Platform Specialty Products Corporation (NYSE: PAH) (“Platform” or
the “Company”), a global and diversified specialty chemicals
company, today announced its financial results for the second
quarter ended June 30, 2018.
Executive Commentary
Platform’s CEO Rakesh Sachdev stated, “We are
pleased to announce our second quarter financial results that
demonstrated another quarter of strong sales and earnings
growth. Both the Agricultural Solutions and the Performance
Solutions businesses achieved solid organic sales growth in line
with the higher-end of our long-term target range. Once again
this quarter, we achieved positive global organic growth in each of
Performance Solutions’ primary end markets with strong growth in
our Industrial and Offshore business lines. The Agricultural
Solutions segment saw double digit sales growth fueled largely by
growth in the Latin and North America regions. From an
adjusted EBITDA perspective, our Performance Solutions segment
demonstrated healthy margin improvement, while our Agricultural
Solutions business continued to successfully mitigate an
inflationary raw material environment as it grew sales.
Overall, we believe these results demonstrate the health of our
businesses, and we are very pleased with the continued momentum in
both of our segments.”
“With the recently announced agreement to sell
our Agricultural Solutions segment, Arysta LifeScience, the second
half of this year will be an important time for Platform as we
prepare for the separation and start a new chapter with a more
focused and restructured company. For our Performance
Solutions segment, which will form the foundation of our new
company going forward, this means capitalizing on the supportive
macro environment we see in most of our markets and preparing it
for its next phase as Element Solutions Inc. As we recently
announced, we expect Element Solutions, excluding Arysta, to have
an annualized adjusted EBITDA in the range of $450 million to $470
million, after realizing the anticipated benefit of an estimated
$25 million in annualized run-rate cost savings we expect to
achieve in 2019. Achieving these financial and operating
results and finalizing our restructuring plans are key priorities
for the rest of the year.”
Sachdev continued, “For Arysta, we believe our
success should be measured by an effective and efficient transition
that will position the combination of Arysta and UPL as a strong
global crop protection company. Our planning for the future
is already underway, and we are working expeditiously to complete
regulatory filings to ensure a timely closing of the
transaction. At the same time, we will remain focused on
delivering on our financial commitments for both of our businesses
as we implement a successful separation.”
Second quarter 2018 Income Statement
Highlights (compared with second quarter 2017):
- Net sales on a reported basis for the second quarter of 2018
were $1.02 billion, an increase of 9%. Organic sales, which
exclude the impact of currency changes, certain metal prices and
acquisitions, increased 7%.
- MacDermid Performance Solutions (the Performance Solutions
segment): net sales increased 9% to $502 million. Organic
sales increased 5%.
- Arysta LifeScience (the Agricultural Solutions segment): net
sales increased 9% to $521 million. Organic sales increased
10%.
- Second quarter 2018 earnings per share performance:
- GAAP diluted earnings per share was $0.04, as compared to a
loss of $0.21.
- Adjusted earnings per share was $0.26, an improvement of $0.06
per share or 30%.
- Reported net income attributable to common stockholders for the
second quarter of 2018 was $12 million, as compared to a net loss
of $61 million.
- Adjusted EBITDA for the second quarter of 2018 was $226
million, an increase of 10%. On a constant currency basis,
adjusted EBITDA increased 8%.
- MacDermid Performance Solutions: adjusted EBITDA was $117
million, an increase of 14%. On a constant currency basis,
adjusted EBITDA increased 10%.
- Arysta LifeScience: adjusted EBITDA was $109 million, an
increase of 7%. On a constant currency basis, adjusted EBITDA
increased 6%.
- Adjusted EBITDA margin for the combined company improved by 30
basis points to 22.1%. On a constant currency basis, adjusted
EBITDA was steady year-over-year.
2018 Guidance Reaffirmed
Platform reaffirms its prior 2018 adjusted
EBITDA guidance of $870 million to $900 million for consolidated
Platform. Arysta is expected to be reported as a discontinued
operation beginning with Platform’s quarterly report on Form 10-Q
for the three and nine months ended September 30, 2018.
Sale of Arysta LifeScience
On July 20, 2018, Platform entered into a
definitive agreement to sell Platform's Agricultural Solutions
business, which consists of Arysta LifeScience Inc. and its
subsidiaries, to UPL Corporation Ltd. for $4.2 billion in cash,
subject to adjustments. The transaction is expected to close
in late 2018 or early 2019, subject to customary closing conditions
and regulatory approvals.
