UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
References to “we”, “us”, “our”, “Aveanna” and the “Company” refer to Aveanna Healthcare Holdings, Inc., a Delaware corporation. The following unaudited pro forma condensed consolidated financial information and the related notes present our unaudited pro forma condensed consolidated statements of operations for the fiscal year ended January 2, 2021 and for the nine-month period ended October 2, 2021 as well as our unaudited pro forma condensed consolidated balance sheet as of October 2, 2021, after giving forma effect to (i) the acquisition by us of Comfort Care Home Health Services, LLC, Comfort Care Hospice, L.L.C., Premier Medical Housecall, LLC, (collectively, “Comfort Care”), as contemplated by that certain Membership Interest Purchase Agreement, entered into on September 27, 2021, by the Company’s wholly owned subsidiary, Aveanna Healthcare Senior Services LLC (the “Comfort Care Acquisition”) and (ii) our entering into a new Second Lien Credit Agreement (the “New Second Lien Term Loan”) on December 10, 2021 under which we incurred $415.0 million aggregate principal amount of indebtedness to fund the Comfort Care Acquisition (the “New Second Lien Financing”).
We refer to the pro forma adjustments for the Comfort Care Acquisition and for the New Second Lien Financing together as the “Transactions”. The unaudited pro forma condensed consolidated statements of operations have been derived by aggregating our historical consolidated financial statements and the historical financial statements of Comfort Care, including certain pro forma adjustments to such aggregated financial statements, to give effect to the Transactions as if they had occurred on December 29, 2019, which was the first day of our 2020 fiscal year. The unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions as if they had occurred as of October 2, 2021.
The unaudited pro forma condensed consolidated financial information herein has been prepared to illustrate the effects of the Transactions in accordance with GAAP and pursuant to Article 11 of Regulation S-X. Information regarding these pro forma adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma condensed consolidated financial information.
In our opinion, all adjustments necessary to reflect the effects of the Transactions have been included and are based upon currently available information and assumptions that we believe are reasonable as of the date of filing of this Current Report on Form 8-K/A; however, such adjustments are subject to change. Any of the factors underlying these estimates and assumptions may change or prove to be materially different than expected. The unaudited pro forma condensed consolidated financial information also does not purport to represent what our actual results of operations and financial position would have been had the Transactions occurred as of the dates indicated, nor are they intended to be representative of or project our future financial condition or results of operations or financial position.
The unaudited pro forma condensed consolidated financial information and the accompanying notes are provided for informational and illustrative purposes only and should be read in conjunction with (i) our historical audited annual consolidated financial statements for the year ended January 2, 2021 included in our prospectus dated April 28, 2021, which is deemed to be part of our Registration Statement on Form S-1 (File No. 333-254981), (ii) our interim unaudited consolidated financial statements for the nine-month period ended October 2, 2021 included in our Quarterly Report on Form 10-Q filed with the SEC on November 15, 2021, (iii) the audited annual consolidated and combined financial statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates for the year ended December 31, 2020 included in this Current Report on Form 8-K/A, and (iv) the unaudited interim consolidated and combined financial statements of Comfort Care Home Health Services, LLC and subsidiaries and affiliates as of and for the nine-month period ended September 30, 2021 included in this Current Report on Form 8-K/A.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of October 2, 2021
(Amounts in thousands, except share and per share data)
| Historical |
|
|
|
|
| |||
| Aveanna as of October 2, 2021 |
