EXHIBIT 99.1
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 2, 2011 and the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six and three months ended July 2, 2011 and July 3, 2010 and for the years ended January 1, 2011, January 2, 2010 and January 3, 2009 have been derived from the historical financial statements of Liz Claiborne, Inc. and Subsidiaries (the “Company”) and adjusted to give effect to the following transactions:
· the sale of the global MEXX business, which closed on October 31, 2011, to a company (“NewCo”), in which the Company indirectly holds an 18.75% interest and affiliates of the Gores Group, LLC (“Gores”) hold an 81.25% interest, pursuant to a Merger Agreement, dated as of September 1, 2011 (the “Merger Agreement”), by and among entities affiliated with Gores, the Company and Liz Claiborne Foreign Holdings, Inc. (“Liz Foreign”), and an Asset Purchase Agreement, dated as of September 1, 2011 (the “Asset Purchase Agreement” and together with the Merger Agreement, the “Agreements”), by and among entities affiliated with Gores, the Company and Liz Claiborne Canada Inc., for cash consideration, subject to working capital adjustments, of $85.0 million, including revolving credit facility debt that was assumed by NewCo;
· the November 2, 2011 sale of the global trademark rights for the LIZ CLAIBORNE family of brands and the trademark rights in the US and Puerto Rico for the MONET brand to J.C. Penney Corporation, Inc. (“JCPenney”) for $267.5 million and the advance of $20.0 million (refundable to JCPenney under certain circumstances) in exchange for the Company’s agreement to develop exclusive brands for JCPenney by Spring 2014; and
· the completed closures of the Company’s remaining LIZ CLAIBORNE outlet stores in the US and Puerto Rico in January 2011 and LIZ CLAIBORNE concessions in Europe in the first quarter of 2011, which were presented as discontinued operations by the Company.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 2, 2011 assumes the sale transactions had been consummated on that date. The Unaudited Pro Forma Condensed Consolidated Statements of Operations assume the transactions were consummated on the first fiscal day of the earliest fiscal period and carried through all periods presented. The pro forma adjustments reflect transactions and events that: (i) are directly attributable to such transactions, (ii) are factually supportable and (iii) with respect to the statements of operations, do not have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
Management believes that the assumptions used to derive the Unaudited Pro Forma Condensed Consolidated Financial Statements are reasonable under the circumstances and given the information available. The Unaudited Pro Forma Condensed Consolidated Financial Statements have been provided for information purposes and are not necessarily indicative of the financial condition or results of future operations or the actual financial condition or results that would have been achieved had the transactions occurred on the dates indicated. These Unaudited Pro Forma Condensed Consolidated Financial Statements (together with the footnotes thereto) should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes thereto, which can be found in the Company’s quarterly report on Form 10-Q for the period ended July 2, 2011, filed with the Securities and Exchange Commission on July 28, 2011 and the Company’s annual report on Form 10-K for the fiscal year ended January 1, 2011, filed with the Securities and Exchange Commission on February 17, 2011.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations do not reflect material non-recurring charges which will impact net income within the 12 months following the transaction, including: (i) a $7.5 million write-off of certain deferred tax assets and (ii) any transaction costs, which the Company currently estimates to be $11.4 million. The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects the impact of these items.
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JULY 2, 2011
(In thousands)
| | | | | | LIZ CLAIBORNE and | | | | | |
| | | | Sale of MEXX | | MONET Sale Transactions | | Pro Forma | | | |
| | As Reported | | (a) | | (b) | | Adjustments | | Pro Forma | |
Assets | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | |
Cash and cash equivalents | | $ | 26,680 | | $ | (21,493) | | $ | - | | $ | 221,071 | (c) | $ | 226,258 | |
Accounts receivable - trade, net | | 175,947 | | (44,172) | | - | | (6,250) | (d) | 125,525 | |
Inventories, net | | 315,128 | | (99,581) | | - | | - | | 215,547 | |
Deferred income taxes | | 4,123 | | - | | - | | (4,107) | (e) | 16 | |
Other current assets | | 93,391 | | (30,445) | | - | | (5,808) | (f) | 57,138 | |
Total current assets | | 615,269 | | (195,691) | | - | | 204,906 | | 624,484 | |
| | | | | | | | | | | |
Property and Equipment, Net | | 362,537 | | (83,764) | | - | | (14,522) | (g) | 264,251 | |
Goodwill and Intangibles, Net | | 227,766 | | (60,805) | | (22,678) | (h) | - | | 144,283 | |
Deferred Income Taxes | | 2,316 | | (153) | | - | | (2,163) | (e) | - | |
Other Assets | | 39,398 | | (7,816) | | - | | 10,049 | (i) | 41,631 | |
Total Assets | | $ | 1,247,286 | | $ | (348,229) | | $ | (22,678) | | $ | 198,270 | | $ | 1,074,649 | |
| | | | | | | | | | | |
Liabilities and Stockholders’ Deficit | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | |
Short-term borrowings | | $ | 144,398 | | $ | (23,361) | | $ | - | | $ | (116,693) | (j) | $ | 4,344 | |
Convertible Senior Notes | | 76,407 | | - | | - | | - | | 76,407 | |
Accounts payable | | 204,171 | | (66,141) | | - | | - | | 138,030 | |
Accrued expenses | | 236,806 | | (65,570) | | - | | (4,292) | (k) | 166,944 | |
Income taxes payable | | 1,265 | | 5,895 | | - | | - | | 7,160 | |
Deferred income taxes | | 4,920 | | - | | - | | - | | 4,920 | |
Total current liabilities | | 667,967 | | (149,177) | | - | | (120,985) | | 397,805 | |
| | | | | | | | | | | |
Long-Term Debt | | 548,030 | | - | | - | | - | | 548,030 | |
Other Non-Current Liabilities | | 208,747 | | (30,472) | | - | | 20,000 | (l) | 198,275 | |
Deferred Income Taxes | | 33,593 | | (15,492) | | (8,450) | (h) | 1,181 | (e) | 10,832 | |
Stockholders’ Deficit | | (211,051) | | (153,088) | | (14,228) | (h) | 298,074 | (m) | (80,293) | |
Total Liabilities and Stockholders’ Deficit | | $ | 1,247,286 | | $ | (348,229) | | $ | (22,678) | | $ | 198,270 | | $ | 1,074,649 | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JULY 2, 2011
On October 31, 2011, the Company completed the sale of its global MEXX business to NewCo, in which the Company indirectly holds an 18.75% interest and affiliates of Gores hold an 81.25% interest, pursuant to the Agreements, for cash consideration, subject to working capital adjustments, of $85.0 million, including revolving credit facility debt that was assumed by NewCo (the “MEXX Transaction”).
On November 2, 2011, the Company sold the global trademark rights of the LIZ CLAIBORNE family of brands and the trademark rights in the US and Puerto Rico for the MONET brand to JCPenney for $267.5 million. In addition, the transaction includes a $20.0 million advance (refundable to JCPenney under certain circumstances) in exchange for the Company’s agreement to develop exclusive brands for JCPenney by Spring 2014.
The following notes are included in the Unaudited Pro Forma Condensed Consolidated Balance Sheet:
(a) Represents the elimination of the historical assets and liabilities of MEXX.
(b) Represents the elimination of the carrying value of the MONET trademark (the carrying value of the trademarks related to the LIZ CLAIBORNE family of brands is zero), which was sold to JCPenney.
(c) Represents estimated cash inflows of $267.5 million from the sale of the global trademark rights for the LIZ CLAIBORNE family of brands and MONET trademark rights in the US and Puerto Rico, $85.0 million from the MEXX Transaction and a $20.0 million advance to develop exclusive brands for JCPenney, partially offset by estimated cash outflows of $11.4 million for the payment of transaction costs and $140.1 million for the repayment of outstanding borrowings under the Company’s revolving credit facility.
(d) Represents the write-off of certain accounts receivable in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands.
(e) Represents the write-off of certain deferred tax assets in connection with the MEXX Transaction.
(f) Represents the write-off of deferred design costs in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands.
(g) Represents the write-off of certain corporate property and equipment in connection with the MEXX Transaction.
