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 March 31, 2016
 
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 ý
Accelerated filer ¨
Non-Accelerated filer ¨
 
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
May 6, 2016
Common Stock, par value $0.01 per share
229,557,867 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
 
Agriphar Acquisition, Alent Acquisition, Arysta Acquisition, CAS Acquisition, MacDermid Acquisition, OMG Acquisition and OMG Malaysia 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 formerly public limited company registered in England and Wales.
Alent Acquisition
 
Acquisition of a 100% interest in Alent completed on December 1, 2015 under the U.K. Companies Act.
Alent EURO Tranche C-2 Term Loan
 
Tranche C-2 term loans denominated in Euros in an aggregate amount of €300 million borrowed by Platform in connection with the Alent Acquisition.
Alent U.S. Dollar Tranche B-3 Term Loan
 
Tranche B-3 term loans denominated in U.S. Dollars in an aggregate principal amount of $1.05 billion, borrowed by Platform in connection with the Alent Acquisition.
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), February 13, 2015 (Amendment No. 3) and December 3, 2015 (Amendment No.4).
Amendment No. 1
 
Amendment No. 1, dated as of October 31, 2013, among, inter alia, Platform (formerly Platform Acquisition Holding Limited), MacDermid Holdings, Matrix Acquisition Corp., MacDermid (as successor to Matrix Acquisition Corp., the borrower), the subsidiaries of the borrower from time to time parties thereto, the lenders from time to time parties thereto and Credit Suisse AG, as administrative agent and as collateral agent, entered into in connection with the MacDermid Acquisition.
Amendment No. 2
 
Amendment No. 2, dated as of August 6, 2014, among Platform, MacDermid Holdings, MacDermid, the subsidiaries of Platform and MacDermid Holdings from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent, entered into in connection with the CAS Acquisition, including the further amendments to the Second Amended and Restated Credit Agreement which became effective upon closing of the CAS acquisition (see Note 8. Debt, Capital Leases, Financial Guarantees and Factoring Arrangements, to the Consolidated Financial Statements).
Amendment No. 3
 
Amendment No. 3, dated as of February 13, 2015,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.
Amendment No. 4
 
Amendment No. 4, dated as of December 3, 2015, among Platform, MacDermid, MAS Holdings, NAIP, MacDermid Europe and MacDermid Funding, the subsidiaries of Platform from time to time parties thereto, the lenders from time to time parties thereto, and Barclays Bank PLC, as administrative agent and collateral agent, entered into in connection with the Alent Acquisition.
Annual Report
 
Platform's annual report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 11, 2016.
Arysta
 
Arysta LifeScience Limited, a formerly Irish private limited company.
Arysta Acquisition
 
Acquisition of a 100% interest in Arysta, completed on February 13, 2015.
Arysta EURO Tranche C-1 Term Loan
 
Tranche C-1 term loans denominated in Euros in an aggregate amount of €83 million borrowed by Platform in connection with the Arysta Acquisition.
Arysta Seller
 
Nalozo, L.P., an affiliate of the Original Arysta Seller who became the seller in the Arysta Acquisition pursuant to an amendment to the share purchase agreement dated February 11, 2015.
Arysta U.S. Dollar Tranche B-2 Term Loan
 
Tranche B-2 term loans denominated in U.S. Dollars in an aggregate principal amount of $500 million borrowed by Platform in connection with the Arysta Acquisition.
ASU
 
Accounting Standards Update.
Asset-Lite, High-Touch
 
Platform’s philosophy and business model focused on dedicating extensive resources to research and development and highly technical customer service teams, while limiting investments in fixed assets and capital expenditures.


G-1






Terms    
 
Definitions
Board
 
Platform’s board of directors.
CAS
 
The Chemtura AgroSolutions business of Chemtura.
CAS Acquisition
 
Acquisition of a 100% interest in CAS, completed on November 3, 2014.
CAS EURO Tranche C-1 Term Loan
 
Tranche C-1 term loans denominated in Euros in an aggregate amount of €205 million borrowed by Platform in connection with the CAS Acquisition.
CAS U.S. Dollar Tranche B Term Loan
 
Tranche B term loans denominated in U.S. Dollars in an aggregate principal amount of $130 million borrowed by Platform in connection with the CAS Acquisition.
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.
Domestic Pension Plan
 
MacDermid, Incorporated Employees’ Pension Plan (as amended and restated, effective January 1, 2009), a non-contributory domestic defined benefit pension plan.
EBITDA
 
Earnings before interest, taxes, depreciation and amortization.
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.
Exchange Act
 
Securities Exchange Act of 1934, as amended.
Exchange Agreement
 
Exchange Agreement, dated October 25, 2013, between Platform and the fiduciaries of the MacDermid, Incorporated Profit Sharing and Employee Savings Plan.
FASB
 
Financial Accounting Standard Board.
FCPA
 
Foreign Corrupt Practices Act of 1977.
February 2015 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, completed on February 2, 2015.
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.
GBP
 
Platform's Global BioSolutions Portfolio within its Agricultural Solutions segment, which includes biostimulants, innovative nutrition and biocontrol products.
GVAP
 
Platform’s Global Value Added Portfolio within its Agricultural Solutions segment, which includes products in the herbicides, insecticides, fungicides and seed treatment categories, based on patented or proprietary off-patent AIs.
Incremental Amendment No. 1
 
Incremental amendment No. 1 to the Amended and Restated Credit Agreement, dated as of 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, entered into in connection with the Agriphar Acquisition.
June 2015 Equity Offering
 
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
 
Platform's Long Term Cash Bonus plan, established in March 2015.
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 Europe
 
MacDermid European Holdings, B.V., a company organized under the laws of the Netherlands and a subsidiary of Platform.
MacDermid Funding
 
MacDermid Funding LLC, a limited liability company organized under the laws of Delaware and a subsidiary of Platform.
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.
NAV
 
Net asset value.


G-2






Terms    
 
Definitions
NAIP
 
Netherlands Agricultural Investment Partners, LLC, a company organized under the laws of Delaware and a subsidiary of Platform.
NYSE
 
New York Stock Exchange.
November 2015 Notes Offering
 
Private offering of $500 million aggregate principal amount of 10.375% senior notes due 2021, completed on November 10, 2015.
OMG
 
OM Group, Inc. (NYSE:OMG), a Delaware corporation.
OMG Businesses
 
OMG's Electronic Chemicals and Photomasks businesses, collectively, other than OMG Malaysia.
OMG Malaysia
 
OMG Electronic Chemicals (M) Sdn Bhd, a subsidiary of OMG located in Malaysia, acquired separately by Platform in the OMG Malaysia Acquisition.
OMG Acquisition
 
Platform's acquisition of 100% interest in the OMG Businesses completed on October 28, 2015.
OMG Malaysia Acquisition
 
Platform's acquisition of 100% interest in OMG Malaysia completed on January 31, 2016.
Original Arysta 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.
Pension Plan
 
MacDermid, Incorporated Employees’ Pension Plan (as amended and restated, effective January 1, 2009), a non-contributory domestic defined benefit pension plan.
Percival
 
Percival S.A., a société anonyme incorporated and organized under the laws of Belgium, acquired by Platform on October 1, 2014.
Quarterly Report
 
This quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2016.
Retaining Holder
 
Each Holder of an equity interest of MacDermid Holdings immediately prior to the closing of the MacDermid Acquisition, not owned by Platform, who executed a RHSA.
Revolving Credit Facility
 
Revolving Credit Facility (in U.S. Dollars or multicurrency) available under the Amended and Restated Credit Agreement.
RHSA
 
Retaining Holder Securityholders’ Agreement dated as of October 31, 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.
RSUs
 
Restricted stock units issued by Platform from time to time under the 2013 Plan.
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 Platform and MacDermid Holdings from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent.
Senior Notes
 
Our 6.00% EUR Notes due 2023, 6.50% USD Notes due 2022 and 10.375% USD Notes due 2021, collectively.
Series A Preferred Stock
 
2,000,000 shares of Platform’s Series A convertible 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 Arysta 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 Arysta Seller.
SERP
 
Supplemental Executive Retirement Plan for executive officers of Platform.
U.K. Companies Act
 
The U.K. Companies Act 2006, as amended.
USD Incremental Loan
 
Incremental term loans under the Incremental Amendment No. 1 to the 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.


