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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

FORM 8-K/A

 

AMENDMENT NO. 1 TO

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): June 19, 2020

 

FRANCHISE GROUP, INC.

(Exact name of registrant as specified in charter)

 

Delaware

(State or other jurisdiction of
incorporation)

001-35588

(Commission File Number)

27-3561876

(I.R.S. Employer

Identification Number)

 

2387 Liberty Way, Virginia Beach, Virginia 23456

(Address of Principal Executive Offices) (Zip Code)

 

(757) 493-8855

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class  

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value per share   FRG   NASDAQ Global Market
         
7.50% Series A Cumulative Perpetual Preferred Stock, par value $0.01 per share and liquidation preference of $25.00 per share   FRGAP   NASDAQ Global Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

Explanatory Note

 

On June 19, 2020, Franchise Group, Inc. (the “Company”) filed with the Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K (the “Initial 8-K”) to file certain pro forma financial information as of and for the three months ended March 28, 2020, for the eight months ended December 28, 2019 and for the year ended April 30, 2019 (collectively, including the footnotes affixed thereto, the “Pro Forma Financial Statements”), so that such financial information could be incorporated by reference into certain of the Company’s filings with the SEC. This Amendment No. 1 to the Initial 8-K (“Amendment No. 1”) is being filed solely to correct errors related to (i) the description of certain fiscal periods, including headers, presented in the Pro Forma Financial Statements and related introductory narrative and (ii) certain inputs for (a) the historical financial data of American Freight, Inc. (b) the historical financial data of Sears Outlet and (c) the line item entitled “Income tax (benefit) expense,” each with resulting updates, as necessary, in the Pro Forma Financial Statements. The errors in the historical financial data of American Freight, Inc. primarily related to seller’s costs related to the acquisitions that were not previously recorded. The errors in the historical financial data of Sears Outlet primarily related to carve-out adjustments recorded to allocate Sears Hometown and Outlet, Inc.’s corporate costs and other shared accounts. In addition, the pro forma income (tax) benefit expense line items were corrected to properly reflect the tax effect of the pro forma adjustments using the statutory tax rate for the periods presented.

 

Except as described above, this Amendment No. 1 does not amend, update or change any other items or disclosures in the Initial 8-K and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Amendment No. 1 speaks only as of the date the Initial 8-K was filed, and the Company has not undertaken herein to amend, supplement or update any information contained in the Initial 8-K to give effect to any subsequent events and any forward-looking statements represent management's views as of the Initial 8-K filing date and should not be assumed to be accurate as of any date thereafter.

 

Item 9.01. Financial Statements and Exhibits.

 

(b) Pro Forma Financial Information

 

The following information is attached hereto as Exhibit 99.1 and incorporated herein by reference:

 

(i)Unaudited Pro Forma Combined Financial Statements as of and for the three months ended March 28, 2020, for the eight months ended December 28, 2019 and for the year ended April 30, 2019.

 

(ii)Notes to the Unaudited Pro Forma Combined Financial Statements.

 

(d) Exhibits

 

The following exhibits are filed herewith:

 

Exhibit No.   Description of Exhibits
99.1   Proforma Financial Statements
     
104   Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document.

 

- 2 -

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  FRANCHISE GROUP, INC.
     
Date: October 26, 2020 By: /s/ Eric Seeton
    Eric Seeton
    Chief Financial Officer

 

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Exhibit 99.1

 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF

THE COMBINED COMPANY AND RELATED NOTES

 

Introduction

 

The following unaudited pro forma combined statement of operations for the three months ended March 28, 2020, the eight months ended December 28, 2019 (the “Transition Period’) and for the year ended April 30, 2019 and the pro forma combined balance sheet as of March 28, 2020 are based on the historical financial statements of Franchise Group, Inc. (“Franchise Group” or the "Company”), Buddy’s Newco, LLC (“Buddy’s”), the Sears Outlet business (“Sears Outlet”) of Sears Hometown and Outlet Stores, Inc’s (“SHOS”), Vitamin Shoppe, Inc. (“VSI”), and American Freight Group, Inc. (“American Freight”).

 

The unaudited pro forma combined financial statements give effect to the following transactions (collectively, the “Transactions”):

 

the acquisitions of Buddy’s, Sears Outlet, VSI and American Freight;
   

the completion of the offer to acquire any and all outstanding shares of Franchise Group common stock other than shares of Franchise Group common stock held by Vintage Capital Management, LLC (“Vintage”) and B. Riley FBR, Inc. (“B. Riley”) and certain of its affiliates, who agreed not to tender their shares of Franchise Group common stock in the offer, for a purchase price of $12.00 per share in cash;
   

the exchange of Franchise Group New Holdco LLC units into Franchise Group common shares and related adjustments pursuant to the tax receivable agreement (“TRA”) that occurred in March and April 2020; and
   

the related debt and equity financings.

 

On October 1, 2019, the Company changed its fiscal year end from April 30 to the Saturday closest to December 31 and filed a Transition Report on Form 10-K/T for the Transition Period ended December 28, 2019 with the Securities and Exchange Commission (the “SEC”) on April 24, 2020. The unaudited pro forma combined financial statements are based on the assumptions, adjustments and eliminations described in the accompanying notes to the unaudited pro forma combined financial statements.

 

The unaudited pro forma combined statement of operations for the fiscal year ended April 30, 2019, eight months ended December 28, 2019 and three months ended March 28, 2020 give effect to the Transactions as if they had occurred on the first day of the fiscal year May 1, 2018. Prior to October 1, 2019, Franchise Group had a fiscal year ending on April 30 while Buddy’s reported its results of operations on a calendar year basis, Sears Outlet had a fiscal year ending on February 2, VSI had a fiscal year ending on the last Saturday in December and American Freight had a fiscal year ending on the Sunday closest to December 31. As a result:

 

 

 

 

the historical statement of operations for the fiscal year ended December 31, 2018 of Buddy’s, the historical statement of operations for the fiscal year ended December 29, 2018 of VSI, and the historical statement of operations for the fiscal year ended December 30, 2018 of American Freight have been adjusted to reflect a trailing twelve month period ending March 31, 2019 by adding Buddy’s, VSI’s and American Freight’s statement of operations for the three months ended March 31, 2019, March 30, 2019, and March 31, 2019, respectively, and subtracting their statement of operations for the three months ended March 31, 2018, March 31, 2018 and April 1, 2018, respectively; and
   

the historical combined statement of operations for the fiscal year ended February 2, 2019 of Sears Outlet has been adjusted to reflect a trailing twelve month period ending May 4, 2019 by adding Sears Outlet’s statement of operations for the three months ended May 4, 2019 and subtracting Sears Outlet’s statement of operations for the three months ended May 5, 2018.

The unaudited pro forma combined statement of operations for the eight months ended December 28, 2019 combines the historical consolidated statement of operations for the eight months ended December 28, 2019 of Franchise Group (that includes certain post-acquisition financial information of Buddy’s, VSI and Sears Outlet), the historical consolidated statement of operations for the three months ended June 30, 2019 of Buddy’s, the historical combined statement of operations for the six months ended August 3, 2019 of Sears Outlet, the historical consolidated statement of operations for the eight months ended November 23, 2019 of VSI, and the historical consolidated statement of operations for the eight months ended December 29, 2019 of American Freight.

 

The unaudited pro forma combined statement of operations for the three months ended March 28, 2020 combines the historical consolidated statement of operations for the three months ended March 28, 2020 of Franchise Group and the pre-acquisition historical consolidated statement of operations for the period December 30, 2019 to February 14, 2020 of American Freight derived from American Freight’s books and records. The unaudited pro forma combined balance sheet as of March 28, 2020 reflects the historical consolidated balance sheet of Franchise Group as of March 28, 2020 adjusted for the full exchange of Franchise Group New Holdco LLC units into Franchise Group common shares and the related TRA adjustments as further discussed below.

 

The unaudited pro forma combined financial statements contain only adjustments that are factually supportable and directly attributable to the Transactions and do not reflect the costs of any integration activities or benefits that may result from realization of future revenue growth or operational synergies expected to result from the Transactions.

 

The unaudited pro forma combined financial statements should be read in conjunction with:

 

the accompanying notes to the unaudited pro forma combined financial statements;
   

Franchise Group’s audited historical consolidated financial statements and related notes for the year ended April 30, 2019, and for the Transition Period ended December 28, 2019; and the unaudited historical consolidated financial statements and related notes for the three months ended March 28, 2020;
   

Buddy’s audited and unaudited historical consolidated financial statements and related notes as of and for the fiscal year ended December 31, 2018 and as of and for the three months ended March 31, 2019 and March 31, 2018 incorporated by reference to Exhibit 99.1 and Exhibit 99.2 on Franchise Group’s Form 8-K/A filed with the SEC on September 24, 2019;

 

- 2 -

 

 

Sears Outlet's audited historical combined financial statements and related notes as of and for the fiscal year ended February 2, 2019 and incorporated by reference to Exhibit 99.1 and Exhibit 99.2 on Franchise Group's Form 8-K/A filed with the SEC on January 8, 2020 and Sears Outlet's restated unaudited historical combined financial statements and related notes as of and for the twenty-six weeks ended August 3, 2019 and August 4, 2018 incorporated by reference to Exhibit 99.1 on Franchise Group's Form 8-K/A filed with the SEC on October 26, 2020;
   

VSI’s audited historical consolidated financial statements and related notes as of and for the fiscal year ended December 29, 2018 incorporated by reference to Exhibit 99.3 on Franchise Group’s Form 8-K/A filed with the SEC on January 8, 2020; and
   

American Freight’s audited historical consolidated financial statements and related notes as of and for the fiscal years ended December 29, 2019 and December 30, 2018 incorporated by reference to Exhibit 99.1 on Franchise Group’s Form 8-K/A filed with the SEC on May 4, 2020.

