Gogo Inc. - FORM 8-K - EX-99.2

Attached files

file	filename
EX-99.1 - EX-99.1 - Gogo Inc.	d50881dex991.htm
EX-10.2 - EX-10.2 - Gogo Inc.	d50881dex102.htm
EX-10.1 - EX-10.1 - Gogo Inc.	d50881dex101.htm
8-K - 8-K - Gogo Inc.	d50881d8k.htm

Exhibit 99.2

Gogo Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

Overview and Basis of Presentation

On December 1, 2020, Gogo Inc. (“we,” “us,” “our,” or the “Company”) completed the previously announced sale of its Commercial Aviation, or “CA,” business to Intelsat Aviation AcquisitionCo LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of Intelsat Jackson Holdings S.A. (“Intelsat” or the “Buyer”), pursuant to the purchase and sale agreement (the “Purchase Agreement”), dated August 31, 2020 with the Buyer, through the sale of all of the issued and outstanding units of our subsidiaries Gogo LLC, a Delaware limited liability company, and Gogo International Holdings LLC, a Delaware limited liability company, for a purchase price of $400 million in cash, subject to certain adjustments (the “Transaction”). The assets and liabilities of the CA business were presented as assets and liabilities held for sale in the Company’s Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, and the results of operations of the CA business were presented as discontinued operations in the Company’s Unaudited Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2020 and 2019, in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on November 9, 2020.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020 and for the years ended December 31, 2019, 2018 and 2017 (collectively, the “Statements”) give effect to the Transaction as if the Transaction occurred on January 1, 2017. The Statements have been derived from, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, which have been filed with the SEC. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2020 gives effect to the Transaction as if the Transaction occurred on September 30, 2020. The Unaudited Pro Forma Condensed Consolidated Balance Sheet has been derived from, and should be read in conjunction with, the unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020.

The following Unaudited Pro Forma Condensed Consolidated Financial Statements are provided for illustrative purposes only and do not purport to represent what the Company’s results of operations or financial position would have been had the Transaction been completed on the dates assumed and are not necessarily indicative of the Company’s future results of operations or financial position.

The Company believes that the adjustments included within the “Assets / Liabilities Held for Sale” column of the Unaudited Pro Forma Condensed Consolidated Balance Sheet and the adjustments included within the “Discontinued Operations” column of the Unaudited Pro Forma Condensed Consolidated Statements of Operations are consistent with the guidance for assets held for sale and discontinued operations under GAAP. The Unaudited Pro Forma Condensed Consolidated Financial Statements are based upon information and assumptions available at the time of the filing of this report on Form 8-K. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts that existed upon completion of the Transaction.

The Company’s historical consolidated financial statements have been adjusted in the Unaudited Pro Forma Condensed Consolidated Financial Statements to present events that are (i) directly attributable to the Transaction, (ii) factually supportable and (iii) with respect to the Statements, expected to have a continuing impact on the Company’s consolidated results following the Transaction.

Gogo Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Balance Sheet

(in thousands, except share data)


	As of September 30, 2020
	Historical			Assets / Liabilities Held for Sale (A)			Pro Forma Adjustments			Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	117,483		$	—		$	375,729	(C)	$	493,212
Accounts receivable, net of allowances of $1,539		32,497			—			—			32,497
Inventories		35,107			—			—			35,107
Prepaid expenses and other current assets		6,448			—			—			6,448
Current assets held for sale		627,499			(627,499	)		—			—

Total current assets		819,034			(627,499	)		375,729			567,264

Non-current assets:
Property and equipment, net		64,307			—			—			64,307
Goodwill and intangible assets, net		53,188			—			—			53,188
Operating lease right-of-use assets		32,564			—			—			32,564
Other non-current assets, net of allowances of $320		15,362			—			—			15,362

Total non-current assets		165,421			—			—			165,421

Total assets	$	984,455		$	(627,499	)	$	375,729		$	732,685

Liabilities and Stockholders’ deficit
Current liabilities:
Accounts payable	$	6,060		$	—		$	23,587	(D)	$	29,647
Accrued liabilities		77,901			—			5,490	(D)		83,391
Deferred revenue		2,492			—			—			2,492
Current liabilities held for sale		369,436			(369,436	)		—			—

Total current liabilities		455,889			(369,436	)		29,077			115,530

Non-current liabilities:
Long-term debt		1,126,634			—			—			1,126,634
Non-current operating lease liabilities		38,223			—			—			38,223
Other non-current liabilities		10,903			—			—			10,903

