UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1 to Form 8-K filed May 6, 2016)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 2, 2016
DLH Holdings Corp.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-18492
New Jersey | 22-1899798 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3565 Piedmont Road, NE, Building 3, Suite 700 |
Atlanta, GA 30305 |
(Address and zip code of principal executive offices) |
(866) 952-1647 |
(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: c Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) c Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) c Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) c Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Explanatory Note
This Current Report on Form 8-K/A is filed as an amendment (the “Amendment”) to the Current Report on Form 8-K filed on May 6, 2016 (the “Original Form 8-K”) by DLH Holdings Corp. (“DLH” or the “Company”) in order to provide financial information required by Item 9.01 of the Original Form 8-K. As previously reported in the Original Form 8-K, DLH acquired Danya International, LLC (“Danya”) pursuant to a definitive Equity Purchase Agreement dated May 3, 2016 (the “Purchase Agreement”) among Danya, DI Holdings, Inc. (the “Seller”) and certain equity holders thereof. The acquisition was completed on May 3, 2016 and Danya became a direct, wholly-owned subsidiary of DLH on such date (the “Acquisition”). The Original Form 8-K is amended by this Current Report on Form 8-K/A to present certain financial statements of Danya and to present certain unaudited pro forma financial information in connection with the Acquisition. Danya’s financial statements and the unaudited pro forma information of DLH and its subsidiaries are filed as exhibits hereto. The foregoing description of the Purchase Agreement and the transactions contemplated therein is not complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement, which is attached as Exhibit 2.1 to the Original Form 8-K and incorporated herein by reference. Items and exhibits previously reported in the Original Form 8-K that are not included in this Amendment remain unchanged.
Item 7.01 Regulation FD Disclosure.
In addition to the unaudited pro forma financial information filed as Exhibit 99.3 to this Current Report on Form 8-K/A, DLH has prepared, and has furnished as Exhibit 99.4 to this Current Report on Form 8-K/A, certain non-GAAP financial information to present the unaudited pro-forma adjusted EBITDA of DLH for the fiscal year ended September 30, 2015 and the six months ended March 31, 2016 as if its acquisition of Danya was consummated on October 1, 2014. A reconciliation of the non-GAAP pro-forma financial information included to the net income of DLH is also included in Exhibit 99.4.
The information in Item 7.01 of this Current Form 8-K/A and Exhibit 99.4 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
The audited consolidated balance sheet of Danya as of December 31, 2015 and December 31, 2014 and the related consolidated statement of operations, consolidated statement of members’ equity and consolidated statement of cash flows for the years ended December 31, 2015 and 2014, the notes to the consolidated financial statements and the independent auditor’s report are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated by reference herein.
The unaudited consolidated balance sheet of Danya as of March 31, 2016 and March 31, 2015 and the related consolidated statement of operations, consolidated statement of members’ equity and consolidated statement of cash flows for the quarter ended March 31, 2016 and 2015, and the notes to the consolidated financial statements are filed as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated by reference herein.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined balance sheet of DLH Holdings Corp. and its subsidiaries as of March 31, 2016 and the unaudited pro forma condensed combined statements of operations of DLH Holdings Corp. and its subsidiaries for the six months ended March 31, 2016 and the year ended September 30, 2015 giving effect to the acquisition of Danya are filed as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated by reference herein.
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(d) Exhibits.
The following exhibits are attached to this Current Report on Form 8-K.
Exhibit No. | ||
23.1 | Consent of Aronson LLC. | |
99.1 | Audited consolidated balance sheet of Danya as of December 31, 2015 and 2014 and the related consolidated statement of operations, consolidated statement of members’ equity and consolidated statement of cash flows for the years ended December 31, 2015 and 2014, the notes to the consolidated financial statements and the independent auditor’s report. | |
99.2 | Unaudited Financial Statements of Danya for the six months ended March 31, 2016. | |
99.3 | Unaudited pro forma condensed combined balance sheet of DLH Holdings Corp. and its subsidiaries as of March 31, 2016, and the unaudited pro forma condensed combined statements of operations of DLH Holdings Corp. and its subsidiaries for the six months ended March 31, 2016 and the year ended September 30, 2015 giving effect to the acquisition of Danya. | |
99.4 | Unaudited pro forma presentation of Adjusted EBITDA, a non-GAAP measure | |
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SIGNATURE
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.
