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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________

FORM 10-Q
_______________

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to                     
 
Commission file number: 001-36272
_______________

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12525194&doc=10

(Exact name of Registrant as specified in its charter)
_______________
Delaware
37-1744899
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
1450 Centrepark Boulevard, Suite 210
West Palm Beach, Florida
33401
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (561) 207-9600
_______________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý      No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý      No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.    
Large accelerated filer ý
Accelerated filer o 
Non-Accelerated filer o  
Smaller reporting company o 
 
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Class
October 26, 2018
Common Stock, par value $0.01 per share
288,329,766 shares



TABLE OF CONTENTS



 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Operations
 
 
Three and Nine Months Ended September 30, 2018 and 2017
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
 
Three and Nine Months Ended September 30, 2018 and 2017
 
Condensed Consolidated Balance Sheets
 
 
September 30, 2018 and December 31, 2017
 
Condensed Consolidated Statements of Cash Flows
 
 
Nine Months Ended September 30, 2018 and 2017
 
Condensed Consolidated Statements of Changes in Stockholders' Equity
 
 
Nine Months Ended September 30, 2018 and 2017
 
 
 
 
 
 
 
 
 
 
 



GLOSSARY OF DEFINED TERMS


Terms    
 
Definitions
Platform; We; Us; Our; the Company; PSP
 
Platform Specialty Products Corporation, a Delaware corporation, and its subsidiaries, collectively.
Amended and Restated Credit Agreement
 
Platform’s Second Amended and Restated Credit Agreement, dated August 6, 2014, among, inter alia, Platform, MacDermid Holdings, LLC, MacDermid, the subsidiaries of Platform and MacDermid Holdings, LLC from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent, as amended and restated from time to time.
Announced Arysta Sale
 
Platform's pending sale of its Agricultural Solutions business, which consists of Arysta and its subsidiaries, to UPL for an aggregate purchase price of $4.2 billion in cash, as announced on July 20, 2018. The Announced Arysta Sale is expected to close in late 2018 or early 2019, subject to customary closing conditions, adjustments and regulatory approvals.
Arysta
 
Arysta LifeScience Inc., parent company of Platform's Agricultural Solutions segment.
Arysta Sale Agreement
 
Stock Purchase Agreement, dated July 20, 2018, between Platform and UPL related to the Announced Arysta Sale.
ASU
 
Accounting Standards Update.
Board
 
Platform’s board of directors.
Credit Facilities
 
First Lien Credit Facility and Revolving Credit Facility, collectively, available under the Amended and Restated Credit Agreement.
DuPont
 
E.I. du Pont de Nemours and Company, now known as DowDuPont Inc.
EBITDA
 
Earnings before interest, taxes, depreciation and amortization.
ESPP
 
Platform Specialty Products Corporation 2014 Employee Stock Purchase Plan.
Exchange Act
 
Securities Exchange Act of 1934, as amended.
FASB
 
Financial Accounting Standard Board.
First Lien Credit Facility
 
First lien credit facility available under the Amended and Restated Credit Agreement.
Founder Entities
 
Mariposa Acquisition, LLC and Berggruen Holdings Ltd. and its affiliates, collectively.
GAAP
 
Generally accepted accounting principles in the United States.
MacDermid
 
MacDermid, Incorporated, a Connecticut corporation.
MacDermid Acquisition
 
Platform’s acquisition on October 31, 2013 of substantially all of the equity of MacDermid Holdings, LLC, which, at the time, owned approximately 97% of MacDermid. As a result, Platform became a holding company for the MacDermid business. Platform acquired the remaining 3% of MacDermid on March 4, 2014, pursuant to the terms of the Exchange Agreement, dated October 25, 2013, between Platform and the fiduciaries of the MacDermid, Incorporated Profit Sharing and Employee Savings Plan.
MacDermid Printing
 
MacDermid Printing Solutions LLC, now known as MacDermid Graphics Solutions LLC.
NYSE
 
New York Stock Exchange.
PDH Common Stock
 
Shares of common stock of Platform Delaware Holdings, Inc., a subsidiary of Platform.
Quarterly Report
 
This quarterly report on Form 10-Q for the three and nine months ended September 30, 2018.
Retaining Holder
 
Each Holder of an equity interest of MacDermid Holdings, LLC immediately prior to the closing of the MacDermid Acquisition, not owned by Platform, who executed a RHSA.
Revolving Credit Facility
 
