Contract
On December 1, 2017, Daseke MFS LLC (“MFS”), an indirect wholly owned subsidiary of Daseke, Inc. (“Daseke”), and Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxx and X. Xxxx Xxxxxxx entered into a Purchase and Sale Agreement pursuant to which MFS purchased 100% of the outstanding equity interests of (1) Xxxxx Freight Service, Inc., a Tennessee corporation, (2) RT & L, LLC, a Tennessee limited liability company, (3) JD and Partners, LLC, a Tennessee limited liability company, (4) TM Transport and Leasing, LLC, a Tennessee limited liability company, and (5) Rand, LLC, a Tennessee limited liability company (collectively, “Xxxxx”), for total consideration of $34.8 million in cash and 145,129 shares of Daseke common stock with a value of approximately $1.8 million (the “Xxxxx Transaction”).
Xxxxx specializes in flat glass transportation. Xxxxx generated $40.2 million and $29.5 million in revenues for the year ended December 31, 2016 and for the nine months ended September 30, 2017, respectively.
Also on December 1, 2017, Xxxxxx XX LLC (“RM”), an indirect wholly owned subsidiary of Daseke, and Xxxxx Capital, LLC, a California limited liability company, entered into a Purchase and Sale Agreement pursuant to which RM acquired 100% of the outstanding equity interests of (1) Roadmaster Group, Inc., a Delaware corporation (“Roadmaster Group”), and its subsidiaries via the merger of Project Montana Merger Sub One, Inc., a Delaware corporation and direct wholly owned subsidiary of Daseke (“MS1”), with and into Roadmaster Group followed by the merger of Roadmaster Group with and into Project Montana Merger Sub Three, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Daseke (“MS3”), pursuant to an Agreement and Plan of Merger by and among Daseke, Roadmaster Group, MS1 and MS3 and (2) Roadmaster Equipment Leasing, Inc., a Delaware corporation (“Roadmaster Equipment”), and its subsidiaries (together with Roadmaster Equipment and Roadmaster Group and its subsidiaries, “Roadmaster”) via the merger of Project Montana Merger Sub Two, Inc., a Delaware corporation and direct wholly owned subsidiary of Daseke (“MS2”), with and into Roadmaster Equipment, pursuant to an Agreement and Plan of Merger by and among Daseke, Roadmaster Equipment and MS2, followed by the contribution of the Roadmaster entities to RM, for total consideration of $37.5 million in cash and 3,114,247 shares of Daseke common stock with a value of approximately $39.1 million (the “Roadmaster Transaction” and collectively with the Xxxxx Transaction, the “Transactions”).
Roadmaster specializes in high security transportation. Roadmaster generated $79.6 million and $77.2 million in revenues for the year ended December 31, 2016 and for the nine months ended September 30, 2017, respectively.
The unaudited pro forma combined financial statements have been presented for illustrative purposes only and are not intended to represent or be indicative of what the combined company’s financial position or results of operations actually would have been had the Xxxxx Transaction and/or the Roadmaster Transaction been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company. The unaudited pro forma combined financial information does not include the impact of any revenue, cost or other operating synergies that may result from the Xxxxx Transaction and/or the Roadmaster Transaction.
The pro forma adjustments are based upon information and assumptions available at the time of the filing of the Current Report on Form 8-K/A to which these unaudited pro forma financial statements are filed as Exhibit 99.5 (the “Current Report”). The pro forma combined financial information is derived from and should be read in conjunction with (i) the consolidated financial statements and related footnotes for the year ended December 31, 2016 as set forth in Daseke’s Current Report on Form 8-K/A filed March 16, 2017, (ii) the unaudited consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which appear in Xxxxxx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, (iii) the financial statements of Xxxxx, which are filed as Exhibits 99.1 and 99.2 to the Current Report and (iv) the financial statements of Xxxxx Capital, LLC, the former parent of Roadmaster, which are filed as Exhibits 99.3 and 99.4 to the Current Report.
