Platform Specialty Products Corporation (NYSE:PAH) (“Platform” or
the “Company”), a global and diversified specialty chemicals
company, today announced its financial results for the first
quarter ended March 31, 2018.
Executive Commentary
Chief Executive Officer Rakesh Sachdev said,
“Our first quarter results demonstrated strong sales growth
bolstered by healthy end-markets, solid execution and a
translational currency tailwind. In our Performance Solutions
business, net sales grew as our end-markets are generally robust
and our teams continue to execute well. In our Ag business,
we saw a strong continuation of the season in Brazil and a healthy
start of the season in North America and Southern Europe, offset
partially by a cold spring in Eastern Europe. In both
businesses, we saw margin pressure from product mix and inflation
in our raw materials. We have seen the inflationary commodity
environment in late 2017 continue into 2018, and our businesses
continue to take actions to offset this pressure. We remain
confident with respect to our adjusted EBITDA margin expansion
goals for 2018."
Mr. Sachdev continued, “Our outlook for the
remainder of the year is optimistic given healthy end-markets in
our Performance Solutions segment and improving end-markets in
Agricultural Solutions. We are reaffirming our full year
adjusted EBITDA guidance in the range of $870 million to $900
million in that context.”
“Progress against our separation continues with
momentum. We remain committed to this path to create two
standalone businesses with terrific market positions, growth
trajectories and management teams. Strategically, we believe
each of these companies will be better positioned to deliver value
to their customers, and we remain confident that our shareholders
should benefit from value creation from the separation.”
First quarter 2018 Income Statement
Highlights (compared with first quarter 2017):
- Net sales on a reported basis for the first quarter of 2018
were $964 million, an increase of 12%. Organic sales, which
exclude the impact of currency changes and certain metal prices,
increased 5%.- MacDermid Performance Solutions (the Performance
Solutions segment): net sales increased 10% to $492 million.
Organic sales increased 4%.- Arysta LifeScience (the Agricultural
Solutions segment): net sales increased 14% to $472 million.
Organic sales increased 6%.
- First quarter 2018 earnings per share performance:- GAAP
diluted earnings per share was $0.13, as compared to a loss of
$0.09.- Adjusted earnings per share was $0.21, an improvement of
$0.05 per share.
- Reported net income attributable to common stockholders for the
first quarter of 2018 was $37 million, as compared to a net loss of
$24 million.
- Adjusted EBITDA for the first quarter of 2018 was $207 million,
an increase of 7%. On a constant currency basis, adjusted
EBITDA decreased 3%.- MacDermid Performance Solutions: Adjusted
EBITDA was $112 million, an increase of 9%. On a constant
currency basis, adjusted EBITDA increased 2%.- Arysta LifeScience:
Adjusted EBITDA was $95 million, an increase of 5%. On a
constant currency basis, adjusted EBITDA decreased 8%.- Adjusted
EBITDA margin for the combined company decreased by 90 basis points
to 21.5%. On a constant currency basis, adjusted EBITDA
margin decreased by 160 basis points.
2018 Guidance Reaffirmed
Platform reaffirms its previously-provided
adjusted EBITDA guidance for 2018 in the range of $870 million to
$900 million. The mid-point of the guidance represents an
increase of 8% over 2017. This guidance for 2018 is based on
foreign exchange rates as of March 31, 2018.
Conference Call
Platform will host a webcast/dial-in conference
call to discuss its first quarter of 2018 financial results at 8:30
a.m. (Eastern Time) on Thursday, May 3, 2018.
Participants on the call will include Rakesh Sachdev, Chief
Executive Officer; John P. Connolly, Chief Financial Officer;
Benjamin Gliklich, Executive Vice President - Operations and
Strategy; Scot R. Benson, President - Performance Solutions and
Diego Lopez Casanello, President - Agricultural Solutions.
To listen to the call by telephone, please dial
(855) 357-3116 (domestic) or (484) 365-2867 (international) and
provide the Conference ID: 7338228. The call will be
simultaneously webcast
at www.platformspecialtyproducts.com. A replay of the
webcast will be available for three weeks shortly after completion
of the live call at www.platformspecialtyproducts.com.
About Platform
Platform is a global and diversified producer of
high-technology specialty chemicals and provider of technical
services. The business involves the formulation of a broad
range of solutions-oriented specialty chemicals, which are sold
into multiple industries, including automotive, agriculture, animal
health, electronics, graphic arts, and offshore oil and gas
production and drilling. More information on Platform is
available at www.platformspecialtyproducts.com.
Forward-Looking Statements
This release is intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995 as it contains "forward-looking
statements" within the meaning of the federal securities laws.
These statements will often contain words such as "expect,"
"anticipate," "project," "will," "should," "believe," "intend,"
"plan," "estimate," "predict," "seek," "continue," "outlook,"
"may," "might," "should," "can have," "likely," "potential,"
"target," and variations of such words and similar expressions.
Examples of forward-looking statements include, but are not limited
to, statements, beliefs, projections and expectations regarding the
proposed separation of our businesses, the expected form, structure
and timing of the proposed separation and its anticipated benefits,
as well as Platform's adjusted EBITDA and adjusted earnings per
share, expected or estimated organic and net sales, meeting
financial and/or strategic goals and objectives, including
Platform's full year 2018 guidance and adjusted EBITDA margin
expansion goals, segment adjusted EBITDA, net interest expense,
income tax provision, cash flow from operations, full year cash
interest, taxes and capital expenditures, restructuring costs and
other non-cash charges, free cash flow, outlook for Platform's
markets and the demand for its products, and the anticipated impact
of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Reform”) on the
Company’s future earnings and effective tax rate. These projections
and statements are based on management's estimates and assumptions
with respect to future events and financial performance, and are
believed to be reasonable, though are inherently uncertain and
difficult to predict. Actual results could differ materially from
those projected as a result of certain factors, which include,
among others, Platform’s ability to successfully complete the
proposed separation and realize the anticipated benefits from it,
the final form, structure and timing for completion of the proposed
separation, adverse effects on the two companies’ business
operations or financial results and the market price of Platform's
shares as a result of the completion of the proposed separation
and/or announcement and completion of related transactions, market
volatility, legal, tax and regulatory requirements, the impact of
the Tax Reform on the proposed separation and on our businesses,
unanticipated delays and transaction expenses, the impact of the
proposed separation on Platform's employees, customers and
suppliers, the ability of the two companies to operate
independently following the proposed separation, the diverting of
management’s attention from Platform’s ongoing business operations,
overall global economic and business conditions impacting the
businesses of the two companies, as well as capital markets and
liquidity, the possibility of more attractive strategic options
arising in the future, and the impact of any future acquisitions or
additional divestitures, restructurings, refinancings, and other
unusual items, including Platform's ability to raise new debt and
equity and to integrate and obtain the anticipated benefits,
results and synergies from these items or other related strategic
initiatives. Forward-looking statements regarding the anticipated
impact of the Tax Reform on the Company's businesses consist of
preliminary estimates, which are based on currently available
information as well as management's current interpretations,
assumptions and expectations relating to the Tax Reform, and
subject to change, possibly materially, as the Company completes
its analysis. Additional information concerning these and other
factors that could cause actual results to vary is, or will be,
included in Platform's periodic and other reports filed with the
Securities and Exchange Commission. Platform undertakes no
obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
PLATFORM SPECIALTY PRODUCTS
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
|
Three Months Ended March 31, |
(in millions, except
per share amounts) |
2018 |
|
2017 |
Net
sales |
$ |
964.1 |
|
|
$ |
861.8 |
|
Cost of
sales |
559.4 |
|
|
483.4 |
|
Gross
profit |
404.7 |
|
|
378.4 |
|
Operating
expenses: |
|
|
|
Selling,
technical, general and administrative |
277.0 |
|
|
257.4 |
|
Research
and development |
23.5 |
|
|
21.6 |
|
Total operating
expenses |
300.5 |
|
|
279.0 |
|
Operating
profit |
104.2 |
|
|
99.4 |
|
Other expense: |
|
|
|
Interest
expense, net |
(78.2 |
) |
|
(89.4 |
) |
Foreign
exchange gain (loss) |
58.0 |
|
|
(12.6 |
) |
Other
income (expense), net |
19.0 |
|
|
(2.3 |
) |
Total other
expense |
(1.2 |
) |
|
(104.3 |
) |
Income (loss)
before income taxes and non-controlling interests |
103.0 |
|
|
(4.9 |
) |
Income
