Exhibit 99.1
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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| Page Number |
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Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements | P-2 |
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Unaudited Pro Forma Condensed Consolidated Balance Sheet | P-3 |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations | P-4 |
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Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements | P-7 |
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INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial statements of ALJ Regional Holdings, Inc. (“ALJ,” the “Company” or “we”) and subsidiaries were derived from the Company’s historical consolidated financial statements. They are presented to give effect to the dispositions of Phoenix Color Corp. and subsidiaries (“Phoenix”) and certain business contracts of Faneuil Inc. and subsidiaries (“Faneuil Contracts”) by ALJ. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2021 is presented as if the dispositions had occurred on that date. The statements of operations for the three months ended December 31, 2021, and the years ended September 30, 2021 and 2020, are presented as if (i) the Phoenix disposition occurred on October 1, 2019, the beginning of the earliest pro forma period presented for Phoenix, and (ii) the Faneuil Contracts disposition occurred on October 1, 2020, the beginning of the earliest pro forma period presented for Faneuil.
The pro forma information has been prepared for illustrative purposes only and is not intended to represent or be indicative of the consolidated results of operations that actually would have been achieved had the dispositions of Phoenix and Faneuil Contracts been completed prior to the periods presented. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations. The pro forma information should be read in conjunction with the historical financial statements of the Company included in its Annual Report on Form 10‑K for the year ended September 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on December 20, 2021, and the Company’s Quarterly Report on Form 10-Q for the three months ended December 31, 2021 filed with the SEC on February 11, 2022.
P-2
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands, except par value)
| | On September 30, 2021 | |
| | As Reported | | | Phoenix | | | Faneuil Contracts | | | Pro Forma Adjustments | | | Pro Forma | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 2,276 | | | $ | (656 | ) | | $ | — | | | $ | 136,128 | | (a) (b) (c) (d) (e) | $ | 137,748 | |
Accounts receivable, net of allowance for doubtful accounts of $83 | | | 68,572 | | | | (10,912 | ) | | | — | | | | — | | | | 57,660 | |
Inventories, net | | | 7,654 | | | | (7,654 | ) | | | — | | | | — | | | | — | |
Prepaid expenses and other current assets | | | 10,894 | | | | (2,042 | ) | | | (189 | ) | | | — | | | | 8,663 | |
Total current assets | | | 89,396 | | | | (21,264 | ) | | | (189 | ) | | | 136,128 | | | | 204,071 | |
Property and equipment, net | | | 63,930 | | | | (41,066 | ) | | | (7,295 | ) | | | — | | | | 15,569 | |
Operating lease right-of-use assets | | | 29,048 | | | | — | | | | (8,252 | ) | | | — | | | | 20,796 | |
Intangible assets, net | | | 30,611 | | | | (18,705 | ) | | | — | | | | — | | | | 11,906 | |
Collateral deposits | | | 487 | | | | — | | | | — | | | | — | | | | 487 | |
Other assets | | | 1,181 | | | | (389 | ) | | | — | | | | — | | | | 792 | |
Total assets | | $ | 214,653 | | | $ | (81,424 | ) | | $ | (15,736 | ) | | $ | 136,128 | | | $ | 253,621 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 15,241 | | | $ | (3,986 | ) | | $ | — | | | $ | — | | | $ | 11,255 | |
Accrued expenses | | | 26,211 | | | | (5,396 | ) | | | (1,340 | ) | | | — | | | | 19,475 | |
Income taxes payable | | | 181 | | | | — | | | | — | | | | 10 | | (e) | | 191 | |
Deferred revenue and customer deposits | | | 4,053 | | | | — | | | | — | | | | — | | | | 4,053 | |
Term loans, net of deferred loan costs - current installments | | | 2,692 | | | | — | | | | — | | | | (2,692 | ) | (c) | | — | |
Finance lease obligations - current installments | | | 765 | | | | — | | | | — | | | | — | | | | 765 | |
Operating lease obligations - current installments | | | 4,722 | | | | — | | | | (2,003 | ) | | | — | | | | 2,719 | |
Current portion of workers' compensation reserve | | | 710 | | | | — | | | | — | | | | — | | | | 710 | |
Other current liabilities | | | 4,353 | | | | (667 | ) | | | — | | | | — | | | | 3,686 | |
Total current liabilities | | | 58,928 | | | | (10,049 | ) | | | (3,343 | ) | | | (2,682 | ) | | | 42,854 | |
Line of credit, net of deferred loan costs | | | 5,490 | | | | — | | | | — | | | | (5,490 | ) | (c) | | — | |
Term loans, less current portion, net of deferred loan costs | | | 93,484 | | | | — | | | | — | | | | (93,484 | ) | (c) | | — | |
Deferred revenue, less current portion | | | 369 | | | | — | | | | — | | | | — | | | | 369 | |
Workers' compensation reserve, less current portion | | | 1,749 | | | | — | | | | — | | | | — | | | | 1,749 | |
Finance lease obligations, less current installments | | | 332 | | | | — | | | | — | | | | — | | | | 332 | |
Operating lease obligations, less current installments | | | 32,767 | | | | — | | | | (10,489 | ) | | | — | | | | 22,278 | |
Deferred tax liabilities, net | | | 852 | | | | — | | | | — | | | | (852 | ) | (e) | | — | |
Other non-current liabilities | | | 8,106 | | | | (1,841 | ) | | | — | | | | — | | | | 6,265 | |
Total liabilities | | | 202,077 | | | | (11,890 | ) | | | (13,832 | ) | | | (102,508 | ) | | | 73,847 | |
Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | |
Common stock, $0.01 par value; authorized – 100,000 shares; 42,406 issued and outstanding on September 30, 2021 | | | 424 | | | | — | | | | — | | | | — | | | | 424 | |
Additional paid-in capital | | | 288,355 | | | | — | | | | — | | | | — | | | | 288,355 | |
Accumulated deficit | | | (276,203 | ) | | | (69,534 | ) | | | (1,904 | ) | | | 238,636 | | (a) (b) (c) (d) (e) | | (109,005 | ) |
Total stockholders’ equity | | | 12,576 | | | | (69,534 | ) | | | (1,904 | ) | | | 238,636 | | | | 179,774 | |
Total liabilities and stockholders’ equity | | $ | 214,653 | | | $ | (81,424 | ) | | $ | (15,736 | ) | | $ | 136,128 | | | $ | 253,621 | |
See notes to unaudited pro forma condensed consolidated financial statements.
P-3
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
| | Three Months Ended December 31, 2021 | |
| | As Reported | | | Phoenix | | | Faneuil Contracts | | | Pro Forma Adjustments | | | Pro Forma | |
Net revenue | | $ | 103,082 | | | $ | (28,303 | ) | | $ | (42,738 | ) | | $ | 447 | | (d) | $ | 32,488 | |
Costs and expenses: | | | | | | | | | | | | | | | | | | | | |
Cost of revenue | | | 89,164 | | | | (21,640 | ) | | | (38,917 | ) | | | (331 | ) | (d) | | 28,276 | |
Selling, general, and administrative expense | | | 20,183 | | | | (3,588 | ) | | | (5,204 | ) | | | (2,099 | ) | (d) | | 9,292 | |
Loss on disposal of assets, net | | | 26 | | | | — | | | | — | | | | — | | | | 26 | |
Total operating expenses | | | 109,373 | | | | (25,228 | ) | | | (44,121 | ) | | | (2,430 | ) | | | 37,594 | |
Operating loss | | | (6,291 | ) | | | (3,075 | ) | | | 1,383 | | | | 2,877 | | | | (5,106 | ) |
Other (expense) income: | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | (2,705 | ) | | | 1,436 | | | | 1,254 | | | | — | | | | (15 | ) |
Total other expense, net | | | (2,705 | ) | | | 1,436 | | | | 1,254 | | | | — | | | | (15 | ) |
Loss from continuing operations before income taxes | | | (8,996 | ) | | | (1,639 | ) | | | 2,637 | | | | 2,877 | | | | (5,121 | ) |
(Provision for) benefit from income taxes | | | (396 | ) | | | 497 | | | | 12 | | | | (129 | ) | (e) | | (16 | ) |
Net loss | | $ | (9,392 | ) | | $ | (1,142 | ) | | $ | 2,649 | | | $ | 2,748 | | | $ | (5,137 | ) |
Loss per share of common stock–basic and diluted | | $ | (0.22 | ) | | | | | | | | | | | | | | $ | (0.12 | ) |
Weighted average shares of common stock outstanding– basic and diluted | | | 42,407 | | | | | | | | | | | | | | | | 42,407 | |
See notes to unaudited pro forma condensed consolidated financial statements.
