EX-99.2 3 d427071dex992.htm UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

Unaudited pro forma condensed consolidated financial data

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 “VBQ” refers to Vilebrequin International SA and its subsidiaries (iii) the term “Acquisition” refers to our acquisition of the stock of Vilebrequin International SA.

The following unaudited pro forma condensed consolidated financial data as of and for the six months ended July 31, 2012 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, 2012 has been derived from G-III’s audited consolidated statement of income for its fiscal year ended January 31, 2012 and VBQ’s audited consolidated statement of income for the year ended December 31, 2011 and gives effect to the consummation of the Acquisition as if it had occurred on February 1, 2011. The unaudited pro forma condensed consolidated balance sheet as of July 31, 2012 has been derived from G-III’s unaudited consolidated balance sheet as of July 31, 2012 and VBQ’s unaudited consolidated balance sheet as of June 30, 2012, as adjusted to give effect to the Acquisition as if it occurred on July 31, 2012. The unaudited pro forma condensed consolidated statement of income for the six months ended July 31, 2012 has been derived from G-III’s unaudited statement of income for the six months ended July 31, 2012, and the unaudited statement of income for the six months ended June 30, 2012 of VBQ, and gives effect to the consummation of the Acquisition, as if they had occurred on February 1, 2011.

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 VBQ 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 intangible assets, interest expense due to incremental borrowings under our credit facility to pay for the cash portion of the purchase and to record interest on our notes payable to the seller, the taxation of G-III’s and VBQ’s combined income as a result of the Acquisition as well as the tax 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 VBQ that exist 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. Additionally, the purchase agreement provides for annual contingent payments for the years ending December 31, 2013 through December 31, 2015, based upon achieving certain performance objectives related to the growth of the operations acquired. The contingent payments have been estimated and recorded as contingent purchase price on the proforma balance sheet.

Vilebrequin’s historical financial statements have been translated from euros to U.S dollars using historic exchange rates. The average exchange rates applicable to Vilebrequin during the periods presented for the proforma Statements of Operation and the period end exchange rate for the proforma Balance Sheet are as follows:

				Euro/USD
Year ended December 31, 2011		Average Spot Rate			1.3924
Six months ended June 30, 2012		Average Spot Rate			1.2977
June 30, 2012		Period End Spot Rate			1.2577

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of July 31, 2012

(in thousands)

		Historical G-III				Historical VBQ				Conversion to USD				Pro Forma Adjustments				G-III Pro Forma Condensed Consolidated
ASSETS
Current Assets
Cash and cash equivalents		$	22,653			€	5,480			$	6,892			$	(4,892	)(d)		$	24,653
Receivables, net of allowances			184,816				6,934				8,721				—				193,537
Inventories, net			336,389				8,101				10,188				—				346,577
Prepaid income taxes			468				—				—				—				468
Deferred income taxes			9,559				—				—				—				9,559
Prepaid expenses and other current assets			27,075				1,234				1,552				—				28,627
Total current assets			580,960				21,749				27,353				(4,892	)			603,421
Investment in joint venture			2,236				—				—				—				2,236
Property, plant and equipment, net			34,110				3,969				4,992				—				39,102
Deferred income tax			—				24				30				—				30
Other assets			1,706				1,909				2,401				—				4,107
Key money			—				3,176				3,994				—				3,994
Intangibles, net			17,231				543				683				60,800	(c)			78,714
Goodwill			26,100				186				234				31,498	(c)
															12,160	(e)			69,992
		$	662,343			€	31,556			$	39,687			$	99,566			$	801,596
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Notes payable		$	87,007			€	19,991			$	25,142			$	87,600	(b)
															(25,142	)(d)		$	174,607
Accounts payable			171,374				6,009				7,558				—				178,932
Due to related party			—				17,254				21,699				(21,699	)(d)			—
Accrued expenses			25,435				3,393				4,267				4,000	(f)			33,702
Deferred income taxes			—				20				25				—				25
Deferred income			—				2,012				2,530				—				2,530
Total current liabilities			283,816				48,679				61,221				44,759				389,796
Deferred income taxes			1,289				—				—				12,160	(e)			13,449
Due to noncontrolling shareholder			1,568				—				—				—				1,568
Other non-current liabilities			11,498				72				91				—				11,589
Note payable – seller			—				—				—				18,600	(b)			18,600
Contingent purchase price			—				—				—				5,500	(b)			5,500
Due to related party			—				6,000				7,546				(7,546	)(d)			—
Total liabilities			298,171				54,751				68,858				73,473				440,502
Stockholders’ Equity
Total owners’ equity			364,080				(23,295	)			(29,297	)			(4,000	)(f)
															30,093	(g)			360,876
Noncontrolling interest			92				100				126				—				218
Total Stockholders’ Equity			364,172				(23,195	)			(29,171	)			26,093				361,094
		$	662,343			€	31,556			$	39,687			$	99,566			$	801,596

See accompanying notes to the unaudited pro forma condensed consolidated balance sheet.

