Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION    

 

The following unaudited pro forma condensed combined balance sheet as of March 26, 2021 and the unaudited pro forma condensed combined statements of operations for the three months and year ended March 26, 2021 and December 25, 2020, respectively, are based on the historical financial statements of Ultra Clean Holdings, Inc. (“Ultra Clean”) and Ham-Let (Israel-Canada) Ltd. (“Ham-Let”) after giving effect to Ultra Clean’s acquisition of Ham-Let using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined balance sheet as of March 26, 2021 combines Ultra Clean’s historical condensed consolidated balance sheet as of March 26, 2021 and Ham-Let’s historical condensed consolidated balance sheet as of March 31, 2021 giving effect to the acquisition as if it had occurred on March 26, 2021. The unaudited pro forma condensed combined statement of operations for the three month periods ended March 26, 2021 combines Ultra Clean’s historical consolidated statement of operations for the three month period ended March 26, 2021 and Ham-Let’s historical consolidated statement of operations for the three month period ended March 31, 2021. The consolidated statement of operations for the year then ended December 25, 2020 combines Ultra Clean’s historical consolidated statement of operation for the year ended December 25, 2020 with Ham-Let’s historical consolidated statement of operation for the year ended December 31, 2020. The unaudited pro forma condensed combined statements of operation give effect to the acquisition as if it had occurred on December 28, 2019.     

 

The acquisition has been accounted for under the acquisition method of accounting in accordance with Financial Accounting Standard ASC 805, Business Combinations. Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 1 to the unaudited pro forma condensed combined financial information, is allocated to the net tangible and intangible assets of Ham-Let acquired in connection with the acquisition, based on their estimated fair values. Management has made a preliminary allocation of the estimated acquisition price to the net tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to the time it takes to gather the necessary information and no longer than one year from the acquisition date). The final determination of the values of assets and liabilities and the integration costs may result in actual values, assets, liabilities and expenses that are different from those set forth in the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only and are not necessarily indicative of the condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had Ultra Clean and Ham-Let been a combined company during the specified periods. The unaudited pro forma condensed combined financial information does not reflect any operating efficiencies and/or cost savings that we may achieve with respect to the combined companies, or any liabilities that may result from integration activities. The pro forma adjustments are based on the information available at the time of the preparation of this document. The unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, Ultra Clean’s historical consolidated financial statements included in its Annual Report on Form 10-K for its year ended December 25, 2020 and its Quarterly Report on Form 10-Q for the three months ended March 26, 2021 and Ham-Let’s historical consolidated financial statements for the year ended December 31, 2020 and the three months ended March 31, 2021, which are included in Exhibit 99.1 to this Form 8-K.

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

(In Thousands)

 

