Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Mirion Technologies, Inc. (“Mirion”, the “Company” or "Successor" or "us" and formerly GS Acquisition Holdings Corp II ("GSAH")) is a global provider of radiation detection, measurement, analysis, and monitoring products and services to the medical, nuclear, and defense end markets. We provide products and services through our two operating and reportable segments; (i) Medical and (ii) Industrial. The Medical segment provides radiation oncology quality assurance, delivering patient safety solutions for diagnostic imaging and radiation therapy centers around the world, dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. The Industrial segment provides robust, field ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors and essential measurement devices for new build, maintenance, decontamination and decommission equipment for monitoring and control during fuel dismantling and remote environmental monitoring.
The Company is headquartered in Atlanta, Georgia and has operations in the United States, Canada, the United Kingdom, France, Germany, Finland, China, Belgium, the Netherlands, Estonia, and Japan.
On October 20, 2021 (the “Closing Date”), the Company, consummated its previously announced business combination (the “Business Combination”) pursuant to the certain business combination agreement (the "Business Combination Agreement"). As contemplated by the Business Combination Agreement, the Company became the corporate parent of Mirion Technologies TopCo., Ltd. ("Mirion TopCo"). In order to implement a structure similar to that of an “Up-C,” the Company established a Delaware corporation, Mirion IntermediateCo, Inc. (“IntermediateCo”), as a subsidiary of the Company.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") for interim financial information. The interim Condensed Consolidated Financial Statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair representation of the results for the periods presented and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the period ended December 31, 2021, which include a complete set of footnote disclosures, including our significant accounting policies included in our Annual Report on Form 10-K. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated in consolidation.
The Company recognizes a noncontrolling interest for the portion of Class B common stock of IntermediateCo that is not attributable to the Company. See Note 19, Noncontrolling Interests.
On October 20, 2021, the Board of Directors determined to change Mirion TopCo's fiscal year end from June 30th of each year to December 31st of each year in order to align Mirion’s fiscal year end with GSAH’s fiscal year end.
Predecessor and Successor Reporting
The financial statements separate the Company’s presentation into two distinct periods. The period before the Closing Date of the Business Combination (the "Predecessor Period") depicts the financial statements of Mirion TopCo, and the period
after the Closing (the "Successor Period") depicts the financial statements of the Company, including the consolidation of GSAH with Mirion Technologies, Inc.
The Business Combination was accounted for under Accounting Standards Codification ("ASC") 805, Business Combinations. GSAH was determined to be the accounting acquirer. Mirion Technologies, Inc. constitutes a business in accordance with ASC 805 and the business combination constitutes a change in control. Accordingly, the Business Combination is being accounted for using the acquisition method. Under this method of accounting, Mirion TopCo is treated as the “acquired” company for financial reporting purposes and the acquired net assets were stated at fair value, with goodwill or other intangible assets recorded.
As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Period.
Segments
The Company manages its operations through two operating and reportable segments: Medical and Industrial. These segments align the Company’s products and service offerings with customer use in medical and industrial markets and are consistent with how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), reviews and evaluates the Company’s operations. The CODM allocates resources and evaluates the financial performance of each operating segment. The Company’s segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. Refer to Note 15, Segments, for further detail.
Use of Estimates
Management estimates and judgments are an integral part of financial statements prepared in accordance with GAAP. We believe that the critical accounting policies listed below address the more significant estimates required of management when preparing our consolidated financial statements in accordance with GAAP. We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustment to these balances in future periods. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include but are not limited to: business combinations, goodwill and intangible assets; estimated progress toward completion for certain revenue contracts; uncertain tax positions and tax valuation allowances and derivative warrant liabilities.
Significant Accounting Policies
There have been no material changes in our significant accounting policies during the six months ended June 30, 2022, as compared to the significant accounting policies described in Note 1 to the audited Consolidated Financial Statements on Form 10-K for the period ended December 31, 2021.
Accounts Receivable and Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The allowance for doubtful accounts was $5.3 million and $5.4 million as of June 30, 2022 and December 31, 2021, respectively.
Prepaid Expenses and Other Current Assets
Other current assets are primarily comprised of various prepaid assets including prepaid insurance, short-term marketable securities, and income tax receivables.
The components of other current assets consist of the following (in millions):
| | | | | | | | |
| Successor |
| June 30, 2022 | December 31, 2021 |
| Prepaid insurance | $ | 2.1 | | $ | 5.3 | |
| Short-term marketable securities | 4.3 | | 4.9 | |
| Income tax receivable | 0.8 | | 2.8 | |
| Other current assets | 22.5 | | 18.5 | |
| $ | 29.7 | | $ | 31.5 | |
Facility and Equipment Decommissioning Liabilities
The Company has asset retirement obligations (“ARO”) consisting primarily of equipment and facility decommissioning costs. ARO liabilities totaled $3.0 million and $3.1 million at June 30, 2022 and December 31, 2021, respectively, and were included in deferred income taxes and other liabilities on the Condensed Consolidated Balance Sheets. Accretion expense related to these liabilities was not material for any periods presented.
Revenue Recognition
The Company recognizes revenue from arrangements that include performance obligations to design, engineer, manufacture, deliver, and install products. If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.
Revenue derived from passive dosimetry and analytical services is of a subscription nature and is provided to customers on an agreed-upon recurring monthly, quarterly or annual basis. Revenue is recognized ratably over the service period as the service is continuous, and no other discernible pattern of recognition is evident.
Contract Balances
The timing of the Company's revenue recognition, invoicing, and cash collections results in accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, and deferred contract revenue. Refer to Note 3, Contracts in Progress for further details.
Remaining Performance Obligations
The remaining performance obligations for all open contracts as of June 30, 2022 include assembly, delivery, installation, and trainings. The aggregate amount of the transaction price allocated to the remaining performance obligations for all open customer contracts was approximately $692.7 million and $747.5 million as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 the Company expects to recognize approximately 38%, 30%, 16%, and 8% of the remaining performance obligations as revenue during the fiscal years 2022, 2023, 2024 and 2025, respectively, and the remainder thereafter.
Disaggregation of Revenues
A disaggregation of the Company’s revenues by segment, geographic region, timing of revenue recognition and product category is provided in Note 15, Segment Information.
Warrant Liability
As of June 30, 2022, the Company had outstanding warrants to purchase up to 27,249,879 shares of Class A common stock. The Company accounts for the warrants in accordance with the guidance contained in ASC 815, “Derivatives and Hedging”, under which the warrants do not meet the criteria for equity treatment and must be recorded as derivative liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized in the Company’s Condensed Consolidated Statements of Operations. The fair value of the warrants (the "Public Warrants") issued in connection with GSAH's initial public offering
has been measured based on the listed market price of such Public Warrants. As the transfer of certain warrants issued in a private placement (the "Private Placement Warrants") to GS Sponsor II LLC, the sponsor of GSAH (the "Sponsor"), to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, we determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. See Note 16, Fair Value Measurements.
Concentrations of Risk
Financial instruments that are potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country. The Company has not experienced any losses in such accounts.
The Company sells its products and services mainly to large, private and governmental organizations in the Americas, Europe, the Middle East and Asia Pacific regions. The Company performs ongoing evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. As of June 30, 2022 and December 31, 2021, no customer accounted for more than 10% of the accounts receivable balance.
Recent Accounting Pronouncements
Accounting Guidance Issued But Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. ASU 2020-04 provides temporary optional expedients and exceptions for applying GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. For all entities, ASU 2020-04 can be adopted after its issuance date through December 31, 2022. The Company is currently evaluating the impact of this ASU.
2. Business Combinations and Acquisitions
On October 20, 2021, Mirion Technologies, Inc. consummated its previously announced Business Combination pursuant to the Business Combination Agreement. On December 1, 2021, the Company acquired 100% of the equity interest of CIRS.
