UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from _____ to _____
Commission File Number:
(Exact name of registrant as specified in its charter)
|
||
(State or Other Jurisdiction of Incorporation) |
|
(IRS Employer Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
|||
|
|
|
|
|
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 ☐
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).
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.
Large accelerated filer |
|
☐ |
|
|
Accelerated filer |
|
☐ |
|
☒ |
|
|
Smaller reporting company |
|
||
Emerging growth company |
|
|
|
|
|
|
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
As of December 10, 2021, the registrant had
ACTIVE 61487311v1
Table of Contents
Part I. |
2 |
|||
|
Item 1. |
2 |
||
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
27 |
|
|
Item 3. |
40 |
||
|
Item 4. |
41 |
||
Part II. |
42 |
|||
|
Item 1. |
42 |
||
|
|
ITEM 1A. |
42 |
|
|
Item 2. |
68 |
||
|
Item 3. |
68 |
||
|
Item 4. |
68 |
||
|
Item 5. |
68 |
||
|
Item 6. |
69 |
||
70 |
Explanatory Note
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.
i
ACTIVE 61487311v1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
A. PERIMETER SOLUTIONS, SA FINANCIAL STATEMENTS
PERIMETER SOLUTIONS SA
Unaudited Interim Balance Sheets
(expressed in thousands of U.S. Dollars, unless otherwise stated)
|
|
September 30, 2021 |
|
|
June 30, |
|
||
Assets |
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Total assets |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Note receivable from EverArc Holdings Ltd. |
|
|
|
|
|
( |
) |
|
Share capital ($ |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
|
|
Total equity |
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
|
|
$ |
|
See accompanying notes to unaudited interim financial statement.
2
ACTIVE 61487311v1
PERIMETER SOLUTIONS SA
Notes to Unaudited Interim Financial Statement
As of September 30, 2021
(expressed in thousands of U.S. Dollars, unless otherwise stated)
General Information
Perimeter Solutions SA (the “Company”), was incorporated in Luxemburg on June 21, 2021. Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a controlling ownership interest in SK Invictus Intermediate, S.à r.l. (“Invictus”) and its subsidiaries, doing business as Perimeter Solutions (“Perimeter”).
On June 21, 2021, the Company issued
Perimeter Acquisition
On November 9, 2021, the Company acquired all of the net assets of Perimeter and its subsidiaries for consideration conveyed of $
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 $
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
3
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 |
|
$ |
|
|
Inventory |
|
|
|
|
Other intangible assets |
|
|
|
|
Customer lists |
|
|
|
|
Existing technology and patents |
|
|
|
|
Goodwill |
|
|
|
|
Working capital |
|
|
|
|
Other assets |
|
|
|
|
LaderaTech Contingent Earnout(1) |
|
|
( |
) |
Debt |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
Total Fair Value |
|
$ |
|
|
|
|
|
|
|
Value Conveyed |
|
|
|
|
Cash to SK Holdings |
|
$ |
|
|
Preferred Equity Contributions |
|
|
|
|
Total preliminary purchase price consideration |
|
$ |
|
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
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
4
ACTIVE 61487311v1
interest period relevant to such borrowing, adjusted for certain additional costs (but which will not be less than a
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 $
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.
5
ACTIVE 61487311v1
B. SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES FINANCIAL STATEMENTS
SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
As of |
|
|
As of |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net of allowance for doubtful accounts of $ |
|
|
|
|
|
|
||
Inventories (1) |
|
|
|
|
|
|
||
Income tax receivable |
|
— |
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property, plant, and equipment—net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Customer lists—net |
|
|
|
|
|
|
||
Existing technology and patents—net |
|
|
|
|
|
|
||
Other intangible assets—net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current portion of long-term debt, net of unamortized debt issuance costs |
|
$ |
|
|
$ |
|
||
Accounts payable |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt, less current portion, net of unamortized debt issuance costs |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
Shareholders’ equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total shareholders’ equity |
|
|
|
|
|
|
||
Total liabilities and shareholders’ equity |
|
$ |
|
|
$ |
|
See accompanying notes to interim condensed consolidated financial statements.
6
ACTIVE 61487311v1
SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
(unaudited) |
|
|
(unaudited) |
|
||||||||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general, and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense—net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on contingent earnout |
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||
Unrealized foreign currency (gain) loss |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other (income) expense—net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign translation adjustments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted-average shares used in |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to interim condensed consolidated financial statements.
7
ACTIVE 61487311v1
SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)
(in thousands, except share data)
|
|
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 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||||
Foreign translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
||||||
Balance as of September 30, 2020 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
Total Shareholders’ |
|
|||||||||
Three Months Ended September 30, 2021 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||
Balance as of June 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
||||||
Foreign translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
Balance as of September 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
Total Shareholders’ |
|
|||||||||
Nine Months Ended September 30, 2020 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||
Balance as of December 31, 2019 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Foreign translation adjustments |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Balance as of September 30, 2020 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
Total Shareholders’ |
|
|||||||||
Nine Months Ended September 30, 2021 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||
Balance as of December 31, 2020 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Foreign translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of September 30, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
See accompanying notes to interim condensed consolidated financial statements.
8
ACTIVE 61487311v1
SK INVICTUS INTERMEDIATE, S. À R.L. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
As of |
|
|
As of |
|
||
|
|
(unaudited) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Loss on contingent earnout |
|
|
|
|
— |
|
||
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
|
|
Income tax receivable |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Other assets |
|
|
|
|
|
|
||
Accounts payable, |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of businesses, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from revolving credit facility |
|
|
|
|
|
|
||
Repayments of revolving credit facility |
|
|
( |
) |
|
|
( |
) |
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |