10-Q

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of December 10, 2021, the registrant had 157,137,635 ordinary shares, nominal value of $1.00 per share, outstanding.

On November 9, 2021 (the “Closing”), the registrant, Perimeter Solutions, SA, a newly-formed public company limited by shares (société anonyme) governed by the laws of the Grand Duchy of Luxembourg, consummated the transactions contemplated by the previously announced business combination with EverArc Holdings Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and the former parent company of registrant, SK Invictus Holdings S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg, SK Invictus Intermediate S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg, and EverArc (BVI) Merger Sub Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and a wholly-owned subsidiary of registrant, pursuant to the business combination agreement dated June 15, 2021.

For more information, see the section of this Report titled “Perimeter Solutions’ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments” and the registrant’s other filings with the Securities and Exchange Commission.

Unless otherwise stated, in this Report, the word “Perimeter” refers to SK Invictus Intermediate S.à r.l., and words “the Company,” "we," "us," and “our" refer to Perimeter Solutions, SA, prior to the Closing and Perimeter Solutions, SA and its wholly owned subsidiaries including Perimeter following the Closing.

The accompanying financial statement has been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”). Through September 30, 2021, there have only been nominal activities in this entity, therefore the statements of income, stockholder’s equity and cash flows have been omitted. For the period ended September 30, 2021, the Company incurred a total of $4 in bank service fees. There have been no other transactions involving the Company as of September 30, 2021.

Subsequent Events

Perimeter Acquisition

On November 9, 2021, the Company acquired all of the net assets of Perimeter and its subsidiaries for consideration conveyed of $1.39 billion as part of a Business Combination (the “Business Combination”). Perimeter has operations in the United States, Canada, Europe, Mexico, Australia and Israel.

The Perimeter acquisition will be accounted for as a business combination under ASC 805 Business Combinations, which requires the allocation of the total consideration to the identifiable assets and liabilities assumed measured at fair value at the acquisition date. This consideration includes payment to SK Invictus Holdings S.à r.l. ("SK Holdings") the sole stockholder of Invictus prior to the closing of the Business Combination as per the Business Combination Agreement, dated June 15, 2021, in the form of $1.29 billion in cash and $100.0 million in Preferred Equity Contributions. Preferred Equity Contributions were issued to existing Perimeter equity holders at par upon the acquisition. Par value is considered to approximate fair value as this amount is equal to the redemption value as of November 8, 2021 (the “Closing”). These instruments have been assessed for classification, and it was determined that the instrument should be classified as a liability due to mandatory redemption features. In addition to the consideration conveyed to SK Holdings, $702.4 million is being used to pay down existing Perimeter debt.

The cash consideration for the Business Combination was funded through cash on hand, proceeds from the sale of Ordinary Shares to the EverArc subscribers, proceeds from the issuance of senior notes, and proceeds from a draw on a revolving credit facility.

The preliminary purchase price was allocated among the identified assets to be acquired, based on a preliminary analysis. All valuation procedures were related to Perimeter’s existing assets as no new assets were identified as a

ACTIVE 61487311v1

result of the procedures performed. Goodwill was recognized as a result of the acquisition, which represents the excess fair value of consideration over the fair value of the underlying net assets, largely arising from the extensive industry expertise that has been established by Perimeter. A deferred tax liability was recorded as part of the purchase price allocation, based on an analysis of the tax impacts of the Business Combination by location and by asset.

The estimates of fair value are based upon preliminary valuation assumptions believed to be reasonable but which are inherently uncertain and unpredictable; and, as a result, actual results are expected to differ from estimates.


Assets Identified	Fair Value
Property, Plant, and Equipment	$	57,074
Inventory		90,103
Other intangible assets		100,061
Customer lists		789,000
Existing technology and patents		257,000
Goodwill		1,079,195
Working capital		32,287
Other assets		980
LaderaTech Contingent Earnout(1)		(22,208	)
Debt		(690,356	)
Deferred tax liabilities		(303,216	)
Total Fair Value	$	1,389,920

Value Conveyed
Cash to SK Holdings	$	1,289,920
Preferred Equity Contributions		100,000
Total preliminary purchase price consideration	$	1,389,920

(1)

Refer to Note 3 to the Unaudited Interim Condensed Consolidated Financial Statements of Perimeter for further information related to the LaderaTech Contingent Earnout.

The Company estimated the fair value of its property, plant, and equipment, inventory, intangible assets, and the LaderaTech earnout as of the acquisition date as well as all other identifiable assets and liabilities. Such fair values were determined in accordance with FASB ASC Topic 820, Fair Value Measurement (FASB Topic 820), using unobservable inputs or an income approach, which represents Level 3 inputs under FASB ASC Topic 820.

The actual results of operations of the acquisition will be included in the consolidated statements of operations and comprehensive income (loss) from the date of acquisition.

Revolving Credit Facility

In connection with the consummation of the Business Combination, SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg ("Invictus II"), as borrower, entered into a five-year revolving credit facility (the “Revolving Credit Facility”), which provides for a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million. The Revolving Credit Facility matures on November 9, 2026. The Revolving Credit Facility includes a $20.0 million swingline sub-facility and a $25.0 million letter of credit sub-facility. The Revolving Credit Facility allows Invictus II to increase commitments under the Revolving Credit Facility up to an aggregate amount not to exceed the greater of (i) $143.0 million and (ii) 100.00% of consolidated EBITDA for the most recent four-quarter period (minus the aggregate outstanding principal amount of certain ratio debt permitted to be incurred thereunder). All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties, subject to certain exceptions.

Borrowings under the Revolving Credit Facility bear interest at a rate equal to (i) an applicable margin, plus (ii) at Invictus II’s option, either (x) LIBOR determined by reference to the cost of funds for U.S. dollar deposits for the

ACTIVE 61487311v1

interest period relevant to such borrowing, adjusted for certain additional costs (but which will not be less than a 0.00% LIBOR floor) or (y) a base rate determined by reference to the highest of (a) the prime commercial lending rate published by the Wall Street Journal, (b) the federal funds rate plus 0.50%, (c) the one-month LIBOR rate plus 1.00% and (d) a minimum floor of 1.00%. The applicable margin is 3.25% in the case of LIBOR-based loans and 2.25% in the case of base rate-based loans, with two step downs of 0.25% each based upon the achievement of certain leverage ratios.

High Yield Offering

In order to finance a portion of the cash consideration payable in the Business Combination and the costs and expenses incurred in connection therewith, on October 5, 2021, EverArc Escrow S.à r.l. (“Escrow Issuer”), a newly-formed limited liability company governed by the laws of the Grand Duchy of Luxembourg and a wholly owned subsidiary of EverArc, launched a private offering of $675,000 principal amount of 5.0% senior secured notes due 2029 (the “Senior Notes”) pursuant to that certain Indenture dated as of October 22, 2021 between SK Invictus Intermediate II S.à r.l., a private limited liability company governed by the laws of the Grand Duchy of Luxembourg (“Invictus II”), a subsidiary of Perimeter, and U.S. Bank National Association, as Trustee and Collateral Agent (the “Trustee”). Upon the consummation of the Business Combination, Invictus II became a wholly owned subsidiary of the Company and assumed the Escrow Issuer’s obligations under the Senior Notes. Additionally, upon closing of the Business Combination, Invictus II borrowed $40,000 against the Revolving Credit Facility. The outstanding $40,000 borrowed against the Revolving Credit Facility was repaid in full by Invictus II on December 9, 2021.

Stock Repurchase Program

On December 8, 2021, the board of directors of the Company (the “Board”) authorized a stock repurchase program (the “Stock Repurchase Program”). Under the Stock Repurchase Program, the Company is authorized to repurchase up to $100,000 of its issued and outstanding common Stock over a period of 24-months, expiring December 8, 2023. Repurchases under the Stock Repurchase Program may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations.

SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income

SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)
(in thousands, except share data)

SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, nominal value of $1.00 per share	PRM	New York Stock Exchange


Part I.	FINANCIAL INFORMATION			2
	Item 1.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		2
	Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		27
	Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		40
	Item 4.	CONTROLS AND PROCEDURES		41
Part II.	OTHER INFORMATION			42
	Item 1.	LEGAL PROCEEDINGS		42
		ITEM 1A.	RISK FACTORS	42
	Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		68
	Item 3.	DEFAULTS UPON SENIOR SECURITIES		68
	Item 4.	MINE SAFETY DISCLOSURES		68
	Item 5.	OTHER INFORMATION		68
	Item 6.	EXHIBITS		69
SIGNATURE				70


	September 30, 2021			June 30, 2021
Assets
Cash	$	36		$	—
Total assets		36			—
Liabilities		—			—
Equity
Note receivable from EverArc Holdings Ltd.		—			(40	)
Share capital ($1.00 par value, 40,000 shares authorized, issued and outstanding)		40			40
Accumulated deficit		(4	)		—
Total equity		36			—
Total liabilities and equity	$	36		$	—