Measurement period adjustments to the previously disclosed preliminary fair value of net assets acquired in the Business Combination have been recorded in the quarter ended June 30, 2022, resulting in a $2.2 million decrease in goodwill. The estimated fair values of all assets acquired and liabilities assumed in the acquisitions are provisional and may be revised as a result of additional information obtained during the measurement period of up to one year from the acquisition dates, including but not limited to valuation of tax accounts, property, plant and equipment and intangible assets.
3. Contracts in Progress
Costs and billings on uncompleted construction-type contracts consist of the following (in millions):
| | | | | | | | |
| Successor |
| June 30, 2022 | December 31, 2021 |
| Costs incurred on contracts (from inception to completion) | $ | 197.2 | | $ | 199.4 | |
| Estimated earnings | 129.0 | | 125.5 | |
| Contracts in progress | 326.2 | | 324.9 | |
| Less: billings to date | (267.8) | | (281.8) | |
| $ | 58.4 | | $ | 43.1 | |
The carrying amounts related to uncompleted construction-type contracts are included in the accompanying Condensed Consolidated Balance Sheets under the following captions (in millions):
| | | | | | | | |
| Successor |
| June 30, 2022 | December 31, 2021 |
| Costs and estimated earnings in excess of billings on uncompleted contracts – current | $ | 72.0 | | $ | 56.3 | |
Costs and estimated earnings in excess of billings on uncompleted contracts – non-current (1) | 3.8 | | 6.5 | |
Billings in excess of costs and estimated earnings on uncompleted contracts – current (2) | (11.3) | | (17.6) | |
Billings in excess of costs and estimated earnings on uncompleted contracts – non-current (3) | (6.1) | | (2.1) | |
| $ | 58.4 | | $ | 43.1 | |
(1)Included in other assets within the Condensed Consolidated Balance Sheets.
(2)Included in deferred contract revenue – current within the Condensed Consolidated Balance Sheets.
(3)Included in other liabilities within the Condensed Consolidated Balance Sheets.
For the three and six months ended June 30, 2022 the Company has recognized revenue of $3.0 million and $6.3 million, respectively, related to the contract liabilities balance as of December 31, 2021.
4. Inventories
The components of inventories consist of the following (in millions):
| | | | | | | | |
| Successor |
| | June 30, 2022 | December 31, 2021 |
| Raw materials | $ | 64.2 | | $ | 56.8 | |
| Work in progress | 31.0 | | 26.6 | |
| Finished goods | 35.2 | | 40.2 | |
| | $ | 130.4 | | $ | 123.6 | |
Inventories as of December 31, 2021 include $6.3 million of fair value step-up from purchase accounting which was recognized as cost of revenues as related inventory was sold during the six months ended June 30, 2022.
5. Property, Plant and Equipment, Net
Property, plant and equipment, net consist of the following (in millions):
| | | | | | | | | | | | | | |
| | | Successor |
| | Depreciable
Lives | | June 30, 2022 | December 31, 2021 |
| Land, buildings, and leasehold improvements | 3-39 years | | $ | 45.7 | | $ | 45.0 | |
| Machinery and equipment | 5-15 years | | 30.4 | | 26.7 | |
| Badges | 3-5 years | | 31.0 | | 27.9 | |
| Furniture, fixtures, computer equipment and other | 3-10 years | | 22.0 | | 16.7 | |
| Construction in progress | — | | 10.4 | | 12.2 | |
| | | | 139.5 | | 128.5 | |
| Less: accumulated depreciation and amortization | | | (17.2) | | (4.5) | |
| | | | $ | 122.3 | | $ | 124.0 | |
Total depreciation expense included in costs of revenues and operating expenses was as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended | | | Three Months Ended | | Six Months Ended | | | Six Months Ended |
| June 30, 2022 | | | June 30, 2021 | | June 30, 2022 | | | June 30, 2021 |
| Depreciation expense in: | | | | | | | | | |
| Cost of revenues | $ | 4.5 | | | | $ | 4.9 | | | $ | 8.6 | | | | $ | 7.7 | |
| Operating expenses | $ | 2.6 | | | | $ | 1.9 | | | $ | 4.6 | | | | $ | 4.1 | |
Construction in progress includes capitalized internal use software costs totaling $0.6 million and $1.7 million as of June 30, 2022 and December 31, 2021 respectively.
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in millions):
| | | | | | | | |
| Successor |
| | June 30, 2022 | December 31, 2021 |
| Compensation and related benefit costs | $ | 33.1 | | $ | 34.0 | |
| Customer deposits | 8.9 | | 8.8 | |
| Accrued commissions | 0.3 | | 0.9 | |
| Accrued warranty costs | 5.3 | | 5.9 | |
| Non-income taxes payable | 6.1 | | 7.5 | |
| Pension and other post-retirement obligations | 0.4 | | 0.3 | |
| Income taxes payable | 4.0 | | 3.2 | |
| Restructuring | 1.8 | | 1.4 | |
| Deferred and contingent consideration | 1.9 | | 2.0 |
| Other accrued expenses | 11.8 | | 11.4 | |
| Total | $ | 73.6 | | $ | 75.4 | |
7. Goodwill and Intangible Assets
Goodwill
Goodwill is calculated as the excess of consideration transferred over the net assets recognized for acquired businesses and represents future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is assigned to reporting units at the date the goodwill is initially recorded and is reallocated as necessary based on the composition of reporting units over time.
The Company assesses goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and upon the occurrence of a triggering event or change in circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
A quantitative test performed upon the occurrence of a triggering event compares the fair value of a reporting unit with its carrying amount. The Company determines fair values for each of the reporting units, as applicable, using the market approach, when available and appropriate, or the income approach, or a combination of both. The Company assesses the valuation methodology based upon the relevance and availability of the data at the time the Company performs the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.
Valuations using the market approach are derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. A
market approach is limited to reporting units for which there are publicly traded companies that have characteristics similar to the Company's businesses.
Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company uses its internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in the forecasts. The Company derives its discount rates using a capital asset pricing model and by analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts.
During the three months ended June 30, 2022, the Company concluded that a triggering event had occurred in the Radiation Monitoring Systems ("RMS") reporting unit of the Industrial segment as a result of the Russia-Ukraine conflict. Goodwill in the Industrial segment was recognized as a result of the Mirion Business Combination in October 2021, at which time approximately $257.2 million of goodwill was attributed to the RMS reporting unit. In May 2022, one of the customers in the RMS reporting unit terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland. The remaining performance obligation related to this contract within our backlog was approximately $67 million, of which approximately 80% was scheduled to be recognized as revenue over the next five years.
Therefore, due to the impact on our planned revenues, the Company conducted a quantitative test for the RMS reporting unit, determining the fair value by estimating the present value of expected future cash flows, discounted by the applicable discount rate of 10.5% (compared to 9% used in determining the initial goodwill from the Business Combination) and assumed a terminal future cash flows growth rate of 3.5%. The Company also compared fair value to peer company multiples which have decreased since the date of the Business Combination. As the carrying value exceeded the fair value, the Company recognized its best estimate of a non-cash impairment loss of $55.2 million during the three months ended June 30, 2022. The impairment loss was recorded in the caption "Goodwill impairment" in our Condensed Consolidated Statements of Operations. After the impairment loss and the impact of translation, $176.1 million of goodwill remained associated with the RMS reporting unit as of June 30, 2022.
No goodwill impairment was recognized for the three and six months ended June 30, 2021, respectively.
The following table shows changes in the carrying amount of goodwill by reportable segment as of June 30, 2022 and December 31, 2021 (in millions): | | | | | | | | | | | | | | | | | |
| Successor |
| Medical | | Industrial | | Consolidated |
| Balance—December 31, 2021 | $ | 712.5 | | | $ | 950.1 | | | $ | 1,662.6 | |
| Goodwill impairment | — | | | (55.2) | | | (55.2) | |
| Business Combination - measurement period adjustments | (0.5) | | | (1.7) | | | (2.2) | |
| Translation adjustment | — | | | (38.6) | | | (38.6) | |
| Balance—June 30, 2022 | $ | 712.0 | | | $ | 854.6 | | | $ | 1,566.6 | |
A portion of goodwill is deductible for income tax purposes.
