Attached files
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2009
combines the historical consolidated balance sheets of Republic Airlines
Holdings Inc. (“Republic”) and Frontier Airlines Holdings, Inc (“Frontier”),
giving effect to the Acquisition (as defined in Note 1) as if it had occurred on
September 30, 2009. The Unaudited Pro Forma Condensed Combined
Statements of Operations for the nine months ended September 30, 2009 and for
the year ended December 31, 2008 combine the historical consolidated statements
of operations of Republic, Midwest, and Frontier, giving effect to the
Acquisitions as if they had occurred at the beginning of the period presented.
The historical consolidated financial statements of Frontier and Midwest have
been adjusted to reflect certain reclassifications to conform to Republic’s
financial statement presentation.
The
Company merged with Midwest Air Group, Inc. (“Midwest”) on July 31, 2009,
pursuant to the terms of the Agreement and Plan of Merger dated as of
June 23, 2009. Midwest financial results for the seven months
ended July 31, 2009 and twelve months ended December 31, 2008 are presented in
the Unaudited Pro Forma Condensed Combined Statements of Operations as separate
columns. Midwest’s
operations for the twelve months ended December 31, 2008 include the sum of the
one month ended January 31, 2008 of the Company prior to being acquired by the
TPG entities and the eleven months ended December 31, 2008 after being acquired
by the TPG entities. Midwest operations for the two month period
beginning August 1, 2009 are included in the Republic results as filed in the
Company’s 10-Q.
As
Republic and Frontier have different fiscal year end dates, the recasted
results for the adoption of FSP APB 14-1 of Frontier have been realigned to
conform to Republic’s fiscal year. The Frontier unaudited pro forma
condensed combined statements of operations for the nine months ended September
30, 2009 includes the unaudited operations for the six months ended September
30, 2009 results (included at Exhibit 99.1) with the unaudited statement of
operations for the three months ended March 31, 2009. The
Frontier unaudited pro forma condensed combined statements of operations for the
year ended December 31, 2008 includes the audited March 31, 2009 results with
the unaudited statement of operations for the three months ended March 31,
2008 and deducting the unaudited statement of operations for the three months
ended March 31, 2009.
The
Unaudited Pro Forma Condensed Combined Financial Statements were prepared using
the acquisition method of accounting with Republic treated as the acquiring
entity. Accordingly, the aggregate value of the consideration paid by Republic
to complete the Acquisition will be allocated to the assets acquired and
liabilities assumed from Frontier based upon their estimated fair values as of
the date of the Acquisition. A final determination of the fair value
of assets acquired and liabilities assumed from Frontier will be based on the
actual net tangible and intangible assets and liabilities of Frontier that
existed as of the date of the Acquisition. As the final valuations
and
tax calculations are being performed, increases or decreases in the fair
value of relevant balance sheet amounts will result in adjustments, which may be
material, to the balance sheet and/or statements of operations.
These
Unaudited Pro Forma Condensed Combined Financial Statements have been developed
from and should be read in conjunction with (1) the unaudited interim condensed
consolidated financial statements of Republic contained in its Quarterly Report
on Form 10-Q for the nine month period ended September 30, 2009; (2) the
unaudited interim condensed consolidated financial statements of Frontier for
the six month period ended September 30, 2009 included as Exhibit 99.1 in this
Form 8-K/A; (3) the audited consolidated financial statements of Republic
contained in its Annual Report on Form 10-K for the year ended December 31,
2008; (4) the audited consolidated financial statements of Frontier for the year
ended March 31, 2009 included as Exhibit 99.2 in this Form 8-K/A; (5) the
audited consolidated financial statements of Midwest included in the Current
Report on Form 8-K/A filed with the SEC on October 16, 2009; and (6) the
unaudited interim condensed consolidated financial statements of Midwest for the
six months period ended June 30, 2009 included in the Current Report on
Form 8-K/A filed with the SEC on October 16, 2009. The Unaudited Pro Forma
Condensed Combined Financial Statements are provided for illustrative purposes
only and do not purport to represent Republic’s consolidated results of
operations or consolidated financial position had the Acquisition occurred on
the dates assumed, nor are these financial statements necessarily indicative of
Republic’s future consolidated results of operations or consolidated financial
position.
The
Unaudited Pro Forma Condensed Combined Financial Statements do not reflect the
costs of any integration activities, benefits that may result from operating
efficiencies or revenue synergies expected to result from the
Acquisition.
- 1
-
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER
30, 2009
|
|||||||||||||||||||||
(In
thousands)
|
Historical
|
Combined
|
|
Combined
|
|||||||||||||||||
Assets
|
Republic
|
Frontier
|
Historical
Balance Sheet |
Pro
Forma
Adjustments |
|
Pro
Forma
Balance Sheet |
|||||||||||||||
Current
Assets:
|
|||||||||||||||||||||
Cash
and cash equivalents
|
$ | 85,525 | $ | 53,918 | $ | 139,443 | $ | (28,750 | ) |
(B)
|
$ | 110,693 | |||||||||
Restricted
cash
|
63,188 | 165,849 | 229,037 | - | 229,037 | ||||||||||||||||
Receivables—net
of allowance for doubtful accounts
|
36,777 | 35,587 | 72,364 | - | 72,364 | ||||||||||||||||
Inventories—net
|
64,059 | 13,156 | 77,215 | (1,257 | ) |
(C)
|
75,958 | ||||||||||||||
Prepaid
expenses and other current assets
|
22,090 | 18,947 | 41,037 | (4,907 | ) |
(A)
(D)
|
36,130 | ||||||||||||||
Notes
receivable—net of allowance
|
78,636 | - | 78,636 | (43,104 | ) |
(E)
|
35,532 | ||||||||||||||
Assets
held for sale
|
31,624 | - | 31,624 | 528 |
(A)
(F)
|
32,152 | |||||||||||||||
Deferred
income taxes
|
35,212 | - | 35,212 | 6,829 |
(G)
|
42,041 | |||||||||||||||
Total
current assets
|
417,111 | 287,457 | 704,568 | (70,661 | ) | 633,907 | |||||||||||||||
Aircraft
and other equipment—net
|
2,705,376 | 559,832 | 3,265,208 | (61,233 | ) |
(H)
|
3,203,975 | ||||||||||||||
Security
and other deposits
|
- | 27,960 | 27,960 | (27,960 | ) |
(A)
|
- | ||||||||||||||
Prepaid
maintenance payments
|
- | 137,452 | 137,452 | (137,452 | ) |
(A)
|
- | ||||||||||||||
Aircraft
pre-delivery payments
|
- | 5,489 | 5,489 | (5,489 | ) |
(A)
|
- | ||||||||||||||
Restricted
cash
|
- | 2,987 | 2,987 | (2,987 | ) |
(A)
|
- | ||||||||||||||
Deferred
loan fees and other assets
|
- | 7,816 | 7,816 | (7,816 | ) |
(A)
(K)
|
- | ||||||||||||||
Intangible
and other assets
|
205,008 | - | 205,008 | (205,008 | ) |
(I)
|
- | ||||||||||||||
Intangible
assets—net
|
- | - | - | 172,464 |
(I)
(J)
|
172,464 | |||||||||||||||
Other
assets
|
- | - | - | 289,354 |
(A)
(I)
|
289,354 | |||||||||||||||
Goodwill
|
84,143 | - | 84,143 | - | 84,143 | ||||||||||||||||
Total
assets
|
$ | 3,411,638 | $ | 1,028,993 | $ | 4,440,631 | $ | (56,788 | ) | $ | 4,383,843 | ||||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||||||||||||||||
Current
Liabilities:
|
|||||||||||||||||||||
Current
portion of long-term debt
|
$ | 157,133 | $ | 25,053 | $ | 182,186 | $ | 14,115 |
(A)
|
$ | 196,301 | ||||||||||
Accounts
payable
|
39,338 | 65,210 | 104,548 | - | 104,548 | ||||||||||||||||
Air
traffic liability
|
41,950 | 138,245 | 180,195 | (26,262 | ) |
(A)
(L)
|
153,933 | ||||||||||||||
Short
term borrowings
|
- | 14,115 | 14,115 | (14,115 | ) |
(A)
|
- | ||||||||||||||
Debtor-in-Possession
loan
|
- | 40,000 | 40,000 | (40,000 | ) |
(M)
|
- | ||||||||||||||
Deferred
frequent flyer revenue
|
15,117 | - | 15,117 | 31,252 |
(A)
(N)
|
46,369 | |||||||||||||||
Other
deferred revenue
|
- | 12,863 | 12,863 | (12,863 | ) |
(A)
|
- | ||||||||||||||
Deferred
income taxes
|
- | 24,005 | 24,005 | (24,005 | ) |
(G)
|
- | ||||||||||||||
Accrued
liabilities
|
181,929 | 55,785 | 237,714 | 3,095 |
(A)
(O)
|
240,809 | |||||||||||||||
Total
current liabilities
|
435,467 | 375,276 | 810,743 | (68,783 | ) | 741,960 | |||||||||||||||
Long-term
debt—less current portion
|
2,071,998 | 303,226 | 2,375,224 | (11,067 | ) |
(A)
(P)
|
2,364,157 | ||||||||||||||
Deferred
frequent flyer revenue
|
47,745 | - | 47,745 | 64,424 |
(A)
(N)
|
112,169 | |||||||||||||||
Deferred
credits and other non current liabilities
|
101,630 | 16,763 | 118,393 | (16,763 | ) |
(Q)
|
101,630 | ||||||||||||||
Other
note payable
|
- | 3,000 | 3,000 | (3,000 | ) |
(A)
|
- | ||||||||||||||
Deferred
income taxes
|
258,377 | 26,401 | 284,778 | 179,093 |
(G)
|
463,871 | |||||||||||||||
Total
liabilities not subject to compromise
|