DASEKE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 2017
(in thousands)
|
|
|
|
Xxxxx Freight |
|
Roadmaster |
|
Pro Forma |
|
Footnote |
|
Pro Forma |
| ||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Cash and cash equivalents |
|
$ |
112,510 |
|
$ |
2,425 |
|
$ |
592 |
|
$ |
36,339 |
|
(3)(8)(9)(12)(17) |
|
$ |
151,866 |
|
|
Accounts receivable, net |
|
106,081 |
|
2,063 |
|
9,648 |
|
— |
|
|
|
117,792 |
| |||||
|
Total other current assets |
|
33,628 |
|
768 |
|
2,879 |
|
(845 |
) |
(18) |
|
36,430 |
| |||||
|
Total current assets |
|
252,219 |
|
5,256 |
|
13,119 |
|
35,494 |
|
|
|
306,088 |
| |||||
|
Property and equipment, net |
|
369,199 |
|
12,534 |
|
37,396 |
|
11,467 |
|
(1)(3)(7)(10)(16) |
|
430,596 |
| |||||
|
Intangible assets, net |
|
77,541 |
|
— |
|
7,640 |
|
(7,640 |
) |
(13) |
|
77,541 |
| |||||
|
Goodwill |
|
139,889 |
|
— |
|
4,754 |
|
108,585 |
|
(4)(19) |
|
253,228 |
| |||||
|
Other long-term assets |
|
18,573 |
|
174 |
|
41 |
|
— |
|
|
|
18,788 |
| |||||
|
Total assets |
|
$ |
857,421 |
|
$ |
17,964 |
|
$ |
62,950 |
|
$ |
147,906 |
|
|
|
$ |
1,086,241 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Checks outstanding in excess of bank balances |
|
$ |
1,479 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
$ |
1,479 |
|
|
Accounts payable |
|
12,493 |
|
— |
|
7,565 |
|
— |
|
|
|
20,058 |
| |||||
|
Accrued expenses and other liabilities |
|
24,660 |
|
1,288 |
|
— |
|
4,772 |
|
(21) |
|
30,720 |
| |||||
|
Accrued payroll, benefits and related taxes |
|
12,027 |
|
— |
|
— |
|
— |
|
|
|
12,027 |
| |||||
|
Accrued insurance and claims |
|
10,248 |
|
— |
|
— |
|
— |
|
|
|
10,248 |
| |||||
|
Current portion of long-term debt |
|
26,514 |
|
2,991 |
|
10,470 |
|
1,491 |
|
(20) |
|
41,466 |
| |||||
|
Total current liabilities |
|
87,421 |
|
4,279 |
|
18,035 |
|
6,263 |
|
|
|
115,998 |
| |||||
|
Line of credit |
|
— |
|
— |
|
2,299 |
|
(2,299 |
) |
(12) |
|
— |
| |||||
|
Long-term debt, net of current portion |
|
395,841 |
|
7,896 |
|
22,869 |
|
127,323 |
|
(3)(12)(20)(22) |
|
553,929 |
| |||||
|
Deferred tax liabilities |
|
114,900 |
|
1,992 |
|
2,096 |
|
10,660 |
|
(2)(11)(23) |
|
129,648 |
| |||||
|
Other long-term liabilities |
|
1,342 |
|
2,896 |
|
— |
|
(2,220 |
) |
(3) |
|
2,018 |
| |||||
|
Total liabilities |
|
599,504 |
|
17,063 |
|
45,299 |
|
139,727 |
|
|
|
801,593 |
| |||||
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Series A convertible preferred stock |
|
65,000 |
|
— |
|
— |
|
— |
|
|
|
65,000 |
| |||||
|
Common Stock |
|
4 |
|
855 |
|
51,449 |
|
(49,045 |
) |
(5)(6)(14)(15) |
|
3,264 |
| |||||
|
Additional paid-in-capital |
|
222,102 |
|
— |
|
— |
|
37,649 |
|
(6)(15) |
|
259,751 |
| |||||
|
Retained earnings (accumulated deficit) |
|
(30,221 |
) |
45 |
|
(33,798 |
) |
19,575 |
|
|
|
(44,399 |
) | |||||
|
Accumulated other comprehensive income (loss) |
|
1,032 |
|
— |
|
— |
|
— |
|
|
|
1,032 |
| |||||
|
Total stockholders’ equity |
|
257,917 |
|
901 |
|
17,651 |
|
8,179 |
|
|
|
284,648 |
| |||||
|
Total liabilities and stockholders’ equity |
|
$ |
857,421 |
|
$ |
17,964 |
|
$ |
62,950 |
|
$ |
147,906 |
|
|
|
$ |
1,086,241 |
|
See accompanying notes to the Unaudited Pro Forma Combined Financial Statements.
