EX-99.1 4 d271811dex991.htm EX-99.1 EX-99.1

EXHIBIT 99.1

Pro Forma Condensed Combined Consolidated Financial Statements

(Unaudited)

INTRODUCTION

On May 10, 2018, MACOM Japan Limited, a company established under the laws of Japan (“MACOM Japan”), completed its previously announced divestiture of certain assets and license of intellectual property pursuant to the Asset Purchase and Intellectual Property License Agreement (“APA”) with CIG Shanghai Co., Ltd. (the “Buyer”) and MACOM Technology Solutions Holdings, Inc. (the “Company”) (solely with respect to Sections 2.5 and 12.16 thereof). Pursuant to the APA, MACOM Japan sold and transferred to the Buyer certain capital equipment, inventory and other assets associated with MACOM Japan’s long-range optical subassembly product line (the “LR4 Business”), and granted to the Buyer a non-exclusive license with respect to related intellectual property. The APA provides that the Buyer shall pay MACOM Japan $5.0 million within 30 days following the closing of the transaction, provide the Company with the opportunity to supply components, and shall pay MACOM Japan an additional estimated $5.0 million and $12.0 million for certain capital equipment and inventory, respectively, within 60 days following the closing, subject to receipt of required government approvals.

The accompanying unaudited pro forma condensed consolidated balance sheet as of March 30, 2018 gives effect to the disposition of certain assets and liabilities of the Company as if it had been consummated as of March 30, 2018. The accompanying unaudited pro forma consolidated statement of operations for the six months ended March 30, 2018 and the year ended September 29, 2017 give effect to the disposition of certain assets and liabilities of the LR4 Business as if the sale had been consummated at the beginning of the earliest period presented.

The historical financial information on which the pro forma financial statements are based is included in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on May 3, 2018 and the Company’s Annual Report on Form 10-K filed with the SEC on November 15, 2017. The pro forma consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are subject to a number of assumptions and adjustments that may not be indicative of the results of operations that would have occurred had the disposition been completed as of the dates indicated or what the financial position or results will be for any future periods. The unaudited pro forma consolidated statements of operations do not include transaction costs or the loss that the Company expects to recognize on the sale of certain assets and liabilities, as these amounts are not expected to have a continuing impact. The pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analysis are performed, and have been made solely for the purpose of providing unaudited pro forma condensed financial statements. Differences between these preliminary estimates and the final divestiture accounting may occur and these differences could have a material effect on the accompanying unaudited pro forma condensed financial statements and the Company’s future financial position and results of operations.


MACOM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 30, 2018

(in thousands)

 

           Pro Forma          Pro Forma as  
     As Reported     Adjustments    

Notes

   Adjusted  

ASSETS

         

Current assets:

         

Cash and cash equivalents

   $ 162,695       —          $ 162,695  

Short term investments

     27,396       —            27,396  

Accounts receivable, net

     107,093       —            107,093  

Cash consideration receivable

     —         25,026     (A)      25,026  

Inventories

     143,897       (11,739   (B), (E)      132,158  

Income tax receivable

     18,970       —            18,970  

Prepaid and other current assets

     15,158       —            15,158  
  

 

 

   

 

 

      

 

 

 

Total current assets

     475,209       13,287          488,496  

Property and equipment, net

     138,542       (8,026   (B), (F)      130,516  

Goodwill

     317,094       (3,686   (B)      313,408  

Intangible assets, net

     584,035       (28,898   (B)      555,137  

Deferred income taxes

     1,713       —            1,713  

Other investments

     37,415       —            37,415  

Other long-term assets

     7,162       —            7,162  
  

 

 

   

 

 

      

 

 

 

TOTAL ASSETS

   $ 1,561,170     $ (27,323      $ 1,533,847  
  

 

 

   

 

 

      

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current liabilities:

         

Current portion of lease payable

   $ 804       —          $ 804  

Current portion of long-term debt

     6,885       —            6,885  

Accounts payable

     29,224       —            29,224  

Accrued liabilities

     51,674       250     (C)      51,924  
  

 

