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

FORM 10-Q
_______________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
 
OR
 
¨ 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
_______________


 (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.)
   
5200 Blue Lagoon Drive, Suite 855
Miami, Florida
33126
(Zip Code)
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code: (203) 575-5850
_______________
 
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  x      No  ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x      No  ¨

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 ¨ Accelerated filer ¨ Non-Accelerated filer x Smaller reporting company ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes ¨  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
 
Class November 7, 2014
Common Stock, par value $0.01 per share
165,481,005 shares
 
 
 

 
Table of Contents
 
Part I.
Financial Information
Page
     
3
29
39
39
     
Part II.
Other Information
 
     
39
39
45
45
45
45
48
     
Signatures
 
 
 
 
 
 
 

 
Part I. Financial Information
 
Item 1. Financial Statements
 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

   
For the three
months ended
September 30, 2014
   
For the three
months ended
September 30, 2013
     
For the three
months ended
September 30, 2013
   
For the nine
months ended
September 30, 2014
   
Period from
Inception
(April 23, 2013) through
September 30, 2013
     
For the nine
months ended
September 30, 2013
 
   
Successor
   
Successor
     
Predecessor
   
Successor
   
Successor
     
Predecessor
 
                                         
Net sales
  $ 196,782     $ -       $ 188,433     $ 569,640     $ -       $ 560,557  
Cost of sales
    93,558       -         89,461       285,507       -         271,730  
Gross profit
    103,224       -         98,972       284,133       -         288,827  
                                                     
Operating expenses:
                                                   
Selling, technical, general and administrative
    72,926       4,773         54,436       231,737       4,870         164,405  
Research and development
    6,368       -         5,678       18,464       -         17,504  
Restructuring
    567       -         238       971       -         1,890  
Total operating expenses
    79,861       4,773         60,352       251,172       4,870         183,799  
 
                                                   
Operating profit (loss)
    23,363       (4,773 )       38,620       32,961       (4,870 )       105,028  
                                                     
Other (expense) income:
                                                   
Interest, net
    (7,971 )     63         (16,127 )     (23,375 )     80         (40,694 )
Loss on extinguishment of debt
    -       -         -       -       -         (18,788 )
Other (expense) income, net
    (3,070 )     -         (993 )     (3,671 )     -         (405 )
      (11,041 )     63         (17,120 )     (27,046 )     80         (59,887 )
Income (loss) before income taxes, non-controlling interests and accrued payment-in-kind dividends on cumulative preferred shares
    12,322       (4,710 )       21,500       5,915       (4,790 )       45,141  
Income tax benefit (provision)
    1,595       -         (6,864 )     3,542       -         (20,932 )
Net income (loss)
    13,917       (4,710 )       14,636       9,457       (4,790 )       24,209  
Net income attributable to the non-controlling interests
    (2,046 )     -         (139 )     (5,380 )     -         (319 )
Net income (loss) attributable to common shareholders
    11,871       (4,710 )       14,497       4,077       (4,790 )       23,890  
Accrued payment-in-kind dividend on cumulative preferred shares
    -       -         (1,028 )     -       -         (22,100 )
Net income (loss) attributable to common shares
  $ 11,871     $ (4,710 )     $ 13,469     $ 4,077     $ (4,790 )     $ 1,790  
                                                     
Earnings (loss) per share
                                                   
Basic
  $ 0.09     $ (0.05 )       n/a     $ 0.03     $ (0.05 )       n/a  
Diluted
  $ 0.08     $ (0.05 )       n/a     $ 0.03     $ (0.05 )       n/a  
                                                     
Weighted average shares outstanding (In thousands)
                                                   
Basic
    137,299       88,529         n/a       124,462       88,529         n/a  
Diluted
    152,694       88,529         n/a       140,534       88,529         n/a  
 
See accompanying notes to condensed consolidated financial statements
 
3

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
   
For the three
months ended
September 30, 2014
   
For the three
months ended
September 30, 2013
     
For the three
months ended
September 30, 2013
   
For the nine
months ended
September 30, 2014
   
Period from
Inception
(April 23, 2013) through
September 30, 2013
     
For the nine
months ended
September 30, 2013
 
   
Successor
   
Successor
     
Predecessor
   
Successor
   
Successor
     
Predecessor
 
                                         
Net income (loss)
  $ 13,917     $ (4,710 )     $ 14,636     $ 9,457     $ (4,790 )     $ 24,209  
                                                     
Other comprehensive income (loss) income, before tax
                                                   
Foreign currency translation adjustments
    (60,278 )     -         15,845       (37,304 )     -         (6,164 )
Unrealized (loss) gain on available for sale securities
    (92 )     -         110       (86 )     -         159  
Pension and postretirement plan
    -       -         -       217       -         -  
Derivative financial instruments revaluation
    -       -         390       (163 )     -         (260 )
Total other comprehensive (loss) income, before tax
    (60,370 )     -         16,345       (37,336 )     -         (6,265 )
Income tax benefit (provision) on comprehensive income (loss)
    35       -         (175 )     107       -         35  
Other comprehensive (loss) income, net of tax
    (60,335 )     -         16,170       (37,229 )     -         (6,230 )
                                                     
Comprehensive (loss) income
    (46,418 )     (4,710 )       30,806       (27,772 )     (4,790 )       17,979  
                                                     
Comprehensive (loss) income attributable to the non-controlling interests
    (2,052 )     -         (172 )     2,858       -         (320 )
Comprehensive (loss) income attributable to common shareholders
  $ (44,366 )   $ (4,710 )     $ 30,634     $ (30,630 )   $ (4,790 )     $ 17,659  
 
See accompanying notes to condensed consolidated financial statements
 
4

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)

   
September 30, 2014
   
December 31, 2013
 
Assets
           
Cash & cash equivalents
  $ 281,676     $ 123,040  
Restricted cash
    315,000       -  
Accounts receivable, net of allowance for doubtful accounts of $9,935 and $10,113 at September 30, 2014 and December 31, 2013, respectively
    145,095       140,525  
Inventories
    79,325       89,618  
Prepaid purchase price
    63,854       -  
Prepaid expenses & other current assets
    26,754       30,269  
Total current assets
    911,704       383,452  
                 
Property, plant & equipment, net
    133,942       136,166  
Goodwill
    971,678       989,808  
Intangible assets, net
    664,920       720,302  
Other assets
    47,376       30,426  
Total assets
  $ 2,729,620     $ 2,260,154  
                 
Liabilities & Stockholders' Equity
               
Accounts payable
    58,217       56,156  
Accrued salaries, wages and employee benefits
    20,363       22,656  
Current portion of long-term debt
    7,904       7,958  
Accrued income taxes payable
    11,841       6,669  
Accrued expenses and other current liabilities
    42,985       26,234  
Total current liabilities
    141,310       119,673  
                 
Long-term debt
    738,474       744,291  
Long-term deferred income taxes
    151,845       169,800  
Long-term contingent consideration
    60,900       34,800  
Other long-term liabilities
    57,509       55,516  
Total liabilities
    1,150,038       1,124,080  
                 
Commitments and contingencies (Note 12)
    -       -  
Redeemable 401(k) plan interest
    -       20,972  
                 
Stockholders' Equity
               
Preferred shares (2,000,000 designated as Series A), 5,000,000 shares authorized, 2,000,000 shares issued and outstanding at September 30, 2014 and December 31, 2013
    20       -  
Common shares, $0.01 par value (effective January 23, 2014), 400,000,000 shares authorized, 137,304,330 and 103,571,941 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
    1,353       -  
Additional paid-in capital
    1,703,407       1,212,038  
Accumulated deficit
    (190,145 )     (194,222 )
Accumulated other comprehensive (loss) income
    (33,440 )     1,265  
Total stockholders equity
    1,481,195       1,019,081  
Non-controlling interests
    98,387       96,021  
Total equity
    1,579,582       1,115,102  
                 
Total liabilities, redeemable 401(k) plan interest and stockholders' equity
  $ 2,729,620     $ 2,260,154  
 
See accompanying notes to condensed consolidated financial statements
 
5

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

   
For the nine
months ended
September 30, 2014
   
Period from
Inception
(April 23, 2013) through
September 30, 2013
     
For the nine
months ended
September 30, 2013
 
   
Successor
   
Successor
     
Predecessor
 
                     
Cash flows from operating activities:
                   
