Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On December 6, 2022 (the “Closing Date”), GPM Investments, LLC, a Delaware limited liability company (“GPM”) and indirect wholly owned subsidiary of ARKO Corp., a Delaware corporation (the “Company” or “ARKO”), completed its acquisition of all of the issued and outstanding membership interests of Pride Convenience Holdings, LLC, a Delaware limited liability company (“Pride”), pursuant to the Purchase and Sale Agreement, entered into on October 19, 2022 (as amended, the “Purchase Agreement”), by and between GPM and Pride Parent, LLC, a Delaware limited liability company (such acquisition, together with the other related transactions contemplated by the Purchase Agreement, the “Pride Acquisition”).

The accompanying unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) have been prepared to reflect the effects of the Pride Acquisition on the consolidated financial statements of the Company as follows: (i) the unaudited pro forma condensed combined balance sheet (the “pro forma balance sheet”) is presented as if the Pride Acquisition had occurred on September 30, 2022; and (ii) the unaudited pro forma condensed combined statements of operations (the “pro forma statements of operations”) for the year ended December 31, 2021 and the nine months ended September 30, 2022 are presented as if the Pride Acquisition had occurred on January 1, 2021. The historical financial statements have been adjusted to reflect factually supportable items that are directly attributable to the Pride Acquisition and, with respect to the statements of operations only, that are expected to have a continuing impact on the combined results. The pro forma adjustments have been prepared based on assumptions that the Company believes are reasonable, but that are subject to change once additional information becomes available and the preliminary purchase price allocation for the Pride Acquisition is finalized.

The pro forma financial statements have been prepared using the acquisition method of accounting in Accounting Standards Codification 805, Business Combinations (“ASC 805”), with the Company treated as the acquirer. The acquisition method of accounting is dependent upon certain valuations that have yet to progress to a stage at which there is sufficient information for definitive measures. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial statements in accordance with the requirements of the Securities and Exchange Commission, and are subject to revision based on a final determination of fair value as of the date of the Pride Acquisition. Differences between these preliminary estimates and the final acquisition accounting may be material; therefore, the pro forma financial statements presented below is not necessarily indicative of what the combined company’s financial condition or results of operations would have been had the Pride Acquisition been completed on the applicable dates of these pro forma financial statements. In addition, the pro forma financial statements do not purport to project the future financial condition and results of operations of the combined company.

The pro forma financial statements should be read in conjunction with:

•
The accompanying notes to the pro forma financial statements;
•
The audited consolidated financial statements of the Company contained in its Annual Report on Form 10-K for the year ended December 31, 2021 and the accompanying notes thereto;
•
The unaudited condensed consolidated financial statements of the Company contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and the accompanying notes thereto;
•
Historical audited consolidated financial statements as of and for the year ended December 30, 2021 which consist of the audited consolidated financial statements of Pride Stores, LLC and Affiliates, which primarily included the operations acquired by Pride on December 31, 2021 under an asset and purchase agreement (“APA”), and the accompanying notes thereto, which are included as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A with which these pro forma financial statements are filed; and
•
Historical interim unaudited consolidated financial statements as of and for the nine months ended September 30, 2022 which consist of the unaudited consolidated financial statements of Pride Convenience Holdings, LLC and Subsidiaries and the accompanying notes thereto, which are included as Exhibit 99.2 to the Company’s Current Report on Form 8-K/A with which these pro forma financial statements are filed.

The unaudited pro forma condensed combined financial statements included herein does not give effect to any potential cost reductions or other operating efficiencies that could result from the Pride Acquisition.

 

ARKO Corp.

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2022

(in thousands)

 

 

 

ARKO Corp. Historical

 

 

Pride Historical

 

 

Pro Forma Adjustments

 

 

ARKO Corp. Pro Forma Combined

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

283,375

 

 

$

4,879

 

 

$

(1,288

)

(a)

 

 

 

 

 

 

 

 

 

 

 

(30,669

)

(b)

 

 

 

 

 

 

 

 

 

 

 

20,000

 

(c)

$

276,297

 

Restricted cash

 

 

14,194

 

 

 

—

 

 

 

—

 

 

 

14,194

 

Short-term investments

 

 

2,122

 

 

 

—

 

 

 

—

 

 

 

2,122

 

Trade receivables, net

 

 

