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8-K/A - AMENDMENT TO FORM 8-K - Ignite Restaurant Group, Inc.a13-15486_18ka.htm
EX-99.2 - EX-99.2 - Ignite Restaurant Group, Inc.a13-15486_1ex99d2.htm
EX-23.1 - EX-23.1 - Ignite Restaurant Group, Inc.a13-15486_1ex23d1.htm
EX-99.1 - EX-99.1 - Ignite Restaurant Group, Inc.a13-15486_1ex99d1.htm

Exhibit 99.3

 

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

 

The unaudited pro forma combined condensed financial statements as of and for the year ended December 31, 2012 were derived by applying pro forma adjustments to the historical consolidated financial statements of Ignite Restaurant Group, Inc. (the “Company” or “Ignite”) and Romano’s Macaroni Grill (“Mac Grill”). The pro forma adjustments are described in the accompanying notes presented below.

 

On April 9, 2013, Ignite completed the acquisition of Mac Grill from Golden Gate Capital, management and other investors (collectively, the “Sellers”). The aggregate acquisition price paid at closing was approximately $60.8 million, consisting of $54.1 million paid directly to the Sellers and $6.7 million paid to other third parties related to outstanding indebtedness and transaction-related expenses of the Sellers. The unaudited pro forma combined condensed balance sheet as of December 31, 2012 gives effect to the acquisition and the related financing transaction as if each had occurred on December 31, 2012, and combines the historical balance sheets of the Company and Mac Grill as of December 31, 2012. The Company’s balance sheet was derived from its audited consolidated balance sheet included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and Mac Grill’s balance sheet was derived from its unaudited condensed consolidated balance sheet as of December 26, 2012 included in Exhibit 99.2.

 

The unaudited pro forma combined condensed statement of operations for the fiscal year ended December 31, 2012 gives effect to (i) the Company’s initial public offering (“IPO”) in May 2012 and to the application of a portion of the net proceeds from the IPO to reduce outstanding indebtedness, (ii) the debt refinancing transaction that occurred in October 2012, and (iii) the Company’s acquisition of Mac Grill and related financing transaction as if each had occurred on the first day of fiscal year 2012. The pro forma adjustments related to the acquisition of Mac Grill give effect to pro forma events that are (1) directly attributable to the acquisition and the related financing transaction, (2) factually supportable, and (3) with respect to the income statement, expected to have a continuing impact on the combined results of the Company and Mac Grill. The Company’s statement of operations was derived from its audited consolidated statement of operations included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Mac Grill’s statement of operations was derived by adding its unaudited results of operations for the six months ended December 26, 2012 to its audited results of operations for the year ended June 27, 2012 and then subtracting its unaudited results of operations for the six months ended December 28, 2011, each of which are included in Exhibits 99.1 and 99.2 of this Form 8-K/A. The unaudited pro forma combined condensed financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma combined condensed financial statements and the historical consolidated financial statements and accompanying notes of the Company and Mac Grill for the applicable periods.

 

The unaudited pro forma combined condensed financial statements are presented for informational purposes only and do not purport to represent the combined company’s actual financial condition or results of operations if such transactions had been completed as of the dates or for the periods indicated above or that may be achieved as of any future date or for any future period. The pro forma adjustments related to the acquisition are based on preliminary estimates and information available at the time of the preparation of this Form 8-K/A. Differences between these preliminary estimates and the final acquisition accounting will occur, including in connection with the final determination of working capital and finalization of the valuation of the acquired assets and assumed liabilities, and these differences could have a material impact on the accompanying unaudited pro forma combined condensed financial statements and the combined company’s future results of operations and financial position.

