Introduction

The unaudited pro forma combined balance sheet gives effect to the Transactions as if they occurred on December 31, 2024 and the unaudited pro forma combined statements of operations give effect to the Transactions as if they occurred on January 1, 2024.

 

The unaudited pro forma combined financial information has been prepared by management in accordance with the Article 11 of Regulation S-X and is not necessarily indicative of what the combined financial position or results of operations actually would have been had the Transactions been completed as of the dates indicated.  In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or results of operations of the combined entity.

 

The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting in accordance with the business combination accounting guidance as provided in Accounting Standards Codification 805, Business Combinations, (“ASC 805”) with QXO being the accounting acquirer.  The pro forma adjustments are preliminary and based on currently available information and are subject to change.  Any difference between these preliminary estimates and the final acquisition accounting may occur and could have a material impact on the accompanying unaudited pro forma combined financial information.

 

The pro forma adjustments included in this document are subject to modification based on changes to the final terms of the Transactions, changes to interest rates, changes in share prices, the final determination of the fair value of the assets acquired and liabilities assumed, additional analysis, and additional information that may become available, which may cause the final adjustments to be materially different from the pro forma combined financial information presented below.

 

The unaudited pro forma combined financial information presented is for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Transactions had been completed on the dates set forth above, nor is it indicative of future results or financial position of the combined company.  The unaudited pro forma combined statement of operations does not reflect any anticipated synergies or dis-synergies, operating efficiencies or cost savings that may result from the Acquisition or any integration costs that may be incurred.  The pro forma adjustments, which QXO believes are reasonable under the circumstances, are preliminary and are based upon available information and certain assumptions described in the accompanying notes to the unaudited pro forma combined financial information.  The final amounts may be materially different from the pro forma combined financial information presented in this document.

 

As described above, on March 20, 2025, QXO and Beacon entered into the Merger Agreement, pursuant to which QXO agreed to acquire Beacon (via Merger Sub). Upon completion of the Acquisition, each share of Beacon common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive $124.35 in cash, without interest. Further, under the terms of the Merger Agreement the outstanding stock options (“Options”), restricted stock units (“RSUs”) and performance-restricted stock units (“PSUs”) held by Beacon employees and directors will either be settled in cash, or converted into replacement QXO instruments with identical terms. Beacon’s employee stock purchase plan (“ESPP”) will be terminated prior to the Acquisition. Any outstanding share purchase rights will be automatically exercised into shares of Beacon, and then settled in cash at identical terms to other Beacon common stockholders.

Description of the Financings

Accounting for the Acquisition

 

The Acquisition is being accounted for as a business combination using the acquisition method, with QXO determined to be the accounting acquirer in accordance with ASC 805. QXO was determined to be the accounting acquirer primarily due to having board and common share voting control over the combined company, and its managers directing the activities of the newly merged entity. Additionally, the Acquisition was initiated by QXO, and the Company will retain the QXO name subsequent to the Acquisition. Under this method of accounting, the aggregate acquisition consideration will be allocated to Beacon’s assets acquired and liabilities assumed based upon their estimated fair values at the date of completion of the Acquisition. The process of valuing the net assets of Beacon immediately prior to the Acquisition, as well as evaluating accounting policies for conformity, is preliminary. Any differences between the estimated consideration transferred and the estimated fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, preliminary purchase price allocation and related adjustments reflected in the unaudited pro forma combined financial information are subject to revision based on a final determination of fair values. The final purchase price allocation may be materially different from the preliminary purchase price allocation presented in the unaudited pro forma combined financial information. Refer to Note 1 - Basis of Presentation for more information. The following unaudited pro forma condensed combined financial information and related notes give effect to the following:

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

Note 1 - Basis of Presentation

 

The unaudited pro forma combined financial information and related notes are prepared in accordance with Article 11 of Regulation S-X.

 

As discussed in Note 2 - QXO and Beacon Reclassification Adjustments, certain reclassifications were made to align QXO and Beacon’s historical financial statement presentation. QXO is currently in the process of evaluating Beacon’s accounting policies, which will be finalized upon completion of the Acquisition, or as more information becomes available. As a result of that review, additional differences could be identified between the accounting policies of the two companies. With the information currently available, QXO has determined that no significant adjustments are necessary to conform Beacon’s financial statements to the accounting policies used by QXO.