Conference Call
Platform will host a webcast/dial-in conference
call to discuss its second quarter of 2018 financial results at
8:30 a.m. (Eastern Time) on Thursday, August 2, 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: 9489998. 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
announced sale of Arysta LifeScience and the timing for completion
of this transaction, the ability of the parties to close this
transaction, Platform’s expected accounting classification of the
Agricultural Solutions business and the related accounting
treatment, including the amount and timing of any impairment charge
that it may be required to record and its effect on Platform’s
results of operations, Platform's new chapter and related
initiatives, expected annualized adjusted EBITDA of Element
Solutions Inc., excluding Arysta, after realizing the
anticipated benefit of an estimated $25 million in annualized
run-rate savings expected to be achieved in 2019, achieving
financial and operating results and finalizing restructuring plans,
the transition of the Arysta business to UPL and position of the
combination of Arysta and UPL after the closing, planning for the
future and completion of regulatory filings as well as delivering
on financial commitments, meeting financial and/or strategic
objectives, including Platform's full year 2018 adjusted EBITDA
guidance, 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, assumptions or
expectations 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 expressed or implied in the
forward-looking statements if one or more of the underlying
estimates, assumptions or expectations prove to be inaccurate or
are unrealized. Important factors that could cause actual
results to differ materially from those suggested by the
forward-looking statements include, but are not limited to, the
occurrence of any event, change or other circumstances that could
give rise to the termination of the Arysta transaction; the risk
that the necessary regulatory approvals may not be obtained or may
be delayed or obtained subject to conditions that are not
anticipated; the risk that the transaction will not be consummated
in a timely manner; the risk that Platform will experience
unanticipated delays or difficulties and transaction costs in
consummating the transaction; the risk that any of the closing
conditions to the transaction may not be satisfied in a timely
manner or at all; the risk related to disruption from the
transaction and the related diverting of management’s attention
making it more difficult to maintain business and operational
relationships; the failure to realize the benefits expected from
the transaction or other related strategic initiatives; the impact
of the transaction on Platform's share price and market volatility;
the effect of the announcement of the transaction on the ability of
Platform to retain customers and suppliers, retain or hire key
personnel, and maintain relationships with customers, suppliers and
lenders; the effect of the transaction or the announcement and
completion of related transactions on Platform’s operating results
and businesses generally; the impact of the Tax Reform on
Platform’s businesses; the impact of any future acquisitions or
additional divestitures, restructurings, refinancings, and other
unusual items, including Platform's ability to raise or retire debt
or equity and to integrate and obtain the anticipated benefits,
results and/or synergies from these items or other related
strategic initiatives; and the possibility of more attractive
strategic options arising in the future. 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 June 30, |