	Ultra Clean  March 26, 2021					Ham-Let March 31, 2021					Pro Forma Adjustments					Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$		264,257			$		20,095			$		(33,310	)	(A)	$		251,042
Accounts receivable, net of allowance for doubtful accounts			168,041					54,495					(2,862	)	(B)			219,674
Inventories			189,167					85,306					(5,006	)	(C)			269,467
Prepaid expenses and other current assets			14,743					—					16,749		(M)			31,492
Other receivables			—					15,392					(15,392	)	(M)			—
Current tax assets			—					1,357					(1,357	)	(M)			—
Total current assets			636,208					176,645					(41,178	)				771,675
Property, plant and equipment, net			157,344					48,033					4,127		(D)			209,504
Goodwill			171,132					—					65,705		(E)			236,837
Intangibles assets, net			155,630					9,236					115,164		(F)			280,030
Deferred tax assets, net			22,277					2,501					—					24,778
Operating lease right-of-use assets			41,642					20,968					6,915		(G)			69,525
Other non-current assets			6,326					—					1,186		(M)			7,512
Investment in investees			—					212					(212	)	(M)			—
Long-term receivables			—					974					(974	)	(M)			—
Total assets	$		1,190,559			$		258,569			$		150,733			$		1,599,861
LIABILITIES & STOCKHOLDERS ’ EQUITY
Current liabilities:
Bank borrowings	$		8,021			$		5,344			$		4,765		(H)	$		18,130
Accounts payable			164,875					30,778					(1,929	)	(B)			193,724
Accrued compensation and related benefits			30,933					—					10,463		(M)			41,396
Operating lease liabilities			12,402					3,266					—					15,668
Other current liabilities			46,848					20,759					(10,449	)	(A)			48,463
													(8,695	)	(M)
Liabilities for put option			—					172					(172	)	(M)			—
Current taxes payable			—					1,596					(1,596	)	(M)			—
Loans from Ultra Clean			—					90,799					(90,799	)	(H)			—
Total current liabilities			263,079					152,714					(98,412	)				317,381
Bank borrowings, net of current portion			259,822					182					340,797		(H)			600,801
Deferred tax liabilities			33,571					281					131		(G)			33,983
Operating lease liabilities			33,875					20,385					282		(G)			54,542
Other liabilities			23,567					—					4,046		(M)			27,613
Employee benefits liabilities			—					4,046					(4,046	)	(M)			—
Total liabilities			613,914					177,608					242,798					1,034,320
Ultra Clean Stockholders’ Equity:
Common stock			40					4,535					(4,535	)	(I)			40
Additional paid-in capital			316,340					22,213					(22,213	)	(I)			316,340
Common shares held in treasury, at cost			(3,337	)				—					—					(3,337	)
Retained earnings			242,969					54,330					(65,434	)	(I)			231,865
Accumulated other comprehensive gain (loss)			1,603					(117	)				117		(I)			1,603
Total Ultra Clean stockholders' equity			557,615					80,961					(92,065	)				546,511
Noncontrolling interest			19,030					—					—					19,030
Total equity			576,645					80,961					(92,065	)				565,541
Total liabilities and stockholders' equity	$		1,190,559			$		258,569			$		150,733			$		1,599,861

 

See notes to unaudited pro forma combined financial information

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(In Thousands, except per share amounts)

 

	Three Months Ended
	Ultra Clean March 26, 2021					Ham-Let March 31, 2021					Pro Forma Adjustments					Pro Forma Combined
Revenues:
Product	$		345,616			$		58,737			$		(2,437	)	(B)	$		401,916
Services			72,011					—					—					72,011
Total revenues			417,627					58,737					(2,437	)				473,927
Cost of revenues:
Product			283,569					42,378					(181	)	(J)			325,766
Services			47,120					—					—					47,120
Total cost of revenues			330,689					42,378					(181	)				372,886
Gross profit			86,938					16,359					(2,256	)				101,041
Operating expenses:
Research and development			4,208					1,705					20		(K)			5,933
Sales and marketing			7,608					7,073					(1,578	)	(K)			13,103
General and administrative			34,712					3,337					1,159		(K)			39,208
Other operating expenses			—					4,489					(4,489	)	(K)			—
Total operating expenses			46,528					16,604					(4,888	)				58,244
Income from operations			40,410					(245	)				2,632					42,797
Interest income			98					2					—					100
Interest expense			(3,605	)				(4,155	)				(75	)	(H)			(7,835	)
Other income (expense), net			(4,263	)				—					11,582		(A)			7,319
Income before provision for income taxes			32,640					(4,398	)				14,139					42,381
Provision for income taxes			7,015					547					3,160		(L)			10,722
Net income			25,625					(4,945	)				10,979					31,659
Less: Net income attributable to noncontrolling interest			628					—					—					628
Net income attributable to Ultra Clean	$		24,997			$		(4,945	)		$		10,979			$		31,031
Net income per share attributable to Ultra Clean common stockholders:
Basic	$		0.62													$		0.76
Diluted	$		0.60													$		0.75
Shares used in computing net income per share:
Basic			40,564															40,564
Diluted			41,639															41,639

