Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - LADENBURG THALMANN FINANCIAL SERVICES INC. | sunsetacq8kaex991.htm |
| 8-K/A - 8-K/A - LADENBURG THALMANN FINANCIAL SERVICES INC. | sunsetacquisition8-ka.htm |
| EX-99.2 - EXHIBIT 99.2 - LADENBURG THALMANN FINANCIAL SERVICES INC. | sunsetacq8kaex992.htm |
| EX-23 - EXHIBIT 23 - LADENBURG THALMANN FINANCIAL SERVICES INC. | sunsetacquisition8-kaex231.htm |
LADENBURG THALMANN FINANCIAL SERVICES INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements are based on the unaudited pro forma combined condensed financial statements of Ladenburg Thalmann Financial Services Inc. (“LTS”) and KMS Financial Services, Inc. ("KMS"), which was acquired by LTS on October 15, 2014, and the historical financial statements of Sunset Financial Services, Inc (“Sunset”) after giving effect to the acquisition of the business and certain intangible assets of Sunset by LTS (the "Acquisition") using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes.
The unaudited pro forma combined condensed statements of operations for the nine months ended September 30, 2014 and the twelve months ended December 31, 2013 are presented as if the Acquisition had occurred on January 1, 2013. The unaudited pro forma combined condensed balance sheet is presented as if the Acquisition had occurred on September 30, 2014. You should read this information in conjunction with the:
• | accompanying notes to the unaudited pro forma combined condensed financial statements; |
• | the unaudited pro forma combined condensed financial statements and accompanying notes included in Exhibit 99.3 of LTS' form 8-K/A filed on December 30, 2014, which give effect to the acquisition of KMS by LTS; |
• | separate unaudited historical financial statements of LTS as of, and for the nine month period ended, September 30, 2014, included in LTS’ quarterly report on Form 10-Q for the three months ended September 30, 2014; |
• | separate historical financial statements of LTS as of, and for the fiscal year ended, December 31, 2013, included in LTS’ annual report on Form 10-K for the fiscal year ended December 31, 2013; and |
• | separate historical financial statements of Sunset as of September 30, 2014, for the nine months ended September 30, 2014 and for the fiscal year ended December 31, 2013 included in Exhibits 99.1 and 99.2 of this report. |
The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition had been completed on the dates indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon available information and certain assumptions that LTS believes are reasonable.
The unaudited pro forma combined condensed financial statements do not include the effects of any operating efficiencies or cost savings expected from the Acquisition.
The unaudited pro forma combined condensed balance sheet as of September 30, 2014 has been derived from:
• | the unaudited pro forma combined condensed balance sheet of LTS and KMS as of September 30, 2014; and |
• | certain intangible assets acquired from Sunset. |
The unaudited pro forma combined condensed statement of operations for the nine months ended September 30, 2014 has been derived from:
• | the unaudited pro forma combined condensed statement of operations of LTS and KMS for the nine months ended September 30, 2014; and |
• | the unaudited historical statement of operations of Sunset for the nine months ended September 30, 2014. |
The unaudited pro forma combined condensed statement of operations for the twelve months ended December 31, 2013 has been derived from:
• | the unaudited pro forma combined condensed statement of operations of LTS and KMS for the twelve months ended December 31, 2013; and |
• | the audited historical statement of operations of Sunset for the twelve months ended December 31, 2013. |
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LADENBURG THALMANN FINANCIAL SERVICES INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET September 30, 2014 (In thousands, except share and per share amounts) | ||||||||||||||
LTS and KMS Pro Forma Combined | Certain Intangible Assets Acquired From Sunset | Pro Forma Combined | ||||||||||||
ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 89,873 | $ | (1,622 | ) | c | $ | 88,251 | ||||||
Securities owned, at fair value | 5,901 | — | 5,901 | |||||||||||
Receivables from clearing brokers and other broker-dealers | 71,837 | — | 71,837 | |||||||||||
Other receivables, net | 32,188 | — | 32,188 | |||||||||||
Fixed assets, net | 19,427 | — | 19,427 | |||||||||||