DASEKE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2017
(in thousands, except share and per share amounts)
|
|
|
|
Xxxxx Freight |
|
Roadmaster |
|
Pro Forma |
|
Footnote |
|
Pro Forma |
| ||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Freight |
|
$ |
446,454 |
|
$ |
29,497 |
|
$ |
74,604 |
|
$ |
— |
|
|
|
$ |
550,555 |
|
|
Brokerage |
|
83,723 |
|
— |
|
— |
|
— |
|
|
|
83,723 |
| |||||
|
Logistics |
|
10,571 |
|
— |
|
— |
|
— |
|
|
|
10,571 |
| |||||
|
Fuel surcharge |
|
48,331 |
|
— |
|
2,626 |
|
— |
|
|
|
50,957 |
| |||||
|
Total revenue |
|
589,079 |
|
29,497 |
|
77,230 |
|
|
|
|
|
695,806 |
| |||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Salaries, wages and employee benefits |
|
174,253 |
|
12,762 |
|
24,753 |
|
— |
|
|
|
211,768 |
| |||||
|
Fuel |
|
64,423 |
|
3,394 |
|
7,499 |
|
— |
|
|
|
75,316 |
| |||||
|
Operations and maintenance |
|
86,332 |
|
3,962 |
|
8,755 |
|
— |
|
|
|
99,049 |
| |||||
|
Communications |
|
1,491 |
|
— |
|
1,068 |
|
— |
|
|
|
2,559 |
| |||||
|
Purchased freight |
|
148,945 |
|
— |
|
21,766 |
|
— |
|
|
|
170,711 |
| |||||
|
Administrative expenses |
|
24,019 |
|
1,917 |
|
1,029 |
|
— |
|
|
|
26,965 |
| |||||
|
Sales and marketing |
|
1,425 |
|
— |
|
— |
|
|
|
|
|
1,425 |
| |||||
|
Taxes and licenses |
|
7,855 |
|
375 |
|
986 |
|
— |
|
|
|
9,216 |
| |||||
|
Insurance and claims |
|
15,516 |
|
1,068 |
|
3,365 |
|
— |
|
|
|
19,949 |
| |||||
|
Acquisition-related transaction expenses |
|
2,255 |
|
— |
|
— |
|
— |
|
|
|
2,255 |
| |||||
|
Depreciation and amortization |
|
53,758 |
|
2,336 |
|
7,592 |
|
3,136 |
|
(1) |
|
66,822 |
| |||||
|
(Gain) loss on disposition of revenue property and equipment |
|
(513 |
) |
(525 |
) |
(253 |
) |
— |
|
|
|
(1,291 |
) | |||||
|
Total operating expenses |
|
579,759 |
|
25,289 |
|
76,560 |
|
3,136 |
|
|
|
684,744 |
| |||||
|
Income from operations |
|
9,320 |
|
4,207 |
|
670 |
|
(3,136 |
) |
|
|
11,062 |
| |||||
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Interest income |
|
(130 |
) |
— |
|
— |
|
— |
|
|
|
(130 |
) | |||||
|
Interest expense |
|
21,064 |
|
707 |
|
1,431 |
|
7,122 |
|
(2)(3) |
|
30,324 |
| |||||
|
Write-off of unamortized deferred financing fees |
|
3,883 |
|
— |
|
— |
|
— |
|
|
|
3,883 |
| |||||
|
Other |
|
(247 |
) |
(63 |
) |
(421 |
) |
— |
|
|
|
(731 |
) | |||||
|
Total other expense |
|
24,570 |
|
644 |
|
1,010 |
|
7,122 |
|
|
|
33,346 |
| |||||
|
Loss before provision (benefit) for income taxes |
|
(15,250 |
) |
3,563 |
|
(340 |
) |
(10,258 |
) |
|
|
(22,284 |
) | |||||
|
Provision (benefit) for income taxes |
|
(3,448 |
) |
880 |
|
2,446 |
|
(2,319 |
) |
(5) |
|
(2,441 |
) | |||||