 

Description of the Transactions

 

Buddy’s merger, the offer and exchange of New Holdco units

 

Pursuant to a business combination agreement, Franchise Group and Buddy’s consummated a merger whereby Buddy’s became a wholly-owned subsidiary of Franchise Group New Holdco, LLC, a wholly-owned direct subsidiary of Franchise Group (“New Holdco”). In connection with the merger, Franchise Group formed New Holdco, which holds, directly or indirectly, all of Franchise Group’s and Buddy’s operating subsidiaries. In connection with the business combination agreement and the merger, Franchise Group designated its voting non-economic preferred stock pursuant to a certificate of designation. The certificate of designation, which was approved by the Company’s board of directors on July 10, 2019, and filed by Franchise Group with the Secretary of State of the State of Delaware on July 10, 2019, designated 1,616,667 shares of voting non-economic preferred stock, substantially all of which were issued to the Buddy’s equity holders as consideration in the merger along with approximately 8,083,333 New Holdco common units. Buddy’s equity holders had the option to exchange each New Holdco common unit and one-fifth (1/5) of a share of Franchise Group preferred stock, respectively, for one share of Franchise Group common stock beginning six months following the date of the merger. Following the merger, Franchise Group became the sole managing member of New Holdco and consolidates New Holdco for financial reporting purposes. The New Holdco common units held by Buddy’s equity holders were recorded as a non-controlling interest on the consolidated financial statements.

 

 

Concurrently with the execution of the business combination agreement, Franchise Group and the Buddy’s equity holders entered into a TRA. Subject to certain exceptions set forth in the tax receivable agreement, the tax receivable agreement generally provides that Franchise Group will pay the Buddy’s equity holders 40% of the cash savings, if any, in federal, state and local taxes that Franchise Group realizes or is deemed to realize as a result of any increase in tax basis of the assets of New Holdco resulting from future redemptions or exchanges of New Holdco common units held by Buddy’s equity holders Subsequent to the merger, the effects of each purchase or exchange of New Holdco common units resulted in adjustments to record a change in deferred tax balances, tax receivable liabilities equal to 40% of the estimated realizable tax benefits, and an increase to additional paid-in capital for the remainder. As of March 28, 2020, a portion of New Holdco common units and the Company’s preferred stock held by certain Buddy’s equity holders were exchanged for shares of Franchise Group common stock. As of April 1, 2020, all remaining New Holdco common units held by the Buddy’s equity holders were exchanged for shares of Franchise Group common stock and New Holdco became a wholly owned subsidiary of Franchise Group. Refer to the pro forma adjustments disclosed in Note 4 for further detail regarding the exchange of New Holdco units and preferred stock for the Company’s common stock and the related adjustments to deferred tax balances and liabilities pursuant to the TRA.

 

- 3 -

 

 

Following the merger, on August 1, 2019, Franchise Group commenced the offer to acquire any and all outstanding shares of its common stock other than shares of its common stock held by the Vintage and B. Riley and certain of its affiliates, who had agreed not to tender their shares of Franchise Group common stock in the offer, for a price per share of $12.00 in cash. The offer was subject to a minimum tender condition and was completed on November 13, 2019. The offer and transaction costs related to the Buddy’s merger were financed through both term loan financing and equity investments:

 

Term loan financing: Buddy’s executed the Buddy’s credit agreement with various lenders from time to time party thereto and Kayne Solutions Fund, L.P., as administrative agent and as collateral agent, with proceeds, net of financing costs, of approximately $80.2 million. The Buddy’s credit agreement was used to repay approximately $25.0 million of the existing line of credit financing of Buddy’s, $22.2 million towards the tender offer and the remaining amount of approximately $23.0 million was used towards the acquisition costs.
   

Equity investment from Tributum, L.P. (“Tributum”): Contemporaneously with the consummation of the merger and pursuant to the closing subscription agreement between Franchise Group and Tributum, Tributum purchased approximately 2,083,333 shares of Franchise Group common stock at a purchase price of $12.00 per share, for an aggregate purchase price of $25.0 million in cash. Such commitment financed the first $25.0 million of tender offer acceptances.

 

The unaudited pro forma combined financial information has been prepared based on Franchise Group’s final results of the tender offer completed on November 13, 2019. Franchise Group stockholders accepted the offer for 3.94 million shares of Franchise Group common stock, or approximately $47.2 million, financed by the closing subscription agreement of $25.0 million and $22.2 million cash from the Buddy’s term loan financing, all discussed above.

 

Sears Outlet Acquisition

 

On October 23, 2019, Franchise Group completed its acquisition of Sears Outlet and nine Buddy’s Home Furnishing franchisees from SHOS, pursuant to the terms of a purchase agreement dated as of August 27, 2019. Pursuant to the terms of the purchase agreement, Franchise Group paid SHOS an aggregate purchase price of $128.8 million including working capital adjustments. The acquisition costs related to the Sears Outlet acquisition were financed through the following term loan and equity contributions:

 

Term loan financing: Franchise Group Newco S, LLC, an indirect subsidiary of Franchise Group, executed a term loan agreement with Guggenheim Credit Services, LLC providing Franchise Group with a senior secured term loan facility in an amount equal to $105.0 million (the “Sears Outlet term loan”). The Sears Outlet term loan will mature on October 23, 2023 and bear interest at a rate per annum based on LIBOR for an interest period of one, two, three or six months, plus an interest margin of 6.5% with a 1.50% LIBOR floor.

 

- 4 -

 

 

Equity contributions from the Investors: On October 23, 2019, Stefac LP, an affiliate of Vintage, Brian R. Kahn, Lauren Kahn, and B. Riley (collectively, the “Investors”) provided Franchise Group with an aggregate $40.0 million of equity financing to fund a portion of the Sears Outlet acquisition through the purchase of Franchise Group common stock at $12.00 per share.

 

VSI Acquisition

 

On December 16, 2019, pursuant to the term of a merger agreement, Franchise Group completed the acquisition of VSI for an all-cash transaction valued at $161.8 million. The acquisition of VSI, including the related acquisition costs, were financed through a mix of a term loan, credit facility and equity contributions:

 

Term loan financing: On December 16, 2019, Vitamin Shoppe Industries, LLC, an indirect subsidiary of Franchise Group executed a term loan agreement with GACP Finance Co., LLC for an amount of $70.0 million (the “VSI term loan”). The VSI term loan will mature on December 16, 2022, unless the maturity is accelerated subject to the terms set forth in the VSI term loan. The VSI term loan will bear interest at a rate per annum based on LIBOR for an interest period of one month plus an interest rate margin of 9.0%.
   

Credit facility financing: On December 16, 2019, Franchise Group entered into a Second Amendment and Restated Loan and Security Agreement (the “ABL Agreement”) with JPMorgan Chase Bank, N.A. whereby JP Morgan Chase Bank, N.A. provided Franchise Group with a $100.0 million credit facility (the “VSI credit facility”). On December 16, 2019, Franchise Group borrowed $70.0 million on the VSI credit facility to finance the acquisition of VSI. The VSI credit facility will mature on December 16, 2022 unless the maturity is accelerated subject to the terms set forth in the ABL Agreement. The VSI credit facility bears interest at a rate per annum based on LIBOR for an interest period of one, two, three or six months, plus an interest rate margin that ranges from 1.25% to $1.75% depending on excess availability.
   

Equity contribution from Tributum: In addition, on December 16, 2019, Tributum, an affiliate of Vintage, purchased 2.5 million shares of common stock which provided Franchise Group with an aggregate of approximately $31.0 million of equity financing in order to partially fund the closing of the acquisition (the “VSI equity contribution”).
   

Equity contribution from Vintage in connection with the repurchase of VSI Convertible Notes: On January 3, 2020, Franchise Group entered into a subscription agreement with an affiliate of Vintage, pursuant to which the affiliate of Vintage purchased from the Company 2.4 million shares of common stock for an aggregate purchase price of $28.2 million in cash.
   

Equity contributions from certain other investors: On February 7, 2020, in connection with the Company’s repurchases of VSI’s outstanding 2.25% Convertible Senior Notes due 2020 (the “VSI Convertible Notes”), certain investors purchased approximately 3.9 million shares of the Company’s common stock for approximately $65.9 million. Franchise Group used the proceeds to complete the repurchase of approximately $60.4 million in aggregate principal amount of outstanding VSI Convertible Notes for a purchase price of approximately $60.6 million, which includes accrued interest.

 

- 5 -

 

 

American Freight acquisition and the refinancing of Buddy’s and Sears Outlet’s term loan

 

On February 14, 2020, pursuant to the term of a merger agreement, dated December 28, 2019, Franchise Group completed the acquisition of American Freight for $357.3 million in cash. The acquisition costs related to the American Freight acquisition were financed through a term loan and credit facility:

 

Term loan financing: On February 14, 2020, Franchise Group Intermediate Holdco, LLC and Franchise Group New Holdco, LLC, an indirect subsidiary of Franchise Group executed a term loan agreement with GACP Finance Co., LLC for an amount of $575.0 million (the “New Holdco term loan”), which consists of a $375.0 million first out tranche (the “New Holdco Tranche A-1”) and a $200.0 million last out Tranche (the “New Holdco Tranche A-2”). The New Holdco term loan will mature on May 14, 2025, unless the maturity is accelerated subject to the terms set forth in the New Holdco term loan. The New Holdco term loan will bear interest at a rate per annum based on LIBOR for an interest period of one, two, three or six months plus an interest rate margin of 8.0% for the New Holdco Tranche A-1 and 12.5% for the New Holdco Tranche A-2.
   

ABL credit facility financing: On February 14, 2020, Franchise Group entered into an ABL credit agreement with various lenders which provided Franchise Group with a $100.0 million credit facility (the “New Holdco credit facility”). On February 14, 2020, Franchise Group borrowed $100.0 million on the New Holdco credit facility to finance the acquisition of American Freight. The New Holdco credit facility will mature on September 30, 2020 and it bears interest at a rate per annum based on LIBOR for an interest period of one, two, three or six months, plus an interest rate margin of 7.5%, as amended on April 3, 2020.

 

In addition to financing the American Freight acquisition and its related acquisition costs, a portion of the proceeds from the New Holdco term loan and the New Holdco credit facility were used to repay the Buddy’s and Sears Outlet’s term loan discussed above for an outstanding amount of $104.6 million and $106.6 million including accrued interest, respectively.

 

Other transactions

 

On August 23, 2019, the Buddy’s segment of Franchise Group entered into an asset purchase agreement with A-Team Leasing, LLC, a franchisee of the Buddy’s segment (“A-Team”), pursuant to which Buddy’s completed the acquisition of 41 Buddy’s Home Furnishings stores from A-Team for total consideration of $26.6 million. To finance the acquisition, Buddy’s entered into a first amendment to the Buddy’s credit agreement which provided for an additional term loan in an amount of $23.0 million. The additional term loan was used to consummate the acquisition, including to repay certain existing indebtedness of A-Team and secure the release of liens on the assets acquired in connection with the acquisition and to pay fees and expenses in connection with the acquisition.

 

On September 30, 2019, the Buddy’s segment of Franchise Group entered into and completed an asset purchase agreement with various parties to acquire certain Buddy’s stores previously franchised in exchange for 1.35 million shares of New Holdco common units and 0.27 million share of Franchise Group voting non-economic preferred stock for an estimated fair value of $16.2 million. In addition, Franchise Group also forgave $0.6 million of receivables due to Buddy’s from the sellers. This resulted in an aggregated purchase price of $16.8 million.

 

- 6 -

 

 

While these other transactions are included in Franchise Group’s historical financial statements, the pro forma statement of operations was not adjusted to give effect to these other transactions as they were not deemed significant pursuant to Rule 3-05 of Regulation S-X.

 

The unaudited pro forma combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or financial position of the Combined Company (as defined below) would have been had the Transactions occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or financial position of the Combined Company on a standalone basis.

 

Unaudited Pro Forma Combined Statement of Operations

Year Ended April 30, 2019

 

   Adjusted
Franchise
Group
(Note 2)
   Adjusted
Buddy’s
(Note 2b)
   Adjusted
Sears Outlet
(Note 2c)
   Adjusted
VSI
(Note 2d)
   Adjusted
American
Freight
(Note 2e)
             
Dollars in thousands,
except per share 
amounts
  Year
Ended
April 30,
2019
   Year Ended
March 31,
2019
   Year Ended
May 4, 2019
   Year
Ended
March
30, 2019
   Year Ended
March 31,
2019
   Acquisition
and related
Pro Forma
Adjustments
(Note 3)
   Financing
and offer
Pro Forma
Adjustments
(Note 4)
   Pro Forma
Combined
Year Ended
April 30, 2019
 
Revenue:                                        
                                         
Product   -    2,592    448,573    1,101,528    443,954    -    -    1,996,647 
Service and other   132,546    23,005    41,626    -    -    (177)(3b)   -    197,000 
Rental   -    26,504    -    -    -    -    -    26,504 
Total revenues   132,546    52,101    490,199    1,101,528    443,954    (177)   -    2,220,151 
Operating Expenses:                                        
Cost of revenue:                                        
Product   -    1,844    334,068    745,028    243,548    -    -    1,324,488 
Service and other   -    -    20,428    -    -    (177)(3b)   -    20,251 
Rental   -    9,230    -    -    -    -    -    9,230 
Total cost of revenue   -    11,074    354,496    745,028    243,548    (177)   -    1,353,969 
Selling, general, and administrative expenses   124,060    29,098    133,364    347,191    155,810    936(3a)   -    790,459 
Restructuring Costs   9,345    -    -    -    -    -    -    9,345 
Total operating expenses   133,405    40,172    487,860    1,092,219    399,358    759    -    2,153,773 
Gain (loss) from operations   (859)   11,929    2,339    9,309    44,596    (936)   -    66,378 
Other income (expense):                                        
Interest expense, net   (3,023)   (1,412)   (6,410)   (5,227)   (8,161)   -    (73,184)(4a)   (97,417)
Other   (113)   259    1,440    4,400    -    -    -    5,986 
Income (loss) before income taxes   (3,995)   10,776    (2,631)   8,482    36,435    (936)   (73,184)   (25,053)
Income tax (benefit) expense   (1,839)   -    271    1,101    9,399    -    (15,788)(4b)   (6,856)
Net (loss) income   (2,156)   10,776    (2,902)   7,381    27,036    (936)   (57,396)   (18,197)
Less: Income/ (Loss) attributable to noncontrolling interests   -    -    -    -    -    -    -    - 
Net (loss) income attributable to common stockholders   (2,156)   10,776    (2,902)   7,381    27,036    (936)   (57,396)   (18,197)
                                         
Earnings per common share                                        
Basic (Note 5)   (0.16)                                 (0.52)
Diluted (Note 5)   (0.16)                                 (0.52)
Weighted average common share                                        
Basic (Note 5)   13,800,884                                  35,157,042 
Diluted (Note 5)   13,800,884                                  35,157,042 

 

See accompanying notes to the unaudited pro forma combined financial statements

 

- 7 -

 

 

Unaudited Pro Forma Combined Statement of Operations

for the eight months ended December 28, 2019

 

   Adjusted
Franchise
Group
(Note 2a)
   Adjusted
Buddy’s
(Note 2b)
   Adjusted
Sears
Outlet
(Note 2c)
   Adjusted VSI
(Note 2d)
   Adjusted
American
Freight
(Note 2e)
             
Dollars in thousands,
except per share amounts
  Eight
Months
Ended
December
28, 2019
   Three
Months
Ended
June 30,
2019
   Six
Months
Ended
August 3,
2019
   Eight Months
Ended
November 23,
2019
   Eight
Months
Ended
December
29, 2019
   Acquisition
and related
Pro Forma
Adjustments
(Note 3)
   Financing
and offer
Pro Forma
Adjustments
(Note 4)
   Pro Forma
Combined
Eight Months
Ended
December 28,
2019
 
Revenue:                                        
                                         
Product   54,266    549    217,393    670,796    273,771    -    -    1,216,775 
Service and other   27,528    5,935    16,746    -    -    (261)    (3b)   -    49,948 
Rental   22,303    6,589    -    -    -    -    -    28,892 
Total revenues   104,097    13,073    234,139    670,796    273,771    (261)   -    1,295,615 
Operating Expenses:                                        
Cost of revenue:                                        
Product   44,684    441    161,491    425,839    151,951    -    -    784,406 
Service and other   (442)   -    7,975    -    -    (261)    (3b)   -    7,272 
Rental   8,121    2,400    -    -    -    -    -    10,521 
Total cost of revenue   52,363    2,841    169,466    425,839    151,951    (261)   -    802,199 
Selling, general, and administrative expenses   142,488    8,466    61,232    257,659    100,220    (17,685)    (3a, 3c)       -    552,380 
Total operating expenses   194,851    11,307    230,698    683,498    252,171    (17,946)   -    1,354,579 
Gain (loss) from operations   (90,754)   1,766    3,441    (12,702)   21,600    17,685    -    (58,964)
Other income (expense):                                        
Interest expense, net   (7,960)   (360)   (1,786)   (2,828)   (3,503)   -    (46,253)(4a)   (62,690)
Other   37    11    2,198    -    -    -    -    2,246 
(Loss) income before income taxes   (98,677)   1,417    3,853    (15,530)   18,097    17,685    (46,253)   (119,408)
Income tax (benefit) expense   (10,445)   -    57    (3,616)   4,494    -    (23,166)(4b)   (32,676)
Net (loss) income   (88,232)   1,417    3,796    (11,914)   13,603    17,685    (23,087)   (86,732)
Less: Income/ (Loss) attributable to noncontrolling interests   (36,039)   -    -    -    -    -    36,039(4c)   - 
Net (loss) income attributable to common stockholders   (52,193)   1,417    3,796    (11,914)   13,603    17,685    (59,126)   (86,732)
                                         
