Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information and related notes present the historical financial statements of Cabot Microelectronics Corporation and its subsidiaries (the "Company", "us", "we", "our") and NexPlanar Corporation ("NexPlanar") after giving effect to our acquisition (the "Acquisition") of NexPlanar, which was completed on October 22, 2015.  We acquired 100% of the stock of NexPlanar for approximately $142.3 million in total cash outlay, funded from our available cash balances.

The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the Company's historical audited financial statements for the fiscal year ended September 30, 2015, which are available in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015, and the historical financial statements of NexPlanar included in this Form 8-K/A.

For purposes of the pro forma condensed combined statement of income, results for NexPlanar are presented for the twelve-month period ended September 30, 2015.  This information was derived from the historical audited statement of operations of NexPlanar for the year ended December 31, 2014, as included within this Form 8-K/A, the historical unaudited statement of operations of NexPlanar for the nine months ended September 30, 2015, as included within this Form 8-K/A, and historical unaudited financial information of NexPlanar for the three months ended December 31, 2014.  For purposes of the pro forma condensed combined balance sheet, we utilized the unaudited historical balance sheet of NexPlanar included in this Form 8-K/A.

The unaudited pro forma condensed combined statement of income for the year ended September 30, 2015 gives effect to the Acquisition as if it had occurred on October 1, 2014, the beginning of our fiscal year.  The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if it had occurred on September 30, 2015.  The historical condensed combined financial information has been adjusted to give effect to pro forma events that are: 1) directly attributable to the Acquisition; 2) factually supportable; and 3) with respect to the statement of income, expected to have a continuing impact on the combined results.  In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made.  The assumptions underlying the pro forma adjustments are described fully in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

The Acquisition is being accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification ("ASC") Topic 805, "Business Combinations" ("ASC 805"), and using the fair value concepts defined in ASC Topic 820, "Fair Value Measurements" ("ASC 820").  ASC 820 defines the term "fair value" and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop fair value measures.  Fair value is defined in ASC 820 as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date".  This is an exit price concept for the valuation of the asset or liability.  In addition, market participant are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability.  Many of these fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.  Under ASC 805, all assets acquired and liabilities assumed are recorded at their acquisition date fair value.  The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information is based upon management's internally developed preliminary estimates of the fair market value of the assets acquired and liabilities assumed, as if the Acquisition had occurred on the above dates.  This allocation of the purchase price depends upon certain estimates and assumptions, all of which are preliminary and, in some instances, are incomplete and have been made solely for the purpose of developing the unaudited pro forma condensed combined financial information.  Any adjustments to the preliminary estimated fair value amounts could have a significant impact on the unaudited pro forma condensed combined financial information contained herein, and our future results of operations and financial position.

The unaudited pro forma condensed combined financial information is for informational purposes only and should not be considered indicative of actual results that would have been achieved if NexPlanar had been acquired and the other transactions had been completed on the date or for the periods presented, and does not purport to indicate the results of operations or financial position as of any future date or for any future period.

 

CABOT MICROELECTRONICS CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 2015
(in thousands, except per share amounts)
		Historical
		Cabot								Pro Forma							Pro Forma
		Microelectronics				NexPlanar				Adjustments				Note 4			Combined
Revenue		$	414,097			$	23,228										$	437,325
Cost of goods sold			201,866				15,210				4,571			a)				221,647
Gross profit			212,231				8,018				(4,571	)						215,678
Operating expenses:
Research, development and technical			59,778				2,964											62,742
Selling and marketing			24,983				4,839				1,870			a)				31,692
General and administrative			52,430				4,080				(526	)		b)				55,984
Total operating expenses			137,191				11,883				1,344							150,418
Operating income			75,040				(3,865	)			(5,915	)						65,260
Interest expense			4,524				595				(595	)		c)				4,524
Other income (expense), net			681				0											681
Income (loss) before income taxes			71,197				(4,460	)			(5,320	)						61,417
Provision (benefit) for income taxes			15,051				(4	)			(1,862	)		d)				13,185
Net income		$	56,146			$	(4,456	)		$	(3,458	)					$	48,232
Basic earnings per share		$	2.32														$	1.99
Weighted-average basic shares outstanding			24,040															24,040
Diluted earnings per share		$	2.26														$	1.94
Weighted-average diluted shares outstanding			24,632															24,632
See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