G-3






Terms    
 
Definitions
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.
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 February 2015 Notes Offering.
6.50% USD Notes due 2022
 
Platform’s 6.50% senior notes due 2022 denominated in U.S. Dollars issued in the February 2015 Notes Offering.
10.375% USD Notes due 2021
 
Platform's 10.375% senior notes due 2021 denominated in U.S. Dollars issued in the November 2015 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 March 31,
 
2016
 
2015
Net sales
$
823.8

 
$
534.8

Cost of sales
467.8

 
327.7

Gross profit
356.0

 
207.1

Operating expenses:
 

 
 
Selling, technical, general and administrative
284.0

 
192.0

Research and development
19.9

 
12.9

Total operating expenses
303.9

 
204.9

Operating profit
52.1

 
2.2

Other (expense) income:
 

 
 

Interest expense, net
(93.8
)
 
(39.4
)
Loss on derivative contracts
(5.3
)
 

Foreign exchange (loss) gain
(71.1
)
 
33.9

Other income, net
2.1

 
1.7

Total other expense
(168.1
)
 
(3.8
)
Loss before income taxes and non-controlling interests
(116.0
)
 
(1.6
)
Income tax expense
(18.4
)
 
(24.7
)
Net loss
(134.4
)
 
(26.3
)
Net income attributable to the non-controlling interests
(0.4
)
 
(0.4
)
Net loss attributable to common stockholders
$
(134.8
)
 
$
(26.7
)
Loss per share
 

 
 

Basic
$
(0.59
)
 
$
(0.14
)
Diluted
$
(0.59
)
 
$
(0.14
)
Weighted average shares outstanding
 

 
 
Basic
229.5

 
191.9

Diluted
229.5

 
191.9

 
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 March 31,
 
2016
 
2015
 
 
 
(as restated)
Net loss
$
(134.4
)
 
$
(26.3
)
 
 
 
 
Other comprehensive income (loss), before tax
 

 
 

Foreign currency translation adjustments:
321.5

 
(352.5
)
 
 
 
 
Pension and post-retirement plans:
 
 
 
Tax expense

 
(0.5
)
Pension and post-retirement plan, net of tax

 
(0.5
)
 
 
 
 
Unrealized loss on available for sale securities:
 
 
 
Unrealized holding loss on available for sale securities
(0.4
)
 
(0.1
)
Unrealized loss on available for sale securities
(0.4
)
 
(0.1
)
Tax expense

 

Unrealized loss on available for sale securities, net of tax
(0.4
)
 
(0.1
)
 
 
 
 
Derivative financial instruments revaluation:
 
 
 
Unrealized hedging loss arising during the period
(11.0
)
 

Derivative financial instruments revaluation
(11.0
)
 

Tax benefit

 

Derivative financial instruments revaluation, net of tax
(11.0
)
 

Total other comprehensive income (loss), net of tax
310.1

 
(353.1
)
Other comprehensive (income) loss attributable to the non-controlling interests
(11.7
)
 
8.7

Other comprehensive income (loss) attributable to common shareholders
298.4

 
(344.4
)
 
 
 
 
Comprehensive income (loss)
164.0

 
(370.7
)
Comprehensive income attributable to the non-controlling interests
(0.4
)
 
(0.4
)
Comprehensive income (loss) attributable to common stockholders
$
163.6

 
$
(371.1
)
 
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)
 
March 31,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Cash and cash equivalents
$
329.7

 
$
432.2

Restricted cash
0.8

 
0.3

Accounts receivable, net of allowance for doubtful accounts of $18.5
and $14.4 at March 31, 2016 and December 31, 2015, respectively
1,172.8

 
1,023.0

Inventories
612.5

 
517.5

Note receivable

 
125.0

Prepaid expenses and other current assets
180.3

 
172.5

Total current assets
2,296.1

 
2,270.5

Property, plant and equipment, net
496.5

 
491.6

Goodwill
4,247.9

 
4,021.9

Intangible assets, net
3,453.6

 
3,314.3

Other assets
98.6

 
91.9

Total assets
$
10,592.7

 
$
10,190.2

Liabilities & Stockholders' Equity
 

 
 

Accounts payable
419.8

 
450.3

Current installments of long-term debt and revolving credit facilities
188.9

 
54.7

Accrued salaries, wages and employee benefits
60.8

 
78.1

Accrued income taxes payable
69.8

 
65.1

Accrued expenses and other current liabilities
436.3

 
414.2

Total current liabilities
1,175.6

 
1,062.4

Long-term debt and capital lease obligations
5,218.4

 
5,173.6

Long-term retirement benefits, less current portion
81.8

 
80.5

Long-term deferred income taxes
723.8

 
678.8

Long-term contingent consideration
73.5

 
70.7

Other long-term liabilities
223.6

 
205.0

Total liabilities
7,496.7

 
7,271.0

Commitments and contingencies (Note 15)


 


Redeemable preferred stock - Series B
645.9

 
645.9

Stockholders' Equity
 

 
 

Preferred stock - Series A

 

Common stock 400,000,000 shares authorized, 229,523,697 and 229,464,157 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively
2.3

 
2.3

Additional paid-in capital
3,521.7

 
3,520.4

Accumulated deficit
(667.5
)
 
(532.7
)
Accumulated other comprehensive loss
(587.7
)
 
(886.1
)
Total stockholders' equity
2,268.8

 
2,103.9

Non-controlling interests
181.3

 
169.4

Total equity
2,450.1

 
2,273.3

Total liabilities, redeemable preferred shares and equity
$
10,592.7

 
$
10,190.2


See accompanying notes to condensed consolidated financial statements


3






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
Three Months Ended March 31,
 
2016
 
2015
 
 
 
(as restated)
Cash flows from operating activities:
 
 
 
Net cash flows (used in) provided by operating activities
$
(210.4
)
 
$
2.8

Cash flows from investing activities:
 

 
 

Change in restricted cash
(0.5
)
 
600.0

Capital expenditures
(11.6
)
 
(20.8
)
Investment in registrations of products
(7.5
)
 
(8.4
)
Proceeds from disposal of property, plant and equipment
2.2

 

Settlement of derivatives
(1.1
)
 

Acquisition of businesses, net of acquired cash
(1.2
)
 
(2,862.1
)
Other, net
(0.2
)
 
0.2

Net cash flows used in investing activities
(19.9
)
 
(2,291.1
)
Cash flows from financing activities:
 

 
 

Proceeds from issuance of debt, net of discount and premium
1.2

 
2,084.0

Change in revolving credit facilities, net
132.5

 
157.9

Repayments of borrowings
(8.7
)
 
(3.6
)
Proceeds from issuance of common stock, net
0.2

 
1.0

Payment of debt financing fees
(0.1
)
 
(44.6
)
Change in factored liabilities
(3.5
)
 
4.2

Other, net
(0.9
)
 

Net cash flows provided by financing activities
120.7

 
2,198.9

Effect of exchange rate changes on cash and cash equivalents
7.1

 
(10.6
)
Net decrease in cash and cash equivalents
(102.5
)
 
(100.0
)
Cash and cash equivalents at beginning of period
432.2

 
397.3

Cash and cash equivalents at end of period
$
329.7

 
$
297.3

Non-cash Investing Activities
 

 
 

Settlement of Note Receivable in exchange for OMG Malaysia
$
125.0

 
$

Acquisition of OMG Malaysia through the settlement of Note Receivable
$
(125.0
)
 
$


 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) Income
 
Total
Stockholders'
Equity
 
Non-
controlling Interest
 
Total Equity
Balance at December 31, 2015
2,000,000

 
$

 
229,464,157

 
$
2.3

 
$
3,520.4

 
$
(532.7
)
 
$
(886.1
)
 
$
2,103.9

 
$
169.4

 
$
2,273.3

Net loss

 

 

 

 

 
(134.8
)
 

 
(134.8
)
 
0.4

 
(134.4
)
Other comprehensive loss, net of taxes

 

 

 

 

 

 
298.4

 
298.4

 
11.7

 
310.1

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

 

 
7,642

 

 

 

 

 

 

 

Conversion of PDH Common Stock into common stock

 

 
16,499

 

 
0.2

 

 

 
0.2

 
(0.2
)
 

Issuance of common stock under ESPP

 

 
35,399

 

 
0.2

 

 

 
0.2

 

 
0.2

Equity compensation expense

 

 

 

 
0.9

 

 

 
0.9

 

 
0.9

Balance at March 31, 2016
2,000,000

 
$

 
229,523,697

 
$
2.3

 
$
3,521.7

 
$
(667.5
)
 
$
(587.7
)
 
$
2,268.8

 
$
181.3

 
$
2,450.1


See accompanying notes to condensed consolidated financial statements


5






PLATFORM SPECIALTY PRODUCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
(Unaudited)
(In millions, except share and per share amounts)
 
