DALLAS, July 25, 2017 /PRNewswire/ -- Ashford Inc. (NYSE
American: AINC) ("Ashford" or the "Company") today announced that
it has agreed to acquire a controlling interest in a privately held
company that conducts the business of J&S Audio Visual in
the United States, Mexico, and the Dominican Republic ("J&S") for
approximately $17.1 million in cash
and $4.3 million of Ashford common
stock consideration (excluding transaction costs and working
capital adjustments), subject to certain closing conditions.
The transaction is expected to close in the third quarter.
J&S provides an integrated suite of audio visual
services, including show & event services, hospitality
services, creative services, and design & integration, making
J&S a leading single-source solution for their clients' meeting
and event needs. J&S currently has multi-year contracts in
place with approximately 55 hotels and convention centers in
addition to regular business representing over 2,500 annual events
and productions, 500 venue locations, and 650 clients.
With over 30 years of operating history, J&S has grown into
a leading integrated single-source audio visual service provider
with a well-diversified geographical presence and customer base.
J&S estimates its customer retention rate to be approximately
90% which highlights the high level of quality customer service,
professional production quality, and unique, tailored solutions
J&S provides. Ashford expects significant revenue and
operational cost synergies with the addition of contracts between
J&S and Ashford asset-managed hotels. Currently, J&S has
two contracts in place with Ashford asset-managed hotels and
further roll-out of J&S services into Ashford asset-managed
hotels should create significant upside potential.
After giving effect to the transaction, Ashford will own
approximately an 85% interest in the common equity of J&S.
The Company expects to finance the investment with a term
loan of approximately $12
million. In addition, J&S will retain or payoff
approximately $777,000 of
pre-existing debt, as well as any debt related to new contracts
signed before the transaction is closed. During the twelve
months ended April 30, 2017, J&S
had Net Income of approximately $1.2
million and Adjusted EBITDA of approximately $5.4 million. The implied total purchase
price represents, as of April 30,
2017, a trailing 12-month Adjusted EBITDA multiple of 5.7x,
according to the Company's preliminary estimates based on unaudited
operating financial data provided by J&S. Ashford believes that
the implied total valuation of 5.7x Adjusted EBITDA represents an
attractive potential return on investment relative to prior
comparable transactions with publicly disclosed information.
After J&S becomes the preferred audio visual service
provider at most of the planned Ashford Hospitality Trust, Inc.
(NYSE: AHT) ("Ashford Trust") and Ashford Hospitality Prime, Inc.
(NYSE: AHP) ("Ashford Prime") hotels
over the next 2-3 years along with conservative growth assumptions
on the legacy business, Net Income and Adjusted EBITDA are expected
to increase by approximately $2.5
million and $5.2 million,
respectively. Ashford expects J&S to initially contribute
approximately $1.77 to its Adjusted
Net Income per diluted share. J&S should add
approximately $2.83 to the Company's
Adjusted Net Income per diluted share after J&S becomes the
preferred audio visual service provider at most of the planned
Ashford Trust and Ashford Prime
hotels by December 31, 2020.
Existing management for J&S will remain in place and will be
heavily incentivized to serve existing business and grow the
Company. Monroe Jost will
retain the title of Chief Executive Officer.
"This transaction represents the next phase of growth for
J&S becoming a leading provider of integrated audio visual
services in the hospitality industry," commented Monroe Jost, Chief Executive Officer of J&S.
"We look forward to leveraging Ashford's hotel and operating
experience and track record of success to further solidify our
market position and support the tremendous potential for growth in
our business."
"We continue to use our hospitality and management experience to
identify and invest in unique business opportunities in the
industry and are excited to integrate our deep operating experience
with the customer service and professional quality of J&S,"
said Monty J. Bennett, Ashford's
Chairman and Chief Executive Officer. "J&S provides
best-in-class solutions for the increasing demand for high-end
audio visual needs for meetings and events, and we are excited
about the future of this partnership."
Ashford provides global asset management, investment management
and related services to the real estate and hospitality
sectors.
Follow Chairman and CEO Monty
Bennett on Twitter at
www.twitter.com/MBennettAshford or @MBennettAshford.
Ashford has created an Ashford App for the hospitality REIT
investor community. The Ashford App is available for free
download at Apple's App Store and
the Google Play Store by searching "Ashford."
Certain statements and assumptions in this press release
contain or are based upon "forward-looking" information and are
being made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties. When we use the
words "will likely result," "may," "anticipate," "estimate,"
"should," "expect," "believe," "intend," or similar expressions, we
intend to identify forward-looking statements. Such statements are
subject to numerous assumptions and uncertainties, many of which
are outside Ashford's control.
These forward-looking statements are subject to known and
unknown risks and uncertainties, which could cause actual results
to differ materially from those anticipated, including, without
limitation: changes in the business or operating prospects of
J&S; adverse litigation or regulatory developments; our success
in implementing our business development plans of integrating
J&S's business and realizing the expected benefits of the
transaction; general volatility of the capital markets and the
market price of our common stock; changes in our business or
investment strategy; availability, terms and deployment of capital;
availability of qualified personnel; changes in our industry and
the market in which we operate, interest rates or the general
economy; and the degree and nature of our competition.
The forward-looking statements included in this press release
are only made as of the date of this press release. Investors
should not place undue reliance on these forward-looking
statements. We are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or circumstances, changes in expectations or
otherwise.