Net income (loss)
  $ 9,457     $ (4,790 )     $ 24,209  
Adjustments to reconcile net income (loss) from operations to net cash flows provided by operating activities:
                         
Depreciation and amortization
    57,614       -         32,014  
Deferred income taxes
    (31,308 )     -         3,192  
Non-cash fair value adjustment to contingent consideration
    26,100       -         -  
Manufacturer's profit in inventory adjustment
    11,956       -         -  
Loss on extinguishment of debt
    -       -         18,788  
Net unrealized loss on foreign exchange contracts
    2,627       -         -  
Other, net
    4,171       105         1,794  
                           
Changes in assets & liabilities, net of acquisitions:
                         
Accounts receivable
    (10,688 )     -         (7,437 )
Inventories
    (3,904 )     -         (4,428 )
Accounts payable
    2,404       -         2,433  
Accrued expenses
    9,437       4,175         (273 )
Other assets and liabilities
    1,590       (209 )       (5,901 )
Net cash flows provided by (used in) operating activities
    79,456       (719 )       64,391  
                           
Cash flows from investing activities:
                         
Capital expenditures, net
    (6,791 )     -         (6,872 )
Purchases of marketable securities
    -       (359,933 )       (472 )
Redemption of marketable securities
    -       179,976         824  
Cash restricted to fund acquisition
    (315,000 )     -         -  
Acquisition of businesses, net
    (59,027 )     -         -  
Other, net
    10       -         462  
Net cash flows used in investing activities
    (380,808 )     (179,957 )       (6,058 )
                           
Cash flows from financing activities:
                         
Proceeds from issuance of debt, net of discount and fees
    -       200         1,109,513  
Repayments of borrowings
    (5,796 )     (200 )       (731,594 )
Repurchase of Predecessor Series A preferred stock
    -       -         (270,167 )
Payment of Predecessor Series A preferred stock
    -       -         (229,833 )
Proceeds from issuance of common stock, net
    473,384       861,218         -  
Proceeds from issuance of preferred stock, net
    -       20,000         -  
Payment of debt financing fees
    (4,104 )     -         (13,519 )
Other, net
    76       -         (488 )
Net cash flows provided by (used in) financing activities
    463,560       881,218         (136,088 )
                           
Effect of exchange rate changes on cash and cash equivalents
    (3,572 )     -         (395 )
                           
Net increase (decrease) in cash and cash equivalents
    158,636       700,542         (78,150 )
                           
Cash and cash equivalents at beginning of period
    123,040       -         143,351  
Cash and cash equivalents at end of period
  $ 281,676     $ 700,542       $ 65,201  
                           
                           
Noncash Investing Activities
                         
Unpaid capital expenditures included in accounts payable and accrued expenses
    5,791       -         -  
 
See accompanying notes to condensed consolidated financial statements
 
6

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Platform Specialty Products Corporation and its subsidiaries (“Platform,” the “Company,” “we” or “us”) (formerly named Platform Acquisition Holdings Limited) is a global producer of high-technology specialty chemical products and provider of technical services, which currently operates through its indirect subsidiaries, including MacDermid, Incorporated (“MacDermid” or the “Predecessor”).  Platform was originally incorporated with limited liability under the laws of the British Virgin Islands under the BVI Companies Act on April 23, 2013. Until its acquisition of MacDermid on October 31, 2013, as described below (the “MacDermid Acquisition”), the Company had neither engaged in any operations nor generated any income. The Company selected December 31 as its fiscal year end.

       On October 31, 2013, Platform indirectly acquired substantially all of the equity of, MacDermid Holdings, LLC (“MacDermid Holdings”), which owned approximately 97% of MacDermid. As a result, Platform became a holding company for the MacDermid business.  We acquired the remaining 3% of MacDermid on March 4, 2014, pursuant to the terms of an Exchange Agreement, dated October 25, 2013, between us and the fiduciaries of the MacDermid, Incorporated Profit Sharing and Employee Savings Plan (the “MacDermid Savings Plan”).  Concurrently with the closing of the MacDermid Acquisition, we changed our name to Platform Specialty Products Corporation. On January 22, 2014, we changed our jurisdiction of incorporation from the British Virgin Islands to Delaware (the “Domestication”) and on January 23, 2014, our shares of common stock, par value $0.01 per share (“Common Stock”) began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “PAH”.
 
The accompanying unaudited condensed consolidated interim financial statements and related information included herein are (1) for Platform as of September 30, 2014 and December 31, 2013 and for the period from July 1, 2014 through September 30, 2014 (the “Successor Quarterly Period”) and January 1, 2014 through September 30, 2014 (the “Successor Nine Month Period”), (2) for Platform, prior to the completion of the MacDermid Acquisition, for the period from July 1, 2013 through September 30, 2013 (the “Platform Preacquisition Quarterly Period) and for the period from Inception (April 23, 2013) through September 30, 2013 (the “Platform Preacquisition Year to Date Period”), and (3) for MacDermid for the period from July 1, 2013 through September 30, 2013 (the “Predecessor Quarterly Period”) and January 1, 2013 through September 30, 2013 (the “Predecessor Nine Month Period”).

These unaudited condensed consolidated interim financial statements and related information have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all adjustments that are, in the opinion of management, normal and recurring and necessary for a fair statement of the results of operations. These unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company’s latest Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Accounting Policies Recently Adopted and Pending Pronouncements
 
In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation—Stock Compensation (Topic 718).” The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2015. The Company does not expect this ASU to have a material impact on its financial statements.
 
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2016. The Company is in the process of evaluating the impact of this new ASU.
 
 
7

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)

2.  ACQUISITIONS OF BUSINESSES
 
MacDermid Acquisition
 
On October 31, 2013, the Company completed the MacDermid Acquisition. The total consideration paid in connection with the MacDermid Acquisition and the acquisition of the approximately 3% of MacDermid equity interests (the “MacDermid Plan Shares”) not already held by MacDermid Holdings was approximately $1,800,000 (including the assumption of approximately $754,200 of indebtedness), plus (i) up to $100,000 of contingent consideration tied to achievement of EBITDA and stock trading price performance metrics over a seven-year period following the closing of the MacDermid Acquisition and (ii) an interest in certain MacDermid pending litigation. As a result of a favorable adjustment to the preliminary estimated working capital factored into the purchase price, the Company received a payment of approximately $8,540 in January 2014 which is reflected in “Acquisition of businesses, net” in the accompanying Condensed Consolidated Statements of Cash Flows.
 
The fair value of contingent consideration was measured based on significant inputs not observable in the market, which are considered to be Level 3 inputs under the FASB ASC Topic 820 fair value hierarchy (see Note 9 - “Fair Value Measurements”). Key assumptions included in the fair value calculation of the EBITDA related earnout include a discount rate of approximately 2% and expected future value of payments of $60,000 calculated using a probability weighted EBITDA assessment with higher probability associated with the Company achieving the maximum EBITDA targets. Key assumptions included in the fair value calculation of the stock price related earnout include the fair value of Common Stock, the expected future value of payments of $40,000 and an assumption of volatility.  The stock price related earnout was calculated using a Monte Carlo simulation.  At the time of the MacDermid Acquisition, the fair value of the contingent payments was $35,500. As of September 30, 2014 and December 31, 2013, the fair value of the contingent consideration was $60,900 and $34,800, respectively. The $26,100 increase in fair value during the Successor Nine Month Period, which is recorded in “Selling, technical, general and administrative expenses” in the accompanying Condensed Consolidated Statements of Operations, was primarily due to the achievement of each of the three stock trading price performance metric targets of the contingent consideration arrangement. During the Successor Quarterly Period, the increase in fair value was $2,300 and primarily related to compensation expense being recorded.
 