 

The unaudited pro forma combined condensed financial statements do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition, the costs to combine the operations of Ignite and Mac Grill or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

 



 

IGNITE RESTAURANT GROUP, INC

Unaudited Pro Forma Combined Condensed Balance Sheet

As of December 31, 2012

(in thousands)

 

 

 

 

 

 

 

Pro Forma

 

 

 

 

 

Historical
Ignite

 

Historical
Mac Grill

 

Adjustments Related
to the Acquisition

 

Pro Forma
Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,929

 

$

5,797

 

$

60,000

(1)

$

4,606

 

 

 

 

 

 

 

(60,794

)(2)

 

 

 

 

 

 

 

 

(2,096

)(3)

 

 

 

 

 

 

 

 

(5,230

)(4)

 

 

Accounts receivable

 

6,285

 

3,490

 

 

 

9,775

 

Inventories

 

4,841

 

4,508

 

 

 

9,349

 

Deferred tax assets

 

1,615

 

 

1,425

(2)

3,040

 

Other current assets

 

4,625

 

4,162

 

 

 

8,787

 

Total current assets

 

24,295

 

17,957

 

(6,695

)

35,557

 

Property and equipment, net

 

165,746

 

21,698

 

(21,698

)(5)

226,359

 

 

 

 

 

 

 

60,613

(2)

 

 

Intangible assets

 

1,755

 

8,435

 

(8,435

)(5)

30,314

 

 

 

 

 

 

 

26,042

(2)

 

 

 

 

 

 

 

 

2,517

(6)

 

 

Goodwill

 

 

 

6,197

(2)

6,197

 

Deferred tax assets

 

5,043

 

4,160

 

(4,160

)(5)

5,043

 

Other assets

 

4,599

 

871

 

6,513

(2)

10,687

 

 

 

 

 

 

 

2,096

(3)

 

 

 

 

 

 

 

 

(392

)(5)

 

 

 

 

 

 

 

 

(483

)(7)

 

 

 

 

 

 

 

 

(2,517

)(6)

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

201,438

 

$

53,121

 

$

59,598

 

$

314,157

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,083

 

$

15,955

 

$

(67

)(5)

$

29,971

 

Accrued liabilities

 

23,068

 

26,650

 

(2,228

)(8)

46,028

 

 

 

 

 

 

 

(1,462

)(5)

 

 

Current portion of debt obligations

 

 

4,129

 

(4,129

)(5)

11,875

 

 

 

 

 

 

 

11,875

(1)

 

 

Total current liabilities

 

37,151

 

46,734

 

3,989

 

87,874

 

Long-term debt obligations

 

45,000

 

 

48,125

(1)

93,125

 

Deferred rent

 

11,744

 

15,523

 

(15,523

)(5)

11,744

 

Deferred tax liability

 

 

 

8,244

(2)

8,244

 

Other long-term liabilities

 

1,326

 

1,244

 

(1,244

)(5)

10,438

 

 

 

 

 

 

 

9,112

(2)

 

 

Total liabilities

 

95,221

 

63,501

 

52,703

 

211,425

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

256

 

 

 

 

256

 

Additional paid-in capital

 

85,728

 

 

 

 

85,728

 

Accumulated earnings

 

20,233

 

 

(483

)(7)

16,748

 

 

 

 

 

 

 

(5,230

)(4)

 

 

 

 

 

 

 

 

2,228

(8)

 

 

Net assets (liabilities)

 

 

(10,380

)

10,380

(5)

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

106,217

 

(10,380

)

6,895

 

102,732

 

Total liabilities and stockholders’ equity

 

$

201,438

 

$

53,121

 

$

59,598

 

$

314,157

 

 



 

Unaudited Pro Forma Combined Condensed Balance Sheet (as of December 31, 2012):

 

(1)                                 To reflect cash proceeds from the Company’s amended and restated credit facility (including a $100.0 million five-year senior secured revolving credit facility and a $50.0 million five-year senior secured term loan facility). Includes $50.0 million of proceeds from borrowings under the term loan facility and a $10.0 million of additional borrowings under the revolving credit facility, which were used to finance the acquisition. See footnote 9 to the Unaudited Pro Forma Combined Condensed Statement of Operations for additional information regarding the amended and restated credit facility.

