TABLE OF CONTENTS
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On September 17, 2015, Communications & Power Industries LLC (“CPI”), a wholly owned subsidiary of CPI International Holding Corp. (“CPII” or the “Company”), entered into and consummated the transactions contemplated by a Stock Purchase Agreement (the “Acquisition Agreement”) with ASC Signal Holdings Corporation (“ASC Signal”), The Resilience Fund II, L.P., and certain other securityholders of ASC Signal, pursuant to which CPI acquired all of the issued and outstanding equity securities of ASC Signal on the terms and conditions set forth in the Acquisition Agreement.
The following unaudited pro forma condensed combined financial information of the Company has been derived from, and should be read in conjunction with, CPII's historical consolidated financial statements and accompanying notes included in its Quarterly Report on Form 10-Q for the period ended July 3, 2015 and Annual Report on Form 10-K for the year ended October 3, 2014, as filed with the Securities and Exchange Commission on August 11, 2015 and December 11, 2014, respectively. CPII's historical consolidated financial statements were combined with information derived from ASC Signal's historical unaudited financial statements and accompanying notes for the nine months ended June 30, 2015 and historical audited financial statements and accompanying notes for the year ended September 30, 2014 contained in this Current Report on Form 8-K/A.
The unaudited pro forma condensed combined balance sheet as of July 3, 2015 is presented as if the acquisition of ASC Signal and the related financing to partially fund the acquisition had occurred on July 3, 2015. The unaudited pro forma condensed combined statements of operations for the nine months ended July 3, 2015 and the year ended October 3, 2014 are presented as if the acquisition and the related financing had occurred on September 28, 2013. The historical financial information is adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the condensed combined statements of operations, expected to have a continuing impact on the combined results.
The unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting under generally accepted accounting principles in the United States of America. The unaudited pro forma adjustments, described under the caption "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" below, were based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statements. The preliminary allocation of the purchase price to the assets acquired and the liabilities assumed is based on preliminary estimates of the fair values of the assets acquired and liabilities assumed, which are subject to change during the measurement period (up to one year from the date of acquisition). The final adjustments will depend on a number of factors, including the finalization of asset valuations. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.
The unaudited pro forma condensed combined financial statements are presented for informational purposes only. The unaudited pro forma condensed combined statements of operations do not reflect the impact of non-recurring charges that may result from or in connection with the acquisition, including: (i) the amortization of backlog, (ii) the amortization of the step-up in value of inventory in the Company's cost of sales, (iii) the amortization of the adjustment to ASC Signal's historical deferred revenue to fair value, and (iv) expenses in connection with the acquisition. Further, the unaudited pro forma condensed combined financial statements do not purport to represent what the Company's financial condition or results of operations would have been had the acquisition actually occurred on the dates indicated, and they do not purport to project the Company's financial condition or results of operations for any future period or as of any future date. The actual results reported by the combined company in periods following the acquisition may differ significantly from those reflected in these unaudited pro forma condensed combined financial statements for a number of reasons, including cost saving synergies from operating efficiencies and the effect of the incremental costs incurred to integrate the two companies.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of July 3, 2015