DLH Holdings Corp. | |||
Date: | June 30, 2016 | By: | /s/ Kathryn M. JohnBull |
Kathryn M. JohnBull | |||
Chief Financial Officer and Treasurer | |||
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EXHIBITS
Exhibit No. | ||
23.1 | Consent of Aronson LLC. | |
99.1 | Audited consolidated balance sheet of Danya as of December 31, 2015 and 2014 and the related consolidated statement of operations, consolidated statement of members’ equity and consolidated statement of cash flows for the years ended December 31, 2015 and 2014, the notes to the consolidated financial statements and the independent auditor’s report. | |
99.2 | Unaudited Financial Statements of Danya for the six months ended March 31, 2016. | |
99.3 | Unaudited pro forma condensed combined balance sheet of DLH Holdings Corp. and its subsidiaries as of March 31, 2016, and the unaudited pro forma condensed combined statements of operations of DLH Holdings Corp. and its subsidiaries for the six months ended March 31, 2016 and the year ended September 30, 2015 giving effect to the acquisition of Danya. | |
99.4 | Unaudited pro forma presentation of Adjusted EBITDA, a non-GAAP measure | |
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements of DLH Holdings Corp. on Form S-3 (File Nos. 333-184912, 333-74478 and 333-120423) and on Form S-8 (No. 333-88012, 333-41871, 333-62380, 333-75263, 333-136400, 333-41867, 333-122711, 333-41869) of our report dated February 24, 2016, related to our audit of the consolidated financial statements of Danya International, Inc. and Subsidiaries as of and for the years ended December 31, 2015 and 2014, included in this Current Report on Form 8-K/A.
/s/ Aronson LLC
Aronson, LLC
Rockville, Maryland
June 27, 2016
Exhibit 99.1
DANYA INTERNATIONAL, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2015 AND DECEMBER 31, 2014
Exhibit 99.2
DANYA INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31. 2016 AND MARCH 31, 2015
Danya International, Inc. and Subsidiaries
Table of Contents
Page
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets 1 - 2
Consolidated Statements of Income 3
Consolidated Statements of Equity 4
Consolidated Statements of Cash Flows 5 - 6
Notes to Consolidated Financial Statements 7 - 14
Exhibit 99.3
DLH UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements combine the historical consolidated financial information of DLH Holdings Corp. and Subsidiaries (the “Company”) and the consolidated financial statements of Danya International, Inc. and its subsidiaries (collectively “Danya”), acquired on May 3, 2016. The unaudited pro forma condensed combined financial information gives effect to the acquisition of Danya as if the acquisition had been consummated at October 1, 2014 for the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2015 and the six months ended March 31, 2016. The unaudited pro forma condensed combined balance sheet at March 31, 2016 gives effect to the acquisition of Danya as if the acquisition had been consummated on that date. The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date.
The Company’s historical financial information was derived from its audited consolidated financial statements for the year ended September 30, 2015 (as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission on December 16, 2015) and the Company’s unaudited consolidated financial statements for the six months ended March 31, 2016 (as filed in its Quarterly Report on Form 10-Q with the Securities and Exchange Commission on May 16, 2016). The Company’s historical financial statements used in preparing the unaudited pro forma financial data are summarized and should be read in conjunction with its historical financial statements and risk factors, all of which are included in the filings with the Securities and Exchange Commission noted above.
Danya’s full year financial information was derived from its audited financial statements for the year ended December 31, 2015. Danya’s financial information for the six months ended March 31, 2016 was derived from unaudited financial statements for the six months ended March 31, 2016.
The unaudited pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable, as described in the accompanying notes. The Company is providing the unaudited pro forma condensed combined information for illustrative purposes only. The companies may have performed differently had they been combined during the periods presented. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies actually been combined during the periods presented or the future results that the combined companies will experience.
The Company is in the process of completing assessments of the fair value of the assets and liabilities acquired. Changes to these estimated fair values may occur. In addition, the purchase price is estimated based upon the working capital acquired. In the pro forma condensed combined balance sheet, the Company has estimated a purchase price based upon estimated working capital at March 31, 2016.
