SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 10, 2017 (October 3, 2017)
Date of Report (Date of earliest event reported)
RED LION HOTELS CORPORATION
(Exact Name of Registrant as Specified in Charter)
Washington | 001-13957 | 91-1032187 | ||
(State or Other Jurisdiction | (Commission file number) | (I.R.S. Employer | ||
of Incorporation) | Identification No.) |
1550 Market St. #350
Denver, CO 80202
(Address of Principal Executive Offices, Zip Code)
(509) 459-6100
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.01. Completion of Acquisition or Disposition of Assets.
On October 3, 2017, Red Lion Hotels Corporation, doing business as RLH Corporation, (the “company”) and its wholly-owned subsidiary TicketsWest.com, Inc. (“TicketsWest”) completed the sale of certain specified liabilities and substantially all of the assets of TicketsWest, including ticketing agreements and engagement agreements with various entertainment venues, teams and artists located throughout the Western United States, to Paciolan, LLC (the “Asset Sale”) for a preliminary purchase price, before transaction costs, of $6.0 million. The final purchase price is subject to a working capital adjustment, which is expected to be finalized within 165 days of the closing date. The accrued third party ticketing liability was $8.2 million as of the close date and was included as part of the Asset Sale. As a result of the transaction, the company’s cash balance decreased by $2.9 million upon completion of the Asset Sale, with $0.6 million in escrow on its balance sheet as of the close date.
Item 7.01. Regulation FD Disclosure.
A copy of the company’s press release, dated October 3, 2017, announcing the completion of the sale is furnished as Exhibit 99.1 hereto.
Non-GAAP Financial Measures
The following is a reconciliation of pro forma Adjusted EBITDA to amounts previously reported, to reflect the deconsolidation of the TicketsWest business, including WestCoast Entertainment, (comprising the Entertainment reportable segment):
Six Months Ended | Year Ended December 31, | |||||||||||||||
June 30, 2017 | 2016 | 2015 | 2014 | |||||||||||||
(in thousands) | ||||||||||||||||
Adjusted EBITDA - as previously reported | $ | 8,536 | $ | 19,472 | $ | 12,463 | $ | 13,350 | ||||||||
Less: Deconsolidation of the Entertainment Segment | (260 | ) | (2,243 | ) | (986 | ) | (2,348 | ) | ||||||||
Pro Forma Adjusted EBITDA | $ | 8,276 | $ | 17,229 | $ | 11,477 | $ | 11,002 |
EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. We believe it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness. Adjusted EBITDA is an additional measure of financial performance. We believe that the inclusion or exclusion of certain special items, such as gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.
EBITDA and Adjusted EBITDA are commonly used measures of performance in our industry. We utilize these measures because management finds them a useful tool to calculate more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. We believe they are a complement to reported operating results. EBITDA and Adjusted EBITDA are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States (GAAP), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in our industry may calculate EBITDA and, in particular, Adjusted EBITDA differently.
Item 9.01. Financial Statements and Exhibits.
(b) | Pro forma financial information. |
The unaudited pro forma condensed statements of operations of the company for the years ended December 31, 2016, 2015 and 2014 and for the six months ended June 30, 2017, unaudited pro forma condensed balance sheet as of June 30, 2107, and the notes related thereto are filed as Exhibit 99.2 to this amendment and are incorporated in their entirety herein by reference.
(d) | Exhibits. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
RED LION HOTELS CORPORATION
| ||
Date: October 10, 2017 | By: | /s/ Douglas L. Ludwig |
|
Douglas L. Ludwig Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 99.1
RLH Corporation Completes the Sale of TicketsWest and WestCoast Entertainment to Paciolan
DENVER, Oct. 03, 2017 (GLOBE NEWSWIRE) -- RLH Corporation (NYSE:RLH) (the “company”) announced the completion of the sale of the assets of TicketsWest, a full service ticketing and marketing service provider, and WestCoast Entertainment, promoter and producer of a variety of entertainment productions, to Paciolan, a leading provider of ticketing, fundraising, marketing and analytics solutions to entertainment venues. The acquisition enables TicketsWest and WestCoast Entertainment to join the second largest primary ticketing provider in North America to realize operational and technological efficiencies while continuing to offer their clients full service ticketing, marketing, content and distribution capabilities. These robust businesses will continue to operate as a division of Paciolan under the TicketsWest and WestCoast Entertainment brands.