Based on this preliminary fair valuation, the Company allocated the purchase price as follows:

Purchase Price Allocation (in thousands):
     
Preliminary value assigned:
     
Accounts receivable
  $ 147,400  
Inventories
    115,300  
Other current assets
    26,200  
Property, plant and equipment
    140,900  
Customer relationships
    494,000  
Developed technology
    164,200  
Tradenames
    70,800  
Goodwill
    990,000  
Other assets
    28,300  
Accounts payable
    (55,900 )
Other current liabilities
    (62,000 )
Long-term debt
    (754,200 )
Non-current deferred tax liability
    (171,200 )
Contingent consideration
    (35,500 )
Redeemable 401(k) plan interest
    (21,000 )
Other liabilities
    (66,500 )
Total purchase price
  $ 1,010,800  
 
 
8

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Immediately prior to the closing of the MacDermid Acquisition, certain sellers of MacDermid, including certain officers of MacDermid (each, a “Retaining Holder”), executed a Retaining Holder Securityholders’ Agreement (a “RHSA”) with the Company pursuant to which they agreed to exchange their equity in MacDermid for equity in our subsidiary, Platform Delaware Holdings, Inc. (“PDH”), at an exchange rate of $11.00 per shares plus, (i) a proportionate share of the $100,000 contingent consideration and (ii) an interest in certain MacDermid pending litigation. This 6.76% ownership has been accounted for as a non-controlling interest in the Company’s financial statements. Beginning on October 31, 2014, the Retaining Holders may elect to exchange up to 25% of shares of PDH for shares of our Common Stock, with the remaining shares of PDH becoming eligible for exchange on November, 2015, 2016 and 2017 in 25% increments. The total number of shares of Common Stock issuable upon the exchange of the PDH shares pursuant to the RHSA is approximately 8.8 million.
 
Upon the closing of the MacDermid Acquisition, the MacDermid Savings Plan retained a 3% interest in MacDermid. The fair value of the obligation to purchase these shares of $20,972 was recorded as a redeemable 401(k) interest in the mezzanine section of the Consolidated Balance Sheets at December 31, 2013 since it could be settled in either cash or stock. On March 4, 2014, pursuant to the terms of an Exchange Agreement, dated October 25, 2013, between the Company and the fiduciaries of the MacDermid Savings Plan, the Company acquired the remaining approximately 3% of the MacDermid Plan Shares for approximately $2,600 in cash (which is reflected in “Acquisition of businesses, net” in the accompanying Condensed Consolidated Statements of Cash Flows) and 1,670,386 shares of the Company’s Common Stock.
 
Chemtura Acquisition
 
On April 16, 2014, the Company entered into a Stock and Asset Purchase Agreement with Chemtura Corporation, a Delaware corporation (“Chemtura,” and together with certain of its subsidiaries, the “Sellers”) pursuant to which Platform agreed to acquire the Sellers’ agrochemicals business, Chemtura AgroSolutions (“CAS”), consisting of the manufacture, distribution, marketing and sale of seed treatments and crop protection in niche markets across seven major product lines – seed treatments, insecticides, miticides, herbicides, fungicides, plant growth regulators and adjuvants, for approximately $1,000,000, consisting of $950,000 in cash, subject to working capital and other adjustments, 2,000,000 shares of Common Stock and the assumption of certain liabilities by Platform (the “Chemtura Acquisition”).
 
During the Successor Quarterly Period, the Company deposited $315,000 into an escrow account, which is restricted to the financing of the Chemtura Acquisition, and entered into an amended and restated debt commitment letter. See Note 7 – “Debt” for more information. This restricted cash is separately classified on the accompanying Condensed Consolidated Balance Sheets. In connection with the Chemtura Acquisition, the Company incurred approximately $5,900 and $15,800, respectively, in related expenses in the Successor Quarterly and Nine Month Periods that are included in Selling, technical, general and administrative expenses in the Condensed Consolidated Statement of Operations. The Company is also committed to pay an additional $5,000 in finder’s fees upon the closing of the Chemtura Acquisition.
 
On November 3, 2014, Platform completed the Chemtura Acquisition and issued 2,000,000 shares of Common Stock to Chemtura. Platform financed the Chemtura Acquisition with the proceeds from the additional borrowings made under the Amended and Restated Credit Agreement (as defined below) and from cash on hand.

Agriphar Acquisition
 
On August 4, 2014, MacDermid Agricultural Solutions Holdings B.V., a limited liability company incorporated and organized under the laws of the Netherlands and a subsidiary of  Platform, as the purchaser (“MAS Holdings”), and Platform, as guarantor, entered into an agreement (the “Agreement”) with a representative of Percival S.A., a  société anonyme incorporated and organized under the laws of Belgium (“Percival”), pursuant to which MAS Holdings agreed to acquire Percival, including Percival’s agrochemical business that does business under the Agriphar trade name and whose product portfolio includes a wide range of herbicide, fungicides and insecticides (the “Agriphar Acquisition”), for a purchase price of €300 million (approximately $379 million assuming an exchange rate of $1.26 per €1.00 at closing on October 1, 2014 as discussed below), consisting of €285 million in cash (approximately $360 million assuming an exchange rate of $1.26 per €1.00) and 711,551 shares of  Common Stock, subject to working capital and other adjustments.
 
On September 30, 2014, the Company prepaid $63,854 of the Agriphar Acquisition purchase price, which is classified as “Prepaid purchase price” on the accompanying Condensed Consolidated Balance Sheets. On October 1, 2014, the Company completed the Agriphar Acquisition, which was funded with cash on hand, and the proceeds from incremental debt as discussed in Note 7 – “Debt” and issued the 711,551 shares of Common Stock to the seller. In connection with the Agriphar Acquisition, the Company incurred approximately $1,000 and $1,300, respectively, in related expenses in the Successor Quarterly and Nine Month Periods that are included in Selling, technical, general and administrative expenses in the Condensed Consolidated Statement of Operations. The Company also paid an additional $1,500 in finder’s fees upon the closing of the Agriphar Acquisition.

 
9

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Any transfer of shares by the Seller prior to January 2, 2018 requires prior written consent of MAS Holdings; it being understood that even with written consent from MAS Holdings, (i) the seller may transfer a maximum of 1/3 of its shares as of January 2, 2016, 1/3 of its shares as of January 2, 2017 and 1/3 of its shares as of January 2, 2018, subject to the terms and provisions of a solvency letter described in the Agreement. Additionally, MAS Holdings granted the seller an option to sell and transfer all (but not part) of the shares (the “Put Option”), on (but not prior to) the date that is six months from the closing of the Agriphar Acquisition to Platform. The consideration payable by Platform for the transfer of such shares under the Put Option shall be an amount equal to 15,000 (approximately $19,000 assuming an exchange rate of $1.26 per €1.00).
 
The initial purchase accounting and purchase price allocation for the Chemtura and Agriphar Acquisitions have not been completed at the date of this filing given the proximity to their respective acquisition dates. These acquisitions will each be accounted for by the acquisition method, and accordingly the results of operations will be included in the Company’s consolidated financial statements from the respective acquisition date. The purchase price will be allocated to the assets acquired based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill.
 
3. INVENTORIES
 
The major components of inventory were as follows:
 
   
September 30, 2014
   
December 31, 2013
 
Finished goods
  $ 50,686     $ 58,360  
Raw materials and supplies
    27,240       29,870  
Equipment
    1,399       1,388  
Total inventory, net
  $ 79,325     $ 89,618  
 
In connection with the MacDermid Acquisition, the fair value assessment of inventory resulted in an increase to finished goods of $35,868. During the Successor Period ended December 31, 2013, $23,992 was charged to cost of sales in the Consolidated Statement of Operations and $11,956 was charged to cost of sales in the Condensed Consolidated Statement of Operations during the three months ended March 31, 2014 based on our estimated inventory turnover.
 
4. GOODWILL AND INTANGIBLE ASSETS
 
The changes in the carrying amount of goodwill by segment are as follows:
 
   
Performance
Materials
   
Graphic
Solutions
   
Total
 
                   
Balance, December 31, 2013
  $ 760,371     $ 229,437     $ 989,808  
Foreign currency translation and other
    (13,230 )     (4,900 )     (18,130 )
Balance, September 30, 2014
  $ 747,141     $ 224,537     $ 971,678  
 
The carrying value of indefinite-lived intangible assets other than goodwill which consist solely of tradenames was $70,838 and $70,913 at September 30, 2014 and December 31, 2013, respectively.
 
 
10

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
Intangible assets subject to amortization were as follows:
 
   
September 30, 2014
   
December 31, 2013
 
   
Gross Carrying
Amount
   
Accumulated
Amortization and
Foreign Exchange
   
Net Book
Value
   
Gross Carrying
Amount
   
Accumulated
Amortization and
Foreign Exchange
   
Net Book
Value
 
                                     
Customer lists
  $ 494,000     $ (45,293 )   $ 448,707     $ 494,000     $ (6,420 )   $ 487,580  
Developed technology
    164,200       (18,825 )     145,375       164,200       (2,391 )     161,809  
Total
  $ 658,200     $ (64,118 )   $ 594,082     $ 658,200     $ (8,811 )   $ 649,389  
 
Customer relationships have useful lives ranging from 8 to 20 years and developed technology has useful lives ranging between 7 to 10 years. This results in weighted average useful lives for customer relationships and developed technology, of approximately 16 years and 10 years, respectively, for an aggregate weighted average useful life of approximately 15 years at September 30, 2014.
 
