UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance sheet presents our financial position as of September 30, 2012, assuming that the acquisition of UOS had been completed as of September 30, 2012.
The following unaudited pro forma condensed combined statements of income include operations of the Company for the nine months ended September 30, 2012 and the twelve months ended December 31, 2011, assuming as if the acquisition had been consummated on January 1, 2011.
These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.
The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition of UOS and are factually supportable. Our unaudited pro forma combined financial information and explanatory notes present how our combined financial statements may have appeared had the businesses actually been combined as of the dates above. The unaudited pro forma combined financial information shows the impact on the combined balance sheet and the combined historical statements of income under acquisition accounting with International Shipholding Corporation treated as the acquirer. Under this method of accounting, the assets purchased and liabilities assumed of UOS have been recorded by International Shipholding Corporation at their estimated fair values as of the acquisition date. See the accompanying Notes for additional information.
The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results or financial position of the combined businesses had they actually been combined on the dates and in accordance with the assumptions described herein. However, management believes that the assumptions used provide a reasonable basis for presenting the combined pro forma information, that the pro forma adjustments give the appropriate effect to the assumptions and are properly applied in the unaudited pro forma combined financial information. The results of operations of UOS will be included in our historical consolidated financial statements beginning November 30, 2012.
As explained in more detail in the accompanying notes to the unaudited pro forma combined financial information, the allocation of the purchase price for the UOS acquisition that is reflected in our pro forma combined financial information is subject to adjustment. The actual purchase price allocation will be recorded based on the final settlement of the working capital adjustment in accordance with the applicable agreement. In addition, there may be further refinements of the purchase price allocation for the UOS acquisition as additional information becomes available.
INTERNATIONAL SHIPHOLDING CORPORATION |
UNAUDITED PRO FORMA CONDENSED COMBINED |
STATEMENTS OF INCOME |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 |
(All Amounts in Thousands Except Share Data) |
(Unaudited) |
UOS | ISH | ||||||||
Pro Forma | Pro Forma | Pro Forma | |||||||
ISH | UOS | Adjustments * | Adjustments | Combined | |||||
Revenues | $ 186,686 | $ 70,417 | $ - | $ - | $ 257,103 | ||||
Operating Expenses: | |||||||||
Voyage Expenses | 143,246 | 53,730 | - | - | 196,976 | ||||
Vessel Depreciation/Amortization | 18,180 | 10,404 | (10,404) | 1 | 2,411 | 1 | 20,591 | ||
Other Depreciation | 9 | - | - | - | 9 | ||||
Administrative and General Expenses | 15,871 | 3,414 | - | - | 19,285 | ||||
Amortization of Intangible | - | 1,634 | (1,634) | 2 | 3,872 | 2 | 3,872 | ||
(Gain) Loss on Sale/Purchase of Other Assets | (4,463) | - | - | - | (4,463) | ||||
Total Operating Expenses | 172,843 | 69,182 | (12,038) | 6,283 | 236,270 | ||||
Operating Income | 13,843 | 1,235 | 12,038 | (6,283) | 20,833 | ||||
Interest and Other: | |||||||||
Interest Expense | 7,152 | - | - | 745 | 3 | 7,897 | |||
Derivative Loss | 97 | - | - | - | 97 | ||||
Gain on Sale of Investment | (66) | - | - | - | (66) | ||||
Other Income from Vessel Financing | (1,815) | - | - | - | (1,815) | ||||
Investment Income | (391) | - | - | - | (391) | ||||
Foreign Exchange Loss (Gain) | (771) | - | - | - | (771) | ||||
4,206 | - | - | 745 | 4,951 | |||||
- | |||||||||
Income Before Provision for Income Taxes and | |||||||||
Equity in Net (Loss) Income of Unconsolidated Entities | 9,637 | 1,235 | 12,038 | (7,028) | 15,882 | ||||