2,915,217 | 724,666 | 3,639,883 | 143,904 | 3,783,787 | ||||||||||||||||
Liabilities
subject to compromise
|
- | 28,750 | 28,750 | (28,750 | ) |
(B)
|
- | ||||||||||||||
Total
liabilities
|
2,915,217 | 753,416 | 3,668,633 | 115,154 | 3,783,787 | ||||||||||||||||
Commitments
and contingencies
|
|||||||||||||||||||||
Stockholders'
Equity:
|
|||||||||||||||||||||
Common
stock
|
44 | 37 | 81 | (37 | ) |
(R)
|
44 | ||||||||||||||
Additional
paid-in capital
|
298,017 | 236,131 | 534,148 | (236,131 | ) |
(R)
|
298,017 | ||||||||||||||
Treasury
stock
|
(181,820 | ) | - | (181,820 | ) | - | (181,820 | ) | |||||||||||||
Accumulated
other comprehensive loss
|
(2,284 | ) | - | (2,284 | ) | - | (2,284 | ) | |||||||||||||
Accumulated
earnings/(deficit)
|
382,464 | 39,409 | 421,873 | 64,226 |
(R)
(S)
|
486,099 | |||||||||||||||
Total
equity
|
496,421 | 275,577 | 771,998 | (171,942 | ) | 600,056 | |||||||||||||||
Total
|
$ | 3,411,638 | $ | 1,028,993 | $ | 4,440,631 | $ | (56,788 | ) | $ | 4,383,843 |
- 2
-
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
Combined
|
|
|
Combined
|
|||||||||||||||||||||||||||
(In
thousands except share and per share amounts)
|
Historical
|
Historical
Income
|
Midwest
Pro
Forma
|
Frontier
Pro
Forma
|
Pro
Forma
Income
|
|||||||||||||||||||||||||
Republic
|
Midwest
|
Frontier
|
Statement
|
Adjustments
|
Adjustments
|
Statement
|
||||||||||||||||||||||||
OPERATING
REVENUES:
|
||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||
Regional
airline services
|
$ | 913,524 | $ | - | $ | - | $ | 913,524 | $ | (35,801 | ) |
(T)
|
$ | - | $ | 877,723 | ||||||||||||||
Passenger
service
|
70,388 | 202,802 | 774,838 | 1,048,028 | - | (20,585 | ) |
(X)
(AB)
|
1,027,443 | |||||||||||||||||||||
Cargo
and other
|
20,982 | 33,362 | 66,122 | 120,466 | - | 20,585 |
(X)
(AB)
|
141,051 | ||||||||||||||||||||||
Total
operating revenues
|
1,004,894 | 236,164 | 840,960 | 2,082,018 | (35,801 | ) | - | 2,046,217 | ||||||||||||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||||||||||||||||
Wages
and benefits
|
207,446 | 45,762 | - | 253,208 | - | 180,364 |
(X)
|
433,572 | ||||||||||||||||||||||
Flight
operations
|
- | - | 116,045 | 116,045 | - | (116,045 | ) |
(X)
|
- | |||||||||||||||||||||
Aircraft
fuel
|
100,179 | 62,104 | 217,450 | 379,733 | - | (290 | ) |
(X)
|
379,443 | |||||||||||||||||||||
Landing
fees and airport rents
|
55,434 | 14,652 | - | 70,086 | - | 65,536 |
(X)
|
135,622 | ||||||||||||||||||||||
Aircraft
and engine rent
|
95,400 | 9,058 | 84,199 | 188,657 | - | 2,804 |
(Y)
|
191,461 | ||||||||||||||||||||||
Aircraft
and traffic servicing
|
- | - | 132,465 | 132,465 | - | (132,465 | ) |
(X)
|
- | |||||||||||||||||||||
Maintenance
and repair
|
151,487 | 9,323 | 48,544 | 209,354 | - | (26,470 | ) |
(X)
(Z)
|
182,884 | |||||||||||||||||||||
Insurance
and taxes
|
19,930 | 1,092 | - | 21,022 | - | 12,294 |
(X)
|
33,316 | ||||||||||||||||||||||
Depreciation
and amortization
|
112,002 | 7,347 | 27,333 | 146,682 | 3,718 |
(U)
|
(1,418 | ) |
(H)
(J)
|
148,982 | ||||||||||||||||||||
Promotion
and sales
|
5,341 | 17,414 | 80,672 | 103,427 | - | (9,980 | ) |
(X)
|
93,447 | |||||||||||||||||||||
General
and administrative
|
- | - | 45,296 | 45,296 | - | (45,296 | ) |
(X)
|
- | |||||||||||||||||||||
Employee
seperation costs
|
- | - | 33 | 33 | - | (33 | ) |
(X)
|
- | |||||||||||||||||||||
Loss
on sale of assets, net
|
- | - | 51 | 51 | - | (51 | ) |
(X)
|
- | |||||||||||||||||||||
Goodwill
and other impairment
|
13,335 | 93,352 | - | 106,687 | - | - | 106,687 | |||||||||||||||||||||||
Other
|
109,340 | 83,247 | - | 192,587 | (35,801 | ) |
(T)
|
71,493 |
(X)
|
228,279 | ||||||||||||||||||||
Total
operating expenses
|
869,894 | 343,351 | 752,088 | 1,965,333 | (32,083 | ) | 443 | 1,933,693 | ||||||||||||||||||||||
OPERATING
INCOME (LOSS)
|
