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

FORM 10-Q
_______________

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
 
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.)
 
 
1450 Centrepark Boulevard, Suite 210
West Palm Beach, Florida
33401
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (561) 207-9600
_______________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý      No  ¨
 
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  ý      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 ý 
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 ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
 
Class
August 12, 2015
Common Stock, par value $0.01 per share
210,864,903 shares







Table of Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







Glossary of Defined Terms

Terms    
 
Definitions
Platform; We; Us; Our; the Company
 
Platform Specialty Products Corporation, a Delaware corporation, and its subsidiaries, collectively, for all periods subsequent to the MacDermid Acquisition.
Acquisitions
 
The Agriphar Acquisition, Arysta Acquisition, CAS Acquisition, and MacDermid Acquisition, collectively.
Agriphar
 
Percival and its agrochemical business, Agriphar.
Agriphar Acquisition
 
Acquisition of a 100% interest in Agriphar, completed on October 1, 2014.
AIs
 
Active ingredients.
Alent
 
Alent plc (LSE:ALNT), a public limited company registered in England and Wales.
Alent Acquisition
 
The proposed acquisition of Alent announced on July 13, 2015, which is expected to close in late 2015 or early 2016 after the satisfaction of the applicable closing conditions, including, but not limited to, Alent shareholder approval and regulatory approvals in certain jurisdictions.
Amended and Restated Credit Agreement
 
Platform’s credit agreement dated April 12, 2007, as amended and/or restated on June 7, 2013, October 31, 2013 (Amendment No. 1), August 6, 2014 (Second Amended and Restated Credit Agreement and the Further Amendments pursuant to Amendment No. 2), October 1, 2014 (Incremental Amendment No. 1) and February 13, 2015 (Amendment No. 3).
Amendment No. 2
 
Amendment No. 2, dated as of August 6, 2014, entered into among, inter alia, Platform, MacDermid Holdings, MacDermid, the subsidiaries of the borrowers from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent, including the Further Amendments to the Second Amended and Restated Credit Agreement, entered into in connection with the CAS Acquisition.
Amendment No. 3
 
Amendment No. 3, dated as of February 13, 2015, entered into among, Platform, MacDermid Holdings, MAS Holdings, NAIP and certain subsidiaries of Platform and MacDermid Holdings, the lenders from time to time parties thereto and Barclays Bank PLC, entered into in connection with the Arysta Acquisition.
Annual Report
 
Platform's annual report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 30, 2015.
Arysta
 
Arysta LifeScience Limited, an Irish private limited company.
Arysta Acquisition
 
Acquisition of a 100% interest in Arysta, completed on February 13, 2015.
ASC
 
Accounting Standards Codification.
ASU
 
Accounting Standards Update.
Board
 
Platform’s board of directors.
CAS
 
AgroSolutions business of Chemtura.
CAS Acquisition
 
Acquisition of a 100% interest in CAS, completed on November 3, 2014.
Chemtura
 
Chemtura Corporation, a Delaware corporation.
Credit Facilities
 
The First Lien Credit Facility and the Revolving Credit Facility, collectively, available under the Amended and Restated Credit Agreement.
Dodd-Frank
 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Domestic Pension Plan
 
MacDermid, Incorporated Employees’ Pension Plan (as amended and restated, effective January 1, 2009), a non-contributory domestic defined benefit pension plan.
Domestication
 
Platform’s change of jurisdiction of incorporation from the British Virgin Islands to Delaware on January 22, 2014.
ESPP
 
Platform Specialty Products Corporation 2014 Employee Stock Purchase Plan, adopted by the Board on March 6, 2014 and approved by Platform’s stockholders at the annual meeting held on June 12, 2014.
Euro Tranche Term Loan
 
Term loans denominated in Euros in an aggregate amount of €205 million borrowed in connection with the CAS Acquisition.
Exchange Act
 
Securities Exchange Act of 1934, as amended.
Exchange Agreement
 
Exchange Agreement, dated October 25, 2013, between Platform and the fiduciaries of the 401K Plan.


G-1






Terms    
 
Definitions
FASB
 
Financial Accounting Standard Board.
FCPA
 
Foreign Corrupt Practices Act of 1977.
First Lien Credit Facility
 
First lien credit facility available under the Amended and Restated Credit Agreement.
Founder Entities
 
Mariposa Acquisition, LLC and Berggruen Holdings Ltd. and its affiliates, collectively.
Further Amendments
 
Further amendments to our Second Amended and Restated Credit Agreement pursuant to the Amendment No. 2 entered on August 6, 2014 by and among Platform, Barclays Bank PLC, the several lenders from time to time party thereto and the other parties thereto, which became effective upon the consummation of the CAS Acquisition on November 3, 2014.
HSRA Act
 
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Incremental Amendment
 
Incremental amendment No. 1 to the Amended and Restated Credit Agreement entered into on October 1, 2014 by and among Platform and MacDermid, as borrowers, MacDermid Holdings, certain subsidiaries of MacDermid Holdings and Platform, Barclays Bank PLC, as collateral agent and administrative agent, and the incremental lender party thereto.
Initial Public Offering
 
Initial public offering of Platform (formerly named “Platform Acquisition Holdings Limited”) completed on the London Stock Exchange on May 22, 2013, raising net proceeds of approximately $881 million.
June 2015 Equity Offering
 
Platform's underwritten public offering of 18,226,414 shares of its common stock at a public offering price of $26.50 per share, which closed on June 29, 2015, raising gross proceeds of approximately $483 million.
LTCB
 
Long Term Cash Bonus plan
MacDermid
 
MacDermid, Incorporated, a Connecticut corporation.
MacDermid Acquisition
 
Platform’s acquisition on October 31, 2013 of substantially all of the equity of MacDermid Holdings, which, at the time, owned approximately 97% of MacDermid. As a result, Platform became a holding company for the MacDermid business. Platform acquired the remaining 3% of MacDermid on March 4, 2014, pursuant to the terms of the Exchange Agreement.
MacDermid Holdings
 
MacDermid Holdings, LLC which, at the time of the MacDermid Acquisition, owned approximately 97% of MacDermid, a subsidiary of MacDermid Holdings.
MAS Holdings
 
MacDermid Agricultural Solutions Holdings B.V., a company organized under the laws of the Netherlands and a subsidiary of Platform.
NAIP
 
Netherlands Agricultural Investment Partners, LLC, a company organized under the laws of the Netherlands and a subsidiary of Platform.
New Euro Tranche Term Loan
 
New term loans denominated in Euros in an aggregate amount of €83 million borrowed in connection with the Arysta Acquisition.
New Tranche B Term Loan
 
New Tranche B term loans denominated in U.S. dollars in an aggregate principal amount of $130 million, borrowed in connection with the CAS Acquisition through an increase in Platform’s existing tranche B term loan facility.
New Tranche B-2 Term Loan
 
New Tranche B-2 term loans denominated in U.S. dollars in an aggregate principal amount of $500 million, borrowed in connection with the Arysta Acquisition through an increase in Platform’s existing tranche B term loan facility.
Notes Offering
 
Private offering of $1.10 billion aggregate principal amount of 6.50% USD Notes due 2022 and €350 million aggregate principal amount of 6.00% EUR Notes due 2023 to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to non-U.S. persons in accordance with Regulation S under the Securities Act, completed on February 2, 2015.
NYSE
 
New York Stock Exchange.
OMG
 
OM Group, Inc. (NYSE:OMG), a Delaware corporation.
OMG Businesses
 
The OMG's Electronic Chemicals and Photomasks businesses, collectively
OMG Acquisition
 
The proposed acquisition of the OMG Businesses announced on June 1, 2015, which is expected to close in two stages, during the fourth quarter of 2015, and then subsequently during the first quarter of 2016.
Original Seller
 
Nalozo S.à.r.l., a Luxembourg limited liability company and the original seller in the Arysta Acquisition.
PDH
 
Platform Delaware Holdings, Inc., a subsidiary of Platform.
PDH Common Stock
 
Shares of common stock of PDH.


G-2






Terms    
 
Definitions
Percival
 
Percival S.A., a société anonyme incorporated and organized under the laws of Belgium, acquired by Platform on October 1, 2014.
Pershing Square
 
Pershing Square Capital Management, L.P.
Private Placement Offering
 
Private placement of an aggregate of 15,800,000 shares of common stock completed on May 20, 2014 at a purchase price of $19.00 per share, raising net proceeds of approximately $287 million.
Quarterly Report
 
This quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015.
Retaining Holder
 
Each Holder of an equity interest of MacDermid Holdings immediately prior to the closing of the MacDermid Acquisition, who executed a RHSA.
Revolving Credit Facility
 
Revolving Credit Facility (in U.S. dollars or multicurrency) available under the Amended and Restated Credit Agreement.
RSUs
 
Restricted stock units issued by Platform from time to time under the 2013 Plan.
RHSA
 
Retaining Holder Securityholders’ Agreement dated October 10, 2013 entered into by and between Platform and each Retaining Holder pursuant to which they agreed to exchange their respective interests in MacDermid Holdings for shares of PDH Common Stock, at an exchange rate of $11.00 per share plus (i) a proportionate share of the $100 million contingent consideration and (ii) an interest in certain MacDermid pending litigation.
Sarbanes-Oxley
 
Sarbanes-Oxley Act of 2002.
SEC
 
Securities and Exchange Commission.
Security Agreement
 
Amended and Restated Pledge and Security Agreement, amended and restated as of October 31, 2013, as amended, supplemented and modified from time to time, entered into by Platform, MacDermid and the guarantors listed therein.
Second Amended and Restated Credit Agreement
 
Second Amended and Restated Credit Agreement, dated as of August 6, 2014, among, inter alia, Platform, MacDermid Holdings, MacDermid, the subsidiaries of the borrowers from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent.
Securities Act
 
Securities Act of 1933, as amended.
Seller
 
Nalozo, L.P., an affiliate of the Original Seller who became the seller in the Arysta Acquisition pursuant to an amendment to the share purchase agreement dated February 11, 2015.
Seller Resale Registration Statement
 
Registration statement on Form S-3 (File No. 333-202287) initially filed on February 25, 2015 to register the resale of a maximum of 22,107,590 shares of common stock issuable upon conversion of the Series B Convertible Preferred Stock pursuant to a registration rights agreement entered into with the Seller dated February 13, 2015. The Seller Registration Statement was amended on March 20, 2015 and April 29, 2015, and declared effective by the SEC on May 6, 2015.
Series A Preferred Stock
 
2,000,000 shares of Platform’s Series A preferred stock which were automatically converted from ordinary shares held by the Founder Entities upon the Domestication, and which are convertible into shares of Platform’s common stock, on a one-for-one basis, at any time at the option of the Founder Entities.
Series B Convertible Preferred Stock
 
600,000 shares of Platform’s Series B convertible preferred stock issued to the Seller in connection with the Arysta Acquisition on February 13, 2015, which are convertible into a maximum of 22,107,590 shares of Platform's common stock at the option of the Seller.
SERP
 
Supplemental Executive Retirement Plan for executive officers of Platform.
Tartan
 
Tartan Holdings, LLC, a Delaware limited liability company and subsidiary of Platform, formed at the time of the MacDermid Acquisition to hold the PDH Common Stock in exchange of MacDermid Holdings equity interests.
U.K. Companies Act
 
The U.K. Companies Act 2006, as amended.
U.K. Takeover Code
 
The U.K. City Code on Takeovers and Mergers.
USD Incremental Loan
 
Incremental term loans under the Incremental Amendment to the Second Amended and Restated Credit Agreement in an aggregate principal amount of $300 million used to finance the Agriphar Acquisition.
U.S. GAAP
 
Generally accepted accounting principles in the United States.
2013 Plan
 
Platform Specialty Products Corporation Amended and Restated 2013 Incentive Compensation Plan adopted by the Board on October 31, 2013, as amended on December 16, 2013 and approved by Platform’s stockholders at the annual meeting held on June 12, 2014.


G-3






Terms    
 
Definitions
401K Plan
 
MacDermid, Incorporated Profit Sharing and Employee Savings Plan.
6.00% EUR Notes due 2023
 
Platform’s 6.00% senior notes due 2023 denominated in Euros issued in the Notes Offering.
6.50% USD Notes due 2022
 
Platform’s 6.50% senior notes due 2022 denominated in U.S. dollars issued in the Notes Offering.



G-4






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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
675.1

 
$
189.1

 
$
1,209.9

 
$
372.8

Cost of sales
406.5

 
92.4

 
734.2

 
191.9

Gross profit
268.6

 
96.7

 
475.7

 
180.9

Operating expenses:
 

 
 
 
 

 
 

Selling, technical, general and administrative
206.2

 
85.2

 
398.2

 
159.2

Research and development
18.4

 
5.9

 
31.3

 
12.1

Total operating expenses
224.6

 
91.1

 
429.5

 
171.3

Operating profit
44.0

 
5.6

 
46.2

 
9.6

Other (expense) income:
 

 
 

 
 

 
 

Interest expense, net
(51.1
)
 
(7.7
)
 
(90.5
)
 
(15.4
)
Other (expense) income, net
(2.2
)
 
(0.5
)
 
33.4

 
(0.6
)
Total other expense
(53.3
)
 
(8.2
)
 
(57.1
)
 
(16.0
)
Loss before income taxes and non-controlling interests
(9.3
)
 
(2.6
)
 
(10.9
)
 
(6.4
)
Income tax benefit (expense)
0.2

 
4.1

 
(24.5
)
 
1.9

Net (loss) income
(9.1
)
 
1.5

 
(35.4
)
 
(4.5
)
Net income attributable to the non-controlling interests
(3.1
)
 
(1.9
)
 
(3.5
)
 
(3.3
)
Net loss attributable to common stockholders
$
(12.2
)
 
$
(0.4
)
 
$
(38.9
)
 
$
(7.8
)
Loss per share
 

 
 

 
 

 
 

Basic
$
(0.06
)
 
$

 
$
(0.20
)
 
$
(0.07
)
Diluted
$
(0.06
)
 
$

 
$
(0.20
)
 
$
(0.07
)
Weighted average shares outstanding
 

 
 
 
 

 
 

Basic
192.8

 
128.6

 
192.3

 
117.9

Diluted
192.8

 
128.6

 
192.3

 
117.9

 
See accompanying notes to condensed consolidated financial statements


1






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In millions)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net (loss) income
$
(9.1
)
 
$
1.5

 
$
(35.4
)
 
$
(4.5
)
Other comprehensive income (loss), before tax
 

 
 

 
 

 
 

Foreign currency translation adjustments
161.5

 
19.7

 
(263.7
)
 
23.0

 
 
 
 
 
 
 
 
Pension and post-retirement plans
 
 
 
 
 
 
 
Net loss recognized during the year

 

 

 
0.2

Pension and post-retirement plans

 

 

 
0.2

Tax expense

 

 
(0.5
)
 

Pension and post-retirement plan, net of tax

 

 
(0.5
)
 
0.2

 
 
 
 
 
 
 
 
Unrealized gain on available for sale securities
 
 
 
 
 
 
 
Unrealized holding gain on available for sale securities
0.3

 
0.1

 
0.2

 

Unrealized gain on available for sale securities
0.3

 
0.1

 
0.2

 

Tax expense

 

 

 

Unrealized gain on available for sale securities, net of tax
0.3

 
0.1

 
0.2

 

 
 
 
 
 
 
 
 
Derivative financial instruments revaluation
 
 
 
 
 
 
 
Unrealized hedging loss arising during the period

 
(0.2
)
 

 
(0.2
)
Derivative financial instruments revaluation

 
(0.2
)
 

 
(0.2
)
Tax benefit

 
0.1

 

 
0.1

Derivative financial instruments revaluation, net of tax

 
(0.1
)
 

 
(0.1
)
 
 
 
 
 
 
 
 
Total other comprehensive income (loss), net of tax
161.8

 
19.7

 
(264.0
)
 
23.1

Comprehensive income (loss)
152.7

 
21.2

 
(299.4
)
 
18.6

Comprehensive (income) loss attributable to the non-controlling interests
(4.7
)
 
(3.2
)
 
3.6

 
(4.6
)
Comprehensive income (loss) attributable to common stockholders
$
148.0

 
$
18.0

 
$
(295.8
)
 
$
14.0

 
See accompanying notes to condensed consolidated financial statements


2






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share and per share amounts)
 
June 30,
 
December 31,
 
2015
 
2014
Assets
 
 
 
Cash and cash equivalents
$
672.2

 
$
397.3

Restricted cash

 
600.0

Accounts receivable, net of allowance for doubtful accounts of $12.4 and $9.6 at June 30, 2015 and December 31, 2014, respectively
1,050.1

 
327.3

Inventories
470.0

 
205.8

Prepaid expenses and other current assets
195.0

 
46.1

Total current assets
2,387.3

 
1,576.5

Property, plant and equipment, net
280.6

 
175.0

Goodwill
3,012.8

 
1,405.3

Intangible assets, net
2,777.3

 
1,341.5

Other assets
88.4

 
49.0

Total assets
$
8,546.4

 
$
4,547.3

Liabilities & Stockholders' Equity
 

 
 

Revolving credit facilities
22.4

 

Current installments of long-term debt
16.8

 
13.2

Accounts payable
386.7

 
106.7

Accrued salaries, wages and employee benefits
30.3

 
31.3

Accrued income taxes payable
1.5

 
16.7

Accrued working capital adjustment payable

 
14.3

Accrued customer rebates and sales incentives
139.5

 
9.9

Financial guarantees and factoring
70.0

 

Other current liabilities
190.8

 
48.6

Total current liabilities
858.0

 
240.7

Long-term debt and capital lease obligations
3,401.6

 
1,392.4

Long-term retirement benefits, less current portion
45.2

 
38.8

Long-term deferred income taxes
675.6

 
202.3

Long-term contingent consideration
67.5

 
63.9

Other long-term liabilities
104.1

 
56.6

Total liabilities
5,152.0

 
1,994.7

Commitments and contingencies (Note 15)


 


Redeemable preferred stock - Series B
645.9

 

Stockholders' Equity
 

 
 

Preferred stock - Series A

 

Common stock, $0.01 par value per share (effective January 23, 2014), 400,000,000 shares authorized, 210,861,044 and 182,066,980 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
2.1