 

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with QXO as the accounting acquirer, using the fair value concepts defined in Accounting Standards Codification 820, Fair Value Measurement, and based on the historical financial statements of QXO and Beacon. Under ASC 805, all assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with the business combination are expensed as incurred. The excess of acquisition consideration over the estimated fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

 

The allocation of the aggregate acquisition consideration depends on certain estimates and assumptions, all of which are preliminary. The allocation of the aggregate acquisition consideration has been made for the purpose of developing the unaudited pro forma combined financial information. The final determination of fair values of assets acquired and liabilities assumed relating to the Acquisition could differ materially from the preliminary allocation of aggregate acquisition consideration. The final valuation will be based on the actual net tangible and intangible assets of Beacon existing at the acquisition date.

 

In addition, the unaudited pro forma combined financial information reflects certain assumptions around the quantum, cost and mix of debt and equity financing. The final capital used to finance the Acquisition has not yet been determined and is subject to change. To the extent that we decide to incur more indebtedness and issue less equity than is currently reflected in the unaudited pro forma combined financial information, our liabilities and interest expense will increase. Similarly, to the extent that we issue additional equity and incur less indebtedness that is currently reflected in the unaudited pro forma combined financial information, then our existing and prospective stockholders will experience dilution. The unaudited pro forma combined balance sheet as of December 31, 2024 and the unaudited pro forma combined statement of operations for the year ended December 31, 2024 presented herein are based on the historical financial statements of QXO and Beacon.

 

Note 2 – QXO and Beacon Reclassification Adjustments

 

Following the Acquisition, the Company will utilize Beacon’s financial statement line item classification. As such, certain reclassification adjustments have been made to conform QXO’s historical financial statement presentation to Beacon’s financial statement presentation. Following the Acquisition, the combined company will finalize the review of accounting policies and reclassifications, which could be materially different from the amounts set forth in the unaudited pro forma combined financial information presented herein.

 

i) Reclassification of $2.9 million of historical QXO Deferred revenue to Accrued expenses.

 

Preliminary Aggregate Acquisition Consideration Allocation

 

The assumed accounting for the Acquisition, including the preliminary aggregate acquisition consideration, is based on provisional amounts, and the associated purchase accounting is not final. The preliminary allocation of the purchase price to the acquired assets and assumed liabilities was based upon the preliminary estimate of fair values. For the preliminary estimate of fair values of assets acquired and liabilities assumed of Beacon, QXO used publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions. QXO is expected to use widely accepted income-based, market-based, and cost-based valuation approaches upon finalization of purchase accounting for the Acquisition. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma combined financial information. The unaudited pro forma adjustments are based upon available information and certain assumptions that QXO believes are reasonable under the circumstances. The purchase price adjustments relating to Beacon and QXO combined financial information are preliminary and subject to change, as additional information becomes available and as additional analyses are performed.

 

The following table summarizes the preliminary aggregate acquisition consideration allocation, as if the Acquisition had been completed on December 31, 2024:

 

A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the amortization expense of approximately $48.3 million for the year ended December 31, 2024. Pro forma amortization is preliminary and based on the use of straight-line amortization. The amount of amortization following the Acquisition may differ significantly between periods based upon the final value assigned and amortization methodology used for each identifiable intangible asset.

Note 4 – Adjustments to the Unaudited Pro Forma Combined Balance Sheet

Adjustments included in Acquisition Transaction Accounting Adjustments column and Financing Transaction Accounting Adjustments column in the accompanying unaudited pro forma combined balance sheet as of December 31, 2024 are as follows:

 

(a) Reflects adjustment to cash and cash equivalents.

(b) Reflects the preliminary purchase accounting adjustment for inventories based on the acquisition method of accounting.

 

Represents the adjustment of acquired inventories to its preliminary estimated fair value. After the closing, the step up in inventories to fair value will increase cost of goods sold as the inventories are sold, which for purposes of these unaudited pro forma combined financial statements is assumed to occur within the first year after the Acquisition.

 

(c) Reflects the preliminary purchase accounting adjustment for property and equipment, net based on the acquisition method of accounting. This adjustment does not include any adjustment to the historically recorded Beacon finance leases, for which book value approximates fair value.