Intangible Assets
Intangible assets consist of our developed technology, customer relationships, backlog, trade names, and non-compete agreements at the time of acquisition through business combinations. The customer relationships definite lived intangible assets are amortized using the double declining balance method while all other definite lived intangible assets are amortized on a straight-line basis over their estimated useful lives.
Many of our intangible assets are not deductible for income tax purposes. A summary of intangible assets useful lives, gross carrying value and related accumulated amortization is below (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Successor |
| | | June 30, 2022 |
| Original Average
Life in Years | | Gross Carrying
Amount | | Accumulated
Amortization | | Net Book
Value |
| Customer relationships | 6 - 13 | | $ | 335.2 | | | $ | (49.9) | | | $ | 285.3 | |
| Distributor relationships | 7 - 13 | | 60.8 | | | (5.1) | | | 55.7 | |
| Developed technology | 5 - 16 | | 243.3 | | | (20.8) | | | 222.5 | |
| Trade names | 3 - 10 | | 97.5 | | | (7.0) | | | 90.5 | |
| Backlog and other | 1 - 4 | | 82.7 | | | (24.0) | | | 58.7 | |
| Total | | | $ | 819.5 | | | $ | (106.8) | | | $ | 712.7 | |
| | | | | | | |
| | | December 31, 2021 |
| Original Average
Life in Years | | Gross Carrying
Amount | | Accumulated
Amortization | | Net Book
Value |
| Customer relationships | 6 - 13 | | $ | 341.0 | | | $ | (15.3) | | | $ | 325.7 | |
| Distributor relationships | 7 - 13 | | 61.0 | | | (1.5) | | 59.5 |
| Developed technology | 5 - 16 | | 251.2 | | | (5.9) | | 245.3 |
| Trade names | 3 - 10 | | 100.0 | | | (2.1) | | 97.9 |
| Backlog and other | 1 - 4 | | 85.7 | | | (7.2) | | 78.4 |
| Total | | | $ | 838.9 | | | $ | (32.0) | | | $ | 806.9 | |
Aggregate amortization expense for intangible assets included in cost of revenues and operating expenses was as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| Amortization expense for intangible assets in: | | | | | | | | | |
| Cost of revenues | $ | 6.6 | | | | $ | 4.4 | | | $ | 13.3 | | | | $ | 11.3 | |
| Operating expenses | $ | 30.9 | | | | $ | 14.2 | | | $ | 63.0 | | | | $ | 25.9 | |
8. Borrowings
On June 17, 2021, Mirion and certain selling shareholders (the "Sellers") entered into the Business Combination Agreement with GSAH, a special purpose acquisition company. On October 20, 2021, Mirion consummated the Business Combination pursuant to the Business Combination Agreement, combining with a subsidiary of GSAH at the Closing, for total consideration of approximately $2.6 billion. The Sellers received cash consideration of approximately $1.3 billion and 30,401,902 shares of Class A and 8,560,540 shares of Class B common stock valued at approximately $0.4 billion on the Closing Date (based upon a $10.45 average price per share of GSAH's Class A common stock on the Closing Date). The Shareholder Notes and Management Notes (each as defined below) were acquired by GSAH at the Closing for a price equal to the full outstanding principal amount together with all accrued but unpaid interest up to but excluding the Closing Date using a portion of the Business Combination Consideration. In connection with the Closing, GSAH contributed the Shareholder Notes and the Management Notes to Mirion TopCo, and then the Shareholder Notes and Management Notes
were extinguished in full. Borrowings under the 2019 Credit Facility (as defined below) as of the Closing Date were paid in full through the cash consideration and new financing obtained through the 2021 Credit Agreement described below.
Third-party notes payable consist of the following (in millions):
| | | | | | | | |
| Successor |
| June 30,
2022 | December 31, 2021 |
| 2021 Credit Agreement | $ | 825.9 | | $ | 828.3 | |
| Canadian Financial Institution | 1.0 | | 1.2 | |
| Other | 1.9 | | 2.3 | |
| Draw on revolving line of credit | — | | — | |
| Total third-party borrowings | 828.8 | | 831.8 |
| Less: notes payable to third-parties, current | (5.2) | | (3.9) | |
| Less: deferred financing costs | (19.5) | | (21.1) | |
| Notes payable to third-parties, non-current | $ | 804.1 | | $ | 806.8 | |
As of June 30, 2022 and December 31, 2021, the fair market value of the Company's 2021 Credit Agreement was $816.6 million and $825.2 million, respectively. The fair market value for the 2021 Credit Agreement was estimated using primarily level 2 inputs, including borrowing rates available to the Company at the respective period ends. The fair market value for the Company’s remaining third-party debt approximates the respective carrying amounts as of June 30, 2022 and December 31, 2021.
2021 Credit Agreement
In connection with the Business Combination, certain subsidiaries of the Company entered into the 2021 Credit Agreement among Mirion Technologies (HoldingSub2), Ltd., a limited liability company incorporated in England and Wales, as Holdings, Mirion Technologies (US Holdings), Inc., as the Parent Borrower, Mirion Technologies (US), Inc., as the Subsidiary Borrower, the lending institutions party thereto, Citibank, N.A., as the Administrative Agent and Collateral Agent and Goldman Sachs Lending Partners, Citigroup Global Markets Inc., Jefferies Finance LLC and JPMorgan Chase Bank, N.A., as the Joint Lead Arrangers and Bookrunners.
The 2021 Credit Agreement refinanced and replaced the credit agreement from March 2019, by and between, among others, Mirion Technologies (HoldingRep), Ltd. ("Mirion HoldingRep"), its subsidiaries and Morgan Stanley Senior Funding Inc., as administrative agent, certain other revolving lenders and a syndicate of institutional lenders (the “2019 Credit Facility”) which is described in more detail below.
The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions to refinance the 2019 Credit Facility referred to below and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50% per annum for unused revolving commitments, subject to stepdowns to 0.375% per annum and 0.25% per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit.
The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions) for borrowings in U.S. dollars, a floating rate formula based on Euro Interbank Offered Rate ("EURIBOR") for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with the Company's lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based upon the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon certain triggering events.
The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40% of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion Technologies (HoldingSub2), Ltd. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised. Mirion Technologies (HoldingSub2), Ltd. and subsidiaries were in compliance with all debt covenants on June 30, 2022 and December 31, 2021.
Term Loan - The term loan has a seven-year term (expiring October 2028), bears interest at the greater of Adjusted London Interbank Offered Rate ("LIBOR") or 0.50%, plus 2.75% and has quarterly principal repayments of 0.25% of the original principal balance. The interest rate was 3.25% as of June 30, 2022 and December 31, 2021. The Company repaid $2.1 million and $1.7 million for the six month period ended June 30, 2022 and for Successor Period ended December 31, 2021, respectively, yielding an outstanding balance of approximately $825.9 million and $828.3 million as of June 30, 2022 and December 31, 2021, respectively.
Revolving Line of Credit - The revolving line of credit arrangement has a five year term and bears interest at the greater of LIBOR or 0%, plus 2.75%. The agreement requires the payment of a commitment fee of 0.50% per annum for unused commitments. The revolving line of credit matures in October 2026, at which time all outstanding revolving facility loans and accrued and unpaid interest are due. Any outstanding letters of credit reduce the availability of the revolving line of credit. There was no outstanding balance under the arrangement as of June 30, 2022 and December 31, 2021. Additionally, the Company has standby letters of credit issued under its 2021 Credit Agreement that reduce the availability under the revolver of $13.6 million and $8.1 million as of June 30, 2022 and December 31, 2021, respectively. The amount available on the revolver as of June 30, 2022 and December 31, 2021 was approximately $76.4 million and $81.9 million, respectively.