Revolving credit facility (in U.S. dollars or multicurrency) available under the Amended and Restated Credit Agreement.
RSUs
 
Restricted stock units issued by Platform from time to time under the 2013 Plan.
SEC
 
Securities and Exchange Commission.
Senior Notes
 
Platform's 5.875% USD Notes due 2025, 6.00% EUR Notes due 2023 and 6.50% USD Notes due 2022, collectively.
Series A Preferred Stock
 
2,000,000 shares of Platform’s Series A convertible preferred stock held by the Founder Entities and convertible into shares of Platform’s common stock, on a one-for-one basis, at any time at the option of the Founder Entities.


i


GLOSSARY OF DEFINED TERMS


Terms    
 
Definitions
TCJA
 
Tax Cuts and Jobs Act of 2017
UPL
 
UPL Corporation Ltd., a Mauritius public limited company and a wholly-owned subsidiary of UPL Limited.
2013 Plan
 
Platform Specialty Products Corporation Amended and Restated 2013 Incentive Compensation Plan adopted by the Board on October 31, 2013, as amended on December 16, 2013 and approved by Platform’s stockholders at the annual meeting held on June 12, 2014.
2017 Annual Report
 
Platform's annual report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 28, 2018.
5.875% USD Notes Indenture
 
The indenture, dated November 24, 2017, governing the 5.875% USD Notes due 2025.
5.875% USD Notes due 2025
 
Platform's 5.875% senior notes due 2023, denominated in U.S. dollars, issued on November 24, 2017.
6.00% EUR Senior Notes due 2023
 
Platform’s 6.00% senior notes due 2023 denominated in euros issued on February 2, 2015.
6.50% USD Senior Notes due 2022
 
Platform’s 6.50% senior notes due 2022 denominated in U.S. dollars issued on February 2, 2015.


ii


Discontinued Operations
Unless otherwise specified, the results presented in this Quarterly Report exclude discontinued operations. Discontinued operations relate to Platform's Agricultural Solutions business, which consists of Arysta and its subsidiaries. On July 20, 2018, the Company entered into the Arysta Sale Agreement to sell Arysta to UPL for $4.20 billion in cash, subject to adjustments. Accordingly, Agricultural Solutions' assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the unaudited interim Condensed Consolidated Financial Statements. See Note 4, Discontinued Operations, to the unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report for information related to Agricultural Solutions.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements that can be identified by words such as "expect," "anticipate," "project," "will," "should," "believe," "intend," "plan," "assume," "estimate," "predict," "believe," "seek," "continue," "outlook," "may," "might," "should," "can have," "likely," "potential," "target," "hope" or "hopeful" 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 Arysta Sale, including the timing for completion of this transaction, including the targeted date; the ability of the parties to close this transaction, including obtaining the outstanding regulatory clearances and meeting other closing conditions for the transaction; the amount of any impairment charge required to be recorded and the effect on our results of operations; our intended name change; corporate reorganization; business strategy and potential shares repurchases; cost savings and efficiencies; as well as the impact of new accounting standards and accounting changes; the impact of the TCJA; our dividend policy; the effects of global economic conditions on our business and financial condition; our hedging activities; timing and outcome of environmental and legal matters; our goodwill and other intangible assets; price volatility and cost environment; our liquidity and capital resources; our funding sources; our capital expenditures; our debt; off-balance sheet arrangements and contractual obligations; general views about future operating results; our risk management program; our business and management strategies; future prospects; and other events or developments that we expect or anticipate will occur in the future.
Forward-looking statements are not guarantees of future performance, actions or events, and are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying estimates, assumptions or expectations prove to be inaccurate or are unrealized, actual results may differ materially from those contemplated by these statements. A discussion of such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, "Risk Factors" of our 2017 Annual Report and Part II, Item 1A, "Risk Factors" of this Quarterly Report. Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Please consult any further disclosures we make on related subjects in the Company’s Form 10-K, 10-Q and 8-K reports filed with the SEC.
Non-GAAP Financial Measures
This Quarterly Report contains the following non-GAAP financial measures, such as operating results on a constant currency and organic basis. Non-GAAP financial measures should not be considered in isolation from, as a substitute for, or superior to, performance measures calculated in accordance with GAAP. For definitions of these non-GAAP financial measures and additional information on why we present them, their respective limitations and reconciliations to the most comparable applicable GAAP measures, see "Non-GAAP Financial Measures" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in Part I, Item 2, and Note 15, Segment Information, to the unaudited interim Condensed Consolidated Financial Statements, both included in this Quarterly Report.


