Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
Except as otherwise indicated in the information included in this Exhibit 99.2, or as the context may otherwise require, references to (i) the terms “we,” “us,” “G-III,” and “our” refer to G-III Apparel Group, Ltd. and its subsidiaries; (ii) the term “AM Apparel” refers to AM Apparel Holdings, Inc. and its subsidiaries; and (iii) the term “Acquisition” refers to our acquisition of the stock of AM Apparel Holdings, Inc.
The following unaudited pro forma condensed consolidated financial data as of and for the year ended January 31, 2008 give effect to the Acquisition as if it had occurred on the dates indicated below and after giving effect to the pro forma adjustments. The unaudited pro forma condensed consolidated statement of income for the fiscal year ended January 31, 2008 has been derived from G-III’s audited consolidated statement of income for its fiscal year ended January 31, 2008 and AM Apparel’s audited consolidated statement of operations for its year ended December 31, 2007 and gives effect to the consummation of the Acquisition as if it had occurred on February 1, 2007. The unaudited pro forma condensed consolidated balance sheet as of January 31, 2008 has been derived from G-III’s audited consolidated balance sheet as of January 31, 2008 and AM Apparel’ ;s audited consolidated balance sheet as of December 31, 2007, as adjusted to give effect to the Acquisition as if it occurred on January 31, 2008.
The pro forma adjustments are based upon available information and certain assumptions that we consider reasonable. The pro forma results of operations are not necessarily indicative of the results of operations that we would have achieved had the Acquisition reflected therein been consummated on the date indicated or that we will achieve in the future. The unaudited pro forma condensed consolidated financial data are based on preliminary estimates and assumptions set forth in the accompanying notes. Pro forma adjustments are necessary to reflect the estimated purchase price and to adjust amounts related to the assets and liabilities of AM Apparel to a preliminary estimate of their fair values. Pro forma adjustments are also necessary to reflect the changes in depreciation and amortization expense resulting from fair value adjustments to assets, interest income due to the us e of cash to acquire AM Apparel, and the taxation of G-III’s and AM Apparel’s combined income as a result of the Acquisition, as well as the effects related to such pro forma adjustments.
The pro forma adjustments and allocation of purchase price are preliminary and are based on our estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. This final valuation will be based on the actual assets and liabilities of AM Apparel that existed as of the date of the completion of the Acquisition. Any final adjustments may materially change the allocation of the purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a significant change to the unaudited pro forma condensed consolidated financial data.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of JANUARY 31, 2008
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| | Historical
G-III | | (a)
Historical
Andrew Marc | | Pro Forma
Adjustments | | G-III
Pro Forma
Condensed
Consolidated | |
Current Assets | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 38,341 | | $ | 169 | | $ | (38,341 | ) (b) | $ | 169 | |
Receivables, net of allowances | | | 66,944 | | | 13,923 | | | — | | | 80,867 | |
Inventories, net | | | 59,934 | | | 5,915 | | | — | | | 65,849 | |
Prepaid expenses and other current assets | | | 8,500 | | | 1,535 | | | — | | | 10,035 | |
Deferred income taxes | | | 10,046 | | | 4,385 | | | — | | | 14,431 | |
Total current assets | | | 183,765 | | | 25,927 | | | (38,341 | ) | | 171,351 | |
Property, plant and equipment, net | | | 5,261 | | | 2,538 | | | — | | | 7,799 | |
Intangible assets, net | | | 42,889 | | | 22,900 | | | 15,608 | (c) (e) | | 81,397 | |
Deferred income taxes | | | 3,944 | | | — | | | — | | | 3,944 | |
Other assets | | | 1,839 | | | 770 | | | — | | | 2,609 | |
| | $ | 237,698 | | $ | 52,135 | | $ | (22,733 | ) | $ | 267,100 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
Current Liabilities | | | | | | | | | | | | | |
Notes payable | | $ | 13,060 | | $ | — | | $ | 4,659 | (b) | $ | 17,719 | |
Due to factor | | | — | | | 6,333 | | | — | | | 6,333 | |
Accounts payable | | | 24,290 | | | 2,246 | | | — | | | 26,536 | |
Contingent purchase price payable | | | 4,894 | | | — | | | — | | | 4,894 | |
Current maturities, long-term debt | | | — | | | 28,060 | | | (28,060 | )(d) | | — | |
Income taxes payable | | | 4,348 | | | — | | | — | | | 4,348 | |
Accrued expenses | | | 15,461 | | | 3,780 | | | — | | | 35,736 | |
Deferred income taxes | | | 1,298 | | | — | | | 9,708 | (e) | | 11,006 | |
Total current liabilities | | | 63,351 | | | 40,419 | | | (13,693 | ) | | 90,077 | |
Other non-current liabilities | | | 473 | | | 100 | | | — | | | 573 | |
Total Stockholders’ equity | | | 173,874 | | | 11,616 | | | (9,040 | )(f) | | 176,450 | |
| | $ | 237,698 | | $ | 52,135 | | $ | (22,733 | ) | $ | 267,100 | |
(a) ACCOUNTING PERIOD
The historical Andrew Marc balance sheet is as of December 31, 2007.
(b) CASH ADJUSTMENT
The purchase price ($42.5 million) and related acquisition fees and expenses ($0.5 million) were paid from cash on hand and borrowings from our credit facility.
(c) GOODWILL AND INTANGIBLES, NET
Estimated Tradename | | $ | 18,480 | |
Estimated license agreements | | | 2,500 | |
Estimated customer list | | | 3,229 | |
Estimated goodwill | | | 4,591 | |
| | $ | 28,800 | |
(d) CURRENT MATURITIES, LONG TERM DEBT
Amounts due to GB Holding I, LLC were repaid on the acquisition date.
(e) DEFERRED INCOME TAXES
Deferred tax liability recorded on intangible assets other than goodwill at G-III’s effective tax rate
Intangibles other than goodwill | | $ | 24,209 | |
G-III’s effective tax rate for the year ended January 31, 2008 | | | 40.1 | % |
| | $ | 9,708 | |
(f) TOTAL STOCKHOLDERS’ EQUITY
Excess of liabilities assumed less assets acquired.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the YEAR ENDED JANUARY 31, 2008
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| | Historical
G-III | | (a)
Historical
Andrew Marc | | Pro Forma
Adjustments | | G-III
Pro Forma
Condensed
Consolidated | |
Net sales | | $ | 518,868 | | $ | 79,482 | | $ | — | | $ | 598,350 | |
Cost of goods sold | | | 379,417 | | | 49,501 | | | — | | | 428,918 | |
| | | | | | | | | | | | | |
Gross profit | | | 139,451 | | | 29,981 | | | — | | | 169,432 | |
| | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 101,669 | | | 27,527 | | | — | | | 129,196 | |
Depreciation and amortization | | | 5,427 | | | 1,520 | | | 822 | (b) | | 7,769 | |
Goodwill impairment | | | — | | | 8,000 | | | (8,000 | )(c) | | — | |
Operating Income (Loss) | | | 32,355 | | | (7,066 | ) | | 7,178 | | | 32,467 | |
Interest and financing charges, net | | | 3,158 | | | 6,384 | | | 3,397 | (d) | | 12,939 | |
Income (Loss) before income taxes | | | 29,197 | | | (13,450 | ) | | 3,781 | | | 19,528 | |
Income tax provision (benefit) | | | 11,707 | | | (2,183 | ) | | 1,516 | (e) | | 11,040 | |
Net Income (Loss) | | $ | 17,490 | | $ | (11,267 | ) | $ | 2,265 | | $ | 8,488 | |
Income per Common Share: | | | | | | | | | | | | | |
Basic | | | | | | | | | | | | | |
Net income per share | | | | | | | | | | | $ | 0.53 | |
Historical and pro forma weighted average number of shares outstanding | | | | | | | | | | | | 16,119 | |
Diluted | | | | | | | | | | | | | |
Net income per share | | | | | | | | | | | $ | 0.51 | |
Historical and pro forma weighted average number of shares outstanding | | | | | | | | | | | | 16,670 | |
(a) ACCOUNTING PERIOD
The historical Andrew Marc statement of income is for the twelve month period ended December 31, 2007.
(b) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Amortization of acquired intangible assets: | | | | | | | |
Amortization of licenses using an estimated life of 5 years | | | | | $ | 500 | |
Amortization of customer lists using an estimated life of 5 to10 years | | | | | | 322 | |
| | | | | | | | | | | $ | 822 | |
| | | | | | | | | | | | | |
There is no amortization related to the acquired Andrew Marc and Marc New York tradenames which have been assigned an indefinite life.
(c) GOODWILL IMPAIRMENT
Reversal of goodwill impairment charge recorded by Andrew Marc for the year ended December 31, 2007.
(d) INTEREST EXPENSE
Interest expense calculated on the purchase price and related cost and expenses of the Andrew Marc acquisition:
Purchase price and related costs and expenses of acquisition | | $ | 43,000 | |
G-III’s weighted average interest rate for the year ended January 31, 2008 | | | | | | 7.90 | % |
Interest | | | | | | | | | | | $ | 3,397 | |
| | | | | | | | | | | | | |
(e) INCOME TAX PROVISION
Income taxes have been provided at G-III’s effective tax rate of 40.1% for the year ended January 31, 2008