	As of September 30, 2021			As of December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	39,581		$	22,478
Accounts receivable, net of allowance for doubtful accounts of $987 and $1,044 as of September 30, 2021 and December 31, 2020, respectively		97,107			28,896
Inventories (1)		64,792			58,784
Income tax receivable	—				11,457
Prepaid expenses and other current assets		7,973			11,406
Total current assets		209,453			133,021
Property, plant, and equipment—net		48,496			48,235
Goodwill		486,375			482,041
Customer lists—net		271,390			304,308
Existing technology and patents—net		126,967			135,928
Other intangible assets—net		33,232			33,464
Other assets		863			1,209
Total assets	$	1,176,776		$	1,138,206
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt, net of unamortized debt issuance costs	$	5,610		$	6,723
Accounts payable		22,840			9,869
Deferred revenue		1,117			286
Accrued expenses and other current liabilities		21,296			16,045
Total current liabilities		50,863			32,923
Long-term debt, less current portion, net of unamortized debt issuance costs		679,540			680,548
Deferred income taxes		106,792			112,162
Other liabilities		20,951			21,151
Total liabilities	$	858,146		$	846,784
Commitments and contingencies (Note 12)
Shareholders’ equity:
Common stock, $1 par value per share; 53,045,510 shares authorized as of September 30, 2021 and December 31, 2020; 53,045,510 shares issued and outstanding as of September 30, 2021 and December 31, 2020		53,046			53,046
Additional paid-in capital		289,344			289,344
Accumulated other comprehensive loss		(5,598	)		(3,174	)
Accumulated deficit		(18,162	)		(47,794	)
Total shareholders’ equity		318,630			291,422
Total liabilities and shareholders’ equity	$	1,176,776		$	1,138,206


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	(unaudited)						(unaudited)
Net sales	$	195,414		$	174,259		$	316,460		$	283,758
Cost of goods sold		86,081			76,264			159,895			145,704
Gross profit		109,333			97,995			156,565			138,054
Operating expenses:
Selling, general, and administrative		15,333			8,845			42,544			26,579
Amortization expense		13,276			12,836			39,818			38,264
Other operating expense		313			360			1,066			1,051
Total operating expenses		28,922			22,041			83,428			65,894
Operating income		80,411			75,954			73,137			72,160
Other expense:
Interest expense—net		8,065			9,244			23,951			33,494
Loss on contingent earnout	—			—				2,763		—
Unrealized foreign currency (gain) loss		1,634			(2,615	)		3,892			(2,768	)
Other (income) expense—net		66			(271	)		(252	)		(351	)
Total other expenses, net		9,765			6,358			30,354			30,375
Income before income taxes		70,646			69,596			42,783			41,785
Income tax expense		(18,637	)		(16,966	)		(13,151	)		(11,242	)
Net income		52,009			52,630			29,632			30,543
Other comprehensive income:
Foreign translation adjustments		(2,020	)		2,209			(2,424	)		(1,234	)
Total comprehensive income	$	49,989		$	54,839		$	27,208		$	29,309
Net income per share:
Basic	$	0.98		$	0.99		$	0.56		$	0.58
Diluted	$	0.98		$	0.99		$	0.56		$	0.58
Weighted-average shares used in computing net income per share:
Basic		53,045,510			53,045,510			53,045,510			53,045,510
Diluted		53,045,510			53,045,510			53,045,510			53,045,510


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒


	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Shareholders’
Three Months Ended September 30, 2020	Shares		Amount		Capital		Loss			Deficit			Equity
Balance as of June 30, 2020		53,045,510	$	53,046	$	289,344	$	(11,404	)	$	(94,130	)	$	236,856
Net income	—		—		—		—				52,630			52,630
Foreign translation adjustments	—		—		—			2,209		—				2,209
Balance as of September 30, 2020		53,045,510	$	53,046	$	289,344	$	(9,195	)	$	(41,500	)	$	291,695


	As of September 30, 2021			As of September 30, 2020
	(unaudited)
Cash flows from operating activities:
Net income	$	29,632		$	30,543
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense		45,593			43,371
Deferred income taxes		(5,195	)		(6,884	)
Amortization of deferred financing costs		2,432			2,649
Loss on contingent earnout		2,763		—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(68,211	)		(65,763	)
Inventories		(5,554	)		15,529
Income tax receivable		11,457			6,528
Prepaid expenses and other current assets		3,104			(2,490	)
Other assets		346			592
Accounts payable,		12,971			(1,613	)
Deferred revenue		831			831
Accrued expenses and other current liabilities		2,448			7,831
Other liabilities		(200	)		576
Net cash provided by operating activities		32,417			31,700
Cash flows from investing activities:
Purchase of property and equipment		(5,149	)		(5,695	)
Purchase of businesses, net of cash acquired		(7,464	)		(1,970	)
Net cash used in investing activities		(12,613	)		(7,665	)
Cash flows from financing activities:
Proceeds from revolving credit facility		19,500			72,100
Repayments of revolving credit facility		(19,500	)		(93,700	)
Repayment of long-term debt		(4,211	)		(4,208	)
Net cash used in financing activities		(4,211	)		(