iii



PART I. FINANCIAL INFORMATION



Item 1. Condensed Consolidated Financial Statements
 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share amounts)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net sales
$
488.5

 
$
480.6

 
$
1,482.6

 
$
1,390.0

Cost of sales
278.9

 
272.4

 
847.2

 
788.4

Gross profit
209.6

 
208.2

 
635.4

 
601.6

Operating expenses:
 

 
 
 
 

 
 

Selling, technical, general and administrative
139.5

 
140.2

 
424.6

 
420.2

Research and development
10.5

 
11.2

 
33.1

 
33.8

Total operating expenses
150.0

 
151.4

 
457.7

 
454.0

Operating profit
59.6

 
56.8

 
177.7

 
147.6

Other expense:
 

 
 

 
 

 
 

Interest expense, net
(77.9
)
 
(84.7
)
 
(233.4
)
 
(256.3
)
Foreign exchange (loss) gain
(4.7
)
 
(11.2
)
 
0.4

 
(47.5
)
Other (expense) income, net
(0.1
)
 
0.6

 
13.6

 
3.4

Total other expense
(82.7
)
 
(95.3
)
 
(219.4
)
 
(300.4
)
Loss before income taxes and non-controlling interests
(23.1
)
 
(38.5
)
 
(41.7
)
 
(152.8
)
Income tax benefit (expense)
18.8

 
1.6

 
(21.1
)
 
(20.2
)
Net loss from continuing operations
(4.3
)
 
(36.9
)
 
(62.8
)
 
(173.0
)
(Loss) income from discontinued operations, net of tax
(401.6
)
 
(29.4
)
 
(293.3
)
 
23.1

Net loss
(405.9
)
 
(66.3
)
 
(356.1
)
 
(149.9
)
Net income attributable to the non-controlling interests
(3.0
)
 
(2.9
)
 
(3.5
)
 
(4.8
)
Net loss attributable to common stockholders
$
(408.9
)
 
$
(69.2
)
 
$
(359.6
)
 
$
(154.7
)
 
 
 
 
 
 
 
 
(Loss) earnings per share
 

 
 

 
 

 
 

Basic from continuing operations
$
(0.02
)
 
$
(0.13
)
 
$
(0.23
)
 
$
(0.62
)
Basic from discontinued operations
(1.40
)
 
(0.11
)
 
(1.02
)
 
0.08

Basic attributable to common stockholders
$
(1.42
)
 
$
(0.24
)
 
$
(1.25
)
 
$
(0.54
)
 
 
 
 
 
 
 
 
Diluted from continuing operations
$
(0.02
)
 
$
(0.13
)
 
$
(0.23
)
 
$
(0.62
)
Diluted from discontinued operations
(1.40
)
 
(0.11
)
 
(1.02
)
 
0.08

Diluted attributable to common stockholders
$
(1.42
)
 
$
(0.24
)
 
$
(1.25
)
 
$
(0.54
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
 

 
 
 
 

 
 

Basic
288.2

 
286.7

 
288.1

 
285.8

Diluted
288.2

 
286.7

 
288.1

 
285.8


See accompanying notes to the Condensed Consolidated Financial Statements


1


PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In millions)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net loss
$
(405.9
)
 
$
(66.3
)
 
$
(356.1
)
 
$
(149.9
)
 
 

 
 

 
 

 
 

Other comprehensive (loss) income
 
 
 
 
 
 
 
Foreign currency translation:
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax of $0.0 for the three and nine months ended September 30, 2018 and 2017, respectively
(93.3
)
 
126.2

 
(411.9
)
 
269.6

Pension and post-retirement plans:
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax benefit of $2.1 and $0.0 for the three and nine months ended September 30, 2018 and 2017, respectively
0.2

 

 
0.2

 
(0.3
)
Available for sale securities:
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax of $0.0 for the three and nine months ended September 30, 2017
 
 
0.9

 
 
 
(0.8
)
Derivative financial instruments:
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications, net of tax expense of $0.4 and $0.0 for the three months ended September 30, 2018 and 2017, and $3.4 and $0.0 for the nine months ended September 30, 2018 and 2017, respectively
1.5

 
(0.2
)
 
9.3

 
(6.4
)
Reclassifications, net of tax of $0.0 for the three and nine months ended September 30, 2018 and 2017, respectively
(0.4
)
 
