The following selected historical financial data for Fenix (the accounting acquirer and registrant) as of and for the period from its inception through December 31, 2014 are derived from the audited financial
statements of Fenix included elsewhere in this prospectus. The following selected historical financial data for the Beagell Group and Standard (the accounting co-predecessors) as of December 31, 2014 and 2013, and for the years ended December 31, 2014, 2013 and 2012 are derived from the audited combined financial statements of the Beagell Group and Standard included elsewhere in this prospectus.
The selected unaudited pro forma financial data as of and for the year ended December 31, 2014, are derived from the unaudited pro forma financial statements included elsewhere in this prospectus. The unaudited pro forma financial data give effect to (a) the Combinations, (b) the 2,000-for-1 common stock split, which will occur immediately prior to the completion of this offering, (c) the completion of this offering and the use of the proceeds therefrom and (d) the Borrowings, as if they had occurred on January 1, 2014, and the use of the proceeds therefrom. The pro forma adjustments are based on currently available information and certain estimates and assumptions, and therefore, the actual effects of the transactions reflected in the pro forma data may differ from the effects reflected below. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of these transactions as contemplated and that the pro forma adjustments give appropriate effect to those assumptions. During the periods presented, Fenix and the Founding Companies were not under common control or management and, therefore, the data presented may not be comparable to, or indicative of, post-combination results.
You should review the information below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Unaudited Pro Forma Financial Statements and the related notes beginning on page F-3 of this prospectus, and the audited financial statements of Fenix, the Beagell Group and Standard and the related notes all included elsewhere in this prospectus.
Fenix Pro Forma (Designated accounting acquirer) From January 2, 2014 (Inception) to December 31, 2014 Year Ended December 31, 2014 (Unaudited) Statement of Operations Data:
Total revenues . . . $ — $ 108,216 Cost of goods sold . . . — 71,186 Gross profit . . . — 37,030 Operating expenses . . . (4,748) (44,257)
Operating loss . . . (4,748) (7,227) Nonoperating income . . . 1 864
Loss before income taxes . . . (4,747) (6,363) Benefit for income taxes . . . — (2,418) Net loss . . . $ (4,747) $ (3,945) Basic and diluted loss per share(1) . . . $(4,427.77) $ (0.22) Weighted average basic and diluted shares outstanding(1) . . . 1,072 17,154,526
Other Data:
Beagell Group
(Designated accounting predecessor)
Standard
(Designated accounting predecessor)
Year Ended December 31, Year Ended December 31,
2014 2013 2012 2014 2013 2012
Statement of Operations Data:
Total revenues . . . $ 30,598 $30,661 $31,637 $ 31,126 $ 31,738 $ 31,037 Cost of goods sold . . . 19,897 19,652 19,927 19,717 19,714 20,243 Gross profit . . . 10,701 11,009 11,710 11,409 12,024 10,794 Operating expenses . . . 8,308 9,258 9,649 9,524 11,602 10,377 Operating income . . . 2,393 1,751 2,061 1,885 422 417
Nonoperating (expenses) income . . . 297 (55) 38 842 31 (1)
Income before income taxes . . . 2,690 1,696 2,099 2,727 453 416
Provision for income taxes . . . 448 279 406 684 172 111
Net income . . . $ 2,242 $ 1,417 $ 1,693 $ 2,043 $ 281 $ 305
Other Data:
Adjusted EBITDA(2) . . . $ 4,578 $ 3,659 $ 4,242 $ 3,308 $ 2,325 $ 2,826 Net cash provided by (used in):
Operating activities . . . 2,915 2,609 2,499 2,267 (850) 1,753 Investing activities . . . 32 (267) (1,322) (2,183) (3,823) (132) Financing activities . . . (1,897) (2,390) (2,584) (246) 249 — Fenix (Designated accounting acquirer) As of December 31, 2014 Pro Forma As of December 31, 2014 (Unaudited) Balance Sheet Data:
Cash and cash equivalents . . . $ 453 $ 7,270 Working capital (deficit) . . . (1,128) 47,084 Total assets . . . 849 169,934 Total debt, including current portion . . . — 10,000 Stockholders’ equity (deficit) . . . (1,128) 120,687
Beagell Group
(Designated accounting predecessor)
Standard
(Designated accounting predecessor)
As of December 31, As of December 31,
2014 2013 2014 2013
Balance Sheet Data:
Cash and cash equivalents . . . $ 2,770 $ 1,720 $ 1,354 $ 1,902 Working capital . . . 9,158 7,739 8,665 9,595 Total assets . . . 16,001 14,664 22,265 20,670 Total debt, including current portion . . . 130 128 — — Stockholders’ equity . . . 11,990 11,647 16,301 15,486
(1) Pro forma earnings per share and related weighted-average shares give effect to the 2,000-for-1 common stock split and reflect the public offering price of $8.00 per share.
Selected Individual Founding Company Financial Data (In thousands)
The selected historical financial data as of December 31, 2014 and 2013, and for the years ended December 31, 2014, 2013 and 2012 for each of the Founding Companies, other than the Beagell Group and Standard, are derived from the audited financial statements of each such Founding Company included elsewhere in this prospectus.
You should review the information below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements of each of the Founding Companies and the related notes included elsewhere in this prospectus. These selected historical financial results may not be indicative of our future financial or operating results.
Year Ended December 31,
2014 2013 2012
Eiss Brothers
Statement of Operations Data:
Total revenues . . . $11,975 $ 10,022 $ 9,054 Cost of goods sold . . . 8,838 7,253 6,200 Gross profit . . . 3,137 2,769 2,854 Operating expenses . . . 2,294 2,420 2,583 Operating income . . . 843 349 271 Nonoperating expenses . . . (45) (1) (26)
Income before income taxes . . . 798 348 245 Provision for income taxes . . . — — — Net income . . . $ 798 $ 348 $ 245
As of December 31, 2014 2013 Balance Sheet Data:
Cash and cash equivalents . . . $ 633 $ 352 Working capital . . . 6,189 5,830 Total assets . . . 8,335 7,819 Total debt, including current portion . . . 611 592 Shareholders’ equity . . . 7,030 6,634
Year Ended December 31,
2014 2013 2012
GO Auto
Statement of Operations Data:
Total revenues . . . $ 9,984 $ 8,022 $ 5,507 Cost of goods sold . . . 6,603 5,587 3,777 Gross profit . . . 3,381 2,435 1,730 Operating expenses . . . 3,043 2,303 1,628 Operating income . . . 338 132 102 Nonoperating expenses . . . (49) (48) (62)
Income before income taxes . . . 289 84 40 Provision for income taxes . . . — — — Net income . . . $ 289 $ 84 $ 40
As of December 31, 2014 2013 Balance Sheet Data:
Cash and cash equivalents . . . $ 109 $ 296 Working capital . . . 1,063 933 Total assets . . . 4,121 3,821 Total debt, including current portion . . . 1,047 1,179 Shareholders’ equity . . . 2,023 1,934
Year Ended December 31,
2014 2013 2012
Jerry Brown
Statement of Operations Data:
Total revenues . . . $ 13,039 $ 12,084 $ 10,652 Cost of goods sold . . . 8,119 7,719 6,615 Gross profit . . . 4,920 4,365 4,037 Operating expenses . . . 4,331 3,645 3,747 Operating income . . . 589 720 290 Nonoperating expenses . . . (61) (18) (4)
Income before income taxes . . . 526 702 286 Provision for income taxes . . . 108 63 153 Net income . . . $ 418 $ 639 $ 133
As of December 31, 2014 2013 Balance Sheet Data:
Cash and cash equivalents . . . $ 362 $ 303 Working capital . . . 4,371 4,684 Total assets . . . 9,839 9,060 Total debt, including current portion . . . 1,703 1,265 Shareholders’ equity . . . 5,279 5,082
Year Ended December 31,
2014 2013 2012
Leesville
Statement of Operations Data:
Total revenues . . . $ 16,865 $ 18,202 $ 16,967 Cost of goods sold . . . 12,592 13,164 12,673 Gross profit . . . 4,273 5,038 4,294 Operating expenses . . . 3,506 4,819 4,476 Operating income (loss) . . . 767 219 (182) Nonoperating expenses . . . (6) (3) (9) Income (loss) before income taxes . . . 761 216 (191) Provision (benefit) for income taxes . . . 392 143 (43) Net income (loss) . . . $ 369 $ 73 $ (148)
As of December 31, 2014 2013 Balance Sheet Data:
Cash and cash equivalents . . . $ 674 $ 269 Working capital . . . 3,889 3,098 Total assets . . . 7,607 6,612 Total debt, including current portion . . . 200 200 Shareholders’ equity . . . 4,802 4,165
Use of Non-GAAP Financial Measurements
EBITDA and Adjusted EBITDA are presented in this prospectus as supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. EBITDA is net income before interest, income taxes, depreciation and amortization. Adjusted EBITDA is EBITDA less reductions in compensation paid to certain employees of the Founding Companies. We believe that EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results.
We believe that the use of EBITDA and Adjusted EBITDA provides additional tools for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other
automotive parts recycling businesses, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate EBITDA and Adjusted EBITDA in the same fashion.
Our management does not consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of EBITDA and Adjusted EBITDA are that they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. Some of these limitations are:
a. EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
b. EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
c. EBITDA and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
d. although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
e. EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
g. other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only
supplementally. You should review the reconciliation of net income to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
The following tables reconcile net income (loss) to EBITDA and Adjusted EBITDA for the periods presented (in thousands).
Fenix
(Designated accounting
acquirer) Pro Forma From January 2, 2014 (Inception) to December 31, 2014 Year Ended December 31, 2014 Net loss . . . $(4,747) $(3,945) Interest expense . . . — 263 Depreciation and amortization expense . . . — 5,724 Benefit for income taxes . . . — (2,418)
EBITDA . . . (4,747) (376) Compensation adjustment(a) . . . — 3,737
Adjusted EBITDA . . . $(4,747) $ 3,361
Beagell Group
(Designated accounting predecessor)
Standard
(Designated accounting predecessor)
Year Ended December 31, Year Ended December 31,
2014 2013 2012 2014 2013 2012
Net income . . . $2,242 $1,417 $1,693 $2,043 $ 281 $ 305 Interest expense . . . — — 10 — — — Depreciation and amortization expense . . . 853 863 881 682 918 737 Provision for income taxes . . . 448 279 406 684 172 111 EBITDA . . . 3,543 2,559 2,990 3,409 1,371 1,153 Compensation adjustment(a) . . . 1,035 1,100 1,252 (101) 954 1,673 Adjusted EBITDA . . . $4,578 $3,659 $4,242 $3,308 $2,325 $2,826
(a) Represents (i) a change in employment compensation paid by certain Founding Companies to their shareholders, certain family members and other executives to amounts to be paid to those employees except for potential performance based bonus amounts pursuant to executed employment agreements with Fenix or its subsidiary and (ii) compensation expense for a one time bonus payable in shares of our common stock by one of our Founding Companies to certain of its employees.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF