Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on and derived from the separate historical financial statements of Entegris and CMC which are incorporated by reference elsewhere in this offering memorandum, after giving effect to the Merger and the other Transactions and gives effect to the assumptions and preliminary pro forma adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined balance sheet which we refer to as the pro forma balance sheet, combines the unaudited historical consolidated balance sheet of Entegris as of April 2, 2022, derived from the unaudited interim financial statements of Entegris, and the unaudited historical consolidated balance sheet of CMC as of March 31, 2022, derived from the unaudited interim financial statements of CMC, giving effect to the Transactions as if they had occurred on April 2, 2022. Entegris’ fiscal year ends on December 31, whereas CMC’s fiscal year ends on September 30. Due to this difference in year end, for the purpose of the unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2021, the CMC financial results for the twelve months ended December 31, 2021, have been calculated by adding its financial results for the three months ended December 31, 2021 to its financial results for the twelve months ended September 30, 2021 and subtracting its financial results for the three months ended December 31, 2020. The unaudited pro forma condensed combined statement of operations, which is referred to as the pro forma statement of operations, for the twelve months ended December 31, 2021 combines the Entegris audited consolidated statement of operations for the year ended December 31, 2021 and the CMC financial results for the twelve months ended December 31, 2021. For the purpose of the unaudited pro forma condensed combined statement of operations for the three month quarter ended April 2, 2022, we combined the Entegris financial results for three month quarter ended April 2, 2022 with the CMC financial results for the three month quarter ended March 31, 2022. For the purpose of the unaudited pro forma condensed combined statement of operations for the twelve months ended April 2, 2022, we combined the Entegris financial results for twelve months ended April 2, 2022 with the CMC financial results for the twelve months ended March 31, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, the three months ended April 2, 2022 and twelve months ended April 2, 2022 gives effect to the Transactions as if they had occurred on January 1, 2021. All amounts presented within this section are presented in thousands, except per share amounts unless otherwise noted. As a result of displaying amounts in thousands, rounding differences may exist in the tables in this section.
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting with Entegris as the acquirer of CMC. Accordingly, consideration given by Entegris to complete the Merger will be allocated to the assets and liabilities of CMC based upon their estimated fair values as of the date of completion of the Merger. Any excess of the consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. As of the date of this offering memorandum, Entegris has not completed the detailed valuation studies necessary to arrive at the required estimates of the fair value of the CMC assets to be acquired and the liabilities to be assumed and the related allocations of purchase price, nor has it identified all adjustments necessary to conform CMC’s accounting policies to Entegris’ accounting policies. A final determination of the fair value of CMC’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities of CMC that exist as of the date of completion of the Merger and, therefore, cannot be made prior to the completion of the transaction. Accordingly, the unaudited pro forma purchase price adjustments are preliminary and are subject to further adjustments as additional information becomes available and as additional analyses are performed, and such further adjustments from purchase price or conforming accounting adjustments may be material. The preliminary unaudited pro forma purchase price adjustments have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information presented below. Entegris estimated the fair value of CMC’s assets and liabilities based on discussions with CMC’s management, preliminary valuation studies, due diligence and information presented in public filings.
The unaudited pro forma condensed combined financial information is provided for informational purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the Transactions been completed as of the dates indicated or that may be achieved in the future and should not be taken as representative of future consolidated results of operations or financial condition of Entegris. Furthermore, no effect has been given in the unaudited pro forma condensed combined statement of operations to synergies and potential cost savings, if any, that may be realized through the combination of the two companies or the costs that may be incurred in integrating their operations.
The unaudited pro forma condensed combined financial information should be read in conjunction with “Risk Factors,” “Summary Historical Consolidated Financial Data of Entegris,” and “Summary Historical Consolidated Financial Data of CMC” and Entegris and CMC’s historical consolidated financial statements and related notes incorporated herein by reference. See “Incorporation By Reference” in this offering memorandum.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF APRIL 2, 2022
($ in thousands)
| | Historical | | | | | | | | | | | |||||||||
| | Entegris | | | CMC as Reclassified | | | Transaction Accounting Adjustments | | | Notes | | | Other Transaction Accounting Adjustments | | | Notes | | | Pro Forma Combined | |
| | | | Note 2 | | | | | | | | | | | |||||||
ASSETS | | | | | | | | | | | | | | | |||||||
Current assets: | | | | | | | | | | | | | | | |||||||
Cash and cash equivalents | | | $352,732 | | | $237,685 | | | $ (3,889,137) | | | 4(A) | | | $5,265,000 | | | 4(K) | | | $713,500 |
| | | | | | (16,000) | | | 4(B) | | | (1,179,751) | | | 4(M) | | | ||||
| | | | | | (24,099) | | | 4(T) | | | — | | | | | |||||
| | | | | | (32,930) | | | 4(U) | | | | | | | ||||||
Trade accounts and notes receivable, net | | | 372,759 | | | 169,345 | | | (861) | | | 4(C) | | | — | | | | | 541,243 | |
Inventories, net | | | 545,607 | | | 184,730 | | | 50,227 | | | 4(D) | | | — | | | | | 780,564 | |
Deferred tax charges and refundable income taxes | | | 34,755 | | | 4,250 | | | 12,780 | | | 4(P) | | | (5,125) | | | 4(R) | | | 43,960 |
Other current assets | | | 63,482 | | | 31,210 | | | 24,099 | | | 4(T) | | | (6,001) | | | 4(Q) | | | 112,790 |
Total current assets | | | 1,369,335 | | | 627,220 | | | (3,875,921) | | | | | 4,074,123 | | | | | 2,194,757 | ||
Property, plant and equipment, net | | | 698,574 | | | 346,344 | | | 139,773 | | | 4(E) | | | — | | | | | 1,184,691 | |