2.3

 
0.5

 
8.2

Total unrealized gain arising on qualified hedging derivatives
1.1

 
2.1

 
9.8

 
1.8

Other comprehensive (loss) income
(92.0
)
 
129.2

 
(401.9
)
 
270.3

Comprehensive (loss) income
(497.9
)
 
62.9

 
(758.0
)
 
120.4

Comprehensive loss (income) attributable to the non-controlling interests
6.3

 
(8.3
)
 
39.1

 
(10.6
)
Comprehensive (loss) income attributable to common stockholders
$
(491.6
)
 
$
54.6

 
$
(718.9
)
 
$
109.8

 
See accompanying notes to the Condensed Consolidated Financial Statements


2


PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
 
September 30,
 
December 31,
 
2018
 
2017
Assets
 
 
 
Cash and cash equivalents
$
252.2

 
$
258.4

Accounts receivable, net of allowance for doubtful accounts of $7.8 and $8.2 at September 30, 2018 and December 31, 2017, respectively
400.3

 
399.8

Inventories
210.2

 
186.4

Prepaid expenses and other current assets
59.6

 
63.9

Current assets of discontinued operations
1,545.0

 
1,432.1

Total current assets
2,467.3

 
2,340.6

Property, plant and equipment, net
270.1

 
287.4

Goodwill
2,187.4

 
2,252.6

Intangible assets, net
1,054.4

 
1,160.8

Other assets
28.8

 
42.4

Non-current assets of discontinued operations
3,383.5

 
4,168.6

Total assets
$
9,391.5

 
$
10,252.4

Liabilities and stockholders' equity
 

 
 

Accounts payable
$
112.7

 
$
111.2

Accrued expenses and other current liabilities
171.5

 
215.6

Current liabilities of discontinued operations
842.4

 
764.9

Total current liabilities
1,126.6

 
1,091.7

Debt and capital lease obligations
5,389.9

 
5,437.1

Pension and post-retirement benefits
53.4

 
56.3

Deferred income taxes
145.3

 
170.0

Contingent consideration
81.7

 
79.2

Other liabilities
76.9

 
85.5

Non-current liabilities of discontinued operations
406.4

 
472.6

Total liabilities
7,280.2

 
7,392.4

Commitments and contingencies (Note 12)


 


Stockholders' Equity
 

 
 

Preferred stock - Series A

 

Common stock: 400.0 shares authorized (2018: 288.3 shares issued; 2017: 287.4 shares issued)
2.9

 
2.9

Additional paid-in capital
4,054.0

 
4,032.0

Treasury stock (2018 and 2017: 0.0 shares)
(0.1
)
 
(0.1
)
Accumulated deficit
(1,230.6
)
 
(871.0
)
Accumulated other comprehensive loss
(780.0
)
 
(420.7
)
Total stockholders' equity
2,046.2

 
2,743.1

Non-controlling interests
65.1

 
116.9

Total equity
2,111.3

 
2,860.0

Total liabilities and stockholders' equity
$
9,391.5

 
$
10,252.4


See accompanying notes to the Condensed Consolidated Financial Statements


3


PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities:
 

 
Net loss
$
(356.1
)
 
$
(149.9
)
Net (loss) income from discontinued operations, net of tax
(293.3
)
 
23.1

Net loss from continuing operations
(62.8
)
 
(173.0
)
Reconciliation of net loss from continuing operations to net cash flows used in operating activities:
 

 
 

Depreciation and amortization
118.5

 
116.5

Deferred income taxes
(12.8
)
 
(32.9
)
Foreign exchange (gain) loss
(3.4
)
 
40.6

Other, net
18.2

 
36.9

Changes in assets and liabilities (net of acquisitions):
 
 
 
Accounts receivable
(15.7
)
 
(26.7
)
Inventories
(30.8
)
 
(22.8
)
Accounts payable
4.8

 
6.7

Accrued expenses
(39.9
)
 
(9.9
)
Prepaid expenses and other current assets
10.7

 
(15.2
)
Other assets and liabilities
(13.2
)
 
14.8

Net cash flows used in operating activities of continuing operations
(26.4
)
 
(65.0
)
Cash flows from investing activities:
 

 
 

Capital expenditures
(19.6
)
 
(24.5
)
Proceeds from disposal of property, plant and equipment
1.7

 
14.2

Proceeds from the sale of equity investment
25.0

 

Acquisition of business, net of cash acquired
(28.2
)
 