Deferred Financing Costs
In connection with the issuance of the 2021 Credit Agreement term loan, we incurred debt issuance costs of $21.7 million on date of issuance. In accordance with accounting for debt issuance costs, we recognize and present deferred finance costs associated with non-revolving debt and financing obligations as a reduction from the face amount of related indebtedness in our Condensed Consolidated Balance Sheets.
In connection with the issuance of the 2021 Credit Agreement revolving line of credit, we incurred debt issuance costs of $1.8 million. We recognize and present debt issuance costs associated with revolving debt arrangements as an asset and include the deferred finance costs within other assets on our Condensed Consolidated Balance Sheets. We amortize all debt issuance costs over the life of the related indebtedness.
For the three and six month period ended June 30, 2022, we incurred approximately $1.3 million and $2.3 million, respectively, of amortization expense of the deferred financing costs.
2019 Credit Facility
In conjunction with the Business Combination, the 2021 Credit Agreement refinanced and replaced the 2019 Credit Facility.
The 2019 Credit Facility provided for financing of a $450.0 million senior secured term loan facility and a €125.0 million term loan facility, as well as a $90.0 million revolving line of credit. The 2019 Credit Facility was amended to provide an additional $225.0 million, $34.0 million and $66.0 million in gross proceeds from the USD term loan in December 2020, July 2019, and December 2019, respectively.
USD term loan – The term loan had a seven-year term (expiring March 2026), bearing interest at the greater of Adjusted London Interbank Offered Rate (“LIBOR”) or 0%, plus 4.00%, and had quarterly principal repayments of 0.25% of the original principal balance. The interest rate was 4.15% as of June 30, 2021. The Company repaid $3.9 million for the six month period ended June 30, 2021.
Euro term loan - The Euro portion of the term loan had a seven-year term (expiring March 2026), bearing interest at the greater of European union interbank market (“Euribor”) or 0%, plus 4.25% and has quarterly principal repayments of 0.25% of the original principal balance. As of June 30, 2021, the interest rate was 4.25%. The Company repaid $0.7 million for the six months ended June 30, 2021.
Revolving Line of Credit - The revolving line of credit arrangement had a five-year term and bearing interest at the greater of LIBOR or 0%, plus 4.00%. The agreement requires the payment of a commitment fee of 0.50% per annum for unused commitments. The revolving line of credit matures in March 2024, at which time all outstanding revolving facility loans and accrued and unpaid interest are due. Any outstanding letters of credit reduce the availability of the revolving line of credit.
Deferred Financing Costs
As noted above, the 2021 Credit Agreement refinanced and replaced the 2019 Credit Facility. In conjunction with the Business Combination purchase accounting we wrote off the remaining unamortized original issue discounts (OID) and debt issuance costs of $15.4 million related to the term loan and $0.4 million related to the revolving line of credit and recorded as a loss on extinguishment of debt on the last day of the Predecessor Period.
For the three and six month period ended June 30, 2021, we incurred approximately $0.9 million and $1.9 million, respectively of amortization expense of the deferred finance costs.
NRG Loan - In conjunction with the acquisition of NRG, the Company entered into a loan agreement for €7.2 million ($7.4 million) at the date of the acquisition. This agreement was scheduled to expire in December 2023. The loan bore interest which is Euribor of three months, plus 2.0%, and mandatory costs if any. The remaining balance for this loan was paid off in full during the six months ended June 30, 2021.
Canadian Financial Institution - In May 2019, the Company entered into a credit agreement for C$1.7 million ($1.3 million) with a Canadian financial institution that matures in April 2039. The note bears annual interest at 4.69%. The credit agreement is secured by the facility acquired using the funds obtained.
Overdraft Facilities
The Company has overdraft facilities with certain German and French financial institutions. As of June 30, 2022 and December 31, 2021 there were no outstanding amounts under these arrangements.
Accounts Receivable Sales Agreement
We are party to an agreement to sell short-term receivables from certain qualified customer trade accounts to an unaffiliated French financial institution without recourse. Under this agreement, the Company can sell up to €8.5 million ($8.9 million) and €8.0 million ($9.1 million) as of June 30, 2022 and December 31, 2021, respectively, of eligible accounts receivables. The accounts receivable under this agreement are sold at face value and are excluded from the consolidated balance if revenue has been recognized on the related receivable. When the related revenue has not been recognized on the receivable the Company considers the accounts receivable to be collateral for short-term borrowings. As of June 30, 2022 and December 31, 2021, there was no amount and approximately $0.4 million, respectively, outstanding under these arrangements included as Other in the Borrowings table above.
Total costs associated with this arrangement were immaterial for the Successor Periods and for all Predecessor Periods presented and are included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.
Performance Bonds and Other Credit Facilities
The Company has entered into various line of credit arrangements with local banks in France and Germany. These arrangements provide for the issuance of documentary and standby letters of credit of up to €64.5 million ($67.4 million) and €70.3 million ($79.7 million), as of June 30, 2022 and December 31, 2021, respectively, subject to certain local restrictions. As of June 30, 2022 and December 31, 2021 there were €43.4 million ($45.3 million) and €37.7 million ($42.7 million), respectively, of the lines had been utilized to guarantee documentary and standby letters of credit, with interest rates ranging from 0.5% to 2.0%. In addition, the Company posts performance bonds with irrevocable letters of credit to support certain contractual obligations to customers for equipment delivery. These letters of credit are supported by restricted cash accounts, which totaled $1.4 million and $1.3 million as of June 30, 2022 and December 31, 2021, respectively.
At June 30, 2022, contractual principal payments of total third-party borrowings are as follows (in millions):
| | | | | |
| Remainder of 2022 | $ | 4.2 | |
| Fiscal year ending December 31: | |
| 2023 | 8.4 | |
| 2024 | 8.3 | |
| 2025 | 8.2 | |
| 2026 | 9.6 | |
| Thereafter | 790.1 | |
| Gross Payments | 828.8 | |
| Unamortized debt issuance costs | (19.5) | |
| Total third-party borrowings, net of debt issuance costs | $ | 809.3 | |
Notes Payable to Related Parties
Concurrent with the Closing, a portion of the Business Combination Consideration was used to extinguish the Shareholder Notes and the Management Notes in full.
Shareholder and Management Notes – Mirion Technologies (HoldingSub1), Ltd., was authorized to issue $900.0 million (plus accrued paid in-kind (PIK) interest) of notes to shareholders (the “Shareholder Notes”) and up to $5.0 million (plus paid in-kind (PIK) cash and interest) of notes to certain members of management (the “Management Notes”). The notes ranked pari passu between each other and other unsecured obligations of the Company. The notes could be prepaid without penalty at the Company’s option and were subordinate in right of payment to any indebtedness of the Company to banks or to other financial institutions (either currently existing or to occur in the future). Certain of the Shareholder and Management Notes were admitted to trading and were on the official listing of The International Stock Exchange (TISE).
During six month period ended June 30, 2021, no additional Shareholder Notes were admitted to trading and were on the official listing of TISE. There was no trading activity related to Shareholder and Management Notes during six month period ended June 30, 2021.
The notes bore simple annual interest at 11.5%. For the Shareholder Notes, the interest was added to the principal outstanding on December 31 of each year until extinguished and were referred to as Shareholder Funding Bonds on TISE. For the Management Notes, half of the interest was added to the principal outstanding on December 31 of each year until extinguished and was referred to as Management Funding Bonds on TISE, while the remaining half was payable in cash annually. The listing on the TISE for Shareholder and Management Funding Bonds was an optional election and certain shareholders had elected to opt-out of listing their Shareholder Funding Bonds. All other shareholders and management had elected to list their funding bonds on TISE. The notes were due when the Company completes a public offering, a winding-up, a sale, or on March 30, 2026, whichever occurred first. The redemption price was equal to the outstanding principal plus all accrued and unpaid interest then outstanding.