tax expense |
(65.0 |
) |
|
(18.7 |
) |
Net income
(loss) |
38.0 |
|
|
(23.6 |
) |
Net
income attributable to the non-controlling interests |
(0.7 |
) |
|
(0.8 |
) |
Net income
(loss) attributable to common stockholders |
$ |
37.3 |
|
|
$ |
(24.4 |
) |
Earnings (loss)
per share |
|
|
|
Basic |
$ |
0.13 |
|
|
$ |
(0.09 |
) |
Diluted |
$ |
0.13 |
|
|
$ |
(0.09 |
) |
Weighted
average common shares outstanding |
|
|
|
Basic |
287.9 |
|
|
284.5 |
|
Diluted |
293.8 |
|
|
284.5 |
|
|
|
|
|
|
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)
|
|
|
|
|
March 31, |
|
December 31, |
(in millions) |
2018 |
|
2017 |
Assets |
|
|
|
Cash and cash
equivalents |
$ |
412.6 |
|
|
$ |
477.8 |
|
Accounts receivable,
net |
1,289.4 |
|
|
1,156.0 |
|
Inventories |
611.6 |
|
|
490.4 |
|
Prepaid expenses |
48.4 |
|
|
42.8 |
|
Other current
assets |
190.1 |
|
|
173.6 |
|
Total current assets |
2,552.1 |
|
|
2,340.6 |
|
Property, plant and
equipment, net |
451.0 |
|
|
452.3 |
|
Goodwill |
4,276.4 |
|
|
4,201.2 |
|
Intangible assets,
net |
3,126.6 |
|
|
3,137.3 |
|
Other assets |
141.1 |
|
|
121.0 |
|
Total assets |
$ |
10,547.2 |
|
|
$ |
10,252.4 |
|
Liabilities
& stockholders' equity |
|
|
|
Accounts payable |
$ |
498.1 |
|
|
$ |
461.8 |
|
Current installments of
long-term debt and revolving credit facilities |
116.3 |
|
|
38.9 |
|
Accrued expenses and
other current liabilities |
620.9 |
|
|
591.1 |
|
Total current liabilities |
1,235.3 |
|
|
1,091.8 |
|
Debt and capital lease
obligations |
5,495.2 |
|
|
5,440.6 |
|
Pension and
post-retirement benefits |
70.1 |
|
|
69.0 |
|
Deferred income
taxes |
569.3 |
|
|
579.6 |
|
Contingent
consideration |
79.7 |
|
|
79.2 |
|
Other liabilities |
130.6 |
|
|
132.2 |
|
Total liabilities |
7,580.2 |
|
|
7,392.4 |
|
Stockholders'
equity |
|
|
|
Preferred stock -
Series A |
— |
|
|
— |
|
Common stock: 400.0
shares authorized (2018: 288.1 shares issued; 2017: 287.4 shares
issued) |
2.9 |
|
|
2.9 |
|
Additional paid-in
capital |
4,043.6 |
|
|
4,032.0 |
|
Treasury stock (2018
and 2017: 0.0 shares) |
(0.1 |
) |
|
(0.1 |
) |
Accumulated
deficit |
(833.7 |
) |
|
(871.0 |
) |
Accumulated other
comprehensive loss |
(356.9 |
) |
|
(420.7 |
) |
Total stockholders' equity |
2,855.8 |
|
|
2,743.1 |
|
Non-controlling
interests |
111.2 |
|
|
116.9 |
|
Total equity |
2,967.0 |
|
|
2,860.0 |
|
Total liabilities and stockholders' equity |
$ |
10,547.2 |
|
|
$ |
10,252.4 |
|
|
|
|
|
|
|
|
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
|
|
Three Months Ended March 31, |
(in millions) |
2018 |
|
2017 |
Cash flows from
operating activities: |
|
|
|
Net income (loss) |
$ |
38.0 |
|
|
$ |
(23.6 |
) |
Reconciliation of net
income (loss) to net cash flows used in operating activities: |
|
|
|
Depreciation and amortization |
91.7 |
|
|
85.9 |
|
Deferred
income taxes |
(22.3 |
) |
|
(14.2 |
) |
Foreign
exchange (gain) loss |
(67.5 |
) |
|
13.7 |
|
Other,
net |
(3.2 |
) |
|
12.8 |
|
Changes in assets and
liabilities, net of acquisitions: |
|
|
|
Accounts
receivable |
(133.9 |
) |
|
(120.1 |
) |
Inventories |
(105.2 |
) |
|
(83.9 |
) |
Accounts
payable |
33.1 |
|
|
32.9 |
|
Accrued
expenses |
22.8 |
|
|
(15.9 |
) |
Other
assets and liabilities |
(14.6 |
) |
|
(7.0 |
) |
Net cash
flows used in operating activities |
(161.1 |
) |
|
(119.4 |
) |
Cash flows from
investing activities: |
|
|
|
Capital
expenditures |
(10.0 |
) |
|
(14.9 |
) |
Investment in
registrations of products |
(13.2 |
) |
|
(12.9 |
) |
Proceeds from
beneficial interests on sold accounts receivable |
10.0 |
|
|
0.1 |
|
Proceeds from the sale
of equity investment |
25.0 |
|
|
— |
|
Other, net |
(5.0 |
) |
|
2.4 |
|
Net cash
flows provided by (used in) investing activities |
6.8 |
|
|
(25.3 |
) |
Cash flows from
financing activities: |
|
|
|
Change in lines of
credit, net |
74.5 |
|
|
89.0 |
|
Repayments of
borrowings |
(0.2 |
) |
|
(9.0 |
) |
Other, net |
(0.1 |
) |
|
(1.1 |
) |
Net cash
flows provided by financing activities |
74.2 |
|
|
78.9 |
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
14.1 |
|
|
9.6 |
|
Net decrease in cash, cash equivalents and restricted
cash |
(66.0 |
) |
|
(56.2 |
) |
Cash, cash equivalents
and restricted cash at beginning of period |
483.9 |
|
|
423.5 |
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
417.9 |
|
|
$ |
367.3 |
|
|
|
|
|
Non-cash
Investing Activities |
|
|
|
Beneficial interests
obtained in exchange for sold accounts receivable |
$ |
14.4 |
|
|
$ |
0.6 |
|
|
|
|
|
|
|
|
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONADDITIONAL FINANCIAL
INFORMATION(Unaudited)
|
I.
UNAUDITED SEGMENT RESULTS |
|
Three Months Ended March 31, |
($ amounts in
millions) |
2018 |
|
2017 |
|
Reported |
|
ConstantCurrency |
|
Organic |
Net Sales |
Performance
Solutions |
$ |
492.4 |
|
|
$ |
447.1 |
|
|
10 |
% |
|
3 |
% |
|
4 |
% |
Agricultural
Solutions |
471.7 |
|
|
414.7 |
|
|
14 |
% |
|
6 |
% |
|
6 |
% |
Total |
$ |
964.1 |
|
|
$ |
861.8 |
|
|
12 |
% |
|
5 |
% |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
Performance
Solutions |
$ |
111.8 |
|
|
$ |
102.3 |
|
|
9 |
% |
|
2 |
% |
|
|
Agricultural
Solutions |
95.4 |
|
|
90.8 |
|
|
5 |
% |
|
(8 |
)% |
|
|
Total |
$ |
207.2 |
|
|
$ |
193.1 |
|
|
7 |
% |
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA excluding corporate costs |
Performance
Solutions |
$ |
119.6 |
|
|
$ |
110.1 |
|
|
9 |
% |
|
2 |
% |
|
|
Agricultural
Solutions |
$ |
103.1 |
|
|
$ |
98.7 |
|
|
4 |
% |
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
Constant Currency |
($ amounts in
millions) |
2018 |
|
|
2017 |
|
|
Reported |
|
2018 |
|
|
Change |
Adjusted EBITDA Margin |
Performance
Solutions |
22.7 |
% |
|
22.9 |
% |
|
(20)
bps |
|
22.6 |
% |
|
(30)
bps |
Agricultural
Solutions |
20.2 |
% |
|
21.9 |
% |
|
(170)
bps |
|
19.0 |
% |
|
(290)
bps |
Total |
21.5 |
% |
|
22.4 |
% |
|
(90) bps |
|
20.8 |
% |
|
(160) bps |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin excluding corporate
costs |
Performance
Solutions |
24.3 |
% |
|
24.6 |
% |
|
(30)
bps |
|
24.2 |
% |
|
(40)
bps |
Agricultural
Solutions |
21.9 |
% |
|
23.8 |
% |
|
(190)
bps |
|
20.8 |
% |
|
(300)
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II. UNAUDITED
CAPITAL STRUCTURE |
|
|
|
|
|
|
|
(in millions) |
|
|
Maturity |
|
Coupon |
|
March 31, 2018 |
Instrument |
|
|
|
|
|
|
|
Corporate Revolver |
|
|
6/7/2020 |
|
|
|
$ |
52.0 |
|
Term Loan B6 - USD |
(1) (2) |
|
6/7/2023 |
|
L + 300 |
|
1,135.3 |
|
Term Loan B7 - USD |
(1) |
|
6/7/2020 |
|
L + 250 |
|
630.3 |
|
Term Loan C5 - EUR |
(1) (2) |
|
6/7/2023 |
|
E + 275 |
|
738.6 |
|
Term Loan C6 - EUR |
(1) |
|
6/7/2020 |
|
E + 250 |
|
719.4 |
|
Other Secured Debt |
|
|
|
|
|
|
19.1 |
|
Total First Lien Debt |
|
|
|
|
|
|
3,294.7 |
|
Senior Notes due
2025 |
|
|
12/1/2025 |
|
5.875 |
% |
|
800.0 |
|
Senior Notes due
2022 |
|
|
2/1/2022 |
|
6.5 |
% |
|
1,100.0 |
|
Senior Notes due 2023
(Euro) |
|
|
2/1/2023 |
|
6.0 |
% |
|
431.3 |
|
Other Unsecured
Debt |
|
|
|
|
|
|
50.6 |
|
Total Unsecured Debt |
|
|
|
|
|
|
2,381.9 |
|
Total Debt |
|
|
|
|
|
|
5,676.6 |
|
Cash Balance at
3/31/2018 |
|
|
|
|
|
|
412.6 |
|
Net Debt |
|
|
|
|
|
|
$ |
5,264.0 |
|
Adjusted Shares
Outstanding |
(3) |
|
|
|
|
|
302.0 |
|
Market
Capitalization |
(4) |
|
|
|
|
|
$ |
2,908.3 |
|
Total Capitalization |
|
|
|
|
|
|
$ |
8,172.3 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Platform swapped certain of its floating term loans to fixed rate
including $1.13 billion of its USD tranches and €278 million of its
Euro tranches. At March 31, 2018, approximately 33% of debt
was floating and 67% was fixed. |
(2 |
) |
These term loans mature on June 7, 2023, provided that the Company
prepays, redeems or otherwise retires and/or refinances in full its
6.50% USD Senior Notes due 2022, as permitted under its Amended and
Restated Credit Agreement, on or prior to November 2, 2021,
otherwise the maturity reverts to November 2, 2021. |
(3 |
) |
See "Non-GAAP Adjusted Common Shares at March 31, 2018 and 2017
(Unaudited)" following the Adjusted Earnings Per Share table. |
(4 |
) |
Based on Platform's closing price of $9.63 at March 29, 2018, the
last trading day of Q1 2018. |
|
|
III. SELECTED
FINANCIAL DATA |
|
|
Three Months Ended March 31, |
(in millions) |
2018 |
|
2017 |
Interest expense |
$ |
79.0 |
|
|
$ |
89.9 |
|
Interest paid |
86.4 |
|
|
