EXHIBIT 99.3

PQ GROUP HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Overview

On March 1, 2021, PQ Group Holdings Inc. (the “Company”), announced that it has entered into a definitive agreement to sell its Performance Chemicals business to a partnership established by Cerberus Capital Management, L.P. and Koch Minerals & Trading LLC (the “Purchaser”). Pursuant to the Purchase Agreement, and upon anticipated closing, the Company will divest its Performance Chemicals business to the Purchaser through the sale of the Company’s direct and indirect equity interests in each of the Company’s subsidiaries comprising the Performance Chemicals business (the “Transaction”) in exchange for a purchase price of $1.1 billion in cash, subject to certain adjustments specified therein, including for indebtedness, cash, working capital and transaction expenses of the Performance Chemicais business at the closing of the Transaction. Upon the anticipated close in 2021 and finalization of net cash proceeds, the Company is required to use portions of the proceeds to repay the outstanding debt and expects to restructure its debt, which is estimated to result in a debt reduction of $450 million to $550 million (the “Estimated Required Debt Repayment”). In addition, subject to the debt restructuring, the Company plans to return capital to shareholders through a special dividend of $2.50 to $3.25 per share (subject to Board approval and declaration).

In conjunction with entering into the definitive agreement, Performance Chemicals met the criteria set forth in Accounting Standards Codification 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”). As a result, the results of operations of Performance Chemicals will be presented as discontinued operations in the consolidated statements of operations for all periods presented beginning with the quarterly financial statements to be filed on Form 10-Q for the quarter ended March 31, 2021.

The unaudited pro forma condensed consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X and have been derived from the historical financial statements prepared in accordance with accounting principles generally accepted in the United States of America and are presented based on available information and certain assumptions that management believes are reasonable.

The unaudited pro forma financial statements present the Company’s unaudited pro forma condensed consolidated financial statements reflecting the effect of the Transaction as well as the Estimated Required Debt Repayment. The unaudited pro forma condensed consolidated balance sheet reflects the Company’s financial position as if the Transaction and the Estimated Required Debt Repayment had occurred on December 31, 2020. The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2020 is presented as if the Transaction and Estimated Required Debt Repayment had occurred on January 1, 2020. The unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2019 and 2018 are presented with the elimination of the historical Performance Chemicals financial results as discontinued operations.

The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with our historical financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and are not necessarily indicative of the operating results that would have occurred if the Transaction had been completed as of the dates set forth above, nor are they indicative of the future results of the Company. The unaudited condensed pro forma financial statements do not purport to project the future operating results or financial position of the Company following the Transaction.


PQ GROUP HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of December 31, 2020

(In thousands)

 

     Historical As
Reported
    (A)
Divestiture of Performance
Chemicals
    (B)
Pro Forma
Adjustments
    Pro Forma  

ASSETS

        

Cash and cash equivalents

   $ 135,531     $ 973,580     $ (500,000   $ 609,111  

Accounts receivables, net

     132,619       (86,695     —         45,924  

Inventories, net

     127,436       (75,625     —         51,811  

Prepaid and other current assets

     32,554       (18,641     —         13,913  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     428,140       792,619       (500,000     720,759  

Investments in affiliated companies

     458,452       (324     —         458,128  

Property, plant and equipment, net

     983,235       (390,541     —         592,694  

Goodwill

     717,738       (326,173     —         391,565  

Other intangible assets, net

     526,303       (388,857     —         137,446  

Right-of-use lease assets

     48,239       (19,296     —         28,943  

Other long-term assets

     35,714       (23,124     —         12,590  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 3,197,821     $ (355,696   $ (500,000   $ 2,342,125  
  

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES

        

Accounts payable

     112,333       (74,228     —         38,105  

Operating lease liabilities—current

     15,194       (8,479     —         6,715  

Accrued liabilities

     73,811       (25,144     —         48,667  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     201,338       (107,851     —         93,487  

Long-term debt, excluding current portion

     1,400,369       —         (489,645     910,724  

Deferred income taxes

     175,901       (49,900     —         126,001  

Operating lease liabilities—noncurrent

     32,019       (10,047     —         21,972  

Other long-term liabilities

     111,015       (97,021     —         13,994  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

   $ 1,920,642     $ (264,819   $ (489,645   $ 1,166,178  

EQUITY

        

