EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

 

EXHIBIT 99.1

 

Higher One Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Information

 

On June 15, 2016, Higher One, Inc., a subsidiary of Higher One Holdings, Inc. (“Higher One”), completed its previously announced sale of substantially all of the assets of Higher One’s disbursements business, including the OneAccount, to Customers Bank (“Bank”) and Customers Bancorp, Inc. (“Bancorp”, and together with Bank, “Customers”), pursuant to the terms of the December 15, 2015 Asset Purchase Agreement between Higher One and Customers. Pursuant to the terms of the Asset Purchase Agreement, the parties agreed upon a purchase price of $37.0 million, payable as follows (x) $17.0 million on the closing date and (y) $10.0 million on each of the first two anniversaries of such date. The Asset Purchase Agreement also includes possible incentive payments during each of the three (3) years beginning in 2017; in the event the annual gross revenue generated by the disbursements business exceeds $75 million, Higher One will receive thirty-five percent of any such excess.

 

At the time of closing, Higher One received total cash consideration of approximately $17.0 million and in connection with the close of the sale, Higher One reduced the amount outstanding under its credit facility by $10 millionused.

 

The accompanying unaudited pro forma consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 and the three months ended March 31, 2016 are presented as if the sale of the disbursements business had occurred on January 1, 2013. The accompanying unaudited pro forma consolidated balance sheet as of March 31, 2016 is presented as if the sale of the disbursements business had occurred on March 31, 2016. The pro forma adjustments related to the sale of the disbursements business do not reflect the final asset and liability balances of the disbursements business and are based on available information and assumptions that management believes are (1) directly attributable to the disposal; (2) are factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on the consolidated results. The pro forma adjustments may differ from those that will be used to report discontinued operations in future filings. The unaudited pro forma financial information is not necessarily indicative of the results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.

 

The following is a brief description of the amounts recorded under each of the column headings in the unaudited pro forma consolidated statements of operations and balance sheet. This unaudited pro forma condensed consolidated financial information should be read in conjunction with our historical audited financial statements and notes thereto as included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2016 and our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 6, 2016.

 

Historical Higher One 

 

This column reflects our historical audited operating results for the years ended December 31, 2015, 2014 and 2013 and the historical unaudited operating results of continuing operations and financial condition as of and for the three months ended March 31, 2016 prior to any adjustment for the disbursements business described above. 

 

 
1
 

  

Disposition of Disbursements

 

This column reflects the elimination of the historical operating results of the disbursements business for the years ended December 31, 2015, 2014 and 2013 and the three months ended March 31, 2016 at the amounts that have been reflected in our consolidated statements of operations for those periods, as well as the impact the sale of the disbursements business had on our credit facility. The amounts eliminated from the historical operating results of the disbursements business include the revenue, cost of revenue, operating expenses and other income which was directly attributable to the disbursements business. Indirect operating expenses which had been allocated to the disbursements business previously for segment reporting purposes have not been eliminated. The disposition column on the unaudited pro forma consolidated balance sheet as of March 31, 2016 reflects the book value of the assets and liabilities included in the disbursements business as of that date, as well as the impact of such disposition on our credit facility. As a direct result of the disposition of the disbursements business, we amended the credit facility. The amendment to the credit facility required that $10.0 million of the purchase price be used to pay down the balance of our credit facility; the size of the credit facility was also reduced. An estimated non-recurring gain of $6.6 million, net of tax, has not been included in the unaudited pro forma statement of income, but will be reflected in the historical income statement when the transaction is consummated. Customers will pay Higher One a total of $5.0 million, in equal monthly installments, for the twelve months following the sale of the disbursements business for transition services that Higher One will provide to Customers. Those transition service payments are not included in the pro forma adjustments below as that amount will not have a continuing impact on Higher One.  

 

 
2
 

  

Higher One Holdings, Inc.