121,736

 

 

 

5,037

 

 

 

1,191

 

(a)

 

127,964

 

Inventory

 

 

224,545

 

 

 

4,746

 

 

 

380

 

(a)

 

229,671

 

Other current assets

 

 

98,842

 

 

 

1,274

 

 

 

(319

)

(a)

 

99,797

 

Total current assets

 

 

744,814

 

 

 

15,936

 

 

 

(10,705

)

 

 

750,045

 

Non-current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

591,024

 

 

 

74,527

 

 

 

130,054

 

(a)

 

 

 

 

 

 

 

 

 

 

 

(166,886

)

(h)

 

628,719

 

Right-of-use assets under operating leases

 

 

1,127,100

 

 

 

—

 

 

 

107,824

 

(h)

 

1,234,924

 

Right-of-use assets under financing leases, net

 

 

185,518

 

 

 

—

 

 

 

—

 

 

 

185,518

 

Goodwill

 

 

197,711

 

 

 

102,715

 

 

 

(83,130

)

(a)

 

217,296

 

Intangible assets, net

 

 

192,651

 

 

 

52,124

 

 

 

(50,300

)

(a)

 

194,475

 

Equity investment

 

 

2,991

 

 

 

—

 

 

 

—

 

 

 

2,991

 

Deferred tax asset

 

 

17,773

 

 

 

—

 

 

 

6,527

 

(a)

 

24,300

 

Other non-current assets

 

 

29,683

 

 

 

—

 

 

 

38

 

(a)

 

29,721

 

Total assets

 

$

3,089,265

 

 

$

245,302

 

 

$

(66,578

)

 

$

3,267,989

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, current portion

 

$

11,477

 

 

$

81,802

 

 

$

(81,802

)

(c)

$

11,477

 

Accounts payable

 

 

211,125

 

 

 

10,131

 

 

 

942

 

(a)

 

222,198

 

Other current liabilities

 

 

148,199

 

 

 

1,796

 

 

 

2,525

 

(a)

 

 

 

 

 

 

 

 

 

 

 

723

 

(h)

 

153,243

 

Operating leases, current portion

 

 

55,952

 

 

 

—

 

 

 

415

 

(h)

 

56,367

 

Financing leases, current portion

 

 

5,741

 

 

 

—

 

 

 

—

 

 

 

5,741

 

Total current liabilities

 

 

432,494

 

 

 

93,729

 

 

 

(77,197

)

 

 

449,026

 

Non-current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

722,097

 

 

 

—

 

 

 

20,000

 

(c)

 

742,097

 

Asset retirement obligation

 

 

63,759

 

 

 

—

 

 

 

675

 

(a)

 

64,434

 

Operating leases

 

 

1,141,450

 

 

 

—

 

 

 

107,409

 

(h)

 

1,248,859

 

Financing leases

 

 

227,182

 

 

 

—

 

 

 

—

 

 

 

227,182

 

Other non-current liabilities

 

 

132,276

 

 

 

—

 

 

 

63

 

(a)

 

 

 

 

 

 

 

 

 

 

 

34,045

 

(h)

 

166,384

 

Total liabilities

 

 

2,719,258

 

 

 

93,729

 

 

 

84,995

 

 

 

2,897,982

 

Series A redeemable preferred stock

 

 

100,000

 

 

 

 

 

 

 

 

 

100,000

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

12

 

 

 

—

 

 

 

—

 

 

 

12

 

Treasury stock, at cost

 

 

(40,042

)

 

 

—

 

 

 

—

 

 

 

(40,042

)

Additional paid-in capital

 

 

226,808

 

 

 

—

 

 

 

—

 

 

 

226,808

 

Accumulated other comprehensive income

 

 

9,119

 

 

 

—

 

 

 

—

 

 

 

9,119

 

Retained earnings

 

 

73,990

 

 

 

—

 

 

 

—

 

 

 

73,990

 

Member's equity

 

 

—

 

 

 

151,573

 

 

 

(151,573

)

(m)

 

—

 

Total shareholders' equity

 

 

269,887

 

 

 

151,573

 

 

 

(151,573

)

 

 

269,887

 

Non-controlling interest

 

 

120

 

 

 

—

 

 

 

—

 

 

 

120

 

Total equity

 

 

270,007

 

 

 

151,573

 

 

 

(151,573

)

 

 

270,007

 

Total liabilities, redeemable preferred stock and equity

 

$

3,089,265

 

 

$

245,302

 

 

$

(66,578

)

 

$

3,267,989

 

 


ARKO Corp.