Preferred Stock
 
Common Stock
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
 
 
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
 
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 (as restated)

 

 

 

 

 

 
(344.4
)
 
(344.4
)
 
(8.7
)
 
(353.1
)
Issuance of common stock to Founder Entities as stock dividend on Series A Preferred Stock declared on 12/31/14

 

 
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 (as restated)
2,000,000

 
$

 
192,221,572

 
$
1.9

 
$
2,814.3

 
$
(250.8
)
 
$
(475.0
)
 
$
2,090.4

 
$
109.1

 
$
2,199.5


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
Description of the Company and Business
Platform Specialty Products Corporation is a global, diversified producer of high-technology specialty chemical products and provider of technical services. The Company's business involves the formulation of a broad range of solutions-oriented specialty chemicals which are sold into multiple industries, including agricultural, animal health, electronics, graphic arts, plating, and offshore oil and gas production and drilling. The Company refers to its products as “dynamic chemistries” due to their intricate chemical compositions which are used in a wide variety of niche markets. As further described in Note 19, Segment Information, the Company operates in two segments: Performance Solutions and Agricultural Solutions.
Until the MacDermid Acquisition on October 31, 2013, the Company had neither engaged in any operations nor generated any income.  Following the MacDermid Acquisition, on January 22, 2014, the Company was domesticated in Delaware and on January 23, 2014, its 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 Company's 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 disclosures required by U.S. GAAP.
Principles of Consolidation
The accompanying unaudited interim Condensed Consolidated Financial Statements include Platform's accounts and all of its controlled subsidiaries. All subsidiaries are included in the unaudited interim Condensed Consolidated Financial Statements for the entire period or, if acquired, from the date on which the Company obtains control. The Company fully consolidates the income, expenses, assets, liabilities and cash flows of subsidiaries from the date it acquires control or becomes the primary beneficiary up to the date control ceases. All intercompany accounts and transactions have been eliminated in consolidation.
Recently Adopted and Pending Accounting Pronouncements
Revenue From Contracts with Customers (Topic 606) - In April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing." The amendments provide clarification on the implementation guidance defining when a good or service is separately identifiable from other promises in the contract and on contracts with licenses of intellectual property. The guidance is effective for fiscal years and interim periods beginning after December 31, 2017 with early adoption permitted. The Company is evaluating the impact of this ASU.
Compensation - Stock Compensation (Topic 718) - In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." The amendments change the accounting treatment related to tax windfall and shortfalls associated with share-based awards. The amendments also eliminate the requirement for entities to estimate future forfeiture rates associated with share-based awards and stipulate the requirement that cash payments made by employers when directly withholding shares for tax-withholdings purposes should be classified as a financing activity in the statement of cash flows. The guidance is effective for fiscal years and interim periods beginning after December 31, 2016 with early adoption permitted. The Company does not expect this ASU to have a material impact on its financial statements.


7

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



Revenue From Contracts with Customers (Topic 606) - In March 2016, the FASB issued ASU 2016-08, "Principal versus Agent Considerations." The amendments improve the operability and understandability of the implementation guidance on principal versus agent considerations. The guidance is effective for fiscal years and interim periods beginning after December 31, 2017 with early adoption permitted. The Company is evaluating the impact of this ASU.
Investments - Equity Method and Joint Ventures (Topic 323) - In March 2016, the FASB issued ASU No. 2016-07, "Simplifying the Transition to the Equity Method of Accounting." The amendments simplify transition accounting when the ownership level or degree of influence held in an investment qualifies that investment for equity method accounting. The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect this ASU to have a material impact on its financial statements.
Derivatives and Hedging (Topic 815) - In March 2016, the FASB issued ASU 2016-06, "Contingent Put and Call Options in Debt Instruments (a consensus of the FASB Emerging Issues Task Force)." The ASU clarifies guidance around determining whether call or put options that can accelerate the repayment of principal on a debt or hybrid instrument that are considered embedded derivatives meet the "clearly and closely related" criterion for determining whether the embedded derivative is required to be separated from the host contract and account for separately as a derivative. The guidance is effective for fiscal years and interim periods beginning after December 31, 2016 with early adoption permitted. Adoption is required on a modified retrospective basis. The Company is evaluating the impact of this ASU.
Derivatives and Hedging (Topic 815) - In March 2016, the FASB issued ASU No. 2016-05, "Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the FASB Emerging Issues Task Force)." The amendments stipulate that a change in the counterparty of a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. The guidance is effective for fiscal years and interim periods beginning after December 15, 2016 and provides entities with the option to apply either a prospective or a modified retrospective approach. The Company does not expect this ASU to have a material impact on its financial statements.
Leases (Topic 842) - In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The updated guidance applies to capital (or finance) and operating leases, and requires lessees to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Lessees can make an accounting policy choice to not recognize right of use assets and lease liabilities for short-term leases (leases with a lease term of 12 months or less). The guidance is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. The Company continues to evaluate the impact of this ASU.
Financial Instruments - Overall (Subtopic 825.10) - In January 2016, the FASB issued ASU No. 2016-1, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This update addresses certain aspects of recognition, measurement, presentation, and disclosure of financial assets and liabilities. Provisions of this ASU include, among others, requiring the measurement of certain equity investments at fair value, with changes in value recognized in net income, and simplifying the impairment assessment of certain equity investments. The guidance is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is only permitted for provisions related to the recognition of changes in fair value of financial liabilities. The Company does not expect this ASU to have a material impact on its financial statements.
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)



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 includes 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 Company adopted this ASU as of January 1, 2016. This ASU did not have a material impact on the Company's financial statements.
Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) - In January 2015, the FASB issued ASU No. 2015-1, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.”  This update eliminates the requirement for entities to identify extraordinary events and transactions, those being both unusual in nature and infrequent in occurrence, and separately classify, present and disclose such items.  The guidance is effective prospectively for fiscal years and interim periods beginning after December 15, 2015. The Company adopted this ASU as of January 1, 2016.  The Company did not have any extraordinary or unusual income statement items recorded for any periods presented,therefore, this ASU did not have a material impact on the Company's financial statements.
Presentation of Financial Statements - Going Concern (Subtopic 205-40) - In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about and Entity’s Ability to Continue as a Going Concern."  The amendments provide clarification on conditions and events that should be considered by management at each annual and interim reporting period in determining whether there exists substantial doubt as to an entity’s ability to continue as a going concern.  The guidance is effective for fiscal years and interim periods beginning after December 31, 2016 with early adoption permitted.  The Company does not expect this ASU to have a material impact on its financial statements.
Compensation – Stock Compensation (Topic 718) - In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force).”  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 adopted this ASU as of January 1, 2016. This ASU did not have a material impact on the Company's financial statements as it had no share-based compensation awards that were effected by this pronouncement.
Restatement
As previously disclosed in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2015, an error to goodwill and foreign currency translation adjustment of $72.8 million occurred relating to the Arysta Acquisition and was corrected as an out-of-period adjustment in such quarterly report.  The Company subsequently concluded that this previously disclosed error also had the effect of understating cash flows provided by operating activities and cash flows used in investing activities by $72.8 million, and therefore further concluded that the previously reported information should be restated. This restatement is included in Note 20, Restatement of Unaudited Interim Condensed Consolidated Financial Statements (Unaudited) to the unaudited interim Condensed Consolidated Financial Statements included herein.
2.  ACQUISITIONS OF BUSINESSES
OMG Malaysia Acquisition
On January 31, 2016, the Company completed the OMG Malaysia Acquisition for approximately $124 million, net of acquired cash and closing working capital adjustments, subject to purchase price adjustments.
The Company acquired OMG Malaysia to add-on to the OMG Acquisition and further enhance its Performance Solutions segment. Legacy OMG Malaysia, which is highly-synergistic with the legacy OMG Businesses, is included in the Company's Performance Solutions business segment.