|
Six Months Ended June 30, |
(in millions, except
per share amounts) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
sales |
$ |
1,022.5 |
|
|
$ |
941.1 |
|
|
$ |
1,986.6 |
|
|
$ |
1,802.9 |
|
Cost of
sales |
599.6 |
|
|
541.2 |
|
|
1,159.0 |
|
|
1,024.6 |
|
Gross
profit |
422.9 |
|
|
399.9 |
|
|
827.6 |
|
|
778.3 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling,
technical, general and administrative |
280.0 |
|
|
284.3 |
|
|
557.0 |
|
|
541.7 |
|
Research
and development |
25.9 |
|
|
25.1 |
|
|
49.4 |
|
|
46.7 |
|
Total operating
expenses |
305.9 |
|
|
309.4 |
|
|
606.4 |
|
|
588.4 |
|
Operating
profit |
117.0 |
|
|
90.5 |
|
|
221.2 |
|
|
189.9 |
|
Other expense: |
|
|
|
|
|
|
|
Interest
expense, net |
(79.5 |
) |
|
(85.0 |
) |
|
(157.7 |
) |
|
(174.4 |
) |
Foreign
exchange (loss) gain |
(52.2 |
) |
|
(59.9 |
) |
|
5.8 |
|
|
(72.5 |
) |
Other
income, net |
11.9 |
|
|
5.5 |
|
|
30.9 |
|
|
3.2 |
|
Total other
expense |
(119.8 |
) |
|
(139.4 |
) |
|
(121.0 |
) |
|
(243.7 |
) |
(Loss) income
before income taxes and non-controlling interests |
(2.8 |
) |
|
(48.9 |
) |
|
100.2 |
|
|
(53.8 |
) |
Income
tax benefit (expense) |
14.6 |
|
|
(11.1 |
) |
|
(50.4 |
) |
|
(29.8 |
) |
Net income
(loss) |
11.8 |
|
|
(60.0 |
) |
|
49.8 |
|
|
(83.6 |
) |
Net loss
(income) attributable to the non-controlling interests |
0.2 |
|
|
(1.1 |
) |
|
(0.5 |
) |
|
(1.9 |
) |
Net income
(loss) attributable to common stockholders |
$ |
12.0 |
|
|
$ |
(61.1 |
) |
|
$ |
49.3 |
|
|
$ |
(85.5 |
) |
Earnings (Loss)
per share |
|
|
|
|
|
|
|
Basic |
$ |
0.04 |
|
|
$ |
(0.21 |
) |
|
$ |
0.17 |
|
|
$ |
(0.30 |
) |
Diluted |
$ |
0.04 |
|
|
$ |
(0.21 |
) |
|
$ |
0.17 |
|
|
$ |
(0.30 |
) |
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
Basic |
288.2 |
|
|
286.1 |
|
|
288.0 |
|
|
285.3 |
|
Diluted |
298.0 |
|
|
286.1 |
|
|
297.9 |
|
|
285.3 |
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)
|
June 30, |
|
December 31, |
(in millions) |
2018 |
|
2017 |
Assets |
|
|
|
Cash and cash
equivalents |
$ |
442.4 |
|
|
$ |
477.8 |
|
Accounts receivable,
net |
1,243.1 |
|
|
1,156.0 |
|
Inventories |
583.8 |
|
|
490.4 |
|
Prepaid expenses |
47.3 |
|
|
42.8 |
|
Other current
assets |
185.2 |
|
|
173.6 |
|
Total current assets |
2,501.8 |
|
|
2,340.6 |
|
Property, plant and
equipment, net |
429.7 |
|
|
452.3 |
|
Goodwill |
4,043.8 |
|
|
4,201.2 |
|
Intangible assets,
net |
2,896.7 |
|
|
3,137.3 |
|
Other assets |
106.4 |
|
|
121.0 |
|
Total assets |
$ |
9,978.4 |
|
|
$ |
10,252.4 |
|
Liabilities
& stockholders' equity |
|
|
|
Accounts payable |
$ |
464.4 |
|
|
$ |
461.8 |
|
Current installments of
long-term debt and revolving credit facilities |
138.8 |
|
|
38.9 |
|
Accrued expenses and
other current liabilities |
582.4 |
|
|
591.1 |
|
Total current liabilities |
1,185.6 |
|
|
1,091.8 |
|
Debt and capital lease
obligations |
5,402.0 |
|
|
5,440.6 |
|
Pension and
post-retirement benefits |
65.7 |
|
|
69.0 |
|
Deferred income
taxes |
524.9 |
|
|
579.6 |
|
Contingent
consideration |
80.7 |
|
|
79.2 |
|
Other liabilities |
115.1 |
|
|
132.2 |
|
Total liabilities |
7,374.0 |
|
|
7,392.4 |
|
Stockholders'
equity |
|
|
|
Preferred stock -
Series A |
— |
|
|
— |
|
Common stock: 400.0
shares authorized (2018: 288.2 shares issued; 2017: 287.4 shares
issued) |
2.9 |
|
|
2.9 |
|
Additional paid-in
capital |
4,048.6 |
|
|
4,032.0 |
|
Treasury stock (2018
and 2017: 0.0 shares) |
(0.1 |
) |
|
(0.1 |
) |
Accumulated
deficit |
(821.7 |
) |
|
(871.0 |
) |
Accumulated other
comprehensive loss |
(697.3 |
) |
|
(420.7 |
) |
Total stockholders' equity |
2,532.4 |
|
|
2,743.1 |
|
Non-controlling
interests |
72.0 |