The preliminary base purchase price of $38.75 million for Danya on May 3, 2016 included a target net working capital of $3.5 million. Our estimated pro forma balance sheet included herein is stated as if the transaction occurred on March 31, 2016. As such, the estimated net working capital at March 31, 2016 is $5.923 million, reflecting an excess of $2.423 million over the $3.5 million target. This also increased the estimated purchase price as of March 31, 2016, from $38.75 million to $41.173 million. Working capital balances on the actual date of the acquisition, May 3, 2016, will be different from those estimated at March 31, 2016. Future adjustments for working capital excess (deficit) compared to the $3.5 million target will change as we finalize valuations and financial results as of the actual date of the acquisition on May 3, 2016.
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DLH HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2015
(Amounts in thousands, except per share data)
The Company | Danya International, Inc. and Subsidiaries [3a] | Danya Africa [3b] | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||
Revenue | $ | 65,346 | $ | 47,049 | $ | — | $ | — | $ | 112,395 | |||||||||||
Direct expenses | 53,658 | 30,655 | (432 | ) | 2,661 | [3c] | 86,542 | ||||||||||||||
Gross profit | 11,688 | 16,394 | 432 | (2,661 | ) | 25,853 | |||||||||||||||
General and administrative expenses | 9,137 | 11,371 | (364 | ) | (3,446 | ) | [3d] | 16,698 | |||||||||||||
Depreciation and amortization | 55 | — | — | 301 | [3d] | 356 | |||||||||||||||
Income from operations | 2,496 | 5,023 | 796 | 484 | 8,799 | ||||||||||||||||
Interest and other income (expense), net | 744 | (69 | ) | 75 | (949 | ) | [3e] | (199 | ) | ||||||||||||
Income/(loss) before income taxes | 3,240 | 4,954 | 871 | (465 | ) | 8,600 | |||||||||||||||
Provision (benefit) for income taxes | (5,488 | ) | — | — | 2,144 | [3f] | (3,344 | ) | |||||||||||||
Net income/(loss) | $ | 8,728 | $ | 4,954 | $ | 871 | $ | (2,609 | ) | $ | 11,944 | ||||||||||
Earnings per share - basic | $ | 0.91 | $ | 1.09 | [3g] | ||||||||||||||||
Earnings per share - diluted | $ | 0.87 | $ | 1.05 | [3g] | ||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 9,573 | 1,381 | [3h] | 10,954 | |||||||||||||||||
Diluted | 10,039 | 1,381 | [3h] | 11,420 | |||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
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DLH HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 2016
(Amounts in thousands, except per share data)
The Company | Danya International, Inc. and Subsidiaries [3a] | Danya Africa [3b] | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||
Revenue | $ | 33,493 | $ | 28,261 | $ | — | $ | — | $ | 61,754 | |||||||||||
Direct expenses | 27,352 | 18,692 | (108 | ) | 1,635 | [3c] | 47,571 | ||||||||||||||
Gross profit | 6,141 | 9,569 | 108 | (1,635 | ) | 14,183 | |||||||||||||||
General and administrative expenses | 5,028 | 6,110 | (307 | ) | (2,203 | ) | [3d] | 8,628 | |||||||||||||
Depreciation and amortization | 42 | 131 | — | 131 | [3d] | 304 | |||||||||||||||
Income from operations | 1,071 | 3,328 | 415 | 437 | 5,251 | ||||||||||||||||
Interest and other income (expense), net | (702 | ) | 1 | 2 | 254 | [3e] | (445 | ) | |||||||||||||
Income/(loss) before income taxes | 369 | 3,329 | 417 | 691 | 4,806 | ||||||||||||||||
Provision (benefit) for income taxes | 148 | — | — | 1,775 | [3f] | 1,923 | |||||||||||||||
Net income/(loss) | $ | 221 | $ | 3,329 | $ | 417 | $ | (1,084 | ) | $ | 2,883 | ||||||||||
Earnings per share - basic | $ | 0.02 | $ | 0.26 | [3g] | ||||||||||||||||
Earnings per share - diluted | $ | 0.02 | $ | 0.24 | [3g] | ||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 9,642 | 1,381 | [3h] | 11,023 | |||||||||||||||||
Diluted | 10,540 | 1,381 | [3h] | 11,921 | |||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
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DLH HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2016
