Exhibit 99.4
Unaudited Pro Forma Consolidated Financial Statements
Introduction
The following unaudited pro forma consolidated financial statements give effect
to the acquisition by Iconix Brand Group Inc. ("Iconix") in July 2005 of assets
of Joe Boxer Company, LLC, a Delaware limited liability company, Joe Boxer
Licensing, LLC, a Delaware limited liability company, JBC Canada Holdings, LLC,
a Delaware limited liability company, Joe Boxer Canada, LP, a Delaware limited
partnership (collectively, "Joe Boxer"), and the acquisition in September 2005
of Rampage brand from Rampage Licensing, LLC, a California limited liability
company ("Rampage"), under the purchase method of accounting. These pro
forma statements are presented for illustrative purpose only. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The pro forma consolidated financial
statements do not purport to represent what the results of operations of Iconix
would actually have been if the acquisition had in fact occurred at the
beginning of the periods presented, nor do they purport to project the results
of operations of Iconix for any future period. Unaudited pro forma consolidated
financial statements giving effect to the Joe Boxer acquisition only were
previously filed in Iconix's Form 8-K/A filed on October 7, 2005.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired and liabilities assumed are recorded at their estimated fair
values. The estimated fair values, useful lives and amortization of certain
assets acquired are based on a preliminary valuation and are subject to final
valuation adjustments. The Joe Boxer and Rampage trademarks have been determined
to have an indefinite useful life, and accordingly, in accordance with FAS 142,
no amortization will be recorded in Iconix's consolidated statements of
operations. Instead, the trademarks will be tested for impairment at least
annually, with any related impairment charge recorded to the statement of
operations at the time of determining such impairment.
The pro forma condensed balance sheet assumes that these acquisitions had
occurred as of June 30, 2005. The pro forma consolidated statements of
operations for the six months ended June 30, 2005 and the 11 months ended
December 31, 2004 were prepared by combining the historical operating results of
Iconix and the historical statements of operations of Joe Boxer and Rampage for
the same periods, giving effect to the acquisition as though it had occurred at
the beginning of each period.
The consolidated historical financial information of Iconix are derived from the
consolidated financial statements included in Iconix's Form 10-K for the 11
months ended December, 2004 and Form 10-Q for the quarter and six months ended
June 30, 2005. The historical financial information of Rampage for the year
ended December 31, 2004 is derived from its audited financial information
included herein and the historical financial statements for the six months ended
June 30, 2005 are derived from their unaudited financial statements included
herein. The historical financial information of Joe Boxer are derived from its
historical financial statements previously filed by Iconix.
Notes to Unaudited Pro Forma Consolidated Balance Sheet:
(A) Reflects the allocation of cost associated with the purchase of Joe
Boxer's assets under the purchase method of accounting as though the
acquisition occurred on June 30, 2005, and the impact of the financing
associated with the acquisition.
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Total purchase price was determined as follows:
(000's omitted)
Cash paid at closing $ 40,000
Fair value of 4,350,000 shares of
common stock at $8.33 per share
fair market value per share 36,236
Assumption of K-mart loan, including
$3,509 due within 12 months 10,798
Accrued interest 309
Value of warrants issued as a
cost of the acquisition 788
Other estimated costs of acquisition,
including $655 paid after closing 755
----------
Total cost of acquisition $ 88,886
==========
The purchase price was allocated to the fair value of the assets
acquired and liabilities assumed as follows:
(000's omitted)
Accounts receivable $ 3,121
Deferred tax asset 2,700
K-mart licensing contract 1,333
Joe Boxer Trademark 79,800
Goodwill 1,932
----------
Total allocated purchase price $ 88,886
==========
Financing for the JOE BOXER(R) acquisition was accomplished through the
private placement by a subsidiary of Iconix, of $63.0 million
aggregate principal amount of 8.45% asset backed notes, $17.5 million
of which was used to refinance previously existing notes with the same
lender, $40.0 million of which was paid to the sellers, approximately
$1.0 million of which was used to pay costs associated with the
refinancing, approximately $0.3 million of which was placed in a trust
account as required by the lender, and approximately $4.0 million of
which was available to Iconix for working capital purposes. Costs
associated with the refinancing of approximately $1.0 million have been
deferred and are being amortized over the 7 year life of the refinanced
debt.