9

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



Alent Acquisition
On December 1, 2015, Platform completed the Alent Acquisition by acquiring all of the issued shares of Alent for approximately $1.74 billion in cash, net of acquired cash, and 18,419,738 shares of the Company's common stock at $12.56 per share, issued to Alent shareholders, including Cevian Capital II Master Fund LP, the then largest shareholder of Alent.
The Company acquired Alent to expand its product capabilities and offerings and improve its geographic outreach in surface treatments. Legacy Alent was a global supplier of specialty chemicals and engineered materials used primarily in electronics, automotive, industrial applications, and high performance consumable products and services. Alent is included in the Company's Performance Solutions business segment.
OMG Acquisition
On October 28, 2015, Platform completed the OMG Acquisition for approximately $239 million, in cash, net of acquired cash, subject to purchase price adjustments.
The Company acquired the highly-synergistic OMG Businesses to bolster its Performance Solutions business segment. Legacy OMG’s Electronic Chemicals business developed, produced and supplied chemicals for electronic and industrial applications. Legacy OMG’s Photomasks products were used by customers to produce semiconductors and related products. The OMG Businesses are included in the Company's Performance Solutions business segment.
Arysta Acquisition
On February 13, 2015, Platform completed the Arysta Acquisition for approximately $3.50 billion, consisting of $2.86 billion in cash, net of acquired cash and closing working capital adjustments, and including Arysta Seller transaction expenses paid by Platform, and the issuance to the Arysta Seller of $600 million of Platform’s Series B Convertible Preferred Stock with a fair value of $646 million.
The Company acquired Arysta to expand its presence in the agrochemical business, complementing the Agriphar and CAS Acquisitions. Legacy Arysta provided products and solutions utilizing globally managed patented and proprietary off-patent agrochemical AIs and biological solutions, or biosolutions, and off-patent agrochemical offerings. Biosolutions includes stimulants, or biostimulants, innovative nutrition and biological control, or biocontrol, products. Arysta is included in the Company's Agricultural Solutions business segment.
Acquisition Net Sales and Net Loss
Since the dates of the respective acquisitions, net sales contributed by the OMG Malaysia, Alent, OMG and Arysta Acquisitions for the three months ended March 31, 2016 and 2015 were as follows:
 (amounts in millions)
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
OMG Malaysia
$
5.5

 
$

Alent
219.6

 

OMG
27.2

 

Arysta
283.6

 
177.5

Total
$
535.9

 
$
177.5



10

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



As the integration continues for (1) the OMG Malaysia, Alent and OMG Acquisitions within the Company's Performance Solutions business segment, and (2) the Arysta, CAS and Agriphar Acquisitions within the Agricultural Solutions segment, discrete revenues reported by these existing businesses are being effected by the integration process and are becoming less comparable to prior periods.
The OMG Malaysia, Alent, OMG and Arysta Acquisitions had net losses for the three months ended March 31, 2016 and 2015 as follows:
 (amounts in millions)
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
OMG Malaysia
$
(0.6
)
 
$

Alent
(1.4
)
 

OMG
(1.0
)
 

Arysta
(70.8
)
 
(4.3
)
Total
$
(73.8
)
 
$
(4.3
)
Purchase Price Allocation
The following table summarizes the consideration transferred and transaction costs incurred to acquire OMG Malaysia, Alent and the OMG Businesses, as well as the applicable amounts of identified assets acquired and liabilities assumed at the applicable acquisition date:
 (amounts in millions)
OMG Malaysia
 
Alent
 
OMG Businesses
Consideration
 
 
 
 
 
Cash, net
$
(1.3
)
 
$
1,507.0

 
$
239.1

Equity Instruments

 
231.4

 

Note receivable settlement
125.0

 

 

Total Consideration
$
123.7

 
$
1,738.4

 
$
239.1

 
 
 
 
 
 
Acquisition costs
$
0.1

 
$
29.3

 
$
7.4

 
 
 
 
 
 
Identifiable Assets acquired and Liabilities Assumed
 
 
 
 
 
Accounts receivable
$
4.3

 
$
177.4

 
$
33.1

 - less uncollectible

 
(1.8
)
 
(1.6
)
Accounts receivable - fair value
4.3

 
175.6

 
31.5

Inventories
7.2

 
116.1

 
13.2

Other current assets
0.2

 
29.3

 
1.6

Property, plant and equipment
4.7

 
192.2

 
35.1

Identifiable intangible assets
59.0

 
682.9

 
77.9

Other assets

 
37.6

 
0.2

Current Liabilities
(3.5
)
 
(181.8
)
 
(21.5
)
Non-current deferred tax liability
(15.1
)
 
(138.6
)
 
(13.6
)
Other long term liabilities

 
(316.9
)
 
(4.0
)
Total identifiable net assets
56.8

 
596.4

 
120.4

Goodwill
66.9

 
1,142.0

 
118.7

Total purchase price
$
123.7

 
$
1,738.4

 
$
239.1



11

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



The purchase accounting and purchase price allocation for the OMG Malaysia Acquisition remains open due to the proximity of the acquisition date to quarter-end. The purchase accounting and purchase price allocation for the Alent and OMG Acquisitions is substantially complete with the exception of the following areas: environmental and legal reserves, developed technology intangible assets, asset retirement obligations, or AROs, as well as income taxes for the Alent Acquisition, and developed technology intangible assets and income taxes for the OMG Acquisition. The Company is still gathering information related to these recent acquisitions to finalize their purchase accounting. For more information regarding Alent's environmental reserves, see Note 15, Contingencies, Environmental and Legal Matters, to the Condensed Consolidated Financial Statements.
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 $1.33 billion of goodwill recorded in connection with the OMG Malaysia, Alent and OMG Acquisitions, $83.1 million is expected to be deductible for tax purposes as result of a part of the OMG Malaysia and OMG Acquisitions.
Identifiable intangible assets recorded in conjunction with the Acquisitions were as follows:
 
OMG Malaysia
 
Alent
 
OMG Businesses
 
Total
 (amounts in millions)
Fair Value
 
Weighted average useful life (years)
 
Fair Value
 
Weighted average useful life (years)
 
Fair Value
 
Weighted average useful life (years)
 
Fair Value
 
Weighted average useful life (years)
Customer lists
$
45.0

 
25.0

 
$
391.4

 
15.5

 
$
49.0

 
24.5

 
$
485.4

 
18.0

Developed technology
14.0

 
10.0

 
203.3

 
10.0

 
28.0

 
10.0

 
245.3

 
10.0

Tradenames

 

 
85.8

(1) 
20.0

 
0.9

 
10.0

 
86.7

 
19.1

In process - R&D

 

 
2.4

(2) 

 

 

 
2.4

 

Total
$
59.0

 
23.3

 
$
682.9

 
14.2

 
$
77.9

 
21.7

 
$
819.8

 
16.3

(1) Includes $81.4 million of indefinite-lived Tradenames which have been excluded from the calculation of weighted average useful life.
(2) Excluded from the calculation of weighted average useful life.
Pro Forma Revenue and Earnings
The following unaudited pro forma summary presents consolidated information of the Company for the three months ended March 31, 2016 and 2015, as if the OMG Malaysia, Alent, OMG and Arysta Acquisitions had occurred on January 1, 2015:
 
Three Months Ended March 31,
 (amounts in millions)
2016
 
2015
Revenue
$
826.7

 
$
897.2

Net loss attributable to stockholders
$
(119.2
)
 
$
(64.4
)
For the three months ended March 31, 2016, the Company incurred $11.6 million of acquisition and integration expenses related to the OMG Malaysia, Alent, OMG and Arysta Acquisitions, which have been reflected in the pro forma earnings above, as if they had been incurred in 2015. In addition, for the three months ended March 31, 2015, the Company incurred $22.9 million of acquisition and integration expenses related to the Arysta Acquisition, which have been excluded from the March 31, 2015 pro forma earnings above. 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, 2015, as well as the effect of the debt instruments used to fund the Arysta and Alent Acquisitions.


12






3. INVENTORIES
The major components of inventory were as follows: 
 (amounts in millions)
March 31,
2016
 
December 31, 2015
Finished goods
$
399.4

 
$
340.1

Work in process
33.9

 
28.5

Raw materials and supplies
179.2

 
148.9

Total inventory, net
$
612.5

 
$
517.5

In connection with Platform's various acquisitions, the value of inventory was increased at the respective dates of acquisition to reflect fair value. For the three months ended March 31, 2016 and 2015, $12.0 million and $36.1 million, respectively, was charged to "Cost of sales" in the Condensed Consolidated Statements of Operations based on inventory turnover of such various acquisitions.
As of March 31, 2016 and December 31, 2015, the remaining portion of the inventory fair value mark-up totaled $0.5 million and $11.5 million, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
The major components of property, plant and equipment, including equipment under capital leases, were as follows:
 (amounts in millions)
 
March 31,
2016
 
December 31, 2015
Land and leasehold improvements
 
$
111.5

 
$
107.9

Buildings and improvements
 
149.3

 
143.8

Machinery, equipment, fixtures and software
 
283.3

 
276.8

Assets under capital lease
 
 
 
 
Land and buildings
 
8.3

 
6.4

Machinery and equipment
 
5.4

 
5.1

Total Property, plant and equipment
 
557.8

 
540.0

Accumulated depreciation
 
(78.3
)
 
(64.3
)
Accumulated amortization of capital leases
 
(6.4
)
 
(5.5
)
Total accumulated depreciation and amortization
 
473.1

 
470.2

Construction in process
 
23.4

 
21.4

Property, plant and equipment, net
 
$
496.5

 
$
491.6

For the three months ended March 31, 2016 and 2015, the Company recorded depreciation expense of $18.2 million and $8.4 million, respectively.
In March 2016, the Company entered into a sale agreement for a long-lived asset with a net book value of $12.1 million in exchange for a cash payment of $9.3 million, net of estimated selling costs of $0.2 million. As a result, the Company reduced the net book value of the asset by $2.8 million, which was recorded in "Selling, technical, general and administrative expense" in the Condensed Consolidated Statements of Operations. The asset will remain classified as an asset held-for-sale in "Other assets" in the Company's Condensed Consolidated Balance Sheets until the sale has been completed.


13

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
Solutions
 
Agricultural Solutions
 
Total
December 31, 2015
$
2,147.2

 
$
1,874.7

 
$
4,021.9

Addition from acquisitions
66.9

 

 
66.9

Purchase accounting adjustments
3.6

 
0.2

 
3.8

Foreign currency translation
34.2

 
121.1

 
155.3

March 31, 2016
$
2,251.9

 
$
1,996.0

 
$
4,247.9

The carrying value of indefinite-lived intangible assets other than goodwill, which consist solely of tradenames, was $377 million and $360 million at March 31, 2016 and December 31, 2015, respectively.
During the three months ended March 31, 2016, the Company found no indications of impairment related to its goodwill and indefinite-lived intangible assets.
Intangible assets subject to amortization were as follows:
 
 
 
March 31, 2016
 
December 31, 2015
 (amounts in millions)
Weighted average useful life (years)
 
Gross Carrying
Amount and Foreign Exchange
 
Accumulated
Amortization and
Foreign Exchange
 
Net Book
Value
 
Gross Carrying
Amount and Foreign Exchange
 
Accumulated
Amortization and
Foreign Exchange
 
Net Book
Value
Customer lists
20.5
 
$
1,250.5

 
$
(80.3
)
 
$
1,170.2

 
$
1,297.2

 
$
(184.0
)
 
$
1,113.2

Developed technology
11.8
 
2,006.0

 
(119.0
)
 
1,887.0

 
2,260.9

 
(440.4
)
 
1,820.5

Tradenames
12.4
 
22.2

 
(3.7
)
 
18.5

 
24.2

 
(5.4
)
 
18.8

Non-compete agreements
5.0
 
1.9

 
(0.6
)
 
1.3

 
1.9

 
(0.5
)
 
1.4

Total
15.1
 
$
3,280.6

 
$
(203.6
)
 
$
3,077.0

 
$
3,584.2

 
$
(630.3
)
 
$
2,953.9

For the three months ended March 31, 2016 and 2015, the Company recorded amortization expense on intangible assets of $64.4 million and $39.8 million, respectively.
6. EQUITY COMPENSATION PLANS
In June 2014, the Company’s stockholders approved the 2013 Plan, which is administered by the compensation committee of the Board, except as otherwise expressly provided in the 2013 Plan. The Board approved a maximum of 15,500,000 shares of common stock (subject to increase in accordance with the terms of the 2013 Plan), which were reserved and made available for issuance under the 2013 Plan. As of March 31, 2016, a total of 373,434 shares of common stock had been issued and 2,663,455 awarded RSUs and stock options were outstanding under the 2013 Plan.


14

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



 
Three Months Ended March 31, 2016
 
Total
 
RSUs
 
Stock Options
 
 
Equity
Classified
 
Liability Classified
 
Outstanding at December 31, 2015
1,006,436

 
501,634

 
329,802

 
175,000

Granted
1,890,998

 
1,526,415

 

 
364,583

Exercised/Issued
(7,642
)
 
(7,642
)
 

 

Forfeited
(51,337
)
 
(51,337
)
 

 

Outstanding at March 31, 2016
2,838,455

 
1,969,070

 
329,802

 
539,583

Equity Classified Share Based Payments
During the three months ended March 31, 2016, grants of 1,501,257 RSUs, approved by the Board under the 2013 Plan, were made to certain employees of the Company with grant-date fair values ranging from $8.32 to $15.80 per unit and vesting periods ranging from 33.5 months to 36 months. Of these, 473,657 RSUs are subject to performance conditions that must be achieved in the applicable vesting year, of which 390,324 include a multiplier from zero to 2.0x depending upon return on invested capital benchmarks and 83,333 include a multiplier from zero to 100% based upon an EBITDA target benchmark. The total grants also include 390,324 RSUs that are subject to market conditions, all of which include a multiplier from zero to 3.0x depending upon the relative shareholder return compared to a market benchmark index during a three year performance measurement period. The remaining 637,276 RSUs are subject to service conditions that will vest ratably over the aforementioned vesting periods. During the three months ended March 31, 2016, 51,337 RSUs were forfeited.
On March 17, 2016, the Board approved grants to certain directors of the Company totaling 25,158 RSUs with a grant-date fair value of $8.84. These RSUs will vest on March 17, 2017, provided that they 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. During the three months ended March 31, 2016, 7,642 previously issued RSUs vested and were settled for 7,642 shares of common stock.
As of March 31, 2016, the Board approved 166,667 RSUs under the 2013 Plan which are subject to performance conditions that must be achieved in the applicable vesting year and include a multiplier of zero to 100% based upon EBITDA target benchmarks. As those target EBITDA benchmarks have not yet been established, these RSUs have been excluded from the above grant activity. The EBITDA target benchmarks are expected to be established in 2017 and 2018.
RSUs granted during the three months ended March 31, 2016 had a weighted-average grant-date fair value of $10.82 per unit.
For the three months ended March 31, 2016 and 2015, total compensation expense associated with RSUs classified as equity totaled $0.9 million and $0.7 million, respectively.
Liability Classified Share Based Payments
On March 6, 2014, effective on June 12, 2014 which corresponded to the Company's stockholders' approval of the 2013 Plan, the Board approved grants to certain employees totaling 329,823 RSUs that cliff vest on December 31, 2020. These 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. There were 329,802 RSUs associated with these grants that remained outstanding as of March 31, 2016. The combined undiscounted maximum cash value of all liability-classified RSUs issued is approximately $7.1 million, which is being recognized as compensation expense over the period from grant to the vesting date.
For the three months ended March 31, 2016 and 2015, compensation (income) expense associated with these awards totaled $(0.1) million and $0.3 million, respectively.


15

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



Stock Options
On March 16, 2016, certain employees of the Company were granted non-qualified stock options under the 2013 Plan to acquire 364,583 ordinary shares with an exercise price of $7.95 and fair value of $4.32. The exercise price associated with these options was based on the closing stock price on March 15, 2016. They are subject to graded vesting over a three year period and have contractual lives of ten years from the grant date. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.
The following table provides the assumptions used in valuing the option grants using the Black-Scholes option pricing method:
 
Black-Scholes Input Assumptions
Weighted average expected term (years)
6.0

Expected Volatility
53.0
%
Risk-free rate
1.56
%
Expected dividend rate
%
Fair value price
$
4.32

Weighted average expected term is calculated based on the simplified method for plain vanilla options as the Company has concluded that its historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term and certain alternative information to assist with estimating it is not easily obtainable. Expected volatility is calculated based on a blend of the implied and historical equity volatility of an index of comparable companies.
For the three months ended March 31, 2016, the Company recognized a de minimis amount of compensation expense associated with stock options.
Long Term Cash Bonus Plan
The Company established the LTCB during the first quarter 2015. As of March 31, 2016, the plan provides participants the right to receive bonuses totaling $12.3 million, a decrease of $3.0 million from December 31, 2015 due to forfeitures. Benefits under the plan vest over periods ranging from 36 to 62.5 months and include EBITDA performance targets, subject to appropriate and equitable adjustments by the compensation committee of the Board to reflect any subsequent acquisition, divestiture or other corporate reorganizations, as necessary. For the three months ended March 31, 2016 and 2015, compensation expense associated with the LTCB totaled $0.2 million and $1.0 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 March 31, 2016, a total of 90,898 shares had been issued under the ESPP, and approximately 830 persons were eligible to participate in the ESPP. For the three months ended March 31, 2016, compensation expense associated with the ESPP was de minimis.


16






7. PENSION AND POST-RETIREMENT PLANS
The components of net periodic pension and post-retirement benefit costs for the three months ended March 31, 2016 and 2015 were as follows:
 
Three Months Ended March 31,
 (amounts in millions)
2016
 
2015
Pension & SERP Benefits:
Domestic
 
Foreign
 
Domestic
 
Foreign
Net periodic (benefit) cost:
 
 
 
 
 
 
 
Service cost
$

 
$
0.4

 
$

 
$
0.2

Interest cost on the projected benefit obligation
2.5

 
0.8

 
1.6

 
0.5

Expected return on plan assets
(2.9
)
 
(0.7
)
 
(2.4
)
 
(0.5
)
Amortization of prior service cost

 
0.2

 

 

Net periodic (benefit) cost
$
(0.4
)
 
$
0.7

 
$
(0.8
)
 
$
0.2

 
Three Months Ended March 31,
 (amounts in millions)
2016
 
2015
Post-retirement Benefits:
Domestic
 
Foreign
 
Domestic
 
Foreign
Net periodic cost:
 

 
 

 
 

 
 

Interest cost on the projected benefit obligation
$
0.1

 
$
0.1

 
$
0.1

 
$

Net periodic cost
$
0.1

 
$
0.1

 
$
0.1

 
$

No pension service cost was recognized during the three months ended March 31, 2016 and 2015 under the Domestic Pension Plan, nor will there be in future periods, as benefits in the plan were frozen in connection with the MacDermid Acquisition.
The Company did not make any contributions to the Pension Plan during the three months ended March 31, 2016. The Company expects to make contributions totaling $6.3 million and $0.6 million to the Pension Plan and other post-retirement benefit plans, respectively, during 2016.


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)
March 31,
2016
 
December 31, 2015
Borrowings under lines of credit,
weighted average interest rate of 3.43% and 4.28% at March 31, 2016 and December 31, 2015, respectively
$
149.2

 
$
16.7

 
 
 
 
USD Notes, due 2022,
interest at 6.50%, net of unamortized premium and debt issuance costs of $18.1million and $18.9 million at March 31, 2016 and December 31, 2015, respectively
1,081.9

 
1,081.1

EUR Notes, due 2023,
interest at 6.00%, net of debt issuance costs of $5.9 million and $6.1 million at March 31, 2016 and December 31, 2015, respectively
392.2

 
374.0

USD Notes, due 2021,
interest at 10.375%, net of debt issuance costs of $12.0 million and $12.5 million at March 31, 2016 and December 31, 2015, respectively
488.0

 
487.5

First lien secured credit facility, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of debt issuance costs of $0.5 million and $0.6 million at March 31, 2016 and December 31, 2015, respectively
733.7

 
735.6

USD Incremental Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $5.1 million and $5.4 million at March 31, 2016 and December 31, 2015, respectively
290.4

 
290.8

CAS U.S. Dollar Tranche B Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $6.1 million and $6.4 million at March 31, 2016 and December 31, 2015, respectively
122.0

 
121.9

Arysta U.S. Dollar Tranche B-2 Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $13.1 million and $13.9 million at March 31, 2016 and December 31, 2015, respectively
480.7

 
481.2

Alent U.S. Dollar Tranche B-3 Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $38.3 million and $40.5 million at March 31, 2016 and December 31, 2015, respectively
1,001.5

 
1,001.8

CAS EURO Tranche C-1 Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount of $0.9 million and $0.9 million at March 31, 2016 and December 31, 2015, respectively
228.8

 
219.0

Arysta EURO Tranche C-1 Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $2.0 million and $2.1 million at March 31, 2016 and December 31, 2015, respectively
91.2

 
87.2

Alent EURO Tranche C-2 Term Loan, due 2020,
interest at the greater of 5.50% or LIBOR plus 4.50%, net of unamortized discount and debt issuance costs of $11.9 million and $11.9 million at March 31, 2016 and December 31, 2015, respectively
327.7

 
313.0

Other
20.0

 
18.5

Total debt and capital lease obligations
5,258.1

 
5,211.6

Less: current portion debt and capital lease obligations
(39.7
)
 
(38.0
)
Total long-term debt and capital lease obligations
$
5,218.4

 
$
5,173.6

The weighted average effective interest rate associated with debt outstanding at March 31, 2016, based on currently applicable interest rates, was 6.92%. This rate includes the effects of interest rate swaps, as well as, the impact of deferred financing fees and original issue discount and premium amortization calculated using the effective interest method.
In August 2015, the Company entered into a series of pay fixed, receiving floating interest rate swaps with respect to a portion of its indebtedness. The swaps effectively fix the floating base rate portion of the interest payments on approximately $1.16 billion of the Company's USD denominated debt and €284 million of its Euro denominated debt at 1.96% and 1.20%, respectively, from September 2015 through June 2020.


18

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



Minimum principal payments on long-term debt and capital leases were as follows:
 (amounts in millions)
Principal Payments
Year ending December 31,
2016 - remaining
$
41.1

2017
34.9

2018
34.7

2019
34.6

2020
3,226.6

2021
500.5

Thereafter
1,499.6

   Total
$
5,372.0

In order to fund our acquisition activity, we have incurred substantial indebtedness totaling $5.26 billion as of March 31, 2016, with expected interest payments in excess of $300 million per year. Our first significant principal debt payments, totaling $3.23 billion and primarily representing principal payments at maturity associated with all of our outstanding term loans under our Amended and Restated Credit Agreement, are due in 2020.  In addition, on April 20, 2017, we may also be required to repurchase each share of Series B Convertible Preferred Stock that has not been previously converted or automatically redeemed. The related potential cash obligation, which varies based on our stock price, corresponds to a maximum amount of $600 million. As of March 31, 2016, this maximum potential obligation was approximately $410 million. We anticipate sufficient cash from operations to fund interest, working capital and other capital expenditures for the foreseeable future and have access to a $500 million line of credit under our Revolving Credit Facility, with current availability of $385 million, as well as availability under various lines of credit and overdraft facilities of $87.4 million. However, any settlement of the Series B Convertible Preferred Stock obligation, working capital shortfalls and future acquisitions may require utilization of our Revolving Credit Facility as well as proceeds from future debt and/or equity offerings.  Our long-term liquidity may be impacted by our ability to borrow additional funds, renegotiate existing debt and/or raise equity under terms that are favorable to us.
Amendments to Credit Agreement
Amendment No. 1 -- In connection with the MacDermid Acquisition, on October 31, 2013, MacDermid entered into Amendment No. 1 to the First Lien Credit Agreement and MacDermid paid $373 million in connection with the repayment of the $360 million in principal on the second lien credit facility. Pursuant to Amendment No. 1, Platform became a co-borrower on all obligations under the $50.0 million Revolving Credit Facility and the second term loan 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 was marked to fair value by adding the original discount of $1.8 million to the carrying value at the time.
Amendment No. 2 -- 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 CAS U.S. Dollar 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 CAS EURO Tranche C-1 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 CAS EURO Tranche C-1 Term Loan and the other loans incurred under the Revolving Credit Facility. With the exception of this collateral package and the interest rate, the CAS EURO Tranche C-1 Term Loan has terms substantially similar to those of Platform’s CAS U.S. Dollar Tranche B Term Loan and bears interest at a rate per annum equal to an applicable


