Groupon, Inc. - FORM 8-K - EX-99.6 - UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS - January 2, 2014

Attached files

file filename
8-K - FORM 8-K - Groupon, Inc.form8-k.htm
EX-99.2 - Q AND A - Groupon, Inc.exhibit992-qanda.htm
EX-2.1 - AMENDMENT NO. 2 TO SHARE PURCHASE AGREEMENT - Groupon, Inc.exhibit21-amendmentno2.htm
EX-99.1 - PRESS RELEASE - Groupon, Inc.exhibit991-pressrelease.htm
EX-23.1 - CONSENT OF PWC - Groupon, Inc.exhibit231-form8xkconsento.htm
EX-99.3 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF LIVINGSOCIAL KOREA, INC - Groupon, Inc.exhibit993-livingsocialfin.htm
EX-99.5 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF TICKET MONSTER INC. - Groupon, Inc.exhibit995-tmonfinancialsa.htm
EX-99.4 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LIVINGSOCIAL KOREA, INC. - Groupon, Inc.exhibit994-livingsocialfin.htm
Exhibit 99.6

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
On January 2, 2014, Groupon, Inc., ("Groupon" or the "Company") through its direct subsidiary Groupon Trailblazer, Inc., completed the acquisition of all the outstanding equity interests of LivingSocial Korea, Inc., a Korean corporation including its subsidiary Ticket Monster Inc., a Korean corporation, from LivingSocial Inc., a Delaware corporation ("LivingSocial"), and LivingSocial B.V., a Netherlands limited liability company and direct subsidiary of LivingSocial for $100.0 million in cash and Groupon, Inc. Class A common stock with a fair value of $162.9 million.
The following unaudited pro forma condensed combined consolidated financial statements have been derived by the application of pro forma adjustments to the Company's historical consolidated financial statements. The unaudited pro forma condensed combined balance sheet as of September 30, 2013 for Groupon, Inc. and LivingSocial Korea, Inc. is presented as if the acquisition had occurred on September 30, 2013. The unaudited pro forma condensed combined statement of operations of Groupon, Inc. and LivingSocial Korea, Inc. for the nine months ended September 30, 2013 and for the year ended December 31, 2012 are presented as if the acquisition had occurred on January 1, 2012. The unaudited pro forma condensed combined consolidated financial statements are being provided for illustrative purposes only and do not purport to represent what our results of operations or financial position would have been if the transaction had occurred on the dates indicated and are not intended to project our results of operations or financial position for any future period. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts existing upon finalization of the acquisition.
The acquisition has been accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition price presented in the accompanying unaudited pro forma condensed combined consolidated financial statements has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Acquired goodwill represents the premium the Company paid over the fair value of the net tangible and intangible assets acquired. The unaudited pro forma condensed combined consolidated financial statements contained herein do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies, or any revenue, tax, or other synergies that may result from the acquisition.
The unaudited pro forma adjustments are based on estimates, available information and certain assumptions that the Company believes are reasonable. The unaudited pro forma adjustments and primary assumptions are described in the accompanying notes. The unaudited pro forma condensed combined consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and the accompanying notes of LivingSocial Korea, Inc. and Ticket Monster Inc. included in Exhibit 99.3, 99.4 and 99.5 of this Current Report on Form 8-K and the historical consolidated financial statements and accompanying notes of Groupon, Inc. included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013.

1


GROUPON, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
BALANCE SHEET
As of September 30, 2013
(in thousands)
 
Groupon, Inc. Historical (unaudited)
 
LivingSocial Korea, Inc. Historical (unaudited)
 
Adjustments for Operations Not Acquired (1)
 
Pro Forma Adjustments (2)
 
Notes
 
Pro Forma Combined
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,139,857

 
$
15,133

 
$
(49
)
 
$
—

 
$
(100,000
)
 
a
 
$
1,054,941

Accounts receivable, net
86,233

 
12,322

 
(35
)
 
—

 
—

 
 
 
98,520

Deferred income taxes
30,692

 
—

 
—

 
—

 
—

 
 
 
30,692

Prepaid expenses and other current assets
136,543

 
5,021

 
(202
)
 
—

 
—

 
 
 
141,362

Total current assets
1,393,325

 
32,476

 
(286
)
 