Amortization expense of $14,257 and $6,697 was recorded during the Successor Quarterly Period and Predecessor Quarterly Period, respectively. Amortization expense of $43,578 and $20,124 was recorded during Successor Nine Month Period and Predecessor Nine Month Period, respectively. There was no amortization expense recorded for the Platform Preacquisition Quarterly or Year to Date Periods.
 
5. EQUITY COMPENSATION PLANS
 
Successor Period
 
On June 12, 2014, the Company’s stockholders approved the Platform Specialty Products Corporation Amended and Restated 2013 Incentive Compensation Plan (the “2013 Plan”). At September 30, 2014, the total number of shares of Common Stock that may be subject to the granting of awards under the 2013 Plan based on the grants issued as discussed below is approximately 15,078,000 shares (subject to increase in accordance with the terms of the 2013 Plan). As of November 1, 2014, Platform estimates that 2 officers, 6 directors, 1,921 employees and one consultant will be eligible to participate in the 2013 Plan.
 
On March 6, 2014, our Board of Directors (the “Board”) approved a grant of 329,823 restricted stock units (“RSUs”), effective on June 12, 2014 with approval of the 2013 Plan, to certain employees that cliff vest on December 31, 2020. The RSUs are subject to an EBITDA performance condition and a share price market condition that are similar in terms to those discussed in Note 2 – “Acquisitions of Businesses” related to the MacDermid contingent consideration arrangement. Additionally, the number of shares of Common Stock to be issued is limited to a maximum cash value, requiring these awards to be classified as liabilities. The combined undiscounted maximum cash value of all RSU’s issued is approximately $7,100 which is being recognized as compensation expense over the period from grant to the vesting date. Compensation expense associated with these awards for the Successor Quarterly and Nine Month Periods was approximately $274 and $366, respectively.
 
On March 6, 2014, the Board approved a grant of 9,242 RSUs to directors of the Company, effective on June 12, 2014 with approval of the 2013 Plan, that immediately vested. Compensation expense of $262 associated with these awards was fully recognized in the three month period ended June 30, 2014. On July 31, 2014 such RSUs were settled in shares of Common Stock and issued to the directors.
 
On May 3, 2014, the Board approved a grant of 72,500 RSUs to certain employees of the Company, effective on June 12, 2014 with approval of the 2013 Plan, with a weighted average grant-date fair value per share of $28.36. Approximately 69% of these RSUs vest on the date on which the Company files its financial statement on Form 10-K for the year ending December 31, 2019, while the remainder will vest under similar terms for the year ending December 31, 2017. The RSUs are subject to an EBITDA performance condition that must be achieved in the final vesting year.
 
Effective March 6, 2014, the Board adopted the Platform Specialty Products Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), which was approved by the Company’s stockholders on June 12, 2014. The Board approved a maximum of 5,178,815 shares of Common Stock, which were reserved and made available for issuance under the ESPP. As of September 30, 2014, 4,108 shares have been issued under the ESPP. As of November 1, 2014, Platform estimates that 497 persons are eligible to participate in the ESPP.
 
 
11

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Predecessor Period

On January 29, 2013, the Predecessor authorized for issuance 5,000,000 Class C Junior Shares. The Class C Junior Shares were allocated to three tranches of 1,666,666 shares each and defined as Class C-1 Junior Shares, Class C-2 Junior Shares and Class C-3 Junior Shares (collectively, the “C Shares”). The Class C-1 Junior Shares vested upon the grant date of January 29, 2013. Class C-2 Junior Shares were to vest on January 1, 2014 and the Class C-3 Junior Shares were to vest on January 1, 2015. The number of issued and awarded Class C Junior Shares was 4,890,000 shares or 1,630,000 shares each for the Class C-1 Junior Shares, Class C-2 Junior Shares and Class C-3 Junior Shares. The value of the C Shares was measured based upon the performance criteria in the operating agreement of MacDermid Holdings based on the estimated equity value of the Predecessor. The C Shares were to be paid in cash in accordance with the operating agreement of MacDermid Holdings upon a change in control, liquidating event or initial public offering. Payment for the C shares required continued employment through a change in control, liquidating event, or initial public offering. The C Shares were considered liability-classified awards with the related fair value recognized as compensation expense ratably over the performance period, with changes in the fair value of the award cumulatively adjusted through compensation expense each period. During the three and nine months ended September 30, 2013 no compensation expense was recognized related to the C Shares as a change in control, liquidating event or initial public offering related to the Company (as defined in the MacDermid Holdings operating agreement) was not probable. The estimated fair value of the Class C Shares (all tranches) was approximately $9,030 at September 30, 2013.
 
6. PENSION, POST-RETIREMENT AND POST-EMPLOYMENT PLANS
 
The components of net periodic pension and postretirement benefit costs for the Successor and Predecessor Quarterly and Nine Month Periods are as follows:
 
   
For the three months ended September 30,
   
For the nine months ended September 30,
 
   
2014
     
2013
   
2014
     
2013
 
   
(Successor)
     
(Predecessor)
   
(Successor)
     
(Predecessor)
 
                                                     
Pension & SERP Benefits:
 
Domestic
   
Foreign
     
Domestic
   
Foreign
   
Domestic
   
Foreign
     
Domestic
   
Foreign
 
                                                     
Net periodic cost (benefit):
                                                   
Service cost
  $ -     $ 208       $ 1,078     $ 174     $ -     $ 627       $ 3,234     $ 522  
Interest cost on the projected benefit obligation
    1,727       761         1,565       768       5,183       2,284         4,695       2,304  
Expected return on plan assets
    (2,432 )     (907 )       (2,005 )     (1,283 )     (7,298 )     (2,718 )       (6,015 )     (3,849 )
Amortization of prior service cost
    -       -         23       -       -       -         69       -  
Amortization of net loss
    -       -         505       135       -       -         1,515       405  
Net periodic (benefit) cost
  $ (705 )   $ 62       $ 1,166     $ (206 )   $ (2,115 )   $ 193       $ 3,498     $ (618 )
 
   
For the three months ended September 30,
   
For the nine months ended September 30,
 
    2014       2013     2014       2013  
   
(Successor)
     
(Predecessor)
   
(Successor)
     
(Predecessor)
 
                                                                     
Postretirement Benefits:
 
Domestic
   
Foreign
     
Domestic
   
Foreign
   
Domestic
   
Foreign
     
Domestic
   
Foreign
 
                                                                     
Net periodic cost (benefit):
                                                                   
Service cost
  $ 13     $ 6       $ 18     $ 11     $ 41     $ 20       $ 54     $ 33  
Interest cost on the projected benefit obligation
    82       8         73       10       248       24         219       30  
Amortization of prior service cost
    -       -         (35 )     7       -       -         (105 )     21  
Net periodic cost
  $ 95     $ 14       $ 56     $ 28     $ 289     $ 44       $ 168     $ 84  
 
No domestic pension service cost was recognized in the Successor Quarterly or Nine Month Periods, nor will be in future periods, as benefits in the domestic pension plan were frozen in connection with the MacDermid Acquisition.
 
 
12

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
7.  DEBT
 
The Company’s debt consisted of the following:
 
   
September 30, 2014
   
December 31, 2013
 
             
Borrowings under lines of credit
  $ -     $ -  
                 
First lien secured credit facility, due 2020, interest at the greater of 4.00% or LIBOR plus 3.00%, weighted average interest rate of 4.00% at September 30, 2014
    745,563       751,225  
Other
    815       1,024  
Total debt
    746,378       752,249  
Less: current portion debt
    (7,904 )     (7,958 )
Total long-term debt
  $ 738,474     $ 744,291  
 
Predecessor Recapitalization and Refinancing
 
On April 12, 2007, MacDermid entered into three senior secured credit facilities consisting of (i) a $360,000 tranche B term loan credit facility denominated in U.S. Dollars, (ii) a $250,000 tranche C term loan credit facility denominated in Euros and (iii) a $50,000 revolving credit facility denominated in U.S. Dollars (collectively, the “2007 Credit Facilities”). On April 12, 2007, MacDermid also issued $350,000 of senior subordinated notes with a fixed interest rate of 9.50% at par.
 
