UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
On August 16, 2019, Tailored Brands, Inc. (the “Company”) completed the sale of MWUK Limited, its UK corporate apparel operations conducted by Dimensions, Alexandra, and Yaffy to Project Dart Bidco Limited, pursuant to a Share Purchase Agreement entered into on August 16, 2019. In addition, the Company also completed the sale of Twin Hill Acquisition Company, Inc. (“Twin Hill”), to TH Holding Company, pursuant to a Stock Purchase Agreement entered into on August 16, 2019. The aggregate consideration paid for all of the outstanding equity of MWUK Limited and Twin Hill (collectively, the “corporate apparel business”) was approximately $62 million, subject to certain working capital adjustments. Of the $62 million in total consideration, approximately $56 million was received upon closing and approximately $6 million is deferred to the first quarter of fiscal 2020. For purposes of the unaudited Pro Forma Condensed Consolidated Financial Statements, the sale of MWUK and Twin Hill are collectively referred to as the “Disposition.”
The following unaudited Pro Forma Condensed Consolidated Balance Sheet, as of May 4, 2019, reflects the Company’s financial position as if the Disposition had occurred on that date. The following unaudited Pro Forma Condensed Consolidated Statements of Earnings for the three months ended May 4, 2019 and the three fiscal years ended February 2, 2019, February 3, 2018, and January 28, 2017, reflect the Company’s results of operations as if the Disposition had occurred on January 31, 2016, the beginning of the earliest period presented. All fiscal years for which financial information is included herein had 52 weeks with the exception of the fiscal year ended February 3, 2018, which had 53 weeks.
These unaudited Pro Forma Condensed Consolidated Financial Statements and the accompanying notes are based upon and should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019 and Quarterly Report on Form 10-Q for the three months ended May 4, 2019. The accompanying unaudited Pro Forma Condensed Consolidated Statements of Earnings are provided for informational purposes only and should not be considered indicative of the financial position or results of operations that would have occurred if the Disposition had been consummated on the dates indicated, nor are they indicative of the future financial position or results of operations of the Company.
The historical financial information has been adjusted in the unaudited Pro Forma Condensed Consolidated Financial Statements to give effect to pro forma events that are directly attributable, factually supportable, and with respect to the unaudited Pro Forma Condensed Statement of Earnings, expected to have a continuing impact on the consolidated results.
TAILORED BRANDS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
|
| For the Three Months Ended May 4, 2019 |
| |||||||
|
| Company As |
| Less: Corporate |
| Company |
| |||
Net sales |
| $ | 781,387 |
| $ | 56,725 |
| $ | 724,662 |
|
Cost of sales |
| 460,831 |
| 41,044 |
| 419,787 |
| |||
Gross margin |
| 320,556 |
| 15,681 |
| 304,875 |
| |||
Advertising expense |
| 45,043 |
| 374 |
| 44,669 |
| |||
Selling, general and administrative expenses |
| 245,211 |
| 14,009 |
| 231,202 |
| |||
Operating income |
| 30,302 |
| 1,298 |
| 29,004 |
| |||
Interest income |
| 96 |
| — |
| 96 |
| |||
Interest expense |
| (18,663 | ) | — |
| (18,663 | ) | |||
Earnings before income taxes |
| 11,735 |
| 1,298 |
| 10,437 |
| |||
Provision for income taxes |
| 4,593 |
| 636 |
| 3,957 |
| |||
Net earnings |
| $ | 7,142 |
| $ | 662 |
| $ | 6,480 |
|
Net earnings per common share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.14 |
|
|
| $ | 0.13 |
| |
Diluted |
| $ | 0.14 |
|
|
| $ | 0.13 |
| |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 50,280 |
|
|
| 50,280 |
| |||
Diluted |
| 50,587 |
|
|
| 50,587 |
|
TAILORED BRANDS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
|
| For the Fiscal Year End February 2, 2019 |
| |||||||
|
| Company As |
| Less: Corporate |
| Company |
| |||
Net sales |
| $ | 3,239,902 |
| $ | 235,391 |
| $ | 3,004,511 |
|
Cost of sales |
| 1,862,435 |
| 168,532 |
| 1,693,903 |
| |||
