Attached files
| file | filename |
|---|---|
| EX-99.4 - EXHIBIT 99.4 - PLANTRONICS INC /CA/ | exhibit994plcmmarch312018a.htm |
| EX-99.3 - EXHIBIT 99.3 - PLANTRONICS INC /CA/ | exhibit993plcm2015fs.htm |
| EX-99.2 - EXHIBIT 99.2 - PLANTRONICS INC /CA/ | exhibit992plcmdec2017and20.htm |
| EX-23.2 - EXHIBIT 23.2 - PLANTRONICS INC /CA/ | exhibit232plcmconsentkpmg.htm |
| EX-23.1 - EXHIBIT 23.1 - PLANTRONICS INC /CA/ | exhibit231plcmconsentpwc.htm |
| 8-K/A - 8-K/A - PLANTRONICS INC /CA/ | polycomacquisition8-ka.htm |
Exhibit 99.5
PLANTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On July 2, 2018 (“Closing Date”), Plantronics, Inc. (“Plantronics” or the “Company”) acquired all the issued and outstanding common stock of Polycom, Inc. (“Polycom”) for a purchase price of approximately $2.2 billion (the “Acquisition”). The Acquisition was funded with a combination of cash-on-hand and the financing made available under the credit facility described below and the issuance of shares of Plantronics common stock. The following unaudited pro forma condensed combined balance sheet of Plantronics as of March 31, 2018 and the unaudited pro forma condensed combined statement of income of Plantronics for the year ended March 31, 2018 are based on the historical financial statements of Plantronics and Polycom using the acquisition method of accounting.
The unaudited pro forma condensed combined balance sheet as of March 31, 2018 gives effect to the Acquisition as if it had occurred on March 31, 2018, and includes all adjustments that give effect to events that are directly attributable to the Acquisition and are factually supportable. The unaudited pro forma condensed combined statement of operations for the year ended March 31, 2018 gives effect to the Acquisition as if it had occurred on April 1, 2017, and includes all adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact, and are factually supportable.
The unaudited pro forma condensed combined financial statements are presented for informational purposes only, in accordance with Article 11 of Regulation S-X, and are not intended to represent or to be indicative of the income or financial position that Plantronics would have reported had the Acquisition been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements for a number of reasons, including but not limited to expected cost savings from operating efficiencies, synergies, and the impact of incremental costs incurred in integrating the two companies. The unaudited pro forma condensed combined balance sheet does not purport to represent the future financial position of the Company and the unaudited pro forma condensed combined statement of operations does not purport to represent the future income of the Company. In addition, as permitted by Regulation S-X, the unaudited pro forma condensed combined statement of operations utilizes Polycom’s consolidated statement of operations for the year ended December 31, 2017, which differs from the Company’s fiscal year end by fewer than 93 days.
The unaudited pro forma condensed combined financial statements reflect management’s preliminary estimates of purchase price and the fair values of tangible and intangible assets acquired and liabilities assumed in the Acquisition, with the remaining estimated purchase price recorded as goodwill. Independent valuation specialists have conducted an analysis to assist management of the Company in determining the fair value of the acquired assets and assumed liabilities. The Company’s management is responsible for these third-party valuations and appraisals. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of the purchase price and fair values of assets acquired and liabilities assumed, upon completion of the valuation for the Acquisition, and finalization of the purchase price the actual amounts recorded may differ materially from the amounts used in the pro forma condensed combined financial statements.
The historical financial information has been adjusted to give effect to matters that are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the operating results of the combined company. The unaudited pro forma condensed combined statement of operations excludes non-recurring items directly related to the Acquisition.
These unaudited pro forma condensed combined financial statements should be read in conjunction with Plantronics’ historical consolidated financial statements and notes thereto contained in Plantronics’ Annual Report on Form 10-K for the year ended March 31, 2018, the Current Report on Form 8-K of Plantronics to which these unaudited pro forma condensed combined financial statements are attached as an exhibit and Polycom’s historical financial statements and notes thereto for the period ended December 31, 2017 filed as Exhibit 99.2 to the Current Report on Form 8-K of Plantronics to which these unaudited pro forma condensed combined financial statements are attached as an exhibit.
