Exhibit 99.4
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
On June 25, 2021, Akumin Inc. (“Akumin” or the “Company”) announced that it entered into a definitive purchase agreement through one of its wholly own subsidiary to acquire Alliance HealthCare Services Inc. (“Alliance”) by acquiring all of the issued and outstanding equity interests of Alliance’s parent company, Thaihot Investment Company US Limited, for a purchase price of $757.4 million plus the assumption of approximately $62.6 million of Alliance’s outstanding equipment financing liabilities (the “Acquisition”). The Acquisition is expected to close in the third quarter of 2021.
The unaudited pro forma combined financial information, which has been prepared in accordance with Article 11 of Regulation S-X, is based on the respective historical consolidated financial statements of Akumin and Alliance for the periods referenced herein, and has been prepared to reflect the Acquisition and the financing structure established to fund the Acquisition, more fully described in Note 2. The unaudited pro forma combined statement of financial position has been prepared to give effect to the Acquisition and related financings as if they were completed on March 31, 2021. The unaudited pro forma combined statements of comprehensive loss for the year ended December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020 assume that the Acquisition and related financing arrangements were completed on January 1, 2020. Pro forma adjustments reflected in the pro forma financial statements are based on available information and certain assumptions that Akumin believes are reasonable and supportable, and do not reflect the cost of any integration activities or benefits from the Acquisition, including potential synergies that may be derived in future periods. The pro forma financial statements are presented for illustrative purposes only and do not necessarily reflect the actual results of operations of Akumin had the Acquisition occurred at the dates indicated or project the results of operations of Akumin for any future date or period.
The pro forma financial statements should be read in conjunction with the following documents:
• | Akumin’s audited consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods; |
• | Alliance’s audited consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods; |
• | Akumin’s unaudited consolidated financial statements as of March 31, 2021 and 2020 and for the three-month periods then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods; and |
• | Alliance’s unaudited consolidated financial statements as of March 31, 2021 and 2020 and for the three-month periods then ended, and management’s discussion and analysis of financial condition and results of operations for the same periods. |
AKUMIN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
AS AT MARCH 31, 2021
Historical Financial Statements (Note 7) | Pro Forma Adjustments | Pro forma combined | ||||||||||||||||||
(In US$’000) | Akumin | Alliance (Note 6) | Transaction accounting adjustments | Note | ||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | 122,725 | 23,924 | (715,035 | ) | 4 | (a) | 72,748 | |||||||||||||
(23,924 | ) | 4 | (a) | |||||||||||||||||
492,500 | 4 | (b) | ||||||||||||||||||
10,221 | 4 | (d) | ||||||||||||||||||
196,000 | 4 | (e) | ||||||||||||||||||
(23,872 | ) | 4 | (c) | |||||||||||||||||
(9,791 | ) | 4 | (g) | |||||||||||||||||
Accounts receivable | 95,886 | 70,292 | 166,178 | |||||||||||||||||
Prepaid expenses and other current assets | 2,550 | 17,661 | 20,211 | |||||||||||||||||
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Total current assets | 221,161 | 111,877 | (73,901 | ) | 259,137 | |||||||||||||||
Non-current assets | ||||||||||||||||||||
Property and equipment | 79,208 | 159,859 | 171,904 | 4 | (a) | 410,971 | ||||||||||||||
Operating lease right-of-use assets | 124,605 | 88,230 | 212,835 | |||||||||||||||||
Goodwill | 360,604 | 93,996 | (93,996 | ) | 4 | (a) | 866,207 | |||||||||||||
505,603 | 4 | (a) | ||||||||||||||||||
Intangible assets | 6,098 | 137,141 | 329,983 | 4 | (a) | 473,222 | ||||||||||||||
Security deposits and other assets | 4,325 | 25,255 | 29,580 | |||||||||||||||||
Other investments | 8,411 | 3,003 | 11,414 | |||||||||||||||||
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Total assets | 804,412 | 619,361 | 839,593 | 2,263,366 | ||||||||||||||||
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Current liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | 43,006 | 86,554 | (6,912 | ) | 4 | (a) | 122,648 | |||||||||||||
Current portion of finance lease liabilities | 3,432 | 4,398 | 7,830 | |||||||||||||||||
Current portion of operating lease liabilities | 9,417 | 19,887 | 29,304 | |||||||||||||||||
Current portion of long-term debt | 411 | 37,490 | (20,250 | ) | 4 | (a) | 17,651 | |||||||||||||
Earn-out liability | 4,689 | — | 4,689 | |||||||||||||||||
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Total current liabilities | 60,955 | 148,329 | (27,162 | ) | 182,122 | |||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Finance lease liabilities | 12,065 | 3,374 | 15,439 | |||||||||||||||||