Restricted assets | 620 | — | 620 | |||||||||||
Intangible assets, net | 115,795 | 4,359 | d | 120,154 | ||||||||||
Goodwill | 120,300 | 21 | d | 120,321 | ||||||||||
Notes receivable from financial advisors, net | 26,956 | — | 26,956 | |||||||||||
Deferred income taxes | — | — | — | |||||||||||
Unamortized debt issue cost | 755 | — | 755 | |||||||||||
Cash surrender value of life insurance | 10,140 | — | 10,140 | |||||||||||
Other assets | 24,477 | — | 24,477 | |||||||||||
Total assets | $ | 518,269 | $ | 2,758 | $ | 521,027 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Securities sold, but not yet purchased, at market value | $ | 3,434 | $ | — | $ | 3,434 | ||||||||
Accrued compensation | 23,472 | — | 23,472 | |||||||||||
Commissions and fees payable | 43,207 | — | 43,207 | |||||||||||
Accounts payable and accrued liabilities | 22,933 | 2,758 | e | 25,691 | ||||||||||
Deferred rent | 1,585 | — | 1,585 | |||||||||||
Deferred income taxes | 9,040 | — | 9,040 | |||||||||||
Accrued interest | 2,039 | — | 2,039 | |||||||||||
Deferred compensation liability | 17,291 | — | 17,291 | |||||||||||
Notes payable, net of unamortized discount | 70,239 | — | 70,239 | |||||||||||
Deferred income | 11 | — | 11 | |||||||||||
Total liabilities | 193,251 | 2,758 | 196,009 | |||||||||||
Shareholders’ equity: | ||||||||||||||
Preferred stock, $.0001 par value; 25,000,000 shares authorized; 8% Series A cumulative redeemable preferred stock; 11,290,000 shares authorized;10,873,206 shares issued and outstanding | 1 | — | 1 | |||||||||||
Common stock, $.0001 par value; 800,000,000 shares authorized; shares issued and outstanding, 183,346,168 | 18 | — | 18 | |||||||||||
Additional paid-in capital | 458,315 | — | 458,315 | |||||||||||
Retained earnings (accumulated deficit) | (133,306 | ) | — | (133,306 | ) | |||||||||
Total shareholders’ equity | 325,028 | — | 325,028 | |||||||||||
Noncontrolling interest | $ | (10 | ) | $ | — | $ | (10 | ) | ||||||
Total liabilities and shareholders’ equity | $ | 518,269 | $ | 2,758 | $ | 521,027 | ||||||||
SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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LADENBURG THALMANN FINANCIAL SERVICES INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the nine months ended September 30, 2014
(In thousands, except share and per share amounts)
LTS and KMS Pro Forma Combined | Sunset | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
Revenues: | ||||||||||||||||||
Commissions | $ | 348,974 | $ | 12,274 | $ | — | $ | 361,248 | ||||||||||
Advisory fees | 277,646 | 2,174 | — | 279,820 | ||||||||||||||
Investment banking | 38,306 | — | — | 38,306 | ||||||||||||||
Principal transactions | 1,671 | (1 | ) | — | 1,670 | |||||||||||||
Interest and dividends | 5,154 | 6 | — | 5,160 | ||||||||||||||
Service fees and other income | 50,767 | 3 | — | 50,770 | ||||||||||||||
Total revenues | 722,518 | 14,456 | — | 736,974 | ||||||||||||||
Expenses: | ||||||||||||||||||
Compensation and benefits | 536,147 | — | — | 536,147 | ||||||||||||||
Commissions and fees | 85,392 | 12,819 | — | 98,211 | ||||||||||||||
Non-cash compensation | 7,828 | — | — | 7,828 | ||||||||||||||
Brokerage, communication and clearance fees | 13,288 | — | — | 13,288 | ||||||||||||||
Rent and occupancy, net of sublease revenue | 5,099 | — | — | 5,099 | ||||||||||||||
Professional services | 8,525 | 347 | — | 8,872 | ||||||||||||||
Interest | 5,381 | — | — | 5,381 | ||||||||||||||
Depreciation and amortization | 13,079 | — | 417 | a | 13,496 | |||||||||||||
Acquisition-related expense | 1,187 | — | — | 1,187 | ||||||||||||||
Loss on extinguishment of debt | 314 | — | — | 314 | ||||||||||||||
Amortization of retention loans | 5,108 | — | — | 5,108 | ||||||||||||||
Other | 33,012 | 1,537 | — | 34,549 | ||||||||||||||
Total expenses | 714,360 | 14,703 | 417 | 729,480 | ||||||||||||||
Income (loss) before item shown below | 8,158 | (247 | ) | (417 | ) | 7,494 | ||||||||||||
Change in fair value of contingent consideration | 12 | — | — | 12 | ||||||||||||||
Income (loss) before income taxes | 8,170 | (247 | ) | (417 | ) | 7,506 | ||||||||||||
Income tax (benefit) expense | (11,978 | ) | (86 | ) | 86 | b | (11,978 | ) | ||||||||||
Net income (loss) | $ | 20,148 | $ | (161 | ) | $ | (503 | ) | $ | 19,484 | ||||||||
Net loss attributable to noncontrolling interest | (62 | ) | — | — | (62 | ) | ||||||||||||
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LADENBURG THALMANN FINANCIAL SERVICES INC.
