Accel Entertainment, Inc 8-K, filed Jul 14, 2020
Accel Entertainment, Inc. (ACEL)
8-K
2020-07-14
For: 2020-07-14
View Original
Added on
April 08, 2026
About this 8-K
Accel Entertainment, Inc filed this 8-K on July 14, 2020.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 14, 2020
ACCEL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-38136 | 98-1350261 | |||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||
140 Tower Drive | |||||
Burr Ridge | , | Illinois | 60527 | ||
(Address of principal executive offices) | (Zip Code) | ||||
(630) 972-2235
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Class A-1 common stock, par value $0.0001 per share | ACEL | New York Stock Exchange |
Warrants, each whole Warrant exercisable for one share of Class A-1 common stock at an exercise price of $11.50 per share | ACEL-WS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 8.01. Other Events.
Commencement of Tender Offer
On July 14, 2020, the Company issued a press release announcing the commencement of its offer to each holder of its warrants that were (i) originally sold as part of the units issued in the Company’s initial public offering, which closed on June 30, 2017 (the “Pace IPO”), referred to as the “Pace Public Warrants”, (ii) privately offered in connection with Pace IPO, based on an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), referred to as the “Pace Private Placement Warrants”, (iii) privately offered in connection with the business combination consummated by the Company on November 20, 2019, referred to as the “Business Combination Private Placement Warrants” and (iv) issued in a registered offering in connection with the business combination, referred to as the “Accel Public Warrants” (collectively, referred to as the “Outstanding Warrants”, and the Outstanding Warrants together with the Pace Public Warrants, the “Accel Warrants”) to receive 0.250 shares of Class A-1 common stock in exchange for each Accel Warrant tendered by the holder and exchanged pursuant to the offer (the “Offer”). The Company previously provided notice that it will redeem 100% of the Pace Public Warrants in accordance with their terms on July 16, 2020. Accordingly, although the Offer is extended to the Pace Public Warrants, the redemption of the Pace Public Warrants is expected to be consummated prior to the expiration of the Offer, and therefore no Pace Public Warrants are expected to remain outstanding at the time the Offer is consummated. Following the redemption, Accel’s warrants may no longer meet the continued listing standards of the NYSE and may be delisted. The Offer is made solely upon the terms and conditions in a Prospectus/Offer to Exchange and other related offering materials that are being distributed to holders of the Accel Warrants. The Offer will be open until 11:59 p.m., Eastern Daylight Time, on August 11, 2020, or such later time and date to which the Company may extend. A copy of the press release is attached hereto as Exhibit 99.1.
Application for Waiver of Debt Covenant Breach
Given the Company’s assumptions about the future impact of COVID-19 on the gaming industry, which could be materially different due to the inherent uncertainties of future restrictions on the industry, the Company expects to meet its cash obligations for the next 12 months. Based upon these current assumptions, the Company expects to remain in compliance with the covenants in its credit agreement dated November 13, 2019 (the “Credit Agreement”); however, given the uncertainty of COVID-19 and the resulting potential impact to the gaming industry and the Company’s future assumptions, as well as to provide additional financial flexibility, the Company has applied for a waiver of covenant breach from September 30, 2020 to March 31, 2021 of the First Lien Net Leverage Ratio and Fixed Charge Coverage Ratio (each as defined under the Credit Agreement).
Financial Statements
This Current Report on Form 8-K includes the Unaudited Pro Forma Condensed Combine Statement of Operations for the year ended December 31, 2019. This financial statement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Important Additional Information Has Been Filed with the SEC
Copies of the Schedule TO to be filed in connection with the Offer and the Prospectus/Offer to Exchange will be available free of charge at the website of the U.S. Securities and Exchange Commission (the “SEC”) SEC at www.sec.gov. Requests for documents may also be directed to Morrow Sodali LLC, toll-free at (800) 662-5200 (banks and brokerage firms, please call (203) 658-9400).
A registration statement on Form S-4 relating to the securities to be issued in the Offer has been filed with the SEC but has not yet become effective. Such securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.
This communication is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Accel Warrants or an offer to sell or a solicitation of an offer to buy any shares of Class A-1 Common Stock. The Offer is being made only through the Schedule TO and Prospectus/Offer to Exchange, and the complete terms and conditions of the Offer is set forth in the Schedule TO and Prospectus/Offer to Exchange. Holders of the Accel Warrants are urged to read the Schedule TO and Prospectus/Offer to Exchange carefully before making any decision with respect to the Offer because they contain important information, including the various terms of, and conditions to, the Offer. None of the Company, or any of its management or its board of directors, or the Exchange Agent makes any recommendation as to whether or not holders of Accel Warrants should tender Accel Warrants for exchange in the Offer.