 

See notes to unaudited pro forma combined financial information

 

  

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(In Thousands, except per share amounts)

 

  

 

	Year Ended
	Ultra Clean  December 25, 2020					Ham-Let  December 31, 2020					Pro Forma Adjustments					Pro Forma Combined
Revenues:
Product	$		1,131,151			$		202,921			$		(7,389	)	(B)	$		1,326,683
Services			267,431					—					—					267,431
Total revenues			1,398,582					202,921					(7,389	)				1,594,114
Cost of revenues:
Product			934,716					149,071					11,872		(J)			1,095,659
Services			172,105					—					—					172,105
Total cost of revenues			1,106,821					149,071					11,872					1,267,764
Gross profit			291,761					53,850					(19,261	)				326,350
Operating expenses:
Research and development			14,829					5,834					82		(K)			20,745
Sales and marketing			25,128					24,456					(5,561	)	(K)			44,023
General and administrative			130,434					10,802					14,828		(K)			156,064
Other income			—					(520	)				520		(K)			—
Other operating expenses			—					590					(590	)	(K)			—
Total operating expenses			170,391					41,162					9,279					220,832
Income from operations			121,370					12,688					(28,540	)				105,518
Interest income			875					24					—					899
Interest expense			(16,852)					(5,101	)				(6,886	)	(H)			(28,839	)
Other income (expense), net			(5,722)					(69	)				(1,134	)	(A)			(6,925	)
Income before provision for income taxes			99,671					7,542					(36,560	)				70,653
Provision for income taxes			19,281					2,363					(3,769	)	(L)			17,875
Net income			80,390					5,179					(32,791	)				52,778
Less: Net income attributable to noncontrolling interest			2,785					—					—					2,785
Net income attributable to Ultra Clean	$		77,605			$		5,179			$		(32,791	)		$		49,993
Net income per share attributable to Ultra Clean common stockholders:
Basic	$		1.93													$		1.24
Diluted	$		1.89													$		1.22
Shares used in computing net income per share:
Basic			40,198															40,198
Diluted			41,074															41,074

 

See notes to unaudited pro forma combined financial information

 

NOTES TO UNAUDITED PRO FORMA

 CONDENSED COMBINED FINANCIAL INFORMATION

 

1.

Acquisition of Ham-Let (Israel-Canada) Ltd.

  

On March 31, 2021 (“Acquisition date”), Ultra Clean Holdings, Inc., a Delaware corporation (“Ultra Clean” or the “Company”), completed the acquisition of Ham-Let (Israel-Canada) Ltd., a public company organized under the laws of the State of Israel whose shares were traded on the Tel Aviv Stock Exchange (“Ham-Let”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Ultra Clean, Sir Daibus Ltd., a company organized under the laws of the State of Israel and an indirect, wholly-owned subsidiary of Ultra Clean, Bealish Ltd., a company organized under the laws of the State of Israel and an indirect wholly-owned subsidiary of Ultra Clean and Ham-Let, with Ham-Let surviving as an indirect, wholly-owned subsidiary of Ultra Clean. Pursuant to the Merger Agreement relating to the acquisition, the Company paid (i) $355.9 million in cash ($273.5 million of equity value plus $82.4 million of net debt), (the “Merger Consideration”).

 

In December 2020, the Company announced the acquisition of Ham-Let. The expected cash consideration for the equity valuation at that time was about 905.8 million ILS or $287.0 million in equity value. In order to hedge against the foreign currency fluctuation of USD against ILS at the settlement date, UCT received Board of Director approval to enter into forward contracts to buy ILS. In January 2021, UCT completed the purchase of forward contracts of 905.8 million ILS to lock in the $283.9 million cash that was delivered at the closing of Ham-Let acquisition. US GAAP requires the recording of the acquired entity at the spot rate on acquisition date, rather than the cash amount hedged and paid. The difference between the cash paid of $283.9 million and the spot value at acquisition of $273.5 million was recognized in earnings.