On June 7, 2013, MacDermid completed a refinancing arrangement whereby the outstanding amounts under the 2007 Credit Facilities and outstanding senior subordinated notes were replaced with two new senior secured credit facilities (the “2013 Credit Facilities”) pursuant to a Credit Agreement dated as of June 7, 2013 (the “Credit Agreement”), which consisted of (i) $805,000 first lien credit facilities allocated between (a) a $755,000 term loan facility denominated in U.S. Dollars (“first lien term loan”), and (b) a $25,000 revolving credit facility denominated in U.S. Dollars and $25,000 multi-currency revolving credit facility (collectively, the “revolving credit facilities”), and (ii) a $360,000 second lien term loan facility denominated in U.S. Dollars (“second lien term loan”). The first lien term loan and related revolving credit facilities accrued interest at L+3.00% subject to, in the case of the first lien term loan, (i) stepdowns based on total leverage ratios and (ii) a LIBOR floor of 1.00%. The revolving credit facilities portion of the first lien term facilities was scheduled to mature June 7, 2018. The first lien term loan was scheduled to mature June 7, 2020. The second lien term loan accrued interest at L+6.75%, was subject to a LIBOR floor of 1.00% and was scheduled to mature on December 7, 2020. The 2013 Credit Facilities were guaranteed by MacDermid Holdings and certain of its direct and indirect wholly owned domestic subsidiaries and were secured by the personal and real property owned or thereafter acquired of MacDermid Holdings and certain of its direct and indirect wholly owned domestic subsidiaries and also 65% of the stock of MacDermid Holdings' first tier foreign subsidiaries, subject to customary exceptions, exclusions and release mechanisms. The June 7, 2013 recapitalization and refinancing transactions sources and uses of cash are summarized below:
 
Sources:
     
First lien term loan
  $ 755,000  
Second lien term loan
    360,000  
Cash
    117,080  
Total sources
  $ 1,232,080  
         
Uses:
       
Retire Tranche B and Tranche C term loans and accrued interest
  $ 345,426  
Retire senior subordinated notes, accrued interest and call premium
    368,164  
Redemption of Series A preferred stock and accumulated dividends
    500,000  
Fees and expenses
    13,003  
Discount on first lien term loan and second lien term loan
    5,487  
Total uses
  $ 1,232,080  
 
 
As part of this recapitalization and refinancing, $100,481 of the senior subordinated notes were called but not tendered on June 7, 2013 and were paid on the tender date of July 8, 2013.  As a result, $105,864 of the new debt proceeds from the refinance and recapitalization were escrowed to pay the outstanding called senior subordinated notes of $100,481, redemption premium of $3,182 and accrued interest $2,201 through the tender date of July 8, 2013. The escrowed funds were paid to the holders of the remaining senior subordinated note holders on July 8, 2013.
 
MacDermid utilized $500,000 of the proceeds from the new term loans to complete the recapitalization whereby any outstanding shares of 9.00% cumulative Series A preferred stock and related accumulated payment in kind dividends were exchanged for cash and issuance of shares of 9.50% cumulative Series B preferred stock.  As a result, 44,977 shares of 9.50% cumulative Series B preferred stock were issued as part of the exchange, the shares of 9.00% cumulative Series A preferred stock were retired and related accumulated payment in kind dividends were paid.
 
 
13

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
During the three months ended June 30, 2013 and in connection with the recapitalization and refinancing, MacDermid recorded a loss of $18,788 on extinguishment of debt. This consisted of $12,539 of called bond retirement premiums and $6,249 of write-offs of deferred financing fees related to the extinguished debt.
 
In connection with this recapitalization and refinancing, the Company recorded an additional $13,519 of deferred financing costs during the Predecessor Nine Month Period, which were to be amortized into interest expense over seven years.
 
Successor Refinancing
 
        In connection with the MacDermid Acquisition, on October 31, 2013, we entered into an Amendment No.1 to the Credit Agreement with respect to the 2013 Credit Facilities and paid $373,000, including $13,000 in early termination fees and accrued and unpaid interest in connection with the repayment of the $360,000 in principal on its second lien credit facility. Pursuant to Amendment No.1, Platform (i) amended and restated 2013 Credit Facilities (as so amended and restated, the “A&R 2013 Credit Facilities”) and the Credit Agreement (as so amended and restated, the “Amended and Restated Credit Agreement”), (ii) repaid in full the Second Lien Term Loan and (iii) became a co-borrower on all obligations under the Revolving Credit Facility, and the negative and affirmative covenants contained therein were modified to reflect the new corporate structure; otherwise, the terms relating to the incremental facility, maturity, indicative margin, LIBOR floor, ranking, guarantors, mandatory prepayments and financial covenants remained unmodified by the amendment. In connection with the MacDermid Acquisition, the First Lien Term Loan were marked to fair value by adding the original discount of $1,775 to the carrying value at the time as the fair value was approximately par.
 
In connection with the Chemtura Acquisition, on April 16, 2014, we entered into a debt commitment letter for (i) $600,000 of incremental first lien term loans (the “2014 Incremental First Lien Facility”) to be incurred under the Amended and Restated Credit Agreement (as further amended as described below) and (ii) second lien term loans (the “2014 Second Lien Facility”) in an aggregate principal amount of $120,000 for the purposes of financing the Chemtura Acquisition and the fees and expenses in connection therewith, on the terms and subject to the conditions set forth in the debt commitment letter.
 
On July 15, 2014, Platform entered into an amended and restated debt commitment letter whereby the maximum commitment under the 2014 Incremental First Lien Facility was reduced to $405,000 and the 2014 Second Lien Facility commitment was eliminated. These amendments resulted from Platform’s improved cash on hand position, primarily as a result of the private placement completed on May 21, 2014. Unless agreed otherwise, the 2014 Incremental First Lien Facility will mature on June 7, 2020 respectively.
 
On August 6, 2014, we further amended the A&R 2013 Credit Facilities by (a) entering into an Amendment No.2 to the Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”), and (b) agreeing on the implementation of certain further amendments upon consummation of the Chemtura Acquisition (the “Further Amendments”) to the Second Amended and Restated Credit Agreement (see Note 16 “Subsequent Events”).  The Second Amended and Restated Credit Agreement generally provides for, among other things, (i) Platform as a borrower under the term loan facilities, (ii) increased flexibility with respect to permitted acquisitions, (iii) the ability to request incremental facilities in currencies other than U.S. Dollars, and (iv) securing foreign assets in support of future term loans. The Second Amended and Restated Credit Agreement also allows us, subject to certain limitations, to extend the maturity of our term loans and/or revolving credit commitments.
 
On October 1, 2014, we and MacDermid, as borrowers, MacDermid Holdings, certain subsidiaries of MacDermid Holdings and Platform party thereto, Barclays Bank PLC, as collateral agent and administrative agent, and the incremental lender entered into an incremental amendment to the Second Amended and Restated Credit Agreement (the “Incremental Amendment”) for an increase in the term loan tranche of the Second A&R 2013 Credit Facilities (the “USD Incremental Loans”) in an aggregate principal amount of $300,000. Except as set forth in the Incremental Amendment, the USD Incremental Loans have identical terms as the existing Tranche B Term Loans (as defined in the Second Amended and Restated Credit Agreement) and are otherwise subject to the provisions of the Second Amended and Restated Credit Agreement. As a result of the Incremental Amendment, the Second Amended and Restated Credit Agreement provides for USD term loans in an aggregate principal amount of $1,055,000. The proceeds from the Incremental Amendment were used to finance the Agriphar Acquisition.

        As described above, the Second Amended and Restated Credit Agreement, as amended by the Incremental Amendment, and without taking effect the consummation of the Further Amendments (as described below), provides for senior secured credit facilities consisting of (i) U.S. Dollar term loans in an aggregate principal amount of $1,055,000, (ii) a U.S. Dollar revolving credit facility in an aggregate principal amount of $25,000, and (iii) a multi-currency revolving credit facility in an aggregate principal amount of $25,000.

 
14

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Upon closing of the Chemtura Acquisition on November 3, 2014, the Further Amendments became effective pursuant to Amendment No. 2, and the Borrowers (i) borrowed new term loans in an aggregate principal amount of $130,000 through an increase in Platform’s existing tranche B term loan facility (the “New Tranche B Term Loans”), (ii) Platform’s existing U.S. Dollar revolving credit facility was increased by $62,500 to $87,500 and (iii) Platform’s existing multicurrency revolving credit facility was increased by $62,500 to $87,500. On the date of the Chemtura Acquisition, the Borrowers borrowed $60,000 under the U.S. Dollar revolving credit facility and €55,000 ($69,000 assuming an exchange rate of $1.26 per €1.00) under the multi-currency revolving credit facility, respectively.  In addition, new term loans denominated in Euros in an aggregate amount of €205,000 ($259,000 assuming an exchange rate of $1.26 per €1.00)(the “Euro Tranche Term Loans”) were borrowed by MAS Holdings and NAIP, serving as a United States co-borrower. Pursuant to the Further Amendments, MAS Holdings and NAIP were added as borrowers under the Second Amended and Restated Credit Agreement, certain foreign subsidiaries of the Borrowers, MAS Holdings and NAIP became guarantors under the Second Amended and Restated Credit Agreement, and in connection therewith, pledged certain additional collateral to secure the obligations incurred under the Euro Tranche Term Loans and/or other loans incurred under the facility.
 
With the exception of the collateral package as noted above and the interest rate, the terms of the Euro Tranche Term Loans are substantially similar to Platform’s New Tranche B Term Loans and bear interest at a rate per annum equal to an applicable margin plus an adjusted Eurocurrency Rate, calculated as set forth in the Amended and Restated Credit Agreement, and mature on June 7, 2020. As amended by the Further Amendments, the Amended and Restated Credit Agreement now also provides for, among other things, additional flexibility with respect to certain limiting covenants, including by increasing certain dollar baskets.
 
As of result of the Incremental Amendment and the Further Amendments in connection with the Chemtura Acquisition, on November 7, 2014, we have (i) approximately $1,437 outstanding under our First Lien Term Loan (including new term loans denominated in Euros in an aggregate of €205,000) and (ii) approximately $129,000 outstanding under our Revolving Credit Facility (including revolving credit facility borrowings denominated in Euros in an aggregate of €55,000).

Interest

Borrowings under the Credit Agreement bear interest either, at the option of the Borrowers, at the Eurocurrency Rate plus the Applicable Rate (each as defined in the Credit Agreement), for interest periods of one, two, three or six months (or if available for all applicable lenders, twelve months) or the Base Rate plus the Applicable Rate (each as defined in the Credit Agreement). The New USD Term Loans will bear interest at the Eurocurrency Rate plus the Applicable Rate.
 
During the Successor Quarterly Period, principal and interest payments of $1,888 and $7,723, respectively, were made on the first lien term loan. During the Successor Nine Month Period, principal and interest payments of $5,663 and $22,812, respectively, were made on the first lien term loan. During the Predecessor Quarterly and Nine Month Periods, interest payments of $7,885 and $9,647, respectively, were made on the first lien term loan. During the Predecessor Quarterly and Nine Month Periods, interest payments of $7,285 and $8,913, respectively were made on the second lien term loan.
 
Covenants and Events of Default
 
Under the terms of our Amended and Restated Credit Agreement, if our borrowings under our revolving credit facilities (including letter of credit borrowings) exceed 25% of the used and unused Dollar or Multicurrency commitments under our revolving credit facilities in the aggregate as of the last day of any fiscal quarter, we must maintain a 6.5 to 1.0 ratio of (x) consolidated indebtedness that is secured by a first priority lien minus unrestricted cash and cash equivalents to (y) consolidated EBITDA for the four most recent fiscal quarters, subject to a right to cure. Upon consummation of the Chemtura Acquisition and satisfaction of certain conditions, however, the Further Amendments would provide flexibility with respect to certain limiting covenants, including by increasing certain U.S. Dollar baskets.
 
The Credit Agreement also contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of certain covenants, inaccuracy of representations and warranties, failure to make payment on certain other material indebtedness, bankruptcy and insolvency events , material judgments and a change of control of Platform. Upon the occurrence of an event of default, payment of any outstanding amounts under the Credit Agreement may be accelerated. Borrowings under the Credit Agreement are also subject to mandatory prepayment under certain circumstances, with customary exceptions, from the proceeds of permitted dispositions of assets and from certain insurance and condemnation proceeds. As of September 30, 2014, the Company was in compliance with the debt covenants contained in the new senior secured credit facilities.
 
 
15

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Guarantees
 
The obligations of the Borrowers under the senior secured credit facility are guaranteed by the Guarantors. Pursuant to an amended and restated pledge and security agreement, dated as of October 31, 2013 (as amended by Amendment No. 2 and as amended, supplemented and modified from time to time, the “Security Agreement”), entered into by the Borrowers, and the Guarantors, obligations under the Credit Agreement are secured by a security interest in substantially all of the personal property, whether owned on the date the Security Agreement was entered into or acquired in the future, of the Borrowers and the Guarantors, including the pledge by the Borrowers and the Guarantors generally of 100% of the voting capital stock and other equity interests in all of their respective domestic subsidiaries and 65% of the voting capital stock and other equity interests in all of their respective directly owned non-domestic subsidiaries (in each case, whether existing on the date the Security Agreement was entered into or acquired thereafter), subject to certain exceptions contained in the Credit Agreement and the Security Agreement.
 
The Company also had letters of credit outstanding of $989 at September 30, 2014. As indicated above, letters of credit reduce the borrowings available under the Revolving Credit Facility.
 
Other Debt Facilities
 
The Company carries various short-term debt facilities worldwide which are used to fund short-term cash needs. As of September 30, 2014 and December 31, 2013, there were no borrowings under these other debt facilities. The Company also has various overdraft facilities available. At September 30, 2014 and December 31, 2013, the capacity under these overdraft facilities was approximately $21,515 and $22,075, respectively. As of September 30, 2014, the Company’s overdraft lines bore interest rates ranging from 1% to 6.25%.
 
Predecessor Retired Senior Secured Credit Facility
 
In addition to scheduled repayments, the tranche B and tranche C loans contained mandatory prepayment provisions, whereby the Company was required to reduce the outstanding principal amounts of these loans based on excess cash flow (as defined in the credit agreement for the tranche B and tranche C loans) as of the most recent completed fiscal year. During the Predecessor Nine Month Period, the Predecessor made a mandatory excess cash flow prepayment, based upon 2012 operating results, of $10,277 on the tranche B term loan and $6,810 on the tranche C term loan.
 
During the Predecessor Nine Month Period, the outstanding tranche B loan and tranche C loan were retired with payments of $206,479 and $138,737, respectively.
 
During the Predecessor Nine Month Period, the Company recorded $3,261 of other expense related to the remeasurement loss on the foreign denominated tranche C term loan. During the Predecessor Nine Month Period, the realized portion of the remeasurement gain on the foreign denominated tranche C term loan was approximately $4,398.
 
Predecessor Senior Subordinated Notes
 
As part of the Refinancing, the senior subordinated notes were called on June 7, 2013 and $249,519 of principal and a redemption premium of $9,357 were paid to retire the tendered senior subordinated notes. Additionally, $105,864 of the new debt proceeds from the refinance and recapitalization were escrowed to pay the outstanding called senior subordinated notes of $100,481. Additionally, proceeds from the refinancing were escrowed for a redemption premium of $3,182 and accrued interest of $2,201 related to these called senior subordinated notes. The escrowed funds were paid to the holders of the remaining senior subordinated note holders on July 8, 2013.
 
Japanese Senior Secured Bank Debt
 
In February 2007, the Predecessor borrowed approximately $15,000 denominated in Japanese Yen in three separate notes that were paid in full by their respective maturity dates between 2009 and 2013. In September 2007, the Predecessor borrowed an additional $2,519 denominated in Japanese Yen which was paid in full in July 2013. In October 2009, the Predecessor borrowed $5,569 denominated in Japanese Yen which was paid in full in October 2013.
 
 
16

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
8. DERIVATIVE INSTRUMENTS
 
In the normal course of business, the Company is exposed to risks relating to changes in foreign currency exchange rates, interest rates and commodity prices. Derivative financial instruments, such as foreign currency exchange rate instruments are used to manage changes in market conditions related to foreign currency exchange rate volatility. All derivatives are recognized on the consolidated balance sheets at fair value at the end of each period. The counterparty to the Company’s derivative agreements is a major international financial institution. The Company continually monitors its positions and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties.
 
