UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K/A
(AMENDMENT NO. 1)

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 2, 2015

LADENBURG THALMANN FINANCIAL SERVICES INC.
(Exact Name of Registrant as Specified in its Charter)
 
Florida
 
001-15799
 
650701248
(State or Other Jurisdiction
 of Incorporation)
 
(Commission File
 Number)
 
(IRS Employer
 Identification No.)

4400 Biscayne Boulevard, 12th Floor, Miami, Florida
 
33137
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code:     (212) 409-2000

Not Applicable
(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))





Introductory Note
 
Ladenburg Thalmann Financial Services Inc. (“LTFS”) previously filed a Current Report on Form 8-K dated January 2, 2015 (the “Current Report”) with the Securities and Exchange Commission on January 6, 2015 to report the acquisition by LTFS of Securities Service Network, Inc. (“SSN”) and Renaissance Capital Corporation. The purpose of this amendment to the Current Report is to include the financial statements and pro forma financial information required under Item 9.01. Except for the foregoing, this Form 8-K/A No. 1 effects no other changes to the Current Report.
 
Item 9.01.   Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

The audited consolidated statement of financial condition of SSN at December 31, 2014 and the audited consolidated statement of income, statement of changes in stockholders' equity and statement of cash flows of SSN for the year ended December 31, 2014 are attached hereto as Exhibit 99.1 and are incorporated in their entirety herein by reference.

(b) Pro forma financial information.

The unaudited pro forma combined condensed balance sheet at December 31, 2014 and the unaudited pro forma combined condensed statement of operations for the twelve months ended December 31, 2014 are attached hereto as Exhibit 99.2 and are incorporated in their entirety herein by reference.

(d) Exhibits.

Exhibit Number
Description
 
23.1
 
Consent of Coulter & Justus, P.C.

 
 
 
99.1
 
Audited consolidated statement of financial condition of Securities Service Network, Inc. at December 31, 2014 and the audited consolidated statement of income, statement of changes in stockholders' equity and statement of cash flows of Securities Service Network, Inc. for the year ended December 31, 2014.
 
 
 
99.2
 
Unaudited pro forma combined condensed balance sheet at December 31, 2014 and the unaudited pro forma combined condensed statement of operations for the twelve months ended December 31, 2014.
 
 
 
 
 
 




SIGNATURES
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.

Date:  March 20, 2015

 
LADENBURG THALMANN FINANCIAL SERVICES INC.
 
 
 
 
By:  
/s/ Brett H. Kaufman    
 
 
Name:  
Brett H. Kaufman
 
 
Title:  
Senior Vice President and Chief Financial Officer







Exhibit 23.1
 
Consent of Independent Registered Public Accounting Firm


We consent to the incorporation by reference in the Registration Statements of Ladenburg Thalmann Financial Services Inc. on Form S-8 (Nos. 333-82688, 333-101360, 333-101361, 333-124366, 333-130024, 333-139246, 333-139247, 333-139254, 333-147386, 333-163007, and 333-198056) and on Form S-3 (Nos. 333-37934, 333-71526, 333-81964, 333-88866, 333-117952, 333-122240, 333-130026, 333-130028, 333-139244, 333-141517, 333-150851, 333-153373, 333-187322 and 333-192712) of our report dated February 24, 2015 relating to the consolidated financial statements of Securities Service Network, Inc. and subsidiaries, which are included in the Current Report on Form 8-K/A of Ladenburg Thalmann Financial Services Inc. filed on March 20, 2015.

/s/ Coulter & Justus, P.C.

Knoxville, Tennessee
March 20, 2015





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





LADENBURG THALMANN FINANCIAL SERVICES INC.

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS


The following unaudited pro forma combined condensed financial statement are based on the unaudited pro forma combined condensed financial statements of Ladenburg Thalmann Financial Services Inc. ("LTS"), HCHC Holdings, Inc. ("HCHC"), which was acquired by LTS on July 31, 2014, and KMS Financial Services, Inc. ("KMS"), which was acquired by LTS on October 15, 2014, and the historical financial statements of Securities Service Network, Inc. ("SSN"), after giving effect to the acquisition of SSN and Renaissance Capital Corporation ("RCC") by LTS (the "SSN Acquisition" and, together with the HCHC acquisition and the KMS acquisition, the "Acquisitions") using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma combined condensed statements of operations for the twelve months ended December 31, 2014 are presented as if the Acquisitions had occurred on January 1, 2014. The unaudited pro forma combined condensed balance sheet is presented as if the SSN Acquisition had occurred on December 31, 2014. You should read this information in conjunction with the:
         
•
accompanying notes to the unaudited pro forma combined condensed financial statements;
•
unaudited pro forma information included in Note 3 to the consolidated financial statements included in LTS’ annual report on Form 10-K for the fiscal year ended December 31, 2014;
•
separate historical financial statements of LTS as of, and for the fiscal year ended, December 31, 2014, included in LTS’ annual report on Form 10-K for the fiscal year ended December 31, 2014; and
•
separate historical financial statements of SSN as of December 31, 2014 and for the fiscal year ended December 31, 2014 included in Exhibit 99.1 of this report.
    
