Unaudited Pro Forma Condensed Consolidated Financial Information
Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Information
On May 4, 2016, Gaiam and its wholly owned subsidiary Gaiam Travel, Inc. (“Gaiam Travel”) entered into a Stock Purchase Agreement (the “Travel Purchase Agreement”) with Xxx Xxxxxxxx (together with Gaiam Travel, collectively, “Sellers”), Xxxxxxxx Expeditions Holdings, Inc. and Xxxxxxxx Expeditions, LLC (the “Travel Purchaser”) and closed the transactions contemplated by the Travel Purchase Agreement. Pursuant to the Travel Purchase Agreement, Travel Purchaser purchased from Gaiam Travel, and Gaiam Travel sold to Travel Purchaser, 51.4% of the equity securities of Natural Habitat, Inc. (“Natural Habitat”), representing all of Gaiam Travel’s interest in Natural Habitat (the “Travel Business Sale”). Natural Habitat owns all of the assets and liabilities primarily related to, or used in, Gaiam’s conservation adventure travel and ecotourism business, referred to in this filing as the “Travel Business.” At the closing, Travel Purchaser paid $12,850,000 in cash to Gaiam Travel.
On May 10, 2016, Xxxxx entered into a Membership Interest Purchase Agreement (the “Brand Purchase Agreement”) with Stretch & Bend Holdings, LLC (“Brand Purchaser”) and its direct parent, Sequential Brands Group, Inc. (“Brand Purchaser Parent”) and an Asset Purchase Agreement with Fit For Life, LLC (“FFL Purchaser”). These transactions were settled on July 1, 2016. Pursuant to the Asset Purchase Agreement, Gaiam sold certain assets and FFL Purchaser assumed certain liabilities of the Brand Business for $21,300,000. Pursuant to the Brand Purchase Agreement, Gaiam sold all of the equity interests in Gaiam Brand Holdco, LLC (“Brand Holdco,” and, together with its subsidiaries, the “Brand Companies”) to Brand Purchaser (the “Brand Business Sale”) for $145,700,000. At the time of the closing of the Brand Business Sale, Brand Holdco held, directly or indirectly through its subsidiaries, all of Gaiam’s assets and liabilities primarily related to, or used in, Gaiam’s fitness, yoga and wellness consumer products business (the “Brand Business”) other than the assets and liabilities transferred and assigned to FFL Purchaser.
The following pro forma condensed consolidated financial information is based on our historical financial statements, including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the sale of Natural Habitat and the Brand Business. The unaudited pro forma condensed consolidated statements of operations for the three months ending March 31, 2016 and for the year ending December 31, 2015 assume that the sale occurred as of January 1, 2016 and January 1, 2015, respectively. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2016 is presented as if the sale had occurred on March 31, 2016.
The unaudited pro forma condensed consolidated financial information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the financial position or results of operations that might have occurred had the sale occurred as of the dates stated above. The pro forma adjustments are described in the notes.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the audited financial statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 and Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
B-1
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three Months Ending March 31, 2016
(in thousands, except per share data)
| Gaiam Historical Financial Statements |
Less: Natural Habitat Historical Financial Statements (a)(e) |
Pro Forma Adjustments (Disposition of Natural Habitat) |
Notes | Pro Forma Results (Adjusted for Disposition of Natural Habitat) |
Less: Brand Business Historical Financial Statements (a) |
Pro Forma Adjustments (Disposition of Brand Business) |
Notes | Pro Forma Results (Combined) |
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| Net revenues |
$ | 35,327 | $ | 9,585 | $ | — | $ | 25,742 | $ | 21,913 | $ | 193 | (d) | $ | 4,022 | |||||||||||||||||||||
| Cost of goods sold |
18,937 | 6,312 | — | 12,625 | 12,024 | — | 601 | |||||||||||||||||||||||||||||
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| Gross profit |
16,390 | 3,273 | — | 13,117 | 9,889 | 193 | 3,421 | |||||||||||||||||||||||||||||
| Selling, general, and administrative |
24,593 | 4,209 | 3 | (b | ) | 20,387 | 12,371 | 190 | (c)(d) | 8,206 | ||||||||||||||||||||||||||
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| Loss from operations |
(8,203 | ) | (936 | ) | (3 | ) | (7,270 | ) | (2,482 | ) | 3 | (4,785 | ) | |||||||||||||||||||||||
| Interest and other income (expense) |
509 | 944 | — | (435 | ) | (399 | ) | — | (36 | ) | ||||||||||||||||||||||||||
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| (Loss) income before income taxes |
(7,694 | ) | 8 | (3 | ) | (7,705 | ) | 2,881 | 3 | (4,821 | ) | |||||||||||||||||||||||||
| Income tax (benefit) expense |
(9 | ) | 1 | — | (10 | ) | (13 | ) | — | 3 | ||||||||||||||||||||||||||
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| Net (loss) income from continuing operations |
(7,685 | ) | 7 | (3 | ) | (7,695 | ) | (2,868 | ) | 3 | (4,824 | ) | ||||||||||||||||||||||||
| Net loss attributable to noncontrolling interest |
61 | 47 | — | 14 | 15 | — | (1 | ) | ||||||||||||||||||||||||||||
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| Net (loss) income from continuing operations attributable to Gaiam, Inc. |
$ | (7,624 | ) | $ | 54 | $ | (3 | ) | $ | (7,681 | ) | $ | (2,853 | ) | $ | 3 | $ | (4,825 | ) | |||||||||||||||||
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| Net loss from continuing operations per share: |
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| Basic and Diluted |
$ | (0.31 | ) | $ | (0.31 | ) | $ | (0.20 | ) | |||||||||||||||||||||||||||
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| Weighted-average shares outstanding: |
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| Basic and Diluted |
24,531 | 24,531 | 24,531 | |||||||||||||||||||||||||||||||||
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| (a) | Represents the revenues and expenses excluding certain fixed overhead costs of Natural Habitat and the Brand Business included in Gaiam’s historical financial statements. |
| (b) | Operating expenses are increased to reverse the impact of a human resources service allocation to Natural Habitat from Gaiam. |
| (c) | Operating expenses are decreased to include the impact of a human resources service allocation to Natural Habitat from Gaiam. |
| (d) | Revenue and expenses are increased to reflect rental income from the Brand Business. |
| (e) | Results are consolidated then adjusted for noncontrolling interests. Gaiam owned 51.4% of Natural Habitat. |
B-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ending December 31, 2015
(in thousands, except per share data)
| Gaiam Historical Financial Statements |
Less: Natural Habitat Historical Financial Statements (a)(e) |
Pro Forma Adjustments (Disposition of Natural Habitat) |
Notes | Pro Forma Results (Adjusted for Disposition of Natural Habitat) |
Less: Brand Business Historical Financial Statements (a) |
Pro Forma Adjustments (Disposition of Brand Business) |
Notes | Pro Forma Results (Combined) |
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| Net revenues |
$ | 188,018 | $ | 43,514 | $ | — | $ | 144,504 | $ | 131,045 | $ | 758 | (d) | $ | 14,217 | |||||||||||||||||||||
| Cost of goods sold |
103,249 | 27,544 | — | 75,705 | 73,684 | — | 2,021 | |||||||||||||||||||||||||||||
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| Gross profit |
84,769 | 15,970 | — | 68,799 | 57,361 | 758 | 12,196 | |||||||||||||||||||||||||||||
| Selling, general, and administrative |
80,588 | 12,126 | 10 | (b) | 68,472 | 48,970 | $ | 748 | (c)(d) | 20,250 | ||||||||||||||||||||||||||
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| Income (loss) from operations |
4,181 | 3,844 | (10 | ) | 327 | 8,391 | 10 | (8,054 | ) | |||||||||||||||||||||||||||
| Interest and other income (expense) |
(1,406 | ) | (1,168 | ) | — | (238 | ) | (10 | ) | — | (228 | ) | ||||||||||||||||||||||||
| Loss from equity method investments |
(465 | ) | — | — | (465 | ) | (382 | ) | — | (83 | ) | |||||||||||||||||||||||||
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| Income (loss) before income taxes |
2,310 | 2,676 | (10 | ) | (376 | ) | 7,999 | 10 | (8,365 | ) | ||||||||||||||||||||||||||
| Income tax expense (benefit) |
1,219 | 1,154 | — | 65 | 68 | — | (3 | ) | ||||||||||||||||||||||||||||
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| Net income (loss) from continuing operations |
1,091 | $ | 1,522 | $ | (10 | ) | (441 | ) | 7,931 | 10 | (8,362 | ) | ||||||||||||||||||||||||
| Net income attributable to noncontrolling interest |
(694 | ) | (672 | ) | — | (22 | ) | (22 | ) | — | — | |||||||||||||||||||||||||
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| Net income (loss) from continuing operations attributable to Gaiam, Inc. |
$ | 397 | $ | 850 | $ | (10 | ) | $ | (463 | ) | $ | 7,909 | $ | 10 | $ | (8,362 | ) | |||||||||||||||||||
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| Net income (loss) from continuing operations per share: |
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| Basic and Diluted |
$ | 0.02 | $ | (0.02 | ) | $ | (0.34 | ) | ||||||||||||||||||||||||||||