|
Net income (loss) |
|
(11,802 |
) |
2,683 |
|
(2,786 |
) |
(7,939 |
) |
|
|
(19,844 |
) | |||||
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Unrealized income (loss) on interest rate swaps |
|
52 |
|
— |
|
— |
|
— |
|
|
|
52 |
| |||||
|
Foreign currency translation adjustments |
|
1,032 |
|
— |
|
— |
|
— |
|
|
|
1,032 |
| |||||
|
Comprehensive income (loss) |
|
$ |
(10,718 |
) |
$ |
2,683 |
|
$ |
(2,786 |
) |
$ |
(7,939 |
) |
|
|
$ |
(18,760 |
) |
|
Net income (loss) |
|
(11,802 |
) |
2,683 |
|
(2,786 |
) |
(7,939 |
) |
|
|
(19,844 |
) | |||||
|
Less dividends to preferred stockholders |
|
(3,725 |
) |
— |
|
— |
|
— |
|
|
|
(3,725 |
) | |||||
|
Net loss attributable to common stockholders |
|
$ |
(15,527 |
) |
$ |
2,683 |
|
$ |
(2,786 |
) |
$ |
(7,939 |
) |
|
|
$ |
(23,569 |
) |
|
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Basic and Diluted |
|
$ |
(0.45 |
) |
— |
|
— |
|
— |
|
|
|
$ |
(0.62 |
) | |||
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Basic and Diluted |
|
34,790,861 |
|
— |
|
— |
|
3,259,376 |
|
(4) |
|
38,050,237 |
| |||||
See accompanying notes to the Unaudited Pro Forma Combined Financial Statements.
DASEKE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2016
(in thousands, except share and per share amounts)
|
|
|
|
Xxxxx Freight |
|
Roadmaster |
|
Pro Forma |
|
Footnote |
|
Pro Forma |
| ||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Freight |
|
$ |
517,861 |
|
$ |
40,175 |
|
$ |
77,529 |
|
$ |
— |
|
|
|
$ |
635,565 |
|
|
Brokerage |
|
87,410 |
|
— |
|
— |
|
— |
|
|
|
87,410 |
| |||||
|
Logistics |
|
— |
|
— |
|
— |
|
— |
|
|
|
— |
| |||||
|
Fuel surcharge |
|
46,531 |
|
— |
|
2,098 |
|
— |
|
|
|
48,630 |
| |||||
|
Total revenue |
|
651,802 |
|
40,175 |
|
79,628 |
|
|
|
|
|
771,605 |
| |||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Salaries, wages and employee benefits |
|
197,789 |
|
18,116 |
|
28,839 |
|
— |
|
|
|
244,744 |
| |||||
|
Fuel |
|
66,865 |
|
4,407 |
|
6,804 |
|
— |
|
|
|
78,076 |
| |||||
|
Operations and maintenance |
|
96,100 |
|
5,523 |
|
8,940 |
|
— |
|
|
|
110,563 |
| |||||
|
Communications |
|
1,618 |
|
— |
|
1,399 |
|
— |
|
|
|
3,017 |
| |||||
|
Purchased freight |
|
154,054 |
|
— |
|
23,931 |
|
— |
|
|
|
177,985 |
| |||||
|
Administrative expenses |
|
25,250 |
|
2,251 |
|
1,241 |
|
— |
|
|
|
28,742 |
| |||||
|
Sales and marketing |
|
1,743 |
|
— |
|
— |
|
— |
|
|
|
1,743 |
| |||||
|
Taxes and licenses |
|
9,222 |
|
422 |
|
1,043 |
|
— |
|
|
|
10,687 |
| |||||
|
Insurance and claims |
|
19,114 |
|
1,495 |
|
3,960 |
|
— |
|
|
|
24,569 |
| |||||
|
Acquisition-related transaction expenses |
|
25 |
|
— |
|
591 |
|