Gross margin |
| 1,377,467 |
| 66,859 |
| 1,310,608 |
| |||
Advertising expense |
| 166,457 |
| 1,209 |
| 165,248 |
| |||
Selling, general and administrative expenses |
| 974,054 |
| 55,282 |
| 918,772 |
| |||
Goodwill impairment charge |
| 23,991 |
| 23,991 |
| — |
| |||
Asset impairment charges |
| 1,026 |
| — |
| 1,026 |
| |||
Operating income (loss) |
| 211,939 |
| (13,623 | ) | 225,562 |
| |||
Interest income |
| 563 |
| — |
| 563 |
| |||
Interest expense |
| (79,573 | ) | (3 | ) | (79,570 | ) | |||
Loss on extinguishment of debt, net |
| (30,253 | ) | — |
| (30,253 | ) | |||
Earnings (loss) before income taxes |
| 102,676 |
| (13,626 | ) | 116,302 |
| |||
Provision for income taxes |
| 19,436 |
| 1,730 |
| 17,706 |
| |||
Net earnings (loss) |
| $ | 83,240 |
| $ | (15,356 | ) | $ | 98,596 |
|
Net earnings per common share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 1.67 |
|
|
| $ | 1.98 |
| |
Diluted |
| $ | 1.64 |
|
|
| $ | 1.94 |
| |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 49,856 |
|
|
| 49,856 |
| |||
Diluted |
| 50,725 |
|
|
| 50,725 |
|
TAILORED BRANDS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
|
| For the Fiscal Year End February 3, 2018 |
| |||||||
|
| Company As |
| Less: Corporate |
| Company |
| |||
Net sales |
| $ | 3,304,346 |
| $ | 251,325 |
| $ | 3,053,021 |
|
Cost of sales |
| 1,895,580 |
| 183,987 |
| 1,711,593 |
| |||
Gross margin |
| 1,408,766 |
| 67,338 |
| 1,341,428 |
| |||
Advertising expense |
| 173,411 |
| 1,410 |
| 172,001 |
| |||
Selling, general and administrative expenses |
| 1,000,892 |
| 52,608 |
| 948,284 |
| |||
Goodwill impairment charge |
| 1,500 |
| — |
| 1,500 |
| |||
Asset impairment charges |
| 3,547 |
| — |
| 3,547 |
| |||
Operating income |
| 229,416 |
| 13,320 |
| 216,096 |
| |||
Interest income |
| 564 |
| — |
| 564 |
| |||
Interest expense |
| (100,471 | ) | — |
| (100,471 | ) | |||
Gain on extinguishment of debt, net |
| 5,445 |
| — |
| 5,445 |
| |||
Earnings before income taxes |
| 134,954 |
| 13,320 |
| 121,634 |
| |||
Provision for income taxes |
| 38,251 |
| 3,634 |
| 34,617 |
| |||
Net earnings |
| $ | 96,703 |
| $ | 9,686 |
| $ | 87,017 |
|
Net earnings per common share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 1.97 |
|
|
| $ | 1.77 |
| |
Diluted |
| $ | 1.95 |
|
|
| $ | 1.76 |
| |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 49,094 |
|
|
| 49,094 |
| |||
Diluted |
| 49,468 |
|
|
| 49,468 |
|
TAILORED BRANDS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
|
| For the Fiscal Year End January 28, 2017 |
| |||||||
|
| Company As |
| Less: Corporate |
| Company |
| |||
Net sales |
| $ | 3,378,703 |
| $ | 280,302 |
| $ | 3,098,401 |
|
Cost of sales |
| 1,937,235 |
| 191,792 |
| 1,745,443 |
| |||
Gross margin |
| 1,441,468 |
| 88,510 |
| 1,352,958 |
| |||
Advertising expense |
| 189,956 |
| 1,606 |
| 188,350 |
| |||
Selling, general and administrative expenses |
| 1,099,328 |
| 60,300 |
| 1,039,028 |
| |||
Asset impairment charges |
| 19,358 |
| — |
| 19,358 |
| |||
Operating income |
| 132,826 |
| 26,604 |
| 106,222 |
| |||
Interest income |
| 167 |
| — |
| 167 |
| |||
Interest expense |
| (103,149 | ) | — |
| (103,149 | ) | |||
Gain on extinguishment of debt, net |
| 1,737 |
| — |
| 1,737 |
| |||
Earnings before income taxes |
| 31,581 |
| 26,604 |
| 4,977 |
| |||
Provision (benefit) for income taxes |
| 6,625 |
| 8,806 |
| (2,181 | ) | |||
Net earnings |
| $ | 24,956 |
| $ | 17,798 |
| $ | 7,158 |
|
Net earnings per common share: |
|
|
|
|
|
|
| |||
Basic |
| $ | 0.51 |
|
|
| $ | 0.15 |
| |
Diluted |
| $ | 0.51 |
|
|
| $ | 0.15 |
| |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
| |||
Basic |
| 48,607 |
|
|
| 48,607 |
| |||
Diluted |
| 48,786 |
|
|
| 48,786 |
|
TAILORED BRANDS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 4, 2019
(In thousands)
(Unaudited)
|
| Company As |
| Less: Corporate |
| Pro Forma |
| Company |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| ||||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 29,749 |
| $ | 9,290 |
| $ | 55,379 | (c) | $ | 75,838 |
|
Accounts receivable, net |
| 80,623 |
| 39,863 |
| 6,047 | (d) | 46,807 |
| ||||
Inventories |
| 874,412 |
| 106,718 |
|
|
| 767,694 |
| ||||
Other current assets |
| 49,904 |
| 3,717 |