Earnings per common share                                        
Basic (Note 5)   (3.13)   (2.47)                              
Diluted (Note 5)   (3.13)   (2.47)                              
Weighted average common share                                        
Basic (Note 5)   16,669,065    35,157,042                               
Diluted (Note 5)   16,669,065    35,157,042                               

 

See accompanying notes to the unaudited pro forma combined financial statements

 

- 8 -

 

 

Unaudited Pro Forma Combined Statement of Operations

for the three months ended March 28, 2020

 

   Historical
Franchise Group
   American Freight             
Dollars in thousands,
except per share amounts
  Three Months
Ended
March 28, 2020
   For the period
December 30, 2019 to
February 14, 2020
   Acquisition and related
Pro Forma
Adjustments
(Note 3)
  Financing and offer
Pro Forma
Adjustments
(Note 4)
   Pro Forma
Combined
Three Months
Ended March 28,
2020
 
Revenue:                                                                     
                          
Product   473,505    48,659    -    -    522,164 
Service and other   102,640    -    -    -    102,640 
Rental   16,420    -    -    -    16,420 
Total revenues   592,565    48,659    -    -    641,224 
Operating Expenses:                         
Cost of revenue:                         
Product   287,818    27,542    -    -    315,360 
Service and other   756    -    -    -    756 
Rental   5,942    -    -    -    5,942 
Total cost of revenue   294,516    27,542    -    -    322,058 
Selling, general, and administrative expenses   252,212    30,729    (12,953)  3a, 3c   -    269,988 
Total operating expenses   546,728    58,271    (12,953)   -    592,046 
Gain (loss) from operations   45,837    (9,612)   12,953    -    49,178 
Other income (expense):                         
Interest expense, net   (25,752)   (624)   -    3,013  4a   (23,363)
Other   (4,056)   -    -    4,042  4d   (14)
(Loss) income before income taxes   16,029    (10,236)   12,953    7,055    25,801 
Income tax (benefit) expense   (45,869)   (2,541)   -    5,215  4b   (43,195)
Net (loss) income   61,898    (7,695)   12,953    1,840    68,996 
Less: Income/ (Loss) attributable to noncontrolling interests   2,359    -    -    (2,359)  4c   - 
Net (loss) income attributable to common stockholders   59,539    (7,695)   12,953    4.199    68,996 
                          
Earnings per common share                         
Basic (Note 5)   2.55                   1.96 
Diluted (Note 5)   2.51                   1.94 
Weighted average common share                         
Basic (Note 5)   23,373,980                   35,157,042 
Diluted (Note 5)   23,696,035                   35,479,097 

 

See accompanying notes to the unaudited pro forma combined financial statements

 

- 9 -

 

 

Unaudited Pro Forma Combined Balance Sheet

as of March 28, 2020

 

   Historical         
   Franchise Group         
(Dollars in thousands, except per share amounts)  As of March 28,
2020
   Financing and offer
Pro Forma
Adjustments
(Note 4)
   Pro Forma
Combined
As of March 28, 2020
 
Assets               
Current assets:               
Cash and cash equivalents  $147,028   $-   $147,028 
Current receivables, net   136,254    -    136,254 
Inventories, net   359,447    -    359,447 
Other current assets   28,279    -    28,279 
Total Current Assets   671,008    -    671,008 
Operating lease right-of-use assets   535,092    -    535,092 
Property, equipment, and software, net   154,713    -    154,713 
Non-current receivable, net   15,581    -    15,581 
Goodwill   469,459    -    469,459 
Intangible assets, net   148,779    -    148,779 
Other non-current assets   24,891    -(4f)   24,891 
Total Assets   2,019,523    -    2,019,523 
Liabilities and Equity               
Current liabilities:               
Current installments of long-term obligations   257,466    -    257,466 
Accounts payable and accrued expenses   259,803    -    259,803 
Current portion of operating lease liabilities   126,701    -    126,701 
Other current liabilities   36,444    -    36,444 
Total current Liabilities   680,414    -    680,414 
Long-term obligations, excluding current installments, net   554,004    -    554,004 
Operating Lease Liabilities - non-current   434,677    -    434,677 
Other non-current liabilities   21,408    9,699(4f)   31,107 
Total Liabilities  $1,690,503   $9,699   $1,700,202 
Stockholders and Members' equity:               
Preferred stock, $0.01 par value per share,   11    (11)(4e)   - 
Common stock, $0.01 par value per share   297    55 (4e)   352 
Additional paid-in capital   237,354    19,968 (4e)   257,322 
         (9,699)(4f)   (9,699)
Accumulated other comprehensive loss, net of taxes   (2,306)   -    (2,306)
Retained earnings   73,652    -    73,652 
Total stockholders' equity attributable to Liberty   309,008    10,313    319,321 
Non-controlling interest   20,012    (20,012)(4e)   - 
Total stockholders' equity   329,020    (9,699)   319,321 
Total Liabilities, Mezzanine Equity and Equity  $2,019,523   $-   $2,019,523 

 

See accompanying notes to the unaudited pro forma combined financial statements

 

 - 10 - 

 

 

Notes to the Unaudited Pro Forma Combined Financial Statements

(dollars in thousands, except share and per share data)

Note 1: Basis of Presentation

 

The accompanying pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X and present the pro forma statements of operations and pro forma balance sheet of the combined company based on the historical financial statements of Franchise Group, Buddy’s, Sears Outlet, VSI, and American Freight (the “Combined Company”), after giving effect to the Transactions as described above. The historical financial statements of Franchise Group, Buddy’s, Sears Outlet, VSI, and American Freight have been adjusted in the accompanying pro forma financial statements to give effect to pro forma events that are (i) directly attributable to the Transactions, (ii) factually supportable and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations of the Combined Company.

 

The accompanying pro forma financial statements are presented for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the Combined Company if the Transactions had been consummated for the periods presented or that will be achieved in the future. The pro forma financial statements do not reflect the costs of any integration activities or benefits that may result from realization of revenue growth or operational synergies expected to result from the Transactions.

 

Note 2: Adjustments to Franchise Group’s, Buddy’s, Sears Outlet’s, VSI’s and American Freight’s Historical Financial Statements

 

(2a) Adjustments and reclassifications to Franchise Group’s historical financial statements:

 

Certain reclassifications have been made to the historical presentation of the statement of operations for the fiscal year ended April 30, 2019 of Franchise Group to conform to its financial statement presentation for the eight months ended December 28, 2019. The pro forma combined statement of operations for the eight months ended December 28, 2019 was prepared by combining the historical consolidated statement of operations for the eight months ended December 28, 2019 of Franchise Group and the pre-merger historical consolidated statement of operations for the three months ended June 30, 2019 of Buddy’s, the pre-acquisition historical combined statement of operations for the six months ended August 3, 2019 of Sears Outlet, the pre-acquisition historical consolidated statement of operations for the eight months ended November 23, 2019 of VSI, and the pre-acquisition historical consolidated statement of operations for the eight months ended December 29, 2019 of American Freight and giving effect to the Transactions as if they had occurred on the first day of the fiscal year May 1, 2018.

 

 - 11 - 

 

 

Unaudited Pro Forma Combined Statement of Operations

for the year-ended April 30, 2019

 

Dollars in thousands, except per share amounts  Historical
Franchise Group
   Reclassification   After
Reclassification
 
Revenue:               
Franchise fees  $2,766   $(2,766)  $- 
Area Developer fees   3,146    (3,146)   - 
Royalties and advertising fees   63,716    (63,716)   - 
Financial products   33,478    (33,478)   - 
Interest income   8,189    (8,189)   - 
Assisted tax preparation fees, net of discounts   14,611    (14,611)   - 
Electronic Filing Fee   2,675    (2,675)   - 
Product   -    -    - 
Service and other   -    132,546    132,546 
Rental   -    -    - 
Other revenues   3,965    (3,965)   - 
Total revenues   132,546    -    132,546 
Operating Expenses:             - 
Cost of revenue:   -    -    - 
Product   -    -    - 
Service and other   -    -    - 
Rental   -    -    - 
Total cost of revenue   -    -    - 
Employee compensation and benefits   39,822    (39,822)   - 
Selling, general, and administrative expenses   42,038    82,022    124,060 
Area Developer expense   15,584    (15,584)   - 
Advertising expense   12,532    (12,532)   - 
Depreciation, amortization, and impairment charges   14,084    (14,084)   - 
Restructuring Costs   9,345    -    9,345 
Total operating expenses   133,405    -    133,405 
Gain (loss) from operations   (859)   -    (859)
Other (expense) income:               
Foreign currency transaction (loss) gain   (113)   113    - 
Interest expense, net   (3,023)   -    (3,023)
Other   -    (113)   (113)
Loss before income taxes   (3,995)   -    (3,995)
Income tax benefit   1,839    -    1,839 
Net loss   (2,156)   -    (2,156)
Less: Net (loss) income attributable to participating securities   -    -    - 
Net loss attributable to Class A and Class B common stockholders  $(2,156)       $(2,156)
Net (loss) income per share attributable to Class A and Class B common stockholders:             - 
Basic  $(0.16)       $(0.16)
Diluted   (0.16)        (0.16)
Weighted-average shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders:               
Basic   13,800,884         13,800,884 
Diluted   13,800,884         13,800,884 

 

The statement of operations for the eight months ended December 28, 2019 includes post-merger operations of Buddy’s for the period July 10, 2019 to December 28, 2019, post-acquisition operations of Sears Outlet for the period October 23, 2019 to December 28, 2019, and post-acquisition operations of VSI for the period December 16, 2019 to December 28, 2019. Accordingly, the following adjustments to Franchise Group’s statement of operations were made to eliminate the post-merger operations of Buddy’s for the period July 10, 2019 to July 31, 2019, the post-acquisition operations of Sears Outlet for the period October 23, 2019 to October 31, 2019, and the post-acquisition operations of VSI for the period December 16, 2019 to December 28, 2019 in order to avoid combining operating results of Buddy’s, Sears Outlet, and VSI that exceed an eight-month period.