Separate historical financial statements of RCC as of December 31, 2014 and for the fiscal year ended December 31, 2014 are not included in this report, and RCC's results of operations are not included in the following unaudited pro forma combined condensed financial statements, as RCC's historical results of operations are not material.

The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisitions had been completed on January 1, 2014, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon available information and certain assumptions that LTS believes are reasonable.

The unaudited pro forma combined condensed financial statements do not include the effects of any operating efficiencies or cost savings expected from the Acquisitions.

The unaudited pro forma combined condensed balance sheet as of December 31, 2014 has been derived from:
 
•
the audited historical condensed consolidated balance sheet of LTS as of December 31, 2014; and
•
the audited historical consolidated balance sheet of SSN as of December 31, 2014.
 
The unaudited pro forma combined condensed statement of operations for the twelve months ended December 31, 2014 has been derived from:
 
•
the unaudited pro forma combined condensed statement of operations of LTS, HCHC and KMS for the twelve months ended December 31, 2014; and
•
the audited historical consolidated statement of income of SSN for the twelve months ended December 31, 2014.



1

LADENBURG THALMANN FINANCIAL SERVICES INC.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
December 31, 2014
 (In thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LTS Historical
 
SSN Historical
 
Pro Forma
Adjustments
 
 
 
Pro Forma Combined
ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
103,087

 
$
8,032

 
$
(25,000
)
 
f
 
$
86,119

Securities owned, at fair value
 
5,910

 
158

 
—

 
 
 
6,068

Receivables from clearing brokers and other broker-dealers
 
40,548

 
630

 
—

 
 
 
41,178

Other receivables, net
 
36,872

 
2,611

 
—

 
 
 
39,483

Fixed assets, net
 
19,820

 
—

 
—

 
 
 
19,820

Restricted assets
 
620

 
—

 
—

 
 
 
620

Intangible assets, net
 
123,000

 
—

 
30,901

 
g
 
153,901

Goodwill
 
115,238

 
—

 
8,936

 
g
 
124,174

Notes receivable from financial advisors, net
 
26,152

 
225

 
—

 
 
 
26,377

Unamortized debt issue cost
 
644

 
—

 
—

 
 
 
644

Cash surrender value of life insurance
 
10,419

 
—

 
—

 
 
 
10,419

Other assets
 
28,448

 
681

 
—

 
 
 
29,129

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
510,758

 
$
12,337

 
$
14,837

 
 
 
$
537,932

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
Securities sold, but not yet purchased, at market value
 
$
230

 
$
—

 
$
—

 
 
 
$
230

Accrued compensation
 
23,483

 
—

 
—

 
 
 
23,483

Commissions and fees payable
 
45,294

 
3,462

 
—

 
 
 
48,756

Accounts payable and accrued liabilities
 
25,747

 
1,381

 
3,590

 
h
 
30,718

Deferred rent
 
1,514

 
—

 
—

 
 
 
1,514

Deferred income taxes
 
3,216

 
—

 
—

 
 
 
3,216

Accrued interest
 
1,129

 
—

 
—

 
 
 
1,129

Deferred compensation liability
 
17,640

 
—

 
—

 
 
 
17,640

Notes payable, net of unamortized discount
 
56,034

 
—

 
18,697

 
i
 
74,731

Deferred income
 
—

 
44

 
—

 
 
 
44

 
 
 
 
 
 
 
 
 
 
 
Total liabilities
 
174,287

 
4,887

 
22,287

 
 
 
201,461

 
 
 
 
 
 
 
 
 
 
 
Shareholders’ equity:
 
 

 
 

 
 
 
 
 
 

Preferred stock, $.0001 par value; 25,000,000 shares authorized; 8% Series A cumulative redeemable preferred stock; 14,290,000 shares authorized;11,096,231 shares issued and outstanding
 
1

 
—

 
—

 
 
 
1

Common stock, $.0001 par value; 800,000,000 shares authorized; shares issued and outstanding, 184,968,487
 
18

 
6

 
(6
)
 
j
 
18

Additional paid-in capital
 
460,446

 
2,903

 
(2,903
)
 
j
 
460,446

Retained earnings (accumulated deficit)
 
(124,005
)
 
4,541

 
(4,541
)
 
j
 
(124,005
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
 
336,460

 
7,450

 
(7,450
)
 
 
 
336,460

 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest
 
11

 
—

 
—

 
 
 
11

 
 
 
 
 
 
 
 
 
 
 
Total liabilities and shareholders’ equity
 
$
510,758

 
$
12,337

 
$
14,837

 
 
 
$
537,932


SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

2

LADENBURG THALMANN FINANCIAL SERVICES INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

For the twelve months ended December 31, 2014
(In thousands, except share and per share amounts)

 
 
LTS, HCHC, KMS Pro Forma Combined
 
SSN
 
Pro Forma
Adjustments
 
 
 
Pro Forma
Combined
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commissions
 
$
508,753

 
$
57,479

 
$
—

 
 
 
$
566,232

Advisory fees
 
377,953

 
44,844

 
—

 
 
 
422,797

Investment banking
 
46,998

 
—

 
—

 
 
 
46,998

Principal transactions
 
1,910

 
—

 
—

 
 
 
1,910

Interest and dividends
 
6,231

 
46

 
—

 
 
 
6,277

Service fees and other income
 
80,277

 
9,918

 
—

 
 
 
90,195

 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
1,022,122

 
112,287

 
—

 
 
 
1,134,409

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 

 
 

 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
 
730,856

 
96,304

 
—

 
 
 
827,160

Compensation and benefits
 
141,402

 
7,248

 
—

 
 
 
148,650

Non-cash compensation
 
11,451

 
—

 
291

 
e
 
11,742

Brokerage, communication and clearance fees
 
18,653

 
2,081

 
—

 
 
 
20,734

Rent and occupancy, net of sublease revenue
 
8,282

 
326

 
—

 
 
 
8,608

Professional services
 
12,428

 
363

 
—

 
 
 
12,791

Interest
 
7,626

 
21

 
642

 
a
 
8,289

Depreciation and amortization
 
22,834

 
—

 
1,831

 
b
 
24,665

Acquisition-related expense
 
1,776

 
—

 
(523
)
 
c
 
1,253

Loss on extinguishment of debt
 
548

 
—

 
—

 
 
 
548

Amortization of retention and forgivable loans
 
11,041

 
6

 
—

 
 
 
11,047

Other
 
49,042

 
2,928

 
—

 
 
 
51,970

 
 
 
 


 
 
 
 
 
 
Total expenses
 
1,015,939

 
109,277

 
2,241

 
 
 
1,127,457

 
 
 
 
 
 
 
 
 
 
 
Income (loss) before item shown below
 
6,183

 
3,010

 
(2,241
)
 
 
 
6,952

 
 
 
 
 
 
 
 
 
 
 
Change in fair value of contingent consideration
 
12

 
—

 
—

 
 
 
12

Income (loss) before income taxes
 
6,195

 
3,010

 
(2,241
)
 
 
 
6,964

 
 
 
 
 
 
 
 
 
 
 
Income tax (benefit) expense
 
(1,885
)
 
175

 
(175
)
 
d
 
(1,885
)
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
8,080

 
$
2,835

 
$
(2,066
)
 
 
 
$
8,849

 
 
 
 
 
 
 
 
 
 
 

3

LADENBURG THALMANN FINANCIAL SERVICES INC.

Net loss attributable to noncontrolling interest
 
(81
)
 
—

 
—

 
 
 
(81
)
Net income (loss) attributable to the Company
 
8,161

 
2,835

 
(2,066
)
 
 
 
8,930

Dividends declared on preferred stock
 
(17,244
)
 
—

 
—

 
 
 
(17,244
)
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
(9,083
)
 
$
2,835

 
$
(2,066
)
 
 
 
$
(8,314
)
 
 
 
 
 
 
 
 
 
 
 
Net loss per share available to common shareholders - Basic and diluted
 
$
(0.05
)
 
 
 
 
 
 
 
$
(0.04
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic and diluted
 
185,370,262

 
 
 
 
 
 
 
185,370,262



SEE NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

4

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(in thousands, except share amounts)

1. Basis of Presentation

On January 2, 2015 (the "Closing Date"), Ladenburg Thalmann Financial Services Inc. ("LTS") completed its acquisition of Securities Service Network, Inc. ("SSN") and Renaissance Capital Corporation ("RCC" and, together with SSN, the "Companies"). SSN is an independent broker-dealer, registered investment advisor and insurance agency based in Knoxville, TN.