(h) Represents the write-off of the carrying value of the trademark rights and related deferred tax liabilities in the US and Puerto Rico for the MONET brand.
(i) Represents the estimated fair value of the retained interest in MEXX.
(j) Represents the repayment of revolving credit facility borrowings, as discussed in (c) above.
(k) Represents the write-off of deferred licensing revenue in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands.
(l) Represents deferral of the $20.0 million advance from JCPenney.
(m) Represents decreases to the Company’s Stockholders’ deficit due to: (i) proceeds of $267.5 million in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands and the MONET trademark rights in the US and Puerto Rico; (ii) estimated net proceeds of $61.6 million (net of outstanding revolver borrowings by MEXX of $23.4 million as of July 2, 2011) in connection with the MEXX Transaction; (iii) the estimated retained interest in MEXX of $10.0 million; and (iv) the write-off of deferred licensing revenue of $4.3 million in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands. Such decreases to the Company’s stockholders’ deficit are estimated to be partially offset by: (i) the write-off of assets totaling $14.5 million in connection with the MEXX Transaction and $12.1 million in connection with the sale of the global trademark rights for the LIZ CLAIBORNE family of brands; (ii) estimated transaction costs of $11.4 million; and (iii) a $7.5 million write-off of certain deferred tax assets.
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 2, 2011
(In thousands, except per share amounts)
| | | | | | | | LIZ CLAIBORNE and | | | | | | | |
| | | | | Sale of MEXX | | | MONET Sale Transactions | | | Pro Forma | | | | |
| | As Reported | | | (b) | | | (c) | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | | | | | | |
Net Sales | | $ | 1,069,073 | | | $ | (345,269 | ) | | $ | (14,178 | ) | | $ | - | | | $ | 709,626 | |
Cost of goods sold | | 511,702 | | | (165,245 | ) | | - | | | - | | | 346,457 | |
Gross Profit | | 557,371 | | | (180,024 | ) | | (14,178 | ) | | - | | | 363,169 | |
Selling, general & administrative expenses | | 678,651 | | | (234,780 | ) | | (3,641 | ) | | (2,429 | ) | (d) | 437,801 | |
Operating Loss | | (121,280 | ) | | 54,756 | | | (10,537 | ) | | 2,429 | | | (74,632 | ) |
Other expense, net | | (24,470 | ) | | (104 | ) | | - | | | (13,600 | ) | (e) | (38,174 | ) |
Gain on extinguishment of debt | | 6,547 | | | - | | | - | | | - | | | 6,547 | |
Interest expense, net | | (29,793 | ) | | 1,851 | | | - | | | 1,704 | | (f) | (26,238 | ) |
Loss Before Provision for Income Taxes | | (168,996 | ) | | 56,503 | | | (10,537 | ) | | (9,467 | ) | | (132,497 | ) |
Provision for income taxes | | 2,674 | | | 1,021 | | | (384 | ) | | - | | | 3,311 | |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (171,670 | ) | | $ | 55,482 | | | $ | (10,153 | ) | | $ | (9,467 | ) | | $ | (135,808 | ) |
| | | | | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (1.82 | ) | | | | | | | | | | | $ | (1.44 | ) |
| | | | | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 94,423 | | | | | | | | | | | | 94,423 | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 3, 2010
(In thousands, except per share amounts)
| | | | | Sale of MEXX | | | Pro Forma | | | | |
| | As Reported | | | (b) | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | | | |
Net Sales | | $ | 1,120,963 | | | $ | (343,703 | ) | | $ | - | | | $ | 777,260 | |
Cost of goods sold | | 583,627 | | | (169,527 | ) | | - | | | 414,100 | |
Gross Profit | | 537,336 | | | (174,176 | ) | | - | | | 363,160 | |