9. Leased Assets
The Company primarily leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers and other equipment. These operating leases generally have remaining lease terms between 1 month and 30 years, and some include options to extend (generally 1 to 10 years). The exercise of lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.
The table below presents the locations of the operating lease assets and liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, respectively (in millions):
| | | | | | | | | | | | | | |
| | | Successor |
| Balance Sheet Line Item | | June 30, 2022 | December 31, 2021 |
| Operating lease assets | Operating lease right-of-use assets | | $ | 42.5 | | $ | 45.7 | |
| Financing lease assets | Other assets | | $ | 0.7 | | $ | 0.9 | |
| | | | |
| Operating lease liabilities: | | | | |
| Current operating lease liabilities | Current operating lease liabilities | | $ | 8.7 | | $ | 9.3 | |
| Non-current operating lease liabilities | Operating lease liability, non-current | | 37.6 | | 40.6 | |
| Total operating lease liabilities: | | | $ | 46.3 | | $ | 49.9 | |
| | | | |
| Financing lease liabilities: | | | | |
| Current financing lease liabilities | Accrued expenses and other current liabilities | | $ | 0.6 | | $ | 0.6 | |
| Non-current financing lease liabilities | Deferred income taxes and other long-term liabilities | | — | | 0.3 | |
| Total financing lease liabilities: | | | $ | 0.6 | | $ | 0.9 | |
The depreciable lives are limited by the expected lease term for operating lease assets and by shorter of either the expected lease term or economic useful life for financing lease assets.
The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. The Company used incremental borrowing rates as of July 1, 2021 for leases that commenced prior to that date.
The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2022 and December 31, 2021, respectively, are:
| | | | | | | | | | | |
| | Successor |
| | June 30, 2022 | December 31, 2021 |
| Operating leases | | | |
| Weighted average remaining lease term (in years) | | 7.2 | 7.5 |
| Weighted average discount rate | | 4.15 | % | 4.19 | % |
The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable operating leases with terms of more than one year to the total lease liabilities recognized on the Condensed Consolidated Balance Sheets as of June 30, 2022 (in millions):
| | | | | |
| Fiscal year ending December 31: | |
| 2022 | $ | 5.4 | |
| 2023 | 9.7 | |
| 2024 | 8.2 | |
| 2025 | 6.8 | |
| 2026 | 5.0 | |
| 2027 and thereafter | 18.6 | |
| Total undiscounted future minimum lease payments | $ | 53.7 | |
| Less: Imputed interest | (7.4) | |
| Total operating lease liabilities | $ | 46.3 | |
| |
For the three and six months ended June 30, 2022, operating lease costs (as defined under ASU 2016-02) were $2.7 million and $5.3 million, respectively. Operating lease costs are included within costs of goods sold, selling, general and administrative, and research and development expenses on the consolidated statements of income and comprehensive income. Short-term lease costs, variable lease costs and sublease income were not material for the periods presented.
Rental expense for operating lease (as defined prior to the adoption of ASC 2016-02) was approximately $2.8 million and $5.6 million for the Predecessor period three and six months ended June 30, 2021, respectively.
Cash paid for amounts included in the measurement of operating lease liabilities was $2.9 million and $5.8 million for the three and six months ended June 30, 2022, respectively, and this amount is included in operating activities in the Condensed Consolidated Statements of Cash Flows. Operating lease assets obtained in exchange for new operating lease liabilities were $2.0 million and $2.9 million for the three and six months ended June 30, 2022, respectively.
10. Commitments and Contingencies
Unconditional Purchase Obligations
The Company has entered into certain long-term unconditional purchase obligations with suppliers. These agreements are non-cancellable and specify terms, including fixed or minimum quantities to be purchased, fixed or variable price provisions, and the approximate timing of payment. As of June 30, 2022, unconditional purchase obligations were as follows (in millions):
| | | | | |
| Fiscal year ending December 31: | |
| 2022 | $ | 19.2 | |
| 2023 | 14.8 | |
| 2024 | 5.2 | |
| 2025 | 3.1 | |
| 2026 | 2.6 | |
| 2027 and thereafter | 0.3 | |
| Total | $ | 45.2 | |
Litigation
The Company is subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. While the ultimate results of such suits or other proceedings against the Company cannot be predicted with certainty, we believe the resolution of these matters will not have a material effect on our results of operations, financial condition, or cash flows. If we believe the likelihood of an adverse legal outcome is probable and the amount is reasonably estimable, we accrue a liability in accordance with accounting guidance for contingencies. We consult with legal counsel on matters related to litigation and seek input both within and outside the Company.
11. Income Taxes
The effective income tax rate was 11.1% and 12.8% for the three and six months ended June 30, 2022 (Successor Period), respectively, and (36.4)% and (8.4)% for the three and six months ended June 30, 2021 (Predecessor Period), respectively. The difference in effective tax rate between the periods was primarily attributable to mix of earnings, certain adjustments for the Successor Period as a result of the Business Combination, and valuation allowances in the Predecessor Period.
The effective income tax rate for the Successor Period differs from the U.S. statutory rate of 21% due primarily to U.S. federal permanent differences. The effective income tax rate for the Predecessor Period differs from the U.K. statutory rate of 19% due primarily to valuation allowances on certain UK losses.
12. Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows
Supplemental cash flow information and schedules of non-cash investing and financing activities (in millions):
| | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 |
| Cash Paid For: | | | | |
| Cash paid for interest | $ | 13.9 | | | | $ | 20.1 | |
| Cash paid for income taxes | 4.5 | | | | 8.9 | |
| Non-Cash Investing and Financing Activities: | | | | |
| Property, plant, and equipment purchases in accounts payable | 1.0 | | | | 0.8 | |
| Acquisition purchases in accrued expense and other liabilities | — | | | | 0.1 | |
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balances Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in millions).
| | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| June 30, | | | December 31, |
| 2022 | | | 2021 |
| Cash and cash equivalents | $ | 90.6 | | | | $ | 84.0 | |
| Restricted cash—current | 0.4 | | | | 0.6 | |
| Restricted cash—non-current | 1.0 | | | | 0.7 | |
| Total cash, cash equivalents, and restricted cash | $ | 92.0 | | | | $ | 85.3 | |
Amounts included in restricted cash represent funds with various financial institutions to support performance bonds with irrevocable letters of credit for contractual obligations to certain customers.
13. Stock-Based Compensation
Stock-based compensation is awarded to employees and directors of the Company and accounted for in accordance with ASC 718, "Compensation—Stock Compensation". Stock-based compensation expense is recognized for equity awards over the vesting period based on their grant-date fair value. Stock-based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported. The Company accounts for forfeitures as they occur. The Company uses various forms of long-term incentives including, but not limited to restricted stock units ("RSUs") and performance-based restricted units ("PSUs"), provided that the granting of such equity awards is in accordance with the Company's 2021 Omnibus Incentive Plan (the "2021 Plan") as filed on Form S-8 with the SEC on December 27, 2021.
2021 Omnibus Incentive Plan
We adopted and obtained stockholder approval at the special meeting of the stockholders on October 19, 2021 of the 2021 Plan. We initially reserved 19,952,329 shares of our Class A common stock for issuance pursuant to awards under the 2021 Plan. The total number of shares of our Class A common stock available for issuance under the 2021 Plan will be increased on the first day of each fiscal year following the date on which the 2021 Plan was adopted in an amount equal to the least of (i) three percent (3%) of the outstanding shares of Class A common stock on the last day of the immediately preceding fiscal year, (ii) 9,976,164 shares of Class A common stock and (iii) such number of shares of Class A common stock as determined by the Committee (as defined and designated under the 2021 Plan) in its discretion. Pursuant to these automatic increase provisions, the number of shares of our Class A common stock reserved for issuance pursuant to awards under the 2021 Plan increased to 24,699,345 shares at January 1, 2022. Any employee, director or consultant of the Company or any of its subsidiaries or affiliates is eligible to receive an award under the 2021 Plan, to the extent that an offer of such award is permitted by applicable law, stock market or exchange rules, and regulations or accounting or tax rules and regulations. The 2021 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, RSUs, PSUs, other share-based awards, or any combination thereof. Each award will be set forth in a separate grant notice or agreement and will indicate the type and terms and conditions of the award.