Unaudited Pro Forma Condensed Combined Statement of Operations

Nine Months Ended September 30, 2022

(in thousands, except per share data)

 

 

 

ARKO Corp. Historical

 

 

Pride Historical

 

 

Pro Forma Adjustments

 

 

ARKO Corp. Pro Forma Combined

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

 

$

5,648,954

 

 

$

245,494

 

 

$

—

 

 

$

5,894,448

 

Merchandise revenue

 

 

1,244,558

 

 

 

43,913

 

 

 

—

 

 

 

1,288,471

 

Other revenues, net

 

 

69,209

 

 

 

4,636

 

 

 

—

 

 

 

73,845

 

Total revenues

 

 

6,962,721

 

 

 

294,043

 

 

 

—

 

 

 

7,256,764

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

 

5,250,105

 

 

 

214,413

 

 

 

—

 

 

 

5,464,518

 

Merchandise costs

 

 

866,110

 

 

 

31,574

 

 

 

—

 

 

 

897,684

 

Store operating expenses

 

 

534,197

 

 

 

25,008

 

 

 

8,384

 

(h)

 

567,589

 

General and administrative expenses

 

 

100,695

 

 

 

6,402

 

 

 

—

 

 

 

107,097

 

Depreciation and amortization

 

 

75,050

 

 

 

1,923

 

 

 

426

 

(f)

 

 

 

 

 

 

 

 

 

 

 

199

 

(g)

 

77,598

 

Interest expense

 

 

—

 

 

 

2,659

 

 

 

(2,659

)

(c)

 

—

 

Goodwill impairment charge

 

 

—

 

 

 

10,500

 

 

 

(10,500

)

(l)

 

—

 

Total operating expenses

 

 

6,826,157

 

 

 

292,479

 

 

 

(4,150

)

 

 

7,114,486

 

Other expenses (income), net

 

 

3,269

 

 

 

(116

)

 

 

—

 

 

 

3,153

 

Operating income

 

 

133,295

 

 

 

1,680

 

 

 

4,150

 

 

 

139,125

 

Interest and other financial income

 

 

2,509

 

 

 

—

 

 

 

—

 

 

 

2,509

 

Interest and other financial expenses

 

 

(45,619

)

 

 

—

 

 

 

(576

)

(c)

 

 

 

 

 

 

 

 

 

 

 

(2,021

)

(h)

 

 

 

 

 

 

 

 

 

 

 

(40

)

(i)

 

(48,256

)

Income before income taxes

 

 

90,185

 

 

 

1,680

 

 

 

1,513

 

 

 

93,378

 

Income tax expense

 

 

(31,060

)

 

 

—

 

 

 

(798

)

(j)

 

(31,858

)

Loss from equity investment

 

 

(7

)

 

 

—

 

 

 

—

 

 

 

(7

)

Net income

 

$

59,118

 

 

$

1,680

 

 

$

715

 

 

$

61,513

 

Less: Net income attributable to non-controlling interests

 

 

182

 

 

 

—

 

 

 

—

 

 

 

182

 

Net income attributable to ARKO Corp.

 

$

58,936

 

 

$

1,680

 

 

$

715

 

 

$

61,331

 

Series A redeemable preferred stock dividends

 

 

(4,301

)

 

 

—

 

 

 

—

 

 

 

(4,301

)

Net income attributable to common shareholders

 

$

54,635

 

 

$

1,680

 

 

$

715

 

 

$

57,030

 

Net income per share attributable to common shareholders -
  basic

 

$

0.45

 

 

 

 

 

 

 

 

$

0.47

 

Net income per share attributable to common shareholders -
  diluted

 

$

0.43

 

 

 

 

 

 

 

 

$

0.46

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

121,950

 

 

 

 

 

 

 

 

 

121,950

 

Diluted

 

 

123,527

 

 

 

 

 

 

 

 

 

123,527

 

 

ARKO Corp.

