SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 23, 2002
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CANDIE'S,INC
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-10593 11-2481903
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
400 Columbus Avenue, Valhalla, New York 10595-1335
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 769-8600
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None
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Former name or former address, if changed since last report
1
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
UNZIPPED APPAREL LLC
Financial Page No.
Report of Independent Auditors F-3
Balance Sheets as of January 31, 2002 and 2001 F-4
Statements of Operations for the Years
Ended January 31, 2002, 2001 and 2000 F-5
Statements of Members' (Deficit) Equity for the
Years Ended January 31, 2002, 2001 and 2000 F-6
Statements Of Cash Flows for
the Years Ended January 31, 2002, 2001 and 2000. F-7
Notes to Financial Statements F-8
(b) Unaudited Pro Forma Financial Information
ACQUISITION OF UNZIPPED APPAREL LLC
Introduction PF-1
Unaudited Pro Forma Consolidated Statements Of
Operations for the Three Months Ended April 30,
2002 and the Year Ended January 31, 2002 PF-2
Notes to Pro Forma Consolidated Statements of
Operations PF-4
(c) Exhibits
Exhibit 23 Consent of Independent Auditors - Ernst & Young LLP
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANDIE'S, INC.
By:/s/ Richard Danderline
----------------------------------------
Name: Richard Danderline
Title: Executive Vice President, Finance
and Operations
Date: July 8, 2002
3
(a) Financial Statements of Business Acquired
UNZIPPED APPAREL LLC
FINANCIAL STATEMENTS
Unzipped Apparel LLC
Three years ended January 31, 2002
with Report of Independent Auditors
F-1
Unzipped Apparel LLC
Financial Statements
Three years ended January 31, 2002
Contents
Report of Independent Auditors...............................................F-3
Audited Financial Statements
Balance Sheets...............................................................F-4
Statements of Operations.....................................................F-5
Statements of Members' (Deficit) Equity......................................F-6
Statements of Cash Flows.....................................................F-7
Notes to Financial Statements................................................F-8
F-2
Report of Independent Auditors
Board of Directors
Unzipped Apparel LLC
We have audited the accompanying balance sheets of Unzipped Apparel LLC as of
January 31, 2002 and 2001, and the related statements of operations, members'
(deficit) equity and cash flows for each of the three years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unzipped Apparel LLC as of
January 31, 2002 and 2001, and the results of its operations and its cash flows
for each of the three years then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Los Angeles, California
April 10, 2002
F-3
Unzipped Apparel LLC
Balance Sheets
January 31
2002 2001
-------------------------------------
Assets
Current assets:
Cash $ 11,168 $ 19,863
Due from factor, net of allowance for customer credits and
returns of $300,000 in 2002 and $459,837 in 2001
5,436,603 4,991,696
Due from related party 93,527 -
Inventories 8,359,212 9,259,938
Prepaid expenses 11,665 -
-------------------------------------
Total current assets 13,912,175 14,271,497
Property and equipment, net of accumulated depreciation
167,742 209,837
Other assets 12,099 12,399
-------------------------------------
Total assets $ 14,092,016 $ 14,493,733
=====================================
Liabilities and members' (deficit) equity Current liabilities:
Accounts payable $ 80,097 $ 89,374
Accrued expenses 147,798 366,348
Revolving credit agreement 6,896,694 9,105,557
Due to related parties 4,816,701 6,156,495
-------------------------------------
Total current liabilities 11,941,290 15,717,774
Due to related party - subordinated 5,000,000 3,500,000
Members' (deficit) equity:
Contributions 2,192,048 2,192,048
Retained deficit (5,041,322) (6,916,089)
-------------------------------------
Total members' (deficit) equity (2,849,274) (4,724,041)
-------------------------------------
Total liabilities and members' (deficit) equity $ 14,092,016 $ 14,493,733
=====================================
See accompanying notes.
