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Platform Specialty Products Corporation announces second quarter 2014 financial results


Miami, Florida, USA
August 6, 2014

Platform Specialty Products Corporation (NYSE:PAH) ("Platform" or "the Company"), a global specialty chemicals company, announced today its financial results for the three and six months ended June 30, 2014.

For the three months ended June 30, 2014:

  • Record quarterly adjusted EBITDA of $48.2 million. Year-over-year adjusted gross profit and adjusted net income growth of 0.2% and 12.0%, respectively.
  • Recurring Free Cash Flow of $33.6 million or $0.22 per share.
  • Net sales of $189 million compared with $190 million for the same period in 2013.
  • Adjusted earnings per diluted share were $0.18 vs. $0.16 for the same period in 2013.
  • Announced entry into agreements to acquire Chemtura AgroSolutions ("CAS") and the Agriphar Group ("Agriphar"). Both transactions are expected to close in Q4 2014, subject to the satisfaction of certain conditions.

For the six months ended June 30, 2014:

  • Net sales of $373 million, a year-over-year increase of $0.7 million.
  • Adjusted gross profit of $193 million, up 1.6% year-over-year, with an adjusted gross profit margin of 51.7% vs. 51.0% for the same period in 2013.
  • Record 6-month adjusted EBITDA of $94.1 million.
  • Adjusted earnings per diluted share were $0.33 vs. $0.29 for the same period in 2013.
  • Recurring Free Cash Flow of $60.4 million or $0.40 per share.

Daniel H. Leever, Platform's Chief Executive Officer, commented, "We have accomplished a great deal so far in 2014. We exceeded our expectations financially in terms of earnings and cash generation. In April we announced an agreement to acquire Chemtura Corporation's CAS business. We are tracking to close this transaction in Q4. Our enthusiasm for the Agro chemical space is evidenced by our announcement earlier today to acquire Agriphar Group, a premier European Agro chemical business. This high quality bolt-on is expected to generate operating synergies and that combining CAS and Agriphar is expected to strengthen both businesses. We continue to evaluate compelling acquisition opportunities and remain steadfast in our disciplined approach to building a portfolio of true market leaders in niche verticals."

Frank J. Monteiro, Platform's Chief Financial Officer, added, "Our ability to successfully execute our asset-lite/high-touch business model has proven itself once again. Despite headwinds in our South American businesses and the continuing anticipated reductions in our Publication and Coating Plates business, we generated record EBITDA and $33.6 million of recurring free cash flow this quarter. This represented more than 70% conversion of adjusted EBITDA into cash. In addition to our strong financial performance in the quarter and the two announced acquisitions, we completed a successful equity offering, finalized our bank financing, reduced our effective tax rate and added key personnel to strengthen our management bench strength."

On May 21st Platform successfully completed a $300.2 million PIPE (Private Placement) equity offering where an additional 15.8 million shares of common stock were issued at $19.00 per share and proceeds being used for general corporate purposes. All adjusted earnings per diluted share calculations for the three-month and six-month periods ending June 30th take this issuance into account accordingly.

Platform is in the process of negotiating an amendment with respect to its existing Amended and Restated Credit Agreement dated October 31, 2013 with Barclays Bank PLC and other lenders. If signed, this amendment would : (i) amend and restate the Company's existing Amended and Restated Credit Agreement to provide the Company with additional flexibility with respect to permitted acquisitions and certain limiting covenants and (ii) provide for certain prospective amendments to be made to the credit agreement upon the consummation of the CAS acquisition and satisfaction of certain other conditions, which would allow for an incremental expansion of Platform's senior credit facilities by increasing its USD Tranche B Facility by $130 million ,establishing a €205 million Euro Tranche Facility (approximately $275 million), and by upsizing its undrawn Revolving Credit Facility from its previous limit of $50 million to a new limit of $175 million. The further details of this transaction will be reported under a Current Report on Form 8-K if and when closed. There can be no assurances that the foregoing amendments will become effective either on these terms or at all.

During the quarter, Platform successfully reduced its effective tax rate (ETR) from 33% to 25% and on a 6-month basis, from 33% to 29%. Platform is focused on optimizing its' ETR and cash paid taxes and will be introducing more efficient tax structures in the near term.

The company has presented both US GAAP and adjusted financials to better provide investors with measures that allow them to more readily compare the performance of the Company. These adjusted amounts will provide investors insight into the cash generated from operations after taking into consideration reinvestment in the business for Free Cash Flow, Recurring Free Cash Flow, and Adjusted EBITDA.

Financial Results

Net Sales

For the three months ended June 30, 2014:

Net sales were $189 million for the second quarter 2014, a decrease of $0.9 million, or 0.5%, compared to MacDermid's (the Predecessor) prior year period. Net sales of new products, which represent opportunities to enter markets adjacent to those we currently serve, were $22.4 million for the three months ended June 2014 compared to $18.6 million for the same period in 2013.

Net sales in the Performance Materials segment increased by $1.8 million, or 1.2%, as compared to the same period in 2013. The increase in net sales is primarily attributable to strong demand for core Industrial Solutions products in North America and Europe during the three month period which were partially offset by a reduction in sales of Offshore Solutions and Industrial Solutions products in South America. Net sales in the Graphic Solutions segment decreased by $2.7 million, or 6.1%, as compared to the Predecessor Quarterly Period. The decrease in net sales is primarily attributable to continuing lower demand for newspaper plating products.

For the six months ended June 30, 2014:

Net sales were $373 million for the six months ended 2014, an increase of $0.7 million, or 0.2%, compared to MacDermid's (the Predecessor) prior year period. Net sales of new products, which represent opportunities to enter markets adjacent to those we currently serve, were $43.7 million for the six months ended June 2014, compared to $36.4 million for the same period in 2013.