—

 
(100,000
)
 

 
1,325,515

Property, equipment and software, net
126,881

 
5,976

 
(157
)
 
—

 
—

 
 
 
132,700

Goodwill
218,224

 
50,685

 
(190
)
 
(50,495
)
 
231,644

 
b
 
449,868

Intangible assets, net
33,182

 
40,960

 
—

 
(40,960
)
 
92,800

 
c
 
125,982

Investments
104,130

 
—

 
—

 
—

 
—

 
 
 
104,130

Deferred income taxes, non-current
29,476

 
—

 
—

 
—

 
—

 
 
 
29,476

Other non-current assets
45,322

 
1,435

 
—

 
—

 
—

 
 
 
46,757

Total Assets
$
1,950,540

 
$
131,532

 
$
(633
)
 
$
(91,455
)
 
$
224,444

 

 
$
2,214,428

Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
33,684

 
$
8,105

 
$
(6
)
 
$
—

 
$
—

 
 
 
$
41,783

Accrued merchant and supplier payables
591,476

 
66,153

 
(1,421
)
 
—

 
—

 
 
 
656,208

Accrued expenses
211,718

 
15,120

 
(186
)
 
—

 
3,394

 
d
 
230,046

Due to related parties
—

 
16,920

 
(2,072
)
 
(14,848
)
 
—

 
e
 
—

Deferred income taxes, current
52,216

 
—

 
—

 
—

 
—

 
 
 
52,216

Other current liabilities
126,764

 
807

 
—

 
—

 
—

 
 
 
127,571

Total current liabilities
1,015,858

 
107,105

 
(3,685
)
 
(14,848
)
 
3,394

 

 
1,107,824

Deferred income taxes, non-current
20,356

 
—

 
—

 
—

 
7,385

 
f
 
27,741

Other non-current liabilities
105,529

 
5,069

 
—

 
—

 
—

 
 
 
110,598

Total Liabilities
1,141,743

 
112,174

 
(3,685
)
 
(14,848
)
 
10,779

 

 
1,246,163

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock
66

 
—

 
—

 
—

 
2

 
g
 
68

Class B common stock
—

 
—

 
—

 
—

 
—

 
 
 
—

Common stock
—

 
—

 
—

 
—

 
—

 
 
 
—

Additional paid-in capital
1,563,815

 
288,475

 
(295
)
 
(288,180
)
 
162,860

 
g, h
 
1,726,675

Treasury stock, at cost
(9,014
)
 
—

 
—

 
—

 
—

 
 
 
(9,014
)
Investment in shares of Parent, at cost
—

 
(99,403
)
 
—

 
99,403

 
—

 
h
 
—

Accumulated deficit
(767,623
)
 
(169,159
)
 
3,409

 
165,750

 
(3,394
)
 
d, h
 
(771,017
)
Accumulated other comprehensive income (loss)
23,579

 
(555
)
 
(62
)
 
617

 
—

 
h
 
23,579

Total Groupon, Inc. Stockholders' Equity
810,823

 
19,358

 
3,052

 
(22,410
)
 
159,468

 
 
 
970,291

Noncontrolling interests
(2,026
)
 
—

 
—

 
—

 
—

 
 
 
(2,026
)
Total Equity
808,797

 
19,358

 
3,052

 
(22,410
)
 
159,468

 
 
 
968,265

Total Liabilities and Equity
$
1,950,540

 
$
131,532

 
$
(633
)
 
$
(37,258
)
 
$
170,247

 
 
 
$
2,214,428

   
The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined consolidated balance sheet.
(1) See note 2 in the accompanying notes for discussion of adjustments related to operations not acquired.
(2) See note 3 in the accompanying notes for discussion of pro forma adjustments.