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2021

(in thousands, except per share data)

 

 

 

ARKO Corp. Historical

 

 

Pride Historical

 

 

Pro Forma Adjustments

 

 

ARKO Corp. Pro Forma Combined

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

 

$

5,714,333

 

 

$

222,913

 

 

$

—

 

 

$

5,937,246

 

Merchandise revenue

 

 

1,616,404

 

 

 

53,224

 

 

 

—

 

 

 

1,669,628

 

Other revenues, net

 

 

86,661

 

 

 

5,159

 

 

 

(765

)

(k)

 

91,055

 

Total revenues

 

 

7,417,398

 

 

 

281,296

 

 

 

(765

)

 

 

7,697,929

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

 

5,275,907

 

 

 

193,708

 

 

 

—

 

 

 

5,469,615

 

Merchandise costs

 

 

1,143,494

 

 

 

35,247

 

 

 

—

 

 

 

1,178,741

 

Store operating expenses

 

 

630,518

 

 

 

32,259

 

 

 

10,500

 

(h)

 

 

 

 

 

 

 

 

 

 

 

(4,297

)

(k)

 

668,980

 

General and administrative expenses

 

 

124,667

 

 

 

11,627

 

 

 

(1,525

)

(e)

 

 

 

 

 

 

 

 

 

 

 

(400

)

(k)

 

134,369

 

Depreciation and amortization

 

 

97,194

 

 

 

2,625

 

 

 

508

 

(f)

 

 

 

 

 

 

 

 

 

 

 

265

 

(g)

 

100,592

 

Interest expense

 

 

—

 

 

 

2,150

 

 

 

(2,150

)

(c)

 

—

 

Total operating expenses

 

 

7,271,780

 

 

 

277,616

 

 

 

2,901

 

 

 

7,552,297

 

Other expenses (income), net

 

 

3,536

 

 

 

(5,633

)

 

 

2,228

 

(d)

 

 

 

 

 

 

 

 

 

 

 

5,633

 

(k)

 

5,764

 

Operating income

 

 

142,082

 

 

 

9,313

 

 

 

(11,527

)

 

 

139,868

 

Interest and other financial income

 

 

3,005

 

 

 

—

 

 

 

—

 

 

 

3,005

 

Interest and other financial expenses

 

 

(74,212

)

 

 

—

 

 

 

(665

)

(c)

 

 

 

 

 

 

 

 

 

 

 

(2,747

)

(h)

 

 

 

 

 

 

 

 

 

 

 

(47

)

(i)

 

(77,671

)

Income before income taxes

 

 

70,875

 

 

 

9,313

 

 

 

(14,986

)

 

 

65,202

 

Income tax expense

 

 

(11,634

)

 

 

(622

)

 

 

2,041

 

(j)

 

(10,215

)

Income from equity investment

 

 

186

 

 

 

—

 

 

 

—

 

 

 

186

 

Net income

 

$

59,427

 

 

$

8,691

 

 

$

(12,945

)

 

$

55,173

 

Less: Net income attributable to non-controlling interests

 

 

229

 

 

 

1,128

 

 

 

(1,128

)

(k)

 

229

 

Net income attributable to ARKO Corp.

 

$

59,198

 

 

$

7,563

 

 

$

(11,817

)

 

$

54,944

 

Series A redeemable preferred stock dividends

 

 

(5,735

)

 

 

—

 

 

 

—

 

 

 

(5,735

)

Net income attributable to common shareholders

 

$

53,463

 

 

$

7,563

 

 

$

(11,817

)

 

$

49,209

 

Net income per share attributable to common shareholders -
  basic

 

$

0.43

 

 

 

 

 

 

 

 

$

0.40

 

Net income per share attributable to common shareholders -
  diluted

 

$

0.42

 

 

 

 

 

 

 

 

$

0.39

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

124,412

 

 

 

 

 

 

 

 

 

124,412

 

Diluted

 

 

125,437

 

 

 

 

 

 

 

 

 

125,437

 

 

ARKO Corp.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

1. Basis of Presentation

The pro forma financial statements have been prepared to reflect the effects of the Pride Acquisition on the financial statements of the Company. The pro forma balance sheet is presented as if the Pride Acquisition had occurred on September 30, 2022. The pro forma statements of operations for the year ended December 31, 2021, and the nine months ended September 30, 2022, are presented as if the Pride Acquisition had occurred on January 1, 2021. The historical consolidated financial statements have been adjusted to reflect factually supportable items that are directly attributable to the Pride Acquisition and, with respect to the statements of operations only, that are expected to have a continuing impact on the combined results.