 

 - 12 - 

 

 

Unaudited Pro Forma Combined Statement of Operations

for the eight months ended December 28, 2019

 

   Historical
Franchise
Group
   Less: Buddy's
adjustments
   Less: Sears
Outlet
adjustments
   Less: VSI
adjustments
   Adjusted
Franchise
Group
 
Dollars in thousands, except per share amounts  Eight Months
Ended
December 28,
2019
   July 10, 2019 -
July 31, 2019
   October 23,
2019 - October
31, 2019
   December 16,
2019 -
December 28,
2019
   Eight Months
Ended
December 28,
2019
 
Revenue:                         
Product  $96,139   $118   $11,181   $30,574   $54,266 
Service and other   29,735    1,191    1,016    -    27,528 
Rental   23,636    1,334    (1)   -    22,303 
Total revenues   149,510    2,643    12,196    30,574    104,097 
Operating expenses:                         
Cost of revenue:                         
Product   71,820    93    7,565    19,478    44,684 
Service and other   768    -    1,210    -    (442)
Rental   8,661    540    -    -    8,121 
Total cost of revenue   81,249    633    8,775    19,478    52,363 
Selling, general, and administrative expenses   173,860    1,479    5,288    24,605    142,488 
Total operating expenses   255,109    2,112    14,063    44,083    194,851 
Loss from operations   (105,599)   531    (1,867)   (13,509)   (90,754)
Other income (expense):                         
Interest expense, net   (9,349)   (487)   (212)   (690)   (7,960)
Other   37    -    -    -    37 
Loss before income taxes   (114,911)   44    (2,079)   (14,199)   (98,677)
Income tax benefit   (10,445)   -    -    -    (10,445)
Loss before income taxes   (104,466)   44    (2,079)   (14,199)   (88,232)
Less: Net loss attributable to non-controlling interest   36,039    -    -    -    36,039 
Net loss attributable to Franchise Group, Inc.  $(68,427)  $44   $(2,079)  $(14,199)  $(52,193)

 

(2b) Adjustments and reclassifications of Buddy’s historical financial statements:

 

Certain reclassifications have been made to the historical presentation of the statement of operations of Buddy’s to conform to the financial statement presentation of Franchise Group. In addition, certain operations of Buddy’s, including its Flexi Buddy’s, BGTG LLC and 1357 LLC subsidiaries, were divested to the Buddy’s equity holders in December 2018 and therefore were not acquired or assumed by Franchise Group. The following summarizes the reclassification adjustments and elimination of the operations that were not acquired as part of the merger in the unaudited pro forma combined statement of operations for the trailing twelve-month period ended March 31, 2019 and the three months ended June 30, 2019.

 

 - 13 - 

 

 

Buddy's Statement of Operations

 

   April 1, 2018 - March 31, 2019   April 1, 2019 - June 30, 2019 
(in thousands)  Before
Adjustment
   Operations
not
contributed
   Reclassification   After
Adjustment
   Before
Adjustment
   Reclassification   After
Adjustment
 
Revenue                                   
Lease revenue  $30,560   $(4,056)  $(26,504)  $-   $6,589   $(6,589)  $- 
Agreement, club and damage waiver fee   6,160    (792)   (5,368)   -    1,352    (1,352)   - 
Retail sales   2,874    (282)   (2,592)   -    549    (549)   - 
Franchising and licensing fees   15,204    532    (15,736)   -    4,270    (4,270)   - 
Other support revenue   2,023    (122)   (1,901)   -    313    (313)   - 
Product   -    -    2,592    2,592    -    549    549 
Service and other   -    -    23,005    23,005    -    5,935    5,935 
Rental   -    -    26,504    26,504    -    6,589    6,589 
Revenue, net   56,821    (4,720)   -    52,101    13,073    -    13,073 
Leasing cost of sales   10,949    (1,719)   (9,230)   -    2,400    (2,400)   - 
Retail cost of sales   2,197    (353)   (1,844)   -    441    (441)   - 
Cost of revenue:                                 - 
Product   -    -    1,844    1,844    -    441    441 
Rental   -    -    9,230    9,230    -    2,400    2,400 
Total cost of revenue   13,146    (2,072)   -    11,074    2,841    -    2,841 
Operating expenses:                                   
Personnel expense   16,375    (2,074)   (14,301)   -    3,722    (3,722)   - 
Occupancy expense   4,845    (635)   (4,210)   -    1,050    (1,050)   - 
Marketing expense   1,927    (89)   (1,838)   -    603    (603)   - 
Delivery/Vehicle expense   1,356    (208)   (1,148)   -    257    (257)   - 
General & Administrative expense   7,426    (339)   (7,087)   -    2,490    (2,490)   - 
Selling, general, and administrative expenses   -    -    29,098    29,098    -    8,466    8,466 
Depreciation expenses   608    (95)   (513)   -    107    (107)   - 
Total operating costs   45,683    (5,512)   1    40,172    11,070    237    11,307 
                                    
Operating income   11,138    792    (1)   11,929    2,003    (237)   1,766 
                                    
Other income (expense)                                   
Net gain on sale of store related assets   178    81    (259)   -    11    (11)   - 
Other   -    -    259    259    -    11    11 
Amortization expense   (178)   177    1    -    (237)   237    - 
Interest expense   (1,453)   41    -    (1,412)   (360)   -    (360)
Total other income (expense)   (1,453)   299    1    (1,153)   (586)   237    (349)
                                    
Net income before income taxes   9,685    1,091    -    10,776    1,417    -    1,417 
                                    
Income taxes   -    -         -    -         - 
                                    
Net income from continuing operations  $9,685   $1,091   $-   $10,776   $1,417   $-   $1,417 

 

 

(2c) Reclassification of Sears Outlet’s historical combined financial statements:

 

Certain reclassifications have been made to the historical presentation of the statement of operations and balance sheet of Sears Outlet to conform to the financial statement presentation of Franchise Group. The following summarizes the reclassification adjustments in the unaudited pro forma carve-out statement of operations for the trailing twelve-month period ended May 4, 2019 and reclassification adjustment in the unaudited pro forma carve-out statement of operations for the six months ended August 3, 2019.

 

 - 14 - 

 

 

Sears Outlet Statement of Operations

 

   May 6, 2018 - May 4, 2019   February 3, 2019 - August 3, 2019 
(in thousands)  Before
Adjustment
   Reclassification   After
Adjustment
   Before
Adjustment
   Reclassification   After
Adjustment
 
Revenue                        
Product   -    448,573    448,573    -    217,393    217,393 
Service and other   -    41,626    41,626    -    16,746    16,746 
Net sales   490,199    (490,199)   -    234,139    (234,139)   - 
Operating expenses:                              
Cost of revenue:                              
Product   -    334,068    334,068    -    161,491    161,491 
Service and other   -    20,428    20,428         7,975    7,975 
Cost of goods sold   354,496    (354,496)   -    169,466    (169,466)   - 
Selling, general, and administrative expenses   126,296    7,068    133,364    58,776    2,456    61,232 
Impairment of property and equipment   1,082    (1,082)   -    -    -    - 
Depreciation and amortization   5,986    (5,986)   -    2,456    (2,456)   - 
Loss (gain) on sale of assets   (1,306)   1,306    -    (2,192)   2,192    - 
Total costs and expenses   486,554    1,306    487,860    228,506    2,192    230,698 
                               
Operating income (loss)   3,645    (1,306)   2,339    5,633    (2,192)   3,441 
                               
Other income (expense)                              
Interest expense   (6,410)   -    (6,410)   (1,786)   -    (1,786)
Other   134    1,306    1,440    6    2,192    2,198 
Income (loss) before income taxes   (2,631)   -    (2,631)   3,853    -    3,853 
                               
Income tax expense (benefit)   271    -    271    57    -    57 
                               
Net income (loss)   (2,902)   -    (2,902)   3,796    -    3,796 

 

(2d) Reclassification of VSI’s historical financial statements:

 

Certain reclassifications have been made to the historical presentation of the statement of operations and balance sheet of VSI to confirm to the financial statement presentation of Franchise Group. The following summarizes the reclassification adjustments in the unaudited pro forma combined statement of operations for the trailing twelve-month period ended March 30, 2019 and reclassification adjustment in the unaudited pro forma combined statement of operations for the eight months ended November 23, 2019.