— |
|
|
|
616 |
| |||||
|
Depreciation and amortization |
|
67,500 |
|
3,007 |
|
8,492 |
|
3,445 |
|
(1) |
|
82,444 |
| |||||
|
(Gain) loss on disposition of revenue property and equipment |
|
(116 |
) |
(1,403 |
) |
(632 |
) |
— |
|
|
|
(2,151 |
) | |||||
|
Impairment |
|
2,005 |
|
— |
|
— |
|
— |
|
|
|
2,005 |
| |||||
|
Total operating expenses |
|
641,169 |
|
33,818 |
|
84,608 |
|
3,445 |
|
|
|
763,040 |
| |||||
|
Income from operations |
|
10,633 |
|
6,357 |
|
(4,980 |
) |
(3,445 |
) |
|
|
8,565 |
| |||||
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Interest income |
|
(44 |
) |
(1 |
) |
— |
|
— |
|
|
|
(45 |
) | |||||
|
Interest expense |
|
23,124 |
|
1,040 |
|
1,901 |
|
9,482 |
|
(2)(3) |
|
35,547 |
| |||||
|
Other |
|
(331 |
) |
(64 |
) |
115 |
|
— |
|
|
|
(280 |
) | |||||
|
Total other expense |
|
22,749 |
|
975 |
|
2,016 |
|
9,482 |
|
|
|
35,222 |
| |||||
|
Loss before provision (benefit) for income taxes |
|
(12,116 |
) |
5,382 |
|
(6,996 |
) |
(12,927 |
) |
|
|
(26,657 |
) | |||||
|
Provision (benefit) for income taxes |
|
163 |
|
1,488 |
|
288 |
|
168 |
|
(5) |
|
2,107 |
| |||||
|
Net income (loss) |
|
(12,279 |
) |
3,894 |
|
(7,284 |
) |
(13,095 |
) |
|
|
(28,764 |
) | |||||
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Unrealized income (loss) on interest rate swaps |
|
62 |
|
— |
|
— |
|
— |
|
|
|
62 |
| |||||
|
Foreign currency translation adjustments |
|
— |
|
|
|
|
|
|
|
|
|
— |
| |||||
|
Comprehensive income (loss) |
|
$ |
(12,217 |
) |
$ |
3,894 |
|
$ |
(7,284 |
) |
(13,095 |
) |
|
|
$ |
(28,702 |
) | |
|
Net income (loss) |
|
(12,279 |
) |
3,894 |
|
(7,284 |
) |
(13,095 |
) |
|
|
(28,764 |
) | |||||
|
Less dividends to preferred stockholders |
|
(4,770 |
) |
— |
|
— |
|
4,770 |
|
(6) |
|
— |
| |||||
|
Net loss attributable to common stockholders |
|
$ |
(17,049 |
) |
$ |
3,894 |
|
$ |
(7,284 |
) |
(8,325 |
) |
|
|
$ |
(28,764 |
) | |
|
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Basic and Diluted |
|
$ |
(117.18 |
) |
|
|
|
|
|
|
|
|
$ |
(0.86 |
) | |||
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Basic and Diluted |
|
145,495 |
|
|
|
|
|
33,395,992 |
|
(4)(6) |
|
33,541,487 |
| |||||
See accompanying notes to the Unaudited Pro Forma Combined Financial Statements.
DASEKE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTE 1 — Purchase Price
The estimated purchase price and the allocation of the estimated purchase price discussed below are preliminary, and subject to certain post-closing adjustments. A final determination of required adjustments will be made based upon final evaluation of the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.