Other assets: | | | | | | | | | | | | | | | |||||||
Right-of-use assets | | | 69,713 | | | 25,738 | | | — | | | | | — | | | | | 95,451 | ||
Goodwill | | | 793,861 | | | 564,279 | | | 2,706,042 | | | 4(I) | | | — | | | | | 4,064,182 | |
Intangible assets, net | | | 322,289 | | | 584,657 | | | 2,020,343 | | | 4(F) | | | — | | | | | 2,927,289 | |
Deferred tax assets and other noncurrent tax assets | | | 17,820 | | | 6,256 | | | — | | | | | — | | | | | 24,076 | ||
Other noncurrent assets | | | 11,848 | | | 46,112 | | | — | | | | | (36,902) | | | 4(Q) | | | 21,058 | |
Total assets | | | $ 3,283,440 | | | $ 2,200,606 | | | $990,237 | | | | | $4,037,221 | | | | | $10,511,504 | ||
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | |||||||
Current liabilities: | | | | | | | | | | | | | | | |||||||
Short-term debt | | | $— | | | $— | | | $— | | | | | $270,830 | | | 4(L) | | | $270,830 | |
Long-term debt, current maturities | | | — | | | 10,650 | | | 2,876 | | | 4(G) | | | (13,526) | | | 4(O) | | | — |
Accounts payable | | | 133,956 | | | 55,540 | | | (861) | | | 4(C) | | | — | | | | | 188,635 | |
Accrued payroll and related benefits | | | 55,562 | | | 38,931 | | | — | | | | | — | | | | | 94,493 | ||
Other accrued liabilities | | | 117,469 | | | 78,222 | | | (32,930) | | | 4(U) | | | — | | | | | 162,761 | |
Income taxes payable | | | 64,674 | | | 15,585 | | | — | | | | | — | | | | | 80,259 | ||
Total current liabilities | | | 371,661 | | | 198,928 | | | (30,915) | | | | | 257,304 | | | | | 796,978 | ||
Long-term debt, excluding current maturities | | | 937,349 | | | 899,153 | | | 7,709 | | | 4(G) | | | 4,864,588 | | | 4(L) | | | 5,656,937 |
| | | | | | — | | | | | (906,862) | | | 4(O) | | | |||||
| | | | | | — | | | | | (145,000) | | | 4(N) | | | |||||
Pension benefit obligations and other liabilities | | | 37,964 | | | 43,246 | | | — | | | | | (27,684) | | | 4(S) | | | 53,526 | |
Deferred tax liabilities and other noncurrent tax liabilities | | | 54,038 | | | 95,190 | | | 494,946 | | | 4(H) | | | (5,125) | | | 4(R) | | | 639,049 |
Long-term lease liability | | | 62,110 | | | 20,008 | | | — | | | | | — | | | | | 82,118 | ||
Equity: | | | | | | | | | | | | | | | |||||||
Common stock | | | 1,361 | | | 41 | | | 88 | | | 4(J) | | | — | | | | | 1,490 | |
Treasury stock | | | (7,112) | | | (625,055) | | | 625,055 | | | 4(J) | | | — | | | | | (7,112) | |
Additional paid-in capital | | | 876,388 | | | 1,080,599 | | | 421,120 | | | 4(J) | | | — | | | | | 2,378,107 | |
Retained earnings | | | 991,821 | | | 467,515 | | | (506,785) | | | 4(J) | | | — | | | | | 952,551 | |
Accumulated other comprehensive loss | | | (42,140) | | | 20,981 | | | (20,981) | | | 4(J) | | | — | | | | | (42,140) | |
Total equity | | | 1,820,318 | | | 944,081 | | | 518,497 | | | | | — | | | | | 3,282,896 | ||
Total liabilities and equity | | | $ 3,283,440 | | | $ 2,200,606 | | | $990,237 | | | | | $4,037,221 | | | | | $10,511,504 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(Amounts in thousands, except per share data)
| | Historical | | | | | | | | | | | |||||||||
| | Entegris | | | CMC as Reclassified | | | Transaction Accounting Adjustments | | | Notes | | | Other Transaction Accounting Adjustments | | | Notes | | | Pro Forma Combined | |
| | | | Note 2 | | | | | | | | | | | |||||||
Net sales | | | $ 2,298,893 | | | $ 1,229,014 | | | $(9,067) | | | 5(A) | | | $— | | | | | $ 3,518,840 | |
Cost of sales | | | 1,239,229 | | | 727,913 | | | 12,461 | | | 5(B) | | | — | | | | | 2,018,495 | |
| | | | | | (9,067) | | | 5(A) | | | — | | | | | |||||
| | | | | | 47,763 | | | 5(K) | | | — | | | | | |||||
| | | | | | 196 | | | 5(J) | | | — | | | | | |||||
Gross profit | | | 1,059,664 | | | 501,101 | | | (60,420) | | | | | — | | | | | 1,500,345 | ||
Selling, general and administrative expenses | | | 292,408 | | | 169,381 | | | 3,169 | | | 5(B) | | | — | | | | | 538,119 | |
| | | | | | 72,983 | | | 5(D) | | | — | | | | | |||||
| | | | | | 178 | | | 5(J) | | | — | | | | | |||||
Engineering, research and development expenses | | | 167,632 | | | 55,095 | | | 1,185 | | | 5(B) | | | — | | | | | 225,059 | |
| | | | | | 1,147 | | | 5(J) | | | — | | | | | |||||
Amortization of intangible assets | | | 47,856 | | | 66,118 | | | 93,549 | | | 5(C) | | | — | | | | | 207,523 | |
Asset impairment charges | | | — | | | 232,480 | | | — | | | | | — | | | | | 232,480 | ||
Operating income (loss) | | | 551,768 | | | (21,973) | | | (232,631) | | | | | — | | | | | 297,164 | ||
Interest expense | | | 41,240 | | | 38,576 | | | — | | | | | 220,363 | | | 5(F) | | | 287,644 | |
| | | | | | — | | | | | (38,576) | | | 5(G) | | | |||||
| | | | | | — | | | | | (3,045) | | | 5(H) | | | |||||
| | �� | | | | | — | | | | | 21,786 | | | 5(I) | | | ||||
| | | | | | | | | | 7,300 | | | 5(L) | | | ||||||
Interest income | | | (243) | | | (58) | | | — | | | | | — | | | | | (301) | ||
Other expense, net | | | 31,695 | | | 2,734 | | | — | | | | | — | | | | | 34,429 | ||
Income (loss) before income taxes | | | 479,076 | | | (63,225) | | | (232,631) | | | | | (207,828) | | | | | (24,608) | ||
Income tax expense (benefit) | | | 69,950 | | | 9,454 | | | (52,342) | | | 5(E) | | | (46,761) | | | 5(E) | | | (19,699) |
Net income (loss) | | | $409,126 | | | $(72,679) | | | $(180,289) | | | | | $(161,067) | | | | | $(4,909) | ||
Per common share data: (Note 6) | | | | | | | | | | | | | | | |||||||
Earnings per share: | | | | | | | | | | | | | | | |||||||
Basic net income (loss) per common share | | | $3.02 | | | $(2.55) | | | | | | | | | | | $(0.03) | ||||
Diluted net income (loss) per common share | | | $3.00 | | | $(2.55) | | | | | | | | | | | $(0.03) | ||||
| | | | | | | | | | | | | | ||||||||
Weighted average shares outstanding: | | | | | | | | | | | | | | | |||||||
Basic | | | 135,411 | | | 28,454 | | | | | | | | | | | 148,315 | ||||
Diluted | | | 136,574 | | | 28,454 | | | | | | | | | | | 150,720 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 2, 2022
(Amounts in thousands, except per share data)
| | Historical | | | | | | | | | | | |||||||||
| | Entegris | | | CMC as Reclassified | | | Transaction Accounting Adjustments | | | Notes | | | Other Transaction Accounting Adjustments | | | Notes | | | Pro Forma Combined | |
| | | | Note 2 | | | | | | | | | | | |||||||
Net sales | | | $ 649,646 | | | $ 324,127 | | | $(3,312) | | | 5(A) | | | $— | | | | | $ 970,461 | |
Cost of sales | | | 339,826 | | | 195,904 | | | 3,256 | | | 5(B) | | | — | | | | | 535,741 | |
| | | | | | (3,312) | | | 5(A) | | | — | | | | | |||||
| | | | | | 67 | | | 5(J) | | | — | | | | | |||||
Gross profit | | | 309,820 | | | 128,223 | | | (3,323) | | | | | — | | | | | 434,720 | ||
Selling, general and administrative expenses | | | 87,108 | | | 43,499 | | | 814 | | | 5(B) | | | — | | | | | 131,814 | |
| | | | | | 393 | | | 5(J) | | | — | | | | | |||||
Engineering, research and development expenses | | | 46,715 | | | 12,337 | | | 298 | | | 5(B) | | | — | | | | | 59,411 | |
| | | | | | 61 | | | 5(J) | | | — | | | | ||||||
Amortization of intangible assets | | | 12,651 | | | 15,855 | | | 24,062 | | | 5(C) | | | — | | | | | 52,568 | |
Asset impairment charges | | | — | | | — | | | — | | | | | — | | | | | — | ||
Operating income (loss) | | | 163,346 | | | 56,532 | | | (28,951) | | | | | — | | | | | 190,927 | ||
Interest expense | | | 12,876 | | | 9,558 | | | — | | | | | 55,091 | | | 5(F) | | | 72,652 | |
| | | | | | — | | | | | (9,558) | | | 5(G) | | | |||||
| | | | | | — | | | | | (761) | | | 5(H) | | | |||||
| | | | | | — | | | | | 5,446 | | | 5(I) | | | |||||
Interest income | | | (12) | | | (21) | | | — | | | | | — | | | | | (33) | ||
Other expense, net | | | 4,902 | | | 1,445 | | | — | | | | | — | | | | | 6,347 | ||
Income (loss) before income taxes | | | 145,580 | | | 45,550 | | | (28,951) | | | | | (50,218) | | | | | 111,961 | ||
Income tax expense (benefit) | | | 19,875 | | | 10,979 | | | (6,514) | | | 5(E) | | | (11,299) | | | 5(E) | | | 13,041 |
Net income (loss) | | | $ 125,705 | | | $34,571 | | | $(22,437) | | | | | $(38,919) | | | | | $98,920 | ||
Per common share data: (Note 6) | | | | | | | | | | | | | | | |||||||
Earnings per share: | | | | | | | | | | | | | | | |||||||
Basic net income per common share | | | $0.93 | | | $1.21 | | | | | | | | | | | $0.67 | ||||
Diluted net income per common share | | | $0.92 | | | $1.19 | | | | | | | | | | | $0.66 | ||||
| | | | | | | | | | | | | | ||||||||
Weighted average shares outstanding: | | | | | | | | | | | | | | | |||||||
Basic | | | 135,670 | | | 28,609 | | | | | | | | | | | 148,574 | ||||
Diluted | | | 136,552 | | | 28,999 | | | | | | | | | | | 150,698 |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED APRIL 2, 2022
(Amounts in thousands, except per share data)
| | Historical | | | | | | | | | | | |||||||||
| | Entegris | | | CMC as Reclassified | | | Transaction Accounting Adjustments | | | Notes | | | Other Transaction Accounting Adjustments | | | Notes | | | Pro Forma Combined | |
| | | | Note 2 | | | | | | | | | | | |||||||
Net sales | | | $ 2,435,695 | | | $ 1,262,613 | | | $(11,493) | | | 5(A) | | | $— | | | | | $ 3,686,815 | |
Cost of sales | | | 1,301,197 | | | 757,035 | | | 12,932 | | | 5(B) | | | — | | | | | 2,097,609 | |
| | | | | | (11,493) | | | 5(A) | | | — | | | | | |||||
| | | | | | 37,670 | | | 5(K) | | | — | | | | | |||||
| | | | �� | | 268 | | | 5(J) | | | — | | | | | |||||
Gross profit | | | 1,134,498 | | | 505,578 | | | (50,870) | | | | | — | | | | | 1,589,206 | ||
Selling, general and administrative expenses | | | 308,127 | | | 170,907 | | | 3,355 | | | 5(B) | | | — | | | | | 483,959 | |
| | | | | | | | | | — | | | | | |||||||
| | | | | | 1,570 | | | 5(J) | | | — | | | | | |||||
Engineering, research and development expenses | | | 176,599 | | | 54,507 | | | 1,185 | | | 5(B) | | | — | | | | | 232,535 | |
| | | | | | 244 | | | 5(J) | | | — | | | | ||||||
Amortization of intangible assets | | | 48,636 | | | 65,408 | | | 94,259 | | | 5(C) | | | — | | | | | 208,303 | |
Asset impairment charges | | | — | | | 24,259 | | | — | | | | | — | | | | | 24,259 | ||
Operating income (loss) | | | 601,136 | | | 190,497 | | | (151,483) | | | | | — | | | | | 640,150 | ||
Interest expense | | | 42,464 | | | 38,625 | | | — | | | | | 220,363 | | | 5(F) | | | 281,568 | |
| | | | | | — | | | | | (38,625) | | | 5(G) | | ||||||
| | | | | | — | | | | | (3,045) | | | 5(H) | | ||||||
| | | | | | — | | | | | 21,786 | | | 5(I) | | ||||||
Interest income | | | (184) | | | (65) | | | — | | | | | — | | | | | (249) | ||
Other expense, net | | | 32,267 | | | 3,695 | | | — | | | | | — | | | | | 35,962 | ||
Income (loss) before income taxes | | | 526,589 | | | 148,242 | | | (151,483) | | | | | (200,479) | | | | | 322,869 | ||
Income tax expense (benefit) | | | 76,434 | | | 36,542 | | | (34,084) | | | 5(E) | | | (45,108) | | | 5(E) | | | 33,784 |
Net income (loss) | | | $450,155 | | | $111,700 | | | $(117,399) | | | | | $(155,371) | | | | | $289,085 | ||
Per common share data: (Note 6) | | | | | | | | | | | | | | | |||||||
Earnings per share: | | | | | | | | | | | | | | | |||||||
Basic net income per common share | | | $3.31 | | | $3.92 | | | | | | | | | | | $1.94 | ||||
Diluted net income per common share | | | $3.29 | | | $3.87 | | | | | | | | | | | $1.92 | ||||
| | | | | | | | | | | | | | ||||||||
Weighted average shares outstanding: | | | | | | | | | | | | | | | |||||||
Basic | | | 136,013 | | | 28,488 | | | | | | | | | | | 148,917 | ||||
Diluted | | | 136,624 | | | 28,871 | | | | | | | | | | | 150,770 |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. | Basis of Pro Forma Presentation |
The Merger is reflected in the unaudited pro forma condensed combined financial information as an acquisition of CMC by Entegris in accordance with Accounting Standards Codification Topic 805, “Business Combinations,” using the acquisition method of accounting and are based on the annual audited and historical financial information of Entegris and annual and unaudited interim historical financial information of CMC. Under these accounting standards, the total estimated purchase price is calculated as described below, and substantially all the assets acquired and the liabilities assumed have been measured at their estimated fair values. The fair value measurements utilize estimates based on key assumptions of the Merger, including historical and current market data. The unaudited pro forma adjustments included herein are preliminary and will be revised at the time of the Merger as additional information becomes available and as additional analyses are performed. The final purchase price allocation will be determined at the time that the Merger is completed, and the final amounts recorded for the Merger may differ materially from the information presented herein.
Pursuant to the Merger Agreement, upon consummation of the Merger, CMC options will be replaced with Entegris options. The CMC performance-based restricted share unit awards will be replaced with Entegris time vested restricted share unit awards with continued time-based vesting schedule resulting in an estimated $4,924 of pre-combination expense, treated as part of total consideration, with the remaining $11,015 being recognized in post combination periods. Additionally, certain CMC employees are entitled to payments upon a change in control and their subsequent termination. These payments are currently estimated to be $24,100. Please refer to adjustment 4(T) for further details regarding the funding of the rabbi trust which is required immediately prior to a change in control, as defined. Merger-related transaction costs are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred. Please refer to adjustments 4(A) and 5(K) for additional details on the effect of merger-related transaction costs in the condensed combined pro forma financial statements.