2


GROUPON, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
For the nine months ended September 30, 2013
(in thousands, except share and per share amounts)

 
Groupon, Inc. Historical (unaudited)
 
LivingSocial Korea, Inc. Historical
(unaudited)
 
Adjustments for Operations Not Acquired (1)
 
Pro Forma Adjustments (2)
 
Notes
 
Pro Forma Combined
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party and other
$
1,252,966

 
$
79,427

 
$
(2,590
)
 
$
(3,447
)
 
$
—

 
i
 
$
1,326,356

Direct
552,242

 
1,638

 
—

 
—

 
—

 
 
 
553,880

Total revenue
1,805,208

 
81,065

 
(2,590
)
 
(3,447
)
 
—

 
 
 
1,880,236

Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party and other
179,524

 
20,187

 
(563
)
 
197

 
—

 
j
 
199,345

Direct
502,359

 
1,145

 
—

 
38

 
—

 
j
 
503,542

Total cost of revenue
681,883

 
21,332

 
(563
)
 
235

 
—

 
 
 
702,887

Gross profit
1,123,325

 
59,733

 
(2,027
)
 
(3,682
)
 
—

 
 
 
1,177,349

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketing
158,319

 
13,567

 
(711
)
 
(3,447
)
 
—

 
i
 
167,728

Selling, general and administrative
904,880

 
72,230

 
(2,175
)
 
1,891

 
14,625

 
j,k
 
991,451

Depreciation and amortization
—

 
13,470

 
—

 
(13,470
)
 
—

 
j,k
 
—

Acquisition-related benefit, net
(2,276
)
 
—

 
—

 
—

 
—

 
 
 
(2,276
)
  Total operating expenses
1,060,923

 
99,267

 
(2,886
)
 
(15,026
)
 
14,625

 
 
 
1,156,903

Income (loss) from operations
62,402

 
(39,534
)
 
859

 
11,344

 
(14,625
)
 
 
 
20,446

Loss on equity method investments
(58
)
 
—

 
—

 
—

 
—

 
 
 
(58
)
Other income (expense), net
(9,772
)
 
(636
)
 
122

 
—

 
—

 
 
 
(10,286
)
Income (loss) before provision (benefit) for income taxes
52,572

 
(40,170
)
 
981

 
11,344

 
(14,625
)
 
 
 
10,102

Provision (benefit) for income taxes
62,657

 
—

 
—

 
2,745

 
(3,539
)
 
l
 
61,863

Net (loss) income
(10,085
)
 
(40,170
)
 
981

 
8,599

 
(11,086
)
 
 
 
(51,761
)
Net income attributable to noncontrolling interests
(4,061
)
 
—

 
—

 
—

 
—

 
 
 
(4,061
)
Net (loss) income attributable to Groupon, Inc.
$
(14,146
)
 
$
(40,170
)
 
$
981

 
$
8,599

 
$
(11,086
)
 
 
 
$
(55,822
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$(0.02)
 
 
 
 
 
 
 
 
 
 
 
$(0.08)
Diluted
$(0.02)
 
 
 
 
 
 
 
 
 
 
 
$(0.08)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
662,531,567

 
 
 
 
 
13,825,283

 
 
 
m
 
676,356,850

Diluted
662,531,567

 
 
 
 
 
13,825,283

 
 
 
m
 
676,356,850

 
The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined consolidated statement of operations.
(1) See note 2 in the accompanying notes for discussion of adjustments related to operations not acquired.
(2) See note 3 in the accompanying notes for discussion of pro forma adjustments.

3


GROUPON, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
For the year ended December 31, 2012
(in thousands, except share and per share amounts)

 
Groupon, Inc. Historical
 
LivingSocial Korea, Inc. Historical
 
Adjustments for Operations Not Acquired (1)
 
Pro Forma Adjustments (2)
 
Notes
 
Pro Forma Combined
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party and other
$
1,879,729

 
$
73,550

 
$
(2,370
)
 
$
(528
)
 
$
—

 
i
 
$
1,950,381

Direct
454,743

 
3,300

 
—

 
—

 
—

 
 
 
458,043

Total revenue
2,334,472

 
76,850

 
(2,370
)
 
(528
)
 
—

 
 
 
2,408,424

Cost of revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party and other
297,739

 
25,032

 
(511
)
 
74

 
—

 
j
 
322,334

Direct
421,201

 
1,808

 
—

 
8

 
—

 
j
 
423,017

Total cost of revenue
718,940

 
26,840

 
(511
)
 
82

 
—

 
 
 
745,351

Gross profit
1,615,532

 
50,010

 
(1,859
)
 
(610
)
 
—

 
 
