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8-K/A - FORM 8-K AMENDMENT NO. 1 - MACOM Technology Solutions Holdings, Inc.d719476d8ka.htm
EX-99.1 - EX-99.1 - MACOM Technology Solutions Holdings, Inc.d719476dex991.htm
EX-23.1 - EX-23.1 - MACOM Technology Solutions Holdings, Inc.d719476dex231.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On February 13, 2014, M/A-COM Technology Solutions Holdings, Inc., through its wholly-owned subsidiary, M/A-COM Technology Solutions Inc. (collectively, MACOM), completed the acquisition (the Acquisition) of Nitronex, LLC, a developer of gallium nitride (GaN) based semiconductors headquartered in North Carolina.

MACOM completed the Acquisition through a cash payment of $26.1 million for all of the outstanding membership interests of Nitronex, LLC. MACOM funded the Acquisition through the use of available cash and borrowings under its revolving credit facility.

On June 25, 2012, GaAs Labs, LLC (GaAs Labs) acquired Nitronex Corporation, which subsequently converted to a limited liability company and changed its name to Nitronex LLC (the Company or Nitronex). GaAs Labs is a stockholder in MACOM and GaAs Labs, Nitronex and MACOM were all under common control from June 25, 2012 through February 13, 2014.

The following unaudited pro forma condensed combined financial statements (Unaudited Pro Forma Financial Information) are presented to illustrate the effects of the Acquisition on MACOM’s historical financial position and results of operations and have been prepared to illustrate the effect of the Acquisition and for informational purposes only. The Unaudited Pro Forma Financial Information is based upon the historical financial statements and notes thereto of MACOM and Nitronex and should be read in conjunction with the:

 

    historical financial statements and the accompanying notes of MACOM included in MACOM’s Annual Report on Form 10-K for the fiscal year ended September 27, 2013;

 

    historical financial statements and the accompanying notes of MACOM included in MACOM’s Quarterly Report on Form 10-Q for the three months ended January 3, 2014; and

 

    historical financial statements and the accompanying notes of Nitronex for the year ended December 31, 2013 included elsewhere herein.

The Acquisition is being accounted for in accordance with the requirements for combinations of entities under common control whereby the historical consolidated financial statements of MACOM and Nitronex will be presented as combined in a manner similar to a pooling-of-interests to include the results of operations of each business since the earliest date of common control, June 25, 2012. All financial statements for the periods from June 25, 2012 through February 13, 2014 will be combined using the historical financial amounts of each entity prior to the combination.

The following unaudited pro forma condensed combined statements of operations for the fiscal years ended September 28, 2012 and September 27, 2013 and the three months ended January 3, 2014 (Unaudited Pro Forma Statements of Operations) has been prepared assuming combined operations from the earliest date of common control, June 25, 2012, and assuming the Acquisition had been completed at the beginning of the most recent fiscal year. The unaudited pro forma condensed combined balance sheet as of January 3, 2014 (Unaudited Pro Forma Balance Sheet) has been prepared assuming the Acquisition had been completed on January 3, 2014. For the purposes of presenting the Unaudited Pro Forma Balance Sheet, the Nitronex balance sheet as of December 31, 2013 included elsewhere herein has been used. The Unaudited Pro Forma Financial Information has been further adjusted with respect to certain aspects of the Acquisition to reflect:

 

    the purchase price and costs incurred in the Acquisition;

 

    additional indebtedness from borrowing under MACOM’s revolving credit facility and related incremental interest expense incurred in connection with the Acquisition; and

 

    income tax effects of the Acquisition.

The Unaudited Pro Forma Financial Information was prepared in accordance with the requirements of common control business combinations under accounting principles generally accepted in the United States (US GAAP) and the regulations of the United States Securities and Exchange Commission (SEC), and is not necessarily indicative of the financial position or results of operations that would have occurred if the Acquisition had been completed on the dates indicated, nor is it necessarily


indicative of the consolidated future operating results or financial position of MACOM. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in connection with the Unaudited Pro Forma Financial Information.

The Unaudited Pro Forma Financial Information does not reflect events that may occur after the Acquisition, including, but not limited to, the anticipated realization of ongoing savings from operating synergies. It also does not give effect to certain one-time charges MACOM expects to incur in connection with the Acquisition, including, but not limited to, restructuring charges that are expected to be incurred to facilitate ongoing cost savings and synergies.