As the result of the sale of this business segment, RLH Corporation will report the results of operations of TicketsWest and WestCoast Entertainment businesses as discontinued operations. These amounts, along with the gain on sale of the business, will be reported in its Form 10-Q, which is expected to be filed on or about November 3, 2017.
ABOUT RLH Corporation
Red Lion Hotels Corporation, doing business as RLH Corporation, is an innovative hotel company focused on the franchising, management and ownership of upscale, midscale and economy hotels. It focuses on maximizing return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the company's website at www.rlhco.com.
MEDIA CONTACTS:
Amy Koch
509.777.6417
investorrelations@rlhco.com
David Wright
509.777.6254
david.wright@rlhco.com
Exhibit 99.2
Unaudited Pro Forma Financial Statements
The following Unaudited Pro Forma Financial Statements are based on Red Lion Hotels Corporation’s (the “Company’s”) historical consolidated results of operations and financial position, adjusted to give effect to the Asset Sale, as defined in Item 2.01 of this Form 8-K, as if it had been completed on June 30, 2017 with respect to the pro forma unaudited condensed balance sheet and as of January 1, 2014 with respect to the pro forma unaudited condensed statements of operations.
The Unaudited Pro Forma Financial Statements and the accompanying notes should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2016, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“Annual Report”) and its unaudited condensed consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2017 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Quarterly Report on Form 10-Q ("Quarterly Report") for the six months ended June 30, 2017. The Unaudited Pro Forma Financial Statements may differ materially from the future financial position or results of operations due to a number of factors described in “Risk Factors” under Item 1A of Part 1 of our Annual Report and “Forward-Looking Statements” under Item 1 of Part 1 of our Annual Report.
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2017
As Reported | Less: Deconsolidation of the Entertainment Segment | Add: Pro Forma Adjustments | Pro Forma | |||||||||||||||
ASSETS | (in thousands) | |||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 32,198 | $ | (8,527 | ) | (a) | $ | 4,700 | (b) | $ | 28,371 | |||||||
Restricted cash | 12,940 | - | - | 12,940 | ||||||||||||||
Accounts receivable, net | 14,933 | (1,429 | ) | (a) | - | 13,504 | ||||||||||||
Accounts receivable from related parties | 1,575 | - | - | 1,575 | ||||||||||||||
Notes receivable, net | 1,600 | - | - | 1,600 | ||||||||||||||
Inventories | 663 | (16 | ) | (a) | - | 647 | ||||||||||||
Prepaid expenses and other | 4,482 | (494 | ) | (a) | 300 | (b) | 4,288 | |||||||||||
Total current assets | 68,391 | (10,466 | ) | 5,000 | 62,925 | |||||||||||||
Property and equipment, net | 206,267 | (225 | ) | (a) | - | 206,042 | ||||||||||||
Goodwill | 12,566 | (3,161 | ) | (a) | - | 9,405 | ||||||||||||
Intangible assets | 51,823 | (6 | ) | (a) | - | 51,817 | ||||||||||||
Other assets, net | 2,153 | (225 | ) | (a) | 300 | (b) | 2,228 | |||||||||||
Total assets | $ | 341,200 | $ | (14,083 | ) | $ | 5,300 | $ | 332,417 | |||||||||
LIABILITIES | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | 6,529 | $ | (402 | ) | (a) | $ | - | $ | 6,127 | ||||||||