 

 Basis of pro forma preparation

 

The unaudited pro forma combined financial statements are based on the historical consolidated financial statements of Ultra Clean and the historical financial statements of Ham-Let, after giving effect to the acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, and applying the assumptions and adjustments described in the accompanying notes.

 

The unaudited pro forma condensed combined balance sheet combines Ultra Clean’s unaudited historical consolidated balance sheet as of March 26, 2021 with Ham-Let’s unaudited historical combined balance sheet as of March 31, 2021 and reflects the acquisition and related borrowings as if it had been consummated on March 26, 2021.

 

The unaudited pro forma condensed combined statements of operations for the year ended December 25, 2020 and the three months ended March 26, 2021 gives effect to the acquisition and related borrowings as if it has been consummated on December 28, 2019.

 

Ham-Let’s historical statements of operations have been adjusted to align with Ultra Clean’s presentation as described below:

 

·

Warehouse related costs included in operating expenses were reclassified to cost of revenues within the accompanying unaudited pro forma condensed combined statements of operations.

·

Ham-Let’s allowance for doubtful accounts and reserve for excess and obsolete inventory were adjusted in accordance with the methodology utilized by Ultra Clean.

 

The historical financial information of Ham-Let was prepared using the International Financial Reporting Standards. The following are the adjustments to reconcile Ham-Let’s historical financial information to U.S. GAAP:

 

·

Ham-Let depreciates operating lease right-of-use assets and records interest expense related to operating lease liabilities according to IFRS 16. The related depreciation and interest expenses were reversed and rent expense per ASC 842 was included in the pro forma adjustments.

 

Basis of presentation

 

Ultra Clean and Ham-Let have different fiscal quarter and year ends. Ultra Clean follows a fiscal calendar widely used by the manufacturing industry that results in a fiscal year consisting of a 52- or 53-week period ending on the Friday closest to December 31. Each fiscal year of Ultra Clean consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years. Ham-Let follows a monthly reporting calendar, with its fiscal year ending on December 31. Accordingly, the unaudited pro forma condensed combined statement of operations for the fiscal year ended December 25, 2020 combines the historical results of (i) Ultra Clean for the 52-week period ended December 25, 2020 and (ii) Ham-Let for the 12 months period ended December 31, 2020. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 combines the historical results of (i) Ultra Clean for the 13-week period ended March 26, 2021 and (ii) Ham-Let for the three months period ended March 31, 2021. The difference in fiscal periods for Ultra Clean and Ham-Let is considered to be insignificant and no related adjustments have been made in the preparation of this unaudited pro forma condensed combined financial information.

 

Accounting Policies

 

During preparation of the unaudited pro forma condensed combined financial information, Ultra Clean management performed a preliminary analysis to identify differences in accounting policies and methodologies between Ultra Clean and Ham-Let. Ultra Clean management identified and quantified those differences as detailed in Note 1 Basis of pro forma preparation. Ultra Clean management will continue to conduct reviews of Ham-Let’s accounting policies and methodologies and may identify differences that, when adjusted or reclassified, could have a material impact on the unaudited pro forma condensed combined financial information.

 

2.

Preliminary Acquisition Price Allocation

 

Under the acquisition method of accounting, the total estimated acquisition price as shown in the table below is allocated to Ham-Let’s net tangible and intangible assets based on their preliminary estimated fair values as of March 31, 2021, the closing date. The preliminary estimated acquisition price was based on various factors as described in the introduction to the unaudited pro forma condensed combined financial information. The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities, primarily accounts receivable, inventory, property and equipment, income and other taxes, intangible assets and residual goodwill. During the measurement period, which can be no more than one year from the date of acquisition, we expect to continue to obtain information to assist us in determining the final fair value of the net assets acquired at the acquisition date during the measurement period. Our preliminary purchase price allocation for Ham-Let is as follows (in thousands):