|
|
116.9 |
|
Total equity |
2,604.4 |
|
|
2,860.0 |
|
Total liabilities and stockholders' equity |
$ |
9,978.4 |
|
|
$ |
10,252.4 |
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(Unaudited)
|
Three Months Ended |
|
|
Six Months Ended |
(in millions) |
June 30, 2018 |
|
March 31, 2018 |
|
|
June 30, 2018 |
|
June 30, 2017 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
11.8 |
|
|
$ |
38.0 |
|
|
|
$ |
49.8 |
|
|
$ |
(83.6 |
) |
Reconciliation of net
income (loss) to net cash flows used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
91.8 |
|
|
91.7 |
|
|
|
183.5 |
|
|
172.9 |
|
Deferred
income taxes |
0.9 |
|
|
(22.3 |
) |
|
|
(21.4 |
) |
|
(19.9 |
) |
Foreign
exchange loss (gain) |
44.7 |
|
|
(67.5 |
) |
|
|
(22.8 |
) |
|
70.2 |
|
Other,
net |
14.6 |
|
|
(3.2 |
) |
|
|
11.4 |
|
|
41.2 |
|
Changes in assets and
liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
Accounts
receivable |
(19.9 |
) |
|
(133.9 |
) |
|
|
(153.8 |
) |
|
(94.8 |
) |
Inventories |
(7.1 |
) |
|
(105.2 |
) |
|
|
(112.3 |
) |
|
(86.5 |
) |
Accounts
payable |
(8.8 |
) |
|
33.1 |
|
|
|
24.3 |
|
|
41.1 |
|
Accrued
expenses |
(13.4 |
) |
|
22.8 |
|
|
|
9.4 |
|
|
(14.7 |
) |
Prepaid
expenses and other current assets |
(24.2 |
) |
|
(24.1 |
) |
|
|
(48.3 |
) |
|
(24.6 |
) |
Other
assets and liabilities |
(21.0 |
) |
|
9.5 |
|
|
|
(11.5 |
) |
|
(11.6 |
) |
Net cash
flows provided by (used in) operating activities |
69.4 |
|
|
(161.1 |
) |
|
|
(91.7 |
) |
|
(10.3 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Capital
expenditures |
(14.3 |
) |
|
(10.0 |
) |
|
|
(24.3 |
) |
|
(28.7 |
) |
Investment in
registrations of products |
(7.1 |
) |
|
(13.2 |
) |
|
|
(20.3 |
) |
|
(18.1 |
) |
Proceeds from
beneficial interests on sold accounts receivable |
24.2 |
|
|
10.0 |
|
|
|
34.2 |
|
|
2.4 |
|
Proceeds from disposal
of property, plant and equipment |
1.9 |
|
|
— |
|
|
|
1.9 |
|
|
4.0 |
|
Proceeds from the sale
of equity investment |
— |
|
|
25.0 |
|
|
|
25.0 |
|
|
— |
|
Acquisition of
business, net of cash acquired |
(50.0 |
) |
|
— |
|
|
|
(50.0 |
) |
|
(0.3 |
) |
Other, net |
5.8 |
|
|
(5.0 |
) |
|
|
0.8 |
|
|
(4.7 |
) |
Net cash
flows (used in) provided by investing activities |
(39.5 |
) |
|
6.8 |
|
|
|
(32.7 |
) |
|
(45.4 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Change in lines of
credit, net |
31.8 |
|
|
74.5 |
|
|
|
106.3 |
|
|
69.9 |
|
Debt proceeds, net of
discount and premium |
— |
|
|
— |
|
|
|
— |
|
|
1,927.6 |
|
Repayments of
borrowings |
(0.2 |
) |
|
(0.2 |
) |
|
|
(0.4 |
) |
|
(1,946.7 |
) |
Change in on-balance
sheet factoring arrangements |
(2.0 |
) |
|
— |
|
|
|
(2.0 |
) |
|
5.1 |
|
Debt prepayment and
debt extinguishment costs |
— |
|
|
— |
|
|
|
— |
|
|
(5.3 |
) |
Other, net |
(0.6 |
) |
|
(0.1 |
) |
|
|
(0.7 |
) |
|
(8.6 |
) |
Net cash
flows provided by financing activities |
29.0 |
|
|
74.2 |
|
|
|
103.2 |
|
|
42.0 |
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash |
(29.9 |
) |
|
14.1 |
|
|
|
(15.8 |
) |
|
18.4 |
|
Net increase (decrease) in cash, cash equivalents and
restricted cash |
29.0 |
|
|
(66.0 |
) |
|
|
(37.0 |
) |
|
4.7 |
|
Cash, cash equivalents
and restricted cash at beginning of period |
417.9 |
|
|
483.9 |
|
|
|
483.9 |
|
|
423.5 |
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
446.9 |
|
|
$ |
417.9 |
|
|
|
$ |
446.9 |
|
|
$ |
428.2 |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing activities: |
|
|
|
|
|
|
|
|
Beneficial interests
obtained in exchange for sold accounts receivable |
$ |
24.5 |
|
|
$ |
14.4 |
|
|
|
$ |
38.9 |
|
|
$ |
27.7 |
|
PLATFORM SPECIALTY PRODUCTS
CORPORATIONADDITIONAL FINANCIAL
INFORMATION(Unaudited)
I.
UNAUDITED SEGMENT RESULTS |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
($ amounts in
millions) |
2018 |
|
2017 |
|
Reported |
|
Constant Currency |
|
Organic |
|
2018 |
|
2017 |
|
Reported |
|
Constant Currency |
|
Organic |
Net Sales |
Performance
Solutions |
$ |
501.7 |
|
|
$ |
462.3 |
|
|
9% |
|
5% |
|
5% |
|
$ |
994.1 |
|
|
$ |
909.4 |
|
|
9% |
|
4% |
|
4% |
Agricultural
Solutions |
520.8 |
|
|
478.8 |
|
|
9% |
|
10% |
|
10% |
|
992.5 |
|
|
893.5 |
|
|
11% |
|
8% |
|
8% |
Total |
$ |
1,022.5 |
|
|
$ |
941.1 |
|
|
9% |
|
8% |
|
7% |
|
$ |
1,986.6 |
|
|
$ |
1,802.9 |
|
|
10% |
|
6% |
|
6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Solutions |
$ |
116.6 |
|
|
$ |
102.7 |
|
|
14% |
|
10% |
|
|
|
$ |
228.4 |
|
|
$ |
205.0 |
|
|
11% |
|
6% |
|
|
Agricultural
Solutions |
109.4 |
|
|
102.5 |
|
|
7% |
|
6% |
|
|
|
204.8 |
|
|
193.3 |
|
|
6% |
|
(1)% |
|
|
Total |
$ |
226.0 |
|
|
$ |
205.2 |
|
|
10% |
|
8% |
|
|
|
$ |
433.2 |
|
|
$ |
398.3 |
|
|
9% |
|
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA excluding corporate costs |
|
|
|
|
|
|
|
|
|
|
Performance
Solutions |
$ |
123.7 |
|
|
$ |
110.0 |
|
|
12% |
|
9% |
|
|
|
$ |
243.3 |
|
|
$ |
220.1 |
|
|
11% |
|
5% |
|
|
Agricultural
Solutions |
$ |
116.6 |
|
|
$ |
109.8 |
|
|
6% |
|
5% |
|
|
|
$ |
219.7 |
|
|
$ |
208.5 |
|
|
5% |
|
(1)% |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Reported |
|
Constant Currency |
|
Reported |
|
Constant Currency |
($ amounts in
millions) |
2018 |
|
2017 |
|
Change |
|
2018 |
|
Change |
|
2018 |
|
2017 |
|
Change |
|
2018 |
|
Change |
Adjusted EBITDA Margin |
Performance
Solutions |
23.2% |
|
22.2% |
|
100 bps |
|
23.2% |
|
100 bps |
|
23.0% |
|
22.5% |
|
50 |
bps |
|
22.9% |
|
40 |
bps |
Agricultural
Solutions |
21.0% |
|
21.4% |
|
(40) bps |
|
20.6% |
|
(80) bps |
|
20.6% |
|
21.6% |
|
(100) |
bps |
|
19.9% |
|
(170) |
bps |
Total |
22.1% |
|
21.8% |
|
30 bps |
|
21.8% |
|
— bps |
|
21.8% |
|
22.1% |
|
(30) |
bps |
|
21.4% |
|
(70) |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin excluding corporate
costs |
Performance
Solutions |
24.7% |
|
23.8% |
|
90 |
bps |
|
24.6% |
|
80 |
bps |
|
24.5% |
|
24.2% |
|
30 |
bps |
|
24.4% |
|
20 |
bps |
Agricultural
Solutions |
22.4% |
|
22.9% |
|
(50) |
bps |
|
22.0% |
|
(90) |
bps |
|
22.1% |
|
23.3% |
|
(120) |
bps |
|
21.4% |
|
(190) |
bps |
II. UNAUDITED
CAPITAL STRUCTURE |
|
|
|
(in millions) |
|
|
Maturity |
|
Coupon |
|
June 30, 2018 |
Instrument |
|
|
|
|
|
|
|
Corporate Revolver |
|
|
6/7/2020 |
|
|
|
$ |
60.0 |
|
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 |
|
700.4 |
|
Term Loan C6 - EUR |
(1) |
|
6/7/2020 |
|
E + 250 |
|
682.2 |
|
Other Secured Debt |
|
|
|
|
|
|
18.2 |
|
Total First Lien Debt |
|
|
|
|
|
|
3,226.4 |
|
Senior Notes due
2022 |
|
|
2/1/2022 |
|
6.5% |
|
1,100.0 |
|
Senior Notes due 2023
(Euro) |
|
|
2/1/2023 |
|
6% |
|
408.9 |
|
Senior Notes due
2025 |
|
|
12/1/2025 |
|
5.875% |
|
800.0 |
|
Other Unsecured
Debt |
|
|
|
|
|
|
66.2 |
|
Total Unsecured Debt |
|
|
|
|
|
|
2,375.1 |
|
Total Debt |
|
|
|
|
|
|
5,601.5 |
|
Cash Balance |
|
|
|
|
|
|
442.4 |
|
Net Debt |
|
|
|
|
|
|
$ |
5,159.1 |
|
Adjusted Shares
Outstanding |
(3) |
|
|
|
|
|
302.0 |
|
Market
Capitalization |
(4) |
|
|
|
|
|
$ |
3,503.2 |
|
Total Capitalization |
|
|
|
|
|
|
$ |
8,662.3 |
|
(1) |
Platform swapped certain of its floating term loans to
fixed rate including $1.13 billion of its USD tranches and €277
million of its Euro tranches. At June 30, 2018, approximately
32% of debt was floating and 68% 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 June 30, 2018
and 2017 (Unaudited)" following the Adjusted Earnings Per Share
table below. |
(4) |
Based on Platform's closing price of $11.60 at June 29,
2018, the last trading day of Q2 2018. |
III. SELECTED
FINANCIAL DATA |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in millions) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Interest expense |
$ |
80.3 |
|
|
$ |
85.9 |
|
|
$ |
159.3 |
|
|
$ |
175.7 |
|
Interest paid |
64.2 |
|
|
69.9 |
|
|
150.6 |
|
|
163.3 |
|
Income tax (benefit)
expense |
(14.6 |
) |
|
11.1 |
|
|
50.4 |
|
|
29.8 |
|
Income taxes paid |
38.5 |
|
|
41.6 |
|
|
86.1 |
|
|
84.2 |
|
Capital
expenditures |
14.3 |
|
|
13.8 |
|
|
24.3 |
|
|
28.7 |
|
Investment in
registrations of products |
7.1 |
|
|
5.2 |
|
|
20.3 |
|
|
18.1 |
|
Proceeds from disposal
of property, plant and equipment |
1.9 |
|
|
— |
|
|
1.9 |
|
|
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. In addition, this press release contains
certain financial information related to Element Solutions Inc.,
including expected annualized adjusted EBITDA, which reflects
Platform's position as if the Arysta sale had occurred on January
1, 2018 and includes the anticipated benefit of an estimated $25
million in annualized run-rate cost savings expected to be achieved
in 2019. This information is provided for informational
purposes only and is not necessarily, and should not be assumed to
be, an indication of the results that would have been achieved had
the transaction been completed as of January 1, 2018, or that may
be achieved in the future.
Management internally reviews each of the
non-GAAP measures mentioned above 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 its financial results in any
particular period or are considered to be costs associated with its
capital structure. 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 calculation methods. 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 on a non-GAAP basis and does not provide reconciliations
of such forward-looking non-GAAP measure to GAAP due to the
inherent difficulty in forecasting and quantifying certain amounts
that are necessary for such reconciliation, 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 net sales and adjusted
EBITDA 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 reported net
sales growth to organic sales growth for the three and six months
ended June 30, 2018:
|
Three Months Ended June 30, 2018 |
|
Reported Net Sales Growth |
|
Impact of Currency |
|
Constant Currency |
|
Metals |
|
Acquisitions |
|
Organic Sales Growth |
Performance Solutions |
9 |
% |
|
(3 |
)% |
|
5 |
% |
|
— |
% |
|
— |
% |
|
5 |
% |
Agricultural
Solutions |
9 |
% |
|
1 |
% |
|
10 |
% |
|
— |
% |
|
— |
% |
|
10 |
% |
Total |
9 |
% |
|
(1 |
)% |
|
8 |
% |
|
— |
% |
|
— |
% |
|
7 |
% |
|
Six Months Ended June 30, 2018 |
|
Reported Net Sales Growth |
|
Impact of Currency |
|
Constant Currency |
|
Metals |
|
Acquisitions |
|
Organic Sales Growth |
Performance Solutions |
9 |
% |
|
(5 |
)% |
|
4 |
% |
|
— |
% |
|
— |
% |
|
4 |
% |
Agricultural
Solutions |
11 |
% |
|
(3 |
)% |
|
8 |
% |
|
— |
% |
|
— |
% |
|
8 |
% |
Total |
10 |
% |
|
(4 |
)% |
|
6 |
% |
|
— |
% |
|
— |
% |
|
6 |
% |
For the six months ended June 30, 2018,
metals pricing had a negative impact of $2.6 million on Performance
Solutions' results and Platform's consolidated results. For
the three months ended June 30, 2018, the metals pricing
impact was immaterial.
For the three and six months ended June 30,
2018, acquisitions had a positive impact of $1.2 million on
Performance Solutions' results, $0.6 million on Agricultural
Solutions' results, and $1.8 million on Platform's consolidated
results.