Operating lease liabilities | 120,863 | 74,238 | 195,101 | |||||||||||||||||
Long-term debt | 467,480 | 560,595 | (506,960 | ) | 4 | (a) | 1,192,982 | |||||||||||||
492,500 | 4 | (b) | ||||||||||||||||||
179,367 | 4 | (e) | ||||||||||||||||||
Other long-term liabilities | 1,346 | 16,070 | (6,845 | ) | 4 | (a) | 10,571 | |||||||||||||
Deferred tax liabilities | 860 | 3,184 | 133,000 | 4 | (a) | 137,044 | ||||||||||||||
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Total liabilities | 663,569 | 805,790 | 263,901 | 1,733,260 | ||||||||||||||||
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Shareholders’ equity | ||||||||||||||||||||
Common shares and additional paid-in capital | 161,392 | 78,393 | (78,393 | ) | 4 | (a) | 230,632 | |||||||||||||
42,386 | 4 | (a) | ||||||||||||||||||
9,354 | 4 | (d) | ||||||||||||||||||
17,500 | 4 | (f) | ||||||||||||||||||
Accumulated other comprehensive loss | — | (11,663 | ) | 11,663 | 4 | (a) | — | |||||||||||||
Accumulated deficit | (26,079 | ) | (330,424 | ) | 330,424 | 4 | (a) | (59,742 | ) | |||||||||||
(23,872 | ) | 4 | (c) | |||||||||||||||||
(9,791 | ) | 4 | (g) | |||||||||||||||||
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Equity attributable to shareholders of the Company | 135,313 | (263,694 | ) | 299,271 | 170,890 | |||||||||||||||
Non-controlling interests | 5,530 | 77,265 | 276,422 | 4 | (a) | 359,217 | ||||||||||||||
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Total shareholders’ equity | 140,843 | (186,429 | ) | 575,693 | 530,107 | |||||||||||||||
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Total liabilities and shareholders’ equity | 804,412 | 619,361 | 839,593 | 2,263,366 | ||||||||||||||||
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2
AKUMIN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED DECEMBER 31, 2020
Historical Financial Statements (Note 7) | Pro Forma Adjustments | Pro forma combined | ||||||||||||||||||
(In US$’000) | Akumin | Alliance | Transaction accounting adjustments | Note | ||||||||||||||||
Revenue | 251,283 | 496,208 | 747,491 | |||||||||||||||||
Cost of operations, excluding depreciation and amortization | 199,887 | 387,510 | 587,397 | |||||||||||||||||
Depreciation and amortization | 20,460 | 67,110 | 121,415 | 5 | (a) | 208,985 | ||||||||||||||
Operational financial instruments revaluation and other ( gains) losses | (3,908 | ) | 5,812 | (5,812 | ) | 5 | (c) | (3,908 | ) | |||||||||||
Impairment charges | — | 29,580 | 29,580 | |||||||||||||||||
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Income from operations | 34,844 | 6,196 | (115,603 | ) | (74,563 | ) | ||||||||||||||
Other income and expenses | ||||||||||||||||||||
Interest expense | 32,781 | 50,669 | 31,875 | 5 | (b) | 101,719 | ||||||||||||||
(47,273 | ) | 5 | (c) | |||||||||||||||||
23,876 | 5 | (e) | ||||||||||||||||||
9,791 | 5 | (f) | ||||||||||||||||||
Loss on extinguishment or modification of debt | — | 14,614 | (14,614 | ) | 5 | (c) | — | |||||||||||||
Other financial instruments revaluation and other ( gains) losses | 22,079 | — | 22,079 | |||||||||||||||||
Settlement costs and other ( recoveries) | 2,324 | (8,156 | ) | (5,832 | ) | |||||||||||||||
Acquisition-related costs | 1,079 | 1,358 | 23,872 | 5 | (d) | 26,309 | ||||||||||||||
Earnings from unconsolidated investee | — | (1,276 | ) | (1,276 | ) | |||||||||||||||
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Income ( loss) before income taxes | (23,419 | ) | (51,013 | ) | (143,130 | ) | (217,562 | ) | ||||||||||||
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Income tax provision (benefit) | (5,751 | ) | 264 | (37,432 | ) | 5 | (f) | (42,919 | ) | |||||||||||
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Net income ( loss) for the period | (17,668 | ) | (51,277 | ) | (105,697 | ) | (174,642 | ) | ||||||||||||
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Less: Net income attributable to noncontrolling interest | 2,729 | 12,132 | 14,861 | |||||||||||||||||
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Net income ( loss) attributable to common shareholders | (20,397 | ) | (63,409 | ) | (105,697 | ) | (189,503 | ) | ||||||||||||
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Comprehensive loss, net of taxes: | ||||||||||||||||||||
Net income (loss) for the period | (17,668 | ) | (51,277 | ) | (105,697 | ) | (174,642 | ) | ||||||||||||
Unrealized loss on hedging transactions, net of taxes | — | (6,325 | ) | 6,325 | 5 | (c) | — | |||||||||||||
Reclassification adjustment for losses included in net loss, net of taxes | — | 5,812 | (5,812 | ) | 5 | (c) | — | |||||||||||||
Foreign currency translation adjustment | — | 1 | 1 | |||||||||||||||||
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Comprehensive loss, net of taxes | (17,668 | ) | (51,789 | ) | (105,184 | ) | (174,641 | ) | ||||||||||||
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Less: Comprehensive income attributable to noncontrolling interest | 2,729 | 12,132 | 14,861 | |||||||||||||||||
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Comprehensive loss attributable to common shareholders | (20,397 | ) | (63,921 | ) | (105,184 | ) | (189,502 | ) | ||||||||||||