135,000 | (107,187 | ) | 88,872 | 116,685 | (3,718 | ) | (443 | ) | 112,524 | ||||||||||||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||||||||||||||||
Interest
income
|
- | - | 1,391 | 1,391 | - | (1,391 | ) |
(X)
|
- | |||||||||||||||||||||
Interest
expense
|
(105,246 | ) | (12,470 | ) | (16,231 | ) | (133,947 | ) | 404 |
(V)
(W)
|
3,401 |
(P)
(AA)
|
(130,142 | ) | ||||||||||||||||
Loss
on early extuingishment of debt
|
- | - | (284 | ) | (284 | ) | - | 284 |
(X)
|
- | ||||||||||||||||||||
Other—net
|
10,418 | 106 | 230 | 10,754 | (1,571 | ) |
(V)
|
(3,444 | ) |
(P)
(X) (AA)
|
5,739 | |||||||||||||||||||
- | ||||||||||||||||||||||||||||||
Total
other income (expense)
|
(94,828 | ) | (12,364 | ) | (14,894 | ) | (122,086 | ) | (1,167 | ) | (1,150 | ) | (124,403 | ) | ||||||||||||||||
INCOME
(LOSS) BEFORE REORGANIZATION ITEMS AND TAXES
|
40,172 | (119,551 | ) | 73,978 | (5,401 | ) | (4,885 | ) | (1,593 | ) | (11,879 | ) | ||||||||||||||||||
Reorganization
expense (income)
|
- | - | (61,541 | ) | (61,541 | ) | - | - | (61,541 | ) | ||||||||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
40,172 | (119,551 | ) | 135,519 | 56,140 | (4,885 | ) | (1,593 | ) | 49,662 | ||||||||||||||||||||
INCOME
TAX EXPENSE (BENEFIT)
|
23,894 | (7,783 | ) | 52,187 | 68,298 | - | - | 68,298 | ||||||||||||||||||||||
NET
INCOME (LOSS) (INCLUDING NONCONTROLLING
INTERESTS)
|
16,278 | (111,768 | ) | 83,332 | (12,158 | ) | (4,885 | ) | (1,593 | ) | (18,636 | ) | ||||||||||||||||||
Add: Net
loss of the company attributable to noncontrolling interest in
MFSI
|
(3,270 | ) | - | - | (3,270 | ) | - | - | (3,270 | ) | ||||||||||||||||||||
- | ||||||||||||||||||||||||||||||
Net
income (loss) of the Company
|
$ | 19,548 | $ | (111,768 | ) | $ | 83,332 | $ | (8,888 | ) | $ | (4,885 | ) | $ | (1,593 | ) | $ | (15,366 | ) | |||||||||||
Weighted
average number of common and common equivalent shares outstanding,
basic
|
34,448,683 | 34,448,683 | 34,448,683 | |||||||||||||||||||||||||||
Net
income (loss) per share, basic
|
$ | 0.57 | $ | (0.26 | ) | $ | (0.45 | ) | ||||||||||||||||||||||
Weighted
average number of common and common equivalent shares outstanding,
diluted
|
34,461,792 | 34,448,683 | 34,448,683 | |||||||||||||||||||||||||||
Net
income (loss) per share, diluted
|
$ | 0.57 | $ | (0.26 | ) | $ | (0.45 | ) |
See
accompanying notes to unaudited pro forma condensed combined financial
information.
- 3
-
REPUBLIC
AIRWAYS HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2008
Combined
|
|
|
Combined
|
|||||||||||||||||||||||||||
(In
thousands except share and per share amounts)
|
Historical
|
Historical
Income
|
Midwest
Pro
Forma
|
|
Frontier
Pro
Forma
|
|
Pro
Forma
Income
|
|||||||||||||||||||||||
Republic
|
Midwest
|
Frontier
|
Statement
|
Adjustments
|
|
Adjustments
|
|
Statement
|
||||||||||||||||||||||
OPERATING
REVENUES:
|
||||||||||||||||||||||||||||||
Regional
airline services
|
$ | 1,462,211 | $ | - | $ | - | $ | 1,462,211 | $ | (11,669 | ) |
(T)
|
$ | (24,984 | ) |
(T)
|
$ | 1,425,558 | ||||||||||||
Passenger
service
|
- | 579,243 | 1,318,425 | 1,897,668 | - | (53,108 | ) |
(X)
(AB)
|
1,844,560 | |||||||||||||||||||||
Cargo
|
- | 8,589 | 6,342 | 14,931 | - | - | 14,931 | |||||||||||||||||||||||
Other
|
17,544 | 63,882 | 48,031 | 129,457 | - | 53,108 |
(X)
(AB)
|
182,565 | ||||||||||||||||||||||
Total
operating revenues
|
1,479,755 | 651,714 | 1,372,798 | 3,504,267 | (11,669 | ) | (24,984 | ) | 3,467,614 | |||||||||||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||||||||||||||||
Wages
and benefits
|
252,336 | 136,876 | - | 389,212 | - | 269,749 |
(X)
|
658,961 | ||||||||||||||||||||||
Flight
operations
|
- | - | 173,242 | 173,242 | - | (173,242 | ) |
(X)
|
||||||||||||||||||||||
Aircraft
fuel
|
327,791 | 322,829 | 594,476 | 1,245,096 | 977 |
(X)
|
24,060 |
(X)
|
1,270,133 | |||||||||||||||||||||
Commissions
|
- | 19,602 | - | 19,602 | (19,602 | ) |