 
1.9

Additional paid-in capital
3,287.9

 
2,812.4

Accumulated deficit
(263.0
)
 
(224.1
)
Accumulated other comprehensive loss
(387.6
)
 
(130.6
)
Total stockholders' equity
2,639.4

 
2,459.6

Non-controlling interests
109.1

 
93.0

Total equity
2,748.5

 
2,552.6

Total liabilities, redeemable preferred shares and equity
$
8,546.4

 
$
4,547.3


See accompanying notes to condensed consolidated financial statements


3






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
Six Months Ended June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net cash flows provided by operating activities
100.3

 
49.2

Cash flows from investing activities:
 

 
 

Capital expenditures, net
(29.3
)
 
(4.6
)
Change in restricted cash
600.0

 

Acquisition of businesses, net
(2,856.7
)
 
4.8

Investment in registrations of products
(14.6
)
 

Other, net
0.1

 

Net cash flows (used in) provided by investing activities
(2,300.5
)
 
0.2

Cash flows from financing activities:
 

 
 

Proceeds from issuance of debt, net of discount and premium
2,082.7

 

Change in revolving credit facilities, net
7.1

 

Repayments of borrowings
(10.3
)
 
(3.8
)
Proceeds from issuance of common stock, net
469.4

 
473.6

Payment of debt financing fees
(45.5
)
 

Change in factored liabilities
(18.9
)
 

Other, net
(0.6
)
 
0.2

Net cash flows provided by financing activities
2,483.9

 
470.0

Effect of exchange rate changes on cash and cash equivalents
(8.8
)
 
0.3

Net increase in cash and cash equivalents
274.9

 
519.7

Cash and cash equivalents at beginning of period
397.3

 
123.0

Cash and cash equivalents at end of period
$
672.2

 
$
642.7


 See accompanying notes to condensed consolidated financial statements


4






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In millions, except share and per share amounts)
 
Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
other
comprehensive
loss
 
Total
Stockholders'
Equity
 
Non-
controlling
interest
 
Total equity
Balance at December 31, 2014
2,000,000

 
$

 
182,066,980

 
$
1.9

 
$
2,812.4

 
$
(224.1
)
 
$
(130.6
)
 
$
2,459.6

 
$
93.0

 
$
2,552.6

Net loss

 

 

 

 

 
(26.7
)
 

 
(26.7
)
 
0.4

 
(26.3
)
Other comprehensive loss, net of taxes

 

 

 

 

 

 
(417.2
)
 
(417.2
)
 
(8.7
)
 
(425.9
)
Issuance of common stock to Founder Entities as stock dividend to Series A Preferred Stock declared on December 31, 2014

 

 
10,050,290

 

 

 

 

 

 

 

Issuance of common stock to former non-founder director for exercise of stock options

 

 
75,000

 

 
0.9

 

 

 
0.9

 

 
0.9

Conversion of PDH Common Stock into common stock

 

 
21,316

 

 
0.2

 

 

 
0.2

 
(0.2
)
 

Issuance of common stock under ESPP

 

 
7,986

 

 
0.1

 

 

 
0.1

 

 
0.1

Equity compensation expense

 

 

 

 
0.7

 

 

 
0.7

 

 
0.7

Acquisition of non-controlling interest with Arysta Acquisition

 

 

 

 

 

 

 

 
24.6

 
24.6

Balance at March 31, 2015
2,000,000

 
$

 
192,221,572

 
$
1.9

 
$
2,814.3

 
$
(250.8
)
 
$
(547.8
)
 
$
2,017.6

 
$
109.1

 
$
2,126.7

Net loss

 

 

 

 

 
(12.2
)
 

 
(12.2
)
 
3.1

 
(9.1
)
Other comprehensive income, net of taxes

 

 

 

 

 

 
160.2

 
160.2

 
1.6

 
161.8

Issuance of common stock at $26.50 per share in June 2015 Equity Offering

 

 
18,226,414

 
0.2

 
482.8

 

 

 
483.0

 

 
483.0

Issuance costs in connection with June 2015 Equity Offering

 

 

 

 
(14.8
)
 

 

 
(14.8
)
 

 
(14.8
)
Conversion of PDH Common Stock into common stock

 

 
406,217

 

 
4.7

 

 

 
4.7

 
(4.7
)
 

Issuance of common stock under ESPP

 

 
6,841

 

 
0.3

 

 

 
0.3

 

 
0.3

Equity compensation expense

 

 

 

 
0.6

 

 

 
0.6

 

 
0.6

Balance at June 30, 2015
2,000,000

 
$

 
210,861,044

 
$
2.1

 
$
3,287.9

 
$
(263.0
)
 
$
(387.6
)
 
$
2,639.4

 
$
109.1

 
$
2,748.5


See accompanying notes to condensed consolidated financial statements


5






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In millions, except share and per share amounts)

 
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

 
$

 
$
1,212.0

 
$
(194.2
)
 
$
1.3

 
$
1,019.1

 
$
96.0

 
$
1,115.1

Net loss

 

 

 

 

 
(7.4
)
 

 
(7.4
)
 
1.5

 
(5.9
)
Other comprehensive income, net of taxes

 

 

 

 

 

 
3.4

 
3.4

 

 
3.4

Impact of Domestication

 

 

 
1.0

 
(1.0
)
 

 

 

 

 

Issuance of common stock at $11.00 per share on January 5, 2014

 

 
3,959

 

 

 

 

 

 

 

Exercise of warrants for common stock at $11.50 per share

 

 
14,992,950

 
0.2

 
172.3

 

 

 
172.5

 

 
172.5

Issuance of common stock at $11.00 per share in connection with Exchange Agreement

 

 
1,670,386

 

 
18.4

 

 

 
18.4

 

 
18.4

Distribution to non-controlling interest

 

 

 

 

 

 

 

 
(0.2
)
 
(0.2
)
Balance at March 31, 2014
2,000,000

 
$

 
120,239,236

 
$
1.2

 
$
1,401.7

 
$
(201.6
)
 
$
4.7

 
$
1,206.0

 
$
97.3

 
$
1,303.3

Net loss

 

 

 

 

 
(0.4
)
 

 
(0.4
)
 
1.9

 
1.5

Other comprehensive income, net of taxes

 

 

 

 

 

 
18.4

 
18.4

 
1.3

 
19.7

Exercise of warrants for common stock at $11.50 per share

 

 
1,251,744

 

 
14.4

 

 

 
14.4

 

 
14.4

Issuance of common stock at $19.00 per share in connection with Private Placement Offering

 

 
15,800,000

 
0.2

 
300.0

 

 

 
300.2

 

 
300.2

Issuance costs in connection with Private Placement Offering

 

 

 

 
(13.4
)
 

 

 
(13.4
)
 

 
(13.4
)
Recovery of short swing profits, net

 

 

 

 
0.5

 

 

 
0.5

 

 
0.5

Equity compensation expense

 

 

 

 
0.3

 

 

 
0.3

 

 
0.3

Distribution to non-controlling interest

 

 

 

 

 

 

 

 
(0.2
)
 
(0.2
)
Balance at June 30, 2014
2,000,000

 
$

 
137,290,980

 
$
1.4

 
$
1,703.5

 
$
(202.0
)
 
$
23.1

 
$
1,526.0

 
$
100.3

 
$
1,626.3


See accompanying notes to condensed consolidated financial statements



6






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


1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Platform Specialty Products Corporation is a global, diversified producer of high-technology specialty chemical products. The Company's business involves the formulation of a broad range of solutions-oriented specialty chemicals, which are sold into multiple industries, including agrochemical, animal health, electronics, graphic arts, plating, and offshore oil production and drilling. The Company refers to its products as “dynamic chemistries” due to their intricate chemical compositions. As further described in Note 20, Segment Information, the Company operates in two segments: Performance Applications and Agricultural Solutions.
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 the MacDermid Acquisition on October 31, 2013, as described below, the Company had neither engaged in any operations nor generated any income.
On October 31, 2013, the Company completed the MacDermid Acquisition pursuant to which it indirectly acquired substantially all of the equity of MacDermid Holdings, which, at the time, owned approximately 97% of MacDermid. The Company acquired the remaining 3% of MacDermid on March 4, 2014, pursuant to the terms of the Exchange Agreement.  On January 22, 2014, the Company completed its Domestication and on January 23, 2014, the Company's common stock, par value $0.01 per share, began trading on the NYSE under the ticker symbol “PAH.”
Basis of Presentation
These unaudited interim Condensed Consolidated Financial Statements and related information have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the applicable rules and regulations of the SEC. Accordingly, they do not include all of the disclosures required in connection with annual financial statements. These unaudited interim Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, normal, recurring and necessary for a fair statement of the results of operations. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the related notes thereto included in the Company’s Annual Report.
The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all footnote disclosures from the annual financial statements.
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements include Platform's accounts and all of its controlled subsidiaries. All subsidiaries are included in the Condensed Consolidated Financial Statements for the entire period or, if acquired, from the date that the Company obtains control. The Company fully consolidates the income, expenses, assets, liabilities and cash flows of subsidiaries from the date it acquires control up to the date control ceases. All intercompany accounts and transactions were eliminated in consolidation.
Significant Accounting Policies
Marketable Equity Securities
Equity securities that have a readily determinable fair value are classified as available for sale and are carried at fair value. Unrealized holding gains and losses are recorded in other comprehensive income. Equity securities which do not have readily determinable fair values are recorded at cost, and are evaluated whenever events or changes in circumstances indicate that the carrying values of such investments may be impaired.


7

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



Financial Guarantees and Factoring of Accounts Receivable
Guarantees provided to financial institutions on vendor and customer loans used to settle outstanding accounts receivable balances are recorded as liabilities until such time when the guarantee periods have elapsed, at which time the accounts receivable balances and the related financial guarantees are reversed.
Factoring arrangements, where substantially all economic risks and rewards associated with trade receivables are transferred to a third party, are accounted for by derecognizing the trade receivables upon receiving the cash proceeds from the factoring arrangement. Factoring arrangements, where some, but not substantially all economic risks and rewards are transfered to a third party and where the assets subject to the factoring remain under the Company's control are accounted for by not derecognizing the trade receivables and by recognizing any related obligations to the third party.
Product Registrations
Product registrations represent external costs incurred to obtain distribution rights from regulatory bodies for certain products in our Agricultural Solutions segment. These costs include laboratory testing, legal, regulatory filing and other costs. Only costs associated with products that are probable of generating future cash flows are capitalized. The capitalized costs are amortized over the useful life of the registrations and are included in "selling, technical, general and administrative" expenses in the Condensed Consolidated Statement of Operations and are evaluated for impairment in the same manner as other finite-lived intangible assets.
Equity Method Investments
Investments in which the Company has the ability to exercise significant influence over, but does not control, are accounted for under the equity method of accounting and are included in "other assets" on the Condensed Consolidated Balance Sheet. Significant influence generally exists when the Company holds between 20% and 50% of the voting power of another entity. Investments are initially recognized at cost. The Condensed Consolidated Financial Statements include the Company's share of net earnings or losses from the date that significant influence commences until the date that significant influence ceases. When the Company's share of losses exceeds its interest in an equity investment, the carrying amount of that interest is reduced to zero, and the recognition of further losses is discontinued, except to the extent that the Company has an obligation or has made payments on behalf of the investee.
Revenue Recognition
The Company recognizes revenue, including freight charged to customers, net of applicable rebates, estimates for sales returns and allowances and discounts, when the earnings process is complete. This occurs when products have been shipped to or received by the customer, in accordance with the terms of the agreement, title and risk of loss has been transferred, pricing is fixed or determinable and collectability is reasonably assured.
The Company allows certain distributors within the Agricultural Solutions segment one-time, non-repeatable extensions of credit on a limited portion of purchases made during a purchasing cycle, which remain in the distributor’s inventory. The extension of credit is not a right to return, and distributors must pay unconditionally when the extended credit period expires.
Accounting Policies Recently Adopted and Pending Pronouncements
Revenue from Contracts with Customers (Topic 606) - In August 2015, the FASB issued ASU No. 2015-14 “Deferral of the Effective Date,” which defers the effective date of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)," for all entities by one year. As a result, the provisions of ASU No. 2014-09 will be effective prospectively for fiscal years and interim periods beginning after December 15, 2017. ASU No. 2014-09 (1) removes inconsistencies and weaknesses in revenue requirements, (2) provides a more robust framework for addressing revenue issues, (3) improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, (4) provides more useful information to users of financial statements through improved disclosure requirements and (5) simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.  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 Company continues to evaluate the impact of this ASU.


8

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



Inventory (Topic 330) - In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” Under the updated guidance, an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less predictable costs of completion, disposal, and transportation. The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this new ASU, but does not expect it to have a material impact on its financial statements.
Fair Value Measurement (Topic 820) - In May 2015, the FASB issued ASU No. 2015-07, “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This update eliminates diversity in practice related to investments whose fair value is measured using net asset values as a practical expedient, and removes the requirement to categorize such investments within the fair value hierarchy. The guidance is effective retrospectively for fiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. The Company continues to evaluate the impact of this new ASU, but does not expect it to have a material impact on its financial statements.
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - In April 2015, the FASB issued ASU No. 2015-05, “Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.” This update provides explicit guidance to customers utilizing a cloud computing solution to help determine whether such an arrangement include a software license, in which case the accounting applied would be similar to that of other software license arrangements. Otherwise, the arrangement would be accounted for as a service contract. The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. The Company does not expect this ASU to have a material impact on its financial statements.
Interest - Imputation of Interest (Subtopic 835-30) - In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This update eliminates the difference in the presentation of debt issuance costs and debt discount and premiums by requiring that debt issuance costs be presented as deductions from the carrying value of the related debt, in a manner similar to debt discounts. The guidance is effective retroactively for fiscal years and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this ASU as of June 30, 2015, and reclassified approximately $48.6 million and $10.3 million of debt issuance costs related to term debt from assets to contra-liabilities as of June 30, 2015 and December 31, 2014, respectively.
Derivatives and Hedging (Topic 815) - In November 2014, the FASB issued ASU No. 2014-16, “ Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force).” Under current practice, there were predominantly two methods used to evaluate whether the nature of the host contract in a hybrid financial instrument is more akin to debt or equity: one considered all the features including the embedded and the other excluded the embedded derivative in the consideration. This update eliminates the difference in practice by clarifying that the evaluation should be based on all the instrument’s features, including the embedded derivative, and that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. The guidance is effective for fiscal years and interim periods beginning after December 15, 2015 and is applied in a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of our fiscal year 2016. Early adoption, including in an interim period, is permitted. The Company adopted the provision of this ASU during the first quarter of 2015, with the issuance of the Series B Convertible Preferred Stock. This ASU did not have a material impact on the Company's financial statements, as there were no hybrid financial instruments requiring retrospective application.
Out of Period Adjustment
In connection with the preparation of the Company's Condensed Consolidated Financial Statements for the period ended June 30, 2015, the Company identified a prior period error related to foreign currency accounting within Arysta and purchase accounting for the Arysta acquisition in accordance with ASC 805 - Business Combinations for the period ended March 31, 2015. The Company determined that goodwill was understated and foreign currency translation adjustment loss was overstated by approximately $73.0 million. Based on an analysis of qualitative and quantitative factors, management has concluded that this error was not material to the Company's Condensed Consolidated Financial Statements for the period ended March 31, 2015 or June 30, 2015. As a result, the affected balances were corrected in the Condensed Consolidated Financial Statements for the period ended June 30, 2015.


9

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



Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
2.  ACQUISITIONS OF BUSINESSES
Arysta Acquisition
On February 13, 2015, we completed the Arysta Acquisition for approximately $3.50 billion, consisting of $2.86 billion in cash (net of acquired cash, closing adjustments and including Seller transaction expenses paid by Platform) and the issuance to the Seller of $600 million of Platform’s Series B Convertible Preferred Stock with a fair market value of $646 million.
We acquired Arysta to expand our presence in the agrochemical business, complementing our acquisitions of Agriphar and CAS. Arysta provides products and solutions utilizing globally managed patented, proprietary off-patent agrochemical AIs and biological solutions, or biosolutions, and off-patent agrochemical offerings. Biosolutions includes biological stimulants, or biostimulants, innovative nutrition and biological control, or biocontrol, products. Arysta is included in the Company's Agricultural Solutions business segment.
In connection with the Arysta Acquisition, the Company incurred $4.9 million and $27.8 million in related expenses for the three and six months ended June 30, 2015, respectively, which are included in “Selling, technical, general and administrative expenses” in the Condensed Consolidated Statement of Operations and $6.4 million in related expenses through December 31, 2014.
CAS Acquisition
On November 3, 2014, we completed the CAS Acquisition for $1.04 billion, consisting of $983 million in cash, net of acquired cash and certain post-closing working capital and other adjustments, and 2,000,000 shares of our common stock. Due to regulatory constraints, title to certain CAS businesses located in Russia was not transferred to Platform until the first quarter of 2015. In connection with the CAS Acquisition, the Company entered into six supply agreements with Chemtura to supply the Company certain products, on an exclusive basis. These arrangements included capital leases for certain equipment totaling $13.2 million, which were recorded as of June 30, 2015. This measurement period adjustment had a cumulative impact to depreciation of $2.2 million which was recorded in the three months ended June 30, 2015 as the impact on the three months ended March 31, 2015 and the year ended December 31, 2014 was not material. In addition, we have agreed to fund the asset retirement obligations associated with the related equipment. Accordingly, we have recognized an asset retirement obligation of $13.2 million. The agreements will remain in force until either party provides advance termination notice, with a minimum term of four years.
In line with our business strategy of growing into niche markets and applications, we acquired CAS to enter the agrochemical industry. CAS is a niche provider of seed treatments and crop protection applications in numerous geographies across seven major product lines - adjuvants, fungicides, herbicides, insecticide, miticides, plant growth regulators and seed treatments. CAS is included in the Company's Agricultural Solutions business segment.
In connection with the CAS Acquisition, the Company incurred $4.9 million and $9.8 million in related expenses for the three and six months ended June 30, 2015, respectively, which are included in “Selling, technical, general and administrative expenses” in the Condensed Consolidated Statement of Operations and $33.9 million in related expenses through December 31, 2014.
Agriphar Acquisition
On October 1, 2014, we completed the Agriphar Acquisition for a purchase price of approximately €300 million ($370 million), consisting of $350 million in cash, net of acquired cash and certain post-closing working capital and other adjustments, and 711,551 restricted shares of our common stock. Such restricted shares will become unrestricted beginning January 2, 2018, unless agreed otherwise in accordance with the terms of the acquisition agreement. The agreement also stipulates that prior to January 2, 2018, the seller may transfer (i) a maximum of 1/3 of its shares as of January 2, 2016, (ii) 1/3 of its shares as of January 2, 2017 and (iii) 1/3 of its shares as of January 2, 2018, in each case subject to the terms and provisions of a solvency letter described in the acquisition agreement. Additionally, the seller was granted a put option to sell and transfer all (but not part) of its shares, on (but not prior to) the date that is six months from the closing of the Agriphar Acquisition, which option was not exercised. As a result,


10

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



for the period ended March 31, 2015, the value of the option totaling $3.0 million was reversed and included in "Other income (expense), net" in the Condensed Consolidated Statement of Operations.
We acquired Agriphar in our crop protection vertical as we believe Agriphar’s and CAS’ businesses are very complementary in terms of product range and distribution capabilities. Agriphar is a European crop protection group supported by a team of researchers and regulatory experts which provides a wide range of fungicides, herbicides and insecticides with end markets primarily across Europe. Agriphar is included in the Company's Agricultural Solutions business segment.
In connection with the Agriphar Acquisition, the Company incurred $0.3 million and $0.8 million in related expenses for the three and six months ended June 30, 2015, respectively, which are included in “Selling, technical, general and administrative expenses” in the Condensed Consolidated Statement of Operations and $4.2 million in related expenses through December 31, 2014.
Acquisition Revenues and Net Income (Loss)
Revenues contributed by the Arysta, CAS and Agriphar Acquisitions for the three and six months ended June 30, 2015 were as follows:
 (amounts in millions)
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
Arysta
$
341.9

 
$
519.4

CAS
105.2

 
208.6

Agriphar
46.4

 
120.0

Total
$
493.5

 
$
848.0

As the integration of the Arysta, CAS and Agriphar Acquisitions continues, discrete revenues reported by the businesses are being effected by the integration process. and are becoming less comparable to prior periods.
Arysta, CAS and Agriphar Acquisitions had net (loss) income for the three and six months ended June 30, 2015 as follows:
 (amounts in millions)
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
Arysta
$
(61.5
)
 
$
(65.8
)
CAS
0.9

 
(27.5
)
Agriphar
4.2

 
22.4

Total
$
(56.4
)
 
$
(70.9
)


11

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



Purchase Price Allocation
The following table summarizes the consideration transferred and transaction related costs incurred to acquire Arysta, CAS and Agriphar and the applicable amounts of identified assets acquired and liabilities assumed at the acquisition date:
 (amounts in millions)
Arysta
 
CAS
 
Agriphar
Consideration
 
 
 
 
 
Cash, net
$
2,856.2

 
$
983.1

 
$
350.2

Equity Instruments
645.9

 
52.0

 
16.6

Derivative liability

 

 
3.5

Total Consideration
3,502.1

 
1,035.1

 
370.3

 
 
 
 
 
 
Transaction related costs
34.2

 
43.7

 
5.0

 
 
 
 
 
 
Identifiable Assets acquired and Liabilities Assumed
 
 
 
 
 
Accounts receivable
675.5

 
154.2

 
60.1

Inventories
294.8

 
132.1

 
42.7

Other current assets
132.2

 
19.1

 
0.4

Property, plant and equipment
110.0

 
24.8

 
31.7

Identifiable intangible assets
1,639.0

   
534.0

  
183.0

Other assets
38.2

 
21.5

 
4.5

Current Liabilities
(570.4
)
 
(69.7
)
 
(47.5
)
Non-current deferred tax liability
(489.5
)
 
(26.7
)
 
(64.9
)
Other long term liabilities
(74.2
)
 
(13.4
)
 
(9.0
)
Non-controlling interest
(24.6
)
 

 

Total identifiable net assets
1,731.0

 
775.9

 
201.0

 
 
 
 
 
 
Goodwill
1,771.1

 
259.2

 
169.3

 
 
 
 
 
 
Total purchase price
$
3,502.1

   
$
1,035.1

  
$
370.3

The purchase accounting and purchase price allocation for the Arysta Acquisition has not been finalized as of the date of this filing pending finalization of fair values assigned to identifiable intangible assets and non-controlling interest, as well as accounts receivable, inventory and reserves related to legal matters and environmental exposure. The purchase price allocation was updated to reflect current 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.
Purchase accounting and purchase price allocation is complete for the Agriphar Acquisition, and substantially complete for the CAS Acquisition, with the exception of valuations related to the supply agreements with Chemtura, and the valuation of the Certis Europe B.V. investment. As a part of the CAS Acquisition, the Company paid for a 15% equity interest in Certis Europe B.V. that was transferred during the second quarter of 2015 after receiving approval from the shareholders of Certis Europe B.V., who had certain rights of first refusal with respect to such transfer of shares. The value of the equity interest is estimated at $15.0 million based on market multiples and is classified in other assets.
The excess of the respective cost of the Acquisitions over the net of amounts assigned to the fair values of the assets acquired and the liabilities assumed is recorded as goodwill and represents the value of estimated synergies and the assembled workforces resulting from the Acquisitions. Of the $2.20 billion of goodwill recorded in connection with the Arysta, CAS and Agriphar Acquisitions, $185 million is expected to be deductible for tax purposes as result of the CAS Acquisition.


12

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



Identifiable intangible assets recorded in conjunction with the Arysta Acquisition have been assigned the following estimated useful lives: 20 years for customer lists, average of 12 years for developed technology and indefinite for tradenames.
Pro Forma Revenue and Earnings
The following unaudited pro forma summary presents consolidated information of the Company for the three and six months ended June 30, 2015 and 2014, as if the Arysta Acquisition had occurred on January 1, 2014:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 (amounts in millions)
2015
 
2014
 
2015
 
2014
Revenue
$
675.1

 
$
591.5

 
$
1,297.4

 
$
1,080.6

Net income (loss) attributable to stockholders
$
4.4

 
$
(34.4
)
 
$
(41.5
)
 
$
(112.0
)
For the three and six months ended June 30, 2015, the Company incurred $4.9 million and $27.8 million, respectively, of acquisition-related expenses which have been reflected in the pro forma earnings above, net of tax, as if they had been incurred in 2014. These pro forma amounts have been prepared to reflect fair value adjustments to intangible assets and the related amortization expense, net of tax, from January 1, 2014, as well as the effect of the debt instruments used to fund the Arysta Acquisition.
The pro forma summary presented above excludes CAS and Agriphar from the 2014 results as the acquisitions closed in the fourth quarter of 2014.
Proposed OMG Acquisition
On May 31, 2015, the Company entered into a merger agreement with OMG and affiliates of Apollo Global Management, LLC (collectively and each individually referred to herein as “Apollo”) and a purchase and separation agreement with Apollo pursuant to which Apollo will first acquire OMG in its entirety, and then subsequently sell to Platform the OMG Businesses. The OMG Acquisition will take place in two stages: the Company expects to first acquire all of the OMG Businesses, other than its Malaysian subsidiary, immediately after Apollo’s acquisition of OMG, currently expected to occur during the fourth quarter of 2015, and then subsequently to acquire the Malaysian subsidiary during the first quarter of 2016. The total purchase price, subject to purchase price adjustments, is approximately $367 million.
Apollo’s acquisition of OMG is subject to certain customary closing conditions, including approval of the acquisition by the OMG's stockholders, expiration or termination of any applicable waiting periods under the HSRA Act, and other consents and approvals required under applicable U.S. and foreign antitrust laws. The first stage of the OMG Acquisition is subject only to the consummation of Apollo’s acquisition of OMG, and the second stage of the transaction is subject to additional standard closing conditions, including the absence of a material adverse effect with respect to the Malaysian subsidiary. On August 10, 2015, OMG's shareholders approved the proposed acquisition.
If the merger agreement is terminated due to Platform's or Apollo’s failure to obtain financing for their respective transactions (and under certain other limited circumstances), (i) the Company and Apollo will be required to pay OMG a pro rata portion of a reverse termination fee to OMG equal to $62.7 million (and the party responsible for such termination of the merger agreement will be required to reimburse the other party for its or their pro rata portion of the amount paid to OMG) and (ii) the party responsible for such termination of the merger agreement will be required to reimburse the other party for its fees and expenses up to $7.5 million. If the merger agreement is terminated due to the failure to obtain certain regulatory approvals for the OMG Acquisition, the Company may be required to reimburse OMG for its fees and expenses up to $7.5 million, and to pay to Apollo its fees and expenses up to $7.5 million. `
Platform believes the proposed OMG Acquisition is in line with its business strategy of growing into niche markets and will be included in the Company's Performance Applications business segment. OMG’s Electronic Chemicals business is similar to Platform's legacy MacDermid electronic chemical and surface treatment businesses. It develops, produces and supplies chemicals for electronic and industrial applications. OMG’s Photomasks products are used by customers to produce semiconductors and related products.


13






3. INVENTORIES
The major components of inventory were as follows: 
 (amounts in millions)
June 30,
2015
 
December 31, 2014
Finished goods
$
326.8

 
$
156.3

Work in process
16.0

 

Raw materials and supplies
127.2

 
49.5

Total inventory, net
$
470.0

 
$
205.8

In connection with the Arysta Acquisition, the fair value assessment of inventory resulted in an increase to finished goods of $39.0 million, of which $20.6 million and $36.5 million was charged to cost of sales during the three and six months ended June 30, 2015, respectively, in the Condensed Consolidated Statement of Operations.
The CAS inventory step-up became fully amortized during the three months ended March 31, 2015. For the six months ended June 30, 2015, $20.2 million was charged to cost of sales in the Condensed Consolidated Statement of Operations in connection with the CAS Acquisition.
The MacDermid inventory step-up became fully amortized during the three months ended March 31, 2014. For the six months ended June 30, 2014, $12.0 million was charged to cost of sales in the Condensed Consolidated Statement of Operations in connection with the MacDermid Acquisition.
4. PROPERTY, PLANT AND EQUIPMENT
The major components of property, plant and equipment, including equipment under capital leases, were as follows:
 (amounts in millions)
 
June 30,
2015
 
December 31, 2014
Land and leasehold improvements
 
$
42.1

 
$
36.6

Buildings and improvements
 
77.8

 
44.4

Machinery, equipment, fixtures and software
 
166.5

 
99.0

Assets under capital leases
 
21.7

 
8.9

 
 
308.1

 
188.9

Less: accumulated depreciation
 
(41.9
)
 
(18.1
)
 
 
266.2

 
170.8

Construction in process
 
14.4

 
4.2

Property, plant and equipment, net
 
$
280.6

 
$
175.0

For the three months ended June 30, 2015 and 2014, the Company recorded a depreciation expense of $13.4 million and $5.4 million, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded a depreciation expense of $21.5 million and $9.0 million, respectively.
The net book value of assets acquired under capital leases was $16.0 million and $5.5 million at June 30, 2015 and December 31, 2014, respectively.
As of June 30, 2015, the Company designated Performance Application's San Marcos, CA facility, with a book value of $10.9 million, as an asset held-for-sale, in accordance with a restructuring plan to streamline the newspaper printing plate operations. The book value of the facility was reclassified from "Property, plant and equipment (net)" to "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheet as of June 30, 2015.
As of June 30, 2015, the Company also recorded a purchase accounting adjustment related to leased capital equipment acquired in connection with the CAS Acquisition totaling $13.2 million.


14

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



5 . GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill by segment were as follows:
  (amounts in millions)
Performance
Applications
 
Agricultural Solutions
 
Total
December 31, 2014
$
961.2

 
$
444.1

 
$
1,405.3

Addition from acquisitions

 
1,697.1

 
1,697.1

Purchase accounting adjustments

 
43.8

 
43.8

Foreign currency translation
(23.9
)
 
(109.5
)
 
(133.4
)
June 30, 2015
$
937.3

 
$
2,075.5

 
$
3,012.8

The carrying value of indefinite-lived intangible assets other than goodwill, which consist solely of tradenames, was $238 million and $69.3 million at June 30, 2015 and December 31, 2014, respectively.
During the second quarter of 2015, as a result of a decline of forecasted cash flows, the Company performed an impairment analysis of the $73.2 million of goodwill assigned to the ASF Americas reporting unit. In performing the impairment test, the Company estimated the fair value of ASF Americas pursuant to an income approach based upon discounted cash flows. For the estimate of fair value, the Company estimated annual revenue growth rates for the initial five year forecast period to range from 4.2% to 5.6% and estimated a long term growth rate in determining the terminal value of the reporting unit of 3.0%. The discount rate for the estimate of fair value was based on a Weighted Average Cost of Capital, or WACC.  The WACC combines the required return on equity, based on a Modified Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, small stock risk premium and a company specific risk premium, with the cost of debt, based on BBB rated corporate bonds, adjusted using an income tax factor.  The calculation resulted in a WACC rate of 10.0%.  The estimated fair value of ASF Americas exceeded its carrying value by 11.8%.  As a result, there was no impairment of goodwill assigned to ASF Americas.
Intangible assets subject to amortization were as follows:
 
June 30, 2015
 
December 31, 2014
 (amounts in millions)
Gross Carrying
Amount
 
Accumulated
Amortization and
Foreign Exchange
 
Net Book
Value
 
Gross Carrying
Amount
 
Accumulated
Amortization and
Foreign Exchange
 
Net Book
Value
Customer lists
$
946.8

 
$
(104.5
)
 
$
842.3

 
$
613.6

 
$
(71.6
)
 
$
542.0

Developed technology
1,855.5

 
(177.0
)
 
1,678.5

 
760.5

 
(50.8
)
 
709.7

Tradenames
19.0

 
(2.2
)
 
16.8

 
19.7

 
(1.0
)
 
18.7

Non-compete agreements
1.9

 
(0.3
)
 
1.6

 
1.9

 
(0.1
)
 
1.8

Total
$
2,823.2

 
$
(284.0
)
 
$
2,539.2

 
$
1,395.7

 
$
(123.5
)
 
$
1,272.2

Useful lives range from 8 to 30 years for customer lists, 5 to 14 years for developed technology, 5 to 20 years for tradenames and 5 years for non-compete agreements, which results in weighted average useful lives of 20 years, 12 years, 20 years and 5 years, respectively, for an aggregate weighted average useful life of approximately 15 years at June 30, 2015.
For the three months ended June 30, 2015 and 2014, the Company recorded amortization expense on intangible assets of $52.4 million and $16.0 million, respectively. For the six months ended June 30, 2015, and 2014, the Company recorded amortization expense on intangible assets of $92.2 million and $29.3 million, respectively.
Annual amortization expense on the Company's intangible assets is estimated to total $198 million in 2015, $211 million in each of the years 2016 through 2019, and $210 million in 2020.


15

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



6. EQUITY COMPENSATION PLANS
In June 2014, the Company’s stockholders approved the 2013 Plan. The 2013 Plan is administered by the compensation committee; provided, however, that except as otherwise expressly provided in the 2013 Plan, the Board may exercise any power or authority granted to the compensation committee under the 2013 Plan. As of June 30, 2015, 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 equal to 15,500,000 shares (subject to increase in accordance with the terms of the 2013 Plan). As of June 30, 2015, a total of 84,242 shares of common stock had been issued under the 2013 Plan.
 
Six Months Ended June 30, 2015
 
Total
 
RSUs
 
Stock Options
 
 
Equity
Classified
 
Liability Classified
 
December 31, 2014
721,933

 
142,110

 
329,823

 
250,000

Granted
464,024

 
250,622

 
213,402

 

Exercised
(75,000
)
 

 

 
(75,000
)
Forfeited
(25,984
)
 
(25,984
)
 

 

June 30, 2015
1,084,973

 
366,748

 
543,225

 
175,000

Equity Classified Share Based Payments
During the six months ended June 30, 2015, the Board approved grants totaling of 242,980 RSUs to certain employees of the Company under the 2013 Plan, with grant-date fair values ranging from $26.17 to $27.05 per unit and vesting periods ranging from 36 months to 57.5 months. In addition, 242,980 RSUs are subject to performance conditions that must be achieved in the final vesting year. During the six months ended June 30, 2015, 25,984 RSU's were forfeited.
On March 17, 2015, the Board approved grants to certain directors of Platform totaling 7,642 RSUs, effective March 25, 2015, with a grant-date fair value of $27.05. The RSUs will vest on March 17, 2016, provided that such directors continue to serve as directors of Platform through the vesting date. Each RSU represents a contingent right to receive one share of our common stock.
For the three months ended June 30, 2015 and 2014, total compensation expense associated with these RSUs totaled zero and $0.3 million, respectively. For the six months ended June 30, 2015 and 2014, total compensation expense associated with all RSUs totaled $0.3 million and $0.3 million, respectively.
Liability Classified Share Based Payments
On March 6, 2014, the Board approved a grant of 329,823 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. 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 RSUs issued is approximately $7.1 million which is being recognized as compensation expense over the period from grant to the vesting date.
During the six months ended June 30, 2015, the Board approved a grant of 213,402 RSUs with a grant-date fair value of $23.43 per unit that cliff vest at the end of a 24 month period, and are subject to certain performance conditions. The awards have been classified as liabilities. The undiscounted maximum cash value of all RSUs issued is approximately $5.0 million which is being recognized as compensation expense over the period from grant to the vesting date.
For the three months ended June 30, 2015 and 2014, compensation expense associated with these awards totaled $0.9 million and $0.1 million, respectively. For the six months ended June 30, 2015 and 2014, compensation expense associated with these awards totaled $1.4 million and $0.1 million, respectively.