(Benefit) Provision for Income Taxes: | |||||||||
Current | 280 | - | - | - | 280 | ||||
Deferred | (400) | - | - | - | (400) | ||||
(120) | - | - | - | (120) | |||||
Equity in Net Income of Unconsolidated | |||||||||
Entities (Net of Applicable Taxes) | 665 | - | - | - | 665 | ||||
Net Income | $ 10,422 | $ 1,235 | $ 12,038 | $ (7,028) | $ 16,667 | ||||
Basic and Diluted Earnings Per Common Share: | |||||||||
Basic Earnings Per Common Share: | $ 1.45 | $ 2.32 | |||||||
Diluted Earnings Per Common Share: | $ 1.45 | $ 2.31 | |||||||
Weighted Average Shares of Common Stock Outstanding: | |||||||||
Basic | 7,192,818 | 7,192,818 | |||||||
Diluted | 7,208,886 | 7,208,886 | |||||||
Dividends Per Share | $ 0.750 | $ 0.750 | |||||||
* Reverse balance to be replaced with fair market value at acquisition date. | |||||||||
1. Reversal of the historical depreciation with the replacement of new depreciation based on fair value at acquisition date. | |||||||||
2. Represents the amortization of the intangibles that were identified and measured during the acquisition of UOS by ISH. | |||||||||
3. Represents interest expense on new debt to partially fund acquisition, based on one-month Libor rate plus 2.5%. |
INTERNATIONAL SHIPHOLDING CORPORATION |
UNAUDITED PRO FORMA CONDENSED COMBINED |
STATEMENTS OF INCOME |
FOR THE YEAR ENDED DECEMBER 31, 2011 |
(All Amounts in Thousands Except Share Data) |
(Unaudited) |
UOS | ISH | ||||||||
Pro Forma | Pro Forma | Pro Forma | |||||||
ISH | UOS | Adjustments * | Adjustments | Combined | |||||
Revenues | $ 263,196 | $ 122,742 | $ - | $ - | $ 385,938 | ||||
Operating Expenses: | |||||||||
Voyage Expenses | 192,082 | 99,935 | - | - | 292,017 | ||||
Vessel Depreciation/Amortization | 25,388 | 21,204 | (21,204) | 1 | 3,215 | 1 | 28,603 | ||
Administrative and General Expenses | 20,961 | 5,922 | - | - | 26,883 | ||||
Gain on Dry Bulk Transaction | (18,844) | (102) | - | - | (18,946) | ||||
Impairment Loss on property and equipment | - | 5,919 | (5,919) | 2 | - | - | |||
Amortization of Intangible | - | 2,678 | (2,678) | 3 | 5,162 | 3 | 5,162 | ||
Total Operating Expenses | 219,587 | 135,556 | (29,801) | 8,377 | 333,719 | ||||
Operating Income | 43,609 | (12,814) | 29,801 | (8,377) | 52,219 | ||||
Interest and Other: | |||||||||
Interest Expense | 10,361 | - | - | 993 | 4 | 11,354 | |||
Derivative Loss | 101 | - | - | - | 101 | ||||
Loss on Sale of Investment | 747 | - | - | - | 747 | ||||
Other Income from Vessel Financing | (2,653) | - | - | - | (2,653) | ||||
Investment Income | (637) | - | - | - | (637) | ||||
Foreign Exchange Loss (Gain) | 3,051 | - | - | - | 3,051 | ||||
10,970 | - | - | 993 | 11,963 | |||||
Income Before Provision for Income Taxes and | |||||||||
Equity in Net (Loss) Income of Unconsolidated Entities | 32,639 | (12,814) | 29,801 | (9,370) | 40,256 | ||||
(Benefit) Provision for Income Taxes: | |||||||||
Current | 680 | - | - | - | 680 | ||||
Deferred | - | - | - | - | - | ||||
680 | - | - | - | 680 | |||||
Equity in Net Income of Unconsolidated | |||||||||
Entities (Net of Applicable Taxes) | (410) | - | - | - | (410) | ||||
Net Income | $ 31,549 | $ (12,814) | $ 29,801 | $ (9,370) | $ 39,166 | ||||
Basic and Diluted Earnings Per Common Share: | |||||||||
Basic Earnings Per Common Share: | 4.42 | - | 5.49 | ||||||
Diluted Earnings Per Common Share: | 4.40 | - | 5.46 | ||||||
Weighted Average Shares of Common Stock Outstanding: | |||||||||
Basic | 7,131,820 | - | 7,131,820 | ||||||
Diluted | 7,176,647 | - | 7,176,647 | ||||||
Dividends Per Share | $ 1.500 | - | $ 1.500 | ||||||
* Reverse balance to be replaced with fair market value at acquisition date. | |||||||||
1. Reversal of the UOS historical depreciation with the replacement of new depreciation based on fair value at acquisition date. | |||||||||
2. To reverse out impairment charges due to the fact the assets were adjusted to fair value at acquisition date. | |||||||||
3. Represents the amortization of the intangibles that were identified and measured during the acquisition of UOS by ISH. | |||||||||