| Comfort Care as of September 30, 2021, after reclassification (Note 2) |
| Transaction Accounting Adjustments for the Acquisition |
| Note 3 |
| Pro Forma for the Acquisition |
ASSETS | |||||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash & Cash Equivalents | $ 121,708 |
| $ 17,286 |
| $ 35,692 |
| (a)(b)(e)(f)(g) |
| $ 174,686 |
Patient accounts receivable | 189,033 |
| 11,123 |
| - |
|
|
| 200,156 |
Receivables under insured programs | 8,264 |
| - |
| - |
|
|
| 8,264 |
Prepaid expenses | 13,038 |
| 803 |
| - |
|
|
| 13,841 |
Other current assets | 10,692 |
| 132 |
| - |
|
|
| 10,824 |
Total current assets | 342,735 |
| 29,344 |
| 35,692 |
|
|
| 407,771 |
Property and equipment, net | 31,599 |
| 1,257 |
| - |
|
|
| 32,856 |
Operating lease right of use assets | 46,817 |
| - |
| 3,952 |
| (i) |
| 50,769 |
Goodwill | 1,419,591 |
| 3,558 |
| 314,857 |
| (d) |
| 1,738,006 |
Intangible assets, net | 77,612 |
| 5,518 |
| 15,032 |
| (c) |
| 98,162 |
Receivables under insured programs | 25,423 |
| - |
| - |
|
|
| 25,423 |
Deferred income taxes | 2,931 |
| - |
| 1,519 |
| (h) |
| 4,450 |
Other long-term assets | 8,946 |
| - |
| - |
|
|
| 8,946 |
Total assets | $ 1,955,654 |
| $ 39,677 |
| $ 371,052 |
|
|
| $ 2,366,383 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, DEFERRED RESTRICTED STOCK UNITS, AND STOCKHOLDERS’ EQUITY | |||||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities | $ 46,883 |
| $ 2,285 |
| $ (1,971) |
| (e)(h) |
| $ 47,197 |
Accrued payroll and employee benefits | 55,211 |
| 8,291 |
| - |
|
|
| 63,502 |
Accrued interest | 1,801 |
| 146 |
| (146) |
| (a) |
| 1,801 |
Notes payable | 2,671 |
| - |
| - |
|
|
| 2,671 |
Current portion of insurance reserve- insured program | 8,264 |
| - |
| - |
|
|
| 8,264 |
Current portion of insurance reserves | 14,105 |
| - |
| - |
|
|
| 14,105 |
Current portion long-term obligations | 8,600 |
| 3,682 |
| (3,682) |
| (a)(b) |
| 8,600 |
Current portion of operating lease liabilities | 12,166 |
| - |
| 1,041 |
| (i) |
| 13,207 |
Current portion of deferred payroll taxes | 25,699 |
| - |
| - |
|
|
| 25,699 |
Other current liabilities | 44,173 |
| 1,024 |
| - |
|
|
| 45,197 |
Total current liabilities | 219,573 |
| 15,428 |
| (4,758) |
|
|
| 230,243 |
Long-term obligations, less current portion | 829,674 |
| - |
| 400,378 |
| (f)(g) |
| 1,230,052 |
Long-term insurance reserves - insured programs | 25,423 |
| - |
| - |
|
|
| 25,423 |
Long-term insurance reserves | 31,296 |
| - |
| - |
|
|
| 31,296 |
Operating lease liabilities, less current portion | 40,099 |
| - |
| 2,911 |
| (i) |
| 43,010 |
Deferred payroll taxes, less current portion | 25,699 |
| 935 |
| (935) |
| (b) |
| 25,699 |
Deferred income taxes | 3,430 |
| - |
| - |
|
|
| 3,430 |
Other long-term liabilities | 23,893 |
| - |
| - |
|
|
| 23,893 |
Total liabilities | 1,199,087 |
| 16,363 |
| 397,596 |
|
|
| 1,613,046 |
Deferred restricted stock units | 2,135 |
| - |
| - |
|
|
| 2,135 |
Stockholders' equity: |
|
|
|
|
|
|
|
| - |
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding | - |
| - |
| - |
|
|
| - |
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 184,164,184 issued and outstanding | 1,841 |
| - |
| - |
|
|
| 1,841 |
Comfort Care's members' capital |
|
| 23,314 |
| (23,314) |
| (h) |
| - |
Additional paid-in capital | 1,201,075 |
| - |
| - |
|
|
| 1,201,075 |
Accumulated deficit | (448,484) |
| - |
| (3,230) |
| (h) |
| (451,714) |
Total stockholders' equity | 754,432 |
| 23,314 |
| (26,544) |
|
|
| 751,202 |
Total liabilities, deferred restricted stock units, and stockholders' equity | $ 1,955,654 |
| $ 39,677 |
| $ 371,052 |
|
|
| $ 2,366,383 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Balance Sheet.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the Fiscal Year Ended January 2, 2021
(Amounts in thousands, except per share data)
| Historical Aveanna Year ended January 2, 2021 |
| Historical Comfort Care Year ended December 31, 2021, after reclassification (Note 2) |
| Transaction Accounting Adjustments for the Acquisition |
| Note 4 |
| Pro Forma for the Acquisition |
Revenue | $ 1,495,105 |
| $ 93,168 |
| $ - |
|
|
| $ 1,588,273 |
Cost of revenue, excluding depreciation and amortization | 1,040,590 |
| 43,081 |
| - |
|
|
| 1,083,671 |
Branch and regional expenses | 240,946 |
| 23,814 |
| - |
|
|
| 264,760 |
Corporate expenses | 113,828 |
| 10,298 |
| - |
|
|
| 124,126 |