Under a stock purchase agreement, dated as of September 21, 2014, by and among LTS, the Companies and the shareholders of the Companies (the "Shareholders"), LTS paid the Shareholders approximately $45,000 at closing, consisting of $25,000 principal amount of secured short term promissory notes, bearing interest at 0.41% per annum and payable on the next business day following the Closing Date (the "Short Term Notes") and $20,000 principal amount of secured four-year promissory notes, bearing interest at 1.74% per annum and payable in equal quarterly installments of principal and interest (the "Long Term Notes"). The outstanding principal and interest under the Short Term Notes was paid in full to the Shareholders on January 5, 2015. The SSN Acquisition consideration is subject to a post-closing adjustment payable in cash based on the aggregate net worth of the Companies as of the Closing Date, and LTS estimates such payment will amount to $3,590 based on the Companies net worth as of December 31, 2014.

The Long Term Notes contain customary events of default, which if uncured, entitle the Long Term Note holders to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Long Term Notes. The Long Term Notes were recorded at a fair value of $18,697 based on an imputed interest rate of 5.5%.

 In connection with the SSN Acquisition, LTS granted stock options to certain of SSN's key employees. The stock options for 500,000 common shares have an exercise price of $3.88 and vest ratably over a period of four years, subject to certain exceptions.

Certain reclassifications have been made to the SSN historical statement of financial condition and statements of operations as of December 31, 2014 and the twelve months ended December 31, 2014, respectively.

Purchase Price and Related Preliminary Allocation

The purchase price is as follows:

Cash paid
$
25,000

Notes payable
18,697

Due to selling shareholders - net worth adjustment
3,590

          
$
47,287

 
The allocation of the purchase price to SSN’s intangible assets acquired was based on their estimated fair values. The valuation of these identifiable intangible assets and the net worth adjustment is preliminary and is subject to further management review. The excess of the purchase price over the identifiable intangible assets acquired has been allocated to goodwill.

The following table summarizes the aggregate preliminary estimates of the fair values of identifiable assets acquired in the SSN Acquisition and the resulting goodwill as of December 31, 2014:

Identifiable intangible assets (a)
$
30,901

Goodwill
8,936

Net working capital and tangible assets
7,450

Total estimated purchase price
$
47,287


(a)
Identifiable intangible assets as of the acquisition date consist of:

5


 
 
 
 
Estimated Useful Life
(years)
Trade Name
 
$
1,756

 
9.0

Representative relationships
 
26,654

 
20.0

Non-compete agreement
 
411

 
3.0

Developed technology
 
2,080

 
12.5

Total identifiable intangible assets
 
$
30,901

 
 

 


2. Acquisition of SSN and Pro Forma adjustments

The following pro forma adjustments are included in the unaudited pro forma combined condensed statements of operations and the unaudited pro forma combined condensed balance sheet:


(a) Adjustments to interest expense
 
 
Twelve months
December 31,
2014
To record interest expense related to notes issued in acquisition
 
$
642


(b) Adjustments to amortization of purchased intangible assets:
 
 
Twelve months
December 31,
2014
To record amortization of identified intangible assets over their estimated useful life
 
$
1,831





(c) Adjustments to acquisition related expense
 
 
Twelve months
December 31,
2014
To eliminate acquisition related expense for SSN
 
$
(523
)

(d) Adjustments to income tax expense:
 
 
Twelve months
December 31,
2014
To eliminate historical income tax expense of SSN
 
$
(175
)

(e) Adjustments to non-cash compensation expense:

6


 
 
Twelve months
December 31,
2014
To record non-cash compensation related to options issued to SSN employees
 
$
291


(f) Adjustments to cash:
 
As of
December 31,
2014
To record cash paid in acquisition
$
(25,000
)


(g) Adjustments to reflect allocation of goodwill and intangible assets:
 
As of
December 31,
2014
Goodwill
$
8,936

Intangible Assets
30,901

Total
$
39,837



(h) Adjustments to record amount due to selling shareholders
 
As of
December 31,
2014
Accounts payable and accrued liabilities
$
3,590


(i) To record notes issued in acquisition, net of discount of $1,303
 
As of
December 31,
2014
Notes payable net of unamortized discount
$
18,697


(j) To eliminate SSN shareholders' equity
 
As of
December 31,
2014
Common stock
$
(6
)
Additional paid-in capital
(2,903
)
Retained earnings
(4,541
)
SSN shareholders' equity
(7,450
)



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