 

	Fair Value
Estimated purchase price	$	355,929
Estimated net assets acquired:
Cash and cash equivalents	$	20,095
Accounts receivable		51,633
Inventories		80,300
Prepaid expenses and other current assets		16,749
Total current assets		168,777
Accounts payable		(30,778	)
Accrued compensation and related benefits		(10,463	)
Other current liabilities		(10,296	)
Estimated working capital		117,240
Property, plant and equipment		52,160
Intangible assets		124,400
Deferred taxes		2,089
Right-of-use assets		27,883
Other assets		1,186
Bank borrowings		(4,987	)
Other liabilities		(29,747	)
Net identifiable assets acquired		290,224
Goodwill		65,705
Net assets acquired	$	355,929

 

A preliminary estimate of $165.8 million has been allocated to net tangible assets acquired. This estimate reflects adjustments of acquired assets and liabilities to fair value. A preliminary estimate of approximately $124.4 million has been allocated to amortizable intangible assets acquired. The amortization related to the amortizable intangible assets is reflected as pro forma adjustments to the unaudited pro forma condensed combined statements of operations. For purposes of this Form 8-K/A, a straight line amortization was used for the identifiable intangible assets with the exception of the Trade name intangible wherein the accelerated method was used.

 

Identifiable intangible assets. Acquired customer contracts and relationships represent existing contracts that relate to underlying customer relationships.

 

Goodwill. Approximately $65.7 million has been allocated to goodwill. Goodwill represents the excess of the acquisition price over the fair value of the underlying net tangible and intangible assets. In accordance with the ASC 350, Goodwill and Other Intangible Assets, goodwill will be tested for impairment at least annually (more frequently if indicators are present). In the event management of the combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

 

3.

Unaudited Pro Forma Adjustments

 

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

 

A. Cash and cash equivalents

 

Cash and cash equivalents have been adjusted as follows:

 

($ in thousands)		Amount
Net proceeds from term loan facility (1)		$	345,297
Consideration transferred (2)			(355,929	)
Acquisition-related costs (3)			(12,229	)
Settlement of forward hedge contracts(4)			(10,449	)
Total pro forma adjustment to cash		$	(33,310	)

 

(1)		Reflects the proceeds, net of $8.9 million in debt issuance costs and $0.8 million of other costs charged to operations, from the additional term loan facility. See Note 3(H).
(2)		Reflects total cash consideration transferred to Ham-Let upon closing.
(3)		Reflects acquisition-related costs associated with banking fees, legal and professional fees, and consulting fees.
(4)		Reflects the cash paid in settlement of the forward hedge contracts entered into in conjunction with the acquisition. See Note 1.

 

B. Accounts receivable

 

To eliminate Ham-Let’s intercompany accounts receivable from Ultra Clean and Ultra Clean’s intercompany payable to Ham-Let of $1.9 million and to eliminate the intercompany revenues of Ham-Let and cost of revenues of Ultra Clean of $7.4 million and $2.4 million, respectively, for the twelve and three month periods ended December 25, 2020 and March 26, 2021, respectively.

 

In addition, the alignment of Ham-let’s methodology in calculating allowance for doubtful accounts to that of Ultra Clean’s methodology resulted in a decrease of $0.9 million to accounts receivable of Ham-Let.

 

C. Inventories

 

The $11.1 million adjustment steps up the pro forma balance sheet for Ham-Let’s inventory to fair value. The calculation of fair value is preliminary and subject to change. The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those selling efforts. The pro forma statement of operations for the year ended December 26, 2020 is also adjusted to increase cost of revenues by the same amount as the inventory is expected to be sold within one year of the acquisition date.

 

In addition, the alignment of Ham-let’s inventory excess and obsolete reserve methodology to that of Ultra Clean’s methodology resulted in a decrease of $16.1 million to the net inventory of Ham-Let.

 

The net proforma impact to Ham-Let’s inventory balance is a decrease of $5.0 million.

