EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following tables present the unaudited condensed consolidated pro forma financial data for Phoenix Footwear Group, Inc. (“Phoenix Footwear” or “the Company”) for the fiscal year ended December 30, 2006 and for the nine month period ended September 29, 2007, and the Company’s condensed consolidated balance sheet as of September 29, 2007 as reported in the Company’s quarterly report on Form 10-Q for the nine month period ended September 29, 2007 as filed on November 13, 2007 with the Securities and Exchange Commission. On December 29, 2007, the Company sold its Altama Delta Corporation (“Altama”) subsidiary, to Tactical Holdings, Inc. (“Tactical”). Under the sale, the Company received $13.5 million as payment of the purchase price, which is subject to a final closing date working capital adjustment currently under review by the parties. In addition to the aggregate cash consideration, Phoenix Footwear and Tactical entered into a Transaction Services Agreement to provide ongoing administrative and other services for the operation of the Altama business post-closing.
Also, during fiscal 2007, on July 2, 2007, the Company sold its Royal Robbins, Inc. (“Royal Robbins”) subsidiary and assets of PXG Canada, Inc., related to the Royal Robbins business, to Kellwood Company. Under the sale, the Company received aggregate cash consideration of $37.2 million.
Historical financial information for the Company as of and for the nine months ended September 29, 2007 has been derived from unaudited historical condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q. Historical financial information for the fiscal year ended December 30, 2006 has been derived from audited historical consolidated financial statements included in Phoenix Footwear’s 2006 Annual Report on Form 10-K.
The unaudited condensed consolidated pro forma balance sheet gives effect to the disposition of Altama as if it had occurred on September 29, 2007. The unaudited pro forma condensed consolidated statements of operations are presented for the year-ended December 30, 2006 and for the nine month period ended September 29, 2007 and give effect to the disposition of Altama and Royal Robbins as if they had been completed as of December 31, 2005. The unaudited pro forma condensed consolidated balance sheet and condensed consolidated statements of operations are provided for informational purposes only and should not be construed to be indicative of the Company’s consolidated financial position or results of operations had the transactions been consummated on the date assumed and do not project the Company’s consolidated financial position or results of operations for any future period or date.
The unaudited pro forma condensed consolidated balance sheet and unaudited pro forma condensed consolidated statements of operations were derived by adjusting the Company’s historical consolidated financial statements for the assets sold. The unaudited pro forma condensed combined statements of operations do not include the impact of any potential cost savings or one-time costs that may result from the dispositions.
PHOENIX FOOTWEAR GROUP, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 29, 2007
(in thousands)
9/29/07 | Pro Forma Adjustments | Pro Forma Results | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 494 | $ | (59 | ) (a) | $ | 435 | |||||
Accounts receivable, less allowances of $1,622 | 21,764 | (2,716 | ) (a) | 19,048 | ||||||||
Inventories, less provision of $2,075 | 25,927 | (5,012 | ) (a) | 20,915 | ||||||||
Other current assets | 2,195 | (94 | ) (a) | 2,101 | ||||||||
Deferred income tax asset | 1,378 | 1,378 | ||||||||||
Total current assets | 51,758 | (7,881 | ) | 43,877 | ||||||||
Property and equipment, net | 3,671 | (1,538 | ) (a) | 2,133 | ||||||||
Goodwill | 14,466 | (6,663 | ) (a) | 7,803 | ||||||||
Unamortizable intangibles | 11,393 | (8,133 | ) (a) | 3,260 | ||||||||
Intangible assets, net | 7,683 | (1,025 | ) (a) | 6,658 | ||||||||
Other assets, net | 50 | 50 | ||||||||||
Total assets | $ | 89,021 | $ | (25,240 | ) | $ | 63,781 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Notes payable | $ | 20,366 | $ | (13,336 | ) (b) | $ | 7,030 | |||||
Accounts payable | 10,871 | (2,170 | ) (a) | 8,701 | ||||||||
Accrued expenses | 3,429 | (519 | ) (a) | 2,910 | ||||||||
Other current liabilities | 1,073 | 1,073 | ||||||||||
Liabilities of discontinued operations | 6,000 | 6,000 | ||||||||||
Total current liabilities | 41,739 | (16,025 | ) | 25,714 | ||||||||
Other Liabilities | ||||||||||||
Other long-term liabilities | 1,246 | 1,246 | ||||||||||
Deferred income tax liability | 2,964 | 2,964 | ||||||||||
Total other liabilities | 4,210 | — | 4,210 | |||||||||
Total liabilities | 45,949 | (16,025 | ) | 29,924 | ||||||||
Commitments and Contingencies | ||||||||||||
Stockholders’ equity | ||||||||||||
Common stock, $0.01 par value – 50,000,000 shares authorized, 8,383,000 shares issued | 84 | 84 | ||||||||||
Additional paid-in capital | 46,227 | 46,227 | ||||||||||
Accumulated (deficit); retained earnings | (489 | ) | (9,215 | ) (c) | (9,704 | ) | ||||||
Accumulated other comprehensive gain | 196 | 196 | ||||||||||
46,018 | (9,215 | ) | 36,803 | |||||||||
Less: Treasury stock at cost | (2,946 | ) | (2,946 | ) | ||||||||
Total stockholders’ equity | 43,072 | (9,215 | ) | 33,857 | ||||||||
Total liabilities and stockholders’ equity | $ | 89,021 | $ | (25,240 | ) | $ | 63,781 | |||||
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated balance sheet.
PHOENIX FOOTWEAR GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 29, 2007
PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated financial statements of the Company include the following pro forma adjustments related to the disposition of the Company’s wholly owned subsidiaries Royal Robbins, Inc. and Altama Delta Corporation.
(a) Represents the assets and liabilities of Altama Delta Corporation held by Phoenix Footwear as a discontinued operation.
(b) Represents the reduction in outstanding debt of Phoenix Footwear through the use of cash proceeds from the sale of Altama Delta Corporation.
(c) Represents the resulting pre-tax loss on the sale of the assets of Altama Delta Corporation pursuant to the Agreement.
PHOENIX FOOTWEAR GROUP, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SEPTEMBER 29, 2007
(in thousands, except per share data)
Nine Months Ended 9/29/07 | Pro Forma Adjustments | |||||||||||||||
Royal Robbins | Altama Delta Corporation | Pro Forma Results | ||||||||||||||
Net sales | $ | 83,540 | $ | $ | 20,078 | $ | 63,462 | |||||||||
Cost of goods sold | 60,170 | 17,292 | 42,878 | |||||||||||||
Gross profit | 23,370 | 2,786 | 20,584 | |||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative expense | 28,148 | 2,626 | 25,522 | |||||||||||||
Other (income) expenses, net | (24 | ) | 4 | (28 | ) | |||||||||||
Total operating expenses | 28,124 | 2,630 | 25,494 | |||||||||||||
Operating (loss) income | (4,754 | ) | 156 | (4,910 | ) | |||||||||||
Interest expense | 1,883 | 776 | (b) | 1,107 | ||||||||||||
Loss before income taxes and discontinued operations | (6,637 | ) | (620 | ) | (6,017 | ) | ||||||||||
Income tax (benefit) provision | (2,353 | ) | (139 | ) | (2,214 | ) | ||||||||||
Net loss before discontinued operations | (4,284 | ) | (481 | ) | (3,803 | ) | ||||||||||
Net earnings from discontinued operations, including gain on sale of Royal Robbins of $14,057, net of tax | 14,831 | (14,831 | ) | — | — | |||||||||||
Net earnings (loss) | $ | 10,547 | $ | 14,831 | (a) | $ | (481 | ) (a) | $ | (3,803 | ) | |||||
Net earnings (loss) per common share | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | (.54 | ) | $ | (.47 | ) | ||||||||||
Discontinued operations | 1.85 | — | ||||||||||||||
Net earnings (loss) | $ | 1.31 | $ | (.47 | ) | |||||||||||
Diluted: | ||||||||||||||||
Continuing operations | $ | (.54 | ) | $ | (.47 | ) | ||||||||||
Discontinued operations | $ | 1.65 | — | |||||||||||||
Net earnings (loss) | $ | 1.17 | $ | (.47 | ) | |||||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 8,025,762 | 8,025,762 | ||||||||||||||
Diluted | 8,997,252 | 8,997,252 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated statement of operations.
PHOENIX FOOTWEAR GROUP, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 30, 2006
(in thousands, except per share data)
Pro Forma Adjustments | ||||||||||||||||
Year Ended 12/30/06 | Royal Robbins | Altama Delta Corporation | Pro Forma Results | |||||||||||||
Net sales | $ | 140,589 | $ | 31,153 | $ | 21,960 | $ | 87,476 | ||||||||
Cost of goods sold | 92,100 | 16,158 | 16,677 | 59,265 | ||||||||||||
Gross profit | 48,489 | 14,995 | 5,283 | 28,211 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative expense | 45,418 | 9,978 | 3,709 | 31,731 | ||||||||||||
Non-cash impairment charge | 23,499 | — | 16,941 | 6,558 | ||||||||||||
Other (income) expenses, net | (539 | ) | — | (1,455 | ) | 916 | ||||||||||
Total operating expenses | 68,378 | 9,978 | 19,195 | 39,205 | ||||||||||||
Operating (loss) income | (19,889 | ) | 5,017 | �� | (13,912 | ) | (10,994 | ) | ||||||||
Interest expense | 5,968 | 3,513 | (b) | 993 | (b) | 1,462 | ||||||||||
(Loss) earnings before income taxes | (25,857 | ) | 1,504 | (14,905 | ) | (12,456 | ) | |||||||||
Income tax (benefit) provision | (5,479 | ) | 1,001 | (2,055 | ) | (4,425 | ) | |||||||||
Net (loss) earnings | $ | (20,378 | ) | $ | 503 | (a) | $ | (12,850 | ) (a) | $ | (8,031 | ) | ||||
Net loss per common share | ||||||||||||||||
Basic | $ | (2.58 | ) | $ | (1.02 | ) | ||||||||||
Diluted | $ | (2.58 | ) | $ | (1.02 | ) | ||||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 7,911,050 | 7,911,050 | ||||||||||||||
Diluted | 7,911,050 | 7,911,050 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated statement of operations.
PHOENIX FOOTWEAR GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 29, 2007
AND FISCAL YEAR ENDED DECEMBER 30, 2006
PRO FORMA ADJUSTMENTS
(a) Represents the income (loss) from discontinued operations attributable to the Company assuming that the assets of Royal Robbins and Altama were sold as of December 31, 2005 and no business activity was conducted over the course of the period presented.
The adjusted net loss does not include the gain or loss on the sale of assets during 2007.
(b) In accordance with EITF 87-24,Allocation of Interest to Discontinued Operations (“EITF 87-24”), interest expense incurred on the debt that was required to be repaid as a result of the sale was allocated to discontinued operations.