4. Represents interest expense on new debt to partially fund acquisition, based on one-month Libor rate plus 2.5% and reflects 12 months of interest. |
INTERNATIONAL SHIPHOLDING CORPORATION |
UNAUDITED PRO FORMA CONDENSED COMBINED |
BALANCE SHEET |
September 30, 2012 |
(All Amounts in Thousands) |
(Unaudited) |
UOS | ISH | |||||||||
Pro Forma | Pro Forma | Pro Forma | ||||||||
ASSETS | ISH | UOS | Adjustments (a) | Adjustments | Combined | |||||
Cash and Cash Equivalents | $ | 12,714 | 105 | (105) | (9,243) | b,c | $ 3,471 | |||
Marketable Securities | 13,382 | - | - | - | 13,382 | |||||
Accounts Receivable | 19,511 | 4,858 | (4,858) | 8,650 | b | 28,161 | ||||
Net Investment in Direct Financing Leases | 3,423 | - | - | - | 3,423 | |||||
Other Current Assets | 6,144 | 901 | (901) | 669 | b | 6,813 | ||||
Notes Receivable | 4,433 | - | - | - | 4,433 | |||||
Material and Supplies Inventory | 5,312 | 6,814 | (6,814) | 6,510 | b | 11,822 | ||||
Total Current Assets | 64,919 | 12,678 | (12,678) | 6,586 | 71,505 | |||||
Investment in Unconsolidated Entities | 13,524 | - | - | - | 13,524 | |||||
Net Investment in Direct Financing Leases | 14,391 | - | - | - | 14,391 | |||||
Vessels, Property, and Other Equipment, at Cost: | ||||||||||
Vessels | 561,207 | 121,899 | (121,899) | 16,696 | b,c | 577,903 | ||||
Building | 1,211 | - | - | - | 1,211 | |||||
Land | 623 | - | - | - | 623 | |||||
Leasehold Improvements | 26,348 | - | - | - | 26,348 | |||||
Construction in Progress | 602 | - | - | - | 602 | |||||
Furniture and Equipment | 11,053 | - | - | - | 11,053 | |||||
601,044 | 121,899 | (121,899) | 16,696 | 617,740 | ||||||
Less - Accumulated Depreciation | (185,907) | (49,100) | 49,100 | - | (185,907) | |||||
415,137 | 72,799 | (72,799) | 16,696 | 431,833 | ||||||
- | ||||||||||
Other Assets: | - | |||||||||
Deferred Charges, Net of Accumulated Amortization | 18,278 | 3,222 | (3,222) | - | 18,278 | |||||
of $15,821 and $17,429 in 2012 and 2011, Respectively | ||||||||||
Intangible Assets, Net | 1,775 | 14,494 | (14,494) | 45,131 | b | 46,906 | ||||
of $30,525 and $30,162 in 2010 and 2009, Respectively | ||||||||||
Due from Related Parties | 1,735 | - | - | - | 1,735 | |||||
Notes Receivable | 34,458 | - | - | - | 34,458 | |||||
Other | 6,036 | - | - | 2,000 | c | 8,036 | ||||
Goodwill | - | - | - | 1,901 | b | 1,901 | ||||
62,282 | 17,716 | (17,716) | 49,032 | 111,314 | ||||||
TOTAL ASSETS | $ | 570,253 | 103,193 | (103,193) | 72,314 | 642,567 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current Liabilities: | ||||||||||
Current Maturities of Long-Term Debt | $ | 27,951 | - | - | 6,000 | c | 33,951 | |||
Accounts Payable and Accrued Liabilities | 34,620 | 6,189 | (6,189) | 7,696 | b,c | 42,316 | ||||
Insurance Reserves | - | 601 | (601) | 547 | b | 547 | ||||
Deferred Revenues | - | 151 | (151) | 342 | b | 342 | ||||
Total Current Liabilities | 62,571 | 6,941 | (6,941) | 14,585 | 77,156 | |||||
Long-Term Debt, Less Current Maturities | 185,660 | - | 36,000 | c | 221,660 | |||||
Other Long-Term Liabilities: | ||||||||||
Lease Incentive Obligation | 6,338 | - | - | - | 6,338 | |||||
Other | 62,073 | 1,717 | (1,717) | 21,729 | b,c | 83,802 | ||||
68,411 | 1,717 | (1,717) | 21,729 | 90,140 | ||||||
TOTAL LIABILITIES | 316,642 | 8,658 | (8,658) | 72,314 | 388,956 | |||||
Commitments and Contingent Liabilities | ||||||||||
Stockholders' Equity: | ||||||||||
Common Stock, $1.00 par value, 20,000,000 shares authorized and | 8,617 | 71,411 | (71,411) | - | 8,617 | |||||
7,203,860 And 7,140,752 Shares Issued and Outstanding at | ||||||||||
September 30, 2012 and December 31, 2011, Respectively | ||||||||||
Additional Paid-In Capital | 86,041 | - | - | - | 86,041 | |||||
Retained Earnings | 207,919 | 23,124 | (23,124) | - | 207,919 | |||||
Treasury Stock, 1,388,066 shares at September 30, 2012 and | (25,403) | - | - | - | (25,403) | |||||
December 31, 2011 | ||||||||||
Defined Benefits Plan | ||||||||||
Accumulated Other Comprehensive (Loss) | (23,563) | - | - | - | (23,563) | |||||
TOTAL STOCKHOLDERS' EQUITY | 253,611 | 94,535 | (94,535) | - | 253,611 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 570,253 | 103,193 | (103,193) | 72,314 | $ 642,567 | ||||