 

 - 15 - 

 

 

VSI Statement of Operations

 

   April 1, 2018 - March 30, 2019   March 31, 2019 - November 23, 2019 
(in thousands)  Before
Adjustment
   Reclassification   After
Adjustment
   Before
Adjustment
   Reclassification   After
Adjustment
 
Revenue                        
Product  $-   $1,101,528   $1,101,528   $-   $670,796   $670,796 
Net sales   1,101,528    (1,101,528)   -    670,796    (670,796)   - 
Cost of revenue:                              
Product   -    745,028    745,028    -    425,839    425,839 
Cost of goods sold   745,028    (745,028)   -    425,839    (425,839)   - 
Gross profit   356,500    -    356,500    244,957    -    244,957 
Selling, general, and administrative expenses   344,174    3,017    347,191    246,255    11,404    257,659 
Goodwill, tradename and store fixed-assets impairment charges   3,017    (3,017)   -    11,404    (11,404)   - 
Income (loss) from operations   9,309    -    9,309    (12,702)   -    (12,702)
Gain on extinguishment of debt   4,400    -    4,400    -    -    - 
Interest expense   (5,227)   -    (5,227)   (2,828)   -    (2,828)
Income (loss) before provision (benefit) for income taxes   8,482    -    8,482    (15,530)   -    (15,530)
Income tax expense (benefit)   1,101    -    1,101    (3,616)   -    (3,616)
Net income (loss) from continuing operations  $7,381   $-   $7,381   $(11,914)  $-   $(11,914)

 

(2e) Reclassification of American Freight’s historical financial statements:

 

Certain reclassifications have been made to the historical presentation of the statement of operations and balance sheet of American Freight to conform to the financial statement presentation of Franchise Group. The following summarizes the reclassification adjustments in the unaudited pro forma combined statement of operations for the trailing twelve-month period ended March 31, 2019 and reclassification adjustment in the unaudited pro forma combined statement of operations for the eight months ended December 29, 2019.

 

 - 16 - 

 

 

American Freight Statement of Operations

 

   April 2, 2018 - March 31, 2019   April 29, 2019 - December 29, 2019 
(in thousands)  Before
Adjustment
   Reclassification   After
Adjustment
   Before
Adjustment
   Reclassification   After
Adjustment
 
Revenue                        
Product  $-   $443,954   $443,954   $-   $273,771   $273,771 
Revenue   443,954    (443,954)   -    273,771    (273,771)   - 
Cost of revenue                            - 
Merchandise   220,365    (220,365)   -    139,231    (139,231)   - 
Freight   23,183    (23,183)   -    12,720    (12,720)   - 
Product   -    243,548    243,548    -    151,951    151,951 
Depreciation expense   1,843    (1,843)   -    1,745    (1,745)     
Selling, general, and administrative expenses   153,967    1,843    155,810    98,475    1,745    100,220 
Gain (loss) from operations   44,596    -    44,596    21,600    -    21,600 
Interest expense   (8,161)   -    (8,161)   (3,503)   -    (3,503)
Income (loss) before provision (benefit) for income taxes   36,435    -    36,435    18,097    -    18,097 
Income tax expense (benefit)   9,399    -    9,399    4,494    -    4,494 
Net income (loss) from continuing operations  $27,036   $-   $27,036   $13,603   $-   $13,603 

 

 - 17 - 

 

 

 

Note 3: Purchase Price Accounting and Related Adjustments

 

The unaudited pro forma statement of operations for the year ended April 30, 2019, the eight months ended December 28, 2019 and the three months ended March 28, 2020 gives effect to the American Freight, VSI, Sears Outlet, and Buddy’s acquisitions as if they occurred on May 1, 2018.

The fair value adjustments of the Buddy’s merger and the acquisitions of Sears Outlet, VSI, and American Freight to the pro forma statements of operations are stated below:

 

   For the year ended April 30, 2019 
(in thousands)  Buddy's   Sears
Outlet
   VSI   American
Freight
   Total
Acquisition
Pro Forma
Adjustments
 
Revenue:                         
Service and other  $(177)  (3b)  $-   $-   $-   $(177)  (3b)
Total   (177)   -    -    -    (177)
Operating Expenses:                         
Cost of revenue:                         
Service and other        (177)  (3b)           (177)  (3b)
Selling, general, and administrative expenses   1,942   (3a4)   4,678   (3a3)   (8,259)  (3a2)   2,575   (3a1)   936   (3a)
Total   1,942    4,501    (8,259)   2,575    759 
Total operating income/ (expense)  $(2,119)  $(4,501)  $8,259   $(2,575)  $(936)

 

   For the 8-months ended December 28, 2019 
(in thousands)  Buddy's   Sears
Outlet
   VSI   American
Freight
   Total 
Acquisition
Pro Forma
Adjustments
 
Revenue:                         
Service and other  $(261)  (3b)  $-   $-   $-   $(261)  (3b)
Total   (261)   -    -    -    (261)
Operating Expenses:                         
Cost of revenue:                         
Service and other   -    (261)  (3b)   -    -    (261)  (3b)
Selling, general, and administrative expenses   (6,367)  (3c)   (5,179)  (3c)     (3,704)  (3c)   (1,502)  (3c)   (16,752)  (3c)
Selling, general, and administrative expenses   486   (3a4)   2,339   (3a3)   (5,474)  (3a2)   1,716   (3a1)   (933)  (3a)
Total   (5,881)     (3,101)   (9,178)   214    (17,946)
Total operating income/ (expense)  $5,620   $3,101   $9,178   $(214)  $17,685 

 

- 18 -

 

 

   For the 3-months ended March 28, 2020 
(in thousands)  Buddy's   Sears Outlet   VSI   American
Freight
   Total Acquisition
Pro Forma
Adjustments
 
Revenue:                         
Service and other  $               -   $          -   $                  -   $          -   $       - 
Total   -    -    -    -    - 
Operating Expenses:                         
Cost of revenue:                         
Service and other   -    -    -    -    - 
Selling, general, and administrative expenses   -    -    -    (13,275)  (3c)   (13,275)  (3c)
Selling, general, and administrative expenses   -    -    -    322   (3a1)   322   (3a)
Total   -    -    -    (12,953)   (12,953)
Total operating income/ (expense)  $-   $-   $-   $12,953   $12,953 

 

Fair value adjustment of American Freight

 

(3a1) Upon consummation of the American Freight acquisition, Franchise Group identified American Freight tradename as an indefinite-lived intangible asset with a fair value adjustment of $14.2 million. In addition, Franchise Group also recognized a fair value adjustment to the right-of-use assets balance relating to below market leases for an amount of $11.5 million.

 

The favorable lease market terms of $11.5 million is amortized on a straight-line basis over the average remaining lease terms and is recognized to Selling, general, and administrative expenses.

 

   American Freight 
                  Amortization expense 
   Fair Value   Estimated
Useful Life
   Amortization
Method
  For the period
December 30,
2019 to
February 14,
2020
   Eight
months
ended
December
29, 2019
   Year ended
April 30,
2019
 
Trademark / trade name   14,200    Indefinite   N/A  $-   $-   $- 
Above/ (below) market leases   11,490    4.9   Straight-line   293    1,563    2,345 
Total acquired intangible assets   25,690            293    1,563    2,345 
Less: historical intangible assets                -    -    - 
Pro forma adjustment               $293   $1,563   $2,345 

 

- 19 -

 

 

The preliminary fair value adjustments to increase Property, equipment, and software, net (“PP&E”) by $2.1 million. This resulted in a pro forma adjustment to increase the depreciation expense charge recorded to Selling, general and administrative expense by $0.2 million for the year ended April 30, 2019, $0.1 million for the eight months ended December 29, 2019 and a minimal amount for the period December 30, 2019 to February 14, 2020. The estimated depreciation expenses were computed using the straight-line method based on the estimated useful life of the PP&E.

 

(3b) Represents intercompany elimination of balances and transactions between the Buddy’s segment of Franchise Group and Buddy’s franchise stores owned by Sears Outlet.

 

(3c) Represents the removal of actual transaction costs related to the Transactions included in the statement of operations of Franchise Group for the eight months ended December 28, 2019 and for the period December 29, 2019 to February 14 as follows:

 

   Eight-months ended
December 28, 2019
   For the period December 29,
2019 to February 14, 2020
 
Buddy's Original Acquisition  $6,367   $- 
Vitamin Shoppe   3,704    - 
Sears Outlet Stores   5,179    - 
American Freight   1,502    13,275 
Total  $16,752   $13,275 

 

Fair value adjustment of VSI

 

(3a2) Upon consummation of the VSI acquisition, Franchise Group identified VSI’s tradename as an indefinite-lived intangible asset with a fair value of $12.0 million. Upon consummation of the VSI acquisition, Franchise Group recognized a fair value adjustment to the right-of-use assets balance relating to above market leases for an amount of ($54.3) million.