93.4 |
|
Income tax expense |
65.0 |
|
|
18.7 |
|
Income taxes paid |
47.6 |
|
|
42.6 |
|
Capital
expenditures |
10.0 |
|
|
14.9 |
|
Investment in
registrations of products |
13.2 |
|
|
12.9 |
|
Proceeds from disposal
of property, plant and equipment |
— |
|
|
4.0 |
|
|
|
|
|
|
|
IV. NON-GAAP MEASURES
For purposes of Regulation G, a non-GAAP
financial measure is a numerical measure of a company’s historical
or future financial performance, financial position or cash flows
that excludes amounts, or is subject to adjustments that have the
effect of excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP
in the statements of operations, balance sheets or statements of
cash flows of the company; or includes amounts, or is subject to
adjustments that have the effect of including amounts, that are
excluded from the most directly comparable measure so calculated
and presented.
To supplement the financial measures prepared in
accordance with GAAP, Platform has provided in this release the
following non-GAAP financial measures: EBITDA, adjusted EBITDA,
adjusted EBITDA margin, adjusted EBITDA guidance, adjusted earnings
(loss) per share, and organic sales growth. Platform also
evaluates and presents its results of operations on a constant
currency basis. Management internally reviews each of these
non-GAAP measures to evaluate performance on a comparative
period-to-period basis in terms of absolute performance, trends and
expected future performance with respect to the Company’s business,
and believes that these non-GAAP measures provide investors with an
additional perspective on trends and underlying operating results
on a period-to-period comparable basis. Platform also
believes that investors find this information helpful in
understanding the ongoing performance of its operations separate
from items that may have a disproportionate positive or negative
impact on Platform's financial results in any particular
period. These non-GAAP financial measures, however, have
limitations as analytical tools, and should not be considered in
isolation from, a substitute for, or superior to, the related
financial information that Platform reports in accordance with
GAAP. The principal limitation of these non-GAAP financial
measures is that they exclude significant expenses and income that
are required by GAAP to be recorded in the Company’s financial
statements, and may not be completely comparable to similarly
titled measures of other companies due to potential differences in
the method of calculation between companies. In addition,
these measures are subject to inherent limitations as they reflect
the exercise of judgment by management about which items are
excluded or included in determining these non-GAAP financial
measures. Investors are encouraged to review the
reconciliations of these non-GAAP financial measures to their most
comparable GAAP financial measures included in this press release,
and not to rely on any single financial measure to evaluate
Platform’s businesses.
The Company only provides adjusted EBITDA
guidance and organic sales growth expectations on a non-GAAP basis
and does not provide reconciliations of such forward-looking
non-GAAP measures to GAAP due to the inherent difficulty in
forecasting and quantifying certain amounts that are necessary for
such reconciliations, including adjustments that could be made for
restructurings, refinancings, divestitures, integration and
acquisition-related expenses, share-based compensation amounts,
non-recurring, unusual or unanticipated charges, expenses or gains,
adjustments to inventory and other charges reflected in our
reconciliation of historic numbers, the amount of which, based on
historical experience, could be significant.