 
1,663,073

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketing
336,854

 
19,803

 
(953
)
 
(528
)
 
—

 
i
 
355,176

Selling, general and administrative
1,179,080

 
101,002

 
(3,095
)
 
2,028

 
19,500

 
j,k
 
1,298,515

Depreciation and amortization
—

 
34,653

 
—

 
(34,653
)
 
—

 
j,k
 
—

Acquisition-related expense, net
897

 
—

 
—

 
—

 
—

 
 
 
897

  Total operating expenses
1,516,831

 
155,458

 
(4,048
)
 
(33,153
)
 
19,500

 
 
 
1,654,588

Income (loss) from operations
98,701

 
(105,448
)
 
2,189

 
32,543

 
(19,500
)
 
 
 
8,485

Loss on equity method investments
(9,925
)
 
—

 
—

 
—

 
—

 
 
 
(9,925
)
Other income (expense), net
6,166

 
1,755

 
(299
)
 
—

 
—

 
 
 
7,622

Income (loss) before provision (benefit) for income taxes
94,942

 
(103,693
)
 
1,890

 
32,543

 
(19,500
)
 
 
 
6,182

Provision (benefit) for income taxes
145,973

 
(8,274
)
 
—

 
7,875

 
(4,719
)
 
l
 
140,855

Net (loss) income
(51,031
)
 
(95,419
)
 
1,890

 
24,668

 
(14,781
)
 
 
 
(134,673
)
Net income attributable to noncontrolling interests
(3,742
)
 
—

 
—

 
—

 
—

 
 
 
(3,742
)
Net (loss) income attributable to Groupon, Inc.
(54,773
)
 
(95,419
)
 
1,890

 
24,668

 
(14,781
)
 
 
 
(138,415
)
Adjustment of redeemable noncontrolling interests to redemption value
(12,604
)
 
—

 
—

 
—

 
—

 
 
 
(12,604
)
Net (loss) income attributable to common stockholders
$
(67,377
)
 
$
(95,419
)
 
$
1,890

 
$
24,668

 
$
(14,781
)
 
 
 
$
(151,019
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$(0.10)
 
 
 
 
 
 
 
 
 
 
 
$(0.23)
Diluted
$(0.10)
 
 
 
 
 
 
 
 
 
 
 
$(0.23)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
650,214,119

 
 
 
 
 
13,825,283

 
 
 
m
 
664,039,402

Diluted
650,214,119

 
 
 
 
 
13,825,283

 
 
 
m
 
664,039,402


The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined consolidated statement of operations.
(1) See note 2 in the accompanying notes for discussion of adjustments related to operations not acquired.
(2) See note 3 in the accompanying notes for discussion of pro forma adjustments.

4


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. PRELIMINARY ESTIMATED ACQUISITION PRICE ALLOCATION
The preliminary acquisition price allocation for LivingSocial Korea, Inc. is based on estimates, assumptions, and valuations which have not yet been finalized. Accordingly, the pro forma adjustments to allocate the acquisition consideration will remain preliminary until Groupon management determines the fair values of assets acquired, net of liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed could differ materially from the amounts presented in the unaudited pro forma condensed combined consolidated financial statements. The preliminary amounts allocated to the net assets acquired and liabilities assumed are based on Groupon management's current best estimates. The fair values of net tangible assets acquired are expected to approximate their net carrying amounts.
The following table summarizes the preliminary allocation of the aggregate acquisition price (in thousands):
    
Preliminary Acquisition Price Allocation
 
 
Cash and cash equivalents
 
$
15,084

Accounts receivable, net
 
12,287

Prepaid expenses and other current assets
 
4,819

Property, equipment and software, net
 
5,819

Goodwill
 
231,644

Intangible Assets:
 
 
Subscriber relationships
 
69,000

Merchant relationships
 
6,600

Developed technology
 
200

Trade names
 
17,000

Other non-current assets
 
1,435

Total assets acquired
 
$
363,888

Accounts payable
 
$
8,099

Accrued merchant and supplier payables
 
64,732

Accrued expenses
 
14,934

Other current liabilities
 
807

Deferred income taxes, non-current
 
7,385

Other non-current liabilities
 
5,069

Total liabilities assumed
 
$
101,026

Total Acquisition Price
 
$
262,862

The aggregate acquisition-date fair value of the consideration transferred consisted of the following (in thousands):
    
Fair Value of Consideration Transferred
 
Fair Value

Cash Paid
 
$
100,000

Issuance of 13,825,283 shares of Class A common stock
 
162,862

Total
 
$
262,862

The fair value of the Groupon Class A common stock issued as consideration was measured based on the stock price upon closing of the transaction on January 2, 2014. This amount differs from the $160 million contractual price as stated in the Share Purchase Agreement, which is based on the average closing price of Groupon’s Class A common stock for the ten trading days immediately prior to close.