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Net income (loss) per share - basic and diluted (in $) | (0.29 | ) | 5 | (h) | 2.16 |
3
AKUMIN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
Historical Financial Statements (Note 7) | Pro Forma Adjustments | Pro forma combined | ||||||||||||||||||
(In US$’000) | Akumin | Alliance | Transaction accounting adjustments | Note | ||||||||||||||||
Revenue | 66,889 | 119,513 | 186,402 | |||||||||||||||||
Cost of operations, excluding depreciation and amortization | 53,551 | 94,006 | 147,557 | |||||||||||||||||
Depreciation and amortization | 5,576 | 15,211 | 31,921 | 5 | (a) | 52,708 | ||||||||||||||
Operational financial instruments revaluation and other ( gains) losses | 90 | 1,606 | (1,606 | ) | 5 | (c) | 90 | |||||||||||||
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Income from operations | 7,672 | 8,690 | (30,315 | ) | (13,953 | ) | ||||||||||||||
Other income and expenses | ||||||||||||||||||||
Interest expense | 8,368 | 14,357 | 7,969 | 5 | (b) | 22,928 | ||||||||||||||
(13,735 | ) | 5 | (c) | |||||||||||||||||
5,969 | 5 | (e) | ||||||||||||||||||
Other financial instruments revaluation and other ( gains) losses | (3,366 | ) | — | (3,366 | ) | |||||||||||||||
Settlement costs and other ( recoveries) | (24 | ) | (42 | ) | (66 | ) | ||||||||||||||
Acquisition-related costs | 1,279 | 704 | 1,983 | |||||||||||||||||
Earnings from unconsolidated investee | — | (317 | ) | (317 | ) | |||||||||||||||
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Income ( loss) before income taxes | 1,415 | (6,012 | ) | (30,518 | ) | (35,115 | ) | |||||||||||||
Income tax provision (benefit) | 281 | — | (8,087 | ) | 5 | (g) | (7,806 | ) | ||||||||||||
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Net income ( loss) for the period | 1,134 | (6,012 | ) | (22,431 | ) | (27,309 | ) | |||||||||||||
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Less: Net income attributable to noncontrolling interest | 453 | 3,895 | 4,348 | |||||||||||||||||
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Net income ( loss) attributable to common shareholders | 681 | (9,907 | ) | (22,431 | ) | (31,657 | ) | |||||||||||||
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Comprehensive loss, net of taxes: | ||||||||||||||||||||
Net income (loss) for the period | 1,134 | (6,012 | ) | (22,431 | ) | (27,309 | ) | |||||||||||||
Unrealized gain (loss) on hedging transactions, net of taxes | — | (404 | ) | 404 | 5 | (c) | — | |||||||||||||
Reclassification adjustment for losses included in net loss, net of taxes | — | 1,606 | (1,606 | ) | 5 | (c) | — | |||||||||||||
Foreign currency translation adjustment | — | — | — | |||||||||||||||||
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Comprehensive loss, net of taxes | 1,134 | (4,810 | ) | (23,633 | ) | (27,309 | ) | |||||||||||||
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Less: Comprehensive income attributable to noncontrolling interest | 453 | 3,895 | 4,348 | |||||||||||||||||
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Comprehensive loss attributable to common shareholders | 681 | (8,705 | ) | (23,633 | ) | (31,657 | ) | |||||||||||||
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Net income (loss) per share - basic and diluted (in $) | 0.01 | 5 | (h) | (0.35 | ) |
4
AKUMIN INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2020
Historical Financial Statements (Note 7) | Pro Forma Adjustments | Pro forma combined | ||||||||||||||||||
(In US$’000) | Akumin | Alliance | Transaction accounting adjustments | Note | ||||||||||||||||
Revenue | 71,262 | 132,405 | 203,667 | |||||||||||||||||
Cost of operations, excluding depreciation and amortization | 56,945 | 108,538 | 165,483 | |||||||||||||||||
Depreciation and amortization | 4,987 | 16,994 | 30,138 | 5 | (a) | 52,119 | ||||||||||||||
Operational financial instruments revaluation and other ( gains) losses | (6,267 | ) | 986 | (986 | ) | (6,267 | ) | |||||||||||||
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Income from operations | 15,597 | 5,887 | (29,152 | ) | (7,668 | ) | ||||||||||||||
Other income and expenses | ||||||||||||||||||||
Interest expense | 7,463 | 12,213 | 7,969 | 5 | (b) | 32,103 | ||||||||||||||
(11,302 | ) | 5 | (c) | |||||||||||||||||
5,969 | 5 | (e) | ||||||||||||||||||
9,791 | 5 | (f) | ||||||||||||||||||
Other financial instruments revaluation and other ( gains) losses | 4,263 | — | 4,263 | |||||||||||||||||
Settlement costs and other ( recoveries) | 356 | 270 | 626 | |||||||||||||||||
Acquisition-related costs | 219 | 514 | 23,872 | 5 | (d) | 24,605 | ||||||||||||||
Earnings from unconsolidated investee | — | (309 | ) | (309 | ) | |||||||||||||||
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Income ( loss) before income taxes | 3,296 | (6,801 | ) | (65,451 | ) | (68,956 | ) | |||||||||||||
Income tax provision (benefit) | 445 | 38 | (17,345 | ) | 5 | (g) | (16,862 | ) | ||||||||||||
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Net income ( loss) for the period | 2,851 | (6,839 | ) | (48,106 | ) | (52,094 | ) | |||||||||||||
