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CANO Cano Health

Filed: 12 Nov 20, 9:07am

 

Exhibit 99.3

 

This supplement (“Supplement”) is for informational purposes only to assist interested parties in making their own evaluation with respect to the proposed business combination (the “Business Combination”) between Jaws Acquisition Corporation (“Jaws”) and Cano Health, LLC (“Cano” or the “Company”). The information contained herein does not purport to be all-inclusive and none of Jaws, the Company or Credit Suisse Securities (USA) LLC nor any of their respective affiliates nor any of its or their control persons, officers, directors, employees or representatives makes any representation or warranty, express or implied, as to the accuracy, completeness or reliability of the information contained in this Supplement. You should consult your own counsel and tax and financial advisors as to legal and related matters concerning the matters described herein, and, by accepting this Supplement, you confirm that you are not relying upon the information contained herein to make any decision. The reader shall not rely upon any statement, representation or warranty made by any other person, firm or corporation (including, without limitation, Credit Suisse Securities (USA) LLC or any of its respective affiliates or control persons, officers, directors and employees) in making its investment or decision to invest in the Company. None of Jaws, the Company or Credit Suisse Securities (USA) LLC, nor any of their respective affiliates nor any of its or their control persons, officers, directors, employees or representatives, shall be liable to the reader for any information set forth herein or any action taken or not taken by any reader, including any investment in shares of Jaws or the Company.

 

The financial information and data contained in this Supplement is either audited in accordance with private company auditing standards or is unaudited and, in each case, does not conform to Regulation S-X or Public Company Accounting Oversight Board ("PCAOB") standards. Accordingly, such information and data may not be included in, may be adjusted in or may be presented differently in any proxy statement/prospectus to be filed with the SEC. In particular, this Supplement includes estimates of certain financial metrics of Cano had they been prepared in accordance with PCAOB standards and are based on Cano's historical financials that have been prepared in accordance with private company auditing standards. Cano's actual financial metrics when prepared and audited in accordance with PCAOB standards may differ from the financial metrics included in this Supplement, including with respect to revenue recognition and amortization of goodwill.

 

Some of the financial information and data contained in this Supplement, such as EBITDA and Adjusted EBITDA, has not been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Jaws and Cano believe these non-GAAP measures of financial results provide useful information regarding certain financial and business trends relating to Cano's financial condition and results of operations. Cano's management uses these non-GAAP measures to compare Cano's performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation and for budgeting and planning purposes. Jaws and Cano believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing Cano's financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Jaws and Cano do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in Cano's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. You should review Cano's audited financial statements, which will be presented in the preliminary proxy statement/prospectus to be filed with the SEC, and not rely on any single financial measure to evaluate Cano's business.

 

Additional Information. In connection with the proposed Business Combination, Jaws intends to file with the SEC a registration statement on Form S-4 containing a preliminary proxy statement/prospectus of Jaws, and after the registration statement is declared effective, Jaws will mail a definitive proxy statement/prospectus relating to the proposed Business Combination to its shareholders. This Supplement does not contain all the information that should be considered concerning the proposed Business Combination and is not intended to form the basis of any investment decision or any other decision in respect of the Business Combination. Jaws’ shareholders and other interested persons are advised to read, when available, the preliminary proxy statement/prospectus and the amendments thereto and the definitive proxy statement/prospectus and other documents filed in connection with the proposed Business Combination, as these materials will contain important information about the Company, Jaws and the Business Combination. When available, the definitive proxy statement/prospectus and other relevant materials for the proposed Business Combination will be mailed to shareholders of Jaws as of a record date to be established for voting on the proposed Business Combination. Shareholders will also be able to obtain copies of the preliminary proxy statement/prospectus, the definitive proxy statement/prospectus and other documents filed with the SEC, without charge, once available, at the SEC’s website at www.sec.gov, or by directing a request to: Jaws Acquisition Corporation, 1601 Washington Avenue, Suite 800, Miami Beach, Florida, 33139.

 

Participants in the Solicitation. Jaws, the Company and their respective directors and executive officers may be deemed participants in the solicitation of proxies from Jaws’ shareholders with respect to the proposed Business Combination. A list of the names of Jaws’ directors and executive officers and a description of their interests in Jaws is contained in Jaws’ final prospectus relating to its initial public offering, dated May 13, 2020, which was filed with the SEC and is available free of charge at the SEC’s web site at www.sec.gov, or by directing a request to Jaws Acquisition Corporation, 1601 Washington Avenue, Suite 800, Miami Beach, Florida, 33139. Additional information regarding the interests of the participants in the solicitation of proxies from Jaws’ shareholders with respect to the proposed Business Combination will be contained in the proxy statement/prospectus for the proposed Business Combination when available.