Forward looking statements
This press release may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this press release are forward-looking statements. When used in this press release, words such as “anticipate,” “believe,” “estimate,”
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“expect,” “intend,” “target,” “plan,” “outlook” and similar expressions, as they relate to us or our management team, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in the Company’s filings with the Securities and Exchange Commission (“SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law. The Company cautions you that these forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in the Company’s Registration Statement on Form S-4, filed July 14, 2020, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are available publicly on the SEC’s website at www.sec.gov.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number | Description | |
99.1 * | ||
99.2 * | ||
* Filed herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ACCEL ENTERTAINMENT, INC. | |||
Date: July 14, 2020 | By: | /s/ Derek Harmer | |
Derek Harmer | |||
General Counsel and Chief Compliance Officer | |||
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Exhibit 99.1
Accel Entertainment, Inc. Announces Commencement of Exchange Offer Relating to its Warrants
CHICAGO - July 14, 2020 - Accel Entertainment, Inc. (NYSE: ACEL) (the “Company”) announced today that it has commenced an exchange offer (the “Offer”) relating to its outstanding warrants. The purpose of the Offer is to simplify the Company’s capital structure and reduce the potential dilutive impact of the Company’s Warrants.
The Offer is being made pursuant to a Prospectus/Offer to Exchange dated July 14, 2020, and the Company’s Schedule TO, dated July 14, 2020, each of which more fully set forth the terms and conditions of the Offer. Until the Expiration Date (as defined below), the Company is offering to holders of its warrants the opportunity to receive 0.250 shares of Class A-1 common stock, par value $0.0001 per share (the “Class A-1 Common Stock”) of the Company in exchange for each of the outstanding warrants tendered by the holder and exchanged pursuant to the Offer. The Offer is being made to:
• | All holders of the Company’s warrants to purchase the Company’s Class A-1 Common Stock that were originally sold as part of the units issued in the Company’s initial public offering, which closed on June 30, 2017 (the “Pace IPO”), referred to as the “Pace Public Warrants.” The Pace Public Warrants entitle such warrant holders to purchase one share of Class A-1 Common Stock for a purchase price of $11.50, subject to certain adjustments. Our Class A-1 Common Stock and Accel Warrants are listed on the New York Stock Exchange (the “NYSE”) under the symbols “ACEL,” and “ACEL.WS”, respectively. As of June 1, 2020, there were 14,999,982 Pace Public Warrants outstanding. The Company previously provided notice that it will redeem 100% of the Pace Public Warrants in accordance with their terms on July 16, 2020. Accordingly, although the Offer is extended to the Pace Public Warrants, the redemption of the Pace Public Warrants is expected to be consummated prior to the expiration of the Offer, and therefore no Pace Public Warrants are expected to remain outstanding at the time the Offer is consummated. Following the redemption, Accel’s warrants may no longer meet the continued listing standards of the NYSE and may be delisted. |
• | All holders of the Company’s Warrants to purchase the Company’s Class A-1 Common Stock that were (i) privately offered in connection with Pace IPO, based on an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), referred to as the “Pace Private Placement Warrants”, (ii) privately offered in connection with the business combination consummated by the Company on November 20, 2019, referred to as the “Business Combination Private Placement Warrants” and (iii) issued in a registered offering in connection with the business combination, referred to as the “Accel Public Warrants” (collectively, referred to as the “Outstanding Warrants”, and the Outstanding Warrants together with the Pace Public Warrants, the “Accel Warrants”). The Outstanding Warrants entitle such warrantholders to purchase one share of the Company’s Class A-1 Common Stock for a purchase price of $11.50, subject to certain adjustments. As of June 1, 2020, there were 7,333,326 Outstanding Warrants, of which 5,683,378 were held by the Company’s affiliates. Pursuant to the Offer, the Company is offering up to an aggregate of 1,833,293 shares of the Company’s Class A-1 Common Stock in exchange for the Outstanding Warrants. |
Each of the following (and/or an affiliate thereof) have agreed to tender their Outstanding Warrants in the Offer pursuant to a Tender and Exchange Agreement, dated as of June 16, 2020: (i) Andrew Rubenstein, our Chief Executive Officer, President and Director, (ii) Brian Carroll, our Chief Financial Officer, (iii) Derek Harmer, our General Counsel and Chief Compliance Officer, (iv) Gordon S. Rubenstein, a member of our board of directors, (v) David W. Ruttenberg, a member of our board of directors, (vi) the Clairvest Investors (as defined in the Prospectus/Offer to Exchange), which is affiliated with Kenneth B. Rotman, a member of our board of directors and (vii) the Pace Sponsor Members (as defined in the Prospectus/Offer to Exchange). The Tender and Exchange Agreement, which is further described in the Prospectus/Offer to Exchange, relates to approximately 94% of the Outstanding Warrants.