Pro Forma Condensed Consolidated Balance Sheet – unaudited

(In thousands of dollars, except shares and per share amounts) 

 

   

As of March 31, 2016

  
   

Historical

Higher One

    

Disposition of

Disbursements

      

Pro Forma

  
                           

Assets

                          

Cash

   $ 35,024     $ 6,850  

(a)

   $ 41,874  

Other current assets

     19,342       (5,922 )

(b)

     13,420  

Fixed assets, net

     40,512       (5,394 )

(b)

     35,118  

Intangible assets, net

     29,855       (12,535 )

(b)

     17,320  

Goodwill

     53,022       (11,080 )

(b)

     41,942  

Other non-current assets

     16,419       18,206  

(c)

     34,625  

Total assets

   $ 194,174     $ (9,875 )     $ 184,299  
                           

Liabilities and Stockholders' Equity

                          

Current liabilities:

                          

Accounts payable

   $ 2,743     $ (1,984 )

(b)

   $ 759  

Accrued expenses

     18,548       (3,673 )

(d)

     14,875  

Deferred revenue

     16,118       (1,616 )

(b)

     14,502  

Total current liabilities

     37,409       (7,273 )       30,136  

Debt

     29,000       (10,000 )

(e)

     19,000  

Other non-current liabilities

     15,008       (109 )

(b)

     14,899  

Total liabilities

     81,417       (17,382 )       64,035  
                           

Stockholders’ equity:

                          

Common stock, $0.001 par value

     60       -         60  

Additional paid-in capital

     191,668       2,382  

(f)

     194,050  

Treasury stock

     (137,899 )     -         (137,899 )

Accumulated other comprehensive loss

     (113 )     -         (113 )

Retained earnings

     59,041       5,125  

(g)

     64,166  

Total stockholders’ equity

     112,757       7,507         120,264  

Total liabilities and stockholders’ equity

   $ 194,174     $ (9,875 )     $ 184,299  

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements. 

 

 
3
 

  

Higher One Holdings, Inc.

Pro Forma Condensed Consolidated Statements of Continuing Operations – unaudited

(In thousands of dollars, except shares and per share amounts) 

 

   

Three Months Ended March 31, 2016

  
   

Historical

Higher One

    

Disposition of Disbursements

      

Pro Forma

  
                           

Revenue

   $ 55,551     $ (32,145 )

(h)

   $ 23,406  

Cost of revenue

     25,931       (14,614 )

(h)

     11,317  

Gross margin

     29,620       (17,531 )       12,089  

Operating expenses

     21,871       (8,134 )

(h)

     13,737  

Merger and acquisition related, net

     421       (421 )

(h)

     -  

Income (loss) from continuing operations

     7,328       (8,976 )       (1,648 )

Interest income

     20       -         20  

Interest expense

     (603 )     110  

(i)

     (493 )

Other income

     77       -         77  

Net income (loss) before income taxes from continuing operations

     6,822       (8,866 )       (2,044 )

Income tax expense (benefit) from continuing operations

     3,053       (3,369 )

(j)

     (316 )

Net income (loss) from continuing operations

   $ 3,769     $ (5,497 )     $ (1,728 )
                           

Net income (loss) from continuing operations available to common stockholders:

                          

Basic

     3,769                 (1,728 )

Diluted

     3,769                 (1,728 )
                           

Weighted average shares outstanding:

                          

Basic

     47,906,498                 47,906,498  

Diluted

     49,145,249          

(l)

     47,906,498  
                           

Net income (loss) from continuing operations available to common stockholders per common share:

                          

Basic

   $ 0.08          

(l)

   $ (0.04 )

Diluted

   $ 0.08          

(l)

   $ (0.04 )

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements. 

 

 
4
 

  

Higher One Holdings, Inc.

Pro Forma Condensed Consolidated Statements of Continuing Operations – unaudited

(In thousands of dollars, except shares and per share amounts) 

 

   

Year Ended December 31, 2015

  
   

Historical

Higher One

    

Disposition of Disbursements

      

Pro Forma

  
                           

Revenue

   $ 157,958     $ (74,544 )

(h)

   $ 83,414  

Cost of revenue

     99,534       (58,754 )

(h)

     40,780  

Gross margin

     58,424       (15,790 )       42,634  

Operating expenses

     86,216       (33,341 )

(h)

     52,875  

Restructuring charges

     680       (680 )

(h)

     -  

Litigation settlement

     6,026       (6,026 )

(h)

     -  

Merger and acquisition related, net

     436       (436 )

(h)

     -  

Loss from continuing operations

     (34,934 )     24,693         (10,241 )

Interest income

     82       -         82  

Interest expense

     (6,073 )     390  

(i)

     (5,683 )

Other income

     1,435       (1,125 )

(h)

     310  

Net loss before income taxes from continuing operations

     (39,490 )     23,958         (15,532 )

Income tax expense (benefit) from continuing operations

     (13,055 )     9,104  

(j)

     (3,951 )

Net loss from continuing operations

   $ (26,435 )   $ 14,854       $ (11,581 )
                           

Net loss from continuing operations available to common stockholders:

                          

Basic

     (26,435 )               (11,581 )

Diluted

     (26,435 )               (11,581 )
                           

Weighted average shares outstanding:

                          

Basic

     47,653,763                 47,653,763  

Diluted

     47,653,763       (1 )       47,653,763  
                           

Net loss from continuing operations available to common stockholders per common share:

                          

Basic

   $ (0.55 )     (1 )      $ (0.24 )

Diluted

   $ (0.55 )     (1 )      $ (0.24 )

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.  