The purpose of the 2021 Plan is to motivate and reward employees and other individuals to perform at their highest level and contribute significantly to the success of the Company. During the three months ended June 30, 2022, the Company granted 914,216 RSUs and 187,356 PSUs to certain members of the Company's Board of Directors and employees. The RSUs are subject to service vesting conditions with one-third of each award vesting on the anniversary of the grant date such that all awards are fully vested after three (3) years. The PSUs are subject to service and performance/market vesting conditions and allow a maximum issuance of shares of our Class A common stock of up to 200% of the granted PSUs based on the Company meeting certain established thresholds. The recipient will generally forfeit all of the awards if the recipient is no longer providing services to the Company before the end of the performance measurement period on March 31, 2025. Fifty percent (50%) of the PSU awards shall vest based on a market condition determined by the Company’s relative total shareholder return (TSR) during the performance period of April 1, 2022 to March 31, 2025, measured as a comparative percentile to the Company’s peers in the Russell 2000 Industrials index with interpolated achievement levels of: (i) 0% if the TSR percentile is below the 30th percentile level, (ii) between 50% and 100% if the TSR percentile is at least at the 30th percentile level and up to the 55th percentile level and (iii) between 100% and 200% if the TSR percentile is at least at the 56th percentile level and up to the 80th percentile level (or above the 80th percentile level with 200% being the maximum). The remaining fifty percent (50%) of the PSU awards shall vest based on performance condition determined by the Company’s organic revenue growth percentage as measured from April 1, 2024 to March 31, 2025 as compared with April 1, 2022 to March 31, 2023 with interpolated achievement levels of (i) 0% if the organic growth revenue percentage is less than 3.0%, (ii) between 50% and 100% if the organic revenue growth percentage is at least 3.0% and up to 5.0% and (iii) between 100% and 200% if the organic revenue growth percentage is at least 5.0% and up to 7.0% (or above 7.0% but with 200% being the maximum). The expense will be recognized on a straight-line basis over the related service period for each tranche of awards.
During the three and six months ended June 30, 2022, $1.7 million and $2.7 million, respectively, of stock compensation expense was recorded, of which $0.2 million and $0.4 million, respectively was related to non-employee directors.
In addition, during the three and six months ended June 30, 2022, certain members of the Company's Directors elected to receive their quarterly retainer fees in the form of shares of Class A common stock. As such, the Company recorded related stock compensation expense for $0.1 million and $0.2 million, respectively, in the same periods.
Profits Interests
In conjunction with entering into the Business Combination Agreement, on June 17, 2021 the Sponsor issued 4,200,000 Profits Interests to Lawrence Kingsley, the current Chairman of the Board of Directors of the Company, 3,200,000 Profits Interests to Thomas Logan, the Chief Executive Officer of Mirion, and 700,000 Profits Interests to Brian Schopfer, the Chief Financial Officer of Mirion. The Profits Interests are intended to be treated as profits interests for U.S. income tax purposes, pursuant to which Messrs. Logan, Schopfer and Kingsley will have an indirect interest in the founder shares held by the Sponsor.
The Profits Interests are subject to service vesting conditions and market vesting conditions. Fifty percent (50%) of the Profits Interests granted to each of Messrs. Logan and Schopfer service-vest on each of the second and third anniversaries of the Closing, and fifty percent (50%) of the Profits Interests granted to Mr. Kingsley service-vest on each of the first and second anniversaries of the Closing), subject in each case to the continuous service of the grantee on such date. The market vesting conditions require that the price per share of Mirion's Class A common stock must meet or exceed certain established thresholds for 20 out of 30 trading days before the fifth anniversary of the Closing Date). The expense will be recognized on a straight-line basis over the related service period for each tranche of awards.
Of the Profits Interests, 3.2 million have a market vesting threshold price of $12 per share of Mirion Class A common stock, 2.0 million have a threshold price of $14 per share of Mirion Class A common stock, and 3.0 million have a threshold price of $16 per share of Mirion Class A common stock.
During the three and six months ended June 30, 2022, $6.8 million and $13.6 million, respectively, of stock compensation expense was recorded and no new Profit Interests were issued.
14. Related-Party Transactions
Founder Shares
As of the closing of the Business Combination, the Sponsor owned 18,750,000 shares of Class B common stock the ("Founder Shares") which automatically converted into 18,750,000 shares of Class A common stock at the closing of the Business Combination. The Founder Shares, are subject to certain vesting and forfeiture conditions and transfer restrictions, including performance vesting conditions under which the price per share of Mirion's Class A common stock must meet or exceed certain established thresholds of $12, $14, or $16 per share for 20 out of 30 trading days before the
fifth anniversary of the Closing Date of the Business Combination). The Founder Shares will be forfeited to the Company for no consideration if they fail to vest before October 20, 2026.
Private Placement Warrants
The Sponsor purchased an aggregate of 8,500,000 private placement warrants (the "Private Placement Warrants") at a price of $2.00 per whole warrant ($17.0 million in the aggregate) in a private placement (the “Private Placement”) that closed concurrently with the closing of GSAH's initial public offering (the "IPO"). Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment in certain circumstances, including upon the occurrence of certain reorganization events. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Private Placement Warrants are accounted for as liabilities as they contain terms and features that do not qualify for equity classification under ASC 815. See Note 16, Fair Value Measurements, for the fair value of the Private Placement Warrants at June 30, 2022.
Profits Interests
In connection with the Business Combination Agreement, the Sponsor issued 8,100,000 Profits Interests to certain individuals affiliated with or expected to be affiliated with Mirion after the Business Combination. The holders of the Profits Interests will have an indirect interest in the Founder Shares held by the Sponsor. The Profits Interests are subject to service and performance vesting conditions, including the occurrence of the Closing, and do not fully vest until all of the applicable conditions are satisfied. In addition, the Profits Interests are subject to certain forfeiture conditions. See Note 13, Stock-Based Compensation, for further detail regarding the Profits Interests.
Registration Rights
The holders of the Founder Shares and Private Placement Warrants are entitled to registration rights to require the Company to register the resale of any the Founder Shares and the shares underlying the Private Placement Warrants upon exercise pursuant to the Amended and Restated Registration Rights Agreement dated October 20, 2021 (the "RRA"). These holders are also entitled to certain piggyback registration rights. The RRA also includes customary indemnification and confidentiality provisions. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the RRA, including those expenses incurred in connection with the shelf-registration statement on Form S-1 filed on October 27, 2021 and declared effective on November 2, 2021.
Charterhouse Capital Partners LLP
The Company had entered into agreements with its Predecessor Period primary investor, Charterhouse Capital Partners LLP ("CCP"), which obligated the Company to pay quarterly management fees of $0.1 million per year. In return, CCP provided various investment banking services relating to financing arrangements, mergers and acquisitions and other services. During the three and six months ended June 30, 2021 (Predecessor), the Company paid CCP $0.1 million and $0.1 million, respectively, for professional fees and expense reimbursements. Upon the completion of the Business Combination, the agreement with CCP was terminated. Therefore, as of June 30, 2022 the Company had no additional payments for professional fees or expense reimbursements.
