REPUBLIC AIRWAYS HOLDINGS INC - FORM 8-K - EX-99.2 - PRO FORMA FINANCIALS - December 9, 2013

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8-K - 8-K - REPUBLIC AIRWAYS HOLDINGS INCdispositionoffrontier.htm
EX-2.2 - AIRBUS ASSIGNMENT AGREEMENT - REPUBLIC AIRWAYS HOLDINGS INCfrontier-assignmentandassu.htm
EX-2.1 - STOCK PURCHASE AGREEMENT - REPUBLIC AIRWAYS HOLDINGS INCfalcon-stockpurchaseagreem.htm
EX-99.1 - PRESS RELEASE - REPUBLIC AIRWAYS HOLDINGS INCpressreleasesaleoffrontier.htm


On December 3, 2013, Republic Airways Holdings Inc. (the "Company") completed the sale of all of the outstanding shares of its wholly owned subsidiary, Frontier Airlines Holdings, Inc. ("Frontier"), to Falcon Acquisition Group, Inc., an affiliate of Indigo Partners LLC (the "Buyer") pursuant to a Stock Purchase Agreement between the Company and the Buyer dated as of September 30, 2013 (the "Purchase Agreement"). The sale included the Company's rights and obligations under agreements with Airbus S.A.S relating to the purchase and maintenance of A320neo aircraft which were assigned to Frontier at the closing. At the closing, the the Company received approximately $84 million in cash related to the sale of Frontier, of which approximately $52 million is subject to certain final reconciliation adjustments under the Purchase Agreement. In addition, Frontier retained approximately $108 million of indebtedness.
The unaudited pro forma balance sheet as of September 30, 2013 was prepared as if the disposition occurred on that date and the adjustments give effect to events that are directly attributable to the transaction, that have a continuing impact and are nonrecurring. The unaudited pro forma consolidated statements of income were prepared as if the disposition occurred on January 1, 2010. The pro forma adjustments for the years ended December 31, 2012, 2011, 2010 and the nine months ended September 30, 2013 give effect to actions taken in conjunction with the disposal. The pro forma adjustments include, the elimination of interest expense associated with the repayment of $79 million of current debt, with proceeds received from transaction. The pro forma adjustments are based on factually supportable available information and certain assumptions that management believes are reasonable.
The pro forma statements do not purport to represent what the results of operations or financial position of Frontier would have been had the transaction occurred on the dates noted above, or to project the results of operations or the financial position of Frontier for any future periods. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma consolidated financial information have been made.
The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements of the Company included in its 2012 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2013.






 
Unaudited Pro Forma Condensed Consolidated Statement of Operation
 
Nine Months ended September 30, 2013
 
As Reported (1)
Pro Forma Adjustments (2)
Pro Forma
OPERATING REVENUES:
 
 
 
Fixed-fee service
$
941.2

 
$
941.2

Passenger service
41.6

 
41.6

Charter and other
17.2

 
17.2

Total operating revenues
1,000.0

 
1,000.0

 
 

 
 
OPERATING EXPENSES:
 
 
 
Wages and benefits
256.6

 
256.6

Aircraft fuel
37.1

 
37.1

Landing fees and airport rents
38.3

 
38.3

Aircraft and engine rent
91.6

 
91.6

Maintenance and repair
184.0

 
184.0

Insurance and taxes
18.5

 
18.5

Depreciation and amortization
110.5

 
110.5

Promotion and sales
2.1

 
2.1

Other impairment charges
21.2

 
21.2

Other
105.4

 
105.4

Total operating expenses
865.3

 
865.3

 
 
 
 
OPERATING INCOME (LOSS)
134.7

 
134.7

OTHER INCOME (EXPENSE):
 

 
 
Interest expense
(83.1
)
3.5

(79.6
)
Other—net
0.1

 
0.1

Total other expense
(83.0
)
3.5

(79.5
)
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
51.7

3.5

55.2

 
 
 
 
INCOME TAX EXPENSE (BENEFIT)
19.9

1.3

21.2

 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS
31.8

2.2

34.0

 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC
$
0.64

 
$
0.68

INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - DILUTED
$
0.60

 
$
0.64


(1)
Amounts as originally reported by Republic in its 2013 third quarter report filed on form 10-Q. Businesses previously reported as discontinued operations are excluded from these results.

(2)    Represents pro forma adjustments which includes, repayment of $79 million of debt with a discount rate of 5.87%.