F-4
Unzipped Apparel LLC
Statements of Operations
Year ended January 31
2002 2001 2000
------------------------------------------------------
Net sales $ 40,152,379 $ 41,578,213 $ 32,111,939
Cost of goods sold 30,948,857 34,894,590 28,065,924
------------------------------------------------------
Gross profit 9,203,522 6,683,623 4,046,015
Operating expenses 6,136,651 7,024,403 7,315,752
------------------------------------------------------
Income (loss) from operations 3,066,871 (340,780) (3,269,737)
Interest expense - net (1,192,104) (1,239,770) (586,785)
Loss on disposal of fixed assets - - (389,453)
------------------------------------------------------
Net income (loss) $ 1,874,767 $ (1,580,550)$ (4,245,975)
======================================================
See accompanying notes.
F-5
Unzipped Apparel LLC
Statements of Members' (Deficit) Equity
Michael Caruso
Sweet Sportswear, and Company, Total Members'
LLC Incorporated Equity
---------------------------------------------------------
Balance at February 1, 1999 $ 51,242 $ 51,242 $ 102,484
Capital contributions 500,000 500,000 1,000,000
Allocation of net loss (2,122,987) (2,122,988) (4,245,975)
---------------------------------------------------------
Balance at January 31, 2000 (1,571,745) (1,571,746) (3,143,491)
Allocation of net loss (790,275) (790,275) (1,580,550)
---------------------------------------------------------
Balance at January 31, 2001 (2,362,020) (2,362,021) (4,724,041)
Allocation of net income 937,383 937,384 1,874,767
---------------------------------------------------------
Balance at January 31, 2002 $ (1,424,637) $ (1,424,637) $ (2,849,274)
=========================================================
See accompanying notes.
F-6
Unzipped Apparel LLC
Statements of Cash Flows
Year ended January 31
2002 2001 2000
------------------------------------------------------
Operating activities
Net income (loss) $ 1,874,767 $ (1,580,550) $ (4,245,975)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation 62,167 55,109 71,772
Loss on disposal of fixed assets - - 389,453
Allowance for customer credits and returns 159,837 (181,055) 640,892
Changes in operating assets and liabilities:
Due from factor (616,409) (629,933) (3,107,133)
Accounts receivable - 36,698 (36,698)
Other assets 300 (1,500) -
Inventories 900,726 (2,540,679) (5,074,787)
Due to related parties 66,679 4,033,452 1,823,639
Accounts payable (9,275) 39,854 (4,228)
Accrued expenses (218,550) 261,077 27,395
------------------------------------------------------
Net cash provided by (used in) operating 2,220,242 (507,527) (9,515,670)
activities
Investing activities
Acquisition of property and equipment (20,072) (31,307) (608,347)
Other assets - 11,779 (4,359)
------------------------------------------------------
Net cash used in investing activities (20,072) (19,528) (612,706)
Financing activities
Payments under revolving credit agreement (38,168,970) (38,208,735) (26,648,212)
Borrowings under revolving credit agreement 35,960,106 38,694,155 33,329,058
Borrowing under subordinated loan from
related party - - 3,500,000
------------------------------------------------------
Net cash (used in) provided by financing
activities (2,208,864) 485,420 10,180,846
------------------------------------------------------
(Decrease) increase in cash (8,695) (41,635) 52,470
Cash at beginning of year 19,863 61,498 9,028
------------------------------------------------------
Cash at end of year $ 11,168 $ 19,863 $ 61,498
======================================================
Schedule of non-cash financing activities
Non-cash equity contributions $ - $ - $ 1,000,000
Supplemental disclosures of cash flow information
Cash paid for interest $ 811,134 $ 918,182 $ 586,785
See accompanying notes.
F-7
Unzipped Apparel LLC
Notes to Financial Statements
January 31, 2002
1. Summary of Significant Accounting Policies
Organization and Basis of Presentation
Unzipped Apparel LLC, a Delaware limited liability company (the Company), was
formed on September 17, 1998, between Sweet Sportswear, LLC (Sweet) and Michael
Caruso & Co., Inc. (Caruso), a subsidiary of Candie's, Inc. (Candie's), both
owning 50% interest, to contract, produce, distribute and market products with
the Candie's and Bongo trademarks. The Company entered into an agreement (the
Operating Agreement) with Sweet and Caruso, and obtained an exclusive license to
use the trademarks effective September 17, 1998. The Company is dependent upon
Azteca Production International (Azteca) to provide working capital funding,
certain management services as well as the production of substantially all of
its goods. The Company's LLC agreement specifies that the Company will terminate
on December 31, 2020, unless terminated earlier based on provisions in the
Operating Agreement. The Company's Operating Agreement provides for a mandatory
sale of Sweet's interest in the Company to Candie's on January 31, 2003. Under
the Company's LLC agreement, profits and losses are allocated and cash is
distributed equally according to each member's ownership interest in the
Company.