(X)
|
- | - | |||||||||||||||||||||
Dining
services
|
- | 5,899 | - | 5,899 | (5,899 | ) |
(X)
|
- | - | |||||||||||||||||||||
Station
rental, landing, and other fees
|
- | 53,635 | - | 53,635 | (53,635 | ) |
(X)
|
- | - | |||||||||||||||||||||
Landing
fees and airport rents
|
59,891 | - | - | 59,891 | 32,877 |
(X)
|
86,795 |
(X)
|
179,563 | |||||||||||||||||||||
Aircraft
and engine rent
|
134,206 | 57,281 | 118,146 | 309,633 | (559 | ) |
(X)
|
2,618 |
(Y)
|
311,692 | ||||||||||||||||||||
Aircraft
and traffic servicing
|
- | - | 189,199 | 189,199 | - | (189,199 | ) |
(X)
|
- | |||||||||||||||||||||
Maintenance
and repair
|
169,425 | 39,012 | 106,053 | 314,490 | - | (37,468 | ) |
(X)
(Z)
|
277,022 | |||||||||||||||||||||
Capacity
purchase agreement
|
- | 74,083 | 63,259 | 137,342 | (11,669 | ) |
(T)
|
(24,984 | ) |
(T)
|
100,689 | |||||||||||||||||||
Insurance
and taxes
|
25,793 | - | - | 25,793 | 3,359 |
(X)
|
19,487 |
(X)
|
48,639 | |||||||||||||||||||||
Depreciation
and amortization
|
133,206 | 24,696 | 42,958 | 200,860 | 6,373 |
(U)
|
(2,293 | ) |
(H)
(J)
|
204,940 | ||||||||||||||||||||
Promotion
and sales
|
- | - | 105,986 | 105,986 | 40,424 |
(X)
|
(18,178 | ) |
(X)
|
128,232 | ||||||||||||||||||||
General
and administrative
|
- | - | 61,443 | 61,443 | - | (61,443 | ) |
(X)
|
- | |||||||||||||||||||||
Employee
separation and exit costs
|
- | - | 466 | 466 | - | (466 | ) |
(X)
|
- | |||||||||||||||||||||
Loss
(gain) on sale of assets, net
|
- | - | (6,803 | ) | (6,803 | ) | - | 6,803 |
(X)
|
- | ||||||||||||||||||||
Acquisition
charges
|
- | 23,138 | - | 23,138 | (23,138 | ) |
(X)
|
- | - | |||||||||||||||||||||
Restructuring
charges
|
- | 38,311 | - | 38,311 | - | (38,311 | ) |
(X)
|
- | |||||||||||||||||||||
Loss
on fuel derivatives
|
- | 10,463 | - | 10,463 | - | (10,463 | ) |
(X)
|
- | |||||||||||||||||||||
Goodwill
impairment
|
- | 190,387 | - | 190,387 | - | - | 190,387 | |||||||||||||||||||||||
Other
impairment losses
|
- | 171,459 | - | 171,459 | - | - | 171,459 | |||||||||||||||||||||||
Other
|
122,012 | 61,573 | - | 183,585 | 25,196 |
(X)
|
120,619 |
(X)
|
329,400 | |||||||||||||||||||||
Total
operating expenses
|
1,224,660 | 1,229,244 | 1,448,425 | 3,902,329 | (5,296 | ) | (25,916 | ) | 3,871,117 | |||||||||||||||||||||
OPERATING
INCOME (LOSS)
|
255,095 | (577,530 | ) | (75,627 | ) | (398,062 | ) | (6,373 | ) | 932 | (403,503 | ) | ||||||||||||||||||
OTHER
INCOME (LOSS):
|
||||||||||||||||||||||||||||||
Interest
income
|
- | - | 5,521 | 5,521 | - | (5,521 | ) |
(X)
|
- | |||||||||||||||||||||
Interest
expense
|
(131,856 | ) | (20,272 | ) | (32,764 | ) | (184,892 | ) | (1,318 | ) |
(V)
(W)
|
589 |
(P)
(AA)
|
(185,621 | ) | |||||||||||||||
Loss
on early extinguishment of debt
|
- | - | (990 | ) | (990 | ) | - | 990 |
(X)
|
- | ||||||||||||||||||||
Other—net
|
14,176 | 2,793 | (1,019 | ) | 15,950 | (682 | ) |
(V)
|
5,738 |
(P)
(X) (AA)
|
21,006 | |||||||||||||||||||
Total
other income (expense)
|
(117,680 | ) | (17,479 | ) | (29,252 | ) | (164,411 | ) | (2,000 | ) | 1,796 | (164,615 | ) | |||||||||||||||||
INCOME
(LOSS) BEFORE REORGANIZATION ITEMS AND TAXES
|
137,415 | (595,009 | ) | (104,879 | ) | (562,473 | ) | (8,373 | ) | 2,728 | (568,118 | ) | ||||||||||||||||||
Reorganization
expense
|
- | - | 59,607 | 59,607 | - | - | 59,607 | |||||||||||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
137,415 | (595,009 | ) | (164,486 | ) | (622,080 | ) | (8,373 | ) | 2,728 | (627,725 | ) | ||||||||||||||||||
INCOME
TAX EXPENSE (BENEFIT)
|
52,835 | (50,653 | ) | 1,035 | 3,217 | - | - | 3,217 | ||||||||||||||||||||||
Net
income (loss)
|
$ | 84,580 | $ | (544,356 | ) | $ | (165,521 | ) | $ | (625,297 | ) | $ | (8,373 | ) | $ | 2,728 | $ | (630,942 | ) | |||||||||||
Weighted
average number of common and common equivalent shares outstanding,
basic
|