P-4
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
| | Year Ended September 30, 2021 | |
| | As Reported | | | Phoenix | | | Faneuil Contracts | | | Pro Forma Adjustments | | | Pro Forma | |
Net revenue | | $ | 440,853 | | | $ | (115,627 | ) | | $ | (154,812 | ) | | $ | 2,951 | | (d) | $ | 173,365 | |
Costs and expenses: | | | | | | | | | | | | | | | | | | | | |
Cost of revenue | | | 355,245 | | | | (87,903 | ) | | | (119,549 | ) | | | (27 | ) | (d) | | 147,766 | |
Selling, general, and administrative expense | | | 76,688 | | | | (15,115 | ) | | | (20,047 | ) | | | (7,381 | ) | (d) | | 34,145 | |
Gain on disposal of assets, net | | | (191 | ) | | | 192 | | | | — | | | | (114,693 | ) | (b) | | (114,692 | ) |
Total operating expenses | | | 431,742 | | | | (102,826 | ) | | | (139,596 | ) | | | (122,101 | ) | | | 67,219 | |
Operating income | | | 9,111 | | | | (12,801 | ) | | | (15,216 | ) | | | 125,052 | | | | 106,146 | |
Other (expense) income: | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | (10,190 | ) | | | 4,922 | | | | 5,209 | | | | — | | | | (59 | ) |
Loss on debt extinguishment | | | (2,072 | ) | | | — | | | | — | | | | 2,072 | | (c) | | — | |
Total other expense, net | | | (12,262 | ) | | | 4,922 | | | | 5,209 | | | | 2,072 | | | | (59 | ) |
(Loss) income from continuing operations before income taxes | | | (3,151 | ) | | | (7,879 | ) | | | (10,007 | ) | | | 127,124 | | | | 106,087 | |
Provision for income taxes | | | (429 | ) | | | 422 | | | | 57 | | | | (10,901 | ) | (e) | | (10,851 | ) |
(Loss) income from continuing operations | | | (3,580 | ) | | | (7,457 | ) | | | (9,950 | ) | | | 116,223 | | | | 95,236 | |
Net loss from discontinued operations, net of taxes | | | (1,063 | ) | | | — | | | | — | | | | — | | | | (1,063 | ) |
Net (loss) income | | $ | (4,643 | ) | | $ | (7,457 | ) | | $ | (9,950 | ) | | $ | 116,223 | | | $ | 94,173 | |
(Loss) income per share of common stock–basic: | | | | | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (0.08 | ) | | | | | | | | | | | | | | $ | 2.25 | |
Discontinued operations | | $ | (0.03 | ) | | | | | | | | | | | | | | $ | (0.03 | ) |
Net (loss) income per share (1) | | $ | (0.11 | ) | | | | | | | | | | | | | | $ | 2.22 | |
(Loss) income per share of common stock–diluted: | | | | | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (0.08 | ) | | | | | | | | | | | | | | $ | 1.75 | |
Discontinued operations | | $ | (0.03 | ) | | | | | | | | | | | | | | $ | (0.02 | ) |
Net (loss) income per share (1) | | $ | (0.11 | ) | | | | | | | | | | | | | | $ | 1.73 | |
Weighted average shares of common stock outstanding: | | | | | | | | | | | | | | | | | | | | |
Basic | | | 42,329 | | | | | | | | | | | | | | | | 42,329 | |
Diluted | | | 42,329 | | | | | | | | | | | | | | | | 54,417 | |
(1) | Amounts may not add due to rounding. |
See notes to unaudited pro forma condensed consolidated financial statements.
P-5
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
| | Year Ended September 30, 2020 | |
| | As Reported | | | Phoenix | | | Pro Forma Adjustments | | | Pro Forma | |
Net revenue | | $ | 350,053 | | | $ | (103,021 | ) | | $ | — | | | $ | 247,032 | |
Costs and expenses: | | | | | | | | | | | | | | | | |
Cost of revenue | | | 282,488 | | | | (79,079 | ) | | | — | | | | 203,409 | |
Selling, general, and administrative expense | | | 67,284 | | | | (14,873 | ) | | | — | | | | 52,411 | |
Impairment of goodwill | | | 56,492 | | | | (32,542 | ) | | | — | | | | 23,950 | |
Gain on disposal of assets, net | | | (324 | ) | | | 324 | | | | — | | | | — | |
Total operating expenses | | | 405,940 | | | | (126,170 | ) | | | — | | | | 279,770 | |
Operating loss | | | (55,887 | ) | | | 23,149 | | | | — | | | | (32,738 | ) |
Other (expense) income: | | | | | | | | | | | | | | | | |
Interest expense, net | | | (10,528 | ) | | | 5,640 | | | | 4,728 | | (c) | | (160 | ) |
Interest from legal settlement | | | 200 | | | | — | | | | — | | | | 200 | |
Loss on debt extinguishment | | | — | | | | — | | | | (3,694 | ) | (c) | | (3,694 | ) |
Total other expense, net | | | (10,328 | ) | | | 5,640 | | | | 1,034 | | | | (3,654 | ) |
Loss from continuing operations before income taxes | | | (66,215 | ) | | | 28,789 | | | | 1,034 | | | | (36,392 | ) |
Benefit from income taxes | | | 2,043 | | | | 284 | | | | 604 | | (e) | | 2,931 | |
Loss from continuing operations | | | (64,172 | ) | | | 29,073 | | | | 1,638 | | | | (33,461 | ) |
Net (loss) gain from discontinued operations, net of taxes | | | (3,502 | ) | | | — | | | | 49,337 | | (a) (e) | | 45,835 | |
Net (loss) income | | $ | (67,674 | ) | | $ | 29,073 | | | $ | 50,975 | | | $ | 12,374 | |
(Loss) income per share of common stock–basic: | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (1.52 | ) | | | | | | | | | | $ | (0.79 | ) |
Discontinued operations | | $ | (0.08 | ) | | | | | | | | | | $ | 1.09 | |
Net (loss) income per share (1) | | $ | (1.60 | ) | | | | | | | | | | $ | 0.29 | |
(Loss) income per share of common stock–diluted: | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (1.52 | ) | | | | | | | | | | $ | (0.63 | ) |
Discontinued operations | | $ | (0.08 | ) | | | | | | | | | | $ | 0.86 | |
Net (loss) income per share (1) | | $ | (1.60 | ) | | | | | | | | | | $ | 0.23 | |
Weighted average shares of common stock outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 42,186 | | | | | | | | | | | | 42,186 | |
Diluted | | | 42,186 | | | | | | | | | | | | 53,360 | |
(1) | Amounts may not add due to rounding. |
See notes to unaudited pro forma condensed consolidated financial statements.
P-6
ALJ REGIONAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2021 was prepared as if the dispositions of Phoenix and Faneuil Contracts had occurred on that date. The statements of operations for the three months ended December 31, 2021, and the years ended September 30, 2021 and 2020, are presented as if (i) the Phoenix disposition occurred on October 1, 2019, the beginning of the earliest pro forma period presented for Phoenix, and (ii) the Faneuil Contracts disposition occurred on October 1, 2020, the beginning of the earliest pro forma period presented for Faneuil.
Note 2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements are based on the Company’s historical consolidated financial statements as adjusted to give effect to the dispositions Phoenix and Faneuil Contracts. The pro forma adjustments give effect to events that are (1) directly attributable to the dispositions, (2) expected to have a continuing impact on the registrant, and (3) factually supportable, and are based on assumptions that management believes are reasonable given the best information currently available.
Explanations that follow correspond to note references identified in the unaudited pro forma condensed financial statements provided on pages P-3 through P-6 of this exhibit:
| (a) | To book proceeds and the related gains from the sale of Phoenix, net of related transaction expenses. |
| (b) | To book proceeds and the related gains from the sale of Faneuil Contracts, net of related transaction expenses. |
| (c) | To book payoff of certain debt, book the requisite prepayment penalty, and remove related interest expense using proceeds from the sale of Phoenix. |
| (d) | To eliminate redundant expenses and add license revenue related to the sale of Faneuil Contracts. |
| (e) | To record the tax impact of adjustments (a) through (d) above. |
P-7