The pro forma financial statements have been prepared using the acquisition method of accounting in ASC 805, Business Combinations, with the Company treated as the acquirer. The acquisition method of accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for definitive measures. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial statements in accordance with the requirements of the Securities and Exchange Commission, and are subject to revision based on a final determination of fair value as of the date of acquisition. Differences between these preliminary estimates and the final acquisition accounting may be material; therefore, the pro forma financial statements presented below are not necessarily indicative of what the combined company’s financial condition or results of operations would have been had the Pride Acquisition been completed on the applicable dates of this pro forma financial statements. In addition, the pro forma financial statements do not purport to project the future financial condition and results of operations of the combined company.

 

2. Estimated Consideration and Preliminary Purchase Price Allocation

The total purchase price for the Pride Acquisition was approximately $230.0 million plus the value of inventory at closing and subject to certain other closing adjustments. The Company financed approximately $30.0 million of the cash consideration plus the value of inventory and other closing adjustments with cash on hand and borrowings under GPM Petroleum LP’s revolving credit facility with a syndicate of banks led by Capital One, National Association (the “GPMP Capital One Line of Credit”). Oak Street Real Estate Capital Net Property Fund, LP (“Oak Street”), under the Company’s standby real estate purchase, designation and lease program agreement with Oak Street, dated as of May 3, 2021 (as amended, the “Program Agreement”), paid the remaining consideration to acquire the entity holding certain real estate assets immediately prior to the closing of the Pride Acquisition. At the closing, pursuant to the Program Agreement, the Company entered into a master lease with Oak Street for the sites Oak Street acquired in the transaction under customary lease terms.

The Company has performed a preliminary valuation of the fair value of the assets acquired and liabilities assumed. The following table summarizes the preliminary allocation of the purchase price of the Pride Acquisition:

 

 

Amount

 

 

 

(in thousands)

 

Fair value of consideration transferred:

 

 

 

Cash

 

$

10,669

 

GPMP Capital One Line of Credit

 

 

20,000

 

Payable to Pride Parent, LLC

 

 

3,055

 

Consideration provided by Oak Street

 

 

201,654

 

Total consideration

 

$

235,378

 

Assets acquired and liabilities:

 

 

 

Cash and cash equivalents

 

$

3,591

 

Trade receivables

 

 

6,228

 

Inventory

 

 

5,126

 

Other assets

 

 

951

 

Property and equipment

 

 

204,581

 

Right-of-use assets under operating leases

 

 

2,245

 

Intangible assets

 

 

1,824

 

Environmental receivables

 

 

42

 

Deferred tax asset

 

 

6,527

 

Total assets

 

 

231,115

 

Accounts payable

 

 

(11,073

)

Other liabilities

 

 

(1,259

)

Environmental liabilities

 

 

(70

)

Asset retirement obligations

 

 

(675

)

Operating leases

 

 

(2,245

)

Total liabilities

 

 

(15,322

)

Total identifiable net assets

 

 

215,793

 

Goodwill

 

$

19,585

 

The initial accounting treatment of the Pride Acquisition reflected in these pro forma financial statements is provisional as the Company has not yet finalized the initial accounting treatment of the business combination, and in this regard, has not finalized the valuation of some of the assets and liabilities acquired and the goodwill resulting from the Pride Acquisition, mainly due to the limited period of time between the Closing Date and the date of these pro forma financial statements. Therefore, some of the financial information presented with respect to the Pride Acquisition in these pro forma financial statements remains subject to change.

 

3. Pro Forma Adjustments and Assumptions

The pro forma adjustments are based on currently available information and certain assumptions that the Company believes are reasonable. The actual effects of the Pride Acquisition may differ materially from the pro forma adjustments included herein. However, management believes that the assumptions used to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the Pride Acquisition and that the pro forma adjustments are factually supportable, give appropriate effect to the expected impact of events that are directly attributable to the Pride Acquisition, and reflect those items expected to have a continuing impact on the Company. The pro forma financial statements may not be indicative of the results that actually would have occurred if the Company had completed the Pride Acquisition on the dates indicated or that could be achieved in the future.

The following pro forma adjustments, as applicable, are included in the pro forma financial statements:

(a)
Reflects the adjustment of the historical carrying amount of Pride’s assets acquired and liabilities assumed as of September 30, 2022 to the preliminary estimated fair value of the assets acquired and liabilities assumed as of the Closing Date.
(b)
Reflects the recognition of the preliminary purchase price, including cash consideration paid of $232.3 million, net of $201.7 million proceeds from Oak Street treated as a sale-leaseback for accounting purposes.
(c)
Certain adjustments that are directly related to the Pride Acquisition were made to debt and debt related accounts. The adjustments were as follows:
1.
A $20.0 million increase to long-term debt which reflects the draw from the GPMP Capital One Line of Credit.
2.
The elimination of Pride’s indebtedness of $81.8 million, which was not assumed by the Company.
3.
Elimination of historical interest expense and recording of the interest expense associated with the new debt as discussed in Note 2 to these pro forma financial statements. The following table summarizes the change in estimated interest expense:

 

 

 

Nine Months Ended September 30, 2022

 

 

Year Ended
December 31, 2021

 

 

 

(in thousands)

 

Estimated interest expense

 

$

576

 

 

$

665

 

Less historical interest expense

 

 

(2,659

)

 

 

(2,150

)

Total

 

$

(2,083

)

 

$

(1,485

)
(d)
Reflects incremental amount of estimated transaction costs incurred or to be incurred related to the Pride Acquisition that are not already reflected in the historical financial statements. The transaction costs have been recorded in the pro forma statement of operations for the year ended December 31, 2021 as the costs would have been incurred shortly after the transaction and are one-time in nature.
(e)
Reflects the reduction of compensation expense for former management personnel of Pride who were not retained by the Company at the Closing Date.
(f)
The following table summarizes the change in estimated depreciation expense:

 

 

Nine Months Ended September 30, 2022

 

 

Year Ended
December 31, 2021

 

 

 

(in thousands)

 

Estimated depreciation expense

 

$

2,349

 

 

$

3,133

 

Less historical depreciation expense

 

 

(1,923

)

 

 

(2,625

)

Total

 

$

426

 

 

$

508

 
(g)
On the Closing Date, the useful life of the tradename acquired was five years. The following table summarizes the change in estimated amortization expense:

 

 

Nine Months Ended September 30, 2022

 

 

Year Ended
December 31, 2021

 

 

 

(in thousands)

 

Estimated amortization expense

 

$

199

 

 

$

265

 

Less historical amortization expense

 

 

—

 

 

 

—

 

Total

 

$

199

 

 

$

265

 

 

(h)
For accounting purposes, the transaction with Oak Street was treated as a sale-leaseback. Because the sale-leaseback was off-market, a financial liability of $34.8 million was recorded, resulting in interest expense recognized over the lease term. Additionally, the right-of-use assets and operating lease liabilities of approximately $105.5 million were recorded in connection with the operating lease, after reducing for accounting purposes from the contractual lease payments the amount attributable to the repayment of the additional financing. In addition, reflects the establishment of $2.2 million of right-of-use assets and operating lease liabilities for assumed existing leases with certain other third-parties. The following table summarizes the change in the estimated lease expense:

 

 

Nine Months Ended September 30, 2022

 

 

Year Ended
December 31, 2021

 

 

 

(in thousands)

 

Estimated lease expense

 

$

8,585

 

 

$

11,447

 

Less historical lease expense

 

 

(201

)

 

 

(947

)

Total

 

$

8,384

 

 

$

10,500

 
(i)
Reflects the increase in interest expense associated with the asset retirement obligation.
(j)
The pro forma income tax adjustments included in the pro forma statement of operations for the nine months ended September 30, 2022 and for the year ended December 31, 2021 reflect the income tax effects of the Pride historical income before taxes and the pro forma adjustments presented. The tax rate applied was 25%.
(k)
Reflects adjustments for related results of operations and properties and vehicles not acquired by Pride from Pride Stores, LLC as of December 31, 2021 under the APA, such as income and expenses associated with such properties and vehicles owned by Pride Stores, LLC, as well as transaction costs incurred related to the APA.
(l)
Reflects adjustment for $10.5 million goodwill impairment charge recorded for the nine months ended September 30, 2022.
(m)
Reflects the elimination of the historical equity balance of Pride.