Other, net
3.1

 
(4.2
)
Net cash flows used in investing activities of continuing operations
(18.0
)
 
(14.5
)
Cash flows from financing activities:
 

 
 

Change in lines of credit, net

 
25.6

Debt proceeds, net of discount and premium

 
1,927.2

Repayments of borrowings
(0.4
)
 
(1,955.5
)
Debt prepayment and debt extinguishment costs

 
(6.1
)
Other, net
(0.4
)
 
(0.3
)
Net cash flows used in financing activities of continuing operations
(0.8
)
 
(9.1
)
Cash flows from discontinued operations:
 
 
 
Net cash flows (used in) provided by operating activities of discontinued operations
(37.0
)
 
133.3

Net cash flows used in investing activities of discontinued operations
(32.5
)
 
(20.7
)
Net cash flows provided by (used in) financing activities of discontinued operations
62.0

 
(66.5
)
Net cash flows (used in) provided by discontinued operations
(7.5
)
 
46.1

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(23.6
)
 
27.3

Net decrease in cash, cash equivalents and restricted cash
(76.3
)
 
(15.2
)
Cash, cash equivalents and restricted cash at beginning of period (1)
483.9

 
423.5

Cash, cash equivalents and restricted cash at end of period (2)
$
407.6

 
$
408.3

(1) Includes cash, cash equivalents and restricted cash of discontinued operations of $225.4 million and $187.4 million at December 31, 2017 and 2016, respectively.
(2) Includes cash, cash equivalents and restricted cash of discontinued operations of $155.4 million and $203.7 million at September 30, 2018 and 2017, respectively.

 See accompanying notes to the Condensed Consolidated Financial Statements


4


PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In millions, except share amounts)
 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total
Stockholders'
Equity
 
Non-
controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2017
2,000,000

 
$

 
287,405,939

 
$
2.9

 
$
4,032.0

 
6,618

 
$
(0.1
)
 
$
(869.7
)
 
$
(422.0
)
 
$
2,743.1

 
$
116.9

 
$
2,860.0

Impact of ASU 2016-01 adoption

 

 

 

 

 

 

 
(1.3
)
 
1.3

 

 

 

Adjusted balance at January 1, 2018
2,000,000

 

 
287,405,939

 
2.9

 
4,032.0

 
6,618

 
(0.1
)
 
(871.0
)
 
(420.7
)
 
2,743.1

 
116.9

 
2,860.0

Net (loss) income

 

 

 

 

 

 

 
(359.6
)
 

 
(359.6
)
 
3.5

 
(356.1
)
Other comprehensive loss, net of taxes

 

 

 

 

 

 

 

 
(359.3
)
 
(359.3
)
 
(42.6
)
 
(401.9
)
Exercise/ vesting of share based compensation

 

 
50,995

 

 

 

 

 

 

 

 

 

Conversion of PDH Common Stock into common stock

 

 
727,069

 

 
9.1

 

 

 

 

 
9.1

 
(9.1
)
 

Issuance of common stock under ESPP

 

 
99,216

 

 
0.9

 

 

 

 

 
0.9

 

 
0.9

Equity compensation expense

 

 

 

 
12.0

 

 

 

 

 
12.0

 

 
12.0

Changes in non-controlling interests

 

 

 

 

 

 

 

 

 

 
(3.6
)
 
(3.6
)
Balance at September 30, 2018
2,000,000

 
$

 
288,283,219

 
$
2.9

 
$
4,054.0

 
6,618

 
$
(0.1
)
 
$
(1,230.6
)
 
$
(780.0
)
 
$
2,046.2

 
$
65.1

 
$
2,111.3


 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total
Stockholders'
Equity
 
Non-
controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2016
2,000,000

 
$

 
284,221,168

 
$
2.8

 
$
3,981.3

 

 
$

 
$
(573.5
)
 
$
(674.5
)
 
$
2,736.1

 
$
153.7

 
$
2,889.8

Net (loss) income

 

 

 

 

 

 

 
(154.7
)
 

 
(154.7
)
 
4.8

 
(149.9
)
Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 
264.5

 
264.5

 
5.8

 
270.3

Exercise/ vesting of share based compensation

 

 
104,625

 

 

 
6,618

 
(0.1
)
 

 

 
(0.1
)
 

 
(0.1
)
Conversion of PDH Common Stock into common stock

 

 
2,674,205

 
0.1

 
32.6

 

 

 

 

