 2006. The Agreement also provides for potential earn-out consideration for the former Jibbitz members of up to an additional $10 million based on Jibbitz’s earnings before interest and taxes over the three years following the closing of the acquisition. The unaudited pro forma condensed consolidated balance sheet reflects the pro forma balance sheet of the Company as if the acquisition had occurred as of September 30, 2006. The unaudited pro forma condensed consolidated statements of operations of the Company’s for the year ended December 31, 2005 and nine months ended September 30, 2006 gives pro forma effect to the acquisition as if it had occurred at the inception of Jibbitz (August 2, 2005). The purchase price allocation presented herein is preliminary; accordingly, the actual purchase accounting adjustments may differ from the pro forma adjustments reflected herein.
The unaudited pro forma condensed consolidated financial statements do not purport to represent what our actual results of operations would have been had the acquisition occurred on the dates indicated or for any future period or date. The unaudited pro forma condensed consolidated financial statements have been prepared for illustrative purposes only. The pro forma adjustments give effect to available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated balance sheets and statements of operations should be read in conjunction with Crocs’ historical financial statements and related notes, as well as “Selected Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s previously filed Annual Reports on Form 10-K for the year ended December 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
CROCS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2006
(In thousands)
| | Historical | | Pro Forma | | Pro Forma | |
| | Crocs, Inc. | | Jibbitz, LLC | | Adjustments | | Crocs, Inc. | |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 57,880 | | $ | 520 | | $ | (10,575 | )(a) | $ | 47,825 | |
Short-term investments | | 25,400 | | — | | — | | 25,400 | |
Accounts receivable—net | | 60,651 | | 536 | | (4 | )(b) | 61,183 | |
Inventories | | 49,128 | | 1,534 | | — | | 50,662 | |
Deferred tax assets | | 1,636 | | — | | 2 | (c) | 1,638 | |
Prepaid expenses and other current assets | | 10,233 | | 169 | | (92 | )(d) | 10,310 | |
Total current assets | | 204,928 | | 2,759 | | (10,669 | ) | 197,018 | |
Property and equipment—net | | 24,713 | | 214 | | — | | 24,927 | |
Goodwill | | 350 | | — | | 6,833 | (e) | 7,183 | |
Intangible assets—net | | 8,106 | | 209 | | 1,461 | (f) | 9,776 | |
Deferred tax assets | | 1,532 | | — | | — | | 1,532 | |
Other assets | | 902 | | 4 | | (4 | )(g) | 902 | |
Total assets | | $ | 240,531 | | $ | 3,186 | | $ | (2,379 | ) | $ | 241,338 | |
LIABILITIES AND STOCKHOLDERS’/MEMBERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable | | $ | 30,459 | | $ | 683 | | $ | (177 | )(b) | $ | 30,965 | |
Accrued expenses and other current liabilities | | 21,716 | | 199 | | 102 | (a) | 22,017 | |
Income taxes payable | | 6,424 | | — | | — | | 6,424 | |
Note payable, line of credit, and current portion of long-term debt and capital lease obligations | | 817 | | 575 | | (575 | )(g) | 817 | |
Total current liabilities | | 59,416 | | 1,457 | | (650 | ) | 60,223 | |
Long-term debt and capital lease obligations, net of current portion | | 1,550 | | — | | — | | 1,550 | |
Deferred tax liabilities | | 1,880 | | — | | — | | 1,880 | |
Other liabilities | | 260 | | — | | — | | 260 | |
Total liabilities | | 63,106 | | 1,457 | | (650 | ) | 63,913 | |
Stockholders’/members’ equity | | 177,425 | | 1,729 | | (1,729 | )(h) | 177,425 | |
Total | | $ | 240,531 | | $ | 3,186 | | $ | (2,379 | ) | $ | 241,338 | |
See notes to unaudited pro forma condensed consolidated financial statements.
CROCS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
(In thousands, except share and per share data)
| | Historical | | Pro Forma | | Pro Forma | |
| | Crocs, Inc. | | Jibbitz, LLC(1) | | Adjustments | | Crocs, Inc. | |
Revenues | | $ | 108,581 | | $ | 111 | | $ | — | | $ | 108,692 | |
Cost of sales | | 47,773 | | 73 | | 14 | (d) | 47,860 | |
Gross profit | | 60,808 | | 38 | | (14 | ) | 60,832 | |
Selling, general and administrative expenses | | 33,916 | | 52 | | 495 | (f) | 34,463 | |
Income (loss) from operations | | 26,892 | | (14 | ) | (509 | ) | 26,369 | |
Interest expense | | 611 | | 2 | | (2 | )(g) | 611 | |
Other (income)—net | | (8 | ) | — | | — | | (8 | ) |
Income (loss) before income taxes | | 26,289 | | (16 | ) | (507 | ) | 25,766 | |
Income tax expense (benefit) | | 9,317 | | — | | (186 | )(c) | 9,131 | |
Net income (loss) | | 16,972 | | (16 | ) | (321 | ) | 16,635 | |
Dividends on redeemable convertible preferred shares | | 275 | | — | | — | | 275 | |
Net income (loss) attributable to common stockholders | | $ | 16,697 | | $ | (16 | ) | $ | (321 | ) | $ | 16,360 | |
Income per common share: | | | | | | | | | |
Basic | | $ | 0.51 | | | | | | $ | 0.49 | |
Diluted | | $ | 0.51 | | | | | | $ | 0.49 | |
Weighted average common shares: | | | | | | | | | |
Basic | | 25,493,577 | | | | | | 25,493,577 | |
Diluted | | 33,570,000 | | | | | | 33,570,000 | |
(1) For the period from Inception (August 2, 2005) through December 31, 2005.
See notes to unaudited pro forma condensed consolidated financial statements.
CROCS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands, except share and per share data)
| | Historical | | Pro Forma | | Pro Forma | |
| | Crocs, Inc. | | Jibbitz, LLC | | Adjustments | | Crocs, Inc. | |
Revenues | | $ | 241,824 | | $ | 8,275 | | $ | (32 | )(b) | $ | 250,067 | |
Cost of sales | | 106,348 | | 2,549 | | 46 | (b)(d) | 108,943 | |
Gross profit | | 135,476 | | 5,726 | | (78 | ) | 141,124 | |
Selling, general and administrative expenses | | 70,345 | | 2,168 | | 548 | (b)(f) | 73,061 | |
Income from operations | | 65,131 | | 3,558 | | (626 | ) | 68,063 | |
Interest expense | | 533 | | 32 | | (32 | )(g) | 533 | |
Other (income)—net | | (1,310 | ) | — | | — | | (1,310 | ) |
Income before income taxes | | 65,908 | | 3,526 | | (594 | ) | 68,840 | |
Income tax expense | | 22,275 | | — | | 993 | (c) | 23,268 | |
Net income | | 43,633 | | 3,526 | | (1,587 | ) | 45,572 | |
Dividends on redeemable convertible preferred shares | | 33 | | — | | — | | 33 | |
Net income attributable to common stockholders | | $ | 43,600 | | $ | 3,526 | | $ | (1,587 | ) | $ | 45,539 | |
Income per common share: | | | | | | | | | |
Basic | | $ | 1.19 | | | | | | $ | 1.24 | |
Diluted | | $ | 1.10 | | | | | | $ | 1.15 | |
Weighted average common shares: | | | | | | | | | |
Basic | | 36,675,319 | | | | | | 36,675,319 | |
Diluted | | 39,726,845 | | | | | | 39,726,845 | |
See notes to unaudited pro forma condensed consolidated financial statements.
CROCS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The following unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of Crocs, Inc. (“the Company”) and Jibbitz, LLC. (“Jibbitz”) after giving effect to the acquisition under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated balance sheet reflects the unaudited pro forma condensed consolidated balance sheet of the Company as if the acquisition had occurred as of September 30, 2006. The unaudited pro forma condensed consolidated statements of operations of the Company for the year ended December 31, 2005 and nine months ended September 30, 2006 are presented to show the effects of the acquisition as if it had occurred at the inception of Jibbitz (August 2, 2005).