Accrued payroll and related benefits | 6,352 | (156 | ) | (a) | - | 6,196 | ||||||||||||
Other accrued entertainment liabilities | 9,215 | (9,215 | ) | (a) | - | - | ||||||||||||
Other accrued liabilities | 5,557 | (83 | ) | (a) | - | 5,474 | ||||||||||||
Long-term debt, due within one year | 15,030 | - | - | 15,030 | ||||||||||||||
Contingent consideration for acquisition due to related party, due within one year | 6,785 | - | - | 6,785 | ||||||||||||||
Total current liabilities | 49,468 | (9,856 | ) | - | 39,612 | |||||||||||||
Long-term debt, due after one year, net of debt issuance costs | 96,027 | - | - | 96,027 | ||||||||||||||
Contingent consideration for acquisition due to related party, due after one year | 4,443 | - | - | 4,443 | ||||||||||||||
Deferred income and other long term liabilities | 1,891 | - | - | 1,891 | ||||||||||||||
Deferred income taxes | 5,980 | - | - | 5,980 | ||||||||||||||
Total liabilities | 157,809 | (9,856 | ) | - | 147,953 | |||||||||||||
Commitments and contingencies | ||||||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Red Lion Hotels Corporation stockholders' equity | ||||||||||||||||||
Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding | - | - | - | - | ||||||||||||||
Common stock - 50,000,000 shares authorized; $0.01 par value; 23,564,176 and 23,434,480 shares issued and outstanding | 235 | - | - | 235 | ||||||||||||||
Additional paid-in capital, common stock | 172,350 | - | - | 172,350 | ||||||||||||||
Accumulated deficit | (19,657 | ) | (4,227 | ) | (a)(c) | 5,300 | (c) | (18,584 | ) | |||||||||
Total Red Lion Hotels Corporation stockholders' equity | 152,928 | (4,227 | ) | 5,300 | 154,001 | |||||||||||||
Noncontrolling interest | 30,463 | - | - | 30,463 | ||||||||||||||
Total stockholders’ equity | 183,391 | (4,227 | ) | 5,300 | 184,464 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 341,200 | $ | (14,083 | ) | $ | 5,300 | $ | 332,417 |
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2017
As Reported | Less: Deconsolidation of the Entertainment Segment (a) | Pro Forma | ||||||||||
(in thousands) | ||||||||||||
Revenue: | ||||||||||||
Company operated hotels | $ | 56,970 | $ | - | $ | 56,970 | ||||||
Other revenues from managed properties | 1,993 | - | 1,993 | |||||||||
Franchised hotels | 23,331 | - | 23,331 | |||||||||
Entertainment | 6,081 | (6,081 | ) | - | ||||||||
Other | 116 | - | 116 | |||||||||
Total revenues | 88,491 | (6,081 | ) | 82,410 | ||||||||
Operating expenses: | ||||||||||||
Company operated hotels | 45,166 | - | 45,166 | |||||||||
Other costs from managed properties | 1,993 | - | 1,993 | |||||||||
Franchised hotels | 17,402 | - | 17,402 | |||||||||
Entertainment | 5,817 | (5,817 | ) | - | ||||||||
Other | 7 | - | 7 | |||||||||
Depreciation and amortization | 9,139 | (58 | ) | 9,081 | ||||||||
Hotel facility and land lease | 2,403 | - | 2,403 | |||||||||
Gain on asset dispositions, net | (217 | ) | (4 | ) | (221 | ) | ||||||
General and administrative expenses | 7,708 | - | 7,708 | |||||||||
Acquisition and integration costs | 11 | - | 11 | |||||||||
Total operating expenses | 89,429 | (5,879 | ) | 83,550 | ||||||||
Operating income (loss) | (938 | ) | (202 | ) | (1,140 | ) | ||||||
Other income (expense): | ||||||||||||
Interest expense | (3,995 | ) | - | (3,995 | ) | |||||||
Other income, net | 224 | - | 224 | |||||||||
Total other income (expense) | (3,771 | ) | - | (3,771 | ) | |||||||
Income (loss) from operations before taxes | (4,709 | ) | (202 | ) | (4,911 | ) | ||||||
