Joe’s Jeans Inc. (the “Company”) (NASDAQ: JOEZ) announced today that it has entered into a new agreement with its founder, Joe Dahan, to remove the contingencies related to the contingent consideration payments that were to be made to him. The new agreement fixes the overall amount to be paid to Mr. Dahan at $9,168,000 over an accelerated time period. Excluding this charge and the expense paid to date prior to entering into this new agreement, the resulting savings in earn out expense is expected to contribute earnings of $0.03 per share for the full year for fiscal 2013.
Marc Crossman, President and CEO, commented, “We are pleased that we were able to enter into this new agreement with Joe Dahan. As a result, going forward, Mr. Dahan’s sole financial incentive comes from stock price appreciation through revenue and earnings growth.” Crossman continued, “Previously, Mr. Dahan received a percentage of the Company’s gross profit. However, as we continue with our retail strategy, we expect our gross profit and gross margin to grow.” Crossman summarized, “Now that we have purchased the earn-out, the Company fully benefits from retail store and other growth going forward.”
The Company expects to record the full amount of the buy-out payment in the first quarter of fiscal 2013. Excluding this charge and the expense paid to date, the Company expects the transaction to be $0.03 accretive to earnings per share for the full year of fiscal 2013 with further accretion in 2014 through 2017, the original period for the earn-out.
The Company originally entered into the earn out in connection with the merger in October 2007 with Mr. Dahan and his company, JD Holdings Inc., for all right, title and interest in the “Joe’s Jeans”, “Joe’s” and “JD” marks. The Company refers the reader to its Current Report on Form 8-K and the preceding description of new agreement is a summary of its material terms, does not purport to be complete, and is qualified in its entirety by the copy of the agreement which is filed as an exhibit thereto.