Goodwill Impairment | 75,727 |
| - |
| - |
|
|
| 75,727 |
Depreciation and amortization | 17,027 |
| 713 |
| 2,004 |
| (a) |
| 19,744 |
Acquisition-related costs | 9,564 |
| - |
| 13,423 |
| (b) |
| 22,987 |
Other operating expenses (income) | 910 |
| (4,316) |
| - |
|
|
| (3,406) |
Operating (loss) income | (3,487) |
| 19,578 |
| (15,427) |
|
|
| 664 |
Interest income | 345 |
| 46 |
| - |
|
|
| 391 |
Interest expense | (82,983) |
| (129) |
| (33,052) |
| (c) |
| (116,164) |
Loss on debt extinguishment | (73) |
| - |
| - |
|
|
| (73) |
Other income (expense) | 34,464 |
| 165 |
| - |
|
|
| 34,629 |
Income (loss) before income taxes | (51,734) |
| 19,660 |
| (48,479) |
|
|
| (80,553) |
Income tax benefit (expenses) | (5,316) |
| - |
| 7,493 |
| (d) |
| 2,177 |
Net income (loss) | (57,050) |
| 19,660 |
| (40,986) |
|
|
| (78,376) |
Net income (loss) attributable to noncontrolling interest | - |
| (8) |
| - |
|
|
| (8) |
Net income (loss) attributable to Aveanna | $ (57,050) |
| $ 19,652 |
| $ (40,986) |
|
|
| $ (78,384) |
Income (loss) per share attributable to Aveanna: |
|
|
|
|
|
|
|
|
|
Net (loss) income per share, basic | $ (0.40) |
|
|
|
|
|
|
| $ (0.56) |
Weighted average shares outstanding, basic | 140,972 |
|
|
|
|
|
|
| 140,972 |
Net (loss) income per share, diluted | $ (0.40) |
|
|
|
|
|
|
| $ (0.56) |
Weighted average shares outstanding, diluted | 140,972 |
|
|
|
|
|
|
| 140,972 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations.
AVEANNA HEALTHCARE HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the Nine-month Period Ended October 2, 2021
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
| Historical Aveanna Nine-month period ended October 2, 2021 |
| Historical Comfort Care Nine-month period ended September 30, 2021, after reclassification (Note 2) |
| Transaction Accounting Adjustments for the Acquisition |
| Note 4 |
| Pro Forma for the Acquisition |
Revenue | $ 1,264,548 |
| $ 74,145 |
| $ - |
|
|
| $ 1,338,693 |
Cost of revenue, excluding depreciation and amortization | 846,534 |
| 31,871 |
| - |
|
|
| 878,405 |
Branch and regional expenses | 223,462 |
| 19,082 |
| - |
|
|
| 242,544 |
Corporate expenses | 97,673 |
| 8,370 |
| - |
|
|
| 106,043 |
Goodwill Impairment | - |
| - |
| - |
|
|
| - |
Depreciation and amortization | 15,163 |
| 494 |
| (126) |
| (a) |
| 15,531 |
Acquisition-related costs | 4,779 |
| - |
| (1,094) |
| (b) |
| 3,685 |
Other operating expenses (income) | - |
| - |
| - |
|
|
| - |
Operating (loss) income | 76,937 |
| 14,328 |
| 1,220 |
|
|
| 92,485 |
Interest income | 182 |
| 19 |
| - |
|
|
| 201 |
Interest expense | (53,793) |
| (78) |
| (24,804) |
| (c) |
| (78,675) |
Loss on debt extinguishment | (13,702) |
| - |
| - |
|
|
| (13,702) |
Other expense (income) | (1,088) |
| 1 |
| - |
|
|
| (1,087) |
Income (loss) before income taxes | 8,536 |
| 14,270 |
| (23,584) |
|
|
| (778) |
Income tax benefit (expense) | 612 |
| - |
| 2,455 |
| (d) |
| 3,067 |
Net income (loss) | $ 9,148 |
| $ 14,270 |
| $ (21,129) |
|
|
| $ 2,289 |
Income (loss) per share: |
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic | $ 0.06 |
|
|
|
|
|
|
| $ 0.01 |
Weighted average shares outstanding, basic | 165,877 |
|
|
|
|
|
|
| 165,877 |
Net income (loss) per share, diluted | $ 0.05 |
|
|
|
|
|
|
| $ 0.01 |
Weighted average shares outstanding, diluted | 170,667 |
|
|
|
|
|
|
| 170,667 |
The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The Comfort Care Acquisition has been accounted for within the unaudited pro forma condensed consolidated financial information as a business combination using the acquisition method of accounting under the provisions of ASC 805, Business Combinations (“ASC 805”), and using the fair value concepts defined in ASC 820, Fair Value Measurements. Under ASC 805, all assets acquired and liabilities assumed are recorded at their acquisition date fair value. The determination of the fair values of the assets acquired and liabilities assumed (and the related determination of estimated useful lives of amortizable identifiable intangible assets) requires significant judgment and estimates. The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows related to the businesses acquired. Although the Company believes the fair values assigned to the assets acquired and liabilities assumed from the acquisitions are accurate, new information may be obtained about facts and circumstances that existed as of the date of the Comfort Care Acquisition during the twelve-month period following which could cause actual results to differ materially from the unaudited pro forma condensed consolidated financial information.
Aveanna and Comfort Care incurred a total of $5.8 million and $7.6 million, respectively, of non-recurring acquisition-related costs related to the Comfort Care Acquisition.
The unaudited pro forma condensed consolidated financial information does not include the realization of any cost savings from operating efficiencies, synergies or other restructuring activities which might result from the Comfort Care Acquisition. Further, the unaudited pro forma condensed consolidated financial information does not assume any differences in accounting policies, except as described in “Note 2. Historical Comfort Care”, as we are not aware of any differences that would have a material impact on the unaudited pro forma condensed consolidated financial statements. Further review of Comfort Care’s detailed accounting policies in the twelve-month period following the Comfort Care Acquisition may result in the identification of additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the financial statements of the combined company.
Certain reclassifications have been made to the historical financial statements of Comfort Care to conform to our presentation as follows:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 2, 2021
Presentation in Comfort Care Financial Statements |
| Amount |
| Presentation in Unaudited Pro Forma Condensed Consolidated Balance Sheet |
Accounts receivable - related parties | $ | 11 |
| Other current assets |
Accounts receivable - other |
| 21 |
| Other current assets |
Accounts payable and accrued expenses |
| 2,075 |
| Accounts payable and other accrued liabilities |
Accounts payable and accrued expenses |
| 837 |
| Other current liabilities |
Accounts payable and accrued expenses |
| 10 |
| Accrued interest |
Accounts payable - related parties |
| 210 |
| Accounts payable and other accrued liabilities |
Accrued payroll and withholdings |
| 8,291 |
| Accrued payroll and employee benefits |
Accrued other |
| 187 |
| Other current liabilities |
Notes payable - related parties |
| 1,541 |
| Current portion of long-term obligations |
Lines of credit |
| 2,141 |
| Current portion of long-term obligations |
Noncurrent liabilities | $ | 935 |
| Deferred payroll taxes, less current portion |
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended January 2, 2021
Presentation in the Comfort Care Statement of Operations |
| Amount (in thousands) |
|
| Presentation in the Unaudited Pro Forma Condensed Consolidated Statement of Operations | |
Cost of revenue |
| $ | 43,081 |
|
| Cost of revenue, excluding depreciation and amortization |
Branch and regional administrative expenses |
| $ | 23,814 |
|
| Branch and regional expenses |
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine-Month period ended October 2, 2021
Presentation in the Comfort Care Statement of Operations |
| Amount (in thousands) |
|
| Presentation in the Unaudited Pro Forma Condensed Consolidated Statement of Operations | |
Cost of revenue |
| $ | 31,871 |
|
| Cost of revenue, excluding depreciation and amortization |
Branch and regional administrative expenses |
|
| 19,082 |
|
| Branch and regional expenses |
Loss on sale of property and equipment |
| $ | (11) |
|
| Other income (expense) |
|
|
|
|
|
|
|
The preliminary GAAP purchase price is as follows (in thousands):
|
| |
Cash consideration to shareholders | $ | 304,355 |
Settlement of closing debt (1) |
| 1,888 |
Settlement of seller transaction costs (2) |
| 7,580 |
Cash paid into escrow and reserve accounts |
| 32,653 |
Total preliminary GAAP purchase price | $ | 346,476 |
| Estimated Useful Lives |
|
| Fair Value | ||
Licenses |
| Indefinite |
|
| $ | 18,300 |
Trade names |
| 12 months |
|
|
| 2,250 |
Fair values of intangible assets |
|
|
|
|
| 20,550 |
Less: historical carrying value of intangible assets |
|
|
|
|
| (5,518) |
Pro forma adjustment |
|
|
|
| $ | 15,032 |
No assurances can be given that the underlying assumptions and estimates used to estimate the fair values of the licenses and tradenames will not change. For this and other reasons, actual results may vary significantly from estimated results.
Goodwill represents the excess of the aggregate purchase consideration over the preliminary estimated fair values of recorded tangible and intangible assets acquired and liabilities assumed in the Comfort Care Acquisition. The actual amount of goodwill to be recorded in connection with the Comfort Care Acquisition is subject to change once the valuation of the fair value of tangible and intangible assets acquired and liabilities assumed has been completed. The final valuation of such assets and liabilities is expected to be completed as soon as practicable but no later than one year after the consummation of the Comfort Care Acquisition. The table below reflects the preliminary purchase price allocation based on estimates, assumptions, valuations and other analyses (in thousands):
Total preliminary GAAP purchase price, net of cash acquired | $ | 342,651 |
|
Patient accounts receivable |
| 11,123 |
|
Prepaid expenses and other current assets |
| 803 |
|
Other current assets |
| 132 |
|
Intangible assets |
| 20,550 |
|
Property and equipment, net |
| 1,257 |
|
Operating lease right of use assets |
| 3,952 |
|
Accounts payable and other accrued liabilities |
| (314) |
|
Accrued payroll and employee benefits |
| (8,291) |
|
Current portion of operating lease liabilities |
| (1,041) |
|
Other current liabilities |
| (1,024) |
|
Operating lease liabilities |
| (2,911) |
|
Net assets acquired, excluding goodwill |
| 24,236 |
|
Goodwill |
| 318,415 |
|
Less: historical Comfort Care goodwill |
| (3,558) |
|
Pro forma adjustment | $ | 314,857 |
|
Accrual for seller transaction costs not recorded in the historical results of Comfort Care as they had not yet been incurred | $ | (7,580) |
Tax effect of deductible seller transaction costs (1) |
| 1,971 |
Elimination of historical Comfort Care members’ equity as well as the aforementioned transaction costs not yet incurred and the tax effect of deductible transaction costs (2) |
| (17,705) |
Non-capitalizable buyer transaction costs |
| (4,749) |
Tax effect of deductible buyer transaction costs (1) |
| 1,519 |
Total pro forma adjustment | $ | (26,544) |
4. Unaudited Pro Forma Condensed Consolidated Statements of Operations Transaction Accounting Adjustments
| For the Nine-Month period ended October 2, 2021 |
|
| For the Fiscal Year ended January 2, 2021 | ||
Pro forma amortization expense | $ | - |
|
| $ | 2,250 |
Historical Comfort Care amortization expense |
| (126) |
|
|
| (246) |
Pro forma adjustment | $ | (126) |
|
| $ | 2,004 |
| For the Nine-Month period ended October 2, 2021 |
|
| For the Fiscal Year ended January 2, 2021 | ||
Pro forma interest expense (1) | $ | (24,847) |
|
| $ | (33,104) |
Historical Comfort Care interest expense |
| 43 |
|
|
| 52 |
Pro forma adjustment | $ | (24,804) |
|
| $ | (33,052) |
Additionally, reflects the increased income tax expense as if Comfort Care’s historical income before income taxes was taxed as a C corporation, consistent with Aveanna’s tax structure as opposed to Comfort Care’s historical filing status which did not have a separate entity level federal and state income tax, using a combined state and federal statutory tax rate of 26%.