Foreign Currency
 
On September 23, 2014, in connection with the Agriphar and Chemtura Acquisitions, the Company entered into two separate foreign exchange forward contracts. The first contract was for the Company to buy €277,000 at a rate of 1.287845, which was settled on October 1, 2014. At September 30, 2014, the fair value of this forward contract was a current liability of approximately $6,827, that was also recorded as an unrealized loss in Other (expense) income in the accompanying Condensed Consolidated Statements of Operations. The second contract was for the Company to sell €203,975 at a rate of 1.284 that is to be settled upon closing the Chemtura Acquisition between November 3, 2014 and December 1, 2014. At September 30, 2014, the fair value of this contract was a current asset of approximately $4,200 that was recorded as an unrealized gain in Other (expense) income in the accompanying Condensed Consolidated Statements of Operations.
 
During the Successor Quarterly Period, there were no unrealized gains (losses) recorded to other comprehensive income related to foreign currency hedges. During the Successor Quarterly Period, there were no realized gains (losses) recorded in other income (expense) related to the settlement of hedged foreign exchange contracts.
 
During the Successor Nine Month Period, $163 was recorded as unrealized losses to other comprehensive income related to hedged foreign currency exchange contracts. During the Successor Nine Month Period, the Company recorded realized gains of $474 in other income related to the settlement of hedged foreign exchange contracts.
 
During the Predecessor Quarterly Period, $390 was recorded as unrealized gains to other comprehensive income related to foreign currency hedges. During the Predecessor Quarterly Period, the Company recorded a realized loss of $(38) in other expense related to the settlement of hedged foreign exchange contracts.
 
During the Predecessor Nine Month Period, $(260) was recorded as unrealized losses to other comprehensive income related to hedged foreign currency exchange contracts. During the Predecessor Nine Month Period, the Company recorded a realized loss of $(372) in other expense related to the settlement of hedged foreign exchange contracts.
 
 
 
 
17

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
The following table summarizes the fair value of derivative instruments reported in the Condensed Consolidated Balance Sheets:
 
       
September 30, 2014
U.S. Dollar Amount
   
December 31, 2013
U.S. Dollar Amount
 
Derivatives designated as hedging instruments:
 
Assets Balance Sheet Location
           
                 
Foreign exchange contracts
 
Prepaid expenses & other current assets
  $ -     $ 163  
                     
                     
Derivatives not designated as hedging instruments:
 
Assets Balance Sheet Location
               
                     
Foreign exchange contracts
 
Prepaid expenses & other current assets
  $ 4,200     $ -  
                     
   
Liabilities Balance Sheet Location
               
                     
Foreign exchange contracts
 
Accrued expenses and other current liabilities
    6,827       -  
                     
Total derivative contracts
      $ (2,627 )   $ 163  
 
9. FAIR VALUE MEASUREMENTS
 
The Company determines fair value measurements used in its consolidated financial statements based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs, as determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company has used the most advantageous market, which is the market in which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement.
 
Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.
 
The three levels of the fair value hierarchy are as follows:
 
·
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
 
·
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in non-active markets; and model derived valuations whose inputs are observable or whose significant valuation drivers are observable.
 
·
Level 3 – significant inputs to the valuation model are unobservable and/or reflect the Company’s market assumptions.
 
 
18

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
The following tables present the Company’s financial instruments, assets and liabilities that are measured at fair value on a recurring basis:
 
         
Fair Value Measurement Using
 
   
September 30, 2014
   
Quoted prices in
active markets
(Level 1)
   
Significant
other observable
inputs (Level 2)
   
Significant
unobservable
inputs (Level 3)
 
                         
Asset Category
                       
Money market accounts
  $ 57,811     $ 57,811     $ -     $ -  
Available for sale equity securities
    2,350       1,489       861       -  
Derivatives
    4,200       -       4,200       -  
Total
  $ 64,361     $ 59,300     $ 5,061     $ -  
                                 
Liability Category
                               
Long term contingent consideration
  $ 60,900     $ -     $ -     $ 60,900  
Derivatives
    6,827       -       6,827       -  
Total
  $ 67,727     $ -     $ 6,827     $ 60,900  
 
         
Fair Value Measurement Using
 
   
December 31, 2013
   
Quoted prices in
active markets
(Level 1)
   
Significant
other observable
inputs (Level 2)
   
Significant
unobservable
inputs (Level 3)
 
                         
Asset Category
                       
Money market accounts
  $ 78,633     $ 78,633     $ -     $ -  
Available for sale equity securities
    2,302       1,470       832       -  
Derivatives
    163       -       163       -  
Total
  $ 81,098     $ 80,103     $ 995     $ -  
                                 
Liability Category
                               
Long term contingent consideration
  $ 34,800     $ -     $ -     $ 34,800  
 
Money market accounts are included in cash and cash equivalents in the Condensed Consolidated Balance Sheets. Available for sale equity securities are included in other assets in the Condensed Consolidated Balance Sheets.
 
As discussed in Note 2 - "Acquisitions of Businesses", the long term contingent consideration represents a potential liability up to $100,000 tied to achievement of EBITDA and stock trading price performance metrics over a seven year period in connection with the MacDermid Acquisition. The fair value of the long term contingent consideration was derived using the income approach with unobservable inputs, which included 1) future forecasts and present value assumptions for the EBITDA component and 2) the fair value of Common Stock and related volatility using a Monte Carlo simulation for the Share Price component and there was little or no market data associated with either component. The Company assessed the fair values of the liabilities as of date of the MacDermid Acquisition date and will assess quarterly thereafter until settlement in December 2020.
 
 
19

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Nonrecurring Fair Value Measurements
 
The following table presents the carrying value and estimated fair value of the Company’s first lien credit facility:
 
   
September 30, 2014
   
December 31, 2013
 
   
Carrying
Value
 
Fair Value
   
Carrying
Value
 
Fair Value
 
                         
First lien credit facility, including current portion
  $ 745,563     $ 734,380     $ 751,225     $ 752,637  
 
The following methods and assumptions were used to estimate the fair value of each class of the Company’s financial instruments, assets and liabilities:
 
Money market accounts - The Company invests in various money market funds which are managed by financial institutions. These money market funds are not publicly traded, but historically have been highly liquid. The fair value of the money market accounts is determined by the banks based upon the funds’ net asset values (“NAV”). All of the money market accounts currently permit daily investments and redemptions at $1.00 NAV.
 
Available for sale equity securities - Equity securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. Level 2 equity securities are measured using quoted prices for similar instruments in active markets.
 
Derivatives - The fair values of foreign currency derivatives were determined using pricing models based upon observable market inputs including both forward and spot prices for the underlying currencies.
 
First Lien credit facility The first lien credit facility is measured using quoted market prices at the reporting date multiplied by the carrying amount of the related debt. Such instruments are valued using Level 2 inputs.
 
10. STOCKHOLDERS’ EQUITY
 
Successor
 
Amendment to Certificate of Incorporation
 
On June 12, 2014, the Company amended its Certificate of Incorporation to increase the number of authorized shares of the Company’s Common Stock from two hundred million (200,000,000) to four hundred million (400,000,000) shares of Common Stock.
 
Founder Preferred Shares
 
On April 25, 2013, the Company issued one preferred share each to Mariposa Acquisition, LLC and Berggruen Acquisition Holdings, IV, Ltd, our founder entities (collectively, the “Founders”), for $20.00. In connection with the initial public offering on May 22, 2013, the Founders purchased an additional 1,999,998 preferred shares (“Preferred” shares or stock; $0.01 par value) for $20,000. The preferred shares have certain voting rights. Beginning in 2014, the holders of the Preferred stock are entitled to receive a dividend in the form of shares of Common Stock equal to 20% of the appreciation of the market price of common shares multiplied by total initial offering shares (90,500,000 shares). In the first year a dividend is payable (if any), the dividend amount will be calculated at the calendar year-end based on the last ten trading days volume weighted average share price (the “Dividend Price) compared to the initial offering price of $10.00 per ordinary share. In subsequent years, the dividend amount will be calculated based on the appreciated stock price compared to the highest Dividend Price previously used in calculating the Preferred stock dividends. Dividends are paid for the term the Preferred stock is outstanding. The Preferred shares may be converted into ordinary shares on a one for one basis (i) automatically in the event of a change of control of the Company following an acquisition, (ii) upon the last day of the seventh full financial year following the MacDermid Acquisition (December 31, 2020, (extendable by the Board of Directors for three additional years)), or (iii) at the option of the holder until December 31, 2020. No shares were issued or dividends paid in the Successor Quarterly or Nine Month Period. Although not finally determinable until December 31, 2014, had the closing price for the Company’s Common Stock on September 30, 2014 been used, a dividend of approximately 11.7 million shares would have been issued to the Founders.
 