 

(2)                                 To record the preliminary acquisition price and the fair values of property and equipment, intangible assets and certain liabilities. The allocation of the preliminary acquisition price is as follows (in thousands):

 

Current assets, excluding deferred tax assets

 

$

17,957

 

Deferred tax assets - current

 

1,425

 

Property and equipment

 

60,613

 

Acquired identifiable intangible assets

 

26,042

 

Other assets

 

479

 

Favorable lease interests

 

6,513

 

Unfavorable lease liability

 

(9,112

)

Deferred tax liability - noncurrent

 

(8,244

)

Assumed liabilities

 

(41,076

)

Total acquired tangible and intangible assets and assumed liabilities

 

54,597

 

Goodwill

 

6,197

 

Total preliminary acquisition price

 

$

60,794

 

 

The allocation of acquired identifiable intangible assets is as follows (in thousands):

 

Tradename

 

$

10,400

 

Liquor licenses

 

7,042

 

Franchise agreements

 

8,600

 

Total acquired identifiable intangible assets

 

$

26,042

 

 

The estimated fair value of tradename and liquor licenses will not be amortized, but will be tested at least annually for impairment. The estimated fair value of franchise agreements will be amortized on a straight-line basis over 16 years.

 

Based on the allocation of the preliminary acquisition price, which was prepared as if the acquisition was completed on December 31, 2012, the amount of the preliminary acquisition price allocated to goodwill is estimated to be $6.2 million. Goodwill represents the excess of the preliminary acquisition price over the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill will not be amortized, but will be tested at least annually for impairment.

 

The preliminary acquisition price and allocation thereof is subject to change based on the final determination of working capital, post-closing adjustments and finalization of the valuation of the acquired assets and assumed liabilities as of the closing date.

 

(3)                                 Represents deferred debt issuance costs paid in connection with the amended and restated credit facility.

 

(4)                                 Represents the payment of acquisition-related costs, primarily related to legal, accounting and severance.

 

(5)                                 To reflect the Company’s repayment of debt ($4.1 million) and accrued interest ($67 thousand) of the Sellers and the write-off of the related debt issuance cost ($150 thousand) at closing, and to eliminate historical balances of the following (in thousands):

 

Pro Forma Adjustments

 

Amount

 

Balance Sheet Line Item

 

Property and equipment

 

$

21,698

 

Property and equipment, net

 

Intangible assets

 

$

8,435

 

Intangible assets

 

Favorable lease interests

 

$

242

 

Other assets

 

Deferred tax assets - noncurrent

 

$

4,160

 

Deferred tax assets - noncurrent

 

Accrued advisory fees

 

$

918

 

Accrued liabilities

 

Deferred tax liability - current

 

$

544

 

Accrued liabilities

 

Deferred rent

 

$

15,523

 

Deferred rent

 

Unfavorable lease liability

 

$

1,244

 

Other long-term liabilities

 

Net assets (liabilities)

 

$

10,380

 

Net assets (liabilities)

 

 

(6)                                 To reclassify liquor licenses to intangible assets to conform to the combined presentation.

 

(7)                                 Represents the write-off of a portion of unamortized debt issuance costs related to the amendment of the Company’s prior credit facility in connection with the acquisition.

 

(8)                                 To adjust for the tax effect associated with the write-off of a portion of debt issuance costs as mentioned in (7) above, and the acquisition-related costs as mentioned in (4) above.