19

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



margin plus an adjusted Eurocurrency Rate, calculated as set forth in the Amended and Restated Credit Agreement. The CAS EURO Tranche C-1 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 No.1 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 No. 1, 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 No. 1 were used to finance the Agriphar Acquisition.
Amendment No. 3 -- 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, as amended by Amendment No. 2, which, among other things, provided for (i) a new tranche of term loans 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) an Arysta U.S. Dollar Tranche B-2 Term Loan of $500 million (less original issue discount of 1%), (ii) an additional Arysta EURO Tranche C-1 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. 
Amendment No. 4 -- On December 3, 2015, the Company entered into and closed the transaction contemplated by Amendment No. 4 to the Second Amended and Restated Credit Agreement, as amended by Amendments No. 2 and 3, which, among other things, provided for (i) a new tranche of term loans denominated in U.S. Dollars in an aggregate principal amount of up to $1.05 billion, (ii) a new tranche of new term loans denominated in Euro in an aggregate principal amount of up to €300 million, (iii) an increase in the size of the existing U.S. Dollar revolving credit facility by $87.5 million to $250 million, and (iv) an increase in the size of the existing multicurrency revolving credit facility by $87.5 million to $250 million. Concurrently with the closing of the Alent Acquisition, the additional $1.05 billion of Alent U.S. Dollar Tranche B-3 Term Loans (less original issue discount of 2%), the additional €300 million of Alent EURO Tranche C-2 Term Loans (less original issue discount of 2%) and $115 million under Platform’s multi-currency Revolving Credit Facility were borrowed to fund a portion of the cash consideration for the Alent Acquisition.
Certain additional domestic and foreign subsidiaries of Platform and MacDermid, including certain subsidiaries acquired in the Alent and 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.
Each of the Alent U.S. Dollar Tranche B-3 Term Loans and the Alent EURO Tranche C-2 Term Loans bear interest at a rate per annum equal to 5.50% plus an adjusted eurocurrency rate, or 4.50% plus an adjusted base rate, calculated as set forth in the Amended and Restated Credit Agreement. Pursuant to Amendment No. 4, each of the previously existing (i) tranche B term loans, (ii) tranche B-2 term loans, and (iii) EURO tranche C-1 term loans will bear interest at 5.50% per annum plus an adjusted Eurocurrency rate, or 4.50% plus an adjusted base rate, calculated as set forth in the Amended and Restated Credit Agreement. Each tranche of term loans will mature on June 7, 2020.
Loans under our Revolving Credit Facility 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. Amendment No. 4 provided for maturity extension of the revolving loans and commitments held by revolving facility lenders consenting to such extension. The extended Revolving Credit Facility will mature on June 7, 2019. Revolving loans and commitments held by revolving facility lenders, other than the lenders who consent to the extension, will mature on June 7, 2018.
Except as set forth in Amendment No. 4 and above, (i) the Alent U.S. Dollar Tranche B-3 Term Loans shall have identical terms as the existing U.S. Dollar denominated term loans and (ii) the Alent EURO Tranche C-2 Term Loans shall have identical terms as the existing euro denominated term loans and, in each case, shall be otherwise subject to the provisions of the Credit Agreement.


20

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. The Revolving Credit Facility also imposes a financial covenant to maintain a first lien net leverage ratio of 6.25 to 1.0 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 March 31, 2016, 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.
The Amended and Restated Credit Agreement also contains a yield protection provision wherein the yield on any current indebtedness issued under the Amended and Restated Credit Agreement would be increased to within 50 basis points of the yield on any additional incremental term loan(s), in the event the incremental term loan(s) provided an initial yield, including OID, subject to the yield calculation provisions, as defined, is in excess of 50 basis points of the yield on existing term loan indebtedness.
Guarantees
The obligations of Platform and MacDermid, as borrowers, under the Amended and Restated Credit Agreement are guaranteed by current and future direct and indirect domestic subsidiaries. Certain of Platform's foreign subsidiaries also guarantee the obligations of MAS Holdings, NAIP, MAcDermid Europe and MacDermid Funding with respect to the Arysta EURO Trance C-1Term Loan and the CAS EURO Tranche C-1 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.
November 2015 Notes Offering
In connection with the Alent Acquisition, on November 10, 2015, Platform completed the November 2015 Notes Offering of $500 million in aggregate principal amount of 10.375% USD Notes due 2021. The notes are governed by an indenture, dated November 10, 2015, as amended from time to time, bear an interest at a rate of 10.375% and mature on May 1, 2021, unless earlier redeemed. Interest is payable in cash, semi-annually in arrears, on May 1 and November 1 of each year, commencing on May 1, 2016. The proceeds of this offering were used to fund a portion of the cash consideration for the Alent Acquisition.
February 2015 Notes Offering
In connection with the Arysta Acquisition, on February 2, 2015, Platform completed the February Notes Offering of $1.10 billion aggregate principal amount of 6.50% USD Notes due 2022, plus original issue premium of $1.0 million, and €350 million aggregate principal amount of 6.00% EUR Notes due 2023. The Notes are governed by an indenture, dated February 2, 2015, as amended from time to time. 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. The proceeds of this offering were used to fund a portion of the cash consideration for the Arysta Acquisition.


21

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 March 31, 2016 and December 31, 2015, borrowings under such facilities totaled $149.2 million and $16.7 million, respectively. The Company also had letters of credit outstanding of $27.4 million and $40.0 million as of March 31, 2016 and December 31, 2015, respectively, of which $10.7 million and $11.0 million reduce the borrowings available under the various credit facilities as of March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016 and December 31, 2015, the availability under these facilities was approximately $472 million and $618 million, respectively, net of outstanding letters of credit.
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 "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets, and totaled $42.7 million and $46.3 million as of March 31, 2016 and December 31, 2015, respectively. Program income and expenses are recorded in "Interest expense, net" in the Condensed Consolidated Statements of Operations and totaled zero and $0.2 million for the three months ended March 31, 2016 and 2015, 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 $263 million as of March 31, 2016. Under these arrangements, factored accounts receivable may be transferred with or without recourse. Factoring transactions qualifying for sales treatment, where the derecognition criteria have been met, totaled $17.9 million as of March 31, 2016. As of December 31, 2015, such transactions totaled $189 million. 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 "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets, and totaled $30.9 million and $24.8 million as of March 31, 2016 and December 31, 2015, respectively. Factoring fees are recorded in "Interest expense, net" in the Condensed Consolidated Statements of Operations and totaled $0.2 million and $0.7 million for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the Company had additional capacity under its factoring arrangements of approximately $56.3 million, subject to the limitations outlined in its Credit Facilities and other agreements governing outstanding debt.
Some of the Company’s subsidiaries in the United States and the Netherlands periodically enter into arrangements for consignment and/or purchase of precious metals with financial institutions. The present and future indebtedness and liability relating to such arrangements are guaranteed by the Company. The Company’s maximum guarantee liability under these arrangements is limited to an aggregate of $18.0 million. No guarantee liability is recorded by the Company for its subsidiary’s debt to financial institutions.
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 forward contracts, interest rate swaps and commodities futures contracts are used to manage the risks associated with changes in the conditions of those markets. All derivatives are recognized in the Condensed Consolidated Balance Sheets at fair value at the end of each period. The counterparties to the Company’s derivative agreements are primarily 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 unaudited interim 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.


22

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



As of March 31, 2016, the Company held foreign currency forward contracts to purchase and sell various currencies primarily with U.S. Dollars and Euro, with lesser amounts traded with Japanese Yen. The Company has not designated any foreign currency exchange forward contracts as eligible for hedge accounting. The total U.S. Dollar equivalent of foreign currency exchange forward contracts held at March 31, 2016 was approximately $289 million, all of which have settlement dates within one year.
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 change in the net fair value of the foreign currency forward contracts is recorded in "Loss on derivative contracts" on the accompanying Condensed Consolidated Statements of Operations.
Interest Rates
In August 2015, the Company entered into a series of pay fixed, receiving floating interest rate swaps with respect to a portion of its indebtedness. The swaps effectively fix the floating base rate portion of the interest payments on approximately $1.16 billion of the Company's USD denominated debt and €284 million of its Euro denominated debt at 1.96% and 1.20%, respectively, from September 2015 through June 2020.
Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in "Accumulated other comprehensive income (loss)" and reclassified into earnings as the underlying hedged item affects earnings. Amounts reclassified into earnings related to the interest rate swaps are included in interest expense.
Commodities
As part of its risk management policy, the Company enters into commodities futures contracts on an ongoing basis for the purpose of mitigating its exposure to fluctuations in prices of certain metals it uses in the production of its finished goods.  The Company held futures contracts to purchase or sell various metals for a notional amount of $21.8 million and $16.5 million as of March 31, 2016 and December 31, 2015, respectively. The change in the net fair value of the commodities futures contracts is recorded in "Loss on derivative contracts" on the accompanying Condensed Consolidated Statements of Operations.
Certain subsidiaries of the Company have entered into supply agreements with a third party that have been deemed to constitute financing agreements with an embedded derivative feature whose fair value is determined by the change in the market value of the underlying metals between delivery date and measurement date.  Assets associated with these supply agreements, which serve as the notional of the embedded derivative, have been recorded in "Inventory" and "Current installments of long-term debt and revolving credit facilities" in the Condensed Consolidated Balance Sheets and totaled $14.5 million and $13 million at March 31, 2016 and December 31, 2015, respectively. The fair value of these contracts has been bifurcated and recorded as a derivative liability in "Accrued expenses and other current liabilities" in the Condensed Consolidated Balance Sheets and totaled $1.2 million and zero at March 31, 2016, and December 31, 2015, respectively.
The following table summarizes the fair value of derivative instruments reported in the Condensed Consolidated Balance Sheets:
 (amounts in millions)
 
 
 
March 31,
2016
 
December 31, 2015
 
 
 