34,855,190 | 34,855,190 | 34,855,190 | |||||||||||||||||||||||||||
Net
income (loss) per share, basic
|
$ | 2.43 | $ | (17.94 | ) | $ | (18.10 | ) | ||||||||||||||||||||||
Weighted
average number of common and common equivalent shares outstanding,
diluted
|
34,949,152 | 34,855,190 | 34,855,190 | |||||||||||||||||||||||||||
Net
income (loss) per share, diluted
|
$ | 2.42 | $ | (17.94 | ) | $ | (18.10 | ) |
- 4
-
REPUBLIC
AIRWAYS HOLDINGS INC.
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(In
thousands, except share and per share amounts)
1.
|
Basis
of Presentation
|
Frontier
Airlines Holdings, Inc.
On
October 1, 2009, pursuant to the terms of the amended and restated investment
agreement, as amended (the “Investment Agreement”), dated as of August 13, 2009,
among Republic Airways Holdings Inc. (the “Company”), Frontier Airlines
Holdings, Inc. (“Frontier”) and its subsidiaries, Frontier Airlines, Inc. and
Lynx Aviation, Inc. (together with Frontier, the “Frontier Entities”), the
Company purchased 1,000 newly issued shares of common stock, constituting all of
the outstanding shares of Frontier, in connection with its emergence from
bankruptcy (the "Acquisition"). Under the Investment Agreement, the Company
served as equity plan sponsor for the Frontier Entities plan of reorganization
and paid $108,750 and relinquished its rights to any distribution on account of
the Company’s allowed general unsecured claims against the Frontier
Entities.
The
results of operations on a pro forma basis include reorganization expenses
(income) recorded by Frontier Airlines which reflect significant adjustments
related to the reduction of liabilities subject to compromise. These adjustments
are not indicative of future results.
Midwest
Presentation
The
Company merged with Midwest Air Group, Inc. (“Midwest”), on July 31, 2009,
pursuant to the terms of the Agreement and Plan of Merger dated as of
June 23, 2009. Midwest financial results for the seven months
ended July 31, 2009 and twelve months ended December 31, 2008 are presented in
the Unaudited Pro Forma Condensed Combined Financial Statements as separate
columns. Midwest operations for the two month period beginning August
1, 2009 are included in the Republic results as filed in the Company’s 10-Q for
the nine months ended September 30, 2009.
Accounting
Periods Presented
As
Republic and Frontier have different fiscal year end dates, the historical
results of Frontier have been realigned to conform to Republic’s fiscal
year.
The
Frontier unaudited pro forma condensed combined statements of operations for the
nine months ended September 30, 2009 includes the unaudited operations for the
six months ended September 30, 2009 results (included at Exhibit 99.1) with the
unaudited statement of operations for the three months ended March 31,
2009.
The
Frontier unaudited pro forma condensed combined statements of operations for the
year ended December 31, 2008 includes the audited March 31, 2009 results with
the unaudited statement of operations for the three months ended March 31,
2008 and deducting the unaudited statement of operations for the three months
ended March 31, 2009.
2.
|
Estimates
of Fair Value of Assets Acquired and Liabilities
Assumed
|
The
accompanying Unaudited Pro Forma Condensed Combined Financial Information was
prepared in accordance with ASC Topic 805, “Business
Combinations.” This financial information reflects the
preliminary estimates of fair values.
The
Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to
reflect the preliminary allocation of the purchase price to identifiable net
assets acquired and
liabilities assumed as well as the amount that the fair values of assets
acquired exceeds the assumed liabilities and purchase price. The
purchase price allocation is based upon total consideration of approximately
$108.75 million.
