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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Jones Grp. | NYSE:JNY | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 14.99 | 0.00 | 01:00:00 |
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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x
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Definitive Additional Materials
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o
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Soliciting Material Pursuant to §240.14a-12
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x
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No fee required.
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¨
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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·
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the impairments recorded as a result of the annual review of indefinite-lived intangible assets and goodwill;
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·
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severance, fixed asset impairment and other charges and credits related to the closure of underperforming retail locations;
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·
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the amortization of certain acquired intangible assets from the acquisition of Atwood Italia S.r.l.;
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·
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investment consulting fees, legal fees, accounting fees and other items related to the acquisitions and other business development activities;
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·
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severance and restricted stock amortization related to executive management changes; and
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·
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present value accruals and adjustments for liabilities related to leases on properties currently not in use.
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(1)
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The Sponsor has presented these non-GAAP financial measures, because it believes such measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in Nine West Holdings’ industry. The use of these non-GAAP financial measures has limitations as an analytical tool, including the failure to reflect changes in cash requirements, including cash requirements necessary to service principal or interest payments on debt, pay income taxes, or invest in maintenance and growth capital expenditures or in working capital needs. Other companies in Nine West Holdings’ industry may calculate these measures differently than Nine West Holdings does, limiting their usefulness as a comparative measure. See below for a reconciliation of each of these non-GAAP financial measures to its most directly comparable GAAP financial measure.
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(2)
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Total Debt as of December 31, 2013 assumes that all of the Old Notes are tendered in the Offer. See “Capitalization” for more information on Nine West Holdings’ debt capital structure in event that less than all of the Old Notes are tendered in the Offer.
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(3)
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Amounts shown for Total Debt include long-term debt and current portion of long-term debt, before any anticipated original issue discount.
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(4)
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Total Lease-Adjusted Debt as of December 31, 2013 assumes that all of the Old Notes are tendered in the Offer and capitalizes Adjusted Rent Expense at 8.0x. See “Capitalization” for more information on Nine West Holdings’ debt capital structure in the event that less than all of the Old Notes are tendered in the Offer.
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(5)
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Cash interest expense for the twelve months ended December 31, 2013 is total cash interest expense for Nine West Holdings after giving pro forma effect to the Transactions, including the incurrence of the senior credit facilities and the New Notes. The calculation reflects twelve months of interest as if such indebtedness had been outstanding on the first day of such twelve-month period. The actual interest rates on any variable interest indebtedness over such twelve-month period may vary from those assumed in the calculation, and this financial data should not be considered indicative of actual results that would have been achieved during such twelve-month period.
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(a)
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Relates to (i) net non-cash royalty income recognized for the intra-company licensing of certain brands which will be replaced by royalty-free agreements between Nine West Holdings and the Apparel Business going forward; (ii) certain corporate costs previously allocated to Nine West Holdings from affiliated companies, and (iii) the expense of one-time fees and expenses related to the Transactions.
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(b)
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Relates to other costs not considered to be part of going forward operations and/or rounding.
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(c)
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Includes (i) trademark and goodwill impairments; (ii) costs associated with retail store restructuring; (iii) costs associated with unused property; and (iv) costs associated with non-retail store restructurings.
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(d)
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Reverses the impact of purchase accounting on deferred rent expense and tenant allowance amortization.
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(e)
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Represents remaining depreciation and amortization not added back to Adjusted Operating Income and includes the impact of additional depreciation and amortization expenses that result from purchase accounting. Depreciation and amortization added back to Adjusted Operating Income was $35 million in the year ended December 31, 2013.
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(f)
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Includes savings contemplated by the Sponsor, including store and brand closures or exits and corporate cost savings initiatives.
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(g)
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See reconciliation for Adjusted Rent Expense.
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(h)
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Run-rate adjustment reflecting rent expense in the year ended December 31, 2013 associated with stores planned to be closed by December 31, 2014. The significant majority of these stores are expected to be closed by June 30, 2014.
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(i)
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Run-rate adjustment reflecting rent expense in the year ended December 31, 2013 associated with planned brand exits.
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(j)
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Includes one-time non-cash charges incurred with respect to subletting vacant real estate.
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(k)
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Relates to other non-base rent (including sales-based percentage rent, equipment rent and storage rent).
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(l)
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Capital expenditures associated with the implementation of SAP, completed in 2013.
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(m)
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Capital expenditures associated with stores and brands planned to be sold or closed, the significant majority of which is expected to be completed by June 30, 2014.
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As of December 31, 2013
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Actual
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Pro Forma
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(in millions)
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(unaudited)
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Cash and cash equivalents
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$ | 89.2 | $ | 70.0 | ||||
Long-term debt (including current portion)(1)
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Guaranteed loan notes(2)
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$ | 10.3 | $ | 10.3 | ||||
2014 Notes
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250.0 | — | ||||||
Old Notes(3)
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400.0 | — | ||||||
2034 Notes
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250.0 | 250.0 | ||||||
Existing revolving credit facility(4)
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— | — | ||||||
Revolving credit facility(3)(4)
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— | 55.0 | ||||||
Secured term loan facility(3)
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— | 445.0 | ||||||
Unsecured term loan facility
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— | 300.0 | ||||||
New Notes (3)
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— | 400.0 | ||||||
Total debt
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910.3 | 1,460.3 | ||||||
Total stockholders’ equity(5)
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98.2 | 103.5 | ||||||
Total capitalization
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$ | 1,008.5 | $ | 1,563.8 |
(1) |
Amount of any debt presented reflects par value and does not reflect any unamortized discount or premium, as applicable, or fair value adjustments.
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(2) |
£6.2 million of fixed rate guaranteed loan notes converted at USD/GBP exchange rate of 1.6488 as of December 31, 2013. The fixed rate guaranteed loan notes will be supported by a letter of credit issued under the senior secured asset-based revolving credit facility.
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(3) |
If less than $300.0 million of the Old Notes are tendered in the Offer, then unless Nine West Holdings waives the condition to the Offer that requires receipt of valid tenders of Old Notes, not validly withdrawn, of at least $300.0 million of the principal amount outstanding of the Old Notes prior to 5:00 p.m., New York time, on April 4, 2014, Nine West Holdings will terminate the Offer and no New Notes will be exchanged for Old Notes. If less than all, but $300.0 million or more, of the Old Notes are tendered in the Offer and the holders of the remaining Old Notes do not tender their Old Notes in the change of control offer, then such untendered Old Notes will remain outstanding and will become the obligation of Nine West Holdings following the consummation of the Transactions. If less than all, but $300.0 million or more, of the Old Notes are tendered in the Offer and the holders of the remaining Old Notes tender their Old Notes in the change of control offer, Nine West Holdings will use up to an additional $25.0 million of drawings under the revolving credit facility, the cash proceeds from an offering of additional notes or an additional Sponsor equity contribution, or any combination of the foregoing, to fund the repurchase of such Old Notes tendered in the change of control offer. If Nine West Holdings elects to issue additional notes and the proceeds from such offering exceed the amount of cash needed to repurchase the Old Notes tendered in the change of control offer, such excess proceeds would reduce the amounts that would otherwise be drawn under the revolving credit facility and/or be used to prepay a portion of the secured term loan facility.
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(4) |
No amounts were outstanding under the Company’s existing revolving credit facility as of December 31, 2013, except for drawn letters of credit totaling $19.6 million, $2.6 million of which related directly to the Stuart Weitzman Business and the Kurt Geiger Business and $10.7 million of which related to the guaranteed loan notes. The existing revolving credit facility is being refinanced as part of the Transactions, and the $2.6 million of letters of credit with respect to the Stuart Weitzman Business and the Kurt Geiger Business are being terminated. As of December 31, 2013, on a pro forma basis giving effect to the Transactions as if they had occurred on that date and assuming that all Old Notes have been tendered and accepted in the Offer, Nine West Holdings would have had $170.0 million of borrowing capacity under the revolving credit facility, excluding $16.9 million of outstanding letters of credit ($10.7 million of which will relate to the guaranteed loan notes).
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(5) |
Pro forma total stockholders’ equity represents $120.0 million sponsor equity contribution, net of buyer transaction costs of $16.5 million relating to the Transactions, which will be recorded as an expense.
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Historical
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Pro Forma
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(Amounts in millions)
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December 31, 2013
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Adjustments
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December 31, 2013
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ASSETS
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Current Assets
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Cash and cash equivalents
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$ | 89.2 | $ | (19.2 | ) | (1 | ) | $ | 70.0 | ||||||
Accounts receivable
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228.6 | - | 228.6 | ||||||||||||
Inventories, primarily finished goods
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302.6 | - | 302.6 | ||||||||||||
Prepaid and refundable income taxes
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2.6 | - | 2.6 | ||||||||||||
Deferred taxes
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18.6 | - | 18.6 | ||||||||||||
Prepaid expenses and other current assets
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31.2 | - | 31.2 | ||||||||||||
Total current assets
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672.8 | (19.2 | ) | 653.6 | |||||||||||
Property, plant and equipment, at cost, less accumulated depreciation and amortization
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144.3 | 47.9 | (2 | ) | 192.2 | ||||||||||
Goodwill
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- | 198.6 | (2 | ) | 198.6 | ||||||||||
Other intangibles, less accumulated amortization
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397.5 | 611.5 | (2 | ) | 1,009.0 | ||||||||||
Investments in unconsolidated affiliate
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55.9 | (1.4 | ) | (2 | ) | 54.5 | |||||||||
Notes receivable
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93.3 | (93.3 | ) | (3 | ) | - | |||||||||
Other assets
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53.2 | 26.9 | (2 | ), (4) | 80.1 | ||||||||||
Total assets
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$ | 1,417.0 | $ | 771.1 | $ | 2,188.1 | |||||||||
LIABILITIES AND EQUITY
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Current Liabilities
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Current portion of long-term debt and capital lease obligations
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$ | 256.6 | $ | (199.4 | ) | (5 | ) | $ | 57.2 | ||||||
Accounts payable
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162.1 | - | 162.1 | ||||||||||||
Income taxes payable
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- | - | - | ||||||||||||
Accrued employee compensation and benefits
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27.9 | - | 27.9 | ||||||||||||
Accrued expenses and other current liabilities
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62.0 | (6.9 | ) | (6 | ) | 55.1 | |||||||||
Total current liabilities
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508.6 | (206.3 | ) | 302.3 | |||||||||||
Long-term debt
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673.4 | 694.7 | (5 | ) | 1,368.1 | ||||||||||
Obligations under capital leases
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19.1 | - | 19.1 | ||||||||||||
Deferred taxes
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56.8 | 297.6 | (2 | ) | 354.4 | ||||||||||
Other liabilities
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60.7 | (20.3 | ) | (2 | ), (7) | 40.4 | |||||||||
Total liabilities
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$ | 1,318.6 | $ | 765.8 | $ | 2,084.4 | |||||||||
Redeemable noncontrolling interest
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0.2 | - | 0.2 | ||||||||||||
Total equity
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98.2 | 5.3 | (8 | ) | 103.5 | ||||||||||
Total liabilities and equity
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$ | 1,417.0 | $ | 771.1 | $ | 2,188.1 |
(1)
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Represent
s
the net effect of the Transactions on cash and cash equivalents based on the estimated sources and use
s
of c
a
sh for the Transactions (assuming all of the Old Notes are exchanged for New Notes in the Offer) as if they had occurred on December 31, 2013 as presented below (in millions):
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SOURCES:
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USES:
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Available cash and equivalents (a)
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$ | 19.2 |
Purchase of Jones equity (f)
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687.7 | |||||
Refinancing of 2014 Notes
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250.0 | ||||||||
Revolving credit facility
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55.0 |
Refinancing of Old Notes
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400.0 | ||||||
Secured term loan facility
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445.0 |
Rollover of 2034 Notes
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250.0 | ||||||
Unsecured term loan facility
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300.0 |
Rollover of guaranteed loan notes
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10.3 | ||||||
New Notes
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400.0 |
Purchase price
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$ | 1,598.0 | |||||
Total New Debt (b)
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$ | 1,200.0 | |||||||
Estimated fees and expenses (g)
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$ | 87.9 | |||||||
Rollover of 2034 Notes
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250.0 | ||||||||
Rollover of guaranteed loan notes
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10.3 |
Accrued interest on redeemed notes (h)
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$ | 6.9 | |||||
Rollover debt (c)
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260.3 | ||||||||
Notes receivable (d)
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93.3 | ||||||||
Equity contribution (e)
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120.0 | ||||||||
Total sources of funds
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$ | 1,692.8 |
Total uses of funds
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$ | 1,692.8 |
(a)
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Represents, as of December 31, 2013, the pro forma use of cash and equivalents used to fund the Transactions. The amount of cash and equivalents to be used at the close of the Transaction will depend on various factors, including the timing of the closing, the levels of net working capital, amounts of existing indebtedness at closing, and transaction fees and expenses.
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(b)
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Newly raised debt for the purposes of funding the transaction, comprised of $55.0 million in borrowings on the revolving credit facility, which has a total borrowing capacity of $225.0 million, $445.0 million in borrowings on the secured term loan facility, $300.0 million in borrowings on the unsecured term loan facility and $400.0 million of New Notes.
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(c)
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The existing 2034 Notes and guaranteed loan notes are contemplated to remain outstanding at the close of the Transactions.
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(d)
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In connection with the carveout of the Kurt Geiger Business, an existing receivable from the Kurt Geiger Business in the amount of $93.3 million will be collected by Nine West Holdings.
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(e)
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Represents an equity contribution to Nine West Holdings by Sycamore and KKR.
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(f)
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Represents the portion of the purchase of total equity of the Company attributable to the Nine West Holdings transaction. The total equity purchase price of the Company of $1,183.2 million represents $1,182.9 million for the purchase of 78.9 million shares outstanding, including restricted shares expected to be outstanding at close, at the purchase price of $15 per share, and $0.3 million for the purchase of 20,000 Share Units.
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(g)
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Represents estimated fees and expenses associated with the Transactions, including an estimated make-whole premium with respect to the existing 2014 Notes of $7.3 million, commitment fees, financing fees, issue discounts and other transaction costs and professional fees attributable to Nine West Holdings.
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(h)
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Represents estimated
interest
accrued on the notes to be
exchanged
or redeemed, as applicable, at close, comprised of $1.8 million of interest accrued related to the Old Notes and $5.1 million of interest accrued related to the 2014 Notes.
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(2
)
|
Reflects the effect of acquisition method accounting based on preliminary
a
llocation of the purchase price to identifiable assets acquired and liabilities assumed, based on preliminary valuations, which changes are not deductible for tax purposes
.
The goodwill will not be amortized and will be evaluated for impairment on an annual basis.
The following preliminary purchase price allocation is subject to adjustment and such adjustments may be material (in millions)
:
|
Purchase consideration
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$ | 1,598.0 | ||
Less: Existing debt
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(910.3 | ) | ||
Purchase price of equity
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$ | 687.7 | ||
Historical book value of net assets
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$ | 98.2 | ||
Less: sellers fees
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14.0 | |||
Less: redemption premium on 2014 Notes
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7.3 | |||
Net assets acquired
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$ | 76.9 | ||
Excess purchase consideration
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$ | 610.8 | ||
Allocated to:
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||||
Property, plant and equipment, net
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$ | 47.9 | ||
Goodwill
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198.6 | |||
Other intangibles
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611.5 | |||
Investments in unconsolidated affiliate
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(1.4 | ) | ||
Deferred rent
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20.3 | |||
Capitalized swap gains - current
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4.4 | |||
Capitalized swap gains - long-term
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13.1 | |||
Existing deferred finance fees
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(23.2 | ) | ||
Revaluation to fair value of 2034 Notes
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37.2 | |||
Deferred income taxes
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(297.6 | ) | ||
Total adjustment
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$ | 610.8 |
(3)
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In connection with the carveout of the Kurt Geiger Business, an existing receivable from the Kurt Geiger Business in the amount of $93.3 million will be collected by Nine West Holdings.
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(4)
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Adjustments reflect the capitalization of $50.1 million in financing fees incurred in connection with the new debt being offered to fund the Transactions and write-off of $23.2 million in financing fees related to existing debt.
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(5) |
Adjustments reflect:
|
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(i) | The issuance of the New Notes and other new debt being used to fund the Transactions, including (a) in current portion of long term debt, $55.0 million in borrowings on the revolving credit facility net of the repayment of the 2014 Notes, and (b) in long-term debt, $445.0 million in borrowings on the secured term loan facility, $300.0 million in borrowings on the unsecured term loan facility, and $400.0 million in New Notes offset by the cancellation of the Old Notes. See Note (1) above for further detail. | |
(ii) | The revaluation of the $250.0 million outstanding senior notes due 2034 to their fair market value of $212.8 million as of December 31, 2013, resulting in a $37.2 million decrease in long-term debt. | |
(iii) | The write-off of capitalized swap gains and unamortized issuance discount on premium, $4.4 million of which is reflected in current portion of long term debt and $13.1 million of which is reflected in long-term debt. | |
(6) |
Payout of $6.9 million of interest accrued on the 2014 Notes and the Old Notes. See Note (1) above for further detail.
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(7) | Reflects the elimination of historical deferred rent and tenant allowance balances in the amount of $8.7 million and $11.7 million, respectively. | |
(8) |
Adjustments to equity reflect:
|
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(i) | Elimination of historical equity in the amount of $98.2 million; and | |
(ii) | Equity contributions in the amount of $120.0 million, net of buyer transaction costs of $16.5 million relating to the Transactions, which will be charged to expense. |
(Amounts in millions)
|
Historical
|
Adjustments
|
Pro Forma
|
||||||||||||
Total revenues
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2,238.5 | $ | - | $ | 2,238.5 | ||||||||||
Cost of goods sold
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1,552.3 | - | 1,552.3 | ||||||||||||
Gross profit
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686.2 | - | 686.2 | ||||||||||||
Selling, general and administrative expenses
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564.5 | 14.3 | (1 | )(2)(3)(4) | 578.8 | ||||||||||
Goodwill impairments
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3.2 | - | 3.2 | ||||||||||||
Trademark impairments
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7.2 | - | 7.2 | ||||||||||||
Operating income
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111.3 | (14.3 | ) | 97.0 | |||||||||||
Interest income
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3.8 | - | 3.8 | ||||||||||||
Interest expense and financing costs
|
60.9 | 40.6 | (5 | ) | 101.5 | ||||||||||
Equity in income of unconsolidated affiliates
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0.6 | - | 0.6 | ||||||||||||
Income (loss) from operations before (benefit) provision for income taxes
|
54.8 | (54.9 | ) | (0.1 | ) | ||||||||||
Provision (benefit) for income taxes
|
27.7 | (25.8 | ) | (6 | ) | 1.9 | |||||||||
Net income (loss)
|
27.1 | (29.2 | ) | (2.1 | ) | ||||||||||
Less: (loss) attributable to noncontrolling interest
|
(1.1 | ) | - | (6 | ) | (1.1 | ) | ||||||||
Income (loss) attributable to Jones Footwear and Jeanswear
|
$ | 28.2 | $ | (29.2 | ) | $ | (1.0 | ) |
(1)
|
Represents additional depreciation expense as a result of the acquisition accounting adjustment to the values of Property, Plant and Equipment assets in an amount of $5.2 million.
|
(2)
|
Reflects an increase in amortization expense resulting from the preliminary estimated fair value assigned to amortizable intangible assets under acquisition accounting in an amount of $8.2 million.
|
(3)
|
Reflects increased non-cash rent expense due to the recalculation of straight-line rent for GAAP under acquisition accounting for the lease periods remaining after closing of the Transactions in an amount of $6.5 million.
|
(4)
|
Reflects elimination of non-recurring fees and expenses already incurred during the fiscal year ended December 31, 2013 by the Company in connection with the Transactions in an amount of $5.6.
|
(5)
|
Reflects increased interest expense related to the new debt being used to fund the transaction (including the New Notes), net of the elimination of interest related to the notes being redeemed and interest related to the current revolving credit facility. Also includes amortization of deferred financing costs related to the new debt issuance, including the New Notes. Additionally, pro forma interest expense includes amortization of expense on the estimated $14.4 million of deferred financing costs associated with the New Notes and $35.8 million of deferred financing costs associated with other newly issued debt, utilizing the effective interest method over the term of each debt facility.
|
(6)
|
Reflects the estimated tax effects of pro forma adjustments resulting from the Transactions at an effective tax rate of 46.9% for the fiscal year ended December 31, 2013.
|
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