|
|
| 46,187 |
| ||||
Total current assets |
| 1,034,688 |
| 159,588 |
| 61,426 |
| 936,526 |
| ||||
PROPERTY AND EQUIPMENT, net |
| 428,380 |
| 14,745 |
|
|
| 413,635 |
| ||||
OPERATING LEASE RIGHT-OF-USE ASSETS |
| 955,970 |
| 11,439 |
|
|
| 944,531 |
| ||||
RENTAL PRODUCT, net |
| 103,895 |
| — |
|
|
| 103,895 |
| ||||
GOODWILL |
| 78,964 |
| — |
|
|
| 78,964 |
| ||||
INTANGIBLE ASSETS, net |
| 156,614 |
| 9,631 |
|
|
| 146,983 |
| ||||
OTHER ASSETS |
| 6,942 |
| 25 |
|
|
| 6,917 |
| ||||
TOTAL ASSETS |
| $ | 2,765,453 |
| $ | 195,428 |
| $ | 61,426 |
| $ | 2,631,451 |
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY |
|
|
|
|
|
|
|
|
| ||||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 218,492 |
| $ | 16,397 |
| $ |
|
| $ | 202,095 |
|
Accrued expenses and other current liabilities |
| 316,821 |
| 16,132 |
|
|
| 300,689 |
| ||||
Current portion of operating lease liabilities |
| 183,011 |
| 2,519 |
|
|
| 180,492 |
| ||||
Income taxes payable |
| 15,923 |
| 1,974 |
| 2,375 | (e) | 16,324 |
| ||||
Current portion of long-term debt |
| 9,000 |
| — |
|
|
| 9,000 |
| ||||
Total current liabilities |
| 743,247 |
| 37,022 |
| 2,375 |
| 708,600 |
| ||||
LONG-TERM DEBT, net |
| 1,151,196 |
| — |
|
|
| 1,151,196 |
| ||||
OPERATING LEASE LIABILITIES |
| 804,895 |
| 9,058 |
|
|
| 795,837 |
| ||||
DEFERRED TAXES, net AND OTHER LIABILITIES |
| 70,161 |
| 5,370 |
|
|
| 64,791 |
| ||||
Total liabilities |
| 2,769,499 |
| 51,450 |
| 2,375 |
| 2,720,424 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
SHAREHOLDERS’ (DEFICIT) EQUITY |
| (4,046 | ) | 143,978 |
| 59,051 | (c),(e) | (88,973 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY |
| $ | 2,765,453 |
| $ | 195,428 |
| $ | 61,426 |
| $ | 2,631,451 |
|
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(a) Represents the Company’s historical financial statements for the periods presented and does not reflect any adjustments related to the Disposition. The historical condensed consolidated balance sheet as of May 4, 2019 and the condensed consolidated statements of earnings for the three months ended May 4, 2019 were derived from the Company’s unaudited condensed consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended May 4, 2019. The historical consolidated statements of earnings for each of the years ended February 2, 2019, February 3, 2018 and January 28, 2017 were derived from the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended February 2, 2019.
(b) Reflects the historical financial results from operations and financial position of the corporate apparel business reflecting the effect of the Disposition of the corporate apparel business on assets, liabilities, revenues and expenses directly attributable to the Disposition. Certain amounts historically allocated to the corporate apparel business’s results of operations are not reflected in this adjustment because they relate to costs that the Company will recognize on an ongoing basis after the Disposition.
(c) Reflects the cash proceeds, net of $0.4 million in transaction costs, received upon closing of the Disposition totaling $55.4 million.
(d) Reflects the establishment of a receivable for the amount of consideration related to Disposition deferred to the first quarter of fiscal 2020 totaling $6.0 million.
(e) Reflects the estimated after-tax loss to be recorded on the Disposition. This loss is not included in the pro forma condensed consolidated statements of earnings as the loss is considered non-recurring and is not expected to have a continuing impact on the Company’s operations. The tax effect on the Disposition differs from the blended statutory rate for the corporate apparel business primarily due to the exclusion of the loss for U.K. purposes and the recognition of withholding tax on the proceeds of the Disposition. The estimated after-tax loss is preliminary and may change based on finalization of certain items and was calculated as follows (amounts in thousands):
Net proceeds related to the Disposition |
| $ | 61,426 |
| |
Net assets of corporate apparel business |
| (143,978 | ) | ||
Pre-tax loss on Disposition |
| (82,552 | ) | ||
Tax effect on Disposition |
| 2,375 |
| ||
After-tax loss on Disposition |
| $ | (84,927 | ) | |