5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. ADJUSTMENTS FOR OPERATIONS NOT ACQUIRED

Groupon did not acquire a Malaysia-based subsidiary of LivingSocial Korea, Inc. Accordingly, the balances relating to that entity have been excluded from the unaudited pro forma condensed combined consolidated financial statements.
3. PRO FORMA ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The final acquisition price allocation may result in different allocations for tangible and intangible assets than presented in the unaudited pro forma condensed combined consolidated financial statements and these notes, and those differences may be material.
Balance Sheet
a.
Adjustment to reflect the cash paid to the sole stockholder of LivingSocial Korea, Inc. as part of the acquisition consideration.
b.
Adjustment to eliminate the historical LivingSocial Korea, Inc. goodwill of approximately $50.5 million and record preliminary goodwill created as a result of the acquisition of approximately $231.6 million.
c.
Adjustment to record the preliminary fair value estimates of intangible assets resulting from the acquisition and to reverse the net book value of existing LivingSocial Korea, Inc. intangible assets. Preliminary fair values for the intangible assets were determined based on the income and cost approaches. The intangible assets acquired were trade names, developed technology, merchant relationships and subscriber relationships and are expected to be amortized on a straight-line basis over the following useful lives:
Identifiable Intangible Assets
 
Useful Life
Trade names
 
5 years
Developed technology
 
2 years
Merchant relationships
 
3 years
Subscriber relationships
 
5 years
d.
Adjustment to record transaction costs for this acquisition that were incurred by Groupon after September 30, 2013.
e.
Adjustment to eliminate the historical LivingSocial Korea, Inc. due to related parties of $14.8 million, which was not assumed in the acquisition.
f.
Adjustment to record the estimated preliminary net deferred tax liability increase of $7.4 million related to the acquisition.
g.
Adjustment to record common stock and additional paid-in capital related to the issuance of 13,825,283 shares of Groupon Class A common stock issued to the sole stockholder of LivingSocial Korea, Inc. as part of the acquisition consideration.
h.
Adjustment to eliminate LivingSocial Korea, Inc.'s historical stockholder's equity (additional paid-in capital, investment in shares of Parent, at cost, accumulated deficit, and accumulated other comprehensive loss).
Statement of Operations
i.
Adjustment to reclassify LivingSocial Korea, Inc.'s $3.4 million and $0.5 million of discount incentives for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively, from marketing expense to a reduction of revenue to conform to Groupon's presentation.
j.
Adjustment to reclassify LivingSocial Korea, Inc.'s $2.1 million and $2.1 million of depreciation and amortization of property, equipment and software for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively, to selling, general and administrative expense and cost of revenue to conform to Groupon's presentation.

6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

k.
Adjustment to eliminate $11.3 million and $32.5 million of historical amortization expense recorded for LivingSocial Korea, Inc.'s pre-existing intangible assets and to record $14.6 million and $19.5 million of amortization expense for the intangible assets expected to be recognized upon Groupon's acquisition of LivingSocial Korea, Inc. for the nine months ended September 30, 2013 and for the year ended December 31, 2012, respectively. The intangible assets acquired include trade names, developed technology, merchant relationships and subscriber relationships. These intangible assets are expected to be amortized on a straight-line basis over the useful life of the underlying assets which range from 2 to 5 years.
l.
Tax impact of pro forma adjustments at the Korean statutory rate.
m.
Adjustment to increase the denominator of the net loss per share calculations to reflect the issuance of Groupon Class A common stock issued to the sole stockholder of LivingSocial Korea, Inc. as part of the acquisition consideration.


7

Groupon, Inc. Reports