Under the acquisition method of accounting, the total estimated acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of CMC based on their estimated fair values as of the acquisition date. Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. The Company expects that all such goodwill will not be deductible for tax purposes. For the purposes of the unaudited pro forma condensed combined financial statements, Entegris has made a preliminary allocation of the acquisition consideration as follows:
The preliminary purchase price allocation is as follows (in thousands): | | | |
Consideration paid to CMC stockholders | | | $5,326,702 |
Repayment of CMC indebtedness | | | 920,388 |
Total consideration transferred to acquire CMC | | | 6,247,090 |
Cash and cash equivalents | | | 204,765 |
Inventories | | | 234,957 |
Trade accounts and notes receivable | | | 169,345 |
Other current assets | | | 40,147 |
Property, plant and equipment | | | 486,117 |
Intangible assets | | | 2,605,000 |
Other noncurrent assets | | | 78,106 |
Deferred tax liabilities and other noncurrent tax liabilities | | | (590,136) |
Income taxes payable | | | (15,585) |
Other current and noncurrent liabilities | | | (235,947) |
Preliminary fair value of identifiable net assets acquired | | | 2,976,769 |
Preliminary allocation to goodwill | | | $3,270,321 |
Entegris expects to finance the Merger and pay related fees and expenses with $4,095,000 of secured debt and $1,170,000 of unsecured debt, together with cash on hand. If the timing or amount of this offering differs from our expectations, Entegris has obtained a revolving facility of $575,000 that is expected to be unutilized at closing. For
purposes of the pro forma financial information the secured debt is assumed to consist of a New Term Facility of $2,495,000, $1,600,000 of New Secured Notes, $895,000 of Notes offered hereby, and a Unsecured 364-Day Bridge Facility of $275,000.
The New Secured Notes have a term of 7 years. For purposes of the pro forma financial information, interest on the New Secured Notes is assumed to accrue at an estimated rate per annum equal to 4.750%.
The New Term Facility has a term of 7 years. For purposes of the pro forma financial information, interest on the New Term Facility is assumed to accrue at an estimated rate per annum equal to 3.000%.
The unsecured notes offered hereby have a term of 8 years. For purposes of the pro forma financial information, interest on the unsecured notes offered hereby is assumed to accrue at an estimated interest rate per annum equal to 6.000%.
The Unsecured 364-Day Bridge Facility has a term of 364 days. For purposes of the pro forma financial information, interest on the Unsecured 364-Day Bridge Facility is assumed to accrue at an estimated rate per annum equal to 5.750%.
Refer to footnote 5(F) for details on the sensitivity analysis of interest rate fluctuations with respect to the New Secured Notes, New Term Facility, Unsecured 364-Day Bridge Facility and unsecured notes offered hereby.
For a more complete description of the credit facilities and the notes offered hereby, see “Description of Certain Indebtedness,” “Description of Notes.”
The Company’s fiscal year ends on December 31, whereas CMC’s fiscal year ends on September 30. Due to this difference in year end, for the purpose of the unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2021 the CMC financial results for the twelve months ended December 31, 2021 have been calculated by adding its financial results for the three months ended December 31, 2021 to its financial results for the twelve months ended September 30, 2021 and subtracting its financial results for the three months ended December 31, 2020. The unaudited pro forma condensed combined statement of operations, which we refer to as the pro forma statement of operations, for the twelve months ended December 31, 2021 combines the Entegris audited consolidated statement of operations for the year ended December 31, 2021 and the CMC financial results for the twelve months ended December 31, 2021.
(Amounts in thousands) | | | Three months ended December 31, 2020 | | | Twelve months ended September 30, 2021 | | | Three months ended December 31, 2021 | | | Twelve months ended December 31, 2021 |
Income statement data | | | A | | | B | | | C | | | Note 2 D = B+C-A |
Revenues: | | | | | | | | | ||||
Revenues | | | $287,863 | | | $1,199,831 | | | $317,046 | | | $1,229,014 |
Cost of sales | | | 164,959 | | | 701,662 | | | 191,210 | | | 727,913 |
Gross profit | | | 122,904 | | | 498,169 | | | 125,836 | | | 501,101 |
Selling, general and administrative | | | 55,920 | | | 228,886 | | | 56,483 | | | 229,449 |
Research, development and technical | | | 12,428 | | | 54,195 | | | 13,328 | | | 55,095 |
Asset impairment charges | | | 7,347 | | | 230,392 | | | 9,435 | | | 232,480 |
Entegris Transaction-related expenses | | | — | | | — | | | 6,050 | | | 6,050 |
Operating income | | | 47,209 | | | (15,304) | | | 40,540 | | | (21,973) |
Interest expense | | | 9,608 | | | 38,360 | | | 9,743 | | | 38,495 |
Interest income | | | (23) | | | — | | | — | | | 23 |
Other (income) expense, net | | | (1,452) | | | 1,130 | | | 152 | | | 2,734 |
Income (loss) before income taxes | | | 39,076 | | | (54,794) | | | 30,645 | | | (63,225) |
Provision for income taxes | | | 7,546 | | | 13,783 | | | 3,217 | | | 9,454 |
Net Income (loss) | | | $31,530 | | | $(68,577) | | | $27,428 | | | $(72,679) |
For the purpose of the unaudited pro forma condensed combined statements of operations for the twelve months ended April 2, 2022 the CMC financial results for the twelve months ended March 31, 2022 have been calculated by subtracting its financial results for the six months ended March 31, 2021 from its financial results for the twelve months ended September 30, 2021, plus the results for the six months ended March 31, 2022. The unaudited pro forma condensed combined statement of operations, which we refer to as the pro forma statement of operations, for the twelve months ended April 2, 2022 combines the Entegris unaudited consolidated statement of operations for the twelve month period ended April 2, 2022 and the CMC financial results for the twelve months ended March 31, 2022.
($ in thousands) | | | Six months ended March 31, 2021 | | | Twelve months ended September 30, 2021 | | | Six months ended March 31, 2022 | | | Twelve months ended March 31, 2022 |
Income Statement Data: | | | | | | | | | Note 2 | |||
| | A | | | B | | | C | | | D = B+C-A | |
Revenues: | | | | | | | | | ||||
Revenues | | | $578,391 | | | $ 1,199,831 | | | $ 641,173 | | | $ 1,262,613 |
Cost of sales | | | 331,741 | | | 701,662 | | | 387,114 | | | 757,035 |
Gross profit | | | 246,650 | | | 498,169 | | | 254,059 | | | 505,578 |
Selling, general and administrative | | | 114,458 | | | 228,886 | | | 103,594 | | | 218,022 |
Research, development and technical | | | 25,353 | | | 54,195 | | | 25,665 | | | 54,507 |
Asset impairment charges | | | 215,568 | | | 230,392 | | | 9,435 | | | 24,259 |
Entegris Transaction-related expenses | | | — | | | — | | | 18,293 | | | 18,293 |
Operating income | | | (108,729) | | | (15,304) | | | 97,072 | | | 190,497 |
Interest expense | | | 19,116 | | | 38,360 | | | 19,280 | | | 38,524 |
Interest income | | | (36) | | | — | | | — | | | 36 |
Other (income) expense, net | | | (968) | | | 1,130 | | | 1,597 | | | 3,695 |
(Loss) income before income taxes | | | (126,841) | | | (54,794) | | | 76,195 | | | 148,242 |
(Benefit from) provision for income taxes | | | (8,563) | | | 13,783 | | | 14,196 | | | 36,542 |
Net (loss) income | | | $(118,278) | | | $(68,577) | | | $61,999 | | | $111,700 |
Financial information presented in the “Historical CMC” column in the unaudited pro forma condensed combined balance sheet and statement of operations has been reclassified to conform to the historical presentation in Entegris’ consolidated financial statements. Please refer to Note 2 for further details.