 

   

 

 

      

 

 

 

Total current liabilities

     88,587       250          88,837  

Lease payable, less current portion

     23,586       —            23,586  

Long-term debt, less current portion

     659,921       —            659,921  

Warranty liability

     9,151       —            9,151  

Deferred income taxes

     15,975       (8,918   (B)      7,057  

Other long-term liabilities

     5,684       —            5,684  
  

 

 

   

 

 

      

 

 

 

Total liabilities

     802,904       (8,668        794,236  
  

 

 

   

 

 

      

 

 

 

Stockholders’ equity:

         

Common stock

     65       —            65  

Treasury stock, at cost

     (330     —            (330

Accumulated other comprehensive income

     7,173       —            7,173  

Additional paid-in capital

     1,057,410       —            1,057,410  

Accumulated deficit

     (306,052     (18,655   (D)      (324,707
  

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     758,266       (18,655        739,611  
  

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 1,561,170     $ (27,323      $ 1,533,847  
  

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.


MACOM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Six Months Ended March 30, 2018

(in thousands, except per share amounts)

 

           Pro Forma          Pro Forma as  
     As Reported     Adjustments    

Notes

   Adjusted  

Revenue

   $ 281,338       (24,102   (G)    $ 257,236  

Cost of revenue

     154,784       (15,492   (G)      139,292  
  

 

 

   

 

 

      

 

 

 

Gross profit

     126,554       (8,610        117,944  
  

 

 

   

 

 

      

 

 

 

Operating expenses:

         

Research and development

     83,246       (394   (G)      82,852  

Selling, general and administrative

     76,922       (3,733   (G)      73,189  

Impairment charges

     6,575       —            6,575  

Restructuring charges

     6,200       —            6,200  
  

 

 

   

 

 

      

 

 

 

Total operating expenses

     172,943       (4,127        168,816  
  

 

 

   

 

 

      

 

 

 

Loss from operations

     (46,389     (4,483        (50,872
  

 

 

   

 

 

      

 

 

 

Other (expense) income:

         

Warrant liability gain

     31,624       —            31,624  

Interest expense, net

     (15,209     —            (15,209

Other expense

     (4,133     —            (4,133
  

 

 

   

 

 

      

 

 

 

Total other expense, net

     12,282       —            12,282  
  

 

 

   

 

 

      

 

 

 

Loss before income taxes

     (34,107     (4,483        (38,590

Income tax benefit

     (1,671     (1,020   (H)      (2,691
  

 

 

   

 

 

      

 

 

 

Loss from continuing operations

     (32,436     (3,463        (35,899

Loss from discontinued operations

     (5,617     —            (5,617
  

 

 

   

 

 

      

 

 

 

Net loss

   $ (38,053   $ (3,463      $ (41,516
  

 

 

   

 

 

      

 

 

 

Net loss per share:

       (I)   

Basic loss per share:

         

Loss from continuing operations

   $ (0.50   $ (0.05      $ (0.56

Loss from discontinued operations

     (0.09     —            (0.09
  

 

 

   

 

 

      

 

 

 

Loss per share—basic

   $ (0.59   $ (0.05      $ (0.64
  

 

 

   

 

 

      

 

 

 

Diluted loss per share:

         

Loss from continuing operations

   $ (0.98   $ (0.05      $ (1.04

Loss from discontinued operations

     (0.09     —            (0.09
  

 

 

   

 

 

      

 

 

 

Loss per share—basic

   $ (1.07   $ (0.05      $ (1.12
  

 

 

   

 

 

      

 

 

 

Shares used:

         

Basic

     64,437       64,437          64,437  
  

 

 

   

 

 

      

 

 

 

Diluted

     65,120       65,120          65,120  
  

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.