(B) Represents the elimination of historical value of intangibles recorded
in Joe Boxer of $11.9 million, elimination of Joe Boxer's assets and
liabilities not acquired, and the elimination of the acquired
liabilities already reflected in the purchase accounting adjustment
(See Note (a) above).
(C) Reflects the allocation of cost associated with the purchase of
Rampage's assets under the purchase method of accounting as though the
acquisition occurred on June 30, 2005, and the impact of the financing
associated with the acquisition.
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Total purchase price was determined as follows;
(000's omitted)
Cash paid at closing $ 25,750
Fair value of 2,171,336 shares of
common stock at $9.28 per share 20,150
Value of warrants issued as a
cost of the acquisition 788
Other estimated costs of acquisition,
including $655 paid after closing 755
--------
Total cost of acquisition $ 47,443
========
The purchase price was allocated to the fair value of the assets
acquired as follows:
(000's omitted)
Rampage licensing contract $ 550
Rampage domain name 230
Rampage non-compete agreement 600
Rampage trademark 41,070
Goodwill 4,993
--------
Total allocated purchase price $ 47,443
========
Financing for the Rampage acquisition was accomplished through the
private placement by IP Holdings, LLC ("IPH"), a subsidiary of Iconix,
of $103.0 million aggregate principal amount of asset backed notes,
$63.0 million of which was used to refinance the previously existing
notes with the same lender (discussed above under note (a)), $25.75
million of which was paid to the sellers, approximately $773,500 of
which was used to pay costs associated with the refinancing,
approximately $1.4 million of which was placed in a trust account as
required by the lender, and $12 million was deposited in an escrow
account for the benefit of the holders of the note, to be used by IPH
only for the purchase of additional intellectual property assets from
Iconix. To the extent such purchase did not occur prior to November
15, 2005, IPH must redeem a portion of the note worth $12 million on
deposit in such escrow account with no penalty. On November 22, 2005,
IPH redeemed $12 million of the note as such purchase did not occur
prior to November 15, 2005. Therefore, interest thereon was not
computed in the pro forma statements of operations for the period
ended June 30, 2005 ad the 12 months ended December 31, 2004 as the
amount would not have been outstanding. Costs associated with the debt
issuance of approximately $.8 million have been deferred and are being
amortized over the 7-year life of the notes.
(D) Represents the elimination of historical value of intangibles recorded
in Rampage of $21.4 million, elimination of Rampage's assets and
liabilities not acquired, including the elimination of due to related
parties and interest thereon.
Notes to Unaudited Pro Forma Consolidated Statements of Operations:
(E) Represents the amortization of acquired Joe Boxer intangible assets
(K-Mart contract) on a straight line basis over the remaining contract
period of 2.5 years and the deferred financing fees incurred in closing
the re-financing arrangement over the same 7 year life of the
refinanced debt.
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(F) Represents the incremental interest expense at 8.45% of interest rate
that would have been incurred under the terms of the refinancing
incurred as part of the Joe Boxer acquisition.
(G) Represents the deferred income tax provision that would be recorded
against the earnings generated from the acquired Joe Boxer business.
(H) Represents the shares of Iconix's common stock that were issued as part
of the Joe Boxer acquisition.
(I) Represents the amortization of acquired Rampage licensing contracts of
$550,000, Rampage domain name of $230,000 and Non-compete agreement, on
a straight line basis over the remaining contract period of 3, 5, and 2
years, respectively, as well as the deferred financing fees incurred in
closing the Rampage re-financing arrangement have over the same 7 year
life of the refinanced debt.
(J) Represents the interest expense at 8.1% of interest rate that would
have been incurred under the terms of the refinancing incurred as part
if the Rampage acquisition, net of interest expenses that would have
been eliminated on the long term liabilities not acquired.
(K) Represents the shares of Iconix's common stock that were issued as part
of the Rampage acquisition.
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Unaudited Pro Forma Consolidated Balance Sheet
('000 omitted, except per share information)
Pro Forma Pro Forma
As of 6/30/05 Adjustment As of 6/30/05 Adjustment Pro Forma
Iconix Joe Boxer Note A Note B Rampage Note C Note D Consolidated
-------- --------- -------- -------- ------------- ------- ------- ------------
Assets
Current assets
Cash 515 3,741 4,047 (3,741) 36 (23) (36) 4,539
Restricted-use cash - - - - - 12,000 - 12,000
Accounts receivable, net 3,982 145 3,121 (145) 1,036 - (1,036) 7,103
Due from factors, net - 16,694 - (16,694) - - - -
Due from affiliate 463 - - - - - - 463
Inventories - 24 - (24) - - - -
Deferred income taxes 3,349 - - - - - - 3,349
Prepaid advertising and other 297 77 - (77) 185 - (185) 297
Other receivables - 75 - (75) - - - -
-------- --------- -------- -------- ------------- ------- ------- ------------
Total current assets 8,606 20,756 7,168 (20,756) 1,257 11,977 (1,257) 27,751
Property and equipment at cost:
Furniture, fixtures and equipment 1,612 - - - - - - 1,612
Leasehold improvements - 470 - (470) - - - -
Less: accum. Depr. And amort. (1,366) (199) - 199 - - - (1,366)
-------- --------- -------- -------- ------------- ------- ------- ------------
246 271 - (271) - - - 246
Other assets:
Restricted cash 2,900 - 310 - - 1,400 - 4,610
Goodwill 25,241 - 1,932 - - 4,993 - 32,166
Intangibles, net 16,121 11,864 81,133 (11,864) 21,364 42,450 (21,364) 139,704
Deferred financing costs, net 1,907 - 1,032 - - 773 - 3,712
Deferred income taxes 2,073 - 2,700 - - - - 4,773
Other 1,142 - - - - - - 1,142
-------- --------- -------- -------- ------------- ------- ------- ------------
49,384 11,864 87,107 (11,864) 21,364 49,616 (21,364) 186,107
-------- --------- -------- -------- ------------- ------- ------- ------------
Total assets 58,236 32,891 94,275 (32,891) 22,621 61,593 (22,621) 214,104
======== ========= ======== ======== ============= ======= ======= ============
Liabilities and stockholders equity
Current liabilities:
Accounts payable and accrued expenses 2,194 183 964 (183) 562 655 (562) 3,813
Accounts payable, subject to litigation 4,886 3,750 (3,750) - - - 4,886
Accrured interest, note payable 276 (276) - - - -
Due to affiliated companies 51 (51) - - - -
Due to related parties 434 - - 4,988 - (4,988) 434
Debt to be repaid with restricted-use cash 12,000 12,000
Current portion of deffered revenue 1,332 - - - - - 1,332
Current portion of long term debt 3,024 3,509 4,856 (3,509) - 2,708 - 10,588
-------- --------- -------- -------- ------------- ------- ------- ------------
Total current liabilities 11,870 7,769 5,820 (7,769) 5,550 15,363 (5,550) 33,053
Deferred revenue 183 - - - - - - 183
Deferred rent 32 - (32) - - - -
Long term debt 17,818 7,290 51,431 (7,290) 17,008 25,292 (17,008) 94,541
Stockholders' equity:
Common stock 30 - 4 - - 2 - 36
Additional paid-in capital 76,962 5,000 37,020 (5,000) 63 20,936 (63) 134,918
Accumulated deficit (47,960) 12,800 - (12,800) - - - (47,960)
Treasury stock - 198 shares at cost (667) - - - - - - (667)
-------- --------- -------- -------- ------------- ------- ------- ------------
Total stockholders' equity 28,365 17,800 37,024 (17,800) 63 20,938 (63) 86,327
-------- --------- -------- -------- ------------- ------- ------- ------------
Total liabilities and stockholders' equity 58,236 32,891 94,275 (32,891) 22,621 61,593 (22,621) 214,104
======== ========= ======== ======== ============= ======= ======= ============
See accompanying introduction and notes to unaudited pro forma consolidated financial statements.
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Unaudited Pro Forma Consolidated Statement of Operations
('000 omitted, except per share information)
For the period For the period
Ended 6/30/05 Ended 6/30/05
Iconix Joe Boxer Pro Forma Rampage Pro Forma Pro Forma
Historical Historical Adjustment Historical Adjustment Consolidated
---------- ---------- ---------- ------------- ---------- ------------
Licensing income 8,587 7,978 3,899 - 20,464
---------- ---------- ---------- ------------- ---------- ------------
Gross profit 8,587 7,978 3,899 - 20,464
Selling, general & administrative expenses 5,517 2,015 340(e) 1,542 320(i) 9,734
Special charges 707 - - - 707
---------- ---------- ---------- ------------- ---------- ------------
Operating income 2,363 5,963 (340) 2,357 (320) 10,023
Other expense (income):
Interest expense - net 845 290 1,744(f) 684 317(j) 3,880
---------- ---------- ---------- ------------- ---------- ------------
Income before income taxes 1,518 5,673 (2,084) 1,673 (637) 6,143
Income taxes (benefits) provisions (1,780) - 1,000(g) - - (780)
---------- ---------- ---------- ------------- ---------- ------------
Net income (loss) 3,298 5,673 (3,084) 1,673 (637) 6,923
========== ========== ========== ============= ========== ============
Earnings (Loss) per share
Basic 0.12 0.20
========== ============
Diluted 0.11 0.19
========== ============
Weighted average number of common shares outstanding:
Basic 28,516 4,350(h) 2,171(k) 35,037
========== ========== ========== ============
Diluted 30,115 4,350(h) 2,171(k) 36,636
========== ========== ========== ============
See accompanying introduction and notes to unaudited pro forma consolidated financial statements.
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Unaudited Pro Forma Consolidated Statement of Operations
('000 omitted, except per share information)
11-month 12-month 12-month
Ended Ended Ended
12/31/04 12/31/04 Pro Forma 12/31/04 Pro Forma Pro Forma
Iconix Joe Boxer Adjustment Rampage Adjustment Consolidated
---------- ----------- ---------- ------------- ---------- ------------
Sales 60,409 - - - 60,409
Licensing income 8,571 20,058 6,422 - 35,051
---------- ---------- ---------- ------------- ---------- ------------
Net revenue 68,980 20,058 6,422 - 95,460
Gost of goods soldSales 48,229 - - - 48,229
---------- ---------- ---------- ------------- ---------- ------------
Gross profit 20,751 20,058 6,422 - 47,231
Selling, general & administrative expenses 17,720 8,007 681(e) 2,793 640(i) 29,841
Special charges 295 - - - 295
---------- ---------- ---------- ------------- ---------- ------------
Operating income 2,736 12,051 (681) 3,629 (640) 17,095
Other expense (income):
Interest expense - net 2,495 544 3,296(f) 658 1,397(j) 8,390
---------- ---------- ---------- ------------- ---------- ------------
Income before income taxes 241 11,507 (3,977) 2,971 (2,037) 8,705
Income taxes (benefits) provisions - - 1,900(g) 13 - 1,913
---------- ---------- ---------- ------------- ---------- ------------
Net income (loss) 241 11,507 (5,877) 2,958 (2,037) 6,792
========== ========== ========== ============= ========== ============
Earnings (Loss) per share
Basic 0.01 0.21
========== ============
Diluted 0.01 0.20
========== ============
Weighted average number of common shares outstanding:
Basic 26,851 4,350(h) 2,171(k) 33,372
========== ========== ========== ============
Diluted 28,706 4,350(h) 2,171(k) 35,227
========== ========== ========== ============
See accompanying introduction and notes to unaudited pro forma consolidated financial statements.
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