For the purpose of the unaudited pro forma condensed combined statements of operations for the twelve months ended April 2, 2022 the Entegris financial results for the twelve months ended April 2, 2022 have been calculated by subtracting its financial results for the three months ended April 3, 2021 from its financial results for the twelve months ended December 31, 2021, plus the results for the three months ended April 2, 2022. The unaudited pro forma condensed combined statement of operations, which we refer to as the pro forma statement of operations, for the twelve months ended April 2, 2022 combines the Entegris unaudited consolidated statement of operations for the twelve month period ended April 2, 2022 and the CMC financial results for the twelve months ended March 31, 2022.
($ in thousands) | | | Three months ended April 2, 2022 | | | Twelve months ended December 31, 2021 | | | Three months ended April 3, 2021 | | | Twelve months ended April 2, 2022 |
Income statement data | | | A | | | B | | | C | | | D = A+B-C |
Net sales | | | 649,646 | | | 2,298,893 | | | 512,844 | | | 2,435,695 |
Cost of sales | | | 339,826 | | | 1,239,229 | | | 277,858 | | | 1,301,197 |
Gross profit | | | 309,820 | | | 1,059,664 | | | 234,986 | | | 1,134,498 |
Selling, general and administrative expenses | | | 87,108 | | | 292,408 | | | 71,389 | | | 308,127 |
Engineering, research and development expenses | | | 46,715 | | | 167,632 | | | 37,748 | | | 176,599 |
Amortization of intangible assets | | | 12,651 | | | 47,856 | | | 11,871 | | | 48,636 |
Operating income | | | 163,346 | | | 551,768 | | | 113,978 | | | 601,136 |
Interest expense | | | 12,876 | | | 41,240 | | | 11,652 | | | 42,464 |
Interest income | | | (12) | | | (243) | | | (71) | | | (184) |
Other (income) expense, net | | | 4,902 | | | 31,695 | | | 4,330 | | | 32,267 |
Income before income taxes | | | 145,580 | | | 479,076 | | | 98,067 | | | 526,589 |
Income tax expense | | | 19,875 | | | 69,950 | | | 13,391 | | | 76,434 |
Net income | | | 125,705 | | | 409,126 | | | 84,676 | | | 450,155 |
2. | Reclassifications |
Certain reclassification adjustments have been made to the historical presentation of CMC financial information in order to conform to Entegris historical financial statements. In order to prepare the pro forma financial statements, Entegris performed a preliminary review of CMC’s accounting policies to identify significant differences.
CMC Unaudited Reclassified Condensed Balance Sheet (as of March 31, 2022)
($ in thousands)
| | CMC Before Reclassification | | | Reclassification | | | Notes | | | CMC as Reclassified | |
ASSETS | | | | | | | | | ||||
Current assets: | | | | | | | | | ||||
Cash and cash equivalents | | | $237,685 | | | $— | | | | | $237,685 | |
Trade accounts and notes receivable, net | | | 169,345 | | | — | | | | | 169,345 | |
Inventories, net | | | 184,730 | | | — | | | | | 184,730 | |
Deferred tax charges and refundable income taxes | | | — | | | 4,250 | | | (A) | | | 4,250 |
Other current assets | | | 35,460 | | | (4,250) | | | (A) | | | 31,210 |
Total current assets | | | 627,220 | | | — | | | | | 627,220 | |
Property, plant and equipment, net | | | 346,344 | | | | | | | 346,344 | ||
Other assets: | | | | | — | | | | | |||
Right-of-use assets | | | — | | | 25,738 | | | (B) | | | 25,738 |
Goodwill | | | 564,279 | | | — | | | | | 564,279 | |
Intangible assets, net | | | 584,657 | | | — | | | | | 584,657 | |
Deferred tax assets and other noncurrent tax assets | | | 6,256 | | | — | | | | | 6,256 | |
Other noncurrent assets | | | 71,850 | | | (25,738) | | | (B) | | | 46,112 |
Total assets | | | $ 2,200,606 | | | $— | | | | | $ 2,200,606 | |
LIABILITIES AND EQUITY | | | | | | | | | ||||
Current liabilities | | | | | | | | | ||||
Long-term debt, current maturities | | | $10,650 | | | $— | | | | | $10,650 | |
Accounts payable | | | 55,540 | | | — | | | | | 55,540 | |
Accrued expenses, income taxes payable and other current liabilities | | | 132,738 | | | (132,738) | | | (C) | | | — |
Accrued payroll and related benefits | | | — | | | 38,931 | | | (C) | | | 38,931 |
Other accrued liabilities | | | — | | | 78,222 | | | (C) | | | 78,222 |
Income taxes payable | | | — | | | 15,585 | | | (C) | | | 15,585 |
Total current liabilities | | | 198,928 | | | — | | | | | 198,928 | |
Long-term debt, excluding current maturities | | | 899,153 | | | — | | | | | 899,153 | |
Pension benefit obligations and other liabilities | | | — | | | 43,246 | | | (E) | | | 43,246 |
Deferred tax liabilities and other noncurrent tax liabilities | | | 74,016 | | | 21,174 | | | (F) | | | 95,190 |
Other long-term liabilities | | | 84,428 | | | (84,428) | | | (D), (E), (F) | | | — |
Long-term lease liabilities | | | — | | | 20,008 | | | (D) | | | 20,008 |
Common stock | | | 41 | | | — | | | | | 41 | |
Treasury stock | | | (625,055) | | | — | | | | | (625,055) | |
Additional paid-in capital | | | 1,080,599 | | | — | | | | | 1,080,599 | |
Retained earnings | | | 467,515 | | | — | | | | | 467,515 | |
Accumulated other comprehensive loss | | | 20,981 | | | — | | | | | 20,981 | |
Total equity | | | 944,081 | | | — | | | | | 944,081 | |
Total liabilities and equity | | | $ 2,200,606 | | | $— | | | | | $ 2,200,606 |
(A) | Reclassification from “Other current assets” to “Deferred tax charges and refundable income taxes” |
(B) | Reclassification from “Other noncurrent assets” to “Right-of-use assets” |
(C) | Reclassification of “Accrued expenses, income taxes payable and other current liabilities” to “Accrued payroll and related benefits,” “Other accrued liabilities,” and “Income taxes payable” |
(D) | Reclassification from “Other long-term liabilities” to “Long-term lease liabilities” |
(E) | Reclassification from “Other long-term liabilities” to “Pension benefit obligations and other liabilities” |
(F) | Reclassification from “Other long-term liabilities” to “Deferred tax liabilities and other noncurrent tax liabilities” |
CMC Unaudited Reclassified Condensed Statement of Operations (for year ended December 31, 2021)
($ in thousands)
| | CMC Before Reclassification | | | Reclassifications | | | Notes | | | CMC as Reclassified | |
| | Note 1 | | | | | | | ||||
Revenues | | | $ 1,229,014 | | | $— | | | | | $ 1,229,014 | |
Cost of sales | | | 727,913 | | | — | | | | | 727,913 | |
Gross profit | | | 501,101 | | | — | | | | | 501,101 | |
Selling, general and administrative | | | 229,449 | | | (60,068) | | | (A), (C) | | | 169,381 |
Research, development and technical | | | 55,095 | | | — | | | | | 55,095 | |
Amortization of intangible assets | | | — | | | 66,118 | | | (A) | | | 66,118 |
Asset impairment charges | | | 232,480 | | | — | | | | | 232,480 | |
Entegris transaction related expenses | | | 6,050 | | | (6,050) | | | (C) | | | — |
Operating income | | | (21,973) | | | — | | | | | (21,973) | |
Interest expense | | | 38,495 | | | 81 | | | (B) | | | 38,576 |
Interest income | | | 23 | | | (81) | | | (B) | | | (58) |
Other expense, net | | | 2,734 | | | — | | | | | 2,734 | |
Loss before income taxes | | | (63,225) | | | — | | | | | (63,225) | |
Provision for income taxes | | | 9,454 | | | — | | | | | 9,454 | |
Net loss | | | $(72,679) | | | $— | | | | | $(72,679) |
(A) | Reclassification from “Selling, general and administrative expenses” to “Amortization of intangible assets.” |
(B) | Reclassification from “Interest expense” to “Interest income.” |
(C) | Reclassification from “Entegris transaction related expenses” to “Selling, general and administrative expenses.” |
CMC Unaudited Reclassified Condensed Statement of Operations (for three months ended March 31, 2022)
($ in thousands)
| | CMC Before Reclassification | | | Reclassifications | | | Notes | | | CMC as Reclassified | |
Revenues | | | $ 324,127 | | | $— | | | | | $ 324,127 | |
Cost of sales | | | 195,904 | | | — | | | | | 195,904 | |
Gross profit | | | 128,223 | | | — | | | | | 128,223 | |
Selling, general and administrative | | | 47,111 | | | (3,612) | | | (A), (C) | | | 43,499 |
Research, development and technical | | | 12,337 | | | — | | | | | 12,337 | |
Amortization of intangible assets | | | — | | | 15,855 | | | (A) | | | 15,855 |
Asset impairment charges | | | — | | | — | | | | | — | |
Entegris transaction related expenses | | | 12,243 | | | (12,243) | | | (C) | | | — |
Operating income | | | 56,532 | | | — | | | | | 56,532 | |
Interest expense | | | 9,537 | | | 21 | | | (B) | | | 9,558 |
Interest income | | | — | | | (21) | | | (B) | | | (21) |
Other expense, net | | | 1,445 | | | — | | | | | 1,445 | |
Income before income taxes | | | 45,550 | | | — | | | | | 45,550 | |
Provision for income taxes | | | 10,979 | | | — | | | | | 10,979 | |
Net Income | | | $34,571 | | | $— | | | | | $34,571 |
(A) | Reclassification from “Selling, general and administrative expenses” to “Amortization of intangible assets” |
(B) | Reclassification from “Interest expense” to “Interest income” |
(C) | Reclassification from “Entegris transaction related expenses” to “Selling, general and administrative expenses” |
CMC Unaudited Reclassified Condensed Statement of Operations (for twelve months ended March 31, 2022)
($ in thousands)
| | CMC Before Reclassification | | | Reclassifications | | | Notes | | | CMC as Reclassified | |
| | Note 1 | | | | | | | ||||
Revenues | | | $ 1,262,613 | | | $— | | | | | $ 1,262,613 | |
Cost of sales | | | 757,035 | | | — | | | | | 757,035 | |
Gross profit | | | 505,578 | | | — | | | | | 505,578 | |
Selling, general and administrative | | | 218,022 | | | (47,115) | | | (A), (C) | | | 170,907 |
Research, development and technical | | | 54,507 | | | — | | | | | 54,507 | |
Amortization of intangible assets | | | — | | | 65,408 | | | (A) | | | 65,408 |
Asset impairment charges | | | 24,259 | | | — | | | | | 24,259 | |
Entegris transaction related expenses | | | 18,293 | | | (18,293) | | | (C) | | | — |
Operating income | | | 190,497 | | | — | | | | | 190,497 | |
Interest expense | | | 38,524 | | | 101 | | | (B) | | | 38,625 |
Interest income | | | 36 | | | (101) | | | (B) | | | (65) |
Other expense, net | | | 3,695 | | | — | | | | | 3,695 | |
Income before income taxes | | | 148,242 | | | — | | | | | 148,242 | |
Provision for income taxes | | | 36,542 | | | — | | | | | 36,542 | |
Net Income | | | $111,700 | | | $— | | | | | $111,700 |
(A) | Reclassification from “Selling, general and administrative expenses” to “Amortization of intangible assets” |
(B) | Reclassification from “Interest expense” to “Interest income” |
(C) | Reclassification from “Entegris transaction related expenses” to “Selling, general and administrative expenses” |
3. | Preliminary Consideration |
(Amounts in thousands, except per share data) | | | |
CMC pro forma diluted shares outstanding as of March 31, 2022 | | | 28,638 |
Cash consideration per share | | | $133.00 |
Cash consideration (value) | | | $ 3,808,854 |
CMC pro forma diluted shares outstanding as of March 31, 2022 | | | 28,638 |
Entegris exchange ratio | | | 0.4506 |
Entegris common shares issued in exchange | | | 12,904 |
Entegris closing share price as of May 27, 2022 | | | $112.86 |
Estimated stock consideration to be transferred | | | $1,456,345 |
Fair value of Entegris options issued in exchange for CMC options | | | $56,579 |
Fair value of Entegris RSU's issued in exchange for CMC PSU's | | | $4,924 |
Estimate of equity consideration expected to be transferred | | | $1,517,848 |
Estimate of cash and stock consideration expected to be transferred to CMC stockholders | | | $5,326,702 |
4. | Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet |
4(A) Represents the cash proceeds paid for the cash consideration of the acquisition and one-time transaction-related costs to be incurred prior to, or concurrent with, the closing of the merger including bank fees. Acquisition-related transaction costs, such as investment banker, advisory, legal, and other professional fees are not included as a component of consideration transferred but are expensed as incurred. See also note 4(J) for the impact to retained earnings.
(In thousands) | | | April 2, 2022 |
Cash component of Merger consideration (Note 3) | | | $ (3,808,854) |
Cash paid for Entegris and CMC combined transaction fees and expenses | | | (113,213) |
Less: Total Entegris and CMC accrued transaction expenses (refer to Note 4(U)) | | | 32,930 |
Total pro forma adjustment to Cash and cash equivalents | | | $(3,889,137) |
4(B) Represents cash reduction related to the equity financing costs.
4(C) Represents the elimination of $861 between accounts receivable and accounts payable resulting from transactions between Entegris and CMC which would be eliminated upon consolidation.
4(D) Represents the preliminary fair value of inventories, which considers replacement cost for materials and net realizable value for work-in-process and finished goods. Refer to note 5(K) for further details.
4(E) Represents the preliminary fair value and resulting adjustment to net property, plant and equipment. The preliminary amounts assigned to net property, plant and equipment and estimated weighted average useful lives are as follows:
March 31, 2022 (Amounts in thousands) | | | Preliminary Fair Value | | | Estimated Weighted Average Useful Life (in years) |
Property, Plant and Equipment | | | $ 441,294 | | | 8 |
Construction in progress | | | 44,823 | | | 15 |
Total fair value of CMC's property, plant and equipment, net | | | $486,117 | | | |
Less: CMC's historical property, plant and equipment, net | | | 346,344 | | | |
Pro forma adjustment | | | $ 139,773 | | |
4(F) Represents the adjustment of historical and newly created intangible assets acquired by the Company to their estimated fair values (other than Goodwill). As part of the preliminary valuation analysis, the Company identified intangible assets, including technology, trade names, and customer relationships. The fair value of identifiable intangible assets is determined considering market research and a limited valuation analysis of the intangible assets. Since all information required to perform a detailed valuation analysis of CMC’s intangible assets could not be obtained as of the date of this filing, for purposes of these unaudited pro forma condensed combined financial statements, the Company used certain assumptions based upon publicly available transaction data for the industry. The following table summarizes the estimated fair values of CMC’s identifiable intangible assets and their estimated useful lives and uses a straight-line method of amortization:
March 31, 2022 (Amounts in thousands) | | | Preliminary Fair Value | | | Estimated Weighted Average Useful Life (in years) |
Customer relationships | | | $ 1,860,000 | | | 20 |
Developed Technology | | | 510,000 | | | 10 |
Trademark / Trade Name | | | 235,000 | | | 15 |
Total fair value of CMC's intangible assets (other than Goodwill) | | | $ 2,605,000 | | | |
Less: CMC historical other intangible assets | | | 584,657 | | | |
Pro forma adjustment | | | $ 2,020,343 | | |
4(G) Represents the adjustment to eliminate deferred financing costs.
4(H) Represents the preliminary adjustment to deferred tax liabilities primarily associated with the one-time deductible transaction and fair value adjustments for property, plant, and equipment, inventories, and other intangible assets excluding goodwill, using a blended statutory tax rate of 22.5%.
4(I) Represents the excess of the preliminary consideration over the preliminary fair value of the assets acquired and liabilities assumed. Goodwill will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. Goodwill is attributable to planned growth in new markets and synergies expected to be achieved from the combined operations of Entegris and CMC. Goodwill is not expected to be deductible for income tax purposes.
4(J) The following table summarized the transaction accounting adjustments impacting equity:
April 2, 2022 (Amounts in thousands) | | | Adjustments to Historical Equity | | | New Equity Structure | | | Other Items | | | Transaction Accounting Adjustments |
Common stock | | | $(41) | | | $129 | | | $— | | | $88 |
Treasury stock | | | 625,055 | | | — | | | — | | | 625,055 |
Additional paid-in capital | | | (1,080,599) | | | 1,501,719 | | | — | | | 421,120 |
Retained earnings | | | (467,515) | | | — | | | (39,270) | | | (506,785) |
Accumulated other comprehensive loss | | | (20,981) | | | — | | | — | | | (20,981) |
Total equity | | | $(944,081) | | | $1,501,848 | | | $(39,270) | | | $518,497 |
New Equity Structure: Represents the allocation of the preliminary stock consideration of $1,501,848 to common stock at the Corporation par value of $.01 ($130) and additional paid-in-capital ($1,517,719) based on the price as of May 27, 2022, net of $16,000 of equity issuance costs.
Other Items: Represents the impact of the nonrecurring transaction costs, net of applicable taxes, to retained earnings, which is discussed within 4(A).
(Amounts in thousands) | | | |
Entegris transaction costs, net of amounts previously accrued | | | $(47,363) |
Estimated tax benefit of Entegris transaction costs, net of amounts previously accrued | | | 8,093 |
Entegris transaction costs treated as reduction to retained earnings | | | $(39,270) |
4(K) Represents the cash proceeds of $5,265,000 from the debt financing funding of the Merger consideration from the unsecured notes offered hereby, the Unsecured 364-Day Bridge Facility, the New Secured Notes and the New Term Facility (see note 1 for further details).
4(L) Represents the debt financing obligation incurred totaling $5,265,000 from the Notes offered hereby, the Unsecured 364-Day Bridge Facility, the New Secured Debt and the New Term Facility (see note 1 for further details), net of applicable debt issuance costs of $88,000, rating agency fees of $9,000 and original issuance discount of $32,582.
4(M) Represents the cash outflow for the payment of Entegris and CMC debt that was extinguished and repaid, net of applicable debt issuance costs, rating agency fees and original issue discount, as well as the extinguished outstanding interest rate swaps noted within note 4(Q) and 4(S), respectively.
(In thousands) | | | April 2, 2022 |
Cash settlement of interest rate swap asset related to CMC's debt | | | $42,903 |
Repayment of CMC's long term debt, current maturities | | | (13,526) |
Repayment of CMC's long-term debt, excluding current maturities | | | (906,862) |
Parital extinguishment of Entegris debt | | | (145,000) |
Cash settlement of CMC's terminated swap | | | (27,684) |
Cash payment of new debt issuance costs | | | (88,000) |
Cash payment for rating agency fees | | | (9,000) |
Cash payment of original issue discount | | | (32,582) |
Cash outflow for pay down for extinguishment of Entegris and CMC debt and refinancing | | | $(1,179,751) |
4(N) Represents the paydown of $145,000 of Entegris debt associated with the refinancing arrangement.
4(O) Represents the elimination of CMC outstanding debt of $920,388, inclusive of unamortized deferred financing fees, associated with the refinancing arrangement of $10,585.
4(P) Represents the expected tax benefit of the anticipated CMC transaction costs to be incurred prior to, or concurrent with, the closing of the merger including bank fees, legal fees or other transaction expenses that are treated as a reduction in goodwill.
4(Q) Represents the elimination of CMC outstanding interest rate swaps associated with the extinguished and refinanced CMC debt as noted within 4(O).
4(R) Represents the reclassification of the CMC deferred tax asset of $5,125 from Deferred tax liabilities and other noncurrent tax liabilities to Deferred tax charges and refundable income taxes. Upon the extinguishment of the existing CMC debt and interest rate swaps, any associated deferred tax assets liabilities will become current income taxes receivable/payable.
4(S) Represents the elimination of the outstanding terminated CMC interest rate swap. During the last quarter of 2020, CMC entered into a new interest rate swap agreement and the existing interest rate swap was terminated and the hedging relationship was de-designated.
4(T) Represents the estimated cash outflow to fund a rabbi trust (recorded within other current assets) which is required immediately prior to a change in control in which CMC or its successor must establish to fully fund the expected severance benefits due under applicable change in control agreements. Our estimate of funding for the rabbi trust is based upon preliminary assumptions that are subject to further refinement as additional information is obtained.
4(U) Represents the repayment of the historical accrued Entegris and CMC transaction fees and expenses and the accrued bank ticking fees as of April 2, 2022.
5. | Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations |
5(A) Transactions between Entegris and CMC have been eliminated as if Entegris and CMC were consolidated affiliates for the period presented.
5(B) Represents the preliminary pro forma adjustment to recognize changes to straight-line depreciation expense resulting from the fair value adjustments to acquired property, plant, and equipment. The preliminary fair value of the property, plant and equipment may not represent the actual value of the property, plant and equipment when the Merger is completed resulting in a potential difference in straight-line depreciation expense, and that difference may be material. For example, an increase or decrease of 15% in the fair value of property, plant and equipment on the closing date of the Merger from the fair value of property, plant and equipment assumed in these pro forma financial statements would change the value of the property, plant and equipment by approximately $72,918, which would be reflected as a corresponding increase or decrease to straight-line depreciation expense of $9,115 on an annual basis or $2,279 for the 3-month period assuming a useful life of 8 years.
5(C) Represents estimated incremental straight-line amortization expense resulting from the allocation of purchase consideration to definite-lived intangible assets subject to amortization. An increase or decrease of 15% in the fair value of intangible assets on the closing date of the Merger from the fair value of intangible assets assumed in these pro forma financial statements would change the value of the intangible assets approximately by $390,750, which would be reflected as a corresponding increase or decrease to straight-line amortization expense of $26,050 on an annual basis or $6,513 for the 3-month period assuming an average useful life of 15 years.
5(D) Represents the one-time transaction-related costs for both Entegris and CMC that have yet to be expensed or accrued in the historical financial statements in connection with the merger including bank fees, legal fees, consulting fees, and other transaction expenses. As of April 2, 2022, the total estimated transaction-related costs amounted to $101,213 with $28,230 expensed to date resulting in a net pro forma adjustment of $72,983.
5(E) Represents the income tax effect of the transaction accounting adjustments related to the merger calculated using a blended statutory income tax rate of 22.5%. The effective tax rate of the combined company could be significantly different depending on the mix of actual earnings in foreign jurisdictions for periods subsequent to completion of the merger.
5(F) Represents the estimated interest expense on the new debt (the New Senior Credit Facilities and the Unsecured 364-Day Bridge Facility) raised to fund in part the consideration paid to effect the merger using estimated interest rates as shown in the table below which is subject to market fluctuations until such time as the loan facilities are in put in place (refer also to Note 1 for further details). From a sensitivity analysis perspective, an increase or decrease of 12.5 basis points in anticipated interest rates would result in an increase or decrease of $6,581 in interest expense for both the year ended December 31, 2021 and the twelve months ended April 2, 2022 and $1,645 for the three months ended April 2, 2022.
(Amounts in thousands) | | | For the year ended December 31, 2021 |
Interest expense on notes offered hereby (6.000%) | | | $53,700 |
Interest expense on New Senior Secured Notes (4.750%) | | | 76,000 |
Interest expense on Unsecured 364-Day Bridge Facility (5.750%) | | | 15,813 |
Interest expense on New Term Facility (3.000%) | | | 74,850 |
Total adjustment | | | $220,363 |
(Amounts in thousands) | | | For the three months ended April 2, 2022 |
Interest expense on notes offered hereby (6.000%) | | | $13,425 |
Interest expense on New Senior Secured Notes (4.750%) | | | 19,000 |
Interest expense on Unsecured 364-Day Bridge Facility (5.750%) | | | 3,953 |
Interest expense on New Term Facility (3.000%) | | | 18,713 |
Total adjustment | | | $55,091 |
(Amounts in thousands) | | | For the twelve months ended April 2, 2022 |
Interest expense on notes offered hereby (6.000%) | | | $53,700 |
Interest expense on New Senior Secured Notes (4.750%) | | | 76,000 |
Interest expense on Unsecured 364-Day Bridge Facility (5.750%) | | | 15,813 |
Interest expense on New Term Facility (3.000%) | | | 74,850 |
Total adjustment | | | $220,363 |
5(G) Represents the elimination of interest expense associated with the extinguished CMC debt outstanding.
5(H) Represents the elimination of interest expense associated with the partial payment of Entegris debt outstanding.
5(I) Represents the amortization of deferred financing costs, rating agency fees and original issue discount associated with the aggregate new debt facilities (refer also to Note 1 for further details). For illustrative purposes of presenting the pro forma financial statements, we have allocated the deferred financing costs to the Notes offered hereby, the Unsecured 364-Day Bridge Facility, New Senior Secured Debt and the New Term Facility which has an expected eight, 364-day, seven and seven-year term, respectively, and we have allocated rating agency fees to the Notes offered hereby and the New Senior Secured Debt which have an expected eight and seven-year term, respectively.
5(J) Represents the incremental differences in stock-based compensation for replaced equity awards. Subject to the terms of the merger agreement, unvested CMC performance-based restricted share awards will be replaced and converted into Entegris time vested restricted share awards.
5(K) Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation. Entegris will recognize the increased value of inventory in cost of sales as the inventory is sold, which for purposes of these pro forma financial statements is assumed to occur within the first year after the merger and is non-recurring in nature. Refer to note 4(D) for additional details.
5(L) Represents one-time bank ticking fees that have yet to be expensed or accrued in the historical financial statements in connection with debt financing commitments used in funding of the Merger consideration. As of April 2, 2022, the total aggregate bank ticking fees were estimated to be $12,000 with $4,700 expensed to date resulting in a net pro forma adjustment of $7,300.
6. | Entegris Earnings Per Share Information |
The following table shows our calculation of pro forma combined basic and diluted earnings per share for the fiscal year ended December 31, 2021, three months ended April 2, 2022 and twelve months ended April 2, 2022.
(Amounts in thousands, except per share data) | | | Year Ended December 31, 2021 | | | Three Months Ended April 2, 2022 | | | Twelve Months Ended April 2, 2022 |
Pro forma net income attributable to Entegris common stock | | | $(4,909) | | | $98,920 | | | $289,085 |
Basic weighted average Entegris shares outstanding | | | 135,411 | | | 135,670 | | | 136,013 |
CMC shares converted to Entegris shares(1) | | | 12,904 | | | 12,904 | | | 12,904 |
Pro forma basic weighted average shares outstanding | | | 148,315 | | | 148,574 | | | 148,917 |
Dilutive effect of securities: | | | | | | | |||
Weighted common shares assumed upon exercise of Entegris options and vesting of Entegris restricted stock units | | | 1,163 | | | 882 | | | 611 |
Entegris options issued in consideration for CMC options(2) | | | 1,101 | | | 1,101 | | | 1,101 |
Entegris RSU’s issued in exchange for CMC PSU’s(3) | | | 141 | | | 141 | | | 141 |
Pro forma diluted weighted average shares outstanding | | | 150,720 | | | 150,698 | | | 150,770 |
Pro forma basic earnings per share | | | $(0.03) | | | $0.67 | | | $1.94 |
Pro forma diluted earnings per share | | | $(0.03) | | | $0.66 | | | $1.92 |
(1) | Represents the estimated number of shares of Entegris common stock to be issued to CMC stockholders based on the number of shares of CMC common stock outstanding as of March 31, 2022 (28,638 CMC pro forma shares outstanding – see Footnote 3) and after giving effect to the exchange ratio of 0.4506 as determined in the merger agreement. This amount is inclusive of 13 shares of prior CMC equity based awards that were fully vested and converted to merger consideration. |
(2) | Represents the total vested and unvested CMC options as of March 31, 2022 which are being converted to Entegris options. |
(3) | Represents the total CMC PSU's as of March 31, 2022 which are being converted to Entegris RSU’s. |