Total non-current liabilities		1,175,760			—			—			1,175,760

Total liabilities		1,631,649			(369,436	)		29,077			1,291,290

Commitments and contingencies		—			—			—			—
Stockholders’ deficit
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2020; 85,255,574 shares issued at September 30, 2020; and 85,237,282 shares outstanding at September 30, 2020		9			—			—			9
Additional paid-in-capital		1,086,665			—			—			1,086,665
Accumulated other comprehensive loss		(4,323	)		—			—			(4,323	)
Treasury stock, at cost		(98,857	)		—			—			(98,857	)
Accumulated deficit		(1,630,688	)		(258,063	)		346,652			(1,542,099	)

Total stockholders’ deficit		(647,194	)		(258,063	)		346,652			(558,605	)

Total liabilities and stockholders’ deficit	$	984,455		$	(627,499	)	$	375,729		$	732,685

See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)


	For the Nine Months Ended September 30, 2020
	Historical			Discontinued Operations (B)		Pro Forma
Revenue:
Service revenue	$	155,083		$	—	$	155,083
Equipment revenue		37,001			—		37,001

Total revenue		192,084			—		192,084

Operating expenses:
Cost of service revenue (exclusive of items shown below)		32,809			—		32,809
Cost of equipment revenue (exclusive of items shown below)		24,036			—		24,036
Engineering, design and development		17,365			—		17,365
Sales and marketing		10,724			—		10,724
General and administrative		36,378			—		36,378
Depreciation and amortization		10,117			—		10,117

Total operating expenses		131,429			—		131,429

Operating income		60,655			—		60,655

Other (income) expense:
Interest income		(689	)		—		(689	)
Interest expense		93,595			—		93,595
Other expense		12			—		12

Total other expense		92,918			—		92,918

Loss from continuing operations before income taxes		(32,263	)		—		(32,263	)
Income tax provision		216			—		216

Net loss from continuing operations		(32,479	)		—		(32,479	)
Net loss from discontinued operations, net of tax		(218,402	)		218,402		—

Net loss	$	(250,881	)	$	218,402	$	(32,479	)

Net loss attributable to common stock per share – basic and diluted:
Net loss from continuing operations	$	(0.40	)			$	(0.40	)
Net loss from discontinued operations		(2.67	)				—

Net loss	$	(3.07	)			$	(0.40	)

Weighted average number of shares - basic and diluted		81,892					81,892

See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)


	For the Year Ended December 31, 2019
	Historical			Discontinued Operations (B)			Pro Forma
Revenue:
Service revenue	$	664,353		$	(442,431	)	$	221,922
Equipment revenue		171,373			(84,310	)		87,063

Total revenue		835,726			(526,741	)		308,985

Operating expenses:
Cost of service revenue (exclusive of items shown below)		297,848			(255,706	)		42,142
Cost of equipment revenue (exclusive of items shown below)		134,728			(82,984	)		51,744
Engineering, design and development		108,610			(82,597	)		26,013
Sales and marketing		49,156			(27,920	)		21,236
General and administrative		89,843			(35,215	)		54,628
Depreciation and amortization		118,817			(102,127	)		16,690

Total operating expenses		799,002			(586,549	)		212,453

Operating income		36,724			59,808			96,532

Other (income) expense:
Interest income		(4,210	)		210			(4,000	)
Interest expense		130,572			(99	)		130,473
Loss on extinguishment of debt		57,962			—			57,962
Other (income) expense		(2,602	)		2,633			31

Total other expense		181,722			2,744			184,466

Loss before income taxes		(144,998	)		57,064			(87,934	)
Income tax provision		1,006			(443	)		563

Net loss	$	(146,004	)	$	57,507		$	(88,497	)

Net loss attributable to common stock per share – basic and diluted	$	(1.81	)				$	(1.10	)

Weighted average number of shares—basic and diluted		80,766						80,766

See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)


	For the Year Ended December 31, 2018
	Historical			Discontinued Operations (B)			Pro Forma
Revenue:
Service revenue	$	630,147		$	(433,770	)	$	196,377
Equipment revenue		263,617			(169,841	)		93,776

Total revenue		893,764			(603,611	)		290,153

Operating expenses:
Cost of service revenue (exclusive of items shown below)		291,642			(254,503	)		37,139
Cost of equipment revenue (exclusive of items shown below)		222,244			(166,828	)		55,416
Engineering, design and development		120,090			(101,571	)		18,519
Sales and marketing		58,823			(34,427	)		24,396
General and administrative		94,269			(36,366	)		57,903
Depreciation and amortization		133,617			(119,254	)		14,363