CABOT MICROELECTRONICS CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2015
(in thousands)
		Historical
		Cabot								Pro Forma							Pro Forma
		Microelectronics				NexPlanar				Adjustments				Note 4			Combined
ASSETS
Current assets:
Cash and cash equivalents		$	354,190			$	16,334			$	(142,321	)		e)			$	228,203
Accounts receivable, less allowance for doubtful accounts			49,405				2,889											52,294
Inventories			70,678				2,083				403			f)				73,164
Prepaid expenses and other current assets			12,840				1,712											14,552
Deferred income taxes			7,395				0											7,395
Total current assets			494,508				23,018				(141,918	)						375,608
Property, plant and equipment, net			93,743				4,714				242			g)				98,699
Goodwill			40,442				0				59,626			h)				100,068
Other intangible assets, net			4,565				0				61,000			i)				65,565
Deferred income taxes			12,212				0				17,200			j)				29,412
Other long-term assets			15,004				60											15,064
Total assets		$	660,474			$	27,792			$	(3,850	)					$	684,416
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	15,448			$	962										$	16,410
Current portion of long-term debt			8,750				0											8,750
Accrued expenses, income taxes payable and other current liabilities			36,446				1,960											38,406
Total current liabilities			60,644				2,922				0							63,566
Long-term debt, net of current portion			155,313				0											155,313
Deferred income taxes			76				0				21,400			j)				21,476
Other long-term liabilities			15,477				225											15,702
Total liabilities			231,510				3,147				21,400							256,057
Commitments and contingencies
Stockholders' equity:
Common stock			33				0											33
Preferred stock			0				1,860				(1,860	)		k)
Capital in excess of par value of common stock			495,673				76,367				(76,367	)		k)				495,673
Retained earnings			284,088				(53,582	)			52,977			k)				283,483
Accumulated other comprehensive loss			(6,090	)			0											(6,090	)
Treasury stock at cost			(344,740	)			0											(344,740	)
Total stockholders' equity			428,964				24,645				(25,250	)						428,359
Total liabilities and stockholders' equity		$	660,474			$	27,792			$	(3,850	)					$	684,416
See accompanying notes to the unaudited pro forma condensed combined financial information

 

 

Note 1. Basis of Pro Forma Presentation

The unaudited pro forma condensed combined statement of income for the year ended September 30, 2015 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K ("FY15 Form 10-K") for the fiscal year ended September 30, 2015, and the unaudited historical financial information of NexPlanar for the same period, and has been prepared as if our Acquisition had occurred on October 1, 2014.  The unaudited pro forma condensed combined balance sheet as of September 30, 2015 combines the consolidated balance sheet included in our FY15 Form 10-K with the historical unaudited balance sheet for NexPlanar for the same period, and has been prepared as if our Acquisition had occurred on September 30, 2015.  The unaudited pro forma condensed combined financial information herein has been prepared to illustrate the effects of the Acquisition in accordance with U.S. GAAP and pursuant to Article 11 of Regulation S-X.

NexPlanar's audited historical financial statements for the year ended December 31, 2014 and unaudited condensed financial statements as of and for the nine months ended September 30, 2015 are included in this Current Report on Form 8-K/A.  These statements should be read in conjunction with such historical financial statements.  The historical financial information is adjusted in the unaudited pro forma condensed financial statements to give effect to pro forma adjustments that are: (1) directly attributable to the Acquisition; (2) factually supportable; and (3) with respect to the pro forma condensed statement of income, expected to have a continuing impact on the combined results.  As discussed in Note 3, the historical financial statements of NexPlanar have been adjusted to reflect certain reclassifications to conform to our financial statement presentation.

We have accounted for the Acquisition under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of ASC 805.  The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.  The final purchase price allocation may include changes to the amount of intangible assets, goodwill, deferred taxes, and purchased internal research and development, as well as other items.  Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.  Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.

The unaudited pro forma condensed combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods presented, nor is it necessarily indicative of the future results of the combined company.  The unaudited pro forma condensed combined financial information does not reflect any cost savings from future operating synergies or integration activities, if any, or any revenue, tax, or other synergies, if any, that could result from the Acquisition.

The following table presents the NexPlanar historical unaudited statements of operations for the nine months ended September 30, 2015, included as Exhibit 99.2 in this Form 8-K/A, and the three months ended December 31, 2014, which, when combined, represent the unaudited statement of income for the year ended September 30, 2015 presented in the unaudited pro forma statement of income.

 

 

 

Note 2. Description of Transaction and Preliminary Purchase Price Allocation

On October 22, 2015, the Company completed the Acquisition of 100% of the stock of NexPlanar, which was a privately held, U.S. based company that specializes in the development, manufacture and sale of advanced CMP pad solutions for the semiconductor industry.  The total cash outlay of $142,321 was paid from our available cash balance and was comprised of $141,716 in total purchase consideration and, as discussed further in Note 4e, $605 charged to compensation expense subsequent to the acquisition date related to the cash settlement of certain NexPlanar stock options.  A portion of the purchase price was deposited with an escrow agent to fund payment obligations with respect to post-closing purchase price adjustments and indemnification obligations.  This Acquisition expands our polishing pad portfolio by adding a complementary pad technology for which we believe we can leverage our global infrastructure to better serve our customers on a global basis, including offering performance-advantaged slurry and pad consumable sets.

 

The following table summarizes the preliminary purchase price allocation as if the Acquisition had occurred on September 30, 2015, which is the assumed acquisition date for the purpose of the pro forma balance sheet:

Intangible assets primarily consist of developed technology assets, in-process technology, trade names and customer relationships.  The excess of the acquisition consideration over the fair value of the net assets acquired is allocated to goodwill.  The goodwill of $59,626 is primarily attributable to anticipated revenue growth from the combination of pad technologies and expected synergies from the merger of operations, and is not expected to be deductible for tax purposes.  Any changes to the preliminary estimates of fair value of the assets acquired and liabilities assumed upon the completion of our fair value assessment will be allocated to goodwill.

Note 3. Reclassification of Historical NexPlanar Financial Information

Certain reclassification adjustments have been made to NexPlanar's historical financial statements to conform to our statement of income and balance sheet presentation:

Note 4. Pro Forma Adjustments

The pro forma adjustments included in the pro forma condensed combined financial information are as follows:

a) Record the preliminary estimate of amortization expense for the year ended September 30, 2015 related to the acquired identifiable intangible assets calculated as if the Acquisition had occurred on October 1, 2014.  See Note i for more information on the fair value of intangible assets acquired, and the related useful lives and method of amortization used.  The amortization expense does not include any amounts for in-process technology shown in Note i.

 

b) Eliminate $526 in transaction costs recorded as general and administrative expense in connection with the Acquisition.

 

c) Eliminate $595 in of historical NexPlanar interest expense related to debt repaid prior to the acquisition date.

d) Record $1,862 for the tax effect of the pro forma adjustments using an estimated statutory tax rate of 35.0%.

 

e) Record $142,321 in cash paid at the acquisition date.  The total cash paid represents $141,716 in purchase consideration and $605 in compensation expense recorded subsequent to the acquisition date.  The compensation expense related to certain unvested NexPlanar stock options settled in cash at the acquisition date.  The unaudited pro forma condensed combined statement of income does not include the $605 of compensation expense as a pro forma adjustment as this expense represents a non-recurring item.

f) Record $403 for the step-up of inventory to its estimated net realizable value as of September 30, 2015.

g) Record $242 for the step-up of property, plant and equipment to its estimated fair value as of September 30, 2015. The effect of the step-up is not expected to have a material effect on depreciation expense, so no proforma adjustment has been presented for depreciation expense

h) Record $59,626 for the preliminary goodwill for the purchase consideration in excess of the fair value of net assets acquired assuming the acquisition had occurred on September 30, 2015.

 

 

i) Record the preliminary fair value of identifiable intangible assets as of September 30, 2015.

j) Record the estimated fair value of deferred tax assets and liabilities related to the Acquisition as of September 30, 2015 using an estimated U.S. statutory tax rate of 35.0%.  This estimate of deferred taxes was determined based on the difference between the book basis and tax basis for assets acquired and liabilities assumed, and is subject to change based upon our final determination of the fair value of assets acquired and liabilities assumed.  The deferred taxes recognized primarily relate to net operating loss carryforwards (NOLs) and differences between the book and tax basis of identifiable intangible assets and goodwill. Based on our initial study pursuant to Internal Revenue Code section 382, we expect that we will be able to utilize the NOLs in the future.

 

k) Eliminate the historical equity balances of NexPlanar as of September 30, 2015 and $605 in for settlement of NexPlanar stock options charged to expense immediately after the acquisition.

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