Constant Currency:
The Company discloses operating results from net
sales through operating profit on a constant currency basis by
adjusting to exclude the impact of changes due to the translation
of foreign currencies of its international locations into U.S.
dollar. Management believes this non-GAAP financial
information facilitates period-to-period comparison in the analysis
of trends in business performance, thereby providing valuable
supplemental information regarding its results of operations,
consistent with how the Company internally evaluates its financial
results.
The impact of foreign currency translation is
calculated by converting the Company's current-period local
currency financial results into U.S. dollar using the prior
period's exchange rates and comparing these adjusted amounts to its
prior period reported results. The difference between actual
growth rates and constant currency growth rates represents the
impact of foreign currency translation.
Organic Sales Growth:
Organic sales growth is defined as net sales
excluding the impact of foreign currency translation, changes due
to the price of certain metals, and acquisitions and/or
divestitures, as applicable. Management believes this non-GAAP
financial measure provides investors with a more complete
understanding of the underlying net sales trends by providing
comparable sales over differing periods on a consistent basis.
The following tables reconcile GAAP net sales
growth to organic sales growth for the three months ended
March 31, 2018:
|
|
|
Three Months Ended March 31,
2018 |
|
Reported NetSales Growth |
|
Impact ofCurrency |
|
ConstantCurrency |
|
Metals |
|
Acquisitions |
|
Organic SalesGrowth |
Performance
Solutions |
10% |
|
(7)% |
|
3% |
|
1% |
|
—% |
|
4% |
Agricultural
Solutions |
14% |
|
(7)% |
|
6% |
|
—% |
|
—% |
|
6% |
Total |
12% |
|
(7)% |
|
5% |
|
—% |
|
—% |
|
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2018,
metals pricing had a negative impact of $2.6 million on Performance
Solutions' and our consolidated results.
Adjusted Earnings Per
Share:
Adjusted earnings per share is defined as net
loss attributable to common stockholders adjusted to reflect
adjustments consistent with our definition of adjusted
EBITDA. Additionally, the Company eliminates the amortization
associated with (i) intangibles assets recognized in purchase
accounting for acquisitions and (ii) costs capitalized in
connection with obtaining regulatory approval of its products
(“registration rights”) as part of ongoing operations, and deducts
capital expenditures associated with obtaining these registration
rights. Further, the Company adjusts its effective tax rate
to 34% for the first quarter of 2018 and 35% for the first quarter
of 2017, as described in footnote (11) under the reconciliation
table below. The resulting adjusted net income attributable
to common stockholders is then divided by Platform's outstanding
number of shares of common stock plus the number of shares that
would be issued if all Platform's convertible stock was converted
to common stock, stock options were vested and exercised, and
awarded equity grants were vested at each period presented.
Adjusted earnings per share is a key metric used by management to
measure operating performance and trends as it believes the
exclusion of certain expenses in calculating adjusted earnings per
share facilitates operating performance comparisons on a
period-to-period basis.
The following table reconciles GAAP "Net income
(loss) attributable to common stockholders" to "Adjusted net income
attributable to common stockholders" and presents the adjusted
number of common shares used in calculating adjusted earnings per
share for each period presented below:
|
|
|
|
|
Three Months Ended March 31, |
(in millions, except
per share amounts) |
|
2018 |
|
2017 |
Net income
(loss) attributable to common stockholders |
|
$ |
37.3 |
|
|
$ |
(24.4 |
) |
Reversal
of amortization expense |
(1 |
) |
71.9 |
|
|
68.6 |
|
Adjustment for investment in registration of products |
(1 |
) |
(13.2 |
) |
|
(12.9 |
) |
Restructuring expense |
(2 |
) |
3.0 |
|
|
2.3 |
|
Acquisition and integration costs |
(3 |
) |
1.0 |
|
|
3.6 |
|
Non-cash
change in fair value of contingent consideration |
(4 |
) |
0.5 |
|
|
1.1 |
|
Foreign
exchange (gain) loss on foreign denominated external and internal
long-term debt |
(5 |
) |
(55.8 |
) |
|
11.8 |
|
Nonrecourse factoring costs |
(6 |
) |
1.1 |
|
|
0.7 |
|
Debt
refinancing costs |