 

   VSI 
              Amortization expense 
   Fair Value   Estimated
Useful Life
   Amortization
Method
  Eight months
ended
November 23,
2019
   Year ended
April 30, 2019
 
Trademark / trade name  $12,000    Indefinite   N/A  $-   $- 
Above/ (below) market leases   (54,311)   5.2   Straight-line   (6,963)   (10,444)
Total acquired intangible assets   (42,311)           (6,963)   (10,444)
Less: historical intangible assets                (190)   (333)
Pro forma adjustment               $(7,153)  $(10,777)

 

- 20 -

 

 

The preliminary fair value of PP&E increased the book value of furniture, fixture and equipment by $17.6 million. This resulted in a pro forma adjustment to increase the depreciation charge recorded to Selling, general, and administrative expenses by $2.5 million for the year ended April 30, 2019 and by $1.7 million for the eight months ended December 28, 2019. The estimated depreciation expenses were computed using the straight-line method based on an estimated useful life of the PP&E.

Fair value adjustment of Sears Outlet

 

(3a3) Upon consummation of the Sears Outlet acquisition, Franchise Group recognized a fair value adjustment to the right-of-use assets balance relating to below market leases for an amount $19.0 million.

 

   Sears Outlet 
              Amortization expense 
   Fair Value   Estimated Useful Life   Amortization Method  Six months ended August 3, 2019   Year ended April 30, 2019 
Above/ (below) market leases  $18,950    4.1   Straight-line  $2,311   $4,622 
Total acquired intangible assets                2,311    4,622 
Less: historical intangible assets                -    - 
Pro forma adjustment               $2,311   $4,622 

 

The fair value of PP&E increased the book value of furniture, fixture and equipment by $0.3 million. This resulted in a pro forma adjustment to increase the depreciation charge recorded to Selling, general, and administrative expenses by $0.1 million for the year ended April 30, 2019 and by a minimal amount for the eight months ended December 28, 2019. The estimated depreciation expenses were computed using the straight-line method based on an estimated useful life of the PP&E.

 

Fair value adjustment of Buddy’s

 

(3a4) Upon consummation of the merger with Buddy’s, Franchise Group identified the Buddy’s tradename as an indefinite-lived intangible asset with a fair value of $11.1 million. Franchise Group also recognized an asset of $10.5 million for franchise agreements, $7.7 million for customer contracts and ($2.3) million for above market operating leases.

 

   Buddy's 
              Amortization expense 
   Fair Value   Estimated Useful Life   Amortization Method  Three months ended June 30, 2019   Year ended April 30, 2019 
Trademark / trade name  $11,100    Indefinite   N/A  $-   $- 
Franchise agreements / relationships   10,500    10   Straight-line   263    1,050 
Customer contacts / relationships   7,700    6   Straight-line   321    1,283 
Above/ (below) market leases   (2,345)   6   Straight-line   (98)   (391)
Total acquired intangible assets   26,955            486    1,942 
Less: historical intangible assets                -    - 
Pro forma adjustment               $486   $1,942 

 

- 21 -

 

 

All amortization adjustments related to identified intangible assets as a result of the merger of Buddy’s are recorded to Selling, general, and administrative expenses. The estimated amortization expense was computed using the straight-line method based on an estimated useful life of the identifiable definite-lived intangible assets.

 

Note 4: Financing and Offer Adjustments

 

Various agreements were executed to finance the Transactions discussed above. The following are fully reflected in the historical balance sheet of Franchise Group as of March 28, 2020:

 

 

In connection with the Buddy’s merger and offer, Buddy’s has signed the Buddy’s initial credit agreement for debt financing of the Transactions consisting of a $82.0 million, 5-year term loan, which bears interest at variable rates. The proceeds were used to finance transaction costs, a portion of the tender offer acceptances and general working capital purposes.
     
 

In connection with the Sears Outlet acquisition, Franchise Group Newco S, LLC, an indirect subsidiary of Franchise Group, signed the Sears Outlet term loan to finance the acquisition of Sears Outlet in an amount equal to $105.0 million. The Sears Outlet term loan bears a variable interest rate. The total proceeds from the debt financing and the equity contribution from the Investors of $40 million as explained above were used to pay the cash consideration in connection with the Sears Outlet acquisition.
     
 

In connection with the VSI acquisition, Vitamin Shoppe Industries, LLC, an indirect subsidiary of Franchise Group has executed a 3-year term loan in the amount of $70.0 million and borrowed $70.0 million of 3-year credit facility and the total proceeds were used to finance the VSI acquisition. The VSI term loan and the VSI credit facility bear variable interest rates. The total proceeds from the debt financing and the equity contribution from Vintage of $30 million as explained above were used to pay the cash consideration in connection with the VSI acquisition.
     
 

In connection with the A-team Asset Acquisition, the Buddy’s segment of Franchise Group entered into the Buddy’s first amendment to the Buddy’s initial term loan to provide for a $23.0 million first priority senior secured term loan. The proceeds from the debt were used to acquire 41 Buddy’s Home Furnishings stores from A-Team. The purchase price allocation related to the Asset Acquisition of the 41 stores is reflected in the historical financial statements of Franchise Group but is not reflected in the pro forma statements of operations as the A-team Asset Acquisition was not considered material to the pro forma results.
     
 

The historical balance sheet of Franchise Group as of December 28, 2019 also reflects the purchase of shares in connection with the final tender offer acceptances of $47.2 million.

 

- 22 -

 

 

 

The issuance of debt to finance the American Freight acquisition and repay the existing Buddy’s and the Sears Outlet term loans. Franchise Group through certain of its subsidiaries, entered into the New Holdco term loan agreement with GACP Finance Co., LLC for an amount of $575.0 million which consists of a $375.0 million first out tranche and a $200.0 million last out tranche. The term loan will mature on May 14, 2025. In addition, Franchise Group entered into an ABL Credit Agreement with various lenders which provided the Company with a $100.0 million credit facility.
     
 

The equity issuance to Kayne FRG Holdings, L.P. (“Kayne FRG”) of 1.3 million shares of common as a consideration and payment for debt financing services rendered to the Company. The fair value of the 1.3 million of shares issued to Kayne FRG is $31.0 million, which has been capitalized as deferred financing costs with an offset to common stock par and Additional Paid In Capital (“APIC”); and
     
 

The additional equity contribution from affiliates of Vintage for $65.9 million or 3.9 million shares to finance the repurchase of the VSI Convertible Notes for $60.6 million including $0.2 million of accrued interest with the excess cash used to fund general, working capital and cash needs of the Company.
     
 

The exchange of New Holdco units from certain Buddy’s equity holders. As of March 28, 2020, certain Buddy’s equity holders have converted 3,937,726 New Holdco units and 787,545 shares of preferred stock for Franchise Group common stock.

 

(4a) Represents an increase to interest expense of $73.2 million and $46.3 million for the fiscal year ended April 30, 2019 and eight months ended December 28, 2019, respectively, and a decrease to interest expense of $3.0 million for three months ended March 28, 2020, which includes the following:

 

(in thousands)  For the twelve months ended April 30, 2019 
   Buddy's   Sears Outlet   VSI   New Holdco (4)   Total 
Estimated interest expense on new financing (1)  $-   $-   $8,439   $71,567   $80,006 
Elimination of historical interest expenses (2)   (1,412)   (6,410)   (5,227)   (8,161)   (21,210)
Amortization of deferred debt issuance costs (3)   -    -    2,792    11,596    14,388 
Total pro forma adjustment to interest expense  $(1,412)  $(6,410)  $6,004   $75,002   $73,184 

 

(in thousands)  For the eight months ended December 28, 2019 
   Buddy's   Sears Outlet   VSI   New Holdco (4)   Total 
Estimated interest expense on new financing (1)  $-   $-   $4,610   $46,765   $51,375 
Elimination of historical interest expenses (2)   (4,881)   (3,383)   (2,828)   (3,503)   (14,595)
Amortization of deferred debt issuance costs (3)   -    -    1,606    7,867    9,473 
Total pro forma adjustment to interest expense  $(4,881)  $(3,383)  $3,388   $51,129   $46,253 

 

- 23 -

 

 

(in thousands)  For the three months ended March 28, 2020 
   Buddy's   Sears Outlet   VSI   New Holdco (4)   Total 
Estimated interest expense on new financing (1)  $-   $-   $1,508   $17,127   $18,635 
Elimination of historical interest expenses (2)   (5,541)   (5,977)   (3,575)   (10,068)   (25,161)
Amortization of deferred debt issuance costs (3)   -    -    542    2,971    3,513 
Total pro forma adjustment to interest expense  $(5,541)  $(5,977)  $(1,525)  $10,030   $(3,013)
     
 

(1)

Represents additional interest expense calculated at an estimated 9.50% interest rate in connection with the New Holdco Tranche A-1, an estimated 14.00% interest rate in connection with the New Holdco Tranche A-2, an estimated 9.00% interest rate in connection with the $100 million New Holdco credit facility, an estimated 11.00% interest rate on the $70.0 million 3-year VSI term loan, and an estimated 2.08% on the $70.0 million 3-year VSI credit facility. The estimated interest rates and adjustments are based on current LIBOR rates and estimated interest rate spreads based on the terms of the executed debt agreements.

     
 

(2)

Represents the elimination of Buddy’s, Sears Outlet’s, VSI’s, and American Freight’s historical interest expense as a result of the extinguishment of its historical term loans and line of credits pursuant to the acquisition agreements. The adjustment also reflects the elimination of the Buddy’s term loan interest incurred from July 10, 2019 to March 28, 2020 and Sears Outlet term loan interest incurred from October 23, 2019 to March 28, 2020 as these two loans were refinanced by using the proceeds from the New Holdco term loan and ABL credit facility.
     