Common stock

     1,371       —         —         1,371  

Preferred stock

     —         —         —         —    

Additional paid-in capital

     1,477,859       —         —         1,477,859  

(Accumulated deficit) retained earnings

     (175,758     (206,309     (10,355     (392,422

Treasury stock

     (11,081     —         —         (11,081

Accumulated other comprehensive loss

     (15,265     115,485       —         100,220  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total PQ Group Holdings Inc. equity

     1,277,126       (90,824     (10,355     1,175,947  

Noncontrolling interest

     53       (53     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     1,277,179       (90,877     (10,355     1,175,947  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 3,197,821     $ (355,696   $ (500,000   $ 2,342,125  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

2


PQ GROUP HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2020

(In thousands, except per share amounts)

 

     Historical As
Reported
    (C)
Divestiture of
Performance
Chemicals
    (D)
Pro Forma
Adjustments
    Pro Forma  

Sales

   $ 1,107,363     $ (611,443     —       $ 495,920  

Cost of goods sold

     834,007       (487,787     —         346,220  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     273,356       (123,656     —         149,700  

Selling, general and administrative expenses

     125,294       (43,778     —         81,516  

Goodwill impairment charge

     260,000       (260,000     —         —    

Other operating expense, net

     50,986       (33,144     —         17,842  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (162,924     213,266       —         50,342  

Equity in net income from affiliated companies

     (21,237     172       —         (21,065

Interest expense, net

     66,979       (14,272     —         52,707  

Debt extinguishment costs

     25,028       —         7,832       32,860  

Other (income) expense, net

     (6,109     548       —         (5,561
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income taxes
and noncontrolling interest

     (227,585     226,818       (7,832     (8,599

(Benefit) provision for income taxes

     (48,122     (13,909     (1,964     (63,995
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income from continuing operations

     (179,463     240,727       (5,868     55,396  

Less: Net (loss) income attributable to the noncontrolling interest—continuing operations

     (3,198     3,198       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to PQ Group Holdings Inc.

     (176,265     237,529       (5,868     55,396  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share

        

Basic (loss) income per share – continuing operations

   $ (1.30       $ 0.41  

Diluted (loss) income per share – continuing operations

   $ (1.30       $ 0.41  

Weighted average shares outstanding

        

Basic

     135,528,977           135,528,977  

Diluted

     135,528,977           135,528,977  

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

 

3


PQ GROUP HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2019

(In thousands, except per share amounts)

 

     Historical As
Reported
    (C)
Divestiture of
Performance Chemicals
    Pro Forma  

Sales

   $ 1,199,914     $ (667,166   $ 532,748  

Cost of goods sold

     901,512       (535,157     366,355  
  

 

 

   

 

 

   

 

 

 

Gross profit

     298,402       (132,009     166,393  

Selling, general and administrative expenses

     129,516       (46,133     83,383  

Other operating expense, net

     21,378       (3,858     17,520  
  

 

 

   

 

 

   

 

 

 

Operating income

     147,508       (82,018     65,490  

Equity in net income from affiliated companies

     (46,022     120       (45,902

Interest expense, net

     87,072       (18,576     68,496  

Debt extinguishment costs

     3,400       —         3,400  

Other (income) expense, net

     (2,372     (349     (2,721
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes and noncontrolling interest

     105,430       (63,213     42,217  

Provision (benefit) for income taxes

     39,677       (30,408     9,269  
  

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     65,753       (32,805     32,948  

Less: Net income attributable to the noncontrolling interest – continuing operations

     617       (617     —    
  

 

 

   

 

 

   

 

 

 

Net income attributable to PQ Group Holdings Inc.

   $ 65,136     $ (32,188   $ 32,948  
  

 

 

   

 

 

   

 

 

 

Net income per share

      

Basic income per share – continuing operations

   $ 0.48       $ 0.25  

Diluted income per share – continuing operations

   $ 0.48       $ 0.24  

Weighted average shares outstanding

      

Basic

     134,389,667         134,389,667  

Diluted

     135,548,694         135,548,694  

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

 

4


PQ GROUP HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31, 2018

(In thousands, except per share amounts)

 

     Historical As
Reported
    (C)
Divestiture of
Performance
Chemicals
    Pro Forma  

Sales

   $ 1,228,926     $ (701,266   $ 527,660  

Cost of goods sold

     925,534       (555,918     369,616  
  

 

 

   

 

 

   

 

 

 

Gross profit

     303,392       (145,348     158,044  

Selling, general and administrative expenses

     131,402       (46,585     84,817  

Other operating expense, net

     16,427       (13,396     3,031  
  

 

 

   

 

 

   

 

 

 