 



 

IGNITE RESTAURANT GROUP, INC

Unaudited Pro Forma Combined Condensed Statement of Operations

For the Fiscal Year Ended December 31, 2012

(in thousands, except earnings per share)

 

 

 

 

 

Pro Forma Adjustments for
Transactions Prior to the Acquisition

 

 

 

Pro Forma
Adjustments

 

 

 

 

 

Historical
Ignite

 

IPO

 

Debt
Refinancing

 

Pro Forma
Ignite

 

Historical
Mac Grill (1)

 

Related to the
Acquisition

 

Pro Forma
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

465,056

 

 

 

 

 

$

465,056

 

$

388,004

 

 

 

$

853,060

 

Cost and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restaurant operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

145,451

 

 

 

 

 

145,451

 

104,160

 

 

 

249,611

 

Labor expenses

 

127,331

 

 

 

 

 

127,331

 

128,055

 

 

 

255,386

 

Occupancy expenses

 

33,846

 

 

 

 

 

33,846

 

30,697

 

(191

)(7)

64,352

 

Other operating expenses

 

81,219

 

 

 

 

 

81,219

 

111,689

 

 

 

192,908

 

General and administrative

 

31,725

 

(1,388

)(3)

 

 

30,337

 

25,116

 

(1,406

)(8)

54,047

 

Depreciation and amortization

 

18,572

 

 

 

 

 

18,572

 

6,276

 

2,125

(7)

26,973

 

Pre-opening costs

 

3,871

 

 

 

 

 

3,871

 

263

 

 

 

4,134

 

Restaurant impairments and closures

 

115

 

 

 

 

 

115

 

706

 

 

 

821

 

Loss on disposal of property and equipment

 

2,296

 

 

 

 

 

2,296

 

 

 

 

2,296

 

Total costs and expenses

 

444,426

 

(1,388

)

 

443,038

 

406,962

 

528

 

850,528

 

Income from operations

 

20,630

 

1,388

 

 

22,018

 

(18,958

)

(528

)

2,532

 

Interest income (expense), net

 

(9,366

)

2,090

(4)

5,784

(6)

(1,492

)

(162

)

(3,179)

(9)

(4,833

)

Gain (loss) on insurance settlements

 

(799

)

 

 

 

 

(799

)

3,199

 

 

 

2,400

 

Income (loss) before income taxes

 

10,465

 

3,478

 

5,784

 

19,727

 

(15,921

)

(3,707

)

99

 

Income tax expense (benefit)

 

1,751

 

1,356

(2)

2,256

(2)

5,363

 

(2,461

)

(1,446

)(2)

(2,193

)

 

 

 

 

 

 

 

 

 

 

 

 

(3,649

)(10)

 

 

Net income (loss)

 

$

8,714

 

$

2,122

 

$

3,528

 

$

14,364

 

$

(13,460

)

$

1,388

 

$

2,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

 

 

 

 

$

0.56

 

 

 

 

 

$

0.09

 

Diluted

 

$

0.37

 

 

 

 

 

$

0.56

 

 

 

 

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

23,328

 

 

 

 

 

25,624

(5)

 

 

 

 

25,624

 

Diluted

 

23,329

 

 

 

 

 

25,625

(5)

 

 

 

 

25,625

 

 



 

Unaudited Pro Forma Combined Condensed Statement of Operations (for the fiscal year ended December 31, 2012):

 

General

 

(1)                                 We calculated Mac Grill’s results of operations for the comparable twelve-month period ended December 26, 2012 by adding its unaudited results of operations for the six months ended December 26, 2012 to its audited results of operations for the year ended June 27, 2012 and then subtracting its unaudited results of operations for the six months ended December 28, 2011, each of which are included as Exhibits 99.1 and 99.2 of this Form 8-K/A.

 

(2)                                 To reflect the tax effect of the pro forma adjustments at an estimated statutory rate of 39%.

 

IPO

 

(3)                                 To reflect a reduction of $0.4 million of management fees paid to entities affiliated with J.H. Whitney Capital Partners, LLC (the Company’s owner before the IPO) prior to our IPO in May 2012. We paid a nonrecurring expense of $1.0 million, recorded within general and administrative expenses, related to the termination of the management agreement in connection with the IPO. As they are nonrecurring, historical management fee and the termination fee are not included in the pro forma consolidated statement of operations.

 

(4)                                 The adjustments related to the IPO reflect a reduction of interest expense resulting from the use of $42.5 million of net proceeds from the IPO to reduce outstanding indebtedness, and are as follows (in thousands):

 

Elimination of the historical interest expense

 

$

(910

)

Elimination of the historical amortization of debt issuance costs

 

(126

)

Elimination of historical write-off of unamortized debt issuance costs

 

(1,054

)

Net pro forma adjustment to interest expense for IPO

 

$

(2,090

)

 

(5)                                 Reflects adjustments to oustanding common stock as if the IPO was completed at the beginning of fiscal year 2012.

 

Debt Refinancing

 

(6)                                 On October 29, 2012, the Company entered into a new $100.0 million five-year senior secured revolving credit facility, which includes a letter of credit sub-facility of up to $10.0 million and a swing line sub-facility of up to $15.0 million, with a syndicate of commercial banks and other financial institutions. Proceeds of $45.0 million from the October 2012 refinancing and $29.5 million of cash on hand were used to repay a $74.5 million term loan. The adjustments related to the debt refinancing transaction in October 2012 reflect the impact on interest expense as if the transaction had occurred on the first day of fiscal year 2012. Pro forma adjustments from the debt refinancing were as follows (in thousands):

 

Pro forma interest expense of the new credit facility

 

$

1,164

 

Elimination of the historical interest expense

 

(3,989

)

Decrease in amortization of debt issuance costs

 

(732

)

Elimination of historical write-off of unamortized debt issuance costs

 

(2,227

)

Net pro forma adjustment to interest expense for the debt refinancing

 

$

(5,784

)

 

The assumed interest rate on the October 2012 refinancing transaction is 2.375% (which is LIBOR of 0.375% plus a margin of 2.0%), the actual interest rate in the credit facility as of December 31, 2012. The debt issuance costs related to the October 2012 refinancing transaction are assumed to be amortized over the term of the credit agreement using the straight-line method for the revolving credit facility.

 



 

Pro Forma Adjustments Related to the Acquisition

 

(7)                                 To reflect Mac Grill’s decrease in deferred rent expense ($0.5 million) and increases in rent expense ($0.3 million), depreciation expense ($1.8 million) and amortization expense ($0.3 million) in connection with the acquisition.

 

(8)                                 To reflect a reduction of $1.4 million of advisory fees expense of Mac Grill related to Golden Gate Capital and Brinker International, Inc. The advisory agreement terminated in connection with the acquisition. As they are nonrecurring, advisory fees are not included in the pro forma consolidated statements of operations.

 

(9)                                 To reflect the addition of a $50.0 million term loan as part of the amended and restated credit facility and a $10.0 million draw under the revolving credit facility to finance the acquisition as if they occurred on the first day of fiscal year 2012. The pro forma adjustments to interest expense related to the acquisition are as follows (in thousands):

 

Pro forma interest expense on the amended and restated credit facility

 

$

4,085

 

Elimination of interest expense on the October 2012 debt refinancing

 

(1,164

)

Pro forma amortization of debt issuance costs on the April 2013 debt refinancing

 

643

 

Elimination of historical amortization of debt issuance costs

 

(328

)

Pro forma interest expense of Mac Grill using Ignite’s amended and restated (April 2013) credit facility

 

105

 

Elimination of historical interest expense of Mac Grill related to its prior credit facility

 

(162

)

Net pro forma adjustment to interest expense for the acquisition

 

$

3,179

 

 

The assumed interest rate on the April 2013 financing transaction is 3.75% (which is LIBOR of 0.25% plus a margin of 3.5%), the actual interest rate in the amended and restated prevailing at closing date. The debt issuance costs related to the April 2013 financing transaction are assumed to be amortized over the term of the credit agreement using the straight-line method for the revolving credit facility. A 1/8 percent variance in the assumed interest rate would result in a net change of $0.1 million in net income for the year.

 

(10)                          To eliminate the impact of the valuation allowance recorded in the historical Mac Grill financial statements that would not be required on a combined basis with Ignite.