(Amounts in thousands except par value of shares)
The Company | Danya International, Inc. and Subsidiaries | Danya Africa [4a] | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 6,934 | $ | 595 | $ | (98 | ) | $ | (7,455 | ) | (4b) | $ | (24 | ) | ||||||
Accounts receivable, net | 3,354 | 9,680 | — | — | 13,034 | |||||||||||||||
Deferred taxes, net | 982 | — | — | — | 982 | |||||||||||||||
Other current assets | 484 | 327 | — | — | 811 | |||||||||||||||
Total current assets | 11,754 | 10,602 | (98 | ) | (7,455 | ) | 14,803 | |||||||||||||
Equipment and Improvements | 329 | 426 | — | — | 755 | |||||||||||||||
Deferred taxes, net | 9,286 | — | — | — | 9,286 | |||||||||||||||
Goodwill and other intangibles | 8,595 | — | — | 34,731 | (4c) | 43,326 | ||||||||||||||
Other long-term assets | 66 | 243 | (150 | ) | 1,282 | (4d) | 1,441 | |||||||||||||
Total assets | $ | 30,030 | $ | 11,271 | $ | (248 | ) | $ | 28,558 | $ | 69,611 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accrued payroll | $ | 2,617 | $ | 1,086 | $ | — | $ | — | $ | 3,703 | ||||||||||
Accounts payable, accrued expenses, and other current liabilities | 3,813 | 3,495 | — | 188 | (4e) | 7,496 | ||||||||||||||
Total current liabilities | 6,430 | 4,581 | — | 188 | 11,199 | |||||||||||||||
Long-term debt, less current portion | — | — | — | 30,000 | (4f) | $ | 30,000 | |||||||||||||
Other long term liabilities | 168 | — | — | — | 168 | |||||||||||||||
Total liabilities | 6,598 | 4,581 | — | 30,188 | 41,367 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Shareholders' equity: | ||||||||||||||||||||
Preferred stock, $.10 par value; authorized 5,000 shares, none issued and outstanding | — | — | — | — | — | |||||||||||||||
Common stock, $.001 par value; authorized 40,000 shares; issued and outstanding 9,717 at March 31, 2016 and 9,551 at September 30, 2015 | 10 | 7 | — | (5 | ) | (4g) | 12 | |||||||||||||
Additional paid-in capital | 76,717 | 480 | — | 4,518 | (4h) | 81,715 | ||||||||||||||
Accumulated deficit | (53,295 | ) | 6,203 | (248 | ) | (6,143 | ) | (4i) | (53,483 | ) | ||||||||||
Total shareholders’ equity | 23,432 | 6,690 | (248 | ) | (1,630 | ) | 28,244 | |||||||||||||
Total liabilities and shareholders' equity | $ | 30,030 | $ | 11,271 | $ | (248 | ) | $ | 28,558 | $ | 69,611 | |||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
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Notes to accompanying Financial Statements:
1. Description of the transaction and basis of presentation
On May 3, 2016, we acquired 100% of the equity interests of Danya International, LLC for a purchase price of $38.75 million, subject to certain adjustments including a final assessment of Danya’s closing date working capital. The preliminary base purchase price of $38.75 million included a target net working capital of $3.5 million. Future adjustments for working capital excess (deficit) compared to the $3.5 million target will change as we finalize valuations and financial results as of the actual date of the acquisition on May 3, 2016.
The acquisition was financed through a combination of borrowings of $30.0 million under our new senior credit facility with Fifth Third Bank, cash on hand of approximately $5.0 million, shares of common stock issued to the seller with a value of $2.5 million, and $2.5 million pursuant to a subordinated loan arrangement with Wynnefield Capital.
The unaudited pro forma condensed combined financial statements have been prepared based upon the Company’s historical financial information and the historical financial information of Danya, giving effect to the acquisition and related adjustments described in these notes. Certain note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted as permitted by SEC rules and regulations.
These unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the acquisitions actually taken place at the dates indicated and do not purport to be indicative of future financial position or operating results.