Net income (loss) attributable to the Company | 20,210 | (161 | ) | (503 | ) | 19,546 | ||||||||||||
Dividends declared on preferred stock | (11,783 | ) | — | — | (11,783 | ) | ||||||||||||
Net income (loss) available to common shareholders | $ | 8,427 | $ | (161 | ) | $ | (503 | ) | $ | 7,763 | ||||||||
Net income per share available to common shareholders: | ||||||||||||||||||
Basic | $ | 0.05 | $ | 0.04 | ||||||||||||||
Diluted | $ | 0.04 | $ | 0.04 | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 183,523,063 | 183,523,063 | ||||||||||||||||
Diluted | 206,684,277 | 206,684,277 | ||||||||||||||||
SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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LADENBURG THALMANN FINANCIAL SERVICES INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the twelve months ended December 31, 2013
(In thousands, except share and per share amounts)
LTS and KMS Pro Forma Combined | Sunset | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
Revenues: | ||||||||||||||||||
Commissions | $ | 435,007 | $ | 15,365 | $ | — | $ | 450,372 | ||||||||||
Advisory fees | 309,740 | 2,677 | — | 312,417 | ||||||||||||||
Investment banking | 41,991 | — | — | 41,991 | ||||||||||||||
Principal transactions | 2,660 | (94 | ) | — | 2,566 | |||||||||||||
Interest and dividends | 6,841 | 8 | — | 6,849 | ||||||||||||||
Service fees and other income | 75,738 | — | — | 75,738 | ||||||||||||||
Total revenues | 871,977 | 17,956 | — | 889,933 | ||||||||||||||
Expenses: | ||||||||||||||||||
Compensation and benefits | 100,107 | — | — | 100,107 | ||||||||||||||
Commissions and fees | 643,405 | 15,848 | — | 659,253 | ||||||||||||||
Non-cash compensation | 6,952 | — | — | 6,952 | ||||||||||||||
Brokerage, communication and clearance fees | 12,143 | — | — | 12,143 | ||||||||||||||
Rent and occupancy, net of sublease revenue | 6,518 | — | — | 6,518 | ||||||||||||||
Professional services | 9,696 | 1,264 | — | 10,960 | ||||||||||||||
Interest | 15,725 | — | — | 15,725 | ||||||||||||||
Depreciation and amortization | 16,132 | — | 556 | a | 16,688 | |||||||||||||
Acquisition-related expense | — | — | — | — | ||||||||||||||
Loss on extinguishment of debt | 4,547 | — | — | 4,547 | ||||||||||||||
Amortization of retention loans | 7,160 | — | — | 7,160 | ||||||||||||||
Other | 47,231 | 1,424 | — | 48,655 | ||||||||||||||
Total expenses | 869,616 | 18,536 | 556 | 888,708 | ||||||||||||||
Income (loss) before item shown below | 2,361 | (580 | ) | (556 | ) | 1,225 | ||||||||||||
Change in fair value of contingent consideration | (121 | ) | — | — | (121 | ) | ||||||||||||
Income (loss) before income taxes | 2,240 | (580 | ) | (556 | ) | 1,104 | ||||||||||||
Income tax expense (benefit) | 2,941 | (126 | ) | 126 | b | 2,941 | ||||||||||||
Net income (loss) | $ | (701 | ) | $ | (454 | ) | $ | (682 | ) | $ | (1,837 | ) | ||||||
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LADENBURG THALMANN FINANCIAL SERVICES INC.