See accompanying notes to unaudited pro forma condensed combined financial statements |
Notes to Unaudited Pro Forma Financial Statements
Pro Forma Basis of Presentation
The acquisition of UOS is reflected in the unaudited pro forma combined financial statements as being accounted for under the acquisition method in accordance with ASC 805. Under the acquisition method, the total estimated purchase price of the acquired company is allocated to the assets acquired and liabilities assumed based on their fair values. Due to the fact that the unaudited pro forma combined financial statements have been prepared based on preliminary estimates of these fair values, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2012 and twelve months ended December 31, 2012, assume the acquisition occurred January 1, 2011. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 assumes the acquisition was completed as of September 30, 2012. The unaudited pro forma combined financial statements are based on historical consolidated financial statements of UOS and International Shipholding Corporation, as adjusted for the effects of the acquisition as further described herein.
Under ASC 805, acquisition costs (such as advisory, legal, valuation or other professional fees) are not included as a component of consideration transferred and have been excluded from the unaudited pro forma combined statements of operations.
The unaudited pro forma combined financial statements do not include the realization of any cost savings from anticipated operating efficiencies, synergies, or other restructuring activities which might result from the acquisition. The unaudited pro forma combined financial statements should be read in conjunction with the separately filed historical consolidated financial statements and accompanying notes of UOS.
The unaudited pro forma combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial conditions of the combined company that would have been reported had the acquisition been completed as of the dates presented, and further should not be taken as representative of the future consolidated results of operations or financial condition of the Company.
Pro Forma Adjustments
Adjustments to the pro forma condensed combined statements of income are reflected on the face of those statements. Adjustments to the pro formas condensed combined balance sheet are set forth below. All of these adjustments are based on current assumptions and are subject to change upon completion of the final purchase price allocation of assets acquired and liabilities assumed from UOS at the acquisition closing date.
a. | To reverse UOS balance sheet |
b. | To record the UOS preliminary fair value of assets acquired and liabilities assumed funded by the combination of assets sold and leased back of $63 million, bank financing of $30 million, a line of credit draw of $12 million and the remainder with available cash. |
Accounts Receivable | $ | 8,650,415 | ||
Inventory | 6,509,731 | |||
Other Current Assets | 668,547 | |||
Vessels and Vehicles | 60,036,883 | |||
Intangible asset | 45,131,316 | |||
Goodwill | 1,900,520 | |||
Total Assets | $ | 122,897,412 | ||
Accounts Payable and Accrued Liabilities | $ | 4,956,425 | ||
Other Current Liabilities | 890,186 | |||
Non-Current Liabilities | 2,069,663 | |||
Total Liabilities | 7,916,274 | |||
Fair Value of Acquisition Price | $ | 114,981,138 |
c. | Funding for Acquisition was based on the following: |
Vessels and Vehicles (Sale leaseback of two vessels) | $ | (43,341,000 | ) | |
Other Long Term Liabilities (Sale leaseback of two vessels) | (19,659,000 | ) | ||
Current Maturities of Long-Term Debt (Bank Loan) | (6,000,000 | ) | ||
Long-Term Debt, Less Current Maturities (Bank Loan) | (24,000,000 | ) | ||
Long-Term Debt, Less Current Maturities (Line of Credit Draw) | (12,000,000 | ) | ||
Accounts Payable (Assumed working capital settlement) | (2,738,610 | ) | ||
Cash and Cash Equivalents | (9,242,528 | ) | ||
Other Assets (Security Deposit Pledged) | 2,000,000 | |||
Total Funding for Acquisition | $ | 114,981,138 |