 

No Offer or Solicitation. This communication is for informational purposes only and does not constitute, or form a part of, an offer to sell or the solicitation of an offer to sell or an offer to buy or the solicitation of an offer to buy any securities, and there shall be no sale of securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Jaws Acquisition Corp. has retained KPMG among other third-party advisors, to conduct a quality of earnings analysis and perform due diligence on internal controls, IT, IPO readiness and tax. Additionally, Kirkland & Ellis have been retained for legal due diligence. Both of these work-streams are ongoing.

 

 

 

 

Cano Health, LLC

Consolidated Statements of Operations

 

   2017   2018  2019 
Revenues            
Managed care revenue $67,200,242  $128,712,587  $261,494,399(1)
MSO revenue  48,539,211   93,334,682   83,038,629(1)
Pharmacy revenues  7,915,149   9,395,003   12,897,397 
Other revenues  6,193,999   3,671,922   7,585,152 
Total Revenues  129,848,601   235,114,194   365,015,577 
             
Operating Expenses            
Third-party medical costs  79,226,666   158,016,730   241,089,046(1)
Patient care and operating expenses  24,991,566   28,801,043   43,233,852 
Selling, general and administrative expenses  13,985,024   34,559,813   59,353,628 
Depreciation and amortization expense  5,529,199   9,540,993   17,111,072 
Transaction costs  2,798,510   3,116,072   18,944,576 
Fair value adjustment in contingent considerations - (Note 11)  -   586,058   7,597,620 
Management fees  372,331   440,115   427,379 
Total Operating Expenses  126,903,296   235,060,824   387,757,173 
             
(Loss) Income from Operations $2,945,305  $53,370  $(22,741,596)
             
Other (Expense) Income            
Interest expense  (2,599,149)  (5,361,269)  (10,233,348)
Interest income  -   219,218   318,574 
Other expenses  -   -   (250,000)
Total Other Expenses, Net  (2,599,149)  (5,142,051)  (10,164,774)
             
Net Loss $346,156  $(5,088,681) $(32,906,370)

 

(1) Historical audits adjusted to exclude health plan administrative fees from gross revenues and third-party medical costs

 

Note: Cano financial information shown above is unaudited, does not conform to Regulation S-X or PCAOB standards and includes estimates of certain financial metrics adjusted to reflect PCAOB standards, and such information may not be included, may be adjusted or may be presented differently in filings made with the SEC

 

  Adjusted EBITDA Reconciliation 
  2017  2018  2019 
Net Income $346  $(5,089) $(32,906)
Depreciation & amortization  5,529   9,541   17,111 
Interest expense  2,599   5,142   9,915 
Taxes  -   -   - 
Reported EBITDA  8,475   9,594   (5,881)
             
Fees paid to current owner  1,051   818   3,888(A)
Stock-based compensation  -   258   90(B)
Non-recurring expenses  -   565   1,770(C)
Deferred purchase price expense  -   602   14,842(D)
One-time transaction expenses  2,120   2,723   6,930(E)
De novo pre-opening losses  -   904   2,904(F)
Adjusted EBITDA  11,645   15,464   24,544 
             
Acquired EBITDA (PF in year of acquisition)  -   -   12,254(G)
             
Pro Forma Adjusted EBITDA $11,645  $15,464  $36,798 

 

(A)Represents transaction fees paid to current majority owner under current management agreements, which will be terminated upon going public

 

(B)Represents non-cash compensation charges

 

(C)Includes one-time legal fees, IT expenses, severance, and various other non-recurring items

 

(D)Represents accruals and change in fair value for deferred purchase considerations to be paid to prior owners of acquired businesses

 

(E)Represents legal and professional fees related to historical acquisitions and debt financings

 

(F)Represents de novo losses incurred prior to opening

 

(G)Represents pre-acquisition EBITDA from completed acquisitions, in the year that businesses were acquired

 

 

 

 

Cano Health, LLC

Consolidated Statement of Cash Flows

 

  2017  2018  2019 
Cash flows from operating activities:            
Net income $346,156  $(5,088,681) $(32,906,370)
Reconciliation of net income to net cash used in operating activities:            
Depreciation and amortization expense  489,917   1,107,284   2,999,382 
Amortization of goodwill and intangible assets  5,039,282   8,433,709   14,111,690 
Fair value adjustment to contingent consideration  -   586,058   7,597,620 
Amortization of debt discount and debt issuance costs  226,544   342,222   516,618 
Equity-based compensation  -   225,000   - 
Profit interest units relating to equity-based compensations  -   32,565   90,500 
Changes in operating assets and liabilities:            
Accounts receivable, net  (8,248,612)  (13,731,576)  (25,145,962)
Inventory  38,494   55,988   (373,437)
Other assets  (1,691,912)  (140,938)  1,404,109 
Prepaid expenses and other current assets  (152,896)  (546,924)  (1,236,462)
Accounts payable and accrued expenses  2,761,369   1,888,164   7,909,143 
Interest accrued due to seller  13,089   56,329   1,234,438 
Deferred rent  123,688   867,156   956,140 
Other liabilities  -   23,920   (16,847)
Net cash used in operating activities $(1,054,881) $(5,889,724) $(22,859,438)
             