Danya’s operating results included in the unaudited pro forma condensed combined statement of operations for the six months ended March 31, 2016 are not intended to represent or be indicative of operating results for a full year. Certain contracts within Danya’s operations have had significant seasonality in their historical performance and such seasonality will likely continue in the future.
2. Purchase accounting
The acquisition of Danya is being accounted for as a business combination using the acquisition method of accounting, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date.
The fair values of the assets and liabilities in the unaudited pro forma condensed combined financial statements are based upon a preliminary assessment of fair value and may change when the final valuation of intangible assets, working capital and tax-related matters are finalized.
The preliminary base purchase price for Danya was $38.75 million, with adjustments as necessary based on an estimated working capital excess. The preliminary base purchase price of $38.75 million included a target net working capital of $3.5 million. Future adjustments for working capital excess (deficit) compared to the $3.5 million target will change as we finalize valuations and financial results as of the actual date of the acquisition on May 3, 2016.
The preliminary base purchase price of $38.75 million on the date of acquisition consisted of $36.25 million in cash, and $2.5 million of DLH common stock with shares issued to the Seller at closing.
Based on March 31, 2016 data, we estimated total acquisition consideration and the preliminary allocation of fair value to the related assets and liabilities as follows:
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(Amounts in thousands) | ||||
Preliminary base purchase price for Danya | $ | 38,750 | ||
Estimated working capital excess as if transaction closed on 3/31/16 | [4j] | $ | 2,423 | |
Estimated purchase price, net of cash acquired | [4j] | $ | 41,173 | |
Estimated net assets acquired as if transaction closed on 3/31/16: | ||||
Cash and cash equivalents | $ | 497 | ||
Accounts receivable | 9,680 | |||
Other current assets | 327 | |||
Total current assets | 10,504 | |||
Accounts payable and accrued expenses | (3,495 | ) | ||
Payroll liabilities | (1,086 | ) | ||
Estimated net working capital surplus | 5,923 | |||
Property and equipment, net | 426 | |||
Other long term assets | 93 | |||
Net identifiable assets acquired | 6,442 | |||
Goodwill and other intangibles | [4c] | 34,731 | ||
Net assets acquired | $ | 41,173 | ||
3. | Pro forma Condensed Combined Statements of Operations adjustments and assumptions |
3a. | Danya International, Inc. was originally organized as an S corporation. Prior to the closing of the acquisition by the Company, Danya International, Inc. was converted from an S corporation to a limited liability company and was renamed Danya International, LLC. The results of Danya for the year are based upon their audited December 31, 2015 financial statements. The results of Danya for the six-month period ended March 31, 2016 are based upon financial statements prepared by Danya. |
3b. | DLH did not acquire the African subsidiaries of Danya International, Inc. Our pro forma financial statements have been adjusted to remove those Danya Africa subsidiaries that were not acquired in the purchase of Danya International, Inc. |
3c. | The adjustment conforms Danya’s income statement presentation with that of DLH, classifying certain operating expenses as direct fringe costs. |
3d. | Adjustments to general and administrative, and depreciation and amortization expenses are as follows: |
Amounts in Thousands | Unaudited | |||||||
Pro Forma Financial Statements | ||||||||
Year Ended | Six Months Ended | |||||||
Adjustments to G&A and Depreciation expense: | 9/30/2015 | 3/31/2016 | ||||||
Reclassify certain Danya fringe costs from G&A to direct costs | $ | (2,661 | ) | $ | (1,635 | ) | ||
Reclassify Danya depreciation and amortization from G&A to depreciation | (301 | ) | (131 | ) | ||||
Eliminate Danya stock-based compensation expense related to Danya common stock units, which were terminated upon acquisition | (2 | ) | (1 | ) | ||||
Eliminate Danya severance payments, as this presentation assumes they would have been incurred prior to the acquisition | (107 | ) | (56 | ) | ||||