(7 |
) |
— |
|
|
1.1 |
|
Costs
related to Proposed Separation |
(8 |
) |
3.1 |
|
|
0.2 |
|
Gain on
sale of equity investment |
(9 |
) |
(11.3 |
) |
|
— |
|
Other,
net |
(10 |
) |
(7.3 |
) |
|
1.9 |
|
Tax
effect of pre-tax non-GAAP adjustments |
(11 |
) |
2.4 |
|
|
(27.4 |
) |
Adjustment to estimated effective tax rate |
(11 |
) |
30.0 |
|
|
20.4 |
|
Adjustment to reverse income attributable to certain
non-controlling interests |
(12 |
) |
1.2 |
|
|
1.9 |
|
Adjusted net income attributable to common
stockholders |
|
$ |
63.9 |
|
|
$ |
48.9 |
|
|
|
|
|
|
Adjusted
earnings per share |
(13 |
) |
$ |
0.21 |
|
|
$ |
0.16 |
|
|
|
|
|
|
Adjusted common
shares outstanding |
(13 |
) |
302.0 |
|
|
300.3 |
|
|
|
|
|
|
|
|
|
(1) |
The
Company eliminates amortization associated with (i) intangible
assets recognized in purchase accounting for acquisitions and (ii)
costs capitalized in connection with obtaining regulatory approval
of its products ("registration rights") as part of ongoing
operations, and deducts capital expenditures associated with
obtaining these registration rights. The Company believes
this adjustment provides insight with respect to the cash flows
necessary to maintain and enhance the Company's product
portfolio. |
(2) |
Adjusted for cost of restructuring the Company's operations,
including those related to its acquired businesses in both the
Agricultural Solutions and Performance Solutions segments.
The Company adjusts these costs because they are not considered to
be reflective of ongoing operations. |
(3) |
The
Company adjusts for costs associated with acquisition and
integration activity, including costs of obtaining related
financing such as investment banking, legal and accounting fees,
and transfer taxes. The Company adjusts these costs because
they are not considered to be reflective of ongoing
operations. |
(4) |
The
Company adjusts for the change in fair value of the contingent
consideration related to the acquisition of MacDermid, Incorporated
(the "MacDermid Acquisition"). The Company adjusts this cost
because it is not considered to be reflective of ongoing
operations. |
(5) |
The
Company adjusts for foreign exchanges gains and losses on long-term
intercompany and third-party debt because the period-to-period
movement of these currencies are expected to offset on a long-term
basis and, due to their long-term nature, are not fully
realized. The Company does not exclude foreign exchange gains
and losses on short-term intercompany and third-party payables and
receivables. |
(6) |
The
Company adjusts for costs associated with its non-recourse
receivables factoring programs because they are considered to be
part of the Company's capital structure, comparable to interest
expense. These charges are included in STG&A. |
(7) |
The
Company adjusts for costs related to its term debt refinancing in
2017 because they are not considered to be reflective of ongoing
operations. |
(8) |
The
Company adjusts for costs related to the proposed separation of its
businesses (the "Proposed Separation"), which is expected to be
completed in 2018. The Company adjusts these costs because
they are not considered to be reflective of ongoing
operations. |
(9) |
The
Company adjusts for gain on the sale of equity investment in 2018
because it is not considered to be reflective of ongoing
operations. |
(10) |
2018
adjustments include a $4.8 million favorable adjustment to the
Company's ARO reserve for a facility which is in the process of
closing in connection with a previously terminated supply agreement
related to the acquisition of the Chemtura AgroSolutions
business of Chemtura Corporation and a $3.7 million insurance
gain. 2017 adjustments include non-recurring senior executive
severance payments. The Company adjusts these costs because
they are not considered to be reflective of ongoing
operations. |
(11) |
The
Company adjusts its effective tax rate to 34% for the three months
ended March 31, 2018. This adjustment does not reflect
the Company’s current or near-term tax structure, including
limitations on its ability to utilize net operating losses and
foreign tax credits in certain jurisdictions. These factors
significantly increase the Company's effective tax rate from
34%. As a result of current tax structure, the Company’s
effective tax rate in accordance with GAAP was 63.1% for the three
months ended March 31, 2018. The Company also applies an
effective tax rate of 34% to pre-tax non-GAAP adjustments.