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PLANTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETAS OF MARCH 31, 2018
(in thousands)
Plantronics | Polycom | Pro Forma | Plantronics | |||||||||||||||
Historical | Historical | Adjustments | Notes | Pro Forma | ||||||||||||||
Assets: | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 390,661 | $ | 52,908 | $ | 1,244,652 | (a) | $ | 7,842 | |||||||||
(842,426 | ) | (b) | ||||||||||||||||
(837,953 | ) | (c) | ||||||||||||||||
Short-term investments | 269,313 | — | (50,000 | ) | (c) | 219,313 | ||||||||||||
Accounts receivables, net | 152,888 | 115,814 | 268,702 | |||||||||||||||
Inventory, net | 68,276 | 71,973 | 42,212 | (d) | 182,461 | |||||||||||||
Other current assets | 18,588 | 35,122 | — | 53,710 | ||||||||||||||
Total current assets | 899,726 | 275,817 | (443,515 | ) | 732,028 | |||||||||||||
Property, plant, and equipment, net | 142,129 | 58,096 | 18,485 | (h) | 218,710 | |||||||||||||
Goodwill and purchased intangibles, net | 15,498 | 501,849 | (493,187 | ) | (g) | 2,286,638 | ||||||||||||
975,359 | (i) | |||||||||||||||||
1,287,119 | (j) | |||||||||||||||||
Deferred tax and other assets | 19,534 | 80,378 | (63,160 | ) | (m) | 31,966 | ||||||||||||
(4,786 | ) | (p) | ||||||||||||||||
Total assets | $ | 1,076,887 | $ | 916,140 | $ | 1,276,315 | $ | 3,269,342 | ||||||||||
Liabilities: | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | 45,417 | $ | 72,749 | $ | — | $ | 118,166 | ||||||||||
Accrued liabilities | 77,111 | 104,792 | (16,733 | ) | (c) | 192,500 | ||||||||||||
5,791 | (a) | |||||||||||||||||
13,658 | (e) | |||||||||||||||||
7,881 | (k) | |||||||||||||||||
Deferred revenue | 2,986 | 178,220 | (103,501 | ) | (l) | 77,705 | ||||||||||||
Total current liabilities | 125,514 | 355,761 | (92,904 | ) | 388,371 | |||||||||||||
Long-term debt, net of issuance costs | 492,509 | 664,296 | 1,238,861 | (a) | 1,731,370 | |||||||||||||
(664,296 | ) | (c) | ||||||||||||||||
Long-term income taxes payable | 87,328 | 9,072 | 22,294 | (m) | 118,694 | |||||||||||||
Long-term deferred revenue | — | 82,582 | (41,861 | ) | (l) | 40,721 | ||||||||||||
Deferred tax liability | — | — | 122,918 | (m) | 122,918 | |||||||||||||
Other long-term liabilities | 18,566 | 80,957 | (65,832 | ) | (f) | 33,691 | ||||||||||||
Total liabilities | 723,917 | 1,192,668 | 519,180 | 2,435,765 | ||||||||||||||
Stockholders' equity: | ||||||||||||||||||
Common stock | 816 | — | — | 816 | ||||||||||||||
Additional paid-in capital | 876,645 | 138,394 | (138,394 | ) | (n) | 1,370,910 | ||||||||||||
494,265 | (o) | |||||||||||||||||
Accumulated other comprehensive income | 2,870 | 222 | (222 | ) | (n) | 2,870 | ||||||||||||
Retained earnings (Accumulated deficit) | 299,066 | (415,144 | ) | 415,144 | (n) | 285,408 | ||||||||||||
(13,658 | ) | (e) | ||||||||||||||||
Total stockholders' equity before treasury stock | 1,179,397 | (276,528 | ) | 757,135 | 1,660,004 | |||||||||||||
Less: Treasury stock at cost | (826,427 | ) | — | — | (826,427 | ) | ||||||||||||
Total stockholders' equity (deficit) | 352,970 | (276,528 | ) | 757,135 | 833,577 | |||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 1,076,887 | $ | 916,140 | $ | 1,276,315 | $ | 3,269,342 | ||||||||||
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PLANTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2018
(in thousands, expect per share amounts)
Plantronics | Polycom | |||||||||||||||||
Historical | Historical | Pro Forma | Plantronics | |||||||||||||||
3/31/2018 | 12/31/2017 | Adjustments | Notes | Pro Forma | ||||||||||||||
Net Revenues | $ | 856,903 | $ | 1,142,779 | $ | — | $ | 1,999,682 | ||||||||||
Cost of revenues: | 417,788 | 495,997 | 109,720 | (dd) | 1,023,505 | |||||||||||||
Gross profit | 439,115 | 646,782 | (109,720 | ) | 976,177 | |||||||||||||
Operating expenses: | ||||||||||||||||||
Research, development, and engineering | 84,193 | 135,655 | — | 219,848 | ||||||||||||||
Selling, general, and administrative | 229,390 | 406,600 | (5,057 | ) | (aa) | 655,725 | ||||||||||||
(56,021 | ) | (bb) | ||||||||||||||||
(9,884 | ) | (cc) | ||||||||||||||||
90,697 | (dd) | |||||||||||||||||
(Gain) loss, net from litigation settlements | (420 | ) | 673 | — | 253 | |||||||||||||
Restructuring and other related charges (credits) | 2,451 | 9,090 | — | 11,541 | ||||||||||||||
Total operating expenses | 315,614 | 552,018 | 19,735 | 887,367 | ||||||||||||||
Operating income | 123,501 | 94,764 | (129,455 | ) | 88,810 | |||||||||||||
Interest expense | (29,297 | ) | (78,677 | ) | 11,973 | (ee) | (96,001 | ) | ||||||||||
Other non-operating income and (expense), net | 6,023 | (52,749 | ) | 54,559 | (gg) | 7,833 | ||||||||||||
Income (loss) before income taxes | 100,227 | (36,662 | ) | (62,923 | ) | 642 | ||||||||||||
Income tax expense (benefit) | 101,096 | 43,379 | (13,214 | ) | (ff) | 131,261 | ||||||||||||
Net loss | $ | (869 | ) | $ | (80,041 | ) | $ | (49,709 | ) | $ | (130,619 | ) | ||||||
Net loss per common unit: | ||||||||||||||||||
Basic | $ | (0.03 | ) | $ | (3.38 | ) | ||||||||||||
Diluted | $ | (0.03 | ) | $ | (3.38 | ) | ||||||||||||
Weighted average common units outstanding: | ||||||||||||||||||
Basic | 32,345 | 6,352 | 38,697 | |||||||||||||||
Diluted | 32,345 | 6,352 | 38,697 | |||||||||||||||
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PLANTRONICS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Description of the Acquisition and Basis of Presentation
The unaudited pro forma condensed combined financial statements have been prepared based on Plantronics’ and Polycom’s historical financial information, giving effect to the Acquisition and related adjustments described in these notes. In addition, certain items have been combined from Polycom’s historical financial statements to align them with Plantronics’ financial statement presentation. Polycom prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Plantronics accounts for business combinations in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, Business Combinations. The preliminary purchase price for the Acquisition has been allocated to the assets acquired and liabilities assumed based on a preliminary valuation of their respective fair values and may change when the final valuation of certain real property, intangible assets, and acquired working capital is determined.
In addition, in connection with the Acquisition, on July 2, 2018, Plantronics entered into a Credit Agreement (the “Credit Agreement”) by and among Plantronics (the “Borrower”), the lenders party thereto (the “Lenders”), and Wells Fargo Bank, National Association (“Wells Fargo”) as administrative agent (“Agent”).
The Credit Agreement is a credit facility comprised of two components: i) a revolving credit facility with an initial maximum credit available of $100 million that matures in July 2023 (the “Revolving Credit Facility” and ii) a $1.275 billion term loan facility due in quarterly principal installments commencing on December 28, 2018, with all remaining outstanding principal due at maturity in July 2025 (the “Term Loan Facility”) (collectively the “Credit Facility”). The Company’s obligations under the Credit Agreement are currently guaranteed by Polycom.
Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) the prime rate publicly announced from time to time by Wells Fargo Bank, National Association, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin.
2. Preliminary Purchase Consideration
The total estimated preliminary purchase consideration as of July 2, 2018 is as follows (in thousands):
Preliminary Purchase Consideration | |||
Base Cash Purchase Price per Stock Purchase Agreement | $ | 1,638,172 | |
Plus: Fair value of equity shares issued | 494,265 | ||
Plus: Polycom closing cash | 72,214 | ||
Plus: Adjustments | 19,993 | ||
Total estimated purchase consideration | $ | 2,224,644 | |
Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of the purchase price, upon completion of the valuation for the Acquisition and finalization of the purchase price, the actual amounts recorded may differ materially from the amounts used in the pro forma condensed combined financial statements.