 

 
5
 

  

Higher One Holdings, Inc.

Pro Forma Condensed Consolidated Statements of Continuing Operations – unaudited

(In thousands of dollars, except shares and per share amounts) 

 

   

Year Ended December 31, 2014

  
   

Historical

Higher One

    

Disposition of Disbursements

      

Pro Forma

  
                           

Revenue

   $ 205,663     $ (127,970 )

(h)

   $ 77,693  

Cost of revenue

     100,607       (61,540 )

(h)

     39,067  

Gross margin

     105,056       (66,430 )       38,626  

Operating expenses

     82,948       (31,999 )

(h)

     50,949  

Income from continuing operations

     22,108       (34,431 )       (12,323 )

Interest income

     92       244  

(k)

     336  

Interest expense

     (2,546 )     -         (2,546 )

Other income

     678       -         678  

Net income (loss) before income taxes from continuing operations

     20,332       (34,187 )       (13,855 )

Income tax expense (benefit) from continuing operations

     8,036       (12,991 )

(j)

     (4,955 )

Net income (loss) from continuing operations

   $ 12,296     $ (21,196 )     $ (8,900 )
                           

Net income (loss) from continuing operations available to common stockholders:

                          

Basic

     12,296                 (8,900 )

Diluted

     12,296                 (8,900 )
                           

Weighted average shares outstanding:

                          

Basic

     47,209,780                 47,209,780  

Diluted

     48,050,039          

(l)

     47,209,780  
                           

Net income from continuing operations available to common stockholders per common share:

                          

Basic

   $ 0.26          

(l)

   $ (0.19 )

Diluted

   $ 0.26          

(l)

   $ (0.19 )

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.  

 

 
6
 

  

Higher One Holdings, Inc.

Pro Forma Condensed Consolidated Statements of Continuing Operations – unaudited

(In thousands of dollars, except shares and per share amounts) 

 

   

Year Ended December 31, 2013

  
   

Historical

Higher One

    

Disposition of Disbursements

      

Pro Forma

  
                           

Revenue

   $ 199,966     $ (140,893 )

(h)

   $ 59,073  

Cost of revenue

     87,014       (57,410 )

(h)

     29,604  

Gross margin

     112,952       (83,483 )       29,469  

Operating expenses

     76,631       (28,704 )

(h)

     47,927  

Litigation settlement

     16,320       (16,320 )

(h)

     -  

Merger and acquisition related, net

     502       -         502  

Income from continuing operations

     19,499       (38,459 )       (18,960 )

Interest income

     88       482  

(k)

     570  

Interest expense

     (2,392 )     -         (2,392 )

Other income

     622       -         622  

Net income (loss) before income taxes from continuing operations

     17,817       (37,977 )       (20,160 )

Income tax expense (benefit) from continuing operations

     7,225       (14,431 )

(j)

     (7,206 )

Net income (loss) from continuing operations

   $ 10,592     $ (23,546 )     $ (12,954 )
                           

Net income (loss) from continuing operations available to common stockholders:

                          

Basic

     10,592                 (12,954 )

Diluted

     10,592                 (12,954 )
                           

Weighted average shares outstanding:

                          

Basic

     46,717,359                 46,717,359  

Diluted

     48,368,365          

(l)

     46,717,359  
                           

Net income (loss) from continuing operations available to common stockholders per common share:

                          

Basic

   $ 0.23          

(l)

   $ (0.28 )

Diluted

   $ 0.22          

(l)

   $ (0.28 )

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements. 

 

 
7
 

  

Higher One Holdings, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations.