 
Unaudited Pro Forma Condensed Consolidated Statement of Operation
 
Year ended December 31, 2012
 
As Reported (1)
Disposition of Frontier (2)
Pro Forma Adjustments (3)
Pro Forma
OPERATING REVENUES:
 
 
 
 
Fixed-fee service
$
1,102.1

$
—

 
$
1,102.1

Passenger service
1,556.8

(1,308.9
)
 
247.9

Charter and other
152.0

(124.5
)
 
27.5

Total operating revenues
2,810.9

(1,433.4
)
 
1,377.5

 
 
 
 


OPERATING EXPENSES:
 
 
 

Wages and benefits
562.3

(253.9
)
 
308.4

Aircraft fuel
693.7

(532.3
)
 
161.4

Landing fees and airport rents
169.7

(108.2
)
 
61.5

Aircraft and engine rent
243.2

(132.5
)
 
110.7

Maintenance and repair
296.3

(61.1
)
 
235.2

Insurance and taxes
38.1

(13.4
)
 
24.7

Depreciation and amortization
190.6

(30.6
)
 
160.0

Promotion and sales
110.5

(97.8
)
 
12.7

Other impairment charges
—

—

 
—

Other
293.6

(159.5
)
 
134.1

Total operating expenses
2,598.0

(1,389.3
)
 
1,208.7

 
 
 
 


OPERATING INCOME (LOSS)
212.9

(44.1
)
 
168.8

OTHER INCOME (EXPENSE):
 
 
 


Interest expense
(127.0
)
9.3

4.6

(113.1
)
Other—net
0.3

(0.1
)
—

0.2

Total other expense
(126.7
)
9.2

4.6

(112.9
)
 
 
 
 


INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
86.2

(34.9
)
4.6

55.9

 
 
 
 


INCOME TAX EXPENSE (BENEFIT)
34.9

(15.0
)
1.8

21.7

 
 
 
 


INCOME (LOSS) FROM CONTINUING OPERATIONS
51.3

(19.9
)
2.8

34.2

 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC
$
1.06

 
 
$
0.71

INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - DILUTED
$
1.02

 
 
$
0.69

(1)
Amounts as originally reported by Republic in its 2012 report filed on form 10-K.

(2)    Represents Frontier Airlines, Inc. and related businesses' results of operations for the period.

(3)    Represents pro forma adjustments which includes, repayment of $79 million of debt with a discount rate of 5.87%.




 
Unaudited Pro Forma Condensed Consolidated Statement of Operation
 
Year ended December 31, 2011
 
As Reported
Disposition of Frontier
Pro Forma Adjustments
Pro Forma
OPERATING REVENUES:
 
 
 
 
Fixed-fee service
$
1,079.0

$
—

 
$
1,079.0

Passenger service
1,694.5

(1,305.0
)
 
389.5

Charter and other
91.0

(45.1
)
 
45.9

Total operating revenues
2,864.5

(1,350.1
)
 
1,514.4

 
 
 
 


OPERATING EXPENSES:
 
 
 

Wages and benefits
560.6

(263.5
)
 
297.1

Aircraft fuel
821.1

(517.8
)
 
303.3

Landing fees and airport rents
167.7

(102.7
)
 
65.0

Aircraft and engine rent
251.5

(134.5
)
 
117.0

Maintenance and repair
297.2

(61.5
)
 
235.7

Insurance and taxes
42.1

(16.0
)
 
26.1

Depreciation and amortization
200.2

(37.4
)
 
162.8

Promotion and sales
133.6

(110.3
)
 
23.3

Other impairment charges
191.1

—

 
191.1

Other
305.0

(188.8
)
 
116.2

Total operating expenses
2,970.1

(1,432.5
)
 
1,537.6

 
 
 
 


OPERATING INCOME (LOSS)
(105.6
)
82.4

 
(23.2
)
OTHER INCOME (EXPENSE):
 
 
 


Interest expense
(137.3
)
11.3

4.7

(121.3
)
Other—net
0.5

(0.4
)
—

0.1

Total other expense
(136.8
)
10.9

4.7

(121.2
)
 
 
 
 


INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(242.4
)
93.3

4.7

(144.4
)
 
 
 
 


INCOME TAX EXPENSE (BENEFIT)
(90.6
)
35.3

1.8

(53.5
)
 
 
 
 


INCOME (LOSS) FROM CONTINUING OPERATIONS
(151.8
)
58.0

2.9

(90.9
)
 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC
$
(3.14
)
 
 
$
(1.88
)
INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - DILUTED
$
(3.14
)
 
 
$
(1.88
)
(1)
Amounts as originally reported by Republic in its 2012 report filed on form 10-K.

(2)    Represents Frontier Airlines, Inc. and related businesses' results of operations for the period.

(3)    Represents pro forma adjustments which includes, repayment of $79 million of debt with a discount rate of 6.0%.




 
Unaudited Pro Forma Condensed Consolidated Statement of Operation
 
Year ended December 31, 2010
 
As Reported (1)
Disposition of Frontier (2)
Pro Forma Adjustments (3)
Pro Forma
OPERATING REVENUES:
 
 
 
 
Fixed-fee service
$
1,030.3

$
201.5

 
$
1,231.8

Passenger service
1,541.3

(1,541.3
)
 
—

Charter and other
82.1

(65.9
)
 
16.2

Total operating revenues
2,653.7

(1,405.7
)


1,248.0

 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
Wages and benefits
549.9

(260.2
)
 
289.7

Aircraft fuel
616.9

(548.9
)
 
68.0

Landing fees and airport rents
170.7

(118.9
)
 
51.8

Aircraft and engine rent
240.6

(121.0
)
 
119.6

Maintenance and repair
255.8

(50.0
)
 
205.8

Capacity purchase agreement
 
—

 
—

Insurance and taxes
45.5

(17.5
)
 
28.0

Depreciation and amortization
204.5

(42.8
)
 
161.7

Promotion and sales
134.8

(134.8
)
 
—

Other impairment charges
11.5

(11.5
)
 
—

Other
290.1

(178.0
)
—

112.1

Total operating expenses
2,520.3

(1,483.6
)
—

1,036.7

 
 
 
 
 
OPERATING INCOME (LOSS)
133.4

77.9

—

211.3

OTHER INCOME (EXPENSE):
 
 
 
 
Interest expense
(151.7
)
13.8

4.7

(133.2
)
Other—net
(3.2
)
6.6

—

3.4

Total other expense
(154.9
)
20.4

4.7

(129.8
)
 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(21.5
)
98.3

4.7

81.5

 
 
 
 
 
INCOME TAX EXPENSE (BENEFIT)
(7.7
)
36.9

1.8

31.0

 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS
(13.8
)
61.4

2.9

50.5

 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC
$
(0.38
)
 
 
$
1.40

INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE - DILUTED
$
(0.38
)
 
 
$
1.36

(1)
Amounts as originally reported by Republic in its 2012 report filed on form 10-K.

(2)
Represents Frontier Airlines, Inc. results of operations for the period, including adjustment for capacity purchase agreement flying completed by Republic on behalf of Frontier and other related businesses.

(3)
Represents pro forma adjustments which includes, repayment of $79 million of debt with a discount rate of 6.0%.






 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
September 30, 2013
 
As Reported (1)
Disposition of Frontier (2)
Pro Forma Adjustments (3)
Pro Forma
ASSETS
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
$
191.9

$
84.0

$
(84.0
)
$
191.9

Restricted cash
32.2

 
 
32.2

Receivables—net of allowance for doubtful accounts of $1.5 and $1.3 respectively
31.0

 
 
31.0

Inventories
72.7

 
 
72.7

Prepaid expenses and other current assets
13.9

 
 
13.9

Assets held for sale
594.8

(594.8
)
 
—

Deferred income taxes
48.3

 
 
48.3

Total current assets
984.8

(510.8
)
(84.0
)
390.0

Aircraft and other equipment—net
2,354.5

 
 
2,354.5

Maintenance deposits
33.0

 
 
33.0

Other intangible assets—net
9.0

 
 
9.0

Other assets
239.8

 
 
239.8

Total assets
$
3,621.1

$
(510.8
)
$
(84.0
)
$
3,026.3

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 


Current Liabilities:
 
 
 


Current portion of long-term debt
$
234.8

 
$
(79.0
)
$
155.8

Accounts payable
21.7

 
 
21.7

Accrued liabilities
163.6

5.0

(5.0
)
163.6

Liabilities held for sale
517.8

(517.8
)
 
—

Total current liabilities
937.9

(512.8
)
(84.0
)
341.1

Long-term debt—less current portion
1,760.9

 
 
1,760.9

Deferred credits and other non-current liabilities
104.5

 
 
104.5

Deferred income taxes
286.3

 
 
286.3

Total liabilities
3,089.6

(512.8
)
(84.0
)
2,492.8

Total stockholders' equity (4)
531.5

2.0

—

533.5

Total liabilities and stockholders' equity
$
3,621.1

$
(510.8
)
$
(84.0
)
$
3,026.3

 
 
 
 
 
(1)
Amounts as originally reported by Republic Airways Holdings, Inc. in its fiscal 2013 third quarter report filed on form 10-Q.

(2)    Represents the net assets of Frontier as of September 30, 2013.

(3)
Represents pro forma adjustments which include repayment of $79 million of aircraft and other equipment debt and $5 million of estimated transaction fees.

(4)
Reflects a revision to the estimated loss attributed to the sale of Frontier that closed on December 3, 2013. This amount is a reduction to the estimated loss of $48 milllion reflected in our historical consolidated financial statements as of and for the period ended September 30, 2013.  The actual gain on sale will differ from the pro forma estimate due to finalization of certain adjustments to the purchase price under the Purchase Agreement.


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