3. Pro Forma Adjustments
Balance Sheet Adjustments
(a) | Reflects the proceeds from the Term Loan Facility of $1.275 billion net of $23.9 million of financing costs related to the Term Loan and Revolving Credit Facilities incurred on the Closing Date. These financing costs were deferred as an element of and reduce the net debt balance recognized. Additionally, the Term Loan Facility balance reflects a reduction for an original issue discount of $6.4 million. |
(b) | Reflects cash consideration paid on the Closing Date for the Acquisition, after adjusting for payment of Polycom’s pre-existing debt and equity award liabilities as required by the purchase agreement and for estimated adjustments in closing cash and working capital. |
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(c) | Reflects the cash payment to settle Polycom’s pre-existing debt and certain of Polycom's transaction expenses in connection with the acquisition, as required by the purchase agreement. |
(d) | Reflects the preliminary fair value of acquired inventory. This increase is not reflected in the unaudited pro forma condensed combined statement of operations as it was determined to not have a continuing impact. |
(e) | Reflects accrual of Plantronics’ transaction-related expenses that had been incurred through the transaction date but not recorded in historical financial statements. |
(f) | Reflects the settlement of Polycom’s currency swap arrangement related to Polycom’s pre-existing debt in connection with the Acquisition. |
(g) | Reflects the adjustment to remove Polycom’s historical goodwill. |
(h) | Reflects the preliminary fair value adjustments for property, plant, and equipment, which is mainly comprised of personal and real property, and the related pro forma depreciation expense adjustments. Pro forma depreciation expense is calculated based on an average remaining useful life of 2 to 4 years for the acquired assets (in thousands, except useful life): |
Historical Amounts | Fair Value Adjustment | Fair Value | Average Remaining Useful Life (years) | Pro Forma Depreciation Expense | |||||||||||||
Computer equipment and software | $ | 31,753 | $ | 391 | $ | 32,144 | 2.1 | $ | 15,042 | ||||||||
Equipment, furniture and fixtures | 11,445 | 7,151 | 18,596 | 3.4 | 5,455 | ||||||||||||
Tooling equipment | 2,181 | 4,113 | 6,294 | 3.0 | 2,098 | ||||||||||||
Leasehold improvements | 12,717 | 6,830 | 19,547 | 4.0 | 4,887 | ||||||||||||
Total | $ | 58,096 | $ | 18,485 | $ | 76,581 | $ | 27,482 | |||||||||
Less: Polycom's historical depreciation expense | $ | 37,366 | |||||||||||||||
Decrease to pro forma depreciation expense | $ | (9,884 | ) | ||||||||||||||
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(i) | Reflects the adjustment to record the fair value of identifiable intangible assets and related amortization expense adjustments, as follows (in thousands, except useful life): |
Fair Value | Average Remaining Useful Life (years) | Pro Forma Amortization Expense | |||||||
Existing Technology | $ | 537,200 | 4.9 | $ | 109,720 | ||||
In-process Technology | 58,000 | — | — | ||||||
Customer Relationships | 245,100 | 5.1 | 48,267 | ||||||
Backlog | 27,900 | 1.0 | 27,900 | ||||||
Trade Name / Trademarks | 115,600 | 6.0 | 19,267 | ||||||
Favorable Leases | 3,108 | 3.7 | 850 | ||||||
(Unfavorable) Leases | (2,887 | ) | 3.1 | (923 | ) | ||||
Total | $ | 984,021 | $ | 205,081 | |||||
Less: Polycom's historical intangible assets and amortization expense | $ | 8,662 | $ | 4,664 | |||||
Increase to pro forma intangibles and amortization expense | $ | 975,359 | $ | 200,417 | |||||
(j) | Reflects the recognition of goodwill arising from the Acquisition based upon the Company’s provisional purchase price allocation. The goodwill is primarily attributable to the assembled workforce of Polycom and synergies and economies of scale expected from combining the operations of Polycom and Plantronics (balance in thousands). Intangible assets arising on acquisition are not expected to be deductible for income taxes. |
Total consideration to be allocated | $ | 2,224,644 | |
Less: Estimated fair value of assets acquired | |||
Current assets | (318,029 | ) | |
Depreciable fixed assets | (76,581 | ) | |
Intangible Assets | (984,021 | ) | |
Other assets | (12,432 | ) | |
Plus: Estimated fair value of assumed liabilities | |||
Current liabilities | 243,408 | ||
Deferred tax liability | 122,918 | ||
Other long-term liabilities | 87,212 | ||
Goodwill | $1,287,119 | ||
Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of the purchase price and fair values of assets acquired and liabilities assumed, upon completion of the valuation for the Acquisition and finalization of the purchase price, the actual amounts recorded may differ materially from the amounts used in the pro forma condensed combined financial statements.
(k) | Reflects the preliminary estimated fair value of the pre-existing Polycom management Long Term Incentive Plan (“Polycom LTIP”), which became vested and payable upon closing of the acquisition. |
(l) | Reflects the adjustment to reflect the fair value of deferred revenue. This decrease is not reflected in the unaudited pro forma condensed combined statement of operations as it was determined to not have a continuing impact. |
(m) | Reflects the tax impact of the pro forma adjustments based on an estimated blended statutory rate and adjustment for uncertain tax positions. The income tax expense/benefit is based on management’s estimate of the blended applicable statutory tax rates for the jurisdictions associated with the respective pro forma adjustments. Because the tax rates used for these pro forma financial statements are an estimate, the blended rate will likely vary from the actual effective tax rate in periods subsequent |
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to the Acquisition. The pro forma tax adjustments are based on the tax law in effect during the period for which the unaudited pro forma combined statements of income is being presented and therefore contemplates the effects of the 2017 Tax Act. As the full determination of the accounting impacts of the 2017 Tax Act has not yet been completed the provisional amounts are based on management’s reasonable estimates. The Acquisition is a non-taxable transaction and therefore the amortization of Intangible assets acquired is not deductible for tax.
(n) | Reflects the elimination of Polycom’s historical stockholders’ equity balances. |
(o) | Reflects the fair value of equity consideration for the Acquisition (shares of Plantronics common stock). |
(p) | Reflects elimination of costs capitalized for internally-developed software. As of the Acquisition, the internally-developed software is part of the Existing technology intangible asset valuation. Please refer to adjustment (i). |
Statement of Operations
(aa) Reflects elimination of Plantronics’ and Polycom’s transaction-related expenses that are included within historical general and administrative expense.
(bb) Reflects elimination of Polycom’s historical amortization of goodwill to align with SEC public registrant's accounting principles. As a private company prior to the Acquisition, Polycom has elected to amortize goodwill as part of its accounting policy. Please refer to Exhibit 99.2 for additional information.
(cc) Reflects the depreciation expense adjustments based on preliminary fair value estimates for property, plant, and equipment. Please refer to adjustment (h)
(dd) Reflects the amortization expense adjustments based on preliminary fair value estimates for acquired intangibles.
(ee) Reflects pro forma increased interest expense for the year ended March 31, 2018, based upon: (i) interest expense on the Credit Facility, (ii) amortization of deferred financing costs of $30.3 million based on an estimated amortization period of 84 months and (iii) the elimination of Polycom’s historical interest expense for the year ended March 31, 2018 as Polycom’s pre-existing debt was settled in connection with the Acquisition. Refer to the table below (in thousands):
Year Ended March 31, 2018 | ||||
Interest on term loan facility borrowing | $ | 62,932 | ||
Amortization of deferred financing costs and discounts from the Credit Facility | 3,772 | |||
Total interest expense | 66,704 | |||
Less: | ||||
Historical Polycom interest expense | 78,677 | |||
Net pro forma adjustment to interest expense | $ | 11,973 | ||
Impact of a 1/8% increase in interest rate | $ | 1,573 | ||
Impact of a 1/8% decrease in interest rate | $ | (1,573 | ) | |
(ff) Reflects the income tax expense/benefit of the pro forma adjustments based on management’s estimate of the blended applicable statutory tax rates for the jurisdictions associated with the respective pro forma adjustments. Because the tax rates used for these pro forma financial statements are an estimate, the blended rate will likely vary from the actual effective tax rate in periods subsequent to the Acquisition. The pro forma tax adjustments are based on the tax law in effect during the period for which the unaudited pro forma combined statements of income are being presented and therefore contemplates the effects of the 2017 Tax Act. As the full determination of the accounting impacts of the 2017 Tax Act has not yet been completed the provisional amounts are based on management’s reasonable estimates.
(gg) Reflects the elimination of Polycom’s historical loss recognized on its cross-currency swap, settled in connection with the acquisition.
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