Adjusted Earnings Per
Share:
Adjusted earnings per share is defined as net
income (loss) attributable to common stockholders adjusted to
reflect adjustments consistent with the Company's 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 three and six months ended June 30, 2018 and
35% for the three and six months ended June 30, 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 management 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 June 30, |
|
Six Months Ended June 30, |
(in millions, except
per share amounts) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income
(loss) attributable to common stockholders |
|
$ |
12.0 |
|
|
$ |
(61.1 |
) |
|
$ |
49.3 |
|
|
$ |
(85.5 |
) |
Reversal
of amortization expense |
(1) |
73.1 |
|
|
67.3 |
|
|
145.0 |
|
|
135.8 |
|
Adjustment for investment in registration of products |
(1) |
(7.1 |
) |
|
(5.2 |
) |
|
(20.3 |
) |
|
(18.1 |
) |
Restructuring expense |
(2) |
5.2 |
|
|
9.3 |
|
|
8.2 |
|
|
11.6 |
|
Acquisition and integration costs |
(3) |
3.5 |
|
|
0.4 |
|
|
4.5 |
|
|
4.0 |
|
Legal
settlements |
(4) |
— |
|
|
(10.6 |
) |
|
— |
|
|
(10.6 |
) |
Foreign
exchange loss (gain) on foreign denominated external and internal
long-term debt |
(5) |
35.8 |
|
|
57.2 |
|
|
(20.0 |
) |
|
69.0 |
|
Nonrecourse factoring costs |
(6) |
3.3 |
|
|
8.1 |
|
|
4.4 |
|
|
8.8 |
|
Debt
refinancing costs |
(7) |
— |
|
|
12.8 |
|
|
— |
|
|
13.9 |
|
Costs
related to the Announced Arysta Sale |
(8) |
6.7 |
|
|
3.5 |
|
|
9.8 |
|
|
3.7 |
|
Gain on
sale of equity investment |
(9) |
— |
|
|
— |
|
|
(11.3 |
) |
|
— |
|
Other,
net |
(10) |
3.0 |
|
|
1.4 |
|
|
(3.8 |
) |
|
4.4 |
|
Tax
effect of pre-tax non-GAAP adjustments |
(11) |
(42.0 |
) |
|
(50.5 |
) |
|
(39.6 |
) |
|
(77.9 |
) |
Adjustment to estimated effective tax rate |
(11) |
(13.7 |
) |
|
28.2 |
|
|
16.3 |
|
|
48.7 |
|
Adjustment to reverse (loss) income attributable to certain
non-controlling interests |
(12) |
(0.6 |
) |
|
— |
|
|
0.6 |
|
|
1.9 |
|
Adjusted net income attributable to common
stockholders |
|
$ |
79.2 |
|
|
$ |
60.8 |
|
|
$ |
143.1 |
|
|
$ |
109.7 |
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share |
(13) |
$ |
0.26 |
|
|
$ |
0.20 |
|
|
$ |
0.47 |
|
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
Adjusted common
shares outstanding |
(13) |
302.0 |
|
|
300.3 |
|
|
302.0 |
|
|
300.3 |
|
(1) The Company eliminates the 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) The Company adjusts for costs of
restructuring its operations, including those related to its
acquired businesses in both the Performance Solutions and
Agricultural Solutions segments. The Company adjusts these
costs because it believes they are not 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 it believes they are not reflective of
ongoing operations.
(4) The Company adjusts for certain legal
settlements which it believes are not considered reflective of
ongoing operations, including the 2017 settlement agreement between
MacDermid Printing Solutions LLC (now known as MacDermid Graphics
Solutions LLC) and E.I. du Pont de Nemours and Company (now known
as DowDuPont Inc.) which resulted in a net gain of $10.6 million in
2017.
(5) The Company adjusts for foreign
exchanges gains and losses on long-term intercompany and
third-party debt because it expects the period-to-period movement
of these currencies 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 it believes they are part of its capital structure,
comparable to interest expense. These charges are included in
STG&A.
(7) The Company adjusts for costs related
to its 2017 term loans refinancings because it believes they are
not reflective of ongoing operations.
(8) The Company adjusts for costs related
to the announced sale of its Agricultural Solutions segment (the
"Announced Arysta Sale"), which is expected to be completed in late
2018 or in early 2019, subject to customary closing conditions and
regulatory approvals. The Company adjusts these costs because
it believes they are not reflective of ongoing operations.
(9) The Company adjusts for a gain on the
sale of an equity investment in 2018 because it believes it is not
reflective of ongoing operations.
(10) The Company's 2018 adjustments include
a $4.8 million favorable adjustment to its 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, offset in part by a
$4.0 million investment impairment charge. The Company's 2017
adjustments include non-recurring severance for a senior
executive. 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 and six months ended June 30,
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%. The Company also
applies an effective tax rate of 34% to pre-tax non-GAAP
adjustments. For the three and six months ended June 30,
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 income or
loss attributable to non-controlling interest created at the time
of the acquisition of MacDermid, Incorporated because holders of
such equity interest are expected to convert their holdings into
shares of Platform's common stock. The Company adjusts these
non-controlling interests because it believes they are not
reflective of ongoing operations.
(13) The Company defines "Adjusted common
shares" as the outstanding shares of Platform's common stock at
June 30, 2018 and 2017 plus the number of shares that would be
issued if all Platform's convertible stock were converted into
common stock, stock options were vested and exercised, and awarded
equity grants were vested at June 30, 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. See table below
for further information.
NON-GAAP ADJUSTED COMMON SHARES AT
JUNE 30, 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:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in millions) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Basic
outstanding common shares |
288.2 |
|
|
286.3 |
|
|
288.2 |
|
|
286.0 |
|
Number of
shares issuable upon conversion of PDH Common Stock |
4.1 |
|
|
5.8 |
|
|
4.1 |
|
|
6.1 |
|
Number of
shares issuable upon conversion of Series A Preferred Stock |
2.0 |
|
|
2.0 |
|
|
2.0 |
|
|
2.0 |
|
Number of
shares issuable upon vesting and exercise of Stock Options |
0.7 |
|
|
0.7 |
|
|
0.7 |
|
|
0.7 |
|
Number of
shares issuable upon vesting of granted Equity Awards |
7.0 |
|
|
5.4 |
|
|
7.0 |
|
|
5.5 |
|
Adjusted common shares outstanding |
302.0 |
|
|
300.3 |
|
|
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 alternatives to net income or cash flow from
operations as measures of profitability or liquidity.
The following table reconciles GAAP "Net income (loss)
attributable to common stockholders" to Adjusted EBITDA:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in millions) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income
(loss) attributable to common stockholders |
|
$ |
12.0 |
|
|
$ |
(61.1 |
) |
|
$ |
49.3 |
|
|
$ |
(85.5 |
) |
Add
(subtract): |
|
|
|
|
|
|
|
|
Net
(loss) income attributable to the non-controlling interests |
|
(0.2 |
) |
|
1.1 |
|
|
0.5 |
|
|
1.9 |
|
Income
tax (benefit) expense |
|
(14.6 |
) |
|
11.1 |
|
|
50.4 |
|
|
29.8 |
|
Interest
expense, net |
|
79.5 |
|
|
85.0 |
|
|
157.7 |
|
|
174.4 |
|
Depreciation expense |
|
18.7 |
|
|
19.7 |
|
|
38.5 |
|
|
37.1 |
|
Amortization expense |
|
73.1 |
|
|
67.3 |
|
|
145.0 |
|
|
135.8 |
|
EBITDA |
|
168.5 |
|
|
123.1 |
|
|
441.4 |
|
|
293.5 |
|
Adjustments to
reconcile to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Restructuring expense |
(2) |
5.2 |
|
|
9.3 |
|
|
8.2 |
|
|
11.6 |
|
Acquisition and integration costs |
(3) |
3.5 |
|
|
0.4 |
|
|
4.5 |
|
|
4.0 |
|
Legal
settlements |
(4) |
— |
|
|
(10.6 |
) |
|
— |
|
|
(10.6 |
) |
Foreign
exchange loss (gain) on foreign denominated external and internal
long-term debt |
(5) |
35.8 |
|
|
57.2 |
|
|
(20.0 |
) |
|
69.0 |
|
Nonrecourse factoring costs |
(6) |
3.3 |
|
|
8.1 |
|
|
4.4 |
|
|
8.8 |
|
Debt
refinancing costs |
(7) |
— |
|
|
12.8 |
|
|
— |
|
|
13.9 |
|
Costs
related to the Announced Arysta Sale |
(8) |
6.7 |
|
|
3.5 |
|
|
9.8 |
|
|
3.7 |
|
Gain on
sale of equity investment |
(9) |
— |
|
|
— |
|
|
(11.3 |
) |
|
— |
|
Other,
net |
(10) |
3.0 |
|
|
1.4 |
|
|
(3.8 |
) |
|
4.4 |
|
Adjusted EBITDA |
|
$ |
226.0 |
|
|
$ |
205.2 |
|
|
$ |
433.2 |
|
|
$ |
398.3 |
|
NOTE: For footnote descriptions, please refer to the footnotes
located under the Adjusted Earnings Per Share reconciliation table
above.
CONTACT:
Investor Relations Contact:
Carey DormanCorporate Treasurer and VP, Investor
RelationsPlatform Specialty Products Corporation1-561-406-8465
Media Contact:
Liz CohenManaging DirectorKekst1-212-521-4845
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