16

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



Stock Options
On April 23, 2013, a former non-founder director was granted a five-year option to acquire 75,000 ordinary shares. This option was fully vested and, upon our Domestication, became an option to acquire shares of our common stock. On March 16, 2015, the option was exercised and 75,000 shares of our common stock were issued on March 19, 2015.
Long Term Cash Bonus Plan
During the three months ended March 31, 2015, the Company established the LTCB. As of June 30, 2015, the plan provides participants the right to receive bonuses totaling $46.5 million upon completion of vesting periods ranging from 24.5 to 60 months. Approximately $12.5 million of the LTCB is subject to achieving a certain stock price target of Platform's common stock on the NYSE, subject to appropriate and equitable adjustments by the Board's compensation committee in the event Platform’s common stock is no longer publicly traded. The balance of the LTCB is subject to EBITDA performance targets that must be achieved, subject to appropriate and equitable adjustments by the Board's compensation committee to reflect any subsequent acquisition, divestiture or other corporate reorganizations. For the three and six months ended June 30, 2015, compensation (income) expense associated with the LTCB totaled $(0.3) million and $0.8 million, respectively.
Employee Stock Purchase Plan
Effective March 6, 2014, the Board adopted 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 June 30, 2015, a total of 25,966 shares had been issued under the ESPP, and 573 persons were eligible to participate in the ESPP.
7. PENSION AND POST-RETIREMENT PLANS
The components of net periodic pension and post-retirement benefit costs for the three and six months ended June 30, 2015 and 2014 were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 (amounts in millions)
2015
 
2014
 
2015
 
2014
Pension & SERP Benefits:
Domestic
 
Foreign
 
Domestic
 
Foreign
 
Domestic
 
Foreign
 
Domestic
 
Foreign
Net periodic (benefit) cost:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$

 
$
0.2

 
$

 
$
0.2

 
$

 
$
0.4

 
$

 
$
0.4

Interest cost on the projected benefit obligation
1.6

 
0.5

 
1.7

 
0.8

 
3.2

 
1.0

 
3.4

 
1.6

Expected return on plan assets
(2.4
)
 
(0.5
)
 
(2.4
)
 
(0.9
)
 
(4.8
)
 
(1.0
)
 
(4.8
)
 
(1.8
)
Net periodic (benefit) cost
$
(0.8
)
 
$
0.2

 
$
(0.7
)
 
$
0.1

 
$
(1.6
)
 
$
0.4

 
$
(1.4
)
 
$
0.2

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 (amounts in millions)
2015
 
2014
 
2015
 
2014
Post-retirement Benefits:
Domestic
 
Foreign
 
Domestic
 
Foreign
 
Domestic
 
Foreign
 
Domestic
 
Foreign
Net periodic cost:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest cost on the projected benefit obligation
$
0.1

 
$

 
$
0.1

 
$

 
$
0.2

 
$

 
$
0.2

 
$

Net periodic cost
$
0.1

 
$

 
$
0.1

 
$

 
$
0.2

 
$

 
$
0.2

 
$

No pension service cost was recognized during the three and six months ended June 30, 2015 and 2014 under the Domestic Pension Plan, nor will be in future periods, as benefits in the plan were frozen in connection with the MacDermid Acquisition.


17

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



8.  DEBT, CAPITAL LEASES, FINANCIAL GUARANTEES AND FACTORING ARRANGEMENTS
The Company’s debt and capital lease obligations consisted of the following:
  (amounts in millions)
June 30,
2015
 
December 31, 2014
Borrowings under lines of credit,
weighted average interest rate of 3.29% at June 30, 2015
$
22.4

 
$

 
 
 
 
USD Notes, due 2022,
interest at 6.50%
1,079.5

 

EUR Notes, due 2023,
interest at 6.00%
383.4

 

First lien secured credit facility and term loan, due 2020,
interest at the greater of 4.50% or LIBOR plus 3.5%
739.3

 
743.0

USD Incremental Loan, due 2020,
interest at the greater of 4.50% or LIBOR plus 3.50%
291.7

 
292.7

New Tranche B Term Loan, due 2020,
interest at the greater of 4.50% or LIBOR plus 3.50%
121.9

 
121.7

New Tranche B-2 Term Loan, due 2020,
interest at the greater of 4.75% or LIBOR plus 3.75%
482.1

 

Euro Tranche Term Loan, due 2020,
interest at the greater of 4.25% or LIBOR plus 3.25%
225.7

 
246.2

New Euro Tranche Term Loan, due 2020,
interest at the greater of 4.25% or LIBOR plus 3.25%
90.3

 

Capital lease obligations
4.5

 
2.0

Total debt and capital lease obligations
3,418.4

 
1,405.6

Less: current portion debt and capital lease obligations
(16.8
)
 
(13.2
)
Total long-term debt and capital lease obligations
$
3,401.6

 
$
1,392.4

The Company adopted ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” as of June 30, 2015, and reclassified approximately $48.6 million and $10.3 million of debt issuance costs related to term debt from assets to contra-liabilities as of June 30, 2015 and December 31, 2014, respectively, of which $4.7 million and $1.9 million, respectively, was classified as current.
Minimum principal payments on long-term debt and capital leases were as follows:
 (amounts in millions)
Principal Payments
Year ending December 31,
2015 - remaining
$
10.9

2016
20.8

2017
20.5

2018
20.4

2019
20.4

2020
1,892.6

Thereafter
1,492.1

   Total
$
3,477.7



18

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



Second Amended and Restated Credit Agreement
On August 6, 2014, the Company amended and restated its senior secured credit facilities by entering into Amendment No. 2 to the First Lien Credit Facility and the Second Amended and Restated Credit Agreement, and agreeing on the implementation of certain Further Amendments to the Second Amended and Restated Credit Agreement. Upon consummation of the CAS Acquisition on November 3, 2014, the Further Amendments became effective, increasing (i) the existing U.S. Dollar revolving credit facility to $87.5 million and (ii) the existing multicurrency revolving credit facility to $87.5 million. On the date of the CAS Acquisition, the Company also borrowed (i) an aggregate principal amount of $130 million under the New Tranche B Term Loan, (ii) $60.0 million under the U.S. Dollar Revolving Credit Facility, and (iii) €55.0 million under the multicurrency Revolving Credit Facility. The amounts under (ii) and (iii) in the immediately preceding sentence were both settled by December 31, 2014.  In addition, an aggregate amount of €205 million was borrowed under the Euro Tranche Term Loan by MAS Holdings and NAIP, subsidiaries of Platform.
Pursuant to the Further Amendments, certain additional domestic and foreign subsidiaries of Platform and MacDermid became guarantors under the Amended and Restated Credit Agreement, and certain additional collateral was pledged to secure the Company's obligations incurred under the Euro Tranche Term Loan and the other loans incurred under the Revolving Credit Facility. With the exception of this collateral package and the interest rate, the Euro Tranche Term Loan has terms substantially similar to those of Platform’s New Tranche B Term Loan and bears 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. The Euro Tranche Term Loan matures on June 7, 2020.
On October 1, 2014, Platform and MacDermid, as borrowers, MacDermid Holdings, certain subsidiaries of MacDermid Holdings and Platform, and Barclays Bank PLC, as collateral and administrative agent and incremental lender, entered into the Incremental Amendment to the Amended and Restated Credit Agreement for an USD Incremental Loan in an aggregate principal amount of $300 million. Except as set forth in the Incremental Amendment, such USD Incremental Loan has identical terms as the existing Tranche B term loans and is otherwise subject to the provisions of the Amended and Restated Credit Agreement. The proceeds from the Incremental Amendment were used to finance the Agriphar Acquisition.
On February 13, 2015, the Company entered into and closed the transactions contemplated by Amendment No. 3 to the Second Amended and Restated Credit Agreement, which, among other things, provided for (i) a New Tranche B-2 of Term Loan denominated in U.S. dollars in an aggregate principal amount of $500 million, (ii) an increase in the size of the existing Euro Tranche Term Loan by €83.0 million to €287 million, (iii) an increase in the size of the existing U.S. Dollar Revolving Credit Facility by $75.0 million to $163 million, and (iv) an increase in the size of the existing multicurrency Revolving Credit Facility by $75.0 million to $163 million. Concurrently with the closing of the Arysta Acquisition, the Company borrowed (i) a New Tranche B-2 Term Loan of $500 million (less original issue discount of 1%), (ii) an additional New Euro Tranche Term Loan of €83.0 million (less original issue discount of 2%), and (iii) $160 million under the U.S. Dollar Revolving Credit Facility to fund a portion of the cash consideration for the Arysta Acquisition.  Certain additional domestic and foreign subsidiaries of Platform and MacDermid, including certain subsidiaries acquired in the Arysta Acquisition, have since become guarantors under the Amended and Restated Credit Agreement, with certain of the Company's subsidiaries having pledged collateral in connection therewith.
The New Tranche B-2 Term Loan bears interest at a rate per annum equal to 3.75% plus an adjusted Eurocurrency rate, or 2.75% plus an adjusted base rate, calculated as set forth in the Amended and Restated Credit Agreement, and matures on June 7, 2020. Pursuant to Amendment No. 3, the previously existing New Tranche B Term Loan now bears interest at 3.50% per annum plus an adjusted Euro currency rate, or 2.50% plus an adjusted base rate, calculated as set forth in the Amended and Restated Credit Agreement. Revolving loans under the Amended and Restated Credit Agreement bear interest at a rate per annum equal to 3.00% plus an adjusted Eurocurrency rate, or 2.00% plus an adjusted base rate, each as calculated as set forth in the Amended and Restated Credit Agreement, and mature on June 7, 2018.
Except as set forth in Amendment No. 3 and above, the New Tranche B-2 Term Loan has identical terms as the existing New Tranche B Term Loan and is otherwise subject to the provisions of the Amended and Restated Credit Agreement.


19

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



Covenants and Events of Default
The Amended and Restated Credit Agreement contains customary covenants including limitations on additional indebtedness, dividends and other distributions, entry into new lines of business, use of loan proceeds, capital expenditures, restricted payments, restrictions on liens, transactions with affiliates, amendments to organizational documents, accounting changes, sale and leaseback transactions and dispositions. Amendment No. 3, among other things, provides additional flexibility with respect to certain negative covenants, including by increasing certain dollar baskets as compared to the previous amendments. The Revolving Credit Facility also imposes a financial covenant, if borrowings under the Revolving Credit Facility and letter of credit obligations exceed 25% of the revolving credit commitments as of the last day of any fiscal quarter, which limits Platform to a 6.5 to 1.0 ratio of (x) consolidated indebtedness secured by a first lien minus unrestricted cash and cash equivalents of the borrowers and guarantors under the Amended and Restated Credit Agreement to (y) consolidated EBITDA for the four most recent fiscal quarters, subject to a right to cure. As of June 30, 2015, the Company was in compliance with the debt covenants contained in its Credit Facilities.
The Amended and Restated 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 change of control provisions. Upon the occurrence of an event of default, payment of any outstanding loans under the Amended and Restated Credit Agreement may be accelerated. Borrowings under the Amended and Restated Credit Agreement are also subject to mandatory prepayment from the proceeds of certain dispositions of assets and from certain insurance and condemnation proceeds, excess cash flow and debt incurrences, in each case, subject to customary carve-outs and exceptions.
Guarantees
The obligations of Platform and MacDermid, as borrowers, under the Amended and Restated Credit Agreement are guaranteed by ocurrent and future direct and indirect domestic subsidiaries. Certain of Platform's foreign subsidiaries also guarantee the obligations of MAS Holdings and NAIP with respect to the Euro Tranche Term Loan and the New Euro Tranche Term Loan. Pursuant to the Security Agreement, the Company's obligations under the Amended and Restated Credit Agreement are secured by a security interest in substantially all of the personal property, whether owned on the date the Security Agreement, or entered into or acquired in the future, of Platform and MacDermid, as borrowers, and the guarantors listed in the Security Agreement, including the pledge by Platform, MacDermid and guarantors generally of 100% of the voting common stock and other equity interests in all of their respective domestic subsidiaries and 65% of the voting common 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 or entered into or acquired thereafter), subject to certain exceptions contained in the Amended and Restated Credit Agreement and the Security Agreement.
Notes Offering
In connection with the Arysta Acquisition, on February 2, 2015, the Platform completed the private offering of $1.10 billion aggregate principal amount of 6.50% USD Notes due 2022, and €350 million aggregate principal amount of 6.00% EUR Notes due 2023, plus original issue premium of $1.0 million. The Notes are governed by an indenture, dated February 2, 2015, as amended by a first supplemental indenture dated February 13, 2015 and a second supplemental indenture dated May 20, 2015. The 6.50% USD Notes due 2022 and the 6.00% EUR Notes due 2023 mature on February 1, 2022 and February 1, 2023, respectively, unless earlier redeemed. The 6.50% USD Notes due 2022 and the 6.00% EUR Notes due 2023 bear interest at a rate of 6.50% and 6.00% per year, respectively, until maturity. Interest is payable in cash, semi-annually in arrears, on February 1 and August 1 of each year, beginning on August 1, 2015. Platform will make each interest payment to the holders of record to be determined on the immediately preceding January 15 and July 15.
The notes are (i) Platform’s senior unsecured obligations, ranking equally in right of payment with all of Platform’s existing and future senior unsecured debt and ranking senior in right of payment to all of Platform’s existing and future unsecured subordinated debt; (ii) effectively subordinated to Platform’s secured indebtedness, including the debt outstanding under the Amended and Restated Credit Agreement, to the extent of the value of the assets securing such debt, and are structurally subordinated to indebtedness and other liabilities, including trade payables, of Platform’s non-guarantor subsidiaries; and (iii) jointly and severally, fully and unconditionally guaranteed on a senior unsecured basis generally by current and future direct and indirect domestic subsidiaries that guarantee the Amended and Restated Credit Agreement.  


20

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



Lines of Credit and Other Debt Facilities
The Company carries various lines of credit, short-term debt facilities and overdraft facilities worldwide which are used to fund short-term cash needs. As of June 30, 2015, borrowings under such facilities totaled $22.4 million. At December 31, 2014, there were no borrowings under such facilities. The Company also had letters of credit outstanding of $7.3 million and $1.0 million at June 30, 2015 and December 31, 2014, respectively, which reduce the borrowings available under the various credit facilities. At June 30, 2015 and December 31, 2014, the availability under these facilities was approximately $367 million and $195 million, respectively, net of outstanding letters of credit. As of June 30, 2015, interest rates on such facilities ranged from 0.45% to 25.00%.
Financial Guarantees and Factoring Arrangements
The Company periodically enters into certain arrangements with vendors and customers under which it provides guarantees to financial institutions for loans entered into between its vendors and customers and the financial institutions, the proceeds of which are used to settle outstanding accounts receivables. The terms of the guarantees are equivalent to the terms of the customer loans. Liabilities for the guarantees are recorded at amounts that approximate fair value, based on the Company’s historical collection experience with vendors and customers that participate in the program and a current assessment of credit exposure. Such liabilities are included in "Financial guarantees and factoring" in the Company's Condensed Consolidated Balance Sheet, and totaled $23.5 million and zero as of June 30, 2015 and December 31, 2014, respectively. Program income and expenses are recorded in "Interest expense, net" in the Condensed Consolidated Statement of Operations and totaled zero for the three months ended June 30, 2015 and 2014. For the six months ended June 30, 2015 and 2014, the Company recorded program expenses of $0.2 million and zero, respectively.
The Company also utilizes accounts receivable factoring arrangements as a part of its working capital management strategies. Total current capacity under such programs is approximately $244 million as of June 30, 2015. Under these arrangements, factored accounts receivable may be transferred with or without recourse. Factoring transactions qualifying for sales treatment, whereas the derecognition criteria have been met, totaled $90.6 million and zero as of June 30, 2015 and December 31, 2014, respectively. Account receivable balances related to arrangements not having met the derecognition criteria, whereas the risks and rewards of ownership have not been transferred, remain recorded in "Account receivable" and the related liabilities are included in "Financial guarantees and factoring" in the Company's Condensed Consolidated Balance Sheet, and totaled $46.5 million and zero as of June 30, 2015 and December 31, 2014, respectively. Factoring fees are recorded in "Interest expense, net" in the Condensed Consolidated Statement of Operations and totaled $0.5 million and zero for the three months ended June 30, 2015 and 2014, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded factoring fees of $1.2 million and zero, respectively.
9. 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 Condensed Consolidated Balance Sheets at fair value at the end of each period. The counterparties to the Company’s derivative agreements are major international financial institutions. The Company continually monitors its positions and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties.
Foreign Currency
The Company conducts a significant portion of its business in currencies other than the U.S. dollar, the currency in which the Condensed Consolidated Financial Statements are reported, and as a result, the Company’s operating results are affected by foreign currency exchange rate volatility relative to the U.S. dollar.
As of June 30, 2015, the aggregate U.S. dollar notional amount of foreign currency forward contracts, none of which were designated as hedges, totaled $139 million, all with settlement dates within one year. The majority of forward contracts are in U.S. dollars ($125 million), British pounds (£5.9 million) and Euros (€4.2 million), with lesser amounts in Chinese yuans and Australian dollars. The market value of forward contracts are determined using pricing models based upon observable market inputs including both forward and spot prices for the underlying currencies. The net fair value of the foreign currency forward contracts is recorded as


21

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



an unrealized gain (loss) under "Other (expense) income, net" in the accompanying Condensed Consolidated Statement of Operations.
The following table summarizes the fair value of derivative instruments reported in the Condensed Consolidated Balance Sheets:
 (amounts in millions)
 
 
 
June 30,
2015
 
December 31, 2014
 
 
 
 
U.S. Dollar Amount
 
U.S. Dollar Amount
Derivatives not designated as hedging instruments:
 
Assets Balance Sheet Location
 
 

 
 

Foreign exchange contracts
 
Prepaid expenses & other current assets
 
$
0.7

 
$

 
 
Liabilities Balance Sheet Location
 
 

 
 

Foreign exchange contracts
 
Other current liabilities
 

 
0.1

Total derivative contracts
 
 
 
$
0.7

 
$
(0.1
)
During the three and six months ended June 30, 2015, there were no unrealized gains (losses) recorded in Other Comprehensive Income related to foreign currency hedges. During the three and six months ended June 30, 2014, unrealized losses recorded in Other Comprehensive Income totaled $0.2 million.
During the three and six months ended June 30, 2015, the Company recorded $1.4 million of realized losses in "Other (expense) income, net" related to the settlement of hedged foreign exchange contracts. During the three and six months ended June 30, 2014, realized gains recorded in "Other (expense) income, net" totaled $0.3 million and $0.5 million, respectively.
10. 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