Eliminate Danya incurred acquisition expenses, as this presentation assumes such costs were incurred prior to the acquisition. | (375 | ) | (380 | ) | ||||
Total adjustments to general and administrative expenses | $ | (3,446 | ) | $ | (2,203 | ) | ||
Depreciation and amortization expense reclassified from G&A | $ | 301 | $ | 131 | ||||
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3e. | Adjustments to other income and expenses are as follows: |
Amounts in Thousands | Unaudited | |||||||
Pro Forma Financial Statements | ||||||||
Year Ended | Six Months Ended | |||||||
Adjustments to other income and expense | 9/30/2015 | 3/31/2016 | ||||||
Eliminate acquisition expenses for the Company, as this presentation assumes such costs were incurred prior to the acquisition | $ | — | $ | 702 | ||||
Eliminate interest expense as originally recorded by Danya | — | 4 | ||||||
Eliminate interest expense as originally recorded by DLH | 36 | — | ||||||
Add estimated interest expense under new $25 Million Term Loan as if it began on October 1, 2014, using amortization schedule at date of closing | (813 | ) | (368 | ) | ||||
Add estimated interest expense under $5M draw on revolving line of credit applied towards acquisition closing purchase price, as if closing occurred on 9/30/2014. | (172 | ) | (86 | ) | ||||
Eliminate Danya loss on disposal of property and equipment, as this presentation assumes such costs were incurred prior to the acquisition | — | 2 | ||||||
Total adjustments to other income and expense | $ | (949 | ) | $ | 254 | |||
3f. | Adjustments to provision (benefit) for income taxes: |
Amounts in Thousands | Unaudited | |||||||
Pro Forma Financial Statements | ||||||||
Year Ended | Six Months Ended | |||||||
Adjustments to provision (benefit) for income taxes | 9/30/2015 | 3/31/2016 | ||||||
Transition of Danya from an S corporation, whose tax obligations are passed to its owners, to a member of the DLH consolidated tax group. This adjustment also reflects the tax effects of the pro forma adjustments outlined above. Following the Acquisition, Danya will accrue taxes based upon corporate tax rates at U.S. Federal, state and local level. | $ | 2,144 | $ | 1,775 | ||||
Total adjustments to other provision (benefit) for income taxes | $ | 2,144 | $ | 1,775 | ||||
3g. | The earnings per share calculations have been adjusted to reflect the pro forma transactions outlined above. |
3h. | Represents the increase in number of shares of DLH common stock issued and outstanding resulting from the acquisition of Danya: |
Adjustments to the number of shares of DLH common stock issued and outstanding | Shares in thousands | ||
Shares of DLH common stock issued to Seller on the date of acquisition | 670 | ||
Shares of DLH common stock issued related to the rights offering | 711 | ||
Total increase in shares of DLH common stock issued and outstanding | 1,381 | ||
4. Pro forma Condensed Combined Balance Sheet adjustments and assumptions
4a. | DLH did not acquire the African subsidiaries of Danya International, Inc. Our pro forma financial statements have been adjusted to remove those Danya Africa subsidiaries that were not acquired in the purchase of Danya International, Inc. |
4b. | Adjustments to cash and cash equivalents: |
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Amounts in Thousands | Unaudited | |||
Pro Forma | ||||
Balance Sheet | ||||
Adjustments to cash and cash equivalents | 3/31/2016 | |||
Proceeds from $30.0 million of senior debt and $2.5 million of subordinated debt required to complete the acquisition. | $ | 32,500 | ||
Financing fees associated with securing 30.0 million senior debt | (1,282 | ) | ||
Based upon working capital at March 31, 2016, the estimated acquisition price for Danya used in this pro forma balance sheet would have been $41.1 million. | (41,173 | ) | ||
Issuance of $2.5 million of equity to Seller as partial consideration for the acquisition. | 2,500 | |||
Total adjustments to cash and cash equivalents | $ | (7,455 | ) | |
4c. | This adjustment reflects recording goodwill and other intangibles of $34.7 million resulting from the Acquisition, representing the difference between the preliminary estimate of the fair value of the identifiable assets acquired and liabilities assumed and the total estimated purchase price: |
Amounts in Thousands | Unaudited | |||
Pro Forma | ||||
Balance Sheet | ||||
Calculation of goodwill and other intangibles at 3/31/16 resulting from the acquisition | 3/31/2016 | |||
Estimated purchase price, net of cash acquired | [4i] | $ | 41,173 | |
Less net identifiable assets acquired | (6,442 | ) | ||
Total estimated goodwill and other intangibles at 3/31/16 | $ | 34,731 | ||
4d. | This adjustment for $1.282 million reflects deferred financing expenses incurred to obtain the senior credit facility of $30.0 million. |
4e. | This adjustment for $188 thousand reflects transaction costs incurred by the Company. These costs were incurred but not paid prior to the Acquisition Date. |
4f. | This adjustment reflects extinguishing the $2.5 million subordinated debt with proceeds of rights offering to be filed in early July 2016. Proceeds from Term Loan and subordinated debt were $32.5 million. The Remaining debt after extinguishing the subordinated debt is $30.0 million senior debt. |
4g. | This adjustment reflects changes to common stock recorded at par value on our balance sheet: |
Amounts in Thousands | Unaudited | |||
Pro Forma | ||||
Balance Sheet | ||||
Adjustment to common stock recorded at par value: | 3/31/2016 | |||
Eliminate Danya balance sheet expense for shares issued and outstanding which were terminated upon the acquisition | $ | (7 | ) | |
Expense at par value for additional 1,381 thousands shares issued and outstanding | 2 | |||
Total adjustment to common stock recorded at par value | $ | (5 | ) | |
4h. | This adjustment reflects changes to additional paid in capital resulting from the acquisition of Danya: |
8
Amounts in Thousands | Unaudited | |||
Pro Forma | ||||
Balance Sheet | ||||
Adjustments to additional paid in capital | 3/31/2016 | |||
Eliminate Danya International Inc. historical paid in capital balance; equity was extinguished on the date of acquisition | $ | (480 | ) | |
Paid in capital for 670 thousand shares common stock at $3.73 per share issued to Danya seller on the date of acquisition ($2,500 thousand less $1 thousand = $2,499 thousand) | 2,499 | |||
Paid in capital for 711 thousand shares common stock at $3.73 per share issued in the rights offering ($2,650 thousand less $1 thousand = $2,649 thousand) | 2,649 | |||
Less transaction expenses associated with the rights offering | (150 | ) | ||
Total adjustments to additional paid in capital | $ | 4,518 | ||
4i. | This adjustment reflects changes to Accumulated Deficit resulting from the acquisition of Danya: |
Amounts in Thousands | Unaudited | |||
Pro Forma | ||||
Balance Sheet | ||||
Adjustments to accumulated deficit resulting from acquisition | 3/31/2016 | |||
Eliminate Danya International Inc. historical retained earnings; equity was extinguished on the date of acquisition | $ | (6,203 | ) | |
Eliminate Danya Africa subsidiaries historical retained earnings; equity was extinguished on the date of acquisition | 248 | |||
Transaction costs incurred by the Company, which were incurred but not paid prior to the date of acquisition | (188 | ) | ||
Total adjustments to accumulated deficit | $ | (6,143 | ) | |
4j. | The preliminary base purchase price of $38.75 million for Danya on May 3, 2016 included a target net working capital of $3.5 million. Our estimated pro forma balance sheet included herein is stated as if the transaction occurred on March 31, 2016. As such, the estimated net working capital at March 31, 2016 is $5.923 million, reflecting an excess of $2.423 million over the $3.5 million target. This also increased the estimated purchase price as of March 31, 2016, from $38.75 million to $41.173 million. Working capital balances on the actual date of the acquisition, May 3, 2016, will be different from those estimated at March 31, 2016. Future adjustments for working capital excess (deficit) compared to the $3.5 million target will change as we finalize valuations and financial results as of the actual date of the acquisition on May 3, 2016. |
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Exhibit 99.4
DLH HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA ADJUSTED EBITDA
YEAR ENDED SEPTEMBER 30, 2015
(Amounts in thousands, except per share data)
We use Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) adjusted for other items (“Adjusted EBITDA”) as supplemental non-GAAP measures of our performance. We define Adjusted EBITDA as net income/(loss) adjusted to exclude (i) interest and other expenses, including acquisition expenses, net, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) G&A expenses - equity grants.