 

(a)

The following amounts comprise the adjustment of cash: 

 

Proceeds from sale of the disbursements business

   $ 17,000  

Estimated transaction costs

     (150

)

Repayment of amounts outstanding on the credit facility

     (10,000

)

Total adjustment of cash

   $ 6,850  

 

(b)

Elimination of assets and liabilities of the disbursements business

 

(c)

The following amounts comprise the adjustment of other non-current assets: 

 

Total other non-current assets associated with the disbursements business

   $ (241

)

Write-off of deferred financing costs associated with the reduction in capacity of the credit facility

     (827

)

Deferred proceeds from sale of the disbursements business (payments of $10,000 to be received on each of the first two anniversary dates of the closing of the asset sale, which have been discounted at 2.5%)

     19,274  

Total adjustment of non-current assets

   $ 18,206  

 

(d)

The following amounts comprise the adjustment of accrued expenses: 

 

Total accrued expenses associated with the disbursements business

   $ (6,814

)

Taxes on gain of the disbursements business at the combined federal and state statutory rate of 38% (refer to (g))

     4,046  

Tax effect of acceleration of stock-based compensation expense at the combined federal and state statutory rate of 38% (refer to (f) below)

     (905

)

Total adjustment of accrued expenses

   $ (3,673

)

 

(e)

Repayment of $10,000 on the credit facility

 

(f)

Reflects the stock-based compensation expense related to acceleration of unvested options to purchase shares of common stock of the Company and unvested restricted stock unit awards as a result of the termination of various employees of Higher One that supported the disbursements business

  

 
8
 

 

(g)

Gain on sale of the disbursements business, net of tax, adjusted for the impact of the acceleration of the stock-based compensation expense (refer to (d) above)

 

Purchase price

   $ 37,000  

Less discount associated with deferred payment of $10,000 per year, at 2.5%

     (726

)

Less estimated transaction related expenses

     (150

)

         

Net proceeds

     36,124  

Assets of the disbursements business

     (35,172

)

Write-off of deferred financing costs

     (827

)

Liabilities of the disbursements business

     10,523  
         

Pre-tax gain on sale of the disbursements business

     10,648  

Taxes on gain of the disbursements business at the combined federal and state statutory rate of 38%

     (4,046

)

After-tax gain on sale of the disbursements business

     6,602  

Acceleration of stock-based compensation expense

     (2,382

)

Tax effect of acceleration of stock-based compensation expense at the combined federal and state statutory rate of 38%

     905  

Net impact on retained earnings

   $ 5,125  

 

(h)

Reflects the elimination of revenue, cost of revenue, operating expenses and other income which was directly attributable to the disbursements business. Indirect operating expenses which had been allocated to the disbursements business have not been eliminated.

 

(i)

Reflects the reduction of interest expense due to the use of proceeds from the sale of the disbursements business to repay $10,000 of the credit facility at the interest rate in effect for the period presented (4.4% for the three months ended March 31, 2016 and 3.9% for the year ended December 31, 2015).

 

(j)

Reflects the income tax effect of the pro-forma adjustments, using the historical combined federal and state statutory rate of 38%

 

(k)

Interest income related to the accretion of $10,000 to be received on each of the first two anniversary dates of the sale of the disbursements business

  

 
9
 

  

(l)

The calculation of pro forma basic and diluted earnings per share for the respective periods presented is as follows:

 

 

   

Three

Months

Ended March

31, 

    

Years Ended

December 31,

  
   

2016

    

2015

    

2014

    

2013

  

Basic and diluted net earnings per share

                                

Numerator:

                                

Pro forma net loss from continuing operations

  $ (1,728 )   $ (11,581 )   $ (8,900 )   $ (12,954 )

Denominator:

                                

Weighted-average shares outstanding

    47,906,498       47,653,763       47,209,780       46,717,359  

Weighted-average shares outstanding with dilution

    47,906,498       47,653,763       47,209,780       46,717,359  

Pro forma basic loss from continuing operations per share

  $ (0.04 )   $ (0.24 )   $ (0.19 )   $ (0.28 )

Pro forma diluted loss from continuing operations per share

  $ (0.04 )   $ (0.24 )   $ (0.19 )   $ (0.28 )

 

Pro forma earnings per share is presented utilizing the pro forma calculated net earnings from continuing operations and computing against the originally disclosed weighted-average share calculation for both basic and diluted shares outstanding in the periods presented as such shares were calculated using the treasury method which assumed conversion of options and restricted share units.

 

The estimated gain on the disbursements sale has been included as an adjustment to retained earnings but has not been reflected in the pro forma statements of operations as the gain is non-recurring in nature. Furthermore, it is estimated that the disbursements sale will result in income taxes payable as described above; however such amounts are subject to further refinement and adjustment based on a more comprehensive tax analysis and review. Such income taxes payable are reflected as an adjustment in the pro forma condensed consolidated balance sheet as of March 31, 2016; however, such amount is not reflected in the pro forma statements of operations for any period presented as the charge is non-recurring.

 

 

10