Operating income

     155,563       (85,367     70,196  

Equity in net income from affiliated companies

     (37,569     177       (37,392

Interest expense, net

     90,758       (17,510     73,248  

Debt extinguishment costs

     7,751       —         7,751  

Other (income) expense, net

     10,603       3,737       14,340  
  

 

 

   

 

 

   

 

 

 

Income before income taxes and noncontrolling interest

     84,020       (71,771     12,249  

Provision (benefit) for income taxes

     33,641       (25,058     8,583  
  

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     50,379       (46,713     3,666  

Less: Net income attributable to the noncontrolling interest – continuing operations

     1,108       (1,108     —    
  

 

 

   

 

 

   

 

 

 

Net income attributable to PQ Group Holdings Inc.

     49,271       (45,605     3,666  

Net income per share

      

Basic income per share – continuing operations

   $ 0.37       $ 0.03  

Diluted income per share – continuing operations

   $ 0.37       $ 0.03  

Weighted average shares outstanding

      

Basic

     133,380,567         133,380,567  

Diluted

     134,684,931         134,684,931  

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

 

5


PQ GROUP HOLDINGS INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma condensed consolidated financial statements (i) are presented based upon available information and assumptions that the Company believes are reasonable, (ii) are intended for informational purposes only, (iii) are not necessarily indicative of and do not purport to represent what the Company’s operating results would have been had the Transaction and related events (including the Estimated Required Debt Repayment) occurred as described or what the Company’s future operating results will be after giving effect to these events, and (iv) do not reflect all actions that may be undertaken by the Company after the divestiture of the Performance Chemicals business. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The special dividend is not reflected in the unaudited pro forma condensed consolidated financial statements as it has not been declared and is not a required use of proceeds from the Transaction.

(A) The unaudited pro forma condensed consolidated balance sheet as of December 31, 2020 reflects the following divestiture-related adjustments as if the Transaction occurred on December 31, 2020:

 

   

The purchase price of $1.1 billion less adjustments for indebtedness, cash and working capital per the Purchase Agreement, plus estimated transaction expenses of $20.0 million

 

   

The elimination of the net assets subject to the Performance Chemicals divestiture

 

   

Estimated taxes of $25.6 million resulting from the Transaction. This adjustment reflects management’s best estimate at the time of this current report filed on Form 8-K. The Company will reflect the after-tax gain (loss) from the sale in its financial statements in the period the sale is completed, which is anticipated to close in 2021.

 

   

Recognition of a preliminary $206.3 million loss on the sale, net of estimated taxes. The actual after-tax loss to be recorded on the sale of Performance Chemicals will change based on items including the exact closing date, adjustments to the estimated transactions costs as well as final calculations related to the tax basis of the assets. The preliminary estimated loss was calculated as follows (in millions):

 

Estimated proceeds, net of transaction costs and closing adjustments(1)

   $ 1,016.6

Performance Chemicals net assets held for sale

     (1,081.8

Recognition of accumulated translation adjustments resulting from the sale of Performance Chemicals’ foreign subsidiaries

     (115.5
  

 

 

 

Pre-tax loss on the sale of Performance Chemicals

     (180.7
  

 

 

 

Estimated taxes on the sale of Performance Chemicals

     (25.6
  

 

 

 

After-tax loss on the sale of Performance Chemicals

   $ (206.3
  

 

 

 

 

  (1)

Expected after-tax proceeds of $995 million, net of transaction costs and closing adjustments.

(B) The unaudited pro forma condensed consolidated balance sheet as of December 31, 2020 reflects an Estimated Required Debt Repayment of approximately $297 million of the Senior Secured Term Loan Facility due February 2027 and $203 million of the New Senior Secured Term Loan Facility due February 2027. The Estimated Required Debt Repayment results in the recognition of an estimated $10.4 million loss on extinguishment of debt, which includes the write-off of $3.2 million of unamortized deferred financing costs and $7.2 million of original issue discount.

 

6


(C) The divestiture of the Performance Chemicals business columns on the unaudited pro forma condensed consolidated financial statements represents the historical financial results directly attributable to the Performance Chemicals business including the interest expense associated with the Estimated Required Debt Repayment noted in (B), in accordance with ASC 205-20.

(D) The unaudited pro forma condensed consolidated income statement for the year ended December 31, 2020 reflects an estimated loss on extinguishment of debt of $7.8 million, and the associated tax impact of $2.0 million, related to the Estimated Required Debt Repayment of $500 million, assuming the Estimated Required Debt Repayment was made on January 1, 2020.