This non-GAAP measure of our performance is used by DLH management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and the Company’s Board utilize this non-GAAP measure to make decisions about the use of the Company’s resources, analyze performance between periods, develop internal projections and measure management performance. We believe that this non-GAAP measure is useful to investors in evaluating the Company’s ongoing operating and financial results and understanding how such results compare with the Company’s historical performance. By providing this non-GAAP measure as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations.
Unaudited pro forma non-GAAP reconciliation for pro forma year ended September 30, 2015 (Amounts in thousands) | The Company | Danya International, Inc. and Subsidiaries [3a] | Danya Africa | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
Pro forma GAAP net income/(loss) | $ | 8,728 | $ | 4,954 | $ | 871 | $ | (2,609 | ) | $ | 11,944 | |||||||||
(i) Interest and other (income) expense (net): | ||||||||||||||||||||
(i) (a) Interest and other expense | (744 | ) | — | — | 842 | 98 | ||||||||||||||
(i) (b) Acquisition expenses | — | 375 | — | (375 | ) | — | ||||||||||||||
(ii) Provision (benefit) for taxes | (5,488 | ) | — | — | 2,144 | (3,344 | ) | |||||||||||||
(iii) Depreciation and amortization | 55 | 301 | — | — | 356 | |||||||||||||||
(iv) G&A expenses - equity grants | 479 | 2 | — | (2 | ) | 479 | ||||||||||||||
Adjusted EBITDA | $ | 3,030 | $ | 5,632 | $ | 871 | $ | — | $ | 9,533 | ||||||||||
Weighted average shares outstanding | ||||||||||||||||||||
Basic | 9,573 | 1,381 | 10,954 | |||||||||||||||||
Diluted | 10,039 | 1,381 | 11,420 | |||||||||||||||||
Please refer to the GAAP pro forma financial statements and notes included in Exhibit 99.3 herein. Weighted average shares outstanding shown in this table are consistent with the shares used for DLH pro forma earnings per share, calculated as required under GAAP.
DLH HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA ADJUSTED EBITDA
SIX MONTHS ENDED March 31, 2016
(Amounts in thousands, except per share data)
We use Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) adjusted for other items (“Adjusted EBITDA”) as supplemental non-GAAP measures of our performance. We define Adjusted EBITDA as net income/(loss) adjusted to exclude (i) interest and other expenses, including acquisition expenses, net, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) G&A expenses - equity grants.
This non-GAAP measure of our performance is used by DLH management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and the Company’s Board utilize this non-GAAP measure to make decisions about the use of the Company’s resources, analyze performance between periods, develop internal projections and measure management performance. We believe that this non-GAAP measure is useful to investors in evaluating the Company’s ongoing operating and financial results and understanding how such results compare with the Company’s historical performance. By providing this non-GAAP measure as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations.
Unaudited pro forma non-GAAP reconciliation for pro forma six months ended March 31, 2016 (Amounts in thousands) | The Company | Danya International, Inc. and Subsidiaries [3a] | Danya Africa | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
Pro forma GAAP net income/(loss) | $ | 221 | $ | 3,329 | $ | 417 | $ | (1,084 | ) | $ | 2,883 | |||||||||
(i) Interest and other (income) expense (net): | ||||||||||||||||||||
(i) (a) Interest and other expense | — | — | — | 393 | 393 | |||||||||||||||
(i) (b) Acquisition expenses | 702 | 380 | — | (1,082 | ) | — | ||||||||||||||
(ii) Provision (benefit) for taxes | 148 | — | — | 1,775 | 1,923 | |||||||||||||||
(iii) Depreciation and amortization | 42 | 131 | — | — | 173 | |||||||||||||||
(iv) G&A expenses - equity grants | 342 | 2 | — | (2 | ) | 342 | ||||||||||||||
Pro forma adjusted EBITDA | $ | 1,455 | $ | 3,842 | $ | 417 | $ | — | $ | 5,714 | ||||||||||
Weighted average shares outstanding | ||||||||||||||||||||
Basic | 9,642 | 1,381 | 11,023 | |||||||||||||||||
Diluted | 10,540 | 1,381 | 11,921 | |||||||||||||||||
Please refer to the GAAP pro forma financial statements and notes included in Exhibit 99.3 herein. Weighted average shares outstanding shown in this table are consistent with the shares used for DLH pro forma earnings per share, calculated as required under GAAP.