M/A-COM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of January 3, 2014

(in thousands)

 

     M/A-COM
Technology
Solutions
Holdings, Inc.
    Nitronex, LLC     Pro Forma
Acquisition
Adjustments
   

Notes (See
Note 6)

   Pro Forma
Combined
 

ASSETS

           

Current assets:

           

Cash and cash equivalents

   $ 66,420      $ 48      $ (1,080   (a)    $ 65,388   

Accounts receivable, net

     66,468        644        —             67,112   

Inventories

     88,687        966        —             89,653   

Prepaid expenses and other

     22,862        53        —             22,915   

Deferred income taxes

     10,421        —          —             10,421   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

     254,858        1,711        (1,080        255,489   

Property, plant and equipment, net

     47,353        1,135        —             48,488   

Goodwill

     14,697        2,760        —             17,457   

Intangible assets, net

     165,359        6,609        —             171,968   

Deferred income taxes

     64,499        —          6,160      (b)      70,659   

Other assets

     20,930        —          —             20,930   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 567,696      $ 12,215      $ 5,080         $ 584,991   
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

           

Current liabilities:

              —     

Notes payable

   $ 6,960      $ —        $ —           $ 6,960   

Accounts payable

     36,622        852        986      (c)      38,460   

Accrued liabilities

     40,547        582        —             41,129   

Deferred revenue

     9,280        330        —             9,610   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

     93,409        1,764        986           96,159   

Long-term debt

     220,000        —          25,000      (d)      245,000   

Warrant liability

     10,591        —          —             10,591   

Other long-term liabilities

     8,353        456        —             8,809   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     332,353        2,220        25,986           360,559   

Stockholders’ equity:

           

Preferred stock

     —          —               —     

Common stock

     47        —          —             47   

Accumulated other comprehensive loss

     (122     —          —             (122

Additional paid-in capital and member’s capital

     362,672        24,180        (19,920   (b)(e)      366,932   

Treasury stock

     (330     —          —             (330

Accumulated deficit

     (126,924     (14,185     (986   (c)      (142,095
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     235,343        9,995        (20,906        224,432   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and stockholders’ equity

   $ 567,696      $ 12,215      $ 5,080         $ 584,991   
  

 

 

   

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.


M/A-COM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended September 27, 2013

(in thousands, expect per share amounts)

 

     M/A-COM
Technology
Solutions
Holdings, Inc.
    Nitronex, LLC     Pro Forma
Acquisition
Adjustments
   

Notes (See
Note 6)

   Pro Forma
Combined
 

Revenue

   $ 318,718      $ 4,353      $ —           $ 323,071   

Cost of revenue

     179,019        7,639        —             186,658   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     139,699        (3,286     —             136,413   

Operating expenses:

           

Research and development

     40,631        3,957        —             44,588   

Selling, general and administrative

     50,242        1,762        —             52,004   

Litigation settlement

     7,250        —          —             7,250   

Contingent consideration

     (577     —          —             (577

Restructuring charges

     950        110        —             1,060   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     98,496        5,829        —             104,325   

Income (loss) from operations

     41,203        (9,115     —             32,088   

Other (expense) income:

           

Warrant liability (expense) gain

     (4,312     —          —             (4,312

Interest expense

     (817     —          (575   (f)      (1,392

Other income

     372        —          —             372   
  

 

 

   

 

 

   

 

 

      

 

 

 

Other (expense) income, net

     (4,757     —          (575        (5,332

Income (loss) before income taxes

     36,446        (9,115     (575        26,756   

Income tax provision

     9,135        —          (201   (g)      8,934   
  

 

 

   

 

 

   

 

 

      

 

 

 

Income (loss) from continuing operations

   $ 27,311      $ (9,115   $ (374      $ 17,822   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income per share:

           

Net income from continuing operations — basic

   $ 0.59             $ 0.39   
  

 

 

          

 

 

 

Net income from continuing operations — diluted

   $ 0.58             $ 0.38   
  

 

 

          

 

 

 

Shares used:

           

Basic

     45,916               45,916   
  

 

 

          

 

 

 

Diluted

     47,137               47,137   
  

 

 

          

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.


M/A-COM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended September 28, 2012

(in thousands, expect per share amounts)

 

     M/A-COM
Technology
Solutions
Holdings, Inc.
    Nitronex, LLC     Pro Forma
Acquisition
Adjustments
     Notes (See
Note 6)
   Pro Forma
Combined
 

Revenue

   $ 302,203      $ 1,133      $ —            $ 303,336   

Cost of revenue

     167,301        1,912        —              169,213   
  

 

 

   

 

 

   

 

 

       

 

 

 

Gross profit

     134,902        (779     —              134,123   

Operating expenses:

            

Research and development

     35,817        935        —              36,752   

Selling, general and administrative

     44,754        934        —              45,688   

Contingent consideration

     (3,922     —          —              (3,922

Restructuring charges

     1,862        —          —              1,862   
  

 

 

   

 

 

   

 

 

       

 

 

 

Total operating expenses

     78,511        1,869        —              80,380   

Income (loss) from operations

     56,391        (2,648     —              53,743   

Other (expense) income:

            

Warrant liability (expense) gain

     3,175        —          —              3,175   

Class B conversion liability expense

     (44,119     —          —              (44,119

Interest expense

     (695     —                (695

Other income

     185        —          —              185   
  

 

 

   

 

 

   

 

 

       

 

 

 

Other (expense) income, net

     (41,454     —          —              (41,454

Income (loss) before income taxes

     14,937        (2,648     —              12,289   

Income tax provision

     15,953        —                15,953   
  

 

 

   

 

 

   

 

 

       

 

 

 

Loss from continuing operations

   $ (1,016   $ (2,648   $ —            $ (3,664
  

 

 

   

 

 

   

 

 

       

 

 

 

Net loss per share:

            

Net loss from continuing operations — basic

   $ (0.15           $ (0.25
  

 

 

           

 

 

 

Net loss from continuing operations — diluted

   $ (0.15           $ (0.25
  

 

 

           

 

 

 

Shares used:

            

Basic

     24,758                24,758   
  

 

 

           

 

 

 

Diluted

     24,758                24,758   
  

 

 

           

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.


M/A-COM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended January 3, 2014

(in thousands, expect per share amounts)

 

     M/A-COM
Technology
Solutions
Holdings, Inc.
    Nitronex, LLC     Pro Forma
Acquisition
Adjustments
   

Notes (See
Note 6)

   Pro Forma
Combined
 

Revenue

   $ 83,468      $ 686      $ —           $ 84,154   

Cost of revenue

     46,803        1,629        —             48,432   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

     36,665        (943     —             35,722   

Operating expenses:

           

Research and development

     11,445        985        —             12,430   

Selling, general and administrative

     18,889        494        —             19,383   

Restructuring charges

     13,090        —          —             13,090   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     43,424        1,479        —             44,903   

Loss from operations

     (6,759     (2,422     —             (9,181

Other (expense) income:

           

Warrant liability (expense) gain

     1,282        —          —             1,282   

Interest expense

     (586     —          (144   (f)      (730

Other income

     78        —          —             78   
  

 

 

   

 

 

   

 

 

      

 

 

 

Other (expense) income, net

     774        —          (144        630   

Loss before income taxes

     (5,985     (2,422     (144        (8,551

Income tax provision

     (1,591     —          (50   (g)      (1,641
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from continuing operations

   $ (4,394   $ (2,422   $ (94      $ (6,910
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share:

           

Net loss from continuing operations — basic

   $ (0.09          $ (0.15
  

 

 

          

 

 

 

Net loss from continuing operations — diluted

   $ (0.09          $ (0.15
  

 

 

          

 

 

 

Shares used:

           

Basic

     46,517               46,517   
  

 

 

          

 

 

 

Diluted

     46,517               46,517   
  

 

 

          

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

1. DESCRIPTION OF ACQUISITION

On February 13, 2014 (Acquisition Date), M/A-COM Technology Solutions Holdings, Inc., through its wholly-owned subsidiary M/A-COM Technology Solutions Inc. (collectively, MACOM), completed the acquisition of Nitronex, LLC (Nitronex Acquisition), whereby MACOM paid cash of $26.1 million for all of the outstanding membership interests of Nitronex, LLC, which includes $3.9 million held on account by a third-party escrow agent pending any claims by MACOM in connection with general representation matters made by the seller in the sale. The escrow agreement expires in August 2015, at which point if no claims are made, all amounts will be paid to the seller. MACOM funded the Nitronex Acquisition through the use of available cash and borrowings of $25.0 million under its revolving credit facility.

2. BASIS OF PRESENTATION

On June 25, 2012, GaAs Labs, LLC (GaAs Labs) acquired Nitronex Corporation, which subsequently converted to a limited liability company and changed its name to Nitronex LLC (the Company or Nitronex). GaAs Labs is a stockholder in MACOM and GaAs Labs, Nitronex and MACOM were under control of a common stockholder from June 25, 2012 through February 13, 2014.

The Acquisition is being accounted for in accordance with the requirements for combinations of entities under common control whereby the historical consolidated financial statements of MACOM and Nitronex will be presented as combined in a manner similar to a pooling-of-interests to include the results of operations of each business since the date of common control, June 25, 2012. All periods from June 25, 2012 will be combined using historical amounts.

Total acquisition-related transaction costs incurred by MACOM were $1.0 million. These costs were incurred after January 3, 2014 and are reflected in the Unaudited Pro Forma Balance Sheet as of January 3, 2014 as an adjustment to accounts payable and retained earnings and are excluded from the Unaudited Pro Forma Statements of Operations.

The Unaudited Pro Forma Financial Information does not reflect ongoing cost savings or synergies that MACOM expects to achieve as a result of the Acquisition or the costs necessary to achieve these costs savings or synergies.

The historical balance sheets of both MACOM and Nitronex used to create the Unaudited Pro Forma Balance Sheet are as of January 3, 2014 and December 31, 2013, respectively.

Certain reclassifications have been made to the historical presentation of MACOM and Nitronex results to conform to the presentation used in the Unaudited Pro Forma Financial Information.

MACOM and Nitronex had no material intra-company transactions prior to the Acquisition.

3. SIGNIFICANT ACCOUNTING POLICIES

Based upon MACOM’s review of Nitronex’s summary of significant accounting policies disclosed in Nitronex’s historical financial statements and discussions with Nitronex management, the nature and amount of any adjustments to the historical financial statements of Nitronex to conform its accounting policies to those of MACOM are not expected to be material. Further review of Nitronex’s accounting policies and financial statements may result in required revisions to Nitronex’s policies and classifications to conform to MACOM’s.

4. DEBT OBLIGATIONS

MACOM has a revolving credit facility of up to $300.0 million that matures in September 2018. Borrowings under the revolving credit facility bear either a variable interest rate equal to (i) the greater of the lender’s prime rate, the federal funds effective rate plus 0.5%, or an adjusted LIBOR plus 1.0%, in each case plus either an additional 1.00%, 1.25% or 1.50%, subject to certain conditions, or (ii) an adjusted LIBOR rate plus either 2.00%, 2.25% or 2.50%, subject to certain conditions. To partially fund the Acquisition, MACOM drew down $25.0 million of indebtedness on its revolving credit facility in February 2014. This $25.0 million borrowing has been reflected in the accompanying Unaudited Pro Forma Balance Sheet and the Unaudited Pro Forma Statements of Operations reflect incremental interest expense relating to the borrowings.


5. INCOME TAXES

From June 25, 2012 through the Acquisition Date, Nitronex elected, for U.S. income tax purposes, to be taxed as a limited-liability corporation. As such, federal and state income taxes were the responsibility of the member and no provision for income taxes were recorded in the Nitronex historical financial statements. MACOM’s taxable basis in the assets acquired exceed the historical book basis, which has given rise to a deferred tax asset of $6.2 million as of the Acquisition Date. Because the MACOM and Nitronex historical financial statements are being combined as entities under common control, the deferred tax asset resulting in this basis difference is recorded with a corresponding increase to additional paid-in capital in the accompanying Unaudited Pro Forma Balance Sheet.

For purposes of the Unaudited Pro Forma Financial Information, the United States federal statutory tax rate of 35% has been used for all periods presented. This rate does not reflect MACOM’s effective tax rate, which includes other tax items, such as state and foreign taxes, as well as other tax charges or benefits, and does not take into account any historical or possible future tax events that may impact the combined company.

6. UNAUDITED PRO FORMA ADJUSTMENTS

The following is a summary of the adjustments made to the unaudited pro forma financial information and should be read in conjunction with Notes 1 through 5 above.

 

  (a) Reflects a reduction of cash to partially fund the Acquisition.

 

  (b) To reflect a net deferred income tax asset relating to the difference between book and tax bases of Nitronex’s net assets as of the Acquisition Date, with a corresponding increase to additional paid-in capital.

 

  (c) To record the direct Acquisition costs incurred by MACOM subsequent to January 3, 2014 as an increase in accounts payable and an increase in accumulated deficit.

 

  (d) To reflect the borrowing of $25.0 million to partially fund the Acquisition.

 

  (e) To reflect the payment of $26.1 million to GaAs Labs as a reduction in additional paid-in capital.

 

  (f) To reflect incremental interest expense at net 2.3% annual rate on the additional borrowings to partially fund the Acquisition.

 

  (g) To reflect the pro forma adjustments at the U.S. Federal statutory tax rate of 35%.