 
U.S. Dollar Amount
 
U.S. Dollar Amount
Derivatives designated as hedging instruments
 
Liabilities Balance Sheet location
 
 
 
 
Interest rate swaps
 
Other long-term liabilities
 
$
(23.5
)
 
$
(12.5
)
Derivatives not designated as hedging instruments:
 
Assets Balance Sheet location
 
 

 
 

Foreign exchange and metals contracts
 
Prepaid expenses and other current assets
 
4.3

 
1.1

Foreign exchange contracts
 
Other Assets
 

 
1.0

 
 
Liabilities Balance Sheet location
 
 

 
 

Foreign exchange and metals contracts
 
Accrued expenses and other current liabilities
 
(9.5
)
 
(1.0
)
Net derivative contract liability
 
 
 
$
(28.7
)
 
$
(11.4
)
For the three months ended March 31, 2016, the Company recorded unrealized losses of $11.0 million in "Other comprehensive income (loss)" related to interest rate swaps. There was no such activity during the three months ended March 31, 2015. The


23

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



interest rate swaps were deemed highly effective with no ineffective portions for cash flow hedge accounting purposes during the three months ended March 31, 2016. During the next twelve months, the Company expects to reclassify $10.9 million from Accumulated Other Comprehensive Income to "Interest expense, net" in the Condensed Consolidated Statements of Operations.
For the three months ended March 31, 2016, the Company recorded realized and unrealized losses of $5.3 million in "Loss on derivative contracts" in the Condensed Consolidated Statements of Operations related to foreign exchange and metals derivative contracts. There was no such activity during the three months ended March 31, 2015.
In the normal course of business, the Company enters into contracts with certain counterparties to purchase and sell foreign currency exchange forwards and metal futures that contain master netting arrangements, typically in the form of an ISDA or similar agreement. The right to set-off within these agreements is limited to certain termination events, such as bankruptcy or default of either party to the agreement. The Company has made an accounting policy decision not to offset and reports gross derivative asset and liability balances in the Condensed Consolidated Balance Sheets. The following table presents recognized foreign currency exchange forward and metal future derivative contracts that are subject to master netting arrangements but not offset, as at March 31, 2016, and shows in the 'Net' column what the net impact would be on the Company's Condensed Consolidated Balance Sheets if all set-off rights were exercised.
Financial assets
Amounts offset
 
Amounts not offset
 
Net
March 31, 2016
Gross assets
 
Gross liabilities offset
 
Net amounts presented
 
Financial instruments
 
Cash collateral received
 
 
Derivative assets
$
3.3

 

 
$
3.3

 
(0.3
)
 
$

 
$
3.0

 
 
 
 
 
 
 
 
 
 
 
 
Financial liabilities
Amounts offset
 
Amounts not offset
 
Net
March 31, 2016
Gross liabilities
 
Gross assets offset
 
Net amounts presented
 
Financial instruments
 
Cash collateral pledged
 
 
Derivative liabilities
$
7.7

 

 
$
7.7

 
(2.2
)
 
$
(1.9
)
 
$
3.6

Cash balances pledged as collateral and held in accounts with counterparties are recorded in "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets.
10. FAIR VALUE MEASUREMENTS
The Company determines fair value measurements used in its unaudited interim Condensed 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 uses 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.


24

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



Recurring Fair Value Measurements
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
 (amounts in millions)
March 31,
2016
 
Quoted prices in
active markets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Asset Category
 
 
 
 
 
 
 
Cash equivalents
$
9.2

 
$
1.0

 
$
8.2

 
$

Available for sale equity securities
6.8

 
6.2

 
0.6

 

Derivatives
4.3

 

 
4.3

 

Total
$
20.3

 
$
7.2

 
$
13.1

 
$

Liability Category
 

 
 

 
 

 
 

Long-term contingent consideration
$
73.5

 
$

 
$

 
$
73.5

Derivatives
33.0

 

 
33.0

 

Total
$
106.5

 
$

 
$
33.0

 
$
73.5

 
 
 
Fair Value Measurement Using
 (amounts in millions)
December 31, 2015
 
Quoted prices in
active markets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Asset Category
 
 
 
 
 
 
 
Cash equivalents
$
59.4

 
$
2.9

 
$
56.5

 
$

Available for sale equity securities
6.6

 
5.8

 
0.8

 

Derivatives
2.1

 

 
2.1

 

Total
$
68.1

 
$
8.7

 
$
59.4

 
$

Liability Category
 

 
 

 
 

 
 

Long-term contingent consideration
$
70.7

 
$

 
$

 
$
70.7

Derivatives
13.5

 

 
13.5

 

Total
$
84.2

 
$

 
$
13.5

 
$
70.7

The following methods and assumptions were used to estimate the fair value of each class of the Company’s financial instruments, assets and liabilities:
Cash equivalents - Cash equivalents comprise money market accounts and certificates of deposits issued by financial institutions. The Company invests in various money market funds which are managed by financial institutions. These funds are not publicly traded, but historically have been highly liquid. The fair values of the money market accounts are determined by the banks based upon the funds’ NAV. All of the money market accounts currently permit daily investments and redemptions at $1.00 NAV and are classified as Level 1 assets. The Company records certificates of deposit at amortized cost in the Condensed Consolidated Balance Sheets. Given the relatively short maturities of these instruments, the Company believes amortized cost approximates fair value. The Company classifies these instruments as Level 2.
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. Available for sale securities are included in "Other assets" in the Condensed Consolidated Balance Sheets.


25

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



Derivatives - Derivative assets and liabilities include foreign currency, metals and interest rate derivatives. The values were determined using pricing models based upon observable market inputs, such as market spot and futures prices on over-the-counter derivative instruments, market interest rates and consideration of counterparty credit risk.
Long-term contingent consideration - The long-term contingent consideration represents a potential liability of up to $100 million tied to achievement of EBITDA and common stock trading price performance metric over a seven-year period ending December 2020 in connection with the MacDermid Acquisition. The common stock performance metric has been satisfied. The fair value of the EBITDA performance metric is derived using the income approach with unobservable inputs, based on future forecasts and present value assumptions which include a discount rate of approximately 1.19% and expected future value of payments of $60.0 million calculated using a probability weighted EBITDA assessment with higher probability associated with the Company achieving the maximum EBITDA targets. Changes in the fair value of the long-term contingent consideration are recorded in "Selling, technical, general and administrative expenses" in the Consolidated Statements of Operations. Relative to the share price metric, an increase or decrease in the discount rate of 1% changes the fair value measure of the metric by approximately $2.0 million. Relative to the EBITDA metric, an increase or a decrease in the discount rate of 1%, within a range of probability between 80% and 100%, changes the fair value measure of the metric by approximately $3.0 million.
The following table provides a reconciliation of the beginning and ending balances for the three months ended March 31, 2016 for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 (amounts in millions)
Long-term contingent consideration
Fair value measurements using significant unobservable inputs (Level 3)
March 31, 2016
Beginning balance
$
70.7

Changes in fair value
2.8

Purchases, sales and settlements (1)

Transfers into Level 3

Transfers out of Level 3

Ending balance
$
73.5

(1) There were no purchases, sales or settlements on a gross basis during the three months ended March 31, 2016.
The Company consistently applies its policy for transfers between fair value hierarchy levels as disclosed in the Company's Annual Report. There were no significant transfers between the fair value hierarchy levels for the three months ended March 31, 2016.


26

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



Nonrecurring Fair Value Measurements
The following table presents the carrying value and estimated fair value of the Company’s long-term debt and capital lease obligations:
 (amounts in millions)
March 31, 2016
 
December 31, 2015
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
USD Notes, due 2022
$
1,081.9

 
$
932.3

 
$
1,081.1

 
$
946.3

EUR Notes, due 2023
392.2

 
333.1

 
374.0

 
326.7

USD Notes, due 2021
488.0

 
485.0

 
487.5

 
500.0

First Lien Credit Facility
733.7

 
711.8

 
735.6

 
710.3

USD Incremental Loan
290.4

 
286.4

 
290.8

 
285.8

CAS U.S. Dollar Tranche B Term Loan
122.0

 
124.1

 
121.9

 
123.9

Arysta U.S. Dollar Tranche B-2 Term Loan
480.7

 
478.9

 
481.2

 
477.7

Alent U.S. Dollar Tranche B-3 Term Loan
1,001.5

 
1,008.6

 
1,001.8

 
1,005.9

CAS EURO Tranche C-1 Term Loan
228.8

 
223.9

 
219.0

 
215.4

Arysta EURO Tranche C-1 Term Loan
91.2

 
90.8

 
87.2

 
87.5