The unaudited pro forma condensed consolidated financial statements do not purport to represent what our actual results of operations would have been had the acquisition occurred on the dates indicated or for any future period or date. The pro forma adjustments give effect to available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated balance sheets and statements of operations should be read in conjunction with the Company’s historical financial statements and related notes, as well as “Selected Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2006 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
Under business combination accounting, the total preliminary purchase price will be allocated to Jibbitz’s assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the assets acquired and liabilities assumed is recorded as goodwill. The preliminary allocation of the purchase price used in the unaudited pro forma condensed consolidated balance sheet is based on a preliminary valuation as if the acquisition occurred on September 30, 2006. The estimated fair values of identifiable intangibles assets have been determined with the assistance of an independent third-party valuation firm and such firm’s preliminary work. The Company’s estimates and assumptions are subject to change upon the finalization of the valuation.
The purchase price allocation presented herein is preliminary; accordingly, the actual purchase accounting adjustments may differ from the pro forma adjustments reflected herein. Except for adjustments to identified intangible assets, assets and liabilities were valued at their respective carrying amounts, as the Company’s management believes that these amounts approximate their current fair values.
Based on a preliminary valuation, the total preliminary purchase price that would have been allocated to assets acquired and liabilities assumed if the acquisition had occurred on September 30, 2006 is as follows (in thousands) :
Working capital | | 1,960 | |
Property, plant, and equipment | | 214 | |
Identified intangible assets | | 1,670 | |
Goodwill | | 6,833 | |
Total preliminary purchase price | | $ | 10,677 | |
| | | | |
2. Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows (in thousands):
(a) Adjustments to cash and accrued liabilities to record the preliminary purchase price. Amounts are included for cash consideration paid and accrued liabilities for direct costs of the acquisition.
Purchase price | | $ | (10,000 | ) |
Note payable and line of credit | | (575 | ) |
Total decrease to cash | | $ | (10,575 | ) |
| | | |
Increase to accrued liabilities | | $ | 102 | |
(b) Adjustments to eliminate intercompany transactions.
(c) Adjustment to deferred tax asset and income tax expense. Prior to the acquisition, Jibbitz was a limited liability company, which passed through all earnings and losses to the members. Prior to the acquisition, Jibbitz had no income tax expense or deferred tax assets or liabilities. Net deferred income taxes include adjustments related to deferred rent and employee vacation accrual.
(d) Adjustment to prepaid expenses and cost of sales to reflect presentation used by Crocs.
(e) Adjustment to record the preliminary estimate of goodwill. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed.
(f) Adjustment to reflect the preliminary estimate of the fair value of intangible assets and the resulting increases in amortization expense. The Company determined that the tradenames have an indefinite life; as such, tradenames will not be amortized. Customer relationships are being amortized over the expected revenue stream. The preliminary estimated fair value of identifiable intangible assets was determined based on an independent third-party preliminary valuation.
| | Historical
Amount, Net | | Preliminary
Fair Value | | Increase
(Decrease) to
Intangible Assets | |
Tradenames | | $ | 78 | | $ | 150 | | $ | 72 | |
Customer relationships | | — | | 1,520 | | 1,520 | |
Other Intangible Assets | | 131 | | — | | (131 | ) |
Total | | $ | 209 | | $ | 1,670 | | $ | 1,461 | |
Net increase to amortization expense for the period ending 12/31/05 | | $ | 495 | |
| | | |
Net increase to amortization expense for the period ending 9/30/06 | | $ | 721 | |
(g) Adjustments to reflect repayment of Jibbitz’s line of credit and note payable and to remove the related debt issuance costs and interest expense.
(h) Adjustment to eliminate Jibbitz’s historical members’ equity.