15. Segment Information
The following table summarizes select operating results for each reportable segment (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| Revenues | | | | | | | | | |
| Medical | $ | 66.8 | | | | $ | 52.1 | | | $ | 126.9 | | | | $ | 103.6 | |
| Industrial | 109.0 | | | | 127.9 | | | 212.1 | | | | 242.6 | |
| Consolidated Revenues | $ | 175.8 | | | | $ | 180.0 | | | $ | 339.0 | | | | $ | 346.2 | |
| Segment (Loss) Income from Operations | | | | | | | | | |
| Medical | $ | (0.1) | | | | $ | (0.4) | | | $ | (3.6) | | | | $ | (2.7) | |
| Industrial | (45.3) | | | | 29.9 | | | (46.7) | | | | 47.7 | |
| Total Segment (Loss) Income from Operations | (45.4) | | | | 29.5 | | | (50.3) | | | | 45.0 | |
| Corporate and other | (29.2) | | | | (24.8) | | | (57.9) | | | | (49.2) | |
| Consolidated Loss from Operations | $ | (74.6) | | | | $ | 4.7 | | | $ | (108.2) | | | | $ | (4.2) | |
The Company’s assets by reportable segment were not included, as this information is not reviewed by, nor otherwise provided to, the chief operating decision maker to make operating decisions or allocate resources.
The following details revenues by geographic region. Revenues generated from external customers are attributed to geographic regions through sales from site locations (i.e., point of origin) (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| North America | | | | | | | | | |
| Medical | $ | 61.7 | | | | $ | 46.7 | | | $ | 117.3 | | | | $ | 93.9 | |
| Industrial | 49.8 | | | | 61.1 | | | 92.0 | | | | 104.9 | |
| Total North America | 111.5 | | | | 107.8 | | | 209.3 | | | | 198.8 | |
| Europe | | | | | | | | | |
| Medical | 5.1 | | | | 5.4 | | | 9.6 | | | | 9.7 | |
| Industrial | 57.9 | | | | 65.0 | | | 111.1 | | | | 126.7 | |
| Total Europe | 63.0 | | | | 70.4 | | | 120.7 | | | | 136.4 | |
| Asia Pacific | | | | | | | | | |
| Medical | — | | | | — | | | — | | | | — | |
| Industrial | 1.3 | | | | 1.8 | | | 9.0 | | | | 11.0 | |
| Total Asia Pacific | 1.3 | | | | 1.8 | | | 9.0 | | | | 11.0 | |
| Total revenues | $ | 175.8 | | | | $ | 180.0 | | | $ | 339.0 | | | | $ | 346.2 | |
The following details revenues by timing of recognition (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| Point in time | $ | 117.2 | | | | $ | 132.6 | | | $ | 234.2 | | | | $ | 254.0 | |
| Over time | 58.6 | | | | 47.4 | | | 104.8 | | | | 92.2 | |
| Total revenues | $ | 175.8 | | | | $ | 180.0 | | | $ | 339.0 | | | | $ | 346.2 | |
The following details revenues by product category (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenues |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| Medical segment: | | | | | | | | | |
| Medical | $ | 66.8 | | | | $ | 52.1 | | | $ | 126.9 | | | | $ | 103.6 | |
| Industrial segment: | | | | | | | | | |
| Reactor Safety and Control Systems | 34.7 | | | | 42.7 | | | 65.5 | | | | 79.6 | |
| Radiological Search, Measurement, and Analysis Systems | 74.3 | | | | 85.2 | | | 146.6 | | | | 163.0 | |
| Total revenues | $ | 175.8 | | | | $ | 180.0 | | | $ | 339.0 | | | | $ | 346.2 | |
16. Fair Value Measurements
The Company applies fair value accounting to all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The fair value of the Company’s cash and cash equivalents, restricted cash, accounts receivable, and other current assets and liabilities approximates their carrying amounts due to the relatively short maturity of these items. The fair value of third-party notes payable approximates the carrying value because the interest rates are variable and reflect market rates.
Fair Value of Financial Instruments
The Company categorizes assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets based upon the level of judgment associated with inputs used to measure their fair value. It is not practicable due to cost and effort for the Company to estimate the fair value of notes issued to related parties primarily due to the nature of their terms relative to the entity’s capital structure.
Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs are quoted prices in active markets for similar assets or liabilities or inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs are unobservable and require significant management judgment or estimation.
The following table summarizes the financial assets and liabilities of the Company that are measured at fair value on a recurring basis (in millions):
| | | | | | | | | | | | | | | | | |
| Successor |
| Fair Value Measurements at June 30, 2022 |
| Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 92.0 | | | $ | — | | | $ | — | |
| Discretionary retirement plan | 3.1 | | | 0.9 | | | — | |
| Liabilities | | | | | |
| Discretionary retirement plan | 3.1 | | | 0.9 | | | — | |
| Public warrants | 19.7 | | | — | | | — | |
| Private placement warrants | — | | | 8.9 | | | — | |
| | | | | |
| Fair Value Measurements at December 31, 2021 |
| Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 85.3 | | | $ | — | | | $ | — | |
| Discretionary retirement plan | 3.7 | | | 0.8 | | | — | |
| Liabilities | | | | | |
| Discretionary retirement plan | 3.7 | | | 0.8 | | | — | |
| Public warrants | 46.9 | | | — | | | — | |
| Private placement warrants | — | | | 21.2 | | | — | |
As of June 30, 2022 and December 31, 2021, the fair value of Public Warrants issued in connection with GSAH's IPO have been measured based on the listed market price of such Public Warrants, a Level 1 measurement.
As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, we determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
For the six months ended June 30, 2022, the Company recognized an unrealized gain resulting from a decrease in the fair value of the warrant liabilities of $39.5 million, which is presented in the Condensed Consolidated Statements of Operations as change in fair value of warrant liabilities.
17. Loss Per Share
A reconciliation of the numerator and denominator used in the calculation of basic and diluted loss per common share is as follows (in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor | | Successor | | | Predecessor |
| Three Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Six Months Ended June 30, |
| 2022 | | | 2021 | | 2022 | | | 2021 |
| Net loss attributable to Mirion Technologies, Inc. (Successor) / Mirion Technologies (TopCo), Ltd. (Predecessor) shareholders | $ | (58.6) | | | | $ | (53.9) | | | $ | (76.3) | | | | $ | (94.6) | |
| Weighted average common shares outstanding – basic and diluted | 180.992 | | | | 6.621 | | | 180.884 | | | | 6.596 | |
| Net loss per common share attributable to Mirion Technologies, Inc. (Successor) / Mirion Technologies (TopCo), Ltd. (Predecessor) — basic and diluted | $ | (0.32) | | | | $ | (8.14) | | | $ | (0.42) | | | | $ | (14.34) | |
| Anti-dilutive employee share-based awards, excluded | 0.933 | | | 0.217 | | 0.938 | | | 0.242 |
Net loss per share of common stock is computed using the two-class method required for multiple classes of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period has been distributed. Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding, adjusted for the outstanding non-vested shares. Diluted loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company incurred a net loss for the three and six months ended June 30, 2022 and 2021, respectively; therefore, none of the potentially dilutive common shares were included in the diluted share calculations for those periods as they would have been anti-dilutive.
Successor Period
Upon the closing of the Business Combination, the following classes of common stock were considered in the loss per share calculation.
Class A Common Stock
Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. The holders of our Class A common stock do not have cumulative voting rights in the election of directors. Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by the Company's Board of Directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of our Class A common stock will be entitled to receive pro rata our remaining assets available for distribution. Class A common stock issued and outstanding is included in the Company’s basic loss per share calculation, with the exception of Founder Shares discussed below.
Class B Common Stock
Holders of shares of our Class B common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. If at any time the ratio at which shares of IntermediateCo Class B common stock are redeemable or exchangeable for shares of our Class A common stock changes from one-for-one as the number of votes to which our Class B common stockholders are entitled will be adjusted accordingly. The holders of our Class B common stock do not have cumulative voting rights in the election of directors. Except for transfers to us or to certain permitted transferees set forth in the IntermediateCo certificate of incorporation, paired interests may not be sold, transferred or otherwise disposed of.