J&S(1), (2)
|
RECONCILIATION OF
NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET
INCOME
|
(unaudited, in
thousands)
|
|
|
|
|
|
Estimated
|
|
12 Months
Ended
|
|
12 Months
Ending
|
|
April
30,
|
|
December
31,
|
|
2017
|
|
2020
|
|
Net
Income
|
$
|
1,163
|
|
$
|
3,657
|
Interest
expense
|
|
287
|
|
|
402
|
Depreciation and amortization
|
|
3,252
|
|
|
4,018
|
Income
tax expense
|
|
89
|
|
|
2,153
|
EBITDA
|
$
|
4,791
|
|
$
|
10,230
|
Non-cash
loss
|
|
24
|
|
|
-
|
Amortization of hotel signing fees
(3)
|
|
309
|
|
|
300
|
Foreign
currency transactions (gain) loss
|
|
162
|
|
|
-
|
Acquisition adjustments (4)
|
|
77
|
|
|
-
|
Adjusted
EBITDA
|
$
|
5,363
|
|
$
|
10,530
|
Interest
expense
|
|
(287)
|
|
|
(402)
|
Income
tax expense
|
|
(89)
|
|
|
(2,153)
|
Adjusted Net
Income
|
$
|
4,987
|
|
$
|
7,975
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) All
historical information in this table is based upon unaudited
operating financial data provided by J&S. Financial
statements for J&S have not been prepared and this data has not
been audited, reviewed or compiled by the Company's independent
registered public accounting firm, and therefore the financial
information presented will likely change.
|
|
|
|
|
|
|
|
|
|
|
(2) All information
in this table represents 100% of J&S financial
information. As such the amount of Net Income, Adjusted
EBITDA, and Adjusted Net Income attributable to Ashford's interest
will be less than the amount presented.
|
|
|
|
|
|
|
|
|
|
|
(3) Hotel signing
fees represent incentive payments incurred in connection with
signing or renewing venue contracts and generally provide the right
to be the exclusive on-site provider of audio-visual services at
the hotel. The payments are deferred and amortized over the life of
the contract.
|
|
(4) Acquisition
adjustments represent add-backs for pro forma expenses related to
executive management compensation of J&S.
|
|
|
|
|
|
|
|
|
|
|
Included in this
press release are certain supplemental measures of performance
which are not measures of operating performance under GAAP, to
assist investors in evaluating the Company's historical or future
financial performance. These supplemental measures include adjusted
earnings before interest, tax, depreciation and amortization
("Adjusted EBITDA") and Adjusted Net Income. We believe that
Adjusted EBITDA and Adjusted Net Income provide investors and
management with a meaningful indicator of operating performance.
Management also uses Adjusted EBITDA and Adjusted Net Income, among
other measures, to evaluate profitability and our board of
directors includes these measures in reviews to determine quarterly
distributions to stockholders. We calculate Adjusted EBITDA by
subtracting or adding to net income (loss): interest expense,
income taxes, depreciation, amortization, net income (loss) to
noncontrolling interests, transaction costs, and other expenses. We
calculate Adjusted Net Income by subtracting or adding to net
income (loss): depreciation, amortization, net income (loss) to
noncontrolling interests, transaction costs, and other expenses.
Our methodology for calculating Adjusted EBITDA and Adjusted Net
Income may differ from the methodologies used by other comparable
companies, when calculating the same or similar supplemental
financial measures and may not be comparable with these companies.
Neither Adjusted EBITDA nor Adjusted Net Income represents cash
generated from operating activities as determined by GAAP and
should not be considered as an alternative to a) GAAP net income
(loss) as an indication of our financial performance or b) GAAP
cash flows from operating activities as a measure of our liquidity
nor are such measures indicative of funds available to satisfy our
cash needs. The Company urges investors to carefully review the
U.S. GAAP financial information as shown in our periodic reports on
Form 10-Q and Form 10-K, as amended.
|
ASHFORD INC. AND
SUBSIDIARIES' SHARE OF ADJUSTED NET INCOME PER SHARE ATTRIBUTABLE
TO J&S(1)
|
(unaudited, in
thousands, except per share amounts)
|
|
|
|
Estimated
|
|
12 Months
Ended
|
|
12 Months
Ending
|
|
April
30,
|
|
December
31,
|
|
2017
|
|
2020
|
|
J&S Adjusted
Net Income (2)
|
$
|
4,239
|
|
$
|
6,779
|
Diluted shares
(3)
|
|
2,394
|
|
|
2,394
|
Incremental
Adjusted Net Income per diluted share
|
$
|
1.77
|
|
$
|
2.83
|
|
(1) All
historical information in this table is based upon unaudited
operating financial data provided by J&S. Financial
statements for J&S have not been prepared and this data has not
been audited, reviewed or compiled by the Company's independent
registered public accounting firm, and therefore the financial
information presented will likely change.
|
|
(2) Represents the
Company's 85% share of Adjusted Net Income attributable to
J&S.
|
|
(3) Represents the
weighted average diluted shares of the Company for the three months
ended March 31, 2017, adjusted to include the Ashford Inc. common
stock issued concurrent with this transaction assuming an implied
valuation, as of April 30, 2017, based on a trailing 12-month
Adjusted EBITDA multiple of 5.7x, and an Ashford Inc. common stock
price of $50.00 per share. This amount is subject to change and
does not include shares issuable in the future pursuant to this
transaction.
|
J&S
|
CAPITALIZATION
(1)
|
(in thousands,
unaudited)
|
|
|
|
Acquisition
Financing
|
$
|
12,000
|
Other Debt
(2)
|
|
777
|
Common Equity
(3)
|
|
17,958
|
Total
Capitalization
|
$
|
30,735
|
|
|
|
|
|
|
(1) Anticipated
capitalization after giving effect to the transaction.
|
|
(2) Includes three
capital leases, estimated debt related to a new
contract,
|
and two equipment
term loans that will either be assumed or paid off
at
|
closing, which could
increase the cash consideration paid by the Company.
|
|
|
(3) Includes
Ashford's ownership of 85% of the Common Equity.
|
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SOURCE Ashford Inc.