 

(3)

Represents the amortization of the estimated deferred financing costs in connection with the New Holdco term loan, the New Holdco credit facility the VSI term loan and the VSI credit facility.
     
 

(4)

New Holdco is the Company’s subsidiary created in connection with the Transactions that owns Buddy’s, Sears Outlet, VSI and American Freight and issued debt on February 14, 2020 to finance the American Freight acquisition and repay the Buddy’s and Sears Outlet existing term loans.

 

A 1/8 percent change in the interest assumed above would result in an aggregate increase or decrease to interest expense of $1.0 million for the twelve months ended April 30, 2019, $0.6 million for the eight months ended December 28, 2019 and $0.2 million for the three months ended March 28, 2020.

 

(4b) Represents adjustments to income tax (benefit) expense. The income of New Holdco which includes the operations of Liberty Tax, Buddy’s, Sears Outlet, VSI, and American Freight attributable to Franchise Group is subject to U.S. income taxes, in addition to state, and local taxes. The income tax expense is based on estimated U.S. statutory tax rates of the Combined Company of 27.4% for the year ended April 30, 2019, the eight months ended December 28, 2019 and the three months ended March 28, 2020. The actual effective tax rate of Franchise Group may differ materially from the pro forma tax rates due to, among other factors, changes in tax laws, the impact of permanent tax differences, income tax reserves determined in connection with the merger and tax planning.

 

(4c) Represents the adjustment to reclassify the income (loss) attributable to non-controlling interests to the income (loss) attributable to common stockholders given the full exchange of New Holdco common units held by Buddy’s equity members into Franchise Group common shares.

 

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(4d) Represents the elimination of the loss on debt extinguishment recorded by the Company for the three months ended March 28, 2020, due to the refinancing of the existing Buddy’s and the Sears Outlet term loans.

 

(4e) Represents adjustments to give effect to the exchange of all New Holdco common units and preferred stock issued to the Buddy’s equity holders in connection with the Buddy’s acquisition. As of April 1, 2020, all Buddy’s equity holders have exercised their option to exchange each New Holdco common unit and one-fifth (1/5) of a share of Franchise Group preferred stock for one share of Franchise Group common stock. Therefore, the Buddy’s equity holders’ noncontrolling interests in the Franchise Group New Holdco, LLC is eliminated and transferred to APIC with an increase to the par value of the common stock issued, and a reduction to the par value of the preferred stock exchanged.

 

(4f) Represents adjustments to give effect to the tax TRA which Franchise Group entered with the Buddy’s equity holders in connection with the acquisition of Buddy’s. The TRA liability of approximately $9.7 million was reflected as an increase to Other non-current liabilities, estimated based on 40% of those tax benefits and an increase to additional paid-in capital for $9.7 million. There is no increase in the other non-current assets (i.e., deferred tax assets) given the valuation allowance in place which will off-set the deferred tax assets related to the increase in tax basis and additional tax benefits that are available to Franchise Group in connection with the exchange of the New Holdco common units and preferred stock from the Buddy’s equity holders. Franchise Group is continuing to assess the tax implications of the transaction, including the assessment of uncertain tax positions and the realizability of any future tax benefits, which may result in changes in the Company’s judgments and estimates affecting the recognition of additional deferred tax assets and obligations related to the tax receivable arrangement.

 

Note 5: Pro Forma Earnings Per Share

 

Pro forma basic earnings per share and pro forma weighted average basic shares outstanding for the year ended April 30, 2019, the eight months ended December 28, 2019 and the three months ended March 28, 2020 reflect the number of shares of the Company’s common stock that are outstanding upon completion of the Transactions. As all shares issued in connection with the Transactions were not completed until after the year ended April 30, 2019, the year ended April 30, 2019 earning per share pro forma adjustments reflect the issuance of common shares assuming it occurred on May 1, 2018. As the shares issued in connection with the Transactions were only reflected in the historical basic and diluted weighted average share counts for a portion of the eight months ended December 28, 2019 and the three months ended March 28, 2020, pro forma adjustments reflected the impact on weight average common shares outstanding assuming the shares issued in connection with the Transactions occurred on May 1, 2018.

 

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In thousands  For the Three Months Ended
March 28, 2020
   For the Eight Months
Ended December 28, 2019
   For the Year Ended April 30,
2019
 
Pro forma net income  $68,996   $(86,732)  $(18,197)
Basic weighted average common shares outstanding               
Basic average common shares outstanding during historic period   23,373,980    16,669,065    13,800,884 
Common stock repurchased as part of the offer   -    -    (3,935,738)
Common stock purchased by Tributum in connection with the offer   -    -    2,083,333 
Common stock purchased by Stefac LP, Brian R. Kahn and Lauren Kahn, and B. Riley FBR, Inc. in connection with the Sears Outlet acquisition   -    -    3,333,333 
Common stock purchased by Tributum/Stefac LP in connection with the VSI acquisition   -    -    2,438,748 
Common stock purchased by Tributum/Stefac LP in connection with the repayment of VSI convertible note   -    2,354,000    2,354,000 
Common stock purchased by certain investors, in connection with the repayment of VSI's convertible note   -    3,877,965    3,877,965 
Common stock issued and sold to Kayne FRG Holdings, LP for the financing services rendered by Kayne FRG   -    1,250,000    1,250,000 
Common stock issued on the conversion of all New Holdco units and preferred stock from Buddy's equity holders   5,495,606    9,433,332    9,433,332 
Additional weighted average impact of common stock repurchased as part of the offer   -    (3,903,211)   - 
Additional weighted average impact of common stock purchased by Tributum in connection with the offer   -    611,226    - 
Additional weighted average impact of common stock purchased by Stefac LP, Brian R. Kahn and Lauren Kahn, and B. Riley FBR, Inc. in connection with the Sears Outlet acquisition   -    2,410,468    - 
Additional weighted average impact of common stock purchased by Tributum/Stefac LP in connection with the VSI acquisition   -    2,307,741    - 
Additional weighted average impact of common stock purchased by Tributum/Stefac LP in connection with the repayment of VSI convertible note   129,341    -    - 
Additional weighted average impact of common stock purchased by certain investors, in connection with the repayment of VSI's convertible note   1,704,600    -    - 
Additional weighted average impact of common stock issued and sold to Kayne FRG Holdings, LP for the financing services rendered by Kayne FRG   645,604    -    - 
Additional weighted average impact of common stock issued on the conversion of New Holdco units and preferred stock from Buddy's equity holders in Q1 2020   3,807,911    -    - 
Other   -    146,456    521,185 
Basic weighted average common shares outstanding used in pro forma net earnings per share   35,157,042    35,157,042    35,157,042 
Pro forma net earnings per common share, basic  $1.96   $(2.47)  $(0.52)
Diluted weighted average common shares outstanding               
Diluted average common shares outstanding during historic period   23,696,035    16,669,065    13,800,884 
Common stock repurchased as part of the offer   -    -    (3,935,738)
Common stock purchased by Tributum in connection with the offer   -    -    2,083,333 
Common stock purchased by Stefac LP, Brian R. Kahn and Lauren Kahn, and B. Riley FBR, Inc. in connection with the Sears Outlet acquisition   -    -    3,333,333 
Common stock purchased by Tributum/Stefac LP in connection with the VSI acquisition   -    -    2,438,748 
Common stock purchased by Tributum/Stefac LP in connection with the repayment of VSI convertible note   -    2,354,000    2,354,000 
Common stock purchased by certain investors, in connection with the repayment of VSI's convertible note   -    3,877,965    3,877,965 
Common stock issued and sold to Kayne FRG Holdings, LP for the financing services rendered by Kayne FRG   -    1,250,000    1,250,000 
Common stock issued on the conversion of all New Holdco units and preferred stock from Buddy's equity holders   5,495,606    9,433,332    9,433,332 
Additional weighted average impact of common stock repurchased as part of the offer   -    (3,903,211)   - 
Additional weighted average impact of common stock purchased by Tributum in connection with the offer   -    611,226    - 
Additional weighted average impact of common stock purchased by Stefac LP, Brian R. Kahn and Lauren Kahn, and B. Riley FBR, Inc. in connection with the Sears Outlet acquisition   -    2,410,468    - 
Additional weighted average impact of common stock purchased by Tributum/Stefac LP in connection with the VSI acquisition   -    2,307,741    - 
Additional weighted average impact of common stock purchased by Tributum/Stefac LP in connection with the repayment of VSI convertible note   129,341    -    - 
Additional weighted average impact of common stock purchased by certain investors, in connection with the repayment of VSI's convertible note   1,704,600    -    - 
Additional weighted average impact of common stock issued and sold to Kayne FRG Holdings, LP for the financing services rendered by Kayne FRG   645,604    -    - 
Additional weighted average impact of common stock issued on the conversion of New Holdco units and preferred stock from Buddy's equity holders in Q1 2020   3,807,911    -    - 
Other        146,456    521,185 
Diluted weighted average common shares outstanding used in pro forma net earnings per share   35,479,097    35,157,042    35,157,042 
Pro forma net earnings per common share, diluted  $1.94   $(2.47)  $(0.52)

 

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