MACOM Technology Solutions Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Fiscal Year Ended September 29, 2017

(in thousands, except per share amounts)

 

           Pro Forma          Pro Forma as  
     As Reported     Adjustments    

Notes

   Adjusted  

Revenue

   $ 698,772       (66,265   (G)    $ 632,507  

Cost of revenue

     371,888       (38,444   (G)      333,444  
  

 

 

   

 

 

      

 

 

 

Gross profit

     326,884       (27,821        299,063  
  

 

 

   

 

 

      

 

 

 

Operating expenses:

         

Research and development

     147,986       (1,182   (G)      146,804  

Selling, general and administrative

     187,886       (7,135   (G)      180,751  

Impairment charges

     4,352       —            4,352  

Restructuring charges

     2,744       —            2,744  
  

 

 

   

 

 

      

 

 

 

Total operating expenses

     342,968       (8,317        334,651  
  

 

 

   

 

 

      

 

 

 

Loss from operations

     (16,084     (19,504        (35,588
  

 

 

   

 

 

      

 

 

 

Other (expense) income:

         

Warrant liability expense

     (2,522     —            (2,522

Interest expense

     (28,855     —            (28,855

Other expense

     (2,044     —            (2,044
  

 

 

   

 

 

      

 

 

 

Total other expense, net

     (33,421     —            (33,421
  

 

 

   

 

 

      

 

 

 

Loss before income taxes

     (49,505     (19,504        (69,009

Income tax expense (benefit)

     100,911       (6,741   (H)      94,170  
  

 

 

   

 

 

      

 

 

 

Loss from continuing operations

     (150,416     (12,763        (163,179

Loss from discontinued operations

     (19,077     —            (19,077
  

 

 

   

 

 

      

 

 

 

Net loss

   $ (169,493   $ (12,763      $ (182,256
  

 

 

   

 

 

      

 

 

 

Net loss per share:

       (I)   

Basic loss per share:

         

Loss from continuing operations

   $ (2.48   $ (0.21      $ (2.69

Loss from discontinued operations

     (0.31     —            (0.31
  

 

 

   

 

 

      

 

 

 

Loss per share—basic

   $ (2.79   $ (0.21      $ (3.00
  

 

 

   

 

 

      

 

 

 

Diluted loss per share:

         

Loss from continuing operations

   $ (2.48   $ (0.21      $ (2.69

Loss from discontinued operations

     (0.31     —            (0.31
  

 

 

   

 

 

      

 

 

 

Loss per share—basic

   $ (2.79   $ (0.21      $ (3.00
  

 

 

   

 

 

      

 

 

 

Shares used:

         

Basic

     60,704       60,704          60,704  
  

 

 

   

 

 

      

 

 

 

Diluted

     60,704       60,704          60,704  
  

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.


MACOM Technology Solutions Holdings, Inc.

Notes to the Pro Forma Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands)

1. Basis of Presentation

The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that the Company’s management believes to be reasonable. Actual results may differ from those estimates. Pro forma adjustments related to the unaudited pro forma financial information presented below assume the sale of the certain assets and liabilities of the Company’s LR4 Business was consummated on the date of the most recent period presented for the consolidated balance sheet and at the beginning of the fiscal year presented for the consolidated statement of operations. The financial statements include adjustments which give effect to events that are (i) directly attributable to the sale, (ii) factually supportable, and (iii) with respect to the pro forma condensed consolidated statement of operations, expected to have a continuing impact on the Company. In addition, the consolidated balance sheet includes adjustments that are nonrecurring, such as the loss on the transaction.

The historical financial information on which the pro forma financial statements are based is included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 3, 2018 and the Company’s Annual Report on Form 10-K filed with the SEC on November 15, 2017. The pro forma consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.

2. Unaudited Pro Forma Condensed Consolidated Balance Sheet

The unaudited pro forma condensed consolidated balance sheet at March 30, 2018 reflects the following pro forma adjustments:

 

(A) Reflects the pro forma impact of the cash consideration receivable for the proceeds from the sale, expected to be received within 30 to 60 days following the closing subject to receipt of required government approvals. This estimate includes $5.0 million associated with a non-exclusive license with respect to related intellectual property, an estimated $8.0 million for certain capital equipment and estimated $12.0 million for inventory.