Income tax expense | 339 | - | 339 | |||||||||
Net income (loss) | (5,048 | ) | (202 | ) | (5,250 | ) | ||||||
Net (income) loss attributable to noncontrolling interest | 1,378 | - | 1,378 | |||||||||
Net income (loss) attributable to Red Lion Hotels Corporation | $ | (3,670 | ) | $ | (202 | ) | $ | (3,872 | ) | |||
Earnings (loss) per share - basic | $ | (0.16 | ) | $ | (0.16 | ) | ||||||
Earnings (loss) per share - diluted | $ | (0.17 | ) | $ | (0.16 | ) | ||||||
Weighted average shares - basic | 23,509 | 23,509 | ||||||||||
Weighted average shares - diluted | 24,199 | 24,199 |
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2016
As Reported | Less: Deconsolidation of the Entertainment Segment (a) | Pro Forma | ||||||||||
(in thousands) | ||||||||||||
Revenue: | ||||||||||||
Company operated hotels | $ | 117,641 | $ | - | $ | 117,641 | ||||||
Other revenues from managed properties | 5,948 | - | 5,948 | |||||||||
Franchised hotels | 24,634 | - | 24,634 | |||||||||
Entertainment | 15,719 | (15,719 | ) | - | ||||||||
Other | 128 | - | 128 | |||||||||
Total revenues | 164,070 | (15,719 | ) | 148,351 | ||||||||
Operating expenses: | ||||||||||||
Company operated hotels | 91,572 | - | 91,572 | |||||||||
Other costs from managed properties | 5,948 | - | 5,948 | |||||||||
Franchised hotels | 19,315 | - | 19,315 | |||||||||
Entertainment | 13,635 | (13,635 | ) | - | ||||||||
Other | 42 | - | 42 | |||||||||
Depreciation and amortization | 16,281 | (186 | ) | 16,095 | ||||||||
Hotel facility and land lease | 4,740 | - | 4,740 | |||||||||
Gain on asset dispositions, net | (2,437 | ) | 1 | (2,436 | ) | |||||||
General and administrative expenses | 11,109 | - | 11,109 | |||||||||
Acquisition and integration costs | 2,112 | - | 2,112 | |||||||||
Total operating expenses | 162,317 | (13,820 | ) | 148,497 | ||||||||
Operating income (loss) | 1,753 | (1,899 | ) | (146 | ) | |||||||
Other income (expense): | ||||||||||||
Interest expense | (6,764 | ) | - | (6,764 | ) | |||||||
Other income, net | 483 | 158 | 641 | |||||||||
Total other income (expense) | (6,281 | ) | 158 | (6,123 | ) | |||||||
Income (loss) from operations before taxes | (4,528 | ) | (1,741 | ) | (6,269 | ) | ||||||
Income tax expense | 312 | - | 312 | |||||||||
Net income (loss) | (4,840 | ) | (1,741 | ) | (6,581 | ) | ||||||
Net (income) loss attributable to noncontrolling interest | 163 | - | 163 | |||||||||
Net income (loss) attributable to Red Lion Hotels Corporation | $ | (4,677 | ) | $ | (1,741 | ) | $ | (6,418 | ) | |||
Earnings (loss) per share - basic | $ | (0.23 | ) | $ | (0.31 | ) | ||||||
Earnings (loss) per share - diluted | $ | (0.23 | ) | $ | (0.31 | ) | ||||||
Weighted average shares - basic | 20,427 | 20,427 | ||||||||||
Weighted average shares - diluted | 20,427 | 20,427 |
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2015
As Reported | Less: Deconsolidation of the Entertainment Segment (a) | Pro Forma | ||||||||||
(in thousands) | ||||||||||||
Revenue: | ||||||||||||
Company operated hotels | $ | 116,187 | $ | - | $ | 116,187 | ||||||
Other revenues from managed properties | 3,586 | - | 3,586 | |||||||||
Franchised hotels | 12,039 | - | 12,039 | |||||||||
Entertainment | 11,057 | (11,057 | ) | - | ||||||||
Other | 51 | - | 51 | |||||||||
Total revenues | 142,920 | (11,057 | ) | 131,863 | ||||||||
Operating expenses: | ||||||||||||
Company operated hotels | 92,057 | - | 92,057 | |||||||||