(In thousands)
|
| | | | | | | | | | | | | | | | | |
| | Historical
CPII | | Historical
ASC Signal | | Pro Forma
Adjustments | | Pro Forma
CPII |
| Assets | | | | | | | | | |
| Current Assets: | | | | | | | | | |
| Cash and cash equivalents | $ | 61,284 |
| | $ | 210 |
| | $ | (24,626 | ) | | A | | $ | 36,868 |
|
| Restricted cash | 1,663 |
| | — |
| | — |
| | | | 1,663 |
|
| Accounts receivable, net | 44,972 |
| | 7,250 |
| | 167 |
| | B | | 52,389 |
|
| Inventories | 98,883 |
| | 10,521 |
| | (547 | ) | | C | | 108,857 |
|
| Deferred tax assets | 8,390 |
| | — |
| | 1,206 |
| | D | | 9,596 |
|
| Prepaid and other current assets | 7,919 |
| | 275 |
| | 757 |
| | E | | 8,951 |
|
| Total current assets | 223,111 |
| | 18,256 |
| | (23,043 | ) | | | | 218,324 |
|
| Property, plant, and equipment, net | 71,981 |
| | 511 |
| | 6,954 |
| | F | | 79,446 |
|
| Deferred debt issue costs, net | 10,636 |
| | — |
| | 1,115 |
| | G | | 11,751 |
|
| Intangible assets, net | 240,467 |
| | — |
| | 25,750 |
| | H | | 266,217 |
|
| Goodwill | 198,881 |
| | — |
| | 16,553 |
| | I | | 215,434 |
|
| Other long-term assets | 537 |
| | 120 |
| | (120 | ) | | J | | 537 |
|
| Total assets | $ | 745,613 |
| | $ | 18,887 |
| | $ | 27,209 |
| | | | $ | 791,709 |
|
| | | | | | | | | | |
| Liabilities and stockholders’ equity | |
| | |
| | | | | | |
| Current Liabilities: | |
| | |
| | | | | | |
| Current portion of long-term debt | $ | 3,100 |
| | $ | 6,992 |
| | $ | (6,992 | ) | | K | | $ | 3,100 |
|
| Accounts payable | 23,857 |
| | 6,424 |
| | (1,304 | ) | | L | | 28,977 |
|
| Accrued expenses | 41,649 |
| | 995 |
| | 4,745 |
| | M | | 47,389 |
|
| Product warranty | 4,869 |
| | 383 |
| | (76 | ) | | N | | 5,176 |
|
| Income taxes payable | 412 |
| | — |
| | — |
| | | | 412 |
|
| Advance payments from customers | 15,275 |
| | 3,489 |
| | (3,489 | ) | | O | | 15,275 |
|
| Total current liabilities | 89,162 |
| | 18,283 |
| | (7,116 | ) | | | | 100,329 |
|
| Deferred tax liabilities | 92,652 |
| | — |
| | 9,408 |
| | P | | 102,060 |
|
| Long-term debt, less current portion | 513,774 |
| | 1,807 |
| | 25,633 |
| | Q | | 541,214 |
|
| Other long-term liabilities | 4,500 |
| | 4,772 |
| | (4,772 | ) | | R | | 4,500 |
|
| Total liabilities | 700,088 |
| | 24,862 |
| | 23,153 |
| | | | 748,103 |
|
| Stockholders’ equity | |
| | |
| | | | | | |
| Class A convertible preferred stock | — |
| | 1 |
| | (1 | ) | | S(a) | | — |
|
| Common stock | — |
| | — |
| | — |
| | | | — |
|
| Additional paid-in capital | 26,326 |
| | 11,538 |
| | (11,538 | ) | | S(a) | | 26,326 |
|
| Accumulated other comprehensive loss | (1,341 | ) | | (1,020 | ) | | 1,020 |
| | S(a) | | (1,341 | ) |
| Retained earnings (accumulated deficit) | 20,540 |
| | (16,494 | ) | | 14,575 |
| | S(b) | | 18,621 |
|
| Total stockholders’ equity | 45,525 |
| | (5,975 | ) | | 4,056 |
| | | | 43,606 |
|
| Total liabilities and stockholders’ equity | $ | 745,613 |
| | $ | 18,887 |
| | $ | 27,209 |
| | | | $ | 791,709 |
|
See notes to unaudited pro forma condensed combined financial statements.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended July 3, 2015
(In thousands)
|
| | | | | | | | | | | | | | | | | |
| | Historical
CPII | | Historical
ASC Signal | | Pro Forma
Adjustments | | Pro Forma
CPII |
| Sales | $ | 328,283 |
| | $ | 32,252 |
| | $ | — |
| | | | $ | 360,535 |
|
| Cost of sales | 236,978 |
| | 20,489 |
| | 351 |
| | T | | 257,818 |
|
| Gross profit | 91,305 |
| | 11,763 |
| | (351 | ) | | | | 102,717 |
|