During the year ended January 31, 2000, the Company terminated its Candie's
apparel division as well as the Caruso license for Candie's apparel products.
Revenue Recognition
Revenues are recorded, net of anticipated returns, allowances and discounts, at
the time of shipment of merchandise.
Shipping and Handling Costs
The Company outsources distribution services to a related party. Costs relating
to shipping and handling of approximately $1,873,000, $2,043,000 and $2,194,000
for the years ended January 31, 2002, 2001 and 2000, respectively, have been
recorded as a component of operating expenses.
F-8
Unzipped Apparel LLC
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Advertising Costs
The Company expenses advertising costs as incurred. The amount charged to
advertising expense during the years ended January 31, 2002, 2001 and 2000 was
approximately $1,247,000, $1,287,000 and $1,054,000, respectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist exclusively of finished goods.
Property and Equipment
Property and equipment is recorded at cost. Depreciation of property and
equipment is being provided by use of the straight-line method over the
estimated useful lives of the assets which range from three to seven years.
Leasehold improvements are amortized using the straight-line method over the
lesser of their estimated useful lives or the term of the lease. Property and
equipment includes capital lease obligations which are by their terms equivalent
to purchase agreements.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less when purchased.
F-9
Unzipped Apparel LLC
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Income Taxes
No provision has been made in the accompanying financial statements for federal,
state or local taxes of the members. The members are individually responsible
for reporting their share of each item of income, gain, loss, deduction, or
credit.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentration of
credit risk consist primarily of cash and cash equivalents, nonfactored accounts
receivable and amounts due from the factor. In order to minimize the risk of
loss, the Company assigns substantially all accounts receivable to a factor who
assumes all credit risk with respect to collections on nonrecourse receivables.
The Company generally does not require collateral from its customers.
Significant Customers
One customer accounted for 11%, 16% and 16% of gross sales for the years ended
January 31, 2002, 2001 and 2000, respectively. Two other customers accounted for
11% and 10% of gross sales for the year ended January 31, 2000.
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of" (SFAS 121), which requires impairment losses to be recorded
on long-lived assets used in operations when indications of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. In such cases, the amount of
the impairment is to be determined based on the relative fair value of the
impaired assets. SFAS 121 also addresses the accounting for long-lived assets to
be disposed of. At January 31, 2002, the Company believes there has been no
impairment of the value of such assets.
F-10
Unzipped Apparel LLC
Notes to Financial Statements (continued)
2. Due from Factor
The Company has a factoring agreement with CIT Group/Commercial Services, Inc.
(CIT). The Company assigns to CIT, without recourse for the financial inability
of the customer to pay at maturity, all trade receivables of the Company
acceptable to CIT at their net invoice price less a commission of approximately
0.4% of the gross amount of each receivable for the first 60-day term. Extended
terms approved by CIT beyond 60 days require an additional 25% increase on the
factor commission for each additional 30 days or portion thereof of extended
terms or additional dating. The Company bears the entire risk of collection for
nonapproved receivables and accounts receivable returned by the factor to the
Company for disputed items. The factor agreement had an initial term of two
years, renewable annually unless terminated by either party.
3. Property and Equipment
Property and equipment consists of the following:
January 31,
2002 2001
------------------------------------
Machinery and equipment $ 1,104 $ 1,104
Computer equipment 93,655 73,581
Furniture and fixtures 213,409 213,409
Leasehold improvements 8,434 8,434
------------------------------------
316,602 296,528
Less accumulated depreciation (148,860) (86,691)
------------------------------------
$ 167,742 $ 209,837
====================================
4. Debt
Revolving Credit Agreement
The Company has a credit facility with Congress Financial Corporation (Congress)
which expires on September 30, 2002. Under the facility as amended, the Company
may borrow up to $15,000,000 under revolving loans. Borrowings are limited by
advance rates against eligible accounts receivable and inventory balances, as
defined. Under the facility, the Company may also arrange for letters of credit.
The borrowings bear interest at the lender's prime rate or at a rate of 2.25%
per annum in excess of the Eurodollar rate.
F-11
Unzipped Apparel LLC
Notes to Financial Statements (continued)
4. Debt (continued)
Revolving Credit Agreement (continued)
Borrowings under the facility are secured by substantially all of the assets of
the Company and are guaranteed by the Chairman/Manager of the Company and his
family trust, with such guarantee being limited to $500,000.
At January 31, 2002, no additional funds were available to be borrowed under the
revolving credit agreement.
The facility requires the Company to be in compliance with certain financial and
nonfinancial covenants. At January 31, 2002, the Company was required to have a
minimum members' equity balance of $750,000. The Company obtained an amendment
to the facility dated March 15, 2002, under which the minimum members' equity
balance was waived for the period from November 1, 2001 through February 28,
2002. In consideration for the amendment, Azteca agreed to increase the amount
of the subordinated loan from $3,500,000 to $5,000,000. For covenant purposes,
the subordinated note payable is considered to be a component of members'
equity.
5. Commitments and Contingencies
Leases
The Company occupies its office and showroom facilities in New York City in a
location leased by Caruso. The Company pays monthly rent pursuant to the terms
of the Caruso lease and remits payments directly to the lessor. The lease
expires on July 31, 2003.
In addition to the lease referred to above, in April 1999, the Company and an
affiliated company of Candie's entered into a noncancelable lease for additional
office and showroom space which expires March 2003 (see Note 6). The Company
also occupies space leased to Azteca and receives an allocated charge related to
such space.
Total rent expense charged to operations for the years ended January 31, 2002,
2001 and 2000 aggregated approximately $150,000, $155,000 and $273,000,
respectively.
F-12
Unzipped Apparel LLC
Notes to Financial Statements (continued)
5. Commitments and Contingencies (continued)
Leases (continued)
Future minimum payments for noncancelable operating leases referred to above
consisted of the following at January 31, 2002:
Operating
Leases
------------------
2003 $ 160,624
2004 160,624
2005 160,624
------------------
Total minimum lease payments $ 481,872
==================
6. Related Party Transactions
The Company has a supply agreement with Azteca for the exclusive development,
manufacturing, and supply of certain products bearing the Bongo trademark. As
consideration for the development of the products, the Company pays Azteca
pursuant to a separate pricing schedule. The Company purchases products from
Azteca at a price which generally approximates Azteca's cost plus 7%. The supply
agreement was consummated upon the Company's formation and extends through
January 31, 2003. Purchases for the years ended January 31, 2002, 2001 and 2000
approximated $30,800,000, $37,600,000 and $33,100,000, respectively.
Azteca also allocated expenses to the Company for the Company's use of a portion
of Azteca's office space, design and production team and support personnel.
Expenses allocated to the Company by Azteca approximated $433,000, $542,000 and
$837,000 for the periods ended January 31, 2002 and 2001, respectively. The
Company also receives executive management services from employees of Azteca and
Candie's. Such services, provided for the benefit of Sweet and Caruso, are
performed without a charge to the Company. Candie's and Caruso also permitted
the Company to use the Bongo trademark for apparel products without charge to
the Company.
At January 31, 2002, Azteca agreed to subordinate $5,000,000 of amounts due to
Azteca by the Company. The subordinated balance bears interest at the prime rate
plus 4% per annum and is repayable after borrowings from Congress have been
repaid in full.
F-13
Unzipped Apparel LLC
Notes to Financial Statements (continued)
6. Related Party Transactions (continued)
Pursuant to the Operating Agreement, the Company recorded advertising expense of
approximately $1,238,000, $1,257,000 and $990,000 for the years ended January
31, 2002, 2001 and 2000, respectively. The expense, which is paid to Candie's,
is equal to 3% of defined net sales intended for the advertising and promotion
of the Company's products primarily by Candie's.
The Company has a distribution agreement with Apparel Distribution Services
(ADS), an entity controlled by the shareholder of Sweet and Azteca. The
agreement provides for a $0.35 per unit fee for warehousing and distribution
functions and $0.15 per unit fee for processing and invoicing orders. The
agreement also provides for reimbursement for certain operating costs incurred
by ADS and charges for special handling fees at hourly rates approved by
management. These rates can be adjusted annually by the parties to reflect
changes in economic factors. The distribution agreement was consummated upon the
Company's formation and extends through December 31, 2002.
For the years ended January 31, 2002, 2001 and 2000, distribution expenses under
the agreement were approximately $1,873,000, $2,043,000 and 2,194,000,
respectively. The amounts due to ADS below represent unpaid distribution fees at
January 31, 2002 and 2001.
The Company occupies office space in a building rented by ADS and Commerce
Clothing Company, LLC (Commerce), a related party. Rent expense allocated to the
Company from ADS and Commerce for the years ended January 31, 2002, 2001 and
2000 was approximately $45,100, $44,400 and $42,500, respectively.
Amounts due to/from related parties consist of the following:
January 31,
2002 2001
--------------------------------------
Due to:
Current:
Azteca $ 641,077 $ 3,054,680
Candie's 183,268 131,045
ADS 3,992,356 2,924,297
Commerce - 46,473
--------------------------------------
4,816,701 6,156,495
F-14
Unzipped Apparel LLC
Notes to Financial Statements (continued)
6. Related Party Transactions (continued)
January 31,
2002 2001
--------------------------------------
Noncurrent:
Azteca $ 5,000,000 $ 3,500,000
--------------------------------------
$ 9,816,701 $ 9,656,495
======================================
Due from:
Current:
Commerce $ 93,527 $ -
======================================
7. Termination of Candie's Apparel Division
During the year ended January 31, 2000, the Company's members committed to close
its Candie's apparel division. In connection with the closure, the Company
wrote-off approximately $368,000 of leasehold improvements and other equipment
which was abandoned when the Company ceased using its showroom.
Candie's has taken title to the leasehold improvements and assumed the
obligation of the showroom and various office equipment contained therein.
Additionally, in connection with the termination of the Candie's division, the
Company recorded a reserve for obsolete and discontinued inventory of
approximately $458,000 and an allowance for customer credits and returns of
approximately $245,000. These amounts are included in the cost of goods and net
sales components of the statement of operations, respectively, for the year
ended January 31, 2000.
8. Events Subsequent to Date of Report of Independent Auditors (Unaudited)
On April 23, 2002, Candies purchased Sweet's 50% interest in the Company in
exchange for 3,000,000 shares of Candies' common stock and $11.0 million of
Candies redeemable preferred stock.
F-15
(b). Unaudited Pro Forma Consolidated Financial Statements
Introduction
The following unaudited pro forma consolidated financial statements give effect
to the acquisition by Candie's Inc. ("Candie's") in April 2002 of the remaining
50% of Unzipped Apparel LLC ("Unzipped") that it did not own, 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 Candie's would actually have been if the acquisition had in
fact occurred on such date, nor do they purport to project the results of
operations of Candie's for any future period.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired and liabilities assumed are recorded at their estimated fair
values. The excess of the purchase price, including estimated fees and expenses
related to the acquisition, over the net assets acquired has been classified as
goodwill. The estimated fair values and useful lives of assets acquired and
liabilities assumed are based on a preliminary valuation and are subject to
final valuation adjustments which may cause certain identified intangibles to be
amortized as opposed to goodwill, which has not been amortized in accordance
with FAS 142.
The unaudited pro forma statements of operations for the quarter ended April 30,
2002 and the year ended January 31, 2002 were prepared by combining Candie's and
Unzipped's statements of operations for the periods then ended, giving effect to
the acquisition as though it had occurred on February 1, 2001.
The consolidated historical financial statements of Candie's are derived from
the consolidated financial statements included in Candie's Form 10-K for the
year ended January 31, 2002 and Form 10-Q for the quarter ended April 30, 2002.
The historical financial statement of Unzipped for the year ended January 31,
2002 is derived from Unzipped's financial statements included herein and the
historical financial statement of Unzipped for the quarter ended April 30, 2002
is derived from unaudited financial statements not included herein.
A pro forma balance sheet has not been presented herein since the effects of the
acquisition have been included in Candie's Form 10-Q for the quarter ended April
30, 2002.
PF-1
Unaudited Pro Forma Consolidated Statement of Operations
Quarter ended April 30, 2002
(`000 omitted, except per share information)
Pro Forma Pro Forma
Candie's Unzipped Adjustments Consolidated
------------------ -------------- ----------------- -----------------
Net sales $ 24,190 $ 13,625 $ (68) (a) $ 37,747
Licensing income 1,427 - (414) (b) 1,013
------------------ -------------- ----------------- -----------------
Net revenue
25,617 13,625 (482) 38,760
Cost of goods sold 17,587 10,863 (59) (a) 28,391
------------------ -------------- ----------------- -----------------
Gross profit
8,030 2,762 (423) 10,369
Selling, general and administrative expenses 7,062 2,087 (414) (b) 8,735
Special charges 15 - - 15
------------------ -------------- ----------------- -----------------
Operating income 953 675 (9) (b) 1,619
Other expenses:
Interest expense - net 277 260 - 537
Equity income in joint venture (250) - 250 (c) -
------------------ -------------- ----------------- -----------------
27 260 250 537
------------------ -------------- ----------------- -----------------
Income (loss) before income taxes 926 415 (259) 1,082
(Benefit) provision for income taxes (139) 13 - (126)
------------------ -------------- ----------------- -----------------
Net income (loss) 1,065 402 (259) 1,208
Dividends - - 198 (d) 198
------------------ -------------- ----------------- -----------------
Net income (loss) available to common stockholders $ 1,065 $ 402 $ (457) $ 1,010
================== ============== ================= =================
Earnings per share:
Basic $ 0.05 $ 0.04
================== =================
Diluted $ 0.05 $ 0.04
================== =================
Weighted average number of common shares outstanding:
Basic 20,642 - 3,000 (e) 23,642
================== ============== ================= =================
-
Diluted 23,104 3,000 (e) 26,104
================== ============== ================= =================
See accompanying notes.
PF-2
Unaudited Pro Forma Consolidated Statement of Operations
Year ended January 31, 2002
(`000 omitted, except per share information)
Pro Forma Pro Forma
Candie's Unzipped Adjustments Consolidated
------------------ -------------- ----------------- -----------------
Net sales $ 96,327 $ 40,152 $ (123) (a) $ 136,356
Licensing income 5,075 - (1,254) (b) 3,821
------------------ -------------- ----------------- -----------------
Net revenue
101,402 40,152 (1,377) 140,177
Cost of goods sold 72,642 30,949 (123) (a) 103,468
------------------ -------------- ----------------- -----------------
Gross profit
28,760 9,203 (1,254) 36,709
Selling, general and administrative expenses 28,514 6,136 (1,254) (b) 33,396
Special charges 1,791 - - 1,791
------------------ -------------- ----------------- -----------------
Operating (loss) income (1,545) 3,067 - 1,522
Other expenses:
Interest expense - net 1,175 1,192 - 2,367
Equity income in joint venture (500) - 500 (c) -
------------------ -------------- ----------------- -----------------
675 1,192 500 2,367
------------------ -------------- ----------------- -----------------
(Loss) income before income taxes (2,220) 1,875 (500) (845)
Provision for income taxes 62 - - 62
------------------ -------------- ----------------- -----------------
Net (loss) income (2,282) 1,875 (500) (907)
Dividends - - 800 (d) 800
------------------ -------------- ----------------- -----------------
Net (loss) income available to common stockholders $ (2,282) $ 1,875 $ (1,300) $ (1,707)
================== ============== ================= =================
Loss per share:
Basic $ (0.12) $ (0.08)
================== =================
Diluted $ (0.12) $ (0.08)
================== =================
Weighted average number of common shares outstanding:
Basic 19,647 - 3,000 (e) 22,647
================== ============== ================= =================
Diluted 19,647 - 3,000 (e) 22,647
================== ============== ================= =================
See accompanying notes.
PF-3
Notes to Unaudited Pro Forma Consolidated Statements of Operations
(a) Represents the elimination of sales by Unzipped to Candie's.
(b) Represents the elimination of licensing income and expenses historically
received and incurred, respectively, relating to the license of Bongo
jeanswear by Candie's to Unzipped.
(c) Represents the elimination of equity income in joint venture by Candie's
resulting from a reduction in its liability relating to Unzipped.
(d) Represents dividends that would have been payable under the terms of the
acquisition agreement.
(e) Represents the shares of Candie's common stock that were issued as part of
the acquisition.
PF-4