 

(d) Preliminary goodwill adjustment which represents the elimination of historical goodwill and excess of the estimated aggregate acquisition consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed.

 

(e) Reflects the preliminary purchase accounting adjustment for estimated intangibles based on the acquisition method of accounting. Refer to Note 3 - Preliminary purchase price allocation above for additional information on the acquired intangible assets expected to be recognized.

 

(f) Reflects the write-off of Beacon’s accrued interest and the accrual of QXO Acquisition transaction costs incurred subsequent to December 31, 2024.

 

(g) Represents the adjustment to deferred tax liability of $2,039.4 million associated with the incremental differences in the book and tax basis created from the preliminary purchase price allocation, primarily resulting from the preliminary fair value of intangible assets. These adjustments were based on the applicable blended tax rate of 26% with the respective estimated purchase price allocation. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, including cash needs, the geographical mix of income and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.

 

(h) Reflects the impact of the settlement of Beacon’s debt and impact of the Debt Financings. The adjustment to current and long-term debt is comprised of the following items:

 

 

Adjustments included in Acquisition Transaction Accounting Adjustments column and Financing Transaction Accounting Adjustments column in the accompanying unaudited pro forma combined Statement of Operations for the fiscal year ended December 31, 2024 are as follows:

 

(a) Reflects the pro forma adjustment to cost of products sold of $28.2 million for the estimated fair value of inventories recognized through cost of products sold during the first year after the Acquisition. These costs are non-recurring in nature and are not anticipated to affect the combined Statement of Operations beyond twelve months after the acquisition date.

 

(b) Reflects the adjustments to selling, general and administrative expenses (“SG&A”) including the preliminary incremental stock-based compensation expense for QXO replacement equity awards and the estimated transaction costs expensed.

 

(c) Reflects the incremental adjustments to depreciation relating to the remeasurement of property and equipment, net to fair value.

 

(d) Reflects the adjustments to amortization including the amortization of the estimated fair value of intangibles.

 

A sensitivity analysis on interest expense for the year ended December 31, 2024 has been performed to assess the effect of a 0.125% basis point change of the hypothetical interest on the Debt Financings that contain variable interest rates. The following table shows the change in the interest expense for Debt Financings described above:

 

(f) Reflects the adjustments to write-off of $2.4 million related to Loss on debt extinguishment as Beacon’s historical debt is assumed to be paid off on January 1, 2024 as part of the Acquisition.

 

(g) To record the income tax impact of the pro forma adjustments utilizing a statutory income tax rate in effect of 26.0% for the year ended December 31, 2024. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, including cash needs, the geographical mix of income and changes in tax law. Because the tax rates used for the pro forma financial information are estimated, the blended rate will likely vary from the actual effective rate in periods subsequent to completion of the Acquisition. This determination is preliminary and subject to change based upon the final determination of the fair value of the acquired assets and assumed liabilities.

 

(h) As discussed in the Description of the Financings, the impact of the Investment Agreement, 2024 Purchase Agreements, Private Placement, and the Anticipated Equity Financing has been adjusted within the pro forma income statement as if each event occurred on January 1, 2024. To reflect the terms of the Investment Agreement for the entirety of 2024, Net loss attributable to common stockholders was decreased by $39.0 million to reflect the additional accrued 9% dividend on the Convertible Preferred Stock issued as a part of the Investment Agreement. Net loss attributable to common stockholders did not require an adjustment for any other issuances under the Equity Financings as the remaining issuances did not have an accruing dividend.

 

The pro forma basic and diluted weighted average shares outstanding are a combination of historic weighted average shares of QXO Common Stock and adjustments to reflect the impact of the Equity Financings being outstanding for the entirety of the year ended December 31, 2024. This resulted in an increase to weighted average shares outstanding as a result of the issuance of Common Stock of the Company from the 2024 Purchase Agreements, Private Placement, and Anticipated Equity Financing. Further, in connection with the Acquisition, QXO agreed to convert certain equity awards held by Beacon employees into QXO equity awards, which increased pro forma weighted average shares outstanding as these awards are assumed to have vested over the twelve-month period from the date of the Acquisition. The pro forma basic and diluted weighted average shares outstanding are as follows:

 

The following table summarizes securities that, if exercised, would have an antidilutive effect on diluted loss per share attributable to the common shareholder:

 

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