Other costs from managed properties | 3,586 | - | 3,586 | |||||||||
Franchised hotels | 11,233 | - | 11,233 | |||||||||
Entertainment | 10,118 | (10,118 | ) | - | ||||||||
Other | 35 | - | 35 | |||||||||
Depreciation and amortization | 13,315 | (254 | ) | 13,061 | ||||||||
Hotel facility and land lease | 6,569 | - | 6,569 | |||||||||
Gain on asset dispositions, net | (17,692 | ) | - | (17,692 | ) | |||||||
General and administrative expenses | 9,819 | - | 9,819 | |||||||||
Acquisition and integration costs | 779 | - | 779 | |||||||||
Total operating expenses | 129,819 | (10,372 | ) | 119,447 | ||||||||
Operating income | 13,101 | (685 | ) | 12,416 | ||||||||
Other income (expense): | ||||||||||||
Interest expense | (6,979 | ) | - | (6,979 | ) | |||||||
Loss on early retirement of debt | (2,847 | ) | - | (2,847 | ) | |||||||
Other income, net | 826 | (46 | ) | 780 | ||||||||
Total other income (expense) | (9,000 | ) | (46 | ) | (9,046 | ) | ||||||
Income from operations before taxes | 4,101 | (731 | ) | 3,370 | ||||||||
Income tax expense | 85 | - | 85 | |||||||||
Net income | 4,016 | (731 | ) | 3,285 | ||||||||
Net (income) loss attributable to noncontrolling interest | (1,297 | ) | - | (1,297 | ) | |||||||
Net income attributable to Red Lion Hotels Corporation | $ | 2,719 | $ | (731 | ) | $ | 1,988 | |||||
Earnings per share - basic | $ | 0.14 | $ | 0.10 | ||||||||
Earnings per share - diluted | $ | 0.13 | $ | 0.10 | ||||||||
Weighted average shares - basic | 19,983 | 19,983 | ||||||||||
Weighted average shares - diluted | 20,200 | 20,200 |
Red Lion Hotels Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2014
As Reported | Less: Deconsolidation of the Entertainment Segment (a) | Pro Forma | ||||||||||
(in thousands) | ||||||||||||
Revenue: | ||||||||||||
Company operated hotels | $ | 118,616 | $ | - | $ | 118,616 | ||||||
Franchised hotels | 9,618 | - | 9,618 | |||||||||
Entertainment | 17,115 | (17,115 | ) | - | ||||||||
Other | 77 | - | 77 | |||||||||
Total revenues | 145,426 | (17,115 | ) | 128,311 | ||||||||
Operating expenses: | ||||||||||||
Company operated hotels | 94,241 | - | 94,241 | |||||||||
Franchised hotels | 7,004 | - | 7,004 | |||||||||
Entertainment | 14,785 | (14,785 | ) | - | ||||||||
Other | 318 | - | 318 | |||||||||
Depreciation and amortization | 12,762 | (349 | ) | 12,413 | ||||||||
Hotel facility and land lease | 5,210 | - | 5,210 | |||||||||
Gain on asset dispositions, net | (4,006 | ) | - | (4,006 | ) | |||||||
General and administrative expenses | 8,353 | - | 8,353 | |||||||||
Acquisition and integration costs | - | - | - | |||||||||
Total operating expenses | 138,667 | (15,134 | ) | 123,533 | ||||||||
Operating income | 6,759 | (1,981 | ) | 4,778 | ||||||||
Other income (expense): | ||||||||||||
Interest expense | (4,575 | ) | - | (4,575 | ) | |||||||
Loss on early retirement of debt | - | - | - | |||||||||
Other income, net | 339 | (17 | ) | 322 | ||||||||
Total other income (expense) | (4,236 | ) | (17 | ) | (4,253 | ) | ||||||
Income from operations before taxes | 2,523 | (1,998 | ) | 525 | ||||||||
Income tax expense | 31 | - | 31 | |||||||||
Net income from continuing operations | 2,492 | (1,998 | ) | 494 | ||||||||
Discontinued operations: | ||||||||||||
Loss from discontinued business units, net of income tax of $0 | (187 | ) | - | (187 | ) | |||||||
Loss on disposal of the assets of the discontinued business units, net of income tax | (2 | ) | - | (2 | ) | |||||||