Holders of shares of our Class B common stock are not entitled to economic interests in us or to receive dividends or to receive a distribution upon our liquidation or winding up. However, if IntermediateCo makes distributions to us other than solely with respect to our Class A common stock, the holders of paired interests will be entitled to receive distributions pro rata in accordance with the percentages of their respective shares of IntermediateCo Class B common stock.
Our Class B common stock has voting rights but no economic interest in the Company and therefore are excluded from the calculation of basic and diluted earnings per share.
Warrants
As described above, the Company has outstanding warrants to purchase up to 27,249,879 shares of Class A common stock. One whole warrant entitles the holder thereof to purchase one share of Mirion Class A common stock at a price of $11.50 per share. The Company’s warrants are not included in the Company’s calculation of basic loss per share and are excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive.
Founder Shares
Founder shares are subject to certain vesting events and forfeit if a required vesting event does not occur within five years of the closing of the Business Combination. The founder shares are subject to vesting in three equal tranches, based on the volume-weighted average price of our Class A common stock being greater than or equal to $12.00, $14.00 and $16.00 per share for any 20 trading days in any 30 consecutive trading day period. Holders of the founder shares are entitled to vote such founder shares and receive dividends and other distributions with respect to such founder shares prior to vesting, but such dividends and other distributions with respect to unvested founder shares will be set aside by the Company and shall only be paid to the holders of the founder shares upon the vesting of such founder shares.
As the holders of the founder shares are not entitled to participate in earnings unless the vesting conditions are met, the 18,750,000 founders shares have been excluded from the calculation of basic earnings per share. The founders shares are also excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive.
Stock-Based Awards
Each stock-based award represents the right to receive a Class A common stock upon vesting of the awards. Per ASC 260, Earnings Per Share ("EPS"), shares issuable for little or no cash consideration upon the satisfaction of certain conditions (i.e. contingently issuable shares) should be included in the computation of basic EPS as of the date that all necessary conditions have been satisfied. As such, any stock-based awards such as RSUs that vest in the Successor Period will be included in the Company's basic loss per share calculations as of the date when all necessary conditions are met.
Predecessor Period
In the Predecessor Periods presented, the rights, including the liquidation, dividend rights, sharing of losses, and voting rights of Mirion TopCo's A Ordinary Shares B Ordinary Shares were identical. As the rights of both classes of shares were identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share attributed to common stockholders is therefore the same for A Ordinary Shares and B Ordinary Shares on an individual or combined basis.
The Company’s participating securities included the Company’s non-vested A Ordinary Shares, as the holders were entitled to non-forfeitable dividend rights in the event a dividend was paid on ordinary shares. The holders of non-vested A Ordinary Shares did not have a contractual obligation to share in losses.
18. Restructuring
The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability, and working capital levels. Actions associated with these initiatives may include improving productivity, workforce reductions, and the consolidation of facilities.
As of June 30, 2022, the Company has identified restructuring actions which will result in additional charges of approximately $0.7 million, primarily in the next 12 months.
The Company’s restructuring expenses are comprised of the following (in millions):
| | | | | | | | | | | | | | | | | |
| Successor |
| Three Months Ended June 30, 2022 |
| Cost of revenue | | Selling, general
and administrative | | Total |
| Severance and employee costs | $ | 0.1 | | | $ | 0.4 | | | $ | 0.5 | |
Other(1) | 0.5 | | | 1.8 | | | 2.3 | |
| Total | $ | 0.6 | | | $ | 2.2 | | | $ | 2.8 | |
| | | | | |
| Six Months Ended June 30, 2022 |
| Cost of revenue | | Selling, general
and administrative | | Total |
| Severance and employee costs | $ | 0.2 | | | $ | 1.3 | | | $ | 1.5 | |
Other(1) | 0.5 | | | 2.8 | | | 3.3 | |
| Total | $ | 0.7 | | | $ | 4.1 | | | $ | 4.8 | |
| | | | | | | | | | | | | | | | | |
| Predecessor |
| Three Months Ended June 30, 2021 |
| Cost of revenue | | Selling, general
and administrative | | Total |
| Severance and employee costs | $ | 0.3 | | | $ | 0.8 | | | $ | 1.1 | |
Other(1) | 0.6 | | | — | | | 0.6 | |
| Total | $ | 0.9 | | | $ | 0.8 | | | $ | 1.7 | |
| | | | | |
| Six Months Ended June 30, 2021 |
| (in millions) | Cost of revenue | | Selling, general
and administrative | | Total |
| Severance and employee costs | $ | 2.2 | | | $ | 0.8 | | | $ | 3.0 | |
Other(1) | 0.6 | | | 0.1 | | | 0.7 | |
| Total | $ | 2.8 | | | $ | 0.9 | | | $ | 3.7 | |
(1) Includes facilities, inventory write-downs, outside services, legal matters, and IT costs.
The Company does not allocate restructuring charges to segment income; instead, these costs are included in Corporate & other.
The following table summarizes the changes in the Company’s accrued restructuring balance, which are included in Accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets (in millions).
| | | | | |
| Successor |
| Balance at December 31, 2021 | $ | 1.4 | |
| Restructuring charges | 4.8 | |
| Payments | (4.4) | |
| Adjustments | — | |
| Balance at June 30, 2022 | $ | 1.8 | |
19. Noncontrolling Interests
On October 20, 2021, Mirion Technologies, Inc. consummated its previously announced Business Combination pursuant to the Business Combination Agreement.
Before the Closing of the Business Combination, the Sellers had the option to elect to have their equity consideration issued as either shares of Class A common stock or Paired Interests. The Sellers receiving shares of Class B common stock also received one share of IntermediateCo Class B common stock per share of Class B common stock as a Paired Interest. Each of the shares of Class A common stock and each Paired Interest were valued at $10.00 per share for purposes of determining the aggregate number of shares issued to the Sellers. Holders of shares of our Class B common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. If at any time the ratio at which shares of IntermediateCo Class B common stock are redeemable or exchangeable for shares of the Company’s our Class A common stock changes from one-for-one, as the number of votes to which our Class B common stockholders are entitled will be adjusted accordingly. The holders of our the Company’s Class B common stock do not have cumulative voting rights in the election of directors. Except for transfers to us or to certain permitted transferees set forth in the IntermediateCo certificate of incorporation, paired interests may not be sold, transferred or otherwise disposed of.
The holders of IntermediateCo Class B common stock have the right to require IntermediateCo to redeem all or a portion of their IntermediateCo Class B common stock for, at the Company’s election, (1) newly issued shares of the Company’s Class A common stock on a one-for-one basis or (2) a cash payment equal to the product of the number of shares of IntermediateCo Class B common stock subject to redemption and the arithmetic average of the closing stock prices for a share of the Company’s Class A common stock for each of three (3) consecutive full trading days ending on and including the last full trading day immediately prior to the date of redemption (subject to customary adjustments, including for stock splits, stock dividends and reclassifications). This redemption right became available upon the expiration of certain lockup restrictions on April 18, 2022. During the three months ended June 30, 2022, 500,000 shares were converted from IntermediateCo Class B common stock to the Company's Class A common stock, resulting in a conversion of $4.9 million from noncontrolling interests to common stock and additional paid-in capital.
At the Closing Date, the Company owned 100% of the voting shares (Class A) of IntermediateCo and approximately 96% of the non-voting Class B shares of IntermediateCo. The Company recognized a noncontrolling interest for the 8,560,540 shares, representing approximately 4% of the non-voting Class B shares, of IntermediateCo that are not attributable to the Company. After the conversion in the current quarter, the Company recognized a noncontrolling interest for the 8,060,540 shares, representing the 3.9% of the non-voting Class B shares of IntermediateCo, that are not attributable to the Company.
As of June 30, 2022, noncontrolling interest was $78.7 million reflected in the Condensed Consolidated Statements of Stockholders’ Equity (Deficit).
20. Subsequent Events
The Company conducted a review for subsequent events and determined that no subsequent events had occurred that would require accrual or additional disclosures.