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Less: Net income attributable to noncontrolling interest | 615 | 4,727 | 5,342 | |||||||||||||||||
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Net income ( loss) attributable to common shareholders | 2,236 | (11,566 | ) | (48,106 | ) | (57,436 | ) | |||||||||||||
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Comprehensive loss, net of taxes: | ||||||||||||||||||||
Net income (loss) for the period | 2,851 | (6,839 | ) | (48,106 | ) | (52,094 | ) | |||||||||||||
Unrealized gain (loss) on hedging transactions, net of taxes | — | (5,893 | ) | 5,893 | 5 | (c) | — | |||||||||||||
Reclassification adjustment for losses included in net loss, net of taxes | — | 986 | (986 | ) | 5 | (c) | — | |||||||||||||
Foreign currency translation adjustment | — | (30 | ) | (30 | ) | |||||||||||||||
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Comprehensive loss, net of taxes | 2,851 | (11,776 | ) | (43,199 | ) | (52,124 | ) | |||||||||||||
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Less: Comprehensive income attributable to noncontrolling interest | 615 | 4,727 | 5,342 | |||||||||||||||||
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Comprehensive loss attributable to common shareholders | 2,236 | (16,503 | ) | (43,199 | ) | (57,466 | ) | |||||||||||||
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Net income (loss) per share - basic and diluted (in $) | 0.03 | 5 | (h) | (0.64 | ) |
5
AKUMIN INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Note 1. Basis of presentation
The pro forma combined financial statements are based on the respective historical consolidated financial statements of Akumin and Alliance, and has been prepared to reflect the Acquisition and the financing structure established to fund the Acquisition.
The unaudited pro forma combined statement of financial position has been prepared to give effect to the Acquisition and related financing arrangements as if it was completed on March 31, 2021. The unaudited pro forma combined statements of comprehensive loss for the year ended December 31, 2020 and for the three months ended March 31, 2021 and March 31, 2020 assume that the Acquisition and related financing arrangements were completed on January 1, 2020. Pro forma adjustments reflected in the pro forma financial statements are based on available information and certain assumptions that Akumin believes are reasonable and supportable, and do not reflect the cost of any integration activities or benefits from the Acquisition, including potential synergies that may be derived in future periods. The pro forma financial statements are presented for illustrative purposes only and do not necessarily reflect the actual results of operations of Akumin had the Acquisition occurred at the dates indicated or project the results of operations of Akumin for any future date or period. The pro forma combined financial statements have been prepared on the basis of the assumptions and adjustments described below and in subsequent notes.
The pro forma financial statements were prepared using the acquisition method of accounting in accordance with ASC 805 Business Combinations, with Akumin being the legal and accounting acquirer of Alliance. Under the acquisition method, the fair value of the purchase consideration, as well as the assets acquired and liabilities assumed is based on valuation which involves judgment. Accordingly, the transaction accounting pro forma adjustments have been recorded based on preliminary estimates of fair value, which have been made solely for the purpose of preparing these pro forma financial statements. Actual fair value may vary from these preliminary estimates and the differences could have a material impact on the accompanying pro forma financial statements and Akumin’s future results of operations and financial position. Accordingly, there can be no assurance that the final allocation of the purchase price will not differ from the preliminary allocation reflected in the pro forma financial statements. Additionally, since the Acquisition has not yet closed as of the date the pro forma financial statements were prepared, it was necessary for Akumin’s management to make assumptions and estimates with respect to certain elements of the source of financing. Actual composition and terms of the financing arrangements may differ from management’s assumptions and estimates, which may also have a material impact on the accompanying pro forma financial statements and Akumin’s future results of operations and financial position.
The pro forma adjustments are based upon the best available information and certain assumptions that Akumin believes to be reasonable. The accounting policies used to compute the pro forma adjustments include all adjustments necessary for the fair presentation of the Acquisition in accordance with the recognition and measurement principles of accounting principles generally accepted in the United States of America (“U.S. GAAP”) and incorporate the significant accounting policies expected to be used to prepare Akumin’s future consolidated financial statements.
There are no material transactions undertaken between Akumin and Alliance during the periods presented in the pro forma financial statements that would need to be eliminated.
Certain reclassifications have been made to Akumin’s and Alliance’s respective historical financial statements in preparation of the pro forma financial statements to conform to the financial statement presentation expected to be adopted post-closing of the Acquisition as described in the notes below.
6
Unless indicated otherwise in the notes to the pro forma financial statements, Akumin applied applicable enacted statutory tax rates in 2021, and has used a tax rate of 26.5 percent to calculate the tax impact of the pro forma adjustments. These rates may be subject to change and may not be reflective of Akumin´s effective tax rate for future periods after consummation of the Acquisition.
Note 2. Financing of the Acquisition
The total purchase price is expected to consist of:
1) | $715.0 million – Cash; |
2) | $62.6 million – Assumption of Alliance’s existing capital leases and other debt-like obligations; and |
3) | $42.4 million – Issuance of Akumin common shares to the Seller, equal to 19.99% of Akumin’s issued and outstanding common shares immediately prior to the signing of the definitive purchase agreement at $2.98 per share, which was priced on the basis of the volume-weighted average trading price of the common shares on the NASDAQ for the five trading days ending on the trading day immediately prior to the signing of the definitive purchase agreement. |
Akumin intends to finance the $715 million cash purchase price payable on closing of the Acquisition as follows:
1) | $492.5 million –Proceeds from the issuance of $500 million of Notes offered hereby, net of issuance costs; |
2) | $186.2 million of proceeds from the issuance of $200 million Series A Unsecured Notes due 2032/2033 to Stonepeak, net of issuance costs, less $9.8 million cash commitment fees paid to Stonepeak for its $489.6 million additional capital commitment; |
3) | $10.2 million – Proceeds from the issuance of Akumin’s common shares to Stonepeak, net of issuance costs; |
4) | $26.1 million – Cash on hand. |
As a part of the issuance of Series A Unsecured Notes and the issuance of common shares to Stonepeak, Akumin expects to issue to Stonepeak approximately 10,067,114 warrants to acquire Akumin’s common shares at the Issue Price, expiring 10 years from the date of issuance.
Note 3. Preliminary purchase price allocation
The Acquisition will be accounted for as a business combination using the acquisition method of accounting in conformity with U.S. GAAP. Under this method, the assets acquired, liabilities assumed and non-controlling interest of the acquiree have been recorded based on preliminary estimates of fair value. In the preliminary purchase price allocation, the difference between the purchase consideration and book value of assets acquired and liabilities assumed by Akumin was allocated based on management’s judgment and assumptions. Note that assets acquired and liabilities assumed in the Acquisition exclude certain significant items reflected in Alliance’s historical consolidated statement of financial position. The estimated fair value of the purchase consideration and the net identifiable assets acquired are as follows:
7
(in US$0 00’) | Fair value | |||
Assets acquired: | ||||
Accounts receivable | 70,292 | |||
Prepaid expenses and other current assets | 17,661 | |||
Property and equipment | 331,763 | |||
Operating lease right-of-use assets | 88,230 | |||
Identifiable intangible assets | 467,124 | |||
Security deposits and other assets | 25,255 | |||
Other investments | 3,003 | |||
Liabilities assumed: | ||||
Accounts payable and accrued liabilities | 79,642 | |||
Current portion of finance lease liabilities | 4,398 | |||
Current portion of operating lease liabilities | 19,887 | |||
Current portion of long-term debt | 17,240 | |||
Finance lease liabilities | 3,374 | |||
Operating lease liabilities | 74,238 | |||
Long-term debt | 53,635 | |||
Other long-term liabilities | 9,225 | |||
Deferred tax liabilities | 3,184 | |||
Deferred tax liabilities arising from purchase accounting | 133,000 | |||
Net identifiable assets | 605,505 | |||
Fair value of purchase consideration | ||||
Cash | 715,035 | |||
Akumin common shares | 42,386 | |||
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Fair value of purchase consideration for Alliance’s share of net identifiable assets | 757,421 | |||
Fair value of NCI Alliance’s noncontrolling interest | 353,687 | |||
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Fair value of purchase price for the net identifiable assets | 1,111,108 | |||
Goodwill | 505,603 |
Note 4. Pro forma adjustments – unaudited pro forma combined statement of financial position
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined statement of financial position:
(a) | Purchase accounting using the acquisition method: Reflects the application of purchase accounting based on the preliminary purchase price allocation as shown in Note 3. |
(b) | Issuance of the Notes: Reflects the issuance of the additional $500 million of Notes offered hereby to finance the Acquisition, net of issuance costs. |
(c) | Transaction costs: As a result of the Acquisition, both Akumin and Alliance have incurred and will incur significant transaction costs. The adjustment reflects the accrual of expected total transaction costs that have not been recognized in the historical financial statements. These costs mainly relate to internal and external costs, including advisors’ fees, to prepare for and execute the Acquisition. Issuance costs of the Series A Unsecured Notes due 2023/2033, the Notes and the equity raise have been recorded as a reduction from the balances of long-term debt and common shares, respectively. |
(d) | Issuance of Akumin’s common shares: Reflects the issuance of approximately 3.5 million Akumin’s common shares to Stonepeak at the Issue Price, net of cash issuance costs and issuance costs satisfied by the issuance of warrants to purchase Akumin’s common shares (see Note 4(f) below). |
(e) | Issuance of Series A Unsecured Notes: Reflects the issuance of $200 million Series A Unsecured Notes due 2032/2033 to Stonepeak to finance the Acquisition, net of cash issuance costs and issuance costs satisfied by the issuance of warrants to purchase Akumin’s common shares (see Note 4(f) below). |
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(f) | Issuance of warrants to purchase Akumin’s common shares: Reflects the issuance of approximately 10,067,114 warrants to purchase Akumin’s common shares to Stonepeak, in connection with the issuance of the Series A Unsecured Notes and common shares as described in Notes 4(d) and 4(e) above. The warrants are treated as issuance costs of the Series A Unsecured Notes and the common shares in proportion to their respective fair value on the issuance date. |
(g) | Commitment fees: In addition to the $200 million Series A Unsecured Notes issued to Stonepeak as described in note 4(e), Akumin has obtained an additional $489.6 million of capital commitment from Stonepeak as a form of back-up financing in the event that the offering of the Notes is not completed at the time the Acquisition closes. The adjustment reflects the 2% commitment fees paid to Stonepeak for providing the additional capital commitment. |
Note 5. Pro forma adjustments – unaudited pro forma combined statement of comprehensive loss
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined statement of comprehensive loss:
(a) | Depreciation and amortization of fair value increment: Reflects the incremental amortization of property and equipment and definite-lived intangible assets as a result of the preliminary purchase price allocation as illustrated in Note 3. Definite-lived intangible assets arising from the Acquisition include trade name, customer relationships, and referral network. The depreciation of property and equipment is based on estimated useful lives range from 5 to 10 years, and the amortization of intangible assets is based on estimated useful lives of approximately 5 years. |
(b) | Interest expense on Notes offered hereby: Reflects the net interest expense including amortization of issuance costs on the Notes offered hereby issued to finance the Acquisition at an assumed interest rate. If the current interest rate on the additional Notes offered hereby increases or decreases by 0.125%, net interest expense will increase or decrease by $625,000 per annum. |
(c) | Reversal of interest expenses and related gains and losses on Alliance’s term loan and credit facilities: As Alliance’s term loan and credit facilities will not be assumed, related historical interest expenses have been reversed, together with gains and losses from the debt modification as well as the remeasurement of the related interest rate contracts. |
(d) | Transaction costs: Estimated transaction costs associated with the Acquisition (see Note 4(c)) that have not been recognized in the historical statement of comprehensive income/loss have been recognized as a pro forma adjustment for the year ended December 31, 2020, assuming the Acquisition consummated as of January 1, 2020. Transaction costs included in the historical statement of comprehensive income/loss for the three months ended March 31, 2021 have not been reversed. |
(e) | Interest expense on Series A Unsecured Notes: Reflects the net interest expense including amortization of issuance costs on the Series A Unsecured Notes issued to Stonepeak. |
(f) | Commitment fees: Commitment fees paid to Stonepeak for providing the $489.6 million additional capital commitment (see Note 4(g)) have been recognized as a pro forma adjustment for the year ended December 31, 2020, assuming the Acquisition consummated as of January 1, 2020. |
(g) | Effect of income taxes: Reflects tax impact of pro forma adjustments to the statement of comprehensive income/loss, computed at Akumin’s statutory tax rate of 26.5%. |
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(h) | Pro forma earnings (loss) per share: please see tables below for the calculation of pro forma earnings (loss) per share for each period presented: |
For the year ended December 31, 2020 | Akumin | Alliance | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Net (loss) income attributable to common shareholders (in $000’s) | $ | (20,397 | ) | $ | (63,409 | ) | $ | (105,697 | ) | $ | (189,503 | ) | ||||
Weighted average basic and diluted common shares outstanding | 70, 101, 618 | 17, 723, 570 | 87,825,188 | |||||||||||||
Basic and diluted loss per share (in $) | $ | (0.29 | ) | $ | (2.16 | ) | ||||||||||
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For the three months ended March 31, 2021 | Akumin | Alliance | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Net (loss) income attributable to common shareholders (in $000’s) | $ | 681 | $ | (9,907 | ) | $ | (22,431 | ) | $ | (31,657 | ) | |||||
Weighted average basic and diluted common shares outstanding | 71,989,726 | 17,723,570 | 89, 713,296 | |||||||||||||
Basic and diluted loss per share (in $) | $ | 0.01 | $ | (0.35 | ) | |||||||||||
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For the three months ended March 31, 2020 | Akumin | Alliance | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||
Net (loss) income attributable to common shareholders (in $000’s) | $ | 2,236 | $ | (11,566 | ) | $ | (48,106 | ) | $ | (57,436 | ) | |||||
Weighted average basic and diluted common shares outstanding | 71,649,321 | 17,723,570 | 89,372,891 | |||||||||||||
Basic and diluted loss per share (in $) | $ | 0.03 | $ | (0.64 | ) | |||||||||||
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Note 6: Accounting principles conformation
Akumin adopted ASC 842 Leases (“ASC 842”) as of January 1, 2019, while Alliance has not adopted the accounting standard due to its status as a non-public business entity as defined under U.S. GAAP. The adjustments reflect the impact of adopting ASC 842 as of January 1, 2019 on Alliance’s historical statement of financial position, which includes recognizing lease liabilities and right-of-use assets for all operating leases where Alliance is the lessee. No adjustments are required on the unaudited pro forma combined statement of comprehensive loss, as the requirements under ASC 842 are largely consistent with Alliance’s current accounting treatment with respect to rent expenses. Please see below for a reconciliation from Alliance’s historical statement of financial position after reclassifications made in Note 7 to Alliance’s historical statement of financial position as shown on the face of the unaudited pro forma combined statement of financial position.