 

D. Property, plant and equipment, net

 

Reflects the adjustment to increase the fair value of the property, plant and equipment of Ham-Let by $4.1 million and the corresponding depreciation expense charged to the statements of operations.

 

E. Goodwill

 

Reflects the preliminary purchase price allocation and recognition of goodwill. An adjustment of $65.7 million reflects the Goodwill resulting from the acquisition consisting largely of synergies and economies of scale expected from combining the operations of Ultra Clean and Ham-Let. The full amount of goodwill is expected to be deductible for income tax purposes.

 

F. Identified intangibles, net

 

The preliminary amounts assigned to the identifiable intangible assets, the estimated useful lives, and the estimated amortization expense related to these identifiable intangible assets are as follows:

 

($ in thousands)		Preliminary Fair Value				Average Estimated Remaining Useful Life in Years				Amortization Expense for the Year Ended December 25, 2020				Amortization Expense for the Three Months March 26, 2021
Customer Relationships		$	73,900				10			$	7,390			$	1,848
Trade Names			9,800				5				3,267				653
IP/Know-How (Process)			27,600				15				1,840				460
IP/Know-How (Semi)			7,900				10				790				197
Backlog			5,200				1				5,200				—
		$	124,400							$	18,487			$	3,158

 

G. Operating lease right-of-use assets

 

Per U.S. GAAP ASC 842, operating and finance leases with lease terms of one year or greater result in the recording of a right-of-use (ROU) asset and lease liability on its balance sheet. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are initially recognized based on the present value of lease payments over the lease term. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

 

Per IFRS 16, on the commencement date, the right-of-use asset is recognized in an amount equal to the lease liability plus lease payments already made on or before the commencement date and initial direct costs incurred. The right-of-use asset is measured by applying the cost model and depreciated over the shorter of its useful life and the lease term while lease liability is measured using the effective interest rate method.

 

The pro forma adjustments reflect the difference in accounting between U.S. GAAP ASC 842 and IFRS 16.

 

H. Bank borrowings and interest expense

 

In connection with the consummation of the acquisition, the Ultra Clean entered into a Second Amendment dated March 31, 2021 to the Credit Agreement dated as of August 27, 2018, and amended as of October 1, 2018, to refinance and reprice its approximately $273.0 million of existing term B borrowings that will remain outstanding and obtain a $355.0 million senior secured incremental term loan B facility (the “Incremental Term Loan”) with Barclays Bank PLC, which increased the amount of term loan indebtedness outstanding under the Company’s Credit Agreement. The Incremental Term Loan has a maturity date of August 27, 2025, with monthly interest payments in arrears, quarterly principal payments of 0.625% of the original outstanding principal balance payable beginning July 2021, with the remaining principal balance paid upon maturity. The Term Loan accrues interest at a rate equal to a base LIBOR rate determined by reference to the London interbank offered rate for dollars, plus 3.75% (subject to certain adjustments quarterly based upon the Company’s consolidated leverage ratio). Ultra Clean paid $8.9 million in debt issuance costs that were capitalized on the balance sheet and $0.8 million charged to the operations in 2021.

 

The Incremental Term Loan, together with cash on hand, was used to finance the acquisition, to pay down the existing debt of Ham-Let and to pay fees and expenses incurred in connection with the Incremental Term Loan and the acquisition of Ham-Let.