 
20

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 
Arysta Seller Financing
 
In connection with the Arysta Acquisition, the Company will issue $600,000 of new Series B convertible preferred stock. (Refer to Note 16 “Subsequent Events”) for further discussion.
 
Common Shares
 
Initial Public Offering
 
In connection with its initial public offering on May 22, 2013, the Company issued 88,500,000 common shares (no par value) for gross proceeds of $885,000. Also, on May 22, 2013, the Company issued an aggregate of 29,500 common shares to non-founder directors for $10.00 per share. Each common share has voting rights and winding-up rights.
 
Each of the 2,000,000 Preferred shares, 88,500,000 common shares issued in connection with the initial public offering as well as the 29,500 common shares issued to the non-founder directors was issued with a warrant (90,529,500 warrants in aggregate), entitling the holder of each warrant to purchase one-third of common shares with a strike price of $11.50 per common share. Each warrant was exercisable until three years from the date of an acquisition, unless mandatorily redeemed by the Company. The warrants were mandatorily redeemable by the Company at a price of $0.01 should the average market price of a common share exceed $18.00 for 10 consecutive trading days. In order to fund a portion of the cash consideration for the MacDermid Acquisition in November 2013, the Company conducted an offer to issue shares of Common Stock of the Company in exchange for $10.50 and 3 warrants, up to a maximum of half of the warrants outstanding (the Warrant Exchange Offer”) in which 40,386,840 warrants (representing $141,354 in cash) were exercised and 13,462,280 underlying shares of Common Stock were issued. In conjunction with the Warrant Exchange Offer not being fully subscribed, on November 13, 2013, the Company issued 380,952 shares at $10.50 per share to the Founders and issued 190,476 shares each to two of its independent directors at $10.50 per share.
 
MacDermid Acquisition
 
In connection with the MacDermid Acquisition, the Company agreed to apply to list its shares on the NYSE and to change its jurisdiction of incorporation from the British Virgin Islands to Delaware, (the “Domestication”). The Company filed a registration statement on Form S-4 with the SEC to effect these changes. The registration statement was declared effective on January 22, 2014 and on that same date the Company completed its Domestication. On January 23, 2014, the Company’s Common Stock began trading on the NYSE under the ticker symbol “PAH.” On March 4, 2014, pursuant to the terms of an Exchange Agreement, dated October 25, 2013, between the Company and the fiduciaries of the MacDermid Savings Plan, the Company acquired the remaining approximately 3% of the MacDermid Plan Shares for approximately $2,600 in cash (which is reflected in “Acquisition of business, net” in the accompanying Condensed Consolidated Statements of Cash Flows) and 1,670,386 shares of the Company’s Common Stock.
 
In connection with the Domestication, (i) each ordinary share of the Company that was issued and outstanding immediately prior to the Domestication was automatically converted into one share of Common Stock (par value $0.01) of the Company, (ii) outstanding options, warrants and other rights to acquire ordinary shares became options, warrants or rights to acquire the corresponding shares of Common Stock of the Company, and (iii) each Founder Preferred share that was issued and outstanding immediately prior to the Domestication was automatically converted into one share of Series A Preferred Stock of the Company.
 
Mandatory Redemption
 
On March 4, 2014, a mandatory redemption event occurred with respect to all of the Company’s outstanding warrants. The Company fixed April 3, 2014 as the date of the mandatory redemption of the warrants, and accordingly, on or after that date, holders of warrants had no further rights with regard to such warrants except to receive $0.01 per warrant. During the three months ended June 30, 2014, 3,755,232 warrants were exercised for 1,251,744 shares of Common Stock resulting in proceeds to the Company of $14,395. During the Successor Nine Month Period, the Company issued 16,244,694 shares of Common Stock in connection with the exercise of a total of 48,734,082 warrants resulting in proceeds to the Company of $186,814. On April 3, 2014, Platform completed the mandatory redemption of the remaining 8,580 outstanding warrants for $0.01 per warrant.
 
 
21

 
PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(Unaudited)
 

 
Private Placement
 
On May 20, 2014, the Company issued to certain investors, an aggregate of 15,800,000 shares of the Company’s Common Stock for an aggregate consideration of $300,200, gross of transaction costs of approximately $13,433, through the Private Placement. Such shares were not registered under the Securities Act of 1933, as amended (the “Securities Act”) and were issued pursuant to an exemption from registration provided under Section 4(a)(2) of the Securities Act. On May 23, 2014, we filed a resale registration statement on Form S-1, which registered an aggregate of 14,825,000 shares of the Company’s Common Stock acquired in the Private Placement. Such registration statement, as amended on June 13, 2014, was declared effective on June 19, 2014 and the 14,825,000 shares covered by such registration statement were eligible for resale in the public market immediately after the effective date of such registration statement.
 
Non-Controlling Interest
 
As described more fully in Note 2 – “Acquisitions of Businesses”, in connection with the MacDermid Acquisition, certain sellers elected to receive shares of common stock of Platform’s subsidiary PDH (the “PDH Common Stock”) representing approximately $97,500, which is classified as a non-controlling interest on the Condensed Consolidated Balance Sheets at September 30, 2014 and December 31, 2013 and will continue to be until such time as it is exchanged for Platform’s Common Stock. Approximately $2,091 and $5,159 of net income has been allocated to the non-controlling interest for the Successor Quarterly and Nine Month Periods, respectively, and is included in the accompanying Condensed Consolidated Statements of Operations.
 
A reconciliation of consolidated changes in equity for the Successor Nine Month Period, the Platform Preacquisition Year to Date Period and the Predecessor Nine Month Period is as follows:
 
Successor
 
                                                             
   
Preferred Stock
   
Common Stock
                                     
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
Paid-in
Capital
   
Accumulated
Deficit
   
Accumulated
other
comprehensive
income (loss)
   
Total
Stockholders'
Equity
   
Non-
controlling
interest
   
Total equity
 
                                                             
Balance at December 31, 2013
    2,000,000     $ -       103,571,941     $ -     $ 1,212,038     $ (194,222 )   $ 1,265     $ 1,019,081     $ 96,021     $ 1,115,102  
Impact of Domestication
    -       20       -       1,016       (1,036 )     -       -       -       -       -  
Issuance of common shares at $11.00 per share on January 5, 2014
    -       -       3,959       -       44       -       -       44       -       44  
Issuance of common shares to Directors on July 31, 2014
                    9,242       -       -       -               -       -       -  
Issuance of common shares from Employee Stock Purchase Plan
    -       -       4,108       -       95       -               95       -       95  
Exercise of warrants for common shares at $11.50 per share
    -       -       16,244,694       163       186,652       -       -       186,815       -       186,815  
Issuance of common shares at $19.00 per share in connection with Private Placement Offering
                    15,800,000       158       300,042       -       -       300,200       -       300,200  
Issuance costs in connection with Private Placement Offering
    -       -       -       -       (13,770 )     -       -       (13,770 )     -       (13,770 )
Issuance of common shares at $11.00 per share in connection with 401(k) Exchange Agreement
    -       -       1,670,386       16       18,358       -       -       18,374       -       18,374  
Recovery of short swing profits, net
    -       -       -       -       533       -       -       533       -       533  
Equity compensation expense
    -       -       -       -       451       -       -       451       -       451  
Net income
    -       -       -       -       -       4,077       -       4,077       5,380       9,457  
Foreign currency translation adjustments
    -       -       -       -       -       -       (37,302 )     (37,302 )     (5 )     (37,307 )
Pension and postretirement plans, net of tax benefit of $11
    -       -       -       -       -       -       228       228       -       228  
Derivatives valuation, net of tax benefit of $63
    -       -       -       -       -       -       (100 )     (100 )     -       (100 )
Unrealized loss on available for sale equity securities, net of tax benefit of $33
    -       -       -       -       -       -       (53 )     (53 )     -       (53 )
Allocation of comprehensive loss to non-controlling interest
    -