Notes to the unaudited pro forma condensed consolidated balance sheet

(a) Accounting Period
The historical Vilebrequin balance sheet is as of June 30, 2012
(b) Purchase Price
The purchase price ($106.2 million) was paid from borrowings from our credit facility and the delivery of an unsecured promissory note. Contingent future payments may be due as a result of obtaining specified performance objectives.
Proceeds from credit facility		$	87,600
Note issued to seller			18,600
Estimated fair value of contingent future payments			5,500
Total consideration		$	111,700
(c) Goodwill and intangibles, net
Estimated tradename		$	52,500
Estimated customer list			3,200
Estimated franchise and distribution agreements			5,100
Estimated goodwill			31,498
		$	92,298
(d) Current maturities of long term debt and repayment of excess cash balance
Amounts due to related party, which represents loans from Vilebrequin’s shareholder, and other debt to third party lenders were repaid upon closing. In addition, cash balances in excess of €2 million was paid to the seller at closing.
(e) Deferred Income Taxes
Deferred tax liability recorded on intangible assets other than goodwill at Vilebrequin’s estimated statutory tax rate
Intangibles other than goodwill		$	60,800
Vilebrequin’s statutory income tax rate in the country in which the intangibles are held			20	%
		$	12,160
(f) Acquisition costs and expenses
Legal, accounting and investment advisory fees related to the acquisition of Vilebrequin are expensed as incurred
(g) Total stockholders’ equity
Elimination of Vilebrequin’s equity from purchase accounting adjustments

Unaudited Pro Forma Condensed Consolidated Statements of Operation

For the year ended January 31, 2012

(in thousands, except per share amounts)

		Historical G-III				Historical VBQ				Conversion to USD				Pro Forma Adjustments				G-III Pro Forma Condensed Consolidated
Net sales		$	1,231,201			€	45,128			$	62,836							$	1,294,037
Cost of goods sold			860,485				13,679				19,047								879,532
Gross profit			370,716				31,449				43,789								414,505
Selling, general and administrative expenses			277,019				22,510				31,343								308,362
Depreciation and amortization			7,473				2,275				3,168			$	1,595	(b)			12,236
Operating profit			86,224				6,664				9,278				(1,595	)			93,907
Equity loss in joint venture			1,271				—				—				—				1,271
Interest and financing charges, net			5,713				2,392				3,331				3,777	(c)
															(3,331	)(c)			9,490
Other nonoperating income			—				85				118				—				118
Income before incomes taxes			79,240				4,187				5,829				(2,041	)			83,028
Income tax expense			29,620				200				278				(1,327	)(d)			28,571
NET INCOME			49,620				3,987				5,551				(714	)			54,457
Less: non-controlling interest			—				12				17				—				17
Income attributed to G-III/VBQ		$	49,620			€	3,975			$	5,534			$	(714	)		$	54,440
NET INCOME PER SHARE:
Net income per common share – basic																		$	2.75
Historical weighted average number of shares outstanding																			19,796
Net income per common share – diluted																		$	2.70
Historical weighted average number of shares outstanding																			20,192

Notes to the unaudited pro forma condensed consolidated balance sheet.

(a) Accounting Period
The historical Vilebrequin statement of operations is for the year ended December 31, 2011
(b) Selling, general and administrative expenses
Estimated amortization of acquired intangible assets which consist of franchise and distribution agreements and customer lists.										$	1,595
(c) Interest expense
Interest expense calculated on incremental borrowing used to acquire Vilebrequin										$	87,600
G III average interest rate on date of acquisition											3.25	%
Annual interest										$	2,847
Interest expense calculated on note payable due to seller										$	18,600
Stated interest rate on unsecured promissory note delivered to seller											5.00	%
Annual interest										$	930
Total interest										$	3,777
Reversal of interest expense related to notes payable and amounts due to related party that were repaid upon the closing of the acquisition										$	3,331
(d) Income tax provision
Tax effect of proforma effect on acquired intangibles at VBQ effective tax rate										$	77
Tax effect of proforma interest expense adjustments at G III effective tax rate											1,250
										$	1,327

Unaudited Pro Forma Condensed Consolidated Statements of Operation

Six months ended July 31, 2012

(in thousands, except per share amounts)

		Historical G-III				Historical VBQ				Conversion to USD				Pro Forma Adjustments				G-III Pro Forma Condensed Consolidated
Net sales		$	480,928			€	20,309			$	26,355							$	507,283
Cost of goods sold			337,395				5,875				7,624								345,019
Gross profit			143,533				14,434				18,731								162,264
Selling, general and administrative expenses			136,068				11,729				15,221								151,289
Depreciation and amortization			4,153				1,227				1,592			$	798	(b)			6,543
Operating profit			3,312				1,478				1,918				(798	)			4,432
Equity loss in joint venture			433				—				—								433
Interest and financing charges, net			2,138				921				1,195				1,888	(c)
															(1,195	)(c)			4,026
Other nonoperating income			—				(29	)			(38	)			—				(38	)
Income before incomes taxes			741				586				761				(1,491	)			11
Income tax expense (benefit)			282				(58	)			(75	)			(203	)(d)			4
NET INCOME			459				644				836				(1,288	)			7
Less: non-controlling interest			(55	)			(5	)			(6	)			—				(61	)
Income attributed to G-III/VBQ		$	514			€	649			$	842			$	(1,288	)		$	68
NET LOSS PER SHARE:
Net loss per common share – basic and diluted																		$	(0.00	)
Historical weighted average number of shares outstanding																			19,928

Notes to the unaudited pro forma condensed consolidated balance sheet.

(a) Accounting Period
The historical Vilebrequin statement of operations is for the six months ended June 30, 2012
(b) Selling, general and administrative expenses
Estimated amortization of acquired intangible assets which consist of franchise and distribution agreements and customer lists.										$	798
(c) Interest expense
Interest expense calculated on incremental borrowing used to acquire Vilebrequin										$	87,600
G III average interest rate on date of acquisition											3.25	%
Annual interest											2,847
Semi-annual interest										$	1,424
Interest expense calculated on note payable due to seller										$	18,600
Stated interest rate on unsecured promissory note delivered to seller											5.00	%
Annual interest											930
Semi-annual interest										$	465
Reversal of interest expense related to notes payable and amounts due to related party that were repaid upon the closing of the Acquisition										$	1,195
(d) Income tax provision
Income taxes have been provided at G III’s proforma estimated effective tax rate of 34.4% as calculated for the year ended January 31, 2012.