The Offer will be open until 11:59 p.m., Eastern Standard Time, on August 11, 2020, or such later time and date to which the Company may extend, as described in the Schedule TO and Prospectus/Offer to Exchange (the “Expiration Date”). As brokers, custodians and the processes of The Depository Trust Company may require action by holders in advance of the Expiration Date in order to participate in the Offer, holders are urged to consult their broker or custodian regarding the participation procedures and any additional deadlines. Tendered warrants may be withdrawn by holders at any time prior to such warrants being accepted by the Company for exchange. The Company’s obligation to complete
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the Offer is not conditioned on the tender of a minimum amount of Accel Warrants. Subject to applicable law, the Company may amend, extend or terminate the Offer at any time.
Important Additional Information Has Been Filed with the SEC
Copies of the Schedule TO and Prospectus/Offer to Exchange will be available free of charge at the website of the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov.
A registration statement on Form S-4 relating to the securities to be issued in the Offer has been filed with the SEC but has not yet become effective. Such securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.
This announcement is for informational purposes only and shall not constitute an offer to purchase or a solicitation of an offer to sell the Accel Warrants or an offer to sell or a solicitation of an offer to buy any shares of Class A-1 Common Stock. The Offer are being made only through the Schedule TO and Prospectus/Offer to Exchange, and the complete terms and conditions of the Offer are set forth in the Schedule TO and Prospectus/Offer to Exchange. Holders of the Accel Warrants are urged to read the Schedule TO and Prospectus/Offer to Exchange carefully before making any decision with respect to the Offer because they contain important information, including the various terms of, and conditions to, the Offer. None of the Company, or any of its management or its board of directors, or the Exchange Agent makes any recommendation as to whether or not holders of Accel Warrants should tender Accel Warrants for exchange in the Offer.
About the Company
Accel is a leading distributed gaming operator in the United States on an Adjusted EBITDA basis, and a preferred partner for local business owners in the Illinois market. Accel’s business consists of the installation, maintenance and operation of VGTs, redemption devices that disburse winnings and contain ATM functionality, and other amusement devices in authorized non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores.
Forward looking statements
This press release may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this press release are forward-looking statements. When used in this press release, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “target,” “plan,” “outlook” and similar expressions, as they relate to us or our management team, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in the Company’s filings with the Securities and Exchange Commission (“SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law. The Company cautions you that these forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in the Company’s Registration Statement on Form S-4, filed July 14, 2020, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are available publicly on the SEC’s website at www.sec.gov.
Media:
Eric Bonach
Abernathy MacGregor
212-371-5999
ejb@abmac.com
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Exhibit 99.2
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2019
Historical Accel Entertainment, Inc. | Pro Forma Adjustments | Pro Forma | |||||||||
Revenues: | |||||||||||
Net video gaming | $ | 410,636 | $ | 40,980 | (3a) | $ | 451,616 | ||||
Amusement | 5,912 | 481 | (3a) | 6,393 | |||||||
ATM fees and other revenue | 7,837 | 601 | (3a) | 8,438 | |||||||
Total net revenues | 424,385 | 42,062 | 466,447 | ||||||||
Operating expenses: | |||||||||||
Video gaming expenses | 271,999 | 27,870 | (3a) | 299,869 | |||||||
General and administrative | 75,028 | 7,056 | (3a) | 82,084 | |||||||
Depreciation and amortization of property and equipment | 26,398 | 3,244 | (3a) | 28,333 | |||||||
(1,309 | ) | (3b) | |||||||||
Amortization of route and customer acquisition costs and location contracts acquired | 17,975 | 1,253 | (3a) | 21,773 | |||||||
2,545 | (3c) | ||||||||||
Other expenses, net | 19,649 | (115 | ) | (3a) | 9,444 | ||||||
462 | (3d) | ||||||||||
(10,552 | ) | (3e) | |||||||||
Total operating expenses | 411,049 | 30,454 | 441,503 | ||||||||
Operating income | 13,336 | 11,608 | 24,944 | ||||||||
Interest expense | 12,860 | 4,427 | (3a) | 17,965 | |||||||
(4,427 | ) | (3f) | |||||||||
5,105 | (3g) | ||||||||||
Loss on debt extinguishment | 1,141 | — | 1,141 | ||||||||
Loss before income tax expense | (665 | ) | 6,503 | 5,838 | |||||||
Income tax expense | 5,199 | 1,985 | (3h) | 7,184 | |||||||
Net loss | $ | (5,864 | ) | $ | 4,518 | $ | (1,346 | ) | |||
Net loss per common share—basic and diluted | $ | (0.09 | ) | $ | (0.02 | ) | |||||
Weighted average number of shares outstanding—basic and diluted | 61,850 | 14,787 | (3i) | 76,637 | |||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
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Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Note 1. Basis of Pro Forma Presentation
Overview
The business combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, TPG Pace Holdings Corp. was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the business combination was treated as the equivalent of Accel Entertainment Inc. issuing stock for the net assets of TPG Pace Holdings Corp., accompanied by a recapitalization.
On September 17, 2019, Accel completed the acquisition of 100% of the outstanding membership interests of Grand River. The acquisition of Grand River by Accel was accounted for as a business combination under ASC Topic 805, Business Combinations (“ASC 805”) and Accel, as the accounting acquirer, recorded the assets acquired and liabilities assumed at fair value on a preliminary basis.
The acquisition method of accounting uses the fair value concepts defined in ASC Topic 820, Fair Value Measurements (“ASC 820”). In general, ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date by Accel.
ASC 820 defines fair value, establishes a framework for measuring fair value, and sets forth a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to develop the fair value measurements. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for a non-financial asset assume the highest and best use by these market participants. Many of these fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.
Under ASC 805, acquisition-related transaction costs are not included as a component of consideration transferred but are accounted for as expenses in the periods in which such costs are incurred, or if related to the issuance of debt, capitalized as debt issuance costs. Acquisition-related transaction costs expected to be incurred as part of the business combination and the other related transactions include estimated fees related to advisory, legal and accounting fees.
The pro forma adjustments represent management’s estimates based on information available as of the date of the condensed combined financial statements and do not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the reverse recapitalization that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrently with the consummation of the reverse recapitalization are not included in the unaudited pro forma condensed combined statements of operations.
Description of Reverse Recapitalization
Pursuant to the Transaction Agreement, TPG Holdings Corp. acquired, directly or indirectly, all of the issued and outstanding shares of common stock and preferred stock of Accel Entertainment, Inc. In connection with reverse recapitalization, TPG Pace Holdings Corp. changed its name to Accel Entertainment, Inc.
The consideration paid to holders of Accel stock in connection with the reverse recapitalization and subject to the terms and conditions of the Transaction Agreement, consisted of a mix of consideration comprised of cash consideration equal to the number of shares of Accel stock for which such holder of Accel stock made a cash election multiplied by $177 per share (the “Purchase Price”) and share consideration comprised of a number of Class A-1 Shares equal to the number of shares of Accel Stock for which such holder of Accel Stock did not make a
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cash election multiplied by an exchange ratio calculated by dividing the Purchase Price by $10.30, which was the closing price of the common stock of TPG Pace Holdings Corp. on November 20, 2019. In addition, each holder of Accel stock that made a cash election with respect to less than 70% of its shares of Accel stock received its pro rata share, with such pro rata share determined with reference to a number of shares equal to 70% of such holder’s shares of Accel Stock less the number of shares of Accel stock with respect to which such holder made a cash election, of 2,444,444 2019 Warrants, subject to the conditions set forth in a warrant agreement and 3,000,000 Class A-2 Shares, subject to the conditions set forth in a restricted stock agreement.
In connection with the reverse recapitalization, TPG Pace Holdings and its affiliates converted 7,500,000 of Class A-1 Shares, 4,888,889 2019 Warrants subject to the conditions set forth in the New Pace Warrant Agreement and 2,000,000 Class A-2 Shares, subject to the conditions set forth in a restricted stock agreement.
As part of an Investment Private Placement, certain accredited investors (as defined by Rule 501 of Regulation D) agreed to subscribe for and purchase and Pace agreed to issue and sell to such investors 4,696,675 Class A-1 Shares for a purchase price of $10.22 per share, or an aggregate of approximately $48 million. The proceeds from the Investment Private Placement was used to fund a portion of the cash consideration required in the reverse recapitalization.
In connection with the reverse recapitalization, Accel repurchased approximately 36,157 shares of its stock from certain employees, directors and officers at a repurchase price of $177 per share in order to facilitate (i) the repayment of existing loans to Accel’s executive officers, (ii) the exercise of vested options and (iii) funding any resulting tax obligations from the exercise of such vested options.
Note 2. Preliminary Allocation of Purchase Price
On September 16, 2019, Accel Entertainment Inc. completed its acquisition of 100% of the outstanding membership interests of Grand River for approximately $100 million in cash. Grand River is a terminal operator in Illinois with over 2,009 VGTs in over 450 licensed establishments.
The acquisition aggregate purchase consideration transferred totaled $113.7 million, which included: i) a cash payment made at closing of $100.0 million; ii) a subsequent cash payment of approximately $6.6 million for a working capital adjustment and; iii) contingent purchase consideration with an estimated fair value of $7.1 million. The total purchase consideration for the business combination has been allocated to the assets acquired and liabilities assumed based on their estimated fair values with the excess recorded as goodwill. Refer to the preliminary purchase price within Accel Entertainment Inc.’s December 31, 2019 financial statements included elsewhere in this filing.
Note 3. Unaudited Pro Forma Adjustments
The pro forma adjustments to the unaudited pro forma condensed combined statements of operation for the year ended December 31, 2019 consist of the following:
(a)Reflects the recognition of pre-combination activities of Grand River.
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(b)Represents the elimination of historical depreciation expense of Grand River, and recognition of depreciation expense in connection with fair value of property and equipment through September 16, 2019. The adjustment in depreciation is based on the estimated fair value and Accel Entertainment Inc.’s historical useful lives of 3 years to 29 years and is calculated using the straight-line method. Grand River’s historic useful lives ranged between 3 to 40 years.
Year Ended December 31, 2019 | |||
Depreciation expense on property and equipment | $ | 1,935 | |
Less: historical depreciation expense | (3,244 | ) | |
Unaudited pro forma adjustment | $ | (1,309 | ) |
(c)Represents the elimination of historical amortization expense of Grand River, and recognition of amortization expense in connection with fair value of intangibles related to location contracts acquired through September 16, 2019. The fair value of identifiable intangible asset is determined using the “income approach”. Amortization expense of fair value intangibles is calculated using the straight-line method over the estimated remaining useful lives of 10 years.
Year Ended December 31, 2019 | |||
Amortization expense on intangible assets | $ | 3,798 | |
Less: historical amortization expense | (1,253 | ) | |
Unaudited pro forma adjustment | $ | 2,545 | |
(d)Represents the increase in operating expenses recorded in the Pace historical unaudited consolidated statement of operations prior to the reverser recapitalization.
(e)Represents the elimination of non-recurring transaction costs.
(f)Represents the reversal of historical interest expense incurred prior to September 16, 2019 on extinguished Grand River debt.
(g)In conjunction with the closing of the reverse recapitalization, Accel entered into a credit agreement on November 13, 2019 to refinance Accel’s existing financing arrangement. The new financing arrangement includes draw at close amounts, net of issuance costs, of $48.7 million in the revolving credit facility, $234.0 million in the initial term loan facility, and $58.5 million in the additional term loan facility, with total outstanding borrowings totalling $341.2 million, net of issuance costs of $8.8 million. The revolving loans and term loans bear interest at LIBOR plus a margin of 2.25%. The following represents the adjustment to record the interest expense on the refinanced debt as if the debt was borrowed on January 1, 2018, including amortization of debt issuance costs, and the subsequent removal of Accel’s interest expense related to the old debt instruments.
Year Ended December 31, 2019 | |||
Interest expense on refinancing arrangement, including amortization of debt issuance costs | $ | 17,965 | |
Less: Accel interest expense on historic financing arrangements | (12,860 | ) | |
Unaudited net pro forma adjustment | $ | 5,105 | |
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(h)Represents the net impact on income taxes resulting from an income tax benefit attributable to application of the effective tax rate of 28.51% for December 31, 2019. The pro forma adjustment tax impacts were estimated on the applicable law in effect on December 31, 2019, inclusive of the effects of the Tax Act.
Year Ended December 31, 2019 | |||
Tax impact on Grand River acquisition | $ | 433 | |
Tax impact on removal of Accel interest expense on refinanced loans and non-reoccurring transaction costs | $ | 6,674 | |
Tax impact on addition of interest expense on refinanced loans | (5,122 | ) | |
Unaudited pro forma adjustment | $ | 1,985 | |
(i)As the reverse recapitalization is being reflected as if it had occurred at January 1, 2019, the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the TPG Pace Holding Inc. shares issued relating to the reverse recapitalization have been outstanding for the entire period presented.
Weighted average Pace Shares outstanding—basic and diluted is calculated as follows:
Number of shares | ||
Pace Public Shareholders | 18,813 | |
Pace Initial Shareholders | 7,500 | |
Private Placement Investors | 4,696 | |
Donor-Advised Fund | 500 | |
Accel Shareholders | 45,128 | |
Pro Forma Shares Outstanding—Basic & Diluted | 76,637 | |
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