Cash flows from investing activities:            
Purchase of property and equipment $(2,297,998) $(5,324,577) $(9,213,738)
Acquisitions of subsidiaries  (24,945,041)  (16,690,856)  (82,849,458)
Holdback payment settlement  -   (737,767)  (59,200)
Increase (decrease) in due to sellers  (9,167,331)  (2,526,078)  8,817,728 
Collections on due from escrow  -   4,975,000   - 
Increase in due from seller  -   -   (83,473)
Advances to related parties  -   (4,501,692)  (3,547)
Net cash used in investing activities $(36,410,370) $(24,805,970) $(83,391,688)
             
Cash flows from financing activities:            
Contributions from member $20,546,850  $1,224,987  $60,656,617 
Distributions to member  -   (935,215)  (1,165,213)
Repurchase of shares from member  -   -   (99,990)
Net proceeds from notes payable, net of debt discounts  19,104,042   29,078,750   73,421,176 
Proceeds from revolving credit facility  600,000   12,200,000   18,050,000 
Repayments of revolving credit facility  -   (12,800,000)  (18,050,000)
Repayments of equipment loans  -   (24,458)  (174,143)
Repayments of capital lease obligations  (106,210)  (175,522)  (597,895)
Net cash provided by financing activities $40,144,682  $28,568,542  $132,040,552 
             
Net increase (decrease) in cash and restricted cash  2,679,431   (2,127,152)  25,789,426 
             
Cash and restricted cash - beginning of year  2,850,286   5,529,717   3,402,565 
             
Cash and restricted cash - end of year $5,529,717  $3,402,565  $29,191,991 

 

Note: Cano financial information shown above does not conform to Regulation S-X or PCAOB standards, and such information may not be included, may be adjusted or may be presented differently in filings made with the SEC

 

 

 

 

Cano Health, LLC

Consolidated Balance Sheet

 

  2017  2018  2019 
Assets:            
Current assets:            
Cash $5,529,717  $3,402,565  $29,191,991 
Accounts receivable, net  8,907,266   24,337,501   49,804,463 
Inventory  328,912   272,924   646,361 
Prepaid expenses and other current assets  252,460   799,384   2,035,846 
Due from seller  4,975,000   -   83,473 
Total current assets  19,993,355   28,812,374   81,762,134 
             
Property and equipment, net  3,829,912   8,849,121   19,725,962 
Goodwill, net  37,683,173   52,912,129   121,736,491 
Intangibles, net  27,265,882   32,877,296   80,723,503 
Note receivables - related parties  -   4,626,692   4,630,239 
Other assets  1,900,996   2,072,567   795,058 
Acquisitions (to be allocated pending valuations)  -   -   - 
Total assets  90,673,318   130,150,179   309,373,387 
             
Liabilities:            
Current liabilities:            
Current portion of notes payable  981,250   2,645,781   1,353,349 
Current portion equipment loans  -   171,976   274,972 
Revolving credit facility  600,000   -   - 
Current portion of capital lease obligations  170,444   226,443   477,388 
Accounts payable and accrued expenses  4,172,555   6,060,719   13,969,862 
Current portion due to seller, net  2,787,074   640,257   50,571,534 
Total current liabilities  8,711,323   9,745,176   66,647,105 
             
Long-term liabilities:            
Notes payable, net of current portion and debt discount  28,889,034   56,645,475   131,875,701 
Equipment loans, net of current portion  -   263,752   1,095,307 
Capital lease obligations, net of current portion  609,564   587,601   1,082,377 
Deferred rent  140,236   1,007,392   1,963,532 
Due to seller, net of current portion  841,089   897,418   2,274,683 
Contingent considerations  4,510,000   15,999,717   23,597,337 
Other liabilities  19,647   43,567   26,720 
Total liabilities $43,720,893  $85,190,098  $228,562,762 
             
Member's Capital  46,952,425   44,960,081   80,810,625 
Total liabilities and equity $90,673,318  $130,150,179  $309,373,387 

 

Note: Cano financial information shown above does not conform to Regulation S-X or PCAOB standards, and such information may not be included, may be adjusted or may be presented differently in filings made with the SEC