The following table summarizes the purchase price allocation adjustments of the assets acquired and liabilities assumed. The final allocation of the purchase price will be determined at a later date and is dependent on a number of factors, including the final evaluation of the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. Final adjustments, including increases and decreases to depreciation and amortization resulting from the allocation of the purchase price to amortizable tangible and intangible assets, may be material. Adjustments to the fair value of tangible and intangible assets acquired and liabilities assumed will impact the value of goodwill recognized in the Transactions, and the adjustment to goodwill may be material. For illustrative purposes, the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed was as follows:
|
|
|
Xxxxx |
|
Roadmaster |
| ||
|
|
|
|
|
|
| ||
|
Cash |
|
$ |
89 |
|
$ |
477 |
|
|
Accounts receivable |
|
4,458 |
|
9,806 |
| ||
|
Parts supplies |
|
312 |
|
231 |
| ||
|
Other assets |
|
415 |
|
1,767 |
| ||
|
Property and equipment |
|
21,978 |
|
36,854 |
| ||
|
Goodwill |
|
36,769 |
|
76,570 |
| ||
|
Deferred tax liability |
|
(2,938 |
) |
(12,033 |
) | ||
|
Total liabilities |
|
(1,997 |
) |
(26,764 |
) | ||
|
|
|
$ |
59,086 |
|
$ |
86,908 |
|
NOTE 2 — PRO FORMA ADJUSTMENTS, AS PRESENTED ON THE SEPTEMBER 30, 2017 BALANCE SHEET
The pro forma adjustments are based upon information and assumptions available at the time of the filing of the Current Report. The unaudited pro forma combined balance sheet includes adjustments that are factually supportable and directly attributable to the transaction regardless of whether they will have a continuing impact or were non-recurring.
Represents adjustments for the Xxxxx Transaction as follows:
1. Represents an increase of $12.2 million in property and equipment to appraised values.
2. Represents increase in deferred tax liabilities due to the increase in property and equipment values and deferred taxes on goodwill of $1.7 million.
3. Represents the payoff of debt and other liabilities of $22.5 million.
4. Recognition of the preliminary goodwill resulting from the pro forma allocation of the purchase price as if the Transactions had occurred using a preliminary goodwill estimate. Goodwill resulting from the Transactions is not amortized, and will be assessed for impairment at least annually in accordance with ASC 350. The goodwill as a result of the Transactions is not deductible for income tax purposes.
5. Represents adjustment to eliminate Xxxxx’x common stock, retained earnings of $855 thousand and $1 million, respectively.
6. Represents 145,129 shares of common stock issued to the sellers of Xxxxx resulting in adjustments to common stock, and additional paid-in capital of $145 thousand and $1.7 million, respectively.
DASEKE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
7. Adjustment to reflect increase in accumulated depreciation of $2.1 million for the increase in depreciation expense related to the increase in the fair value of property and equipment.
8. Represents cash consideration paid in the transaction of $34.8 million.
9. Represents elimination of historical cash balances not received by Xxxxxx in the transaction of $2.3 million.
Represents adjustments for the Roadmaster Transaction as follows:
10. Represents an increase of $2.4 million in property and equipment to appraised values.
11. Represents increase in deferred tax liabilities due to the increase in property and equipment values and deferred taxes on goodwill of $12.0 million.
12. Represents the payoff of debt and other liabilities of $10.3 million.
13. Represents the write off of acquired intangible assets.
14. Represents adjustment to eliminate Roadmaster’s member’s equity and accumulated deficit of $51.4 million and $31.1 million, respectively.
15. Represents 3,114,247 shares of common stock issued to the seller of Roadmaster resulting in adjustments to common stock, and additional paid-in capital of $3.1 million and $36.0 million, respectively.
16. Adjustment to reflect increase in accumulated depreciation of $1.0 million for the increase in depreciation expense related to the increase in the fair value of property and equipment.