The
Company is in the process of determining the fair value of assets acquired and
liabilities assumed. This valuation process, as well as evaluation of
the related income tax implications of the transaction and Frontier’s bankruptcy
process, is still in progress and will likely not be completed prior to the
filing of Republic’s Annual Report on Form 10-K for the year ending December 31,
2009. The
Company has not recognized any deferred tax assets for net operating losses
carried forward as the Company is assessing the amount that will be available as
well as the amount of valuation allowance that would need to be recorded for
these deferred tax assets. The following table represents a
preliminary allocation of the total consideration to tangible and intangible
assets acquired and liabilities assumed from Frontier based on Republic’s
preliminary estimate of their respective fair values as of September 30, 2009
(rounded to the nearest hundred):
- 5
-
Total
purchase consideration
|
$ | 108,800 | ||
Assets
acquired:
|
||||
Current
assets *
|
325,500 | |||
Aircraft
and other equipment—net
|
498,600 | |||
Intangible
assets
|
79,400 | |||
Other
assets
|
177,400 | |||
Total
assets acquired
|
1,080,900 | |||
Liabilities
acquired:
|
||||
Current
liabilites
|
306,500 | |||
Long
term liabilities
|
356,500 | |||
Deferred
income taxes
|
142,200 | |||
Total liabilities acquired | 805,200 | |||
Amount
that the fair values of assets acquired exceeds the assumed liabilities
and purchase price
|
$ | (166,900 | ) |
* Current
assets include $37 million of cash injected into Frontier.
The
estimated gain on bargain purchase will change as valuations and additional
analysis is performed on the assets acquired and liabilities assumed. The
estimated gain will be reduced by approximately 38% for the income
taxes.
The
accompanying Unaudited Pro Forma Condensed Combined Financial Statements present
the pro forma consolidated financial position and results of operations of the
combined company based upon the historical financial statements of Republic,
Midwest, and Frontier, after giving effect to the Acquisition and the
adjustments described in these notes, and are intended to reflect the impact of
the Acquisition on Republic’s consolidated financial statements.
The pro
forma condensed combined information set forth in this Form 8-K/A is presented
for illustrative purposes only. Such information does not purport to be
indicative of the results of operations and financial position that actually
would have resulted had the acquisition occurred on the date indicated, nor is
it indicative of the results that may be expected in future periods. The pro
forma adjustments are based upon information and assumptions available at the
time of filing this Form 8-K/A.
3.
|
Pro Forma Financial Statements
and Adjustments
|
The
unaudited pro forma condensed combined financial statements give effect to the
following pro forma adjustments, and do not include any adjustments for material
non-recurring charges:
|
(A)
|
Reflects
a reclassification of certain Frontier assets and liabilities reported
under the Frontier financial statement classifications to Republic’s
financial statement classifications for consistency
purposes.
|
|
(B)
|
Represents
an adjustment of $28,750 to reduce cash and cash equivalents reflecting
the settlement of Frontier’s liabilities subject to compromise as set out
in Frontier's Plan of
Reorganization.
|
|
(C)
|
Adjustment
reflects a decrease of $1,257 to report Frontier's inventories
at their preliminary estimated fair
value.
|
|
(D)
|
Adjustment
reflects a reduction of $4,321 to report prepaid expenses for Frontier at
the preliminary estimated fair
value.
|
- 6
-
|
(E)
|
Reflects the repayment and elimination of Republic’s $43,104 debtor-in-possession (DIP) loan due from Frontier ($40,000 in principal and $3,104 in interest). |
|
(F)
|
Adjustment
reflects a reduction of $58 to record Frontier’s assets
held for sale at the preliminary estimated fair
value.
|
|
(G)
|
Adjustment
reflects an increase in the Company’s
preliminary estimate of the deferred taxes as of the acquisition date. The
Company’s
preliminary estimate includes a net current deferred tax asset of $6,829
and a net long-term deferred tax liability of $142,165. Additionally, the
adjustment includes an additional deferred tax liability of $63,329
attributable to the estimated gain on the Frontier acquisition, which
relates to the preliminary fair value of assets acquired in excess of the
liabilities assumed and the total purchase consideration.
|
|
(H)
|
Adjustment
reflects the decrease of $61,233 to Frontier's aircraft and other
equipment to record the assets at the preliminary estimated fair
value. As a result of this adjustment, the Unaudited Pro
Forma Condensed Combined Statements of Operations reflect a decrease of
depreciation expense of $6,271 for the nine months ended September 30,
2009 and $8,764 for the year ended December 31,
2008.
|
|
(I)
|
Republic’s
intangibles and other assets were adjusted to seperate the
identifiable intangible assets from other long term assets. The
Company included $93,064 of indentifiable intangible assets,
primarily airport slots and credit card agreements, in intangible
assets, net and the remaining balance of $111,944 in other
assets.
|
|
(J)
|
An
increase of intangible assets of $79,400 reflects the increase in the
preliminary estimated fair value of slots, trademarks, and the credit card
agreements at Frontier. As a result of this adjustment, the
Unaudited Pro Forma Condensed Combined Statements of Operations reflect an
increase of amortization expense of $4,853 for the nine months ended
September 30, 2009 and $6,471 for the year ended December 31,
2008. The Barclay’s credit card agreement has a life of eight
years, the American Express credit card agreement has a life of two years,
and the slots and trademarks are indefinite lived assets and will be
reviewed for impairment annually.
|
|
(K)
|
Adjustment
reflects a reduction of $4,294 to write off Frontier's deferred financing
costs as a result of the application of accounting for business
combinations.