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(In US$’000) | As at March 31, 2021, after reclassification (Note 7) | Adjustments to align accounting principles | As shown on pro forma combined statement of financial position | |||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 23,924 | $ | 23,924 | ||||||||
Accounts receivable | 70,292 | 70,292 | ||||||||||
Prepaid expenses and other current assets | 17,661 | 17,661 | ||||||||||
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Total current assets | 111,877 | — | 111,877 | |||||||||
Non-current assets | ||||||||||||
Property and equipment | 159,859 | 159,859 | ||||||||||
Operating lease right-of-use assets | — | 88,230 | 88,230 | |||||||||
Goodwill | 93,996 | 93,996 | ||||||||||
Intangible assets | 137,141 | 137,141 | ||||||||||
Security deposits and other assets | 25,255 | 25,255 | ||||||||||
Other investments | 3,003 | 3,003 | ||||||||||
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Total assets | $ | 531,131 | $ | 88,230 | $ | 619,361 | ||||||
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Current liabilities | ||||||||||||
Accounts payable and accrued liabilities | $ | 87,212 | $ | (658 | ) | $ | 86,554 | |||||
Current portion of finance lease liabilities | 4,398 | 4,398 | ||||||||||
Current portion of operating lease liabilities | — | 19,887 | 19,887 | |||||||||
Current portion of long-term debt | 37,490 | 37,490 | ||||||||||
Earn-out liability | — | — | ||||||||||
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Total current liabilities | 129,100 | 19,229 | 148,329 | |||||||||
Non-current liabilities | ||||||||||||
Finance lease liabilities | 3,374 | 3,374 | ||||||||||
Operating lease liabilities | — | 74,238 | 74,238 | |||||||||
Long-term debt | 560,595 | 560,595 | ||||||||||
Other long-term liabilities | 21,307 | (5,237 | ) | 16,070 | ||||||||
Deferred tax liabilities | 3,184 | 3,184 | ||||||||||
— | ||||||||||||
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Total liabilities | $ | 717,560 | $ | 88,230 | $ | 805,790 | ||||||
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Shareholders’ equity | ||||||||||||
Common shares and additional paid-in capital | $ | 78,393 | $ | 78,393 | ||||||||
Accumulated other comprehensive loss | (11,663 | ) | (11,663 | ) | ||||||||
Accumulated deficit | (330,424 | ) | (330,424 | ) | ||||||||
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Equity attributable to shareholders of the Company | (263,694 | ) | (263,694 | ) | ||||||||
Non-controlling interests | 77,265 | 77,265 | ||||||||||
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Total shareholders’ equity | $ | (186,429 | ) | $ | — | $ | (186,429 | ) | ||||
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Total liabilities and shareholders’ equity | $ | 531,131 | $ | 88,230 | $ | 619,361 | ||||||
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Note 7. Reclassifications of historical financial statements to conform presentation
The classification of certain items presented by Alliance has been modified in order to align with the presentation used by Akumin and the presentation expected to be adopted post-closing of the Acquisition. See below for reconciliations from Akumin and Alliance’s historical financial statements to the presentation of the pro forma financial statements.
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Reconciliation from historical financial statements to historical information presented in unaudited pro forma combined statement of financial position
Akumin
Balance Sheet as at March 31, 2021 | ||||||
Historical classification | Amount ($’000) | Pro Forma classification | ||||
Finance lease liabilities | 3,432 | Current portion of finance lease liabilities | ||||
operating lease liabilities (right-of-use) | 9,417 | Current portion of operating lease liabilities | ||||
Senior loan payable | 411 | Current portion of long-term debt | ||||
Senior loan payable | 467,480 | Long-term debt | ||||
Accrued payroll taxes | 1,346 | Other long-term liabilities | ||||
Additional paid-in capital | 161,392 | Common shares and additional paid-in capital | ||||
Deficit | (26,079 | ) | Accumulated deficit |
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Alliance
Balance Sheet as at March 31, 2021 | ||||||
Historical classification | Amount ($’000) | Pro Forma classification | ||||
Prepaid expenses | 9,350 | |||||
Other current assets | 8,311 | |||||
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17,661 | Prepaid expenses and other current assets | |||||
Other intangible assets, net | 137,141 | Intangible assets | ||||
25,255 | Security deposits and other assets | |||||
3,003 | Other investments | |||||
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Other assets | 28,258 | |||||
Accounts payable | 21,924 | |||||
Accrued compensation and related expenses | 22,364 | |||||
Other accrued liabilities | 42,924 | |||||
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87,212 | Accounts payable and accrued liabilities | |||||
Current portion of obligations under capital leases | 4,398 | Current portion of finance lease liabilities | ||||
Long-term debt, net of current portion | 560,595 | Long-term debt | ||||
Obligations under capital leases, net of current portion | 3,374 | Finance lease liabilities | ||||
21,307 | Other long-term liabilities | |||||
3,184 | Deferred tax liabilities | |||||
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Other liabilities | 24,491 | |||||
Common stock | 193 | |||||
Additional paid-in capital | 78,200 | |||||
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78,393 | Common shares and additional paid-in capital |
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Reconciliation from historical financial statements to historical information presented in unaudited pro forma combined statement of comprehensive income/loss
Akumin
Income Statement for the year ended December 31, 2020 | ||||||
Historical classification | Amount ($’000) | Pro Forma classification | ||||
Service fees - net of allowances and discounts | 243,981 | |||||
Other revenue | 7,302 | |||||
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251,283 | Revenue | |||||
Cost of operations, excluding depreciation and amortization | 197,803 | |||||
Stock- based compensation | 2,084 | |||||
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199,887 | Cost of operations, excluding depreciation and amortization |
Income Statement for the 3 months ended March 31, 2021 and March 31, 2020 | ||||||||||
Historical classification | For the 3 months ended March 31, 2021 ($’000) | For the 3 months ended March 31, 2020 ($’000) | Pro Forma classification | |||||||
Service fees - net of allowances and discounts | 66,392 | 70,637 | ||||||||
Other revenue | 497 | 625 | ||||||||
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66,889 | 71,262 | Revenue | ||||||||
Cost of operations, excluding depreciation and | 53,124 | 56,354 | ||||||||
Stock- based compensation | 427 | 593 | ||||||||
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53,551 | 56,946 | Cost of operations, excluding depreciation and amortization |
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Alliance
Income Statement for the year ended December 31, 2020 | ||||||
Historical classification | Amount ($’000) | Pro Forma classification | ||||
Cost of revenues, excluding depreciation and amortization | 307,028 | |||||
Selling, general and administrative expenses | 80,482 | |||||
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387,510 | Cost of operations, excluding depreciation and amortization | |||||
Transaction costs | 1,358 | Acquisition- related costs | ||||
Depreciation expense | 54,870 | |||||
Amortization expense | 12,240 | |||||
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67,110 | Depreciation and amortization | |||||
Restructuring charges | 1,124 | |||||
Severance and related costs | 1,870 | |||||
Other income, net | (11,150 | ) | ||||
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(8,156 | ) | Settlement costs and other ( recoveries) | ||||
5,812 | Operational financial instruments revaluation and other (gains) losses | |||||
50,669 | Interest expense, net | |||||
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Interest expense, net | 56,481 |
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Income Statement for the 3 months ended March 31, 2021 and March 31, 2020 | ||||||||||
Historical classification | For the 3 months ended March 31, 2021 ($’000) | For the 3 months ended March 31, 2020 ($’000) | Pro Forma classification | |||||||
Cost of revenues, excluding depreciation and a | 73,033 | 85,517 | ||||||||
Selling, general and administrative expenses | 20,973 | 23,021 | ||||||||
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94,006 | 108,538 | Cost of operations, excluding depreciation and amortization | ||||||||
Transaction costs | 704 | 514 | Acquisition- related costs | |||||||
Depreciation expense | 12,721 | 13,860 | ||||||||
Amortization expense | 2,490 | 3,134 | ||||||||
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15,211 | 16,994 | Depreciation and amortization | ||||||||
Restructuring charges | 609 | 136 | ||||||||
Severance and related costs | 129 | 537 | ||||||||
Other income, net | (780 | ) | (403 | ) | ||||||
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(42 | ) | 270 | Settlement costs and other ( recoveries) | |||||||
1,606 | 986 | Operational financial instruments revaluation and other (gains) losses | ||||||||
14,357 | 12,213 | Interest expense, net | ||||||||
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| |||||||
Interest expense, net | 15,963 | 13,199 |
16