For the three months ended March 31, 2017, before the
enactment of the Tax Reform in December 2017, the Company adjusted
its effective tax rate to 35%. The Company adjusts the
effective tax rates because it believes it provides a meaningful
comparison of its performance between periods. |
(12) |
The
Company adjusts for the loss or income attributable to
non-controlling interest created at the time of the MacDermid
Acquisition because holders of such equity interest are expected to
convert their holdings into shares of Platform's common
stock. The Company adjusts these costs because they are not
considered to be reflective of ongoing operations. |
(13) |
The
Company defines "Adjusted common shares" as the outstanding shares
of Platform's common stock at March 31, 2018 and 2017 plus the
number of shares that would be issued if all convertible stock were
converted into Platform's common stock, stock options were vested
and exercised, and awarded equity grants were vested at
March 31, 2018 and 2017. The Company adjusts the
outstanding shares of Platform's common stock for this calculation
to provide an understanding of the Company’s results of operations
on a per share basis. |
NON-GAAP ADJUSTED COMMON SHARES AT
MARCH 31, 2018 AND 2017 (Unaudited)
The following table shows Platform's adjusted
common shares outstanding at each period presented which consists
of Platform's outstanding number of shares of common stock plus the
number of shares that would be issued if all Platform's convertible
stock was converted to common stock, stock options were vested and
exercised, and awarded equity grants were vested at each period
presented:
|
|
|
|
|
2018 |
|
2017 |
(in millions) |
Q1 |
|
Q1 |
Basic
outstanding common shares |
288.1 |
|
|
285.7 |
|
Number of
shares issuable upon conversion of PDH Common Stock |
4.2 |
|
|
6.4 |
|
Number of
shares issuable upon conversion of Series A Preferred Stock |
2.0 |
|
|
2.0 |
|
Number of
shares issuable upon vesting and exercise of Stock Options |
0.7 |
|
|
0.7 |
|
Number of
shares issuable upon vesting of granted Equity Awards |
7.0 |
|
|
5.5 |
|
Adjusted common shares outstanding |
302.0 |
|
|
300.3 |
|
|
|
|
|
|
|
EBITDA and Adjusted EBITDA:
EBITDA represents earnings before interest,
provision for income taxes, depreciation and amortization.
Adjusted EBITDA is defined as EBITDA, excluding the impact of
additional items, which the Company believes are not representative
or indicative of its ongoing business or are considered to be part
of its capital structure, as described in the footnotes located
under the Adjusted Earnings Per Share reconciliation table
above. Adjusted EBITDA for each segment also includes an
allocation of corporate costs, such as compensation expense and
professional fees, as indicated in this press release under "I.
Unaudited Segment Results." Management believes adjusted
EBITDA and adjusted EBITDA margin provide investors with a more
complete understanding of the long-term profitability trends of
Platform’s business, and facilitate comparisons of its
profitability to prior and future periods. However, these
measures, which do not consider certain cash requirements, should
not be construed as an alternative to net income or cash flow from
operations as a measure of profitability or liquidity.
The following table reconciles GAAP "Net income (loss)
attributable to common stockholders" to Adjusted EBITDA:
|
|
|
|
|
Three Months Ended March 31, |
(in millions) |
|
2018 |
|
2017 |
Net income
(loss) attributable to common stockholders |
|
$ |
37.3 |
|
|
$ |
(24.4 |
) |
Add
(subtract): |
|
|
|
|
Net
income attributable to the non-controlling interests |
|
0.7 |
|
|
0.8 |
|
Income
tax expense |
|
65.0 |
|
|
18.7 |
|
Interest
expense, net |
|
78.2 |
|
|
89.4 |
|
Depreciation expense |
|
19.8 |
|
|
17.3 |
|
Amortization expense |
|
71.9 |
|
|
68.6 |
|
EBITDA |
|
272.9 |
|
|
170.4 |
|
Adjustments to
reconcile to Adjusted EBITDA: |
|
|
|
|
Restructuring expense |
(2 |
) |
3.0 |
|
|
2.3 |
|
Acquisition and integration costs |
(3 |
) |
1.0 |
|
|
3.6 |
|
Non-cash
change in fair value of contingent consideration |
(4 |
) |
0.5 |
|
|
1.1 |
|
Foreign
exchange (gain) loss on foreign denominated external and internal
long-term debt |
(5 |
) |
(55.8 |
) |
|
11.8 |
|
Nonrecourse factoring costs |
(6 |
) |
1.1 |
|
|
0.7 |
|
Debt
refinancing costs |
(7 |
) |
— |
|
|
1.1 |
|
Costs
related to Proposed Separation |
(8 |
) |
3.1 |
|
|
0.2 |
|
Gain on
sale of equity investment |
(9 |
) |
(11.3 |
) |
|
— |
|
Other,
net |
(10 |
) |
(7.3 |
) |
|
1.9 |
|
Adjusted EBITDA |
|
$ |
207.2 |
|
|
$ |
193.1 |
|
|
|
|
|
|
|
|
|
|
NOTE: For the footnote descriptions, please refer to the
footnotes located under the Adjusted Earnings Per Share
reconciliation table above.
CONTACT:
Investor Relations Contact:
Carey DormanSenior Director - Corporate DevelopmentPlatform
Specialty Products Corporation1-561-406-8465
Platform Specialty Products (NYSE:PAH)
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