 
32.7

 
(32.7
)
 

Issuance of common stock under ESPP

 

 
100,949

 

 
0.9

 

 

 

 

 
0.9

 

 
0.9

Equity compensation expense

 

 

 

 
9.1

 

 

 

 

 
9.1

 

 
9.1

Changes in non-controlling interests

 

 

 

 
2.0

 

 

 

 

 
2.0

 
(3.2
)
 
(1.2
)
Balance at September 30, 2017
2,000,000

 
$

 
287,100,947

 
$
2.9

 
$
4,025.9

 
6,618

 
$
(0.1
)
 
$
(728.2
)
 
$
(410.0
)
 
$
2,890.5

 
$
128.4

 
$
3,018.9


See accompanying notes to the Condensed Consolidated Financial Statements


5


PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


1. BACKGROUND AND BASIS OF PRESENTATION
Background
Platform Specialty Products Corporation was incorporated in Delaware in January 2014 and its shares of common stock, par value $0.01 per share, trade on the NYSE under the ticker symbol “PAH.”
Platform is a global and diversified producer of high-technology specialty chemical products. Platform's business involves the blending of a number of key ingredients to produce proprietary formulations. The Company operates in a wide variety of niche markets across multiple industries, including automotive, electronics, graphics, and offshore oil and gas production and drilling. Platform delivers its products to customers through its sales and service workforce, regional distributors, and manufacturing representatives.
Platform has leading positions in niche segments of high-growth markets. The Company continually seeks opportunities to grow and enhance its strategic position by pursuing inorganic initiatives and focusing on specialty chemical businesses or assets within existing or complementary end-markets, particularly those meeting its “Asset-Lite, High-Touch” philosophy, which involves prioritizing resources to research and development, offering highly-technical sales and customer service, and managing conservatively its capital investments. Platform regularly reviews acquisition opportunities and may acquire businesses that meet its acquisition criteria when it deems it to be financially prudent.
Basis of Presentation
The accompanying unaudited interim Condensed Consolidated Financial Statements and related information in this Quarterly Report include the accounts of Platform and all of its controlled subsidiaries, and have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s 2017 Annual Report. In the opinion of management, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments that are normal, recurring and necessary for a fair presentation of the Company's financial position, results of operations and cash flows for interim periods, but are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the related notes thereto included in the Company’s 2017 Annual Report.
On July 20, 2018, the Company entered into the Arysta Sale Agreement to sell its Agricultural Solutions business to UPL for $4.20 billion. Accordingly, Agricultural Solutions' assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the unaudited interim Condensed Consolidated Financial Statements. See Note 4, Discontinued Operations, for information related to Agricultural Solutions. Subject to the covenants, events of default and provisions discussed in Note 8, Debt, the Company's existing Senior Notes and term loans are not required to be immediately redeemed or repaid in connection with the Announced Arysta Sale. As such, the related liabilities and interest expense are not included in discontinued operations and therefore fully burden continuing operations.
The process of preparing the Company’s unaudited interim Condensed Consolidated Financial Statements requires the use of estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses. These estimates and judgments are based on historical experience, future expectations and other factors as well as assumptions the Company believes to be reasonable under the circumstances. These estimates and judgments are reviewed on an ongoing basis and revised as necessary. Actual amounts may differ materially from these estimates.
Certain other prior year amounts have been reclassified to conform to the current year’s presentation.