Total operating expenses		920,685			(712,949	)		207,736

Operating income (expense)		(26,921	)		109,338			82,417

Other (income) expense:
Interest income		(4,292	)		170			(4,122	)
Interest expense		122,809			(189	)		122,620
Loss on extinguishment of debt		19,653			—			19,653
Other (income) expense		233			(153	)		80

Total other expense		138,403			(172	)		138,231

Loss before income taxes		(165,324	)		109,510			(55,814	)
Income tax benefit		(3,293	)		(61	)		(3,354	)

Net loss	$	(162,031	)	$	109,571		$	(52,460	)

Net loss attributable to common stock per share – basic and diluted	$	(2.02	)				$	(0.66	)

Weighted average number of shares - basic and diluted		80,038						80,038

See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(in thousands, except per share amounts)


	For the Year Ended December 31, 2017
	Historical			Discontinued Operations (B)			Pro Forma
Revenue:
Service revenue	$	617,906		$	(447,026	)	$	170,880
Equipment revenue		81,184			(11,452	)		69,732

Total revenue		699,090			(458,478	)		240,612

Operating expenses:
Cost of service revenue (exclusive of items shown below)		268,334			(238,278	)		30,056
Cost of equipment revenue (exclusive of items shown below)		58,554			(11,922	)		46,632
Engineering, design and development		133,286			(111,761	)		21,525
Sales and marketing		64,017			(39,829	)		24,188
General and administrative		93,671			(37,070	)		56,601
Depreciation and amortization		145,490			(134,187	)		11,303

Total operating expenses		763,352			(573,047	)		190,305

Operating income (expense)		(64,262	)		114,569			50,307

Other (income) expense:
Interest income		(2,964	)		38			(2,926	)
Interest expense		111,944			(406	)		111,538
Other (income) expense		750			(544	)		206

Total other expense		109,730			(912	)		108,818

Loss before income taxes		(173,992	)		115,481			(58,511	)
Income tax benefit		(1,997	)		(48	)		(2,045	)

Net loss	$	(171,995	)	$	115,529		$	(56,466	)

Net loss attributable to common stock per share – basic and diluted	$	(2.17	)				$	(0.71	)

Weighted average number of shares—basic and diluted		79,407						79,407

See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

(unaudited)

1.	Pro Forma Adjustments

The following are the explanations for the adjustments reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements based on preliminary estimates, which may change as additional information is obtained:

(A)

Adjustments reflect the elimination of the CA assets and liabilities that were determined to be assets or liabilities held for sale as of September 30, 2020, as reported in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, and resulting net impact on stockholders’ equity.

(B)

Adjustments reflect the reclassification to discontinued operations of historical CA revenues and expenses. Interest expense and corporate expenses that were not specifically related to CA have been excluded as such general corporate expenses do not meet the requirements to be presented as discontinued operations.

(C)

Represents the cash proceeds received at closing in connection with the Transaction, computed pursuant to the Purchase Agreement as (i) the $400.0 million purchase price, (ii) plus security deposits of $5.0 million acquired by the Buyer, (iii) less debt-like items and transaction expenses, as defined in the Purchase Agreement, of $9.3 million assumed by the Buyer, and (iv) less the estimated net working capital adjustment, as defined in the Purchase Agreement, of $20.0 million, which is subject to finalization within 90 days following the closing date of the Transaction. Additional cash transferred to and separately paid by the Buyer in the Transaction is not included in this adjustment.

(D)

Represents estimated transaction costs related primarily to investment banking fees, legal expenses, other professional fees and accelerated payments attributable to the Transaction under commercial agreements specifically related to CA totaling $23.6 million and Transaction bonuses totaling $5.5 million that were unpaid as of September 30, 2020.

The Unaudited Pro Forma Condensed Consolidated Financial Statements do not include adjustments to reflect the non-recurring gain on the Transaction or the related income tax effect. The gain will be included in the Company’s results of operations for the three-month period ending December 31, 2020, and the Company does not anticipate any income tax effect as it plans to utilize its net operating loss carryforwards to offset the gain on the Transaction.

2.	Transition Services Agreement and Sublease

In connection with the Transaction, the Company and the Buyer entered into a transition services agreement whereby the Company and the Buyer will provide certain post-closing services to each other on a transitional basis. The Company and the Buyer also entered into a sublease agreement whereby the Company will sublease a portion of its Chicago office space to the Buyer for a period of no longer than one year. No pro forma adjustments have been made in respect of these agreements as the post-closing services will not have a continuing impact on the Company’s future results and the sublease expense is immaterial.

Gogo Inc. - FORM 8-K - EX-99.2 - December 1, 2020

Attached files

Gogo Inc. Reports