17. Represents cash consideration paid in the transaction of $37.5 million.
18. Reflects the reserve of restricted cash held in escrow due to uncertainties regarding the matter.
19. Recognition of the preliminary goodwill resulting from the pro forma allocation of the purchase price as if the Transactions had occurred using a preliminary goodwill estimate. Goodwill resulting from the Transactions is not amortized, and will be assessed for impairment at least annually in accordance with ASC 350. The goodwill as a result of the Transactions is not deductible for income tax purposes.
Other adjustments are as follows:
20. Represents increase in term loan of $150.0 million, net of deferred finance fees of $4.4 million and interest expense of $1.8 million, resulting in net cash of $143.8 million.
21. Represents additional interest on the term loan advance at 6.5% of $5.5 million, net of $303 thousand and $410 thousand of interest expense on debt paid off for the Roadmaster and Xxxxx Transactions, respectively.
22. Adjustment to reflect amortization of deferred loan fees associated with the term loan advance of $.5 million.
23. Represents $2.3 million reduction to deferred tax liabilities to recognize the impact of pro forma adjustments as of September 30, 2017.
NOTE 3 — PRO FORMA ADJUSTMENTS, AS PRESENTED IN THE STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
The unaudited pro forma combined statements of operations include adjustments which give effect to the events that are factually supportable, directly attributable to the transaction, and are expected to have a continuing impact on Daseke and the Transactions on a consolidated basis.
Represents adjustments for the Transactions as follows:
1. Represents adjustment to record pro forma depreciation expense of $2.1 million and $1.0 million on the purchase price allocation for the fair value of assets of Xxxxx and Roadmaster, respectively.
DASEKE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
2. Represents incremental interest expense of $7,313 million from the advance on Xxxxxx’s term loan as if the advance occurred on January 1, 2016 partially offset by $303 thousand and $410 thousand reversal of interest on existing Xxxxx and Roadmaster debt upon assumed refinance of debt on January 1, 2016 utilizing funds from the advance on the Daseke term loan.
3. Represents amortization of $0.5 million of deferred finance fees incurred in term loan increase.
4. Represents 145,129 and 3,114,247 shares of common stock issued to the sellers of Xxxxx and Roadmaster, respectively.
5. Represents $2.3 million tax benefit on impact of pro forma adjustments calculated using Xxxxxx’s effective tax rate of 22.6% for the nine months ended September 30, 2017.
NOTE 4 — PRO FORMA ADJUSTMENTS, AS PRESENTED IN THE STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2016
The unaudited pro forma combined statements of operations include adjustments which give effect to the events that are factually supportable, directly attributable to the transaction, and are expected to have a continuing impact on Daseke and the Transactions on a consolidated basis.
Represents adjustments for the Transactions as follows:
1. Represents adjustment to record pro forma depreciation expense of $2.2 million and $1.2 million for Xxxxx and Roadmaster, respectively, on the purchase price allocation for the fair value of assets.
2. Represents incremental interest expense of $9.7 million from the advance on Xxxxxx’s term loan as if the advance occurred on January 1, 2016 partially offset by $0.6 million and $0.4 million reversal of interest on existing Xxxxx and Roadmaster debt upon assumed refinance of debt on January 1, 2016 utilizing funds from the advance on the Daseke term loan.
3. Represents amortization of $0.7 million of deferred finance fees incurred on the term loan increase.
4. Represents 145,129 and 3,114,247 shares of common stock issued to the sellers of Xxxxx and Roadmaster, respectively.
5. Represents $171 thousand tax expense on impact of pro forma adjustments calculated using Xxxxxx’s effective tax rate of (1.3%) for the year ended December 31, 2016.
6. Represents conversion of 145,495 shares of common stock and 64,500 shares of Series B Convertible Preferred Stock of premerger Daseke at a conversion of 144.2 shares for each share outstanding, resulting in 30,282,111 shares of common stock. Dividends to preferred stockholders of $4.8 million were removed from the calculation of basic and diluted earnings per share due to the conversion of the Series B preferred stock to common.