|
|
(L)
|
Adjustment
reflects the preliminary estimate of the fair value of Frontier’s air
traffic liability in the amount of
$21,866.
|
|
(M)
|
Reflects
the repayment and elimination of the principal balance of the $40,000
debtor-in-possession (DIP) loan payable to
Republic.
|
|
(N)
|
Reflects an
adjustment of $91,280 to record the frequent flyer liability to the
preliminary estimate of fair value. The Company estimated $31,252
would be classified as current.
|
(O)
|
Adjustment
reflects elimination of accrued interest expense from Frontier’s $40,000
debtor-in-possession (DIP) loan payable to Republic in the amount of
$3,104, the elimination of the co-branded credit card deferred revenue and
other deferred revenue amounts of $12,173 related to preliminary estimate
of the fair value of the frequent flyer liability, offset by the
preliminary estimate of $5,509 in remaining professional fees related to
the bankruptcy of Frontier.
|
|
(P)
|
Adjustment
reflects the decrease of $14,067 to long-term debt to adjust the balance
to the preliminary estimate of fair value. As a result of this adjustment,
the Unaudited Pro Forma Condensed Combined Statements of Operations
reflect an increase in interest expense of $1,610 for the nine months
ended September 30, 2009 and $2,147 for the year ended December 31, 2008.
In addtion, the removal of deferred loan fees resulted in a reduction to
expense of $460 for the nine months ended September 30, 2009 and $351 for
the year ended December 31, 2008.
|
|
(Q)
|
Adjustment
reflects the removal of $11,633 related to deferred rents as of the
acquisition date and the elimination of the co-branded credit card
deferred revenue and reclassification of deferred revenue amounts of
$5,130 to the frequent flyer
liability.
|
- 7
-
|
(R)
|
Adjustment
reflects the elimination of all of Frontier’s shareholders’ deficit,
including $37 of common stock, $236,131 of additional paid-in capital, and
accumulated earnings of $39,409.
|
|
(S)
|
The
adjustment reflects the amount that the fair values of assets acquired
exceeds the assumed liability and purchase price by $166,964 less the tax
impact related to the estimated gain of $63,329 for a net impact of
$103,635 that would be recorded as a gain on the bargain purchase of
Frontier by Republic based on the preliminary assessment of the fair value
of the assets acquired and liabilities assumed by
Republic.
|
|
(T)
|
Adjustment
reflects the elimination of income and expense associated with Republic’s
regional airline services agreements with Midwest and
Frontier.
|
|
(U)
|
Midwest
had an increase of intangible and other assets of $16,007 which reflects
the increase in the estimated fair value of slots and the fair value of
the credit card agreement, resulting from the preliminary
assessment of fair value of assets acquired by Republic. As a
result of this adjustment, the Unaudited Pro Forma Condensed Combined
Statements of Operations reflect an increase of amortization expense of
$3,718 for the nine months ended September 30, 2009 and $6,373 for the
year ended December 31, 2008. The adjustment at September 30,
2009 was based on 7 months of amortization (January 2009 to July 2009) as
the Republic historical results include Midwest operations for August and
September 2009.
|
|
(V)
|
Reflects
the elimination of intercompany interest expense of $1,571 for the nine
months ended September 30, 2009 and $682 for the year ended December 31,
2008 resulting from the note payable at Midwest to
Republic. The adjustment at September 30, 2009 was based on 7
months of expense (January 2009 to July 2009) as the Republic historical
results include eliminations for Midwest operations from August and
September 2009.
|
|
(W)
|
Reflects
an increase in Midwest’s interest expense of $1,167 for the nine months
ended September 30, 2009, and $2,000 for the year ended December 31, 2008,
for interest on the 8% annual, $25,000 convertible note payable to TPG
resulting from the Merger. The adjustment at September 30, 2009
was based on 7 months of expense (January 2009 to July 2009) as the
Republic historical results include eliminations for Midwest operations
from August and September 2009.
|
|
(X)
|
Reflects
a reclassification of certain Republic, Frontier, and Midwest operating
expenses reported under the historical basis of presentation to conform
with Republic’s intended financial statement classifications for the newly
combined entity. In doing so, a new line item for promotion and
sales was created which is intended to include items such as travel agent
commissions, customer relations and reservations, credit card fees, and
other similar items.
|
|
(Y)
|
Adjustment
of $2,804 reflects the straight line rent adjustment for the nine months
ended September 30, 2009 and $2,618 for the year ended December 31,
2008.
|
- 8
-
|
(Z)
|
Adjustment
to reduce maintenance costs by $943 for the nine months ended September
30, 2009 and $1,257 for the year ended December 31, 2008 related to a
reduction in inventory based on the preliminary estimated fair
value.
|
|
(AA)
|
Reflects
the elimination of intercompany interest income and expense of $4,551 for
the nine months ended September 30, 2009 and $1,207 for the year ended
December 31, 2008 resulting from the DIP loan payable to
Republic.
|
(AB)
|
The
Company reclassified certain items (primarily administrative fees and
checked bag fees) from Passenger service revenue to Cargo and other
revenue to be consistent with historical
presentation.
|
- 9
-