Net loss attributable to noncontrolling interest | (68 | ) | — | — | (68 | ) | ||||||||||||
Net income (loss) attributable to the Company | (633 | ) | (454 | ) | (682 | ) | (1,769 | ) | ||||||||||
Dividends declared on preferred stock | (6,911 | ) | — | — | (6,911 | ) | ||||||||||||
Net income (loss) available to common shareholders | $ | (7,544 | ) | $ | (454 | ) | $ | (682 | ) | $ | (8,680 | ) | ||||||
Net loss per share available to common shareholders (basic and diluted) | $ | (0.04 | ) | $ | (0.05 | ) | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic and diluted | 183,736,398 | 183,736,398 | ||||||||||||||||
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(in thousands, except share amounts)
1. Basis of Presentation
On November 14, 2014 (the "Closing Date"), Securities America Financial Corporation ("SAFC"), a subsidiary of Ladenburg Thalmann Financial Services Inc. ("LTS"), completed its acquisition of certain assets of Sunset Financial Services, Inc. ("Sunset") from Kansas City Life Insurance Company ("KCL").
Pursuant to an asset purchase agreement, dated July 16, 2014 (the "Purchase Agreement"), by and among SAFC, Sunset and KCL, certain registered representatives and investment advisor representatives transitioned from Sunset to subsidiaries of SAFC. In addition, certain client accounts and records and all goodwill related to the foregoing were acquired. Under the terms of the Purchase Agreement, in exchange for the foregoing, SAFC paid Sunset an initial cash payment of $1,622. SAFC will be required to make an additional cash payment to Sunset based on the Based GDC (as defined in the Purchase Agreement) generated by certain registered representatives and investment advisor representatives who are affiliated with SAFC or its affiliates as of the ninetieth (90th) day following the Closing Date (currently estimated at $1,576). In addition, SAFC will be required to deliver, during the three years following the Closing Date, an annual payment to Sunset based on the GDC (as defined in the Purchase Agreement) generated by such registered representatives and investment advisor representatives, which is estimated to have a fair value of $1,182.
Certain reclassifications have been made to the Sunset historical statement of operations for the nine months ended September 30, 2014 and the twelve months ended December 31, 2013.
Purchase Price and Related Preliminary Allocation
The purchase price is as follows:
Cash paid | $ | 1,622 | |
Contingent consideration | 1,182 | ||
Additional payment due to seller | 1,576 | ||
$ | 4,380 | ||
The allocation of the purchase price to Sunset’s intangible assets acquired was based on their estimated fair values. The valuation of these identifiable intangible assets and the contingent consideration liability is preliminary and is subject to further
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management review and may change materially. The excess of the purchase price over the identifiable intangible assets acquired has been allocated to goodwill.
The following table summarizes the aggregate preliminary estimates of the fair values of identifiable assets acquired in the Acquisition and the resulting goodwill as of September 30, 2014:
Identifiable intangible assets (a) | $ | 4,359 | |
Goodwill | 21 | ||
Total estimated purchase price | $ | 4,380 | |
(a) | Identifiable intangible assets as of the acquisition date consist of: |
Estimated Useful Life (years) | |||||||
Relationships with independent contractor financial advisors | $ | 3,557 | 10.0 | ||||
Non-solicitation agreement | 802 | 4.0 | |||||
Total identifiable intangible assets | $ | 4,359 | |||||
2. Acquisition of Sunset and Pro forma adjustments
The following pro forma adjustments are included in the unaudited pro forma combined condensed statements of operations and the unaudited pro forma combined condensed balance sheet:
(a) Adjustments to amortization of purchased intangible assets:
Nine months ended September 30, 2014 | Twelve months ended December 31, 2013 | |||||||
To record amortization of identified intangible assets over their estimated useful life | $ | 417 | $ | 556 | ||||
(b) Adjustments to income tax expense:
Nine months ended September 30, 2014 | Twelve months ended December 31, 2013 | |||||||
To eliminate historical income tax benefit of Sunset | $ | 86 | $ | 126 | ||||
(c) Adjustments to cash:
As of September 30, 2014 | |||
To record cash paid in acquisition | $ | (1,622 | ) |
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(d) Adjustments to reflect allocation of purchase price:
As of September 30, 2014 | |||
Goodwill | $ | 21 | |
Intangible Assets | 4,359 | ||
Total | $ | 4,380 | |
(e) Adjustments to record amount due to Sunset of $1,576 and the estimated fair value of contingent consideration that may become payable over three years of $1,182.
As of September 30, 2014 | |||
Accounts payable and accrued liabilities | $ | 2,758 | |
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