 

The table below illustrates Ultra Clean’s incremental debt transaction and summarizes the transaction accounting adjustments as if the acquisition were consummated on March 26, 2021:

 

($ in thousands)		March 26, 2021
Barclays Incremental Term Loan		$	355,000
Less: Unamortized debt issuance costs on Incremental Term Loan			(8,899	)
Less: Ham-Let's debt paid off on acquisition date			(91,338	)
Total pro forma adjustment to Ultra Clean's bank borrowings		$	254,763

 

The table below illustrates Ultra Clean’s interest expense as if the acquisition were consummated on December 28, 2019:

 

($ in thousands)		Year Ended December 25, 2020				Three Months Ended  March 26, 2021
Incremental interest expense of Ultra Clean Term Loan B facility		$	8,957			$	2,900
Eliminate Ham-Let interest expense			(3,100	)			(3,089	)
Amortization of new debt issuance costs			2,022				511
Lease accounting related interest expense 3(G)			(993	)			(247	)
Total pro forma adjustments to interest expense		$	6,886			$	75

 

I. Stockholders' equity

 

Shareholders' equity has been adjusted as follows:

 

($ in thousands)		Amount
Retained Earnings(1)		$	(11,104	)
Invested Equity(2)			(81,078	)
Accumulated other comprehensive loss(3)			117
Total pro forma adjustment to shareholders' equity		$	(92,065	)

 

(1)		Reflects the Company's acquisition and financing transaction expenses of $12.2 million and $0.8 million, respectively, included in retained earnings and the elimination intercompany transactions of $1.9 million. See note 3(A)(H).
(2)		Elimination of invested equity included in the historical statement of operations of Ham-Let.
(3)		Elimination of accumulated other comprehensive loss included in the historical statement of operations of Ham-Let.

 

J. Cost of revenues

 

Adjustments to cost of revenues are as follows:

 

($ in thousands)		Year Ended December 25, 2020				Three Months Ended March 26, 2021
Reclassification of warehouse related costs (Note 1)		$	5,675			$	1,627
Lease accounting difference 3(G)			596			164
Elimination of amortization of intangibles of Ham-Let			(1,283	)			(322	)
Amortization of new intangibles 3(F)			2,630			657
Amortization of inventory step-up 3(C)			11,127				—
Depreciation of property, plant and equipment fair value adjustment 3(D)			516				130
Elimination of intercompany transactions			(7,389	)			(2,437	)
Total pro forma adjustments to cost of revenues		$	11,872			$	(181	)

K. Operating expenses

 

Adjustments to total operating expenses are as follows:

 

($ in thousands)		Year Ended December 25, 2020				Three Months Ended March 26, 2021
Reclassification of warehouse related costs (Note 1)		$	(5,675	)		$	(1,627	)
Difference in lease accounting standards 3(G)			20				21
Amortization of new intangibles 3(F)			15,857				2,501
Depreciation of property, plant and equipment fair value adjustment 3(D)			172				43
Acquisition-related costs 3(A)			(1,025	)			(1,337	)
Non-recurring charges			(70	)			(4,489	)
Total pro forma adjustments to operating expenses		$	9,279			$	(4,888	)

Adjustments to operating expenses per classification:

 

($ in thousands)		Year Ended December 25, 2020				Three Months Ended March 26, 2021
Research and development:
Difference in lease accounting standards 3(G)		$	25			$	6
Depreciation of property, plant and equipment fair value adjustment 3(D)		57				14
			82				20
Sales and marketing:
Reclassification of warehouse related costs (Note 1)			(5,675	)			(1,627	)
Difference in lease accounting standards 3(G)			57				35
Depreciation of property, plant and equipment fair value adjustment 3(D)			57				14
			(5,561	)			(1,578	)
General and administrative:
Difference in lease accounting standards 3(G)			(62	)			(20	)
Amortization of new intangibles 3(F)			15,857				2,501
Depreciation of property, plant and equipment fair value adjustment 3(D)			58				15
Acquisition-related costs 3(A)			(1,025	)			(1,337	)
		$	14,828			$	1,159

 

L. Income tax expense

 

Adjustment to reflect income tax expense of the total combined pro forma pretax results of operations based on Ultra Clean’s estimated statutory tax rate of 25.3%. The actual tax is subject to change based upon post-acquisition pretax income by jurisdiction and other factors of the combined companies.

 

M. Reclassifications

 

Represents reclassifications to align with Ultra Clean’s financial statement presentation.