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| Weighted-average shares outstanding: |
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| Basic |
24,510 | 24,510 | 24,510 | |||||||||||||||||||||||||||||||||
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| Diluted |
24,612 | 24,510 | 24,510 | |||||||||||||||||||||||||||||||||
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| (a) | Represents the revenues and expenses excluding certain fixed overhead costs of Natural Habitat and the Brand Business included in Gaiam’s historical financial statements. |
| (b) | Operating expenses are increased to reverse the impact of a human resources service allocation to Natural Habitat from Gaiam. |
| (c) | Operating expenses are decreased to include the impact of a human resources service allocation to Natural Habitat from Gaiam. |
| (d) | Revenue and expenses are increased to reflect rental income from the Brand Business. |
| (e) | Results are consolidated then adjusted for noncontrolling interests. Gaiam owned 51.4% of Natural Habitat. |
B-3
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2016
(in thousands)
| Gaiam Historical Financial Statements |
Less: Natural Habitat Historical Financial Statements (a) |
Pro Forma Adjustments (Disposition of Natural Habitat) |
Notes | Pro Forma Results (Adjusted for Disposition of Natural Habitat) |
Less: Brand Business Historical Financial Statements (a) |
Pro Forma Adjustments (Disposition of Brand Business) |
Notes | Pro Forma Results (Combined) |
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| Cash |
$ | 11,228 | $ | 3,951 | $ | 11,050 | (b) | $ | 18,327 | $ | 6,715 | $ | 159,238 | (b) | $ | 170,850 | ||||||||||||||||||||
| Accounts receivable, net |
13,002 | 389 | — | 12,613 | 11,885 | — | 728 | |||||||||||||||||||||||||||||
| Inventory, less allowances |
16,847 | — | — | 16,847 | 16,830 | — | 17 | |||||||||||||||||||||||||||||
| Other current assets |
14,351 | 8,714 | 5,637 | 2,993 | 2,644 | |||||||||||||||||||||||||||||||
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| Total current assets |
55,428 | 13,054 | 11,050 | 53,424 | 38,423 | 159,238 | 174,239 | |||||||||||||||||||||||||||||
| Property and equipment, net |
25,590 | 1,418 | — | 24,172 | 2,301 | — | 21,871 | |||||||||||||||||||||||||||||
| Media library, net |
9,348 | — | — | 9,348 | 2,448 | — | 6,900 | |||||||||||||||||||||||||||||
| Goodwill |
15,448 | 3,384 | — | 12,064 | 1,455 | — | 10,609 | |||||||||||||||||||||||||||||
| Other intangibles, net |
782 | 75 | — | 707 | 400 | — | 307 | |||||||||||||||||||||||||||||
| Other assets |
4,160 | 423 | — | 3,737 | 2,294 | — | 1,443 | |||||||||||||||||||||||||||||
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| Total assets |
$ | 110,756 | $ | 18,354 | $ | 11,050 | $ | 103,452 | $ | 47,321 | $ | 159,238 | $ | 215,369 | ||||||||||||||||||||||
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| Accounts payable |
$ | 10,437 | $ | 2,615 | $ | — | $ | 7,822 | $ | 5,957 | $ | — | $ | 1,865 | ||||||||||||||||||||||
| Accrued liabilities |
20,779 | 13,310 | 544 | (c) | 8,013 | 2,110 | 8,337 | (c) | 14,240 | |||||||||||||||||||||||||||
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| Total current liabilities |
31,216 | 15,925 | 544 | 15,835 | 8,067 | 8,337 | 16,105 | |||||||||||||||||||||||||||||
| Total Gaiam, Inc. shareholders’ equity |
76,743 | 1,501 | 10,506 | (d) | 85,748 | 37,385 | 150,901 | (d) | 199,264 | |||||||||||||||||||||||||||
| Noncontrolling interest |
2,797 | 928 | — | 1,869 | 1,869 | — | — | |||||||||||||||||||||||||||||
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| Total equity |
79,540 | 2,429 | 10,506 | 87,617 | 39,254 | 150,901 | 199,264 | |||||||||||||||||||||||||||||
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| Total liabilities and equity |
$ | 110,756 | $ | 18,354 | $ | 11,050 | $ | 103,452 | $ | 47,321 | $ | 159,238 | $ | 215,369 | ||||||||||||||||||||||
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| (a) | Represents the assets, liabilities, and equity attributable to Natural Habitat and the Brand Business included in Gaiam’s historical financial statements. |
| (b) | Cash is adjusted to reflect the $11.0 million estimated net proceeds from the sale of Natural Habitat and the $159.2 million estimated net proceeds from the sale of the Brand Business. |
| (c) | Accrued liabilities have been adjusted to reflect the accrual of estimated nonrecurring costs directly related to the disposition (not paid in close). |
| (d) | Equity is adjusted to reflect the estimated net gain of $9.0 million on the sale of Natural Habitat and to reflect the estimated net gain of $113.5 million on the sale of the Brand Business. |
B-4