Net sales in the Performance Materials segment increased by $6.1 million, or 2.1%, as compared to the same period in 2013. The increase in net sales is primarily attributable to strong demand for core Industrial Solutions products in North America and Europe and higher sales of Electronic Solutions products in Asia during the period and were partially offset by lower sales of Offshore Fluids and Industrial Solutions products in South America. Net sales in the Graphic Solutions segment decreased by $5.4 million, or 6.1%, as compared to the same period in 2013. The decrease in net sales is primarily attributable to lower demand for newspaper plating products.

Gross Profit

For the three months ended June 30, 2014:

Gross profit of $96.7 million increased in the period by $0.1 million, or 0.2%, as compared to the same period in 2013 and was favorably impacted by foreign currency translation of approximately $1.0 million as compared to the same period in 2013. Gross profit was 51.1% in the period as compared to 50.8% for the prior year.

For the six months ended June 30, 2014:

Gross profit of $181 million decreased by $8.9 million, or 4.7%, as compared to the same period in 2013. The decrease in gross profit is primarily attributable to the elimination of manufacturer's profit in inventory charged to cost of sales in connection with the previously discussed acquisition of MacDermid by Platform on October 31, 2013 (the "MacDermid Acquisition"). Adjusted gross profit of $193 million increased by $3.0 million or 1.6% with a margin percentage of 51.7% in the period as compared to 51.0% for the same period in 2013 with the increase primarily due to favorable changes in product mix.

Operating Expenses

For the three months ended June 30, 2014:

Operating expense increased in the period by $31.2 million, or 52.0%, as compared to the same period in the prior year. The increase in operating expenses is primarily attributable to a fair value adjustment to the long-term contingent consideration liability of $10.8 million and incremental amortization expense on newly valued intangible assets associated with the MacDermid Acquisition of approximately $9.3 million. Additionally, we incurred transaction costs in connection with the Chemtura Acquisition of approximately $10.1 million in the period. Excluding these items, operating expenses on an adjusted basis increased $0.1 million or 0.2% vs. the same period in the prior year.

For the six months ended June 30, 2014:

Operating expense increased in the period by $47.9 million, or 38.8%, as compared to the same period in the prior year. The increase in operating expenses is primarily attributable to a fair value adjustment to the long-term contingent consideration liability of $23.8 million and incremental amortization expense on newly valued intangible assets associated with the MacDermid Acquisition of approximately $15.9 million. Additionally, we incurred transaction costs in connection with the Chemtura Acquisition of approximately $10.1 million in the period. Excluding these items, operating expenses on an adjusted basis decreased $1.1 million or 1.1% vs. the same period in the prior year, respectively.

Net Income (Loss)

For the three months ended June 30, 2014:

Net loss in the period decreased to $0.4 million, as compared to the same period in the prior year of a net loss of $15.1 million. On an adjusted basis, we are reporting net income of $26.6 million vs. $23.8 million for the same period in the prior year. The increase in net income year over year is primarily attributed to favorable product mix, variable operating expense management, and increased work in the company's long term tax planning. Specifically in regards to tax planning, the company was able to reduce its' expected effective tax rate to 25% for 2014 as compared to 33% for 2013. Adjusted earnings per diluted share increased to $0.18 vs. $0.16 in the prior year period.

For the six months ended June 30, 2014:

Net loss in the period decreased to $7.8 million, as compared to the same period in the prior year of a net loss of $11.7 million. On an adjusted basis, we reported net income of $49.7 million vs. $43.8 million for the same period in the prior year, an increase of $5.8 million or 13.3%. The increase in net income year over year is primarily attributed to favorable product mix, variable operating expense management, and increased work in the company's long term tax planning. Specifically in regards to tax planning, the company was able to reduce its' effective tax rate to 29% in the period as compared to 33% for the same period in the prior year. Adjusted earnings per diluted share increased to $0.33 vs. $0.29 in the prior year period.

Adjusted EBITDA

For the three months ended June 30, 2014:

Adjusted EBITDA for the period grew 2.3% to $48.2 million from $47.1 million in the same period of 2013, representing a record level for adjusted EBITDA in the quarter compared to MacDermid's performance prior to its acquisition by Platform. Adjusted EBITDA margin climbed to 25.5% vs. 24.8% in the prior year period.

Adjusted EBITDA in the Performance Materials segment for the period grew 5.7% to $37.1 million from $35.1 million in the same period of 2013, with adjusted EBITDA margin climbing to 25.2% vs. 24.2% in the prior year period. For the Graphic Solutions Segment, adjusted EBITDA decreased 7.5% to $11.1 million from $12.0 million in the same period of 2013, representing an adjusted EBITDA margin of 26.4% vs. 26.8% in the prior year period.

For the six months ended June 30, 2014:

Adjusted EBITDA for the period grew 6.9% to $94.1 million from $88.0 million in the same period of 2013, representing a record level for adjusted EBITDA in the measurement period as compared to MacDermid's performance prior to its acquisition by Platform. Adjusted EBITDA margin climbed to 25.2% vs. 23.7% in the prior year period.

Adjusted EBITDA in the Performance Materials segment for the period grew 10.4% to $71.2 million from $64.5 million in the same period of 2013, with adjusted EBITDA margin climbing to 24.5% vs. 22.7% in the prior year period. For the Graphic Solutions Segment, adjusted EBITDA decreased 2.6% to $22.9 million from $23.5 million in the same period of 2013, representing an adjusted EBITDA margin of 27.7% vs. 26.7% in the prior year period.

Full release



More news from: Platform Specialty Products Corporation


Website: http://www.platformspecialtyproducts.com/

Published: August 6, 2014

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