Selling, general & administrative expenses | | 669,560 | | | (228,476 | ) | | (2,429 | ) | (d) | 438,655 | |
Impairment of intangible assets | | 2,594 | | | - | | | - | | | 2,594 | |
Operating Loss | | (134,818 | ) | | 54,300 | | | 2,429 | | | (78,089 | ) |
Other income, net | | 41,801 | | | (89 | ) | | 25,500 | | (e) | 67,212 | |
Interest expense, net | | (34,552 | ) | | 1,429 | | | 974 | | (f) | (32,149 | ) |
Loss Before Provision for Income Taxes | | (127,569 | ) | | 55,640 | | | 28,903 | | | (43,026 | ) |
Provision for income taxes | | 5,367 | | | - | | | (1,557 | ) | | 3,810 | |
Loss from Continuing Operations | | (132,936 | ) | | 55,640 | | | 30,460 | | | (46,836 | ) |
Net loss attributable to the noncontrolling interest | | (613 | ) | | - | | | - | | | (613 | ) |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (132,323 | ) | | $ | 55,640 | | | $ | 30,460 | | | $ | (46,223 | ) |
| | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (1.40 | ) | | | | | | | | $ | (0.49 | ) |
| | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 94,207 | | | | | | | | | 94,207 | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 2, 2011
(In thousands, except per share amounts)
| | | | | | | | LIZ CLAIBORNE and | | | | | | | |
| | | | | Sale of MEXX | | | MONET Sale Transactions | | | Pro Forma | | | | |
| | As Reported | | | (b) | | | (c) | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | | | | | | |
Net Sales | | $ | 555,831 | | | $ | (180,149 | ) | | $ | (7,189 | ) | | $ | - | | | $ | 368,493 | |
Cost of goods sold | | 267,220 | | | (84,057 | ) | | - | | | - | | | 183,163 | |
Gross Profit | | 288,611 | | | (96,092 | ) | | (7,189 | ) | | - | | | 185,330 | |
Selling, general & administrative expenses | | 359,695 | | | (122,693 | ) | | (1,939 | ) | | (1,215 | ) | (d) | 233,848 | |
Operating Loss | | (71,084 | ) | | 26,601 | | | (5,250 | ) | | 1,215 | | | (48,518 | ) |
Other expense, net | | (2,413 | ) | | (624 | ) | | - | | | (3,400 | ) | (e) | (6,437 | ) |
Gain on extinguishment of debt | | 6,547 | | | - | | | - | | | - | | | 6,547 | |
Interest expense, net | | (17,243 | ) | | 1,435 | | | - | | | 897 | | (f) | (14,911 | ) |
Loss Before Provision for Income Taxes | | (84,193 | ) | | 27,412 | | | (5,250 | ) | | (1,288 | ) | | (63,319 | ) |
Provision for income taxes | | 3,963 | | | (1,261 | ) | | (192 | ) | | - | | | 2,510 | |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (88,156 | ) | | $ | 28,673 | | | $ | (5,058 | ) | | $ | (1,288 | ) | | $ | (65,829 | ) |
| | | | | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (0.93 | ) | | | | | | | | | | | $ | (0.70 | ) |
| | | | | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 94,447 | | | | | | | | | | | | 94,447 | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 3, 2010
(In thousands, except per share amounts)
| | | | | Sale of MEXX | | | Pro Forma | | | | |
| | As Reported | | | (b) | | | Adjustments | | | Pro Forma | |
| | | | | | | | | | | | |
Net Sales | | $ | 536,803 | | | $ | (162,541 | ) | | $ | - | | | $ | 374,262 | |
Cost of goods sold | | 270,316 | | | (76,161 | ) | | - | | | 194,155 | |
Gross Profit | | 266,487 | | | (86,380 | ) | | - | | | 180,107 | |
Selling, general & administrative expenses | | 340,005 | | | (112,116 | ) | | (1,215 | ) | (d) | 226,674 | |
Impairment of intangible assets | | 2,594 | | | - | | | - | | | 2,594 | |
Operating Loss | | (76,112 | ) | | 25,736 | | | 1,215 | | | (49,161 | ) |
Other income, net | | 22,008 | | | 23 | | | 13,000 | | (e) | 35,031 | |
Interest expense, net | | (19,100 | ) | | 525 | | | 307 | | (f) | (18,268 | ) |
Loss Before Provision for Income Taxes | | (73,204 | ) | | 26,284 | | | 14,522 | | | (32,398 | ) |
Provision for income taxes | | 3,783 | | | - | | | (1,949 | ) | | 1,834 | |
Loss from Continuing Operations | | (76,987 | ) | | 26,284 | | | 16,471 | | | (34,232 | ) |
Net loss attributable to the noncontrolling interest | | (355 | ) | | - | | | - | | | (355 | ) |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (76,632 | ) | | $ | 26,284 | | | $ | 16,471 | | | $ | (33,877 | ) |
| | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (0.81 | ) | | | | | | | | $ | (0.36 | ) |
| | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 94,243 | | | | | | | | | 94,243 | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 1, 2011
(In thousands, except per share amounts)
| | | | Discontinued | | | | | | LIZ CLAIBORNE and | | | | | |
| | | | Operations | | Adjusted | | Sale of MEXX | | MONET Sale Transactions | | Pro Forma | | | |
| | As Reported | | | (a) | | | Historical | | | (b) | | | (c) | | | | Adjustments | | | Pro Forma | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net Sales | | $ | 2,500,072 | | | $ | (72,360 | ) | | $ | 2,427,712 | | | $ | (731,819 | ) | | $ | (11,254 | ) | | $ | - | | | $ | 1,684,639 | | |
Cost of goods sold | | 1,261,551 | | | (42,589 | ) | | 1,218,962 | | | (352,751 | ) | | - | | | - | | | 866,211 | | |
Gross Profit | | 1,238,521 | | | (29,771 | ) | | 1,208,750 | | | (379,068 | ) | | (11,254 | ) | | - | | | 818,428 | | |
Selling, general & administrative expenses | | 1,415,441 | | | (45,141 | ) | | 1,370,300 | | | (479,146 | ) | | (3,170 | ) | | (4,859 | ) | (d) | 883,125 | | |
Impairment of intangible assets | | 2,594 | | | - | | | 2,594 | | | - | | | - | | | - | | | 2,594 | | |
Operating Loss | | (179,514 | ) | | 15,370 | | | (164,144 | ) | | 100,078 | | | (8,084 | ) | | 4,859 | | | (67,291 | ) | |
Other income, net | | 26,665 | | | - | | | 26,665 | | | 82 | | | - | | | 13,100 | | (e) | 39,847 | | |
Interest expense, net | | (60,193 | ) | | - | | | (60,193 | ) | | 3,969 | | | - | | | 3,335 | | (f) | (52,889 | ) | |
Loss Before Provision for Income Taxes | | (213,042 | ) | | 15,370 | | | (197,672 | ) | | 104,129 | | | (8,084 | ) | | 21,294 | | | (80,333 | ) | |
Provision for income taxes | | 7,941 | | | - | | | 7,941 | | | 1,116 | | | (800 | ) | | - | | | 8,257 | | |
Loss from Continuing Operations | | (220,983 | ) | | 15,370 | | | (205,613 | ) | | 103,013 | | | (7,284 | ) | | 21,294 | | | (88,590 | ) | |
Net loss attributable to the noncontrolling interest | | (842 | ) | | - | | | (842 | ) | | - | | | - | | | - | | | (842 | ) | |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (220,141 | ) | | $ | 15,370 | | | $ | (204,771 | ) | | $ | 103,013 | | | $ | (7,284 | ) | | $ | 21,294 | | | $ | (87,748 | ) | |
| | | | | | | | | | | | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (2.34 | ) | | | | | | | | | | | | | | | | | $ | (0.93 | ) | |
| | | | | | | | | | | | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 94,243 | | | | | | | | | | | | | | | | | | 94,243 | | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 2, 2010
(In thousands, except per share amounts)
| | | | Discontinued | | | | | | | | | |
| | | | | Operations | | | Adjusted | | | Sale of MEXX | | | Pro Forma | | | |
| | As Reported | | | (a) | | | Historical | | | (b) | | | Adjustments | | | Pro Forma | | |
| | | | | | | | | | | | | | | | | |
Net Sales | | $ | 2,915,919 | | | $ | (73,444 | ) | | $ | 2,842,475 | | | $ | (831,889 | ) | | $ | - | | | $ | 2,010,586 | | |
Cost of goods sold | | 1,563,594 | | | (40,337 | ) | | 1,523,257 | | | (408,304 | ) | | - | | | 1,114,953 | | |
Gross Profit | | 1,352,325 | | | (33,107 | ) | | 1,319,218 | | | (423,585 | ) | | - | | | 895,633 | | |
Selling, general & administrative expenses | | 1,653,376 | | | (44,265 | ) | | 1,609,111 | | | (555,365 | ) | | (4,649 | ) | (d) | 1,049,097 | | |
Goodwill impairment | | 2,785 | | | - | | | 2,785 | | | - | | | - | | | 2,785 | | |
Impairment of other intangible assets | | 14,222 | | | - | | | 14,222 | | | - | | | - | | | 14,222 | | |
Operating Loss | | (318,058 | ) | | 11,158 | | | (306,900 | ) | | 131,780 | | | 4,649 | | | (170,471 | ) | |
Other expense, net | | (4,007 | ) | | - | | | (4,007 | ) | | (2,290 | ) | | (9,400 | ) | (e) | (15,697 | ) | |
Interest expense, net | | (65,084 | ) | | - | | | (65,084 | ) | | 4,021 | | | 8,708 | | (f) | (52,355 | ) | |
Loss Before Benefit for Income Taxes | | (387,149 | ) | | 11,158 | | | (375,991 | ) | | 133,511 | | | 3,957 | | | (238,523 | ) | |
Benefit for income taxes | | (108,238 | ) | | - | | | (108,238 | ) | | 48 | | | (787 | ) | | (108,977 | ) | |
Loss from Continuing Operations | | (278,911 | ) | | 11,158 | | | (267,753 | ) | | 133,463 | | | 4,744 | | | (129,546 | ) | |
Net loss attributable to the noncontrolling interest | | (681 | ) | | - | | | (681 | ) | | - | | | - | | | (681 | ) | |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (278,230 | ) | | $ | 11,158 | | | $ | (267,072 | ) | | $ | 133,463 | | | $ | 4,744 | | | $ | (128,865 | ) | |
| | | | | | | | | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | | | | | |
Loss Income from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (2.96 | ) | | | | | | | | | | | | | | $ | (1.37 | ) | |
| | | | | | | | | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 93,880 | | | | | | | | | | | | | | | 93,880 | | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 3, 2009
(In thousands, except per share amounts)
| | | | Discontinued | | | | | | | | | |
| | | | Operations | | Adjusted | | Sale of MEXX | | Pro Forma | | | |
| | As Reported | | | (a) | | | Historical | | | (b) | | | Adjustments | | Pro Forma | |
| | | | | | | | | | | | | |
Net Sales | | $ | 3,861,111 | | | $ | (88,810 | ) | | $ | 3,772,301 | | | $ | (1,202,900 | ) | | $ | - | | | $ | 2,569,401 | | |
Cost of goods sold | | 2,025,321 | | | (46,098 | ) | | 1,979,223 | | | (510,229 | ) | | - | | | 1,468,994 | | |
Gross Profit | | 1,835,790 | | | (42,712 | ) | | 1,793,078 | | | (692,671 | ) | | - | | | 1,100,407 | | |
Selling, general & administrative expenses | | 1,876,558 | | | (52,596 | ) | | 1,823,962 | | | (663,158 | ) | | (4,313 | ) | (d) | 1,156,491 | | |
Goodwill impairment | | 683,071 | | | - | | | 683,071 | | | (300,718 | ) | | - | | | 382,353 | | |
Impairment of other intangible assets | | 10,046 | | | - | | | 10,046 | | | - | | | - | | | 10,046 | | |
Operating Loss | | (733,885 | ) | | 9,884 | | | (724,001 | ) | | 271,205 | | | 4,313 | | | (448,483 | ) | |
Other (expense) income, net | | (6,372 | ) | | - | | | (6,372 | ) | | 6,755 | | | 26,900 | | (e) | 27,283 | | |
Interest expense, net | | (48,288 | ) | | - | | | (48,288 | ) | | 3,803 | | | 7,794 | | (f) | (36,691 | ) | |
Loss Before Provision for Income Taxes | | (788,545 | ) | | 9,884 | | | (778,661 | ) | | 281,763 | | | 39,007 | | | (457,891 | ) | |
Provision for income taxes | | 22,512 | | | - | | | 22,512 | | | (13,205 | ) | | (789 | ) | | 8,518 | | |
Loss from Continuing Operations | | (811,057 | ) | | 9,884 | | | (801,173 | ) | | 294,968 | | | 39,796 | | | (466,409 | ) | |
Net income attributable to the noncontrolling interest | | 252 | | | - | | | 252 | | | - | | | - | | | 252 | | |
Net Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (811,309 | ) | | $ | 9,884 | | | $ | (801,425 | ) | | $ | 294,968 | | | $ | 39,796 | | | $ | (466,661 | ) | |
| | | | | | | | | | | | | | | | | | | |
Earnings per Share: | | | | | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | | | | | |
Loss from Continuing Operations Attributable to Liz Claiborne, Inc. | | $ | (8.67 | ) | | | | | | | | | | | | | | $ | (4.99 | ) | |
| | | | | | | | | | | | | | | | | | | |
Weighted Average Shares, Basic and Diluted | | 93,606 | | | | | | | | | | | | | | | 93,606 | | |
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JULY 2, 2011 AND JULY 3, 2010
AND THE FISCAL YEARS ENDED JANUARY 1, 2011, JANUARY 2, 2010 AND JANUARY 3, 2009
On October 31, 2011, the Company completed the MEXX Transaction.
On November 2, 2011, the Company sold the global trademark rights of the LIZ CLAIBORNE family of brands and the trademark rights in the US and Puerto Rico for the MONET brand to JCPenney for $267.5 million. In addition, the transaction includes a $20.0 million advance (refundable to JCPenney under certain circumstances) in exchange for the Company’s agreement to develop exclusive brands for JCPenney by Spring 2014.
The following notes are included in the Unaudited Pro Forma Condensed Consolidated Statements of Operations:
(a) Represents the elimination of the historical revenues and expenses of the Company’s LIZ CLAIBORNE outlet stores in the US and Puerto Rico and LIZ CLAIBORNE concessions in Europe that closed in the first quarter of 2011, which were presented as discontinued operations by the Company.
(b) Represents the elimination of the historical revenues and expenses of MEXX.
In accordance with accounting principles generally accepted in the United States of America, the amounts eliminated on the Unaudited Pro Forma Condensed Consolidated Statements of Operations do not include certain indirect corporate overhead included in Selling, general & administrative expenses that were allocated to MEXX.
(c) Represents the elimination of the historical revenues and expenses associated with the LIZ CLAIBORNE family of brands under the previous license agreement with JCPenney and the MONET wholesale apparel operations in the US and Puerto Rico, which will cease as a result of the sale of the global trademark rights for the LIZ CLAIBORNE family of brands and the MONET trademark rights in the US and Puerto Rico to JCPenney.
(d) Represents the estimated reduction in depreciation expense resulting from the write-off of corporate property and equipment of $2.4 million and $2.4 million for the six months ended July 2, 2011 and July 3, 2010, $1.2 million and $1.2 million for the three months ended July 2, 2011 and July 3, 2010 and $4.9 million, $4.6 million and $4.3 million for the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009, respectively, each in connection with the MEXX Transaction.
(e) Represents (expense) income related to translation on the portion of the Company’s outstanding 5.0% Euro Notes due July 2013 that was designated and accounted for as an effective hedge of the Company’s net investment in certain Euro functional currency subsidiaries. As a result of the sale of MEXX, such translation will cease to be recorded within Cumulative translation adjustment in Stockholders’ deficit and will be recorded within Other (expense) income on the Consolidated Statement of Operations.
(f) Represents the estimated reduction in revolver interest expense of $1.7 million and $1.0 million for the six months ended July 2, 2011 and July 3, 2010, $0.9 million and $0.3 million for the three months ended July 2, 2011 and July 3, 2010 and $3.3 million, $8.7 million and $7.8 million for the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009, respectively, in connection with the anticipated repayment of all such debt with proceeds from the MEXX Transaction and sale transactions with JCPenney.