 

(B) Adjustment to reflect the assets and liabilities sold.

 

  a. The estimated cost of inventory to be sold to the Buyer.

 

  b. The estimated cost of property and equipment to be sold to the Buyer.

 

  c. The estimated amount of Company goodwill to be allocated to the LR4 Business being divested.

 

  d. Represents the remaining unamortized balance of the LR4 Business customer relationship intangible asset, which was initially acquired at the time of the acquisition of FiBest Limited in December 2015.

 

  e. Represents the portion of deferred taxes associated with the customer relationship intangible asset discussed in (d) above.

 

(C) Reflects the estimated selling and transaction expenses not yet incurred as of March 30, 2018.

 

(D) Reflects the estimated loss on disposal of $18.4 million plus $0.2 million in estimated selling and transaction expenses. These items have not been reflected in the pro forma condensed consolidated statement of operations as they are not expected to have a continuing impact on the Company’s results of operations.

 

(E) Includes $7.1 million of inventory assumed by the Buyer at closing. The remaining $4.9 million is expected to be settled within 30 days following closing. The Company expects to receive total proceeds of $12.0 million pertaining to the sold inventory within 60 days following closing.

 

(F) Includes $2.6 million of equipment assumed by the Buyer at closing. The remaining $5.4 million of equipment is expected to be settled within 30 days following closing. The Company expects to receive total proceeds of $8.0 million pertaining to the sold equipment within 60 days following closing.

3. Unaudited Pro Forma Condensed Consolidated Statements of Operations

The unaudited pro forma condensed consolidated statements of operations for the six months ended March 30, 2018 and the year ended September 29, 2017 reflect the following pro forma adjustments:

 

(G) To reflect the elimination of the revenue, cost of revenue and operating expenses related to the LR4 Business.

 

(H) The following table sets forth the computation for the estimated tax impact of the above pro forma items.


     Six Months Ended     Year Ended  
     March 30, 2018     September 29, 2017  

MACOM Japan recorded income before income taxes

   $ 564     $ 11,923  

Pro forma adjustments to loss before income taxes

     (4,483     (19,504
  

 

 

   

 

 

 

Adjusted MACOM Japan loss before income taxes

     (3,919     (7,581

Japan statutory income tax rate

     30.86     30.86
  

 

 

   

 

 

 

Tax benefit on MACOM Japan, as adjusted

     (1,209     (2,339

MACOM Japan income tax (benefit) expense before adjustment

     (189     4,402  
  

 

 

   

 

 

 

Pro forma income tax adjustment

   $ (1,020   $ (6,741
  

 

 

   

 

 

 

 

(I) The following table sets forth the computation for basic and diluted pro forma as adjusted net loss per share of common stock (in thousands, except per share data):

 

     Six Months Ended     Year Ended  
     March 30, 2018     September 29, 2017  

Numerator:

    

Loss from continuing operations

   $ (35,899   $ (163,179

Loss from discontinued operations

     (5,617     (19,077
  

 

 

   

 

 

 

Net loss

   $ (41,516   $ (182,256

Warrant liability gain

     (31,624     —    
  

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (73,140   $ (182,256
  

 

 

   

 

 

 

Denominator:

    

Weighted average common shares outstanding-basic

     64,437       60,704  

Dilutive effect of warrants

     683       —    
  

 

 

   

 

 

 

Weighted average common shares outstanding-diluted

     65,120       60,704  
  

 

 

   

 

 

 

Loss per share—basic:

    

Continuing operations

   $ (0.56   $ (2.69

Discontinued operations

     (0.09     (0.31
  

 

 

   

 

 

 

Net loss to common stockholders per share-basic

   $ (0.64   $ (3.00
  

 

 

   

 

 

 

Loss per share—diluted:

    

Continuing operations

   $ (1.04   $ (2.69

Discontinued operations

     (0.09     (0.31
  

 

 

   

 

 

 

Net loss to common stockholders per share-diluted

   $ (1.12   $ (3.00