Net loss from discontinued operations | (189 | ) | - | (189 | ) | |||||||
Net income | 2,303 | (1,998 | ) | 305 | ||||||||
Net (income) loss attributable to noncontrolling interest | - | - | - | |||||||||
Net income attributable to Red Lion Hotels Corporation | 2,303 | (1,998 | ) | 305 | ||||||||
Comprehensive income (loss) : | ||||||||||||
Unrealized loss on cash flow hedge, net of tax | (44 | ) | - | (44 | ) | |||||||
Comprehensive income | $ | 2,259 | $ | (1,998 | ) | $ | 261 | |||||
Earnings (loss) per share - basic: | ||||||||||||
Income from continuing operations attributable to RLHC | $ | 0.13 | $ | 0.02 | ||||||||
Loss from discontinued operations | (0.01 | ) | (0.01 | ) | ||||||||
Net income attributable to RLHC | $ | 0.12 | $ | 0.01 | ||||||||
Earnings (loss) per share - diluted | ||||||||||||
Income from continuing operations attributable to RLHC | $ | 0.13 | $ | 0.02 | ||||||||
Loss from discontinued operations | (0.01 | ) | (0.01 | ) | ||||||||
Net income attributable to RLHC | $ | 0.12 | $ | 0.01 | ||||||||
Weighted average shares - basic | 19,785 | 19,785 | ||||||||||
Weighted average shares - diluted | 19,891 | 19,891 |
Notes to Unaudited Pro Forma Condensed Financial Information
Note 1 — Basis of presentation
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed financial statements to give effect to pro forma events that are (1) directly attributable to the business disposition, (2) factually supportable and (3) with respect to the unaudited pro forma condensed statements of operations, expected to have a continuing impact on the results following the business disposal.
The disposed business represented a separate, stand-along reporting segment.
Note 2 — The transaction
The company completed the sale of substantially all of the assets and the liabilities of TicketsWest.com, Inc., including WestCoast Entertainment, (TicketsWest or the Entertainment business segment) to Paciolan, LLC (Paciolan) for $6.0 million, resulting in a preliminary gain on sale of approximately $1.1 million, which will be recognized in the fourth quarter of 2017. The final sale price is subject to a working capital adjustment, which is expected to be finalized within 165 days of the closing date.
Note 3 — Pro forma adjustments
The following adjustments have been reflected in the unaudited pro forma condensed financial information:
(a) | Reflects the elimination of the Entertainment segment’s asset and liability balances and results of operations. | |
(b) | Represents the cash proceeds of $6.0 million, including $0.6 million held in escrow and classified in other current assets ($0.3 million) and other long-term assets ($0.3 million), from Paciolan for purchase of TicketsWest assets, less $0.7 million for transaction related expenses. | |
(c) | The net of the amounts reflected in retained earnings ($1.1 million) represents the estimated gain on sale of the acquisition, net of transaction costs. The gain is calculated as the net cash received ($5.3 million after payment of transaction related expenses) less the net assets transferred ($4.2 million). Due to the availability of offsetting net operating loss carryforwards, there is no tax expense associated with the gain on sale. As the gain is directly attributable to the disposal and is not expected to have a continuing impact on the Company’s operations, it is only reflected in retained earnings on the pro forma unaudited condensed consolidated balance sheet. | |