6

PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



2. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
Revenue from Contracts with Customers (Topic 606) - In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," as a new FASB Accounting Standards Codification (ASC) Topic 606. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance requires expanded disclosure of qualitative and quantitative information about the Company's revenues from contracts with customers.
The new guidance did not have a material impact on the Company's financial statements since the timing and pattern of revenue recognition predominantly continued to be recognized as the Company’s performance obligation to ship or deliver its products was completed and the transfer of control passes to the customer in accordance with the new standard. The Company adopted the new guidance effective January 1, 2018 using the modified retrospective method. See Note 3, Significant Accounting Policies, to the Company's unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report for more information.
Statement of Cash Flows (Topic 230) - In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments." This ASU was issued to reduce diversity in practice with respect to how certain cash receipts and cash payments are classified and presented in the statement of cash flows. The Company adopted the new guidance effective January 1, 2018 and retrospectively reclassified $6.1 million of cash payments for debt prepayments and debt extinguishment costs from "Cash flows from operating activities" to "Cash flows from financing activities" in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017.
Recently Issued Accounting Pronouncements Not Yet Adopted
Leases (Topic 842) - In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This ASU requires lessees to recognize most leases in their balance sheets, but to record expenses on their income statements in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The two permitted adoption methods under this ASU are the modified retrospective approach, which requires application of the guidance in all comparative periods presented, and the cumulative-effect-adjustment approach, which allows for application at the adoption date without restating prior periods. The Company is in the process of implementing a new software system and corresponding controls for administering its leases and facilitating compliance with the ASU, including the required disclosures, upon adoption. The Company is currently evaluating the impact of this ASU to its financial statements and related disclosures, and expects to utilize the cumulative-effect-adjustment approach.
Derivatives and Hedging (Topic 815) - In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU improves the financial reporting of hedge relationships by updating hedging designation and measurement guidance. The update also simplifies the application of existing hedge accounting guidance related to assessing hedge effectiveness. The guidance is effective prospectively as of January 1, 2019, and is applied to contracts in existence at the date of adoption, with its effects required to be reflected as of January 1 of the year of adoption. The Company is evaluating the impact of this ASU.
3. SIGNIFICANT ACCOUNTING POLICIES
In connection with the Company's adoption of ASU No. 2014-09, "Revenue from Contracts with Customers," and ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities," the Company has updated its significant accounting policies for revenue recognition and equity securities as noted below.
Revenue Recognition The Company recognizes revenue either upon shipment or delivery of product depending on when it is reasonably assured that both title and the risks and rewards of ownership have been passed on to the customer, and the Company's performance obligations have been fulfilled and collectability is reasonably assured. Estimates for sales rebates, incentives and discounts, as well as sales returns and allowances, are accounted for as reductions of revenue when the earnings process is complete.


7

PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



Sales rebates, incentives and discounts are typically earned by customers based on annual sales volume targets. The Company records an estimate for these accruals based on contract terms and its historical experience with similar programs. An estimate for future expected sales returns is recorded based on historical experience with product returns; however, changes to these estimates may be required if the historical data used in the calculation differ from actual experience. Differences between estimated expense and actual costs are typically immaterial and are recognized in earnings in the period such differences are determined. Variable consideration for volume discounts, rebates and returns are recorded as contract liabilities and settled with the customer in accordance with the terms of the applicable contract, typically when annual program requirements are achieved by the customer.
Most performance obligations relate to contracts with a duration of less than one year, in which the Company has the right to invoice the customer at the time the performance obligation is satisfied for the amount of revenue recognized at that time. Accordingly, the Company has elected the practical expedient available under ASC Topic 606, Revenue from Contracts with Customers, not to disclose remaining performance obligations under its contracts. The Company has also elected the practical expedient to expense incremental costs for obtaining contracts with terms of less than one year.
See Note 15, Segment Information, to the Company's unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report for a disaggregation of net sales.
Equity Securities – Equity securities that have readily determinable fair values are classified as available for sale and are carried at fair value. Unrealized holding gains and losses are recorded in the Condensed Consolidated Statements of Operations as "Other (expense) income." Equity securities which do not have readily determinable fair values are recorded at cost and are evaluated whenever events or changes in circumstances indicate that the carrying values of such investments may be impaired. Equity securities are included in the Condensed Consolidated Balance Sheets as "Other assets."
4. DISCONTINUED OPERATIONS
On July 20, 2018, the Company entered into the Arysta Sale Agreement to sell its Agricultural Solutions business, which consists of Arysta and its subsidiaries, to UPL for $4.20 billion in cash, subject to adjustments. The Announced Arysta Sale is currently targeted to close on December 31, 2018, subject to customary closing conditions and outstanding regulatory clearances. The Company expects the Announced Arysta Sale to maximize long-term value for its stockholders by enabling investors to focus on its specific and differentiated high-quality businesses that serve the specialty chemicals industry.
The Agricultural Solutions business was previously its own reportable segment and has been presented for all periods as discontinued operations in this Quarterly Report as the sale represents a significant strategic shift and was determined to have a major effect on the Company's operations and financial results. Previously allocated corporate costs to the Agricultural Solutions segment have been reallocated to the Performance Solutions segment for all periods presented as these costs are not clearly identifiable as costs of the Agricultural Solutions segment.
In the third quarter of 2018, the Company recorded an estimated asset impairment loss of $376 million as the carrying value of its discontinued operations exceeded the estimated fair value less costs to sell. This estimated impairment loss primarily reflected the recognition of foreign currency translation adjustments that have been recorded in "Accumulated Other Comprehensive Loss" within Stockholders’ Equity. The estimated impairment loss reflects Platform’s best estimate of the amount of the charge at this time. The actual loss on sale will be dependent on a number of factors, including foreign exchange rates on the closing date of the Announced Arysta Sale and other closing adjustments.


