Attached files
file | filename |
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8-K/A - FORM 8-K AMENDMENT - RigNet, Inc. | d410609d8ka.htm |
EX-23.1 - EX-23.1 - RigNet, Inc. | d410609dex231.htm |
EX-99.1 - EX-99.1 - RigNet, Inc. | d410609dex991.htm |
Exhibit 99.2
RIGNET, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On July 5, 2012 RigNet, Inc. (RigNet or the Company) completed the acquisition of Nessco Group Holdings Ltd. (Nessco) for a purchase price of $46.5 million, (the Nessco Acquisition). The following unaudited pro forma condensed combined balance sheet as of June 30, 2012 and the unaudited pro forma condensed combined statements of income for the six months ended June 30, 2012 and for the year ended December 31, 2011 are based on the historical financial statements of RigNet and Nessco using the acquisition method of accounting.
The unaudited condensed combined pro forma balance sheet as of June 30, 2012 gives effect to the Nessco Acquisition as if it had occurred on June 30, 2012, and includes all adjustments that give effect to events that are directly attributable to the Nessco Acquisition and are factually supportable. The unaudited pro forma condensed combined statements of income for the year ended December 31, 2011 and the six months ended June 30, 2012 give effect to the Nessco Acquisition as if it had occurred on January 1, 2011, and include all adjustments that give effect to events that are directly attributable to the Nessco Acquisition, are expected to have a continuing impact, and are factually supportable.
The unaudited pro forma condensed combined financial statements reflect managementss preliminary estimates of the fair values of tangible and intangible assets acquired and liabilities assumed. Upon completion of detailed valuation studies the Company may make additional adjustments, and these valuations could change significantly from those used in the pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not intended to represent or to be indicative of the results of operations or financial position that RigNet would have reported had the Nessco Acquisition been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements are not intended to project the future financial results of RigNet after the transaction. The assumptions used to prepare the unaudited pro forma condensed combined financial statements are contained in the notes to the unaudited pro forma condensed combined financial statements, and such assumptions should be reviewed in their entirety.
These unaudited pro forma condensed combined financial statements should be read in conjunction with RigNets historical consolidated financial statements and notes thereto contained in RigNets Annual Report on Form 10-K for the year ended December 31, 2011, RigNets Quarterly Report on Form 10-Q for the six months ended June 30, 2012, RigNets Current Report on Form 8-K filed with the United States Securities and Exchange Commission on July 5, 2012, Nesscos historical financial statements and notes thereto for the periods ended March 31, 2012 and 2011 contained herein as Exhibit 99.1.
As RigNet has a fiscal year ending on December 31 and Nessco has a fiscal year ending on March 31, the unaudited pro forma condensed combined statements of income for the twelve months ended combines the historical results of RigNet for the fiscal year ended December 31, 2011 with the historical results of Nessco for the twelve months ended March 31, 2012. The unaudited pro forma condensed combined statements of income for the six months ended June 30, 2012, combines the historical results of RigNet and Nessco for the six months ended June 30, 2012.
1
RigNet, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands of US Dollars)
June 30, 2012 | ||||||||||||||||||||||
RigNet | Nessco | Reclassifications | Pro Forma Adjustments |
Pro Forma Combined |
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Assets |
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Current assets: |
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Cash and cash equivalents |
51,999 | 5,940 | | | 57,939 | |||||||||||||||||
Accounts receivable, net |
24,803 | 14,126 | | (2,336 | ) | D | 36,593 | |||||||||||||||
Contracts in progress |
| | 7,717 | | 7,717 | |||||||||||||||||
Prepaid expenses and other current assets |
4,890 | 9,839 | (7,825 | ) | (48 | ) | D | 6,856 | ||||||||||||||
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Total current assets |
81,692 | 29,905 | (108 | ) | (2,384 | ) | 109,105 | |||||||||||||||
Property and equipment, net |
35,974 | 6,426 | 210 | 1,108 | D | 43,718 | ||||||||||||||||
Restricted cash |
| 97 | | | 97 | |||||||||||||||||
Goodwill |
13,812 | 5,775 | | (5,775 | ) | E | 31,582 | |||||||||||||||
17,770 | D | |||||||||||||||||||||
Intangibles |
5,253 | | | 17,326 | D | 22,579 | ||||||||||||||||
Deferred tax and other assets |
6,246 | | (2,106 | ) | 478 | D | 4,618 | |||||||||||||||
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Total assets |
142,977 | 42,203 | (2,004 | ) | 28,523 | 211,699 | ||||||||||||||||
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Liabilities and Equity Current liabilities: |
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Accounts payable |
5,921 | 5,185 | | | 11,106 | |||||||||||||||||
Accrued expenses |
6,172 | 13,490 | 102 | (64 | ) | D | 19,700 | |||||||||||||||
Short-term debt and current maturities of long-term debt |
8,746 | 5,713 | | (5,713 | ) | D | 8,746 | |||||||||||||||
Income taxes payable |
3,774 | 1,038 | | (14 | ) | D | 4,798 | |||||||||||||||
Deferred revenue |
1,517 | 251 | | (131 | ) | D | 1,637 | |||||||||||||||
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Total current liabilities |
26,130 | 25,677 | 102 | (5,922 | ) | 45,987 | ||||||||||||||||
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Long-term debt |
10,409 | 12,963 | | (12,963 | ) | D | 56,444 | |||||||||||||||
46,487 | A,J | |||||||||||||||||||||
(452 | ) | L | ||||||||||||||||||||
Deferred revenue |
363 | | | | 363 | |||||||||||||||||
Deferred tax liability |
48 | | (2,106 | ) | 4,460 | D | 2,402 | |||||||||||||||
Other liabilities |
16,009 | | | 476 | D | 16,485 | ||||||||||||||||
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Total liabilities |
52,959 | 38,640 | (2,004 | ) | 32,086 | 121,681 | ||||||||||||||||
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Equity: |
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Common stock |
16 | 2,284 | | (2,284 | ) | H | 16 | |||||||||||||||
Additional paid in capital |
118,327 | 308 | | (308 | ) | H | 118,327 | |||||||||||||||
Retained earnings (accumulated deficit) |
(27,657 | ) | 971 | | (971 | ) | H | (27,657 | ) | |||||||||||||
Accumulated other comprehensive loss |
(831 | ) | | | | (831 | ) | |||||||||||||||
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Total shareholders equity |
89,855 | 3,563 | | (3,563 | ) | 89,855 | ||||||||||||||||
Non-redeemable, non-controlling interest |
163 | | | | 163 | |||||||||||||||||
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Total equity |
90,018 | 3,563 | | (3,563 | ) | 90,018 | ||||||||||||||||
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Total liabilities and equity |
142,977 | 42,203 | (2,004 | ) | 28,523 | 211,699 | ||||||||||||||||
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2
RigNet Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
(In thousands of US Dollars, except per share data)
12 Months Ended | ||||||||||||||||||
December 31, 2011 |
March 31, 2012 |
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RigNet | Nessco | Pro Forma Adjustments |
Pro Forma Combined |
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Revenue |
109,355 | 52,915 | | 162,270 | ||||||||||||||
Expenses: |
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Cost of revenue (excluding depreciation and amortization) |
48,645 | 44,954 | | 93,599 | ||||||||||||||
Depreciation and amortization |
14,584 | 509 | 749 | F | 18,881 | |||||||||||||
3,039 | G | |||||||||||||||||
Selling and marketing |
2,276 | | | 2,276 | ||||||||||||||
General and administrative |
26,960 | 2,045 | | 29,005 | ||||||||||||||
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Total expenses |
92,465 | 47,508 | 3,788 | 143,761 | ||||||||||||||
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Operating income (loss) |
16,890 | 5,407 | (3,788 | ) | 18,509 | |||||||||||||
Interest expense |
(1,249 | ) | (1,950 | ) | (931 | ) | K | (4,220 | ) | |||||||||
(90 | ) | L | ||||||||||||||||
Other income, net |
613 | 5 | | 618 | ||||||||||||||
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Income (loss) from continuing operations before income tax provision |
16,254 | 3,462 | (4,809 | ) | 14,907 | |||||||||||||
Income tax benefit (expense) |
(6,502 | ) | (973 | ) | 909 | I | (6,566 | ) | ||||||||||
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Income (loss) from continuing operations |
9,752 | 2,489 | (3,900 | ) | 8,341 | |||||||||||||
Loss from discontinued operations, net of tax |
| (651 | ) | | (651 | ) | ||||||||||||
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Net income (loss) |
9,752 | 1,838 | (3,900 | ) | 7,690 | |||||||||||||
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Income per share from continuing operations attributable to RigNet common stockholders: |
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Basic |
$ | 0.62 | $ | 0.53 | ||||||||||||||
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Diluted |
$ | 0.57 | $ | 0.48 | ||||||||||||||
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Weighted average shares outstanding, basic |
15,387 | 15,387 | ||||||||||||||||
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Weighted average shares outstanding, diluted |
16,814 | 16,814 | ||||||||||||||||
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3
RigNet Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
(In thousands of US Dollars, except per share data)
6 Months Ended June 30, 2012 |
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RigNet | Nessco | Pro Forma Adjustments |
Pro Forma Combined |
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Revenue |
64,450 | 29,592 | | 94,042 | ||||||||||||||
Expenses: |
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Cost of revenue (excluding depreciation and amortization) |
29,343 | 24,597 | | 53,940 | ||||||||||||||
Depreciation and amortization |
7,734 | 214 | 395 | F | 9,863 | |||||||||||||
1,520 | G | |||||||||||||||||
Selling and marketing |
1,387 | | | 1,387 | ||||||||||||||
General and administrative |
16,405 | 1,365 | (401 | ) | B | 16,647 | ||||||||||||
(722 | ) | C | ||||||||||||||||
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Total expenses |
54,869 | 26,176 | 792 | 81,837 | ||||||||||||||
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Operating income (loss) |
9,581 | 3,416 | (792 | ) | 12,205 | |||||||||||||
Interest expense |
(316 | ) | (1,226 | ) | (465 | ) | K | (2,052 | ) | |||||||||
(45 | ) | L | ||||||||||||||||
Other income, net |
165 | | | 165 | ||||||||||||||
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Income (loss) from continuing operations before income tax provision |
9,430 | 2,190 | (1,302 | ) | 10,318 | |||||||||||||
Income tax benefit (expense) |
(4,075 | ) | (619 | ) | 460 | I | (4,234 | ) | ||||||||||
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Income (loss) from continuing operations |
5,355 | 1,571 | (842 | ) | 6,084 | |||||||||||||
Loss from discontinued operations, net of tax |
| (469 | ) | | (469 | ) | ||||||||||||
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Net income (loss) |
5,355 | 1,102 | (842 | ) | 5,615 | |||||||||||||
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Income per share from continuing operations attributable to RigNet common stockholders: |
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Basic |
$ | 0.34 | $ | 0.39 | ||||||||||||||
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Diluted |
$ | 0.31 | $ | 0.35 | ||||||||||||||
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Weighted average shares outstanding, basic |
15,515 | 15,515 | ||||||||||||||||
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Weighted average shares outstanding, diluted |
16,939 | 16,939 | ||||||||||||||||
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4
RIGNET, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. | Description of the Transaction and Basis of Presentation |
The unaudited pro forma condensed combined financial statements have been prepared based on RigNet, Inc. (RigNet or the Company) and Nessco Group Holdings Ltd. (Nessco) consolidated historical financial information, giving effect to the acquisition (Nessco Acquisition) and related adjustments described in these notes. The unaudited pro forma condensed combined balance sheet is presented as if the Nessco Acquisition had occurred on June 30, 2012. The unaudited pro forma condensed combined statements of income for the six months ended June 30, 2012, and the twelve months ended December 31, 2011 are presented as if the Nessco Acquisition had occurred on January 1, 2011.
Nessco prepared its annual consolidated financial statements in accordance with UK generally accepted accounting principles (GAAP). The historical Nessco Financial Statements have been adjusted to US GAAP.
Nessco historically reported its financial statements in British pound sterling (GBP), its local currency. In order to present the pro forma financial information in US dollars (USD), Nesscos balance sheet has been translated using the spot rate at June 30, 2012, and each of Nesscos statements of income has been translated using the average rate for the applicable period.
For purposes of preparing the unaudited pro forma condensed combined balance sheet, certain reclassifications have been made to the historical financial statements of Nessco to conform with RigNets presentation. Also, certain note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as permitted by the Securities and Exchange Commission rules and regulations.
RigNet accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 805, Business Combinations. The purchase price for the Nessco Acquisition has been allocated to the assets and liabilities acquired based on a preliminary estimate of their respective fair values and may change when the final valuation of certain tangible and intangible assets and acquired working capital is determined.
Pro Forma Footnotes
A. | Cash consideration paid for the Nessco Acquisition was $46.5 million, funded through borrowings under the Companys Amended and Restated Credit Agreement. |
B. | Reflects the payment of transaction costs related to the Nessco Acquisition of $0.4 million. The impact of transaction costs already incurred has not been reflected in the unaudited pro forma condensed combined statement of income since these costs are expected to be nonrecurring in nature. |
C. | Reflects an accrual for estimated transaction costs related to the Nessco Acquisition of $0.7 million. The impact of estimated transaction costs has not been reflected in the unaudited pro forma condensed combined statement of operations since these costs are expected to be nonrecurring in nature. |
5
D. | Reflects the preliminary purchase price allocation and recognition of goodwill arising from the Nessco Acquisition as follows (in thousands): |
Cash consideration paid to shareholders |
$ | 26,676 | * | |
Debt repayment |
19,811 | |||
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Total purchase price |
$ | 46,487 | ||
Liabilities assumed |
$ | 24,341 | ||
Less: Estimated fair value of assets acquired: |
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Current assets |
(27,413 | ) | ||
Property and equipment |
(7,744 | ) | ||
Trade name |
(4,353 | ) | ||
Covenants not to compete |
(151 | ) | ||
Backlog |
(1,116 | ) | ||
Customer relationships |
(11,706 | ) | ||
Other assets |
(575 | ) | ||
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Goodwill |
$ | 17,770 | ||
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* | Includes $0.1 million of contingent consideration paid in July and August 2012. |
E. | Reflects the elimination of Nesscos historical goodwill. |
F. | Reflects fair value adjustments for property and equipment and related pro forma depreciation expense adjustments, as follows (in thousands): |
Pro forma depreciation expense |
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Historical amounts |
Fair Value |
Fair value adjustment |
Useful lives (yrs) |
For the twelve months ended December 31, 2011 |
For the six months ended June 30, 2012 |
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Property: |
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Land |
$ | 2,178 | $ | 1,405 | $ | (773 | ) | N/A | N/A | N/A | ||||||||||||||
Buildings and improvements |
3,622 | 4,395 | 773 | 10.0 | 439 | 220 | ||||||||||||||||||
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Subtotal - property |
$ | 5,800 | $ | 5,800 | $ | | $ | 439 | $ | 220 | ||||||||||||||
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Equipment: |
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Computer hardware |
$ | 43 | $ | 43 | $ | | 1.7 | $ | 25 | $ | 13 | |||||||||||||
Furniture and fixtures |
24 | 67 | 43 | 1.2 | 56 | 11 | ||||||||||||||||||
Teleport |
139 | 595 | 456 | 1.8 | 331 | 165 | ||||||||||||||||||
Motor vehicles |
| 7 | 7 | 0.5 | 7 | | ||||||||||||||||||
Rental assets |
273 | 852 | 579 | 2.3 | 380 | 190 | ||||||||||||||||||
Tools and equipment |
147 | 170 | 23 | 8.5 | 20 | 10 | ||||||||||||||||||
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Subtotal - equipment |
$ | 626 | $ | 1,734 | $ | 1,108 | $ | 819 | $ | 389 | ||||||||||||||
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Total property and equipment |
$ | 6,426 | $ | 7,534 | $ | 1,108 | 1,258 | 609 | ||||||||||||||||
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Historical depreciation expense |
509 | 214 | ||||||||||||||||||||||
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Pro forma increase to depreciation expense |
$ | 749 | $ | 395 | ||||||||||||||||||||
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6
G. | Reflects fair value adjustments for identifiable intangible assets and related amortization expense adjustments, as follows (in thousands): |
Pro forma amortization expense | ||||||||||||||||
Fair Value |
Amortization period (yrs) |
For the twelve months ended December 31, 2011 |
For the six months ended June 30, 2012 |
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Identified Intangible Assets: |
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Trade name |
$ | 4,353 | 7.0 | $ | 622 | $ | 311 | |||||||||
Covenants not to compete |
151 | 1.7 | 89 | 44 | ||||||||||||
Backlog |
1,116 | 1.7 | 656 | 328 | ||||||||||||
Customer relationships |
11,707 | 7.0 | 1,672 | 837 | ||||||||||||
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Total identified intangible assets |
$ | 17,326 | 3,039 | 1,520 | ||||||||||||
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Historical amortization expense |
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Increase to pro forma amortization expense |
$ | 3,039 | $ | 1,520 | ||||||||||||
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H. | Reflects the elimination of Nesscos historical shareholders equity balances. |
I. | Reflects the tax impact of the Acquisition based on the statutory rates in effect during the six months ended June 30, 2012 and the year ended December 31, 2011. |
J. | To reflect the issuance of new debt to finance the purchase price. Of the total $47.2 million term loan that was drawn on July 5, 2012, $46.5 million was used to fund the Nessco Acquisition, including the repayment of Nessco debt. The remaining $0.7 million was used to add to the Companys liquidity; this amount has not been reflected in the unaudited pro forma condensed combined balance sheet as this portion of the debt is unrelated to the acquisition. |
K. | To reflect the increase in interest expense resulting from the issuance of debt to finance the purchase price, as well as the amortization of related deferred financing costs. The interest rate on new debt to finance the cash consideration paid to Nessco shareholders of $26.7 million is assumed to be 3.49%, which is the current interest rate. |
L. | Reflects the capitalization of $0.5 million of deferred financing costs incurred in connection with the term loan used to fund the Nessco Acquisition. Costs include bank fees, financial advisory, legal, and other professional fees. These costs are deferred and recognized over the term of the debt agreement using the straight-line method. |
7