| Operating costs and expenses: | |
| | |
| | | | | | |
| Research and development | 11,370 |
| | 1,379 |
| | — |
| | | | 12,749 |
|
| Selling and marketing | 17,018 |
| | 3,238 |
| | 72 |
| | U | | 20,328 |
|
| General and administrative | 23,234 |
| | 3,231 |
| | (521 | ) | | V | | 25,944 |
|
| Amortization of acquisition-related intangible assets | 7,637 |
| | — |
| | 1,198 |
| | W | | 8,835 |
|
| Total operating costs and expenses | 59,259 |
| | 7,848 |
| | 749 |
| | | | 67,856 |
|
| Operating income | 32,046 |
| | 3,915 |
| | (1,100 | ) | | | | 34,861 |
|
| Interest expense, net | 27,312 |
| | 897 |
| | 979 |
| | X | | 29,188 |
|
| Income before income taxes | 4,734 |
| | 3,018 |
| | (2,079 | ) | | | | 5,673 |
|
| Income tax expense (benefit) | 1,402 |
| | (4 | ) | | 361 |
| | Y | | 1,759 |
|
| Net income | $ | 3,332 |
| | $ | 3,022 |
| | $ | (2,440 | ) | | | | $ | 3,914 |
|
See notes to unaudited pro forma condensed combined financial statements.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended October 3, 2014
(In thousands)
|
| | | | | | | | | | | | | | | | | |
| | Historical
CPII | | Historical
ASC Signal | | Pro Forma
Adjustments | | Pro Forma
CPII |
| Sales | $ | 475,301 |
| | $ | 30,009 |
| | $ | — |
| | | | $ | 505,310 |
|
| Cost of sales | 336,679 |
| | 22,650 |
| | 570 |
| | T | | 359,899 |
|
| Gross profit | 138,622 |
| | 7,359 |
| | (570 | ) | | | | 145,411 |
|
| Operating costs and expenses: | |
| | |
| | | | | | |
| Research and development | 15,825 |
| | 1,553 |
| | — |
| | | | 17,378 |
|
| Selling and marketing | 23,542 |
| | 3,779 |
| | 164 |
| | U | | 27,485 |
|
| General and administrative | 32,545 |
| | 4,129 |
| | (584 | ) | | V | | 36,090 |
|
| Amortization of acquisition-related intangible assets | 10,480 |
| | — |
| | 1,597 |
| | W | | 12,077 |
|
| Total operating costs and expenses | 82,392 |
| | 9,461 |
| | 1,177 |
| | | | 93,030 |
|
| Operating income (loss) | 56,230 |
| | (2,102 | ) | | (1,747 | ) | | | | 52,381 |
|
| Interest expense, net | 32,182 |
| | 1,316 |
| | 1,165 |
| | X | | 34,663 |
|
| Loss on debt restructuring | 7,235 |
| | — |
| | — |
| | | | 7,235 |
|
| Income (loss) before income taxes | 16,813 |
| | (3,418 | ) | | (2,912 | ) | | | | 10,483 |
|
| Income tax expense (benefit) | 7,696 |
| | (14 | ) | | (2,401 | ) | | Y | | 5,281 |
|
| Net income (loss) | $ | 9,117 |
| | $ | (3,404 | ) | | $ | (511 | ) | | | | $ | 5,202 |
|
See notes to unaudited pro forma condensed combined financial statements.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(All tabular dollar amounts in thousands)
1. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined balance sheet as of July 3, 2015 gives effect to the acquisition of ASC Signal as if it had been completed on July 3, 2015. The unaudited pro forma condensed combined statements of operations for the nine months ended July 3, 2015 and the year ended October 3, 2014 gives effect to the acquisition as if it had occurred on September 28, 2013. The unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations were derived by adjusting the historical financial statements of the Company for the acquisition.
The Company's acquisition of ASC Signal constitutes a transaction or event in which an acquirer obtains control of one or more “businesses” or a “business combination” and, accordingly, is accounted for under the acquisition method of accounting in which the Company is deemed to be the accounting acquirer. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values.
Certain amounts in ASC Signal's historical financial information have been reclassified to conform to the Company's presentation.
2. Preliminary Purchase Price
The unaudited pro forma condensed combined financial information reflects a total purchase price of $52.9 million paid in cash. The Company used approximately $25.5 million of cash on hand and approximately $27.4 million of debt financing to fund the purchase price.
The following table summarizes the preliminary allocation of the purchase price to the preliminary estimated fair values of the assets acquired and liabilities assumed:
|
| | | |
| Assets acquired: | |
| Cash and cash equivalents | $ | 2,177 |
|
| Accounts receivable | 7,417 |
|
| Inventories | 9,974 |
|
| Deferred tax assets - current | 1,206 |
|
| Prepaid and other current assets | 1,032 |
|
| Property, plant and equipment | 7,465 |
|
| Identifiable intangible assets | 25,750 |
|
| Total assets acquired | 55,021 |
|
| | |
| Liabilities assumed: | |
| Accounts payable | 5,120 |
|
| Accrued expenses | 921 |
|
| Deferred revenue | 2,900 |
|
| Product warranty | 307 |
|
| Deferred income taxes | 9,408 |
|
| Total liabilities assumed | 18,656 |
|
| | |
| Net assets acquired | 36,365 |
|
| Goodwill | 16,553 |
|
| Total purchase price | $ | 52,918 |
|
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired.
This preliminary purchase price allocation above has been used to prepare pro forma adjustments in the pro forma balance sheet and statements of operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.
2. Pro Forma Financial Statement Adjustments
The following adjustments are included in the unaudited pro forma condensed consolidated financial statements:
Unaudited Pro Forma Condensed Combined Balance Sheet
| |
| A. | Cash and cash equivalents |
|
| | | |
| Reflects the working capital adjustment based on the purchase price allocation as of the acquisition date as shown in Note 2. | $ | 1,967 |
|
| Reflects borrowings, net of original issue discount, under a new term loan facility used to fund a portion of the ASC Signal acquisition purchase price. | 27,440 |
|
| Reflects cash consideration paid by the Company for the acquisition of ASC Signal. | (52,918 | ) |
| Reflects cash paid by the Company for costs incurred in conjunction with entering into new term loan facility. | (1,115 | ) |
| | $ | (24,626 | ) |
| |
| B. | Accounts receivable, net |
Represents the working capital adjustment based on the purchase price allocation as of the acquisition date as shown in Note 2.
|
| | | |
| Reflects the working capital adjustment, before the step-up of finished goods and work in process inventory, based on the purchase price allocation as of the acquisition date. | $ | (1,603 | ) |
| Reflects the step up of finished goods and work in process inventory to fair value upon acquisition. | 1,056 |
|
| | $ | (547 | ) |
The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. After the acquisition, the step-up in inventory fair value will increase cost of sales over approximately four months as the inventory is sold. This increase is not reflected in the unaudited pro forma condensed combined statements of operations because it does not have a continuing impact.
| |
| D. | Deferred tax assets - current |
Represents estimated current deferred tax asset related primarily to ASC Signal's net operating losses.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
| |
| E. | Prepaid and other current assets |
|
| | | |
| Reflects the reclassification of certain deposits from long-term to short-term. | $ | 120 |
|
| Reflects the working capital adjustment related primarily to prepaid liability insurance and property taxes based on the purchase price allocation as of the acquisition date as shown in Note 2. | $ | 637 |
|
| | $ | 757 |
|
| |
| F. | Property, plant and equipment |
Represents preliminary fair value adjustment to the acquired property and equipment. The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. Building, land improvements and process equipment are depreciated generally over 25, 20 and 12 years, respectively. Machinery and equipment are depreciated generally over seven to 12 years. Office furniture and equipment are depreciated generally over five to 10 years. Leasehold improvements are amortized using the straight-line method over their estimated useful lives, or the remaining term of the lease, whichever is shorter.
| |
| G. | Deferred debt issue costs, net |
Represents debt issue costs associated with the new term loan facility mentioned in A. above. Debt issue costs are capitalized and amortized over the estimated time the corresponding debt is expected to be outstanding (approximately 5 1/2 years) using the effective interest method.
Represents purchase price allocation to the following intangible assets:
|
| | | | | |
| |
Fair Value | | Useful Life (years) |
| Tradenames | $ | 3,050 |
| | 15 |
| Completed technology | 11,150 |
| | 15 |
| Backlog | 2,450 |
| | 1 |
| Customer relationship | 9,100 |
| | 14 |
| Total identifiable intangible assets | $ | 25,750 |
| | |
The values assigned to acquired identifiable intangible assets for technology were determined based on the excess earnings method of the income approach. This method determines fair market value using estimates and judgments regarding the expectations of future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and sales, all of which are discounted to their present value. Identifiable intangible assets are amortized on a straight-line basis over their useful lives
Represents preliminary estimate of goodwill, which represents the excess of the purchase price over the fair value of ASC Signal’s identifiable assets acquired and liabilities assumed as shown in Note 2.
Represents the reclassification of certain deposits from long-term to short-term.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
| |
| K. | Current portion of long-term debt |
Represents the elimination of ASC Signal's historical borrowings under a line of credit not assumed by the Company.
Represents the working capital adjustment based on the purchase price allocation as of the acquisition date as shown in Note 2.
|
| | | |
| Reflects the reclassification of ASC Signal's customer deposits from "advance payments from customers" to "deferred revenue" (accrued expenses). | $ | 3,489 |
|
| Reflects an adjustment to deferred revenue for the estimated fair value of fulfilling the remaining contractual obligations of ASC Signal at the date of acquisition. | $ | (392 | ) |
| Reflects the working capital adjustment based on the purchase price allocation as of the acquisition date as shown in Note 2. | $ | (271 | ) |
| Reflects an accrual for acquisition-related transaction costs incurred by the Company. | 1,919 |
|
| | $ | 4,745 |
|
No corresponding adjustments have been recorded in the unaudited pro forma condensed combined statements of operations as (1) the pro forma adjustment to reflect the fair value of acquired deferred revenue has no continuing impact, and (2) the transaction costs are nonrecurring charges that are directly attributable to the ASC Signal acquisition.
Represents fair value adjustment to ASC Signal's product warranty. The Company’s products typically carry warranty periods of one to three years or warranties over a predetermined product usage life. The Company estimates the costs that may be incurred under its warranty plans and records a liability in the amount of such estimated costs at the time revenue is recognized. The determination of product warranty reserves requires the Company to make estimates of product return rates and expected cost to repair or replace the products under warranty. The Company assesses the adequacy of its preexisting warranty liabilities and adjusts the balance based on actual experience and changes in future expectations.
| |
| O. | Advance payments from customers |
Represents the reclassification of ASC Signal's customer deposits from "advance payments from customers" to "deferred revenue" (accrued expenses).
| |
| P. | Deferred tax liabilities |
Represents deferred tax liabilities related primarily to amortizable intangible assets acquired from ASC Signal.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
| |
| Q. | Long-term debt, less current portion |
|
| | | |
| Reflects borrowings, net of original issue discount, under a new term loan facility used to fund a portion of the ASC Signal acquisition purchase price. | $ | 27,440 |
|
| Reflects the elimination of ASC Signal’s historical loan payable not assumed by the Company. | (1,807 | ) |
| | $ | 25,633 |
|
The original issue discount associated with the new term loan facility are capitalized and amortized over the estimated time the corresponding debt is expected to be outstanding (approximately 5 1/2 years) using the effective interest method.
| |
| R. | Other long-term liabilities |
Represents the elimination of ASC Signal's historical long-term liability not assumed by the Company. The liability was for non-recurring management and consulting services provided by the former owner of ASC Signal.
| |
| S. | Stockholders' equity accounts |
|
| | | | |
| (a) | Represents ASC Signal's Class A convertible preferred stock, common stock, additional paid-in capital and accumulated other comprehensive loss. |
| | | |
| (b) | Reflects the elimination of ASC Signal's historical accumulated deficit. | $ | 16,494 |
|
| | Reflects the effect on the retained earnings of acquisition-related transaction costs incurred by the Company. See corresponding accrual in L. above. | (1,919 | ) |
| | | $ | 14,575 |
|
Unaudited Pro Forma Condensed Combined Statements of Operations
|
| | | | | | | |
| | For the Nine Months Ended July 3, 2015 | | For the Year Ended October 3, 2014 |
| Reflects the elimination of ASC Signal's historical depreciation expense allocated to cost of sales. | $ | (69 | ) | | $ | (89 | ) |
| Reflects the estimated depreciation expense related to the acquired property, plant and equipment discussed at F. above. | 420 |
| | 659 |
|
| | $ | 351 |
| | $ | 570 |
|
The Company allocates depreciation of its property, plant, and equipment to cost of sales.
Represents an increase in the compensation for two key sales and marketing executives of ASC Signal from their previous compensation as a result of new compensation arrangements executed in connection with the acquisition.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
| |
| V. | General and administrative |
|
| | | | | | | |
| | For the Nine Months Ended July 3, 2015 | | For the Year Ended October 3, 2014 |
| Reflects the elimination of ASC Signal's historical depreciation expense allocated to general and administrative | $ | (69 | ) | | $ | (89 | ) |
| Reflects the elimination of the Company's nonrecurring transaction costs incurred that are directly related to the acquisition of ASC Signal | (297 | ) | | — |
|
| Reflects the elimination of ASC Signal's historical fees paid for management and consulting services provided by former owner of ASC Signal | (423 | ) | | (969 | ) |
| Reflects the adjustment to the annual advisory fee owed by the Company to Veritas Management as a result of additional earnings or loss contributed by ASC Signal. See more information below. | 96 |
| | (104 | ) |
| Reflects an increase in the compensation for three key management executives of ASC Signal from their previous compensation as a result of new compensation arrangements executed in connection with the acquisition. | 172 |
| | 578 |
|
| | $ | (521 | ) | | $ | (584 | ) |
The Company pays Veritas Capital Fund Management, L.L.C. (“Veritas Management”) an annual fee equal to the greater of $1.0 million or 3.0% of the Company’s Adjusted EBITDA (EBITDA further adjusted to exclude certain acquisition-related transaction and start-up costs, refinancing expenses, stock-based compensation expense and the Veritas Management annual advisory fee).
| |
| W. | Amortization of acquisition-related intangible assets |
Represents the estimated amortization expense related to the acquired intangible assets discussed at H. above.
|
| | | | | | | | | | | | | |
| |
Fair Value | | Useful Life (years) | | For the Nine Months Ended July 3, 2015 | | For the Year Ended
October 3, 2014 |
| Tradenames | $ | 3,050 |
| | 15 | | $ | 153 |
| | $ | 203 |
|
| Completed technology | 11,150 |
| | 15 | | 557 |
| | 744 |
|
| Customer relationship | 9,100 |
| | 14 | | 488 |
| | 650 |
|
| | $ | 23,300 |
| | | | $ | 1,198 |
| | $ | 1,597 |
|
No corresponding adjustments related to backlog have been recorded in the unaudited pro forma condensed combined statement of operations as the amortization of backlog is considered non-recurring.
CPI INTERNATIONAL HOLDING CORP.
and Subsidiaries
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
(All tabular dollar amounts in thousands)
|
| | | | | | | |
| | For the Nine Months Ended July 3, 2015 | | For the Year Ended
October 3, 2014 |
| Reflects interest expense using the interest rate of 8% for the $28.0 million borrowings under a term loan facility entered into by the Company to partially fund the ASC Signal acquisition. | $ | 1,679 |
| | $ | 2,241 |
|
| Reflects the amortization of deferred debt issue costs associated with the new term loan facility. | 131 |
| | 160 |
|
| Reflects the effect of the accretion of original issue discount associated with the borrowings under the new term loan facility | 66 |
| | 80 |
|
| Reflects the elimination of interest expense relating to ASC Signal’s debt that is not assumed by the Company. | (897 | ) | | (1,316 | ) |
| | $ | 979 |
| | $ | 1,165 |
|
Excluded from the table above is the elimination of interest earned on cash on hand used by the Company to fund a portion of the ASC Signal acquisition as amount of such interest is not material.
| |
| Y. | Income tax expense (benefit) |
Represents the tax impact of the pro forma adjustments based on the estimated blended federal and state statutory tax rate of 38%.