8

PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



The following table details the components comprising Net income (loss) from the Company's discontinued operations attributable to common stockholders:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 (amounts in millions)
2018
 
2017
 
2018
 
2017
Net sales
$
422.1

 
$
423.7

 
1,414.6

 
1,317.2

Cost of sales
(260.0
)
 
(260.8
)
 
(850.7
)
 
(769.4
)
Selling, technical, general and administrative
(103.6
)
 
(123.9
)
 
(375.5
)
 
(385.6
)
Research and development
(12.0
)
 
(12.2
)
 
(38.9
)
 
(36.3
)
Impairment loss
(376.0
)
 

 
(376.0
)
 

Operating (loss) profit
(329.5
)
 
26.8

 
(226.5
)
 
125.9

Other expense items
(30.3
)
 
(17.1
)
 
(14.5
)
 
(55.7
)
(Loss) income from discontinued operations, before income taxes
(359.8
)
 
9.7

 
(241.0
)
 
70.2

Income tax expense
(41.8
)
 
(39.1
)
 
(52.3
)
 
(47.1
)
(Loss) income from discontinued operations, net of tax
(401.6
)
 
(29.4
)
 
(293.3
)
 
23.1

Net income from discontinued operations attributable to the non-controlling interests
(1.0
)
 
(2.1
)
 
(0.8
)
 
(2.0
)
Net (loss) income from discontinued operations attributable to common stockholders
$
(402.6
)
 
$
(31.5
)
 
$
(294.1
)
 
$
21.1

The carrying value of major classes of assets and liabilities related to the Company's discontinued operations at September 30, 2018 and December 31, 2017 were as follows:
 
September 30,
 
December 31,
 
2018
 
2017
Assets
 
 
 
Cash and cash equivalents
$
151.2

 
$
219.4

Accounts receivable, net
815.4

 
740.5

Inventories
402.1

 
304.0

Other current assets
176.3

 
168.2

Current assets of discontinued operations
$
1,545.0

 
$
1,432.1

 
 
 
 
Property, plant and equipment, net
$
156.2

 
$
164.9

Goodwill
1,784.1

 
1,948.5

Intangible assets, net
1,750.3

 
1,976.5

Other assets (1)
(307.1
)
 
78.7

Non-current assets of discontinued operations
$
3,383.5

 
$
4,168.6

 
 
 
 
Liabilities
 
 
 
Accounts payable
$
329.8

 
$
350.6

Current installments of revolving credit facilities
71.9

 
28.8

Accrued expenses and other current liabilities
440.7

 
385.5

Current liabilities of discontinued operations
$
842.4

 
$
764.9

 
 
 
 
Deferred income taxes
$
357.2

 
$
409.6

Other liabilities
49.2

 
63.0

Non-current liabilities of discontinued operations
$
406.4

 
$
472.6

(1) Includes an estimated impairment loss of $376 million on discontinued operations.


9

PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



5. INVENTORIES
The major components of inventory, on a net basis, were as follows: 
 (amounts in millions)
September 30,
2018
 
December 31,
2017
Finished goods
$
118.4

 
$
107.6

Work in process
15.3

 
14.5

Raw materials and supplies
76.5

 
64.3

Total inventory, net
$
210.2

 
$
186.4


6. PROPERTY, PLANT AND EQUIPMENT
The major components of property, plant and equipment were as follows:
 (amounts in millions)
September 30,
2018
 
December 31,
2017
Land and leasehold improvements
$
67.7

 
$
68.9

Buildings and improvements
101.2

 
94.6

Machinery, equipment, fixtures and software
205.4

 
195.6

Construction in process
16.6

 
18.1

Total property, plant and equipment
390.9

 
377.2

Accumulated depreciation
(120.8
)
 
(89.8
)
Property, plant and equipment, net
$
270.1

 
$
287.4


For the three months ended September 30, 2018 and 2017, the Company recorded depreciation expense of $10.9 million and $12.3 million, respectively. For the nine months ended September 30, 2018 and 2017, the Company recorded depreciation expense of $33.8 million and $34.8 million, respectively.


10

PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill were as follows: