Company Quick10K Filing
Quick10K
Platform Specialty Products
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-05 Shareholder Vote
8-K 2019-05-17 Other Events
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-04-22 Officers, Other Events, Exhibits
8-K 2019-03-12 Officers, Other Events, Exhibits
8-K 2019-02-03 Enter Agreement, Officers, Exhibits
8-K 2019-01-30 Enter Agreement, Leave Agreement, M&A, Off-BS Arrangement, Officers, Amend Bylaw, Regulation FD, Other Events, Exhibits
8-K 2019-01-28 Enter Agreement, Earnings, Off-BS Arrangement, Officers, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-19 Enter Agreement, Impairments, Officers, Regulation FD, Exhibits
8-K 2018-06-25 Shareholder Vote
8-K 2018-03-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-27 Earnings, Exhibits
8-K 2018-01-10 Regulation FD, Exhibits
AYX Alteryx 5,560
OPK Opko Health 1,290
PRTY Party City Holdco 755
IMXI International Money Express 431
GENC Gencor Industries 182
WILC G Willi Food 118
VUZI Vuzix 73
ACHV Achieve Life Sciences 28
BNKL Bionik Laboratories 0
HLYK Healthlynked 0
PAH 2019-03-31
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 esi10-q2019331exx311.htm
EX-31.2 esi10-q2019331exx312.htm
EX-32.1 esi10-q2019331exx321.htm

Platform Specialty Products Earnings 2019-03-31

PAH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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

FORM 10-Q
_______________

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to                     
 
Commission file number: 001-36272
elementlogoupdatedregrgba01.jpg
Element Solutions Inc
(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.)
 
 
500 East Broward Boulevard, Suite 127
Fort Lauderdale, Florida
33394
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (561) 207-9600

_______________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý      No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý      No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.    
Large accelerated filer ý
Accelerated filer o 
Non-Accelerated filer o  
Smaller reporting company o 
 
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Class
April 26, 2019
Common Stock, par value $0.01 per share
257,553,622 shares



TABLE OF CONTENTS



 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Operations
 
 
Three Months Ended March 31, 2019 and 2018
 
Condensed Consolidated Statements of Comprehensive Income
 
 
Three Months Ended March 31, 2019 and 2018
 
Condensed Consolidated Balance Sheets
 
 
March 31, 2019 and December 31, 2018
 
Condensed Consolidated Statements of Cash Flows
 
 
Three Months Ended March 31, 2019 and 2018
 
Condensed Consolidated Statements of Changes in Stockholders' Equity
 
 
Three Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 



GLOSSARY OF DEFINED TERMS


Terms    
 
Definitions
Element Solutions;
We; Us; Our; the Company
 
Element Solutions Inc, a Delaware corporation, and, where the context requires, its subsidiaries or operating businesses.
Arysta
 
Arysta LifeScience Inc., parent company of the former Agricultural Solutions segment.
Arysta Sale
 
Sale of 100% of the issued and outstanding shares of common stock of Arysta and its subsidiaries to UPL for an aggregate purchase price of approximately $4.2 billion in cash, subject to adjustments, completed on January 31, 2019.
Arysta Sale Agreement
 
Stock Purchase Agreement, dated July 20, 2018, as amended by Amendment Number One to Stock Purchase Agreement, dated as of January 25, 2019, related to the Arysta Sale.
ASU
 
Accounting Standards Update.
Board
 
Element Solutions' board of directors.
Credit Agreement
 
Element Solutions' Second Amended and Restated Credit Agreement, dated August 6, 2014, among, inter alia, Platform, MacDermid Holdings, LLC, MacDermid, the subsidiaries of Element Solutions and MacDermid Holdings, LLC from time to time parties thereto, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent and collateral agent, as amended and restated from time to time.
Credit Facilities
 
First Lien Credit Facility and Revolving Credit Facility, collectively, available under the Credit Agreement.
EBITDA
 
Earnings before interest, taxes, depreciation and amortization.
ESPP
 
2014 Employee Stock Purchase Plan of Element Solutions.
Exchange Act
 
Securities Exchange Act of 1934, as amended.
FASB
 
Financial Accounting Standard Board.
First Lien Credit Facility
 
First lien credit facility available under the Credit Agreement.
Founder Entities
 
Mariposa Acquisition, LLC and Berggruen Holdings Ltd. and affiliates, collectively.
GAAP
 
Generally accepted accounting principles in the United States.
MacDermid
 
MacDermid, Incorporated, a Connecticut corporation.
MacDermid Acquisition
 
Element Solutions' acquisition on October 31, 2013 of substantially all of the equity of MacDermid Holdings, LLC, which, at the time, owned approximately 97% of MacDermid. Element Solutions acquired the remaining 3% of MacDermid on March 4, 2014, pursuant to the terms of the Exchange Agreement, dated October 25, 2013, between Element Solutions and the fiduciaries of the MacDermid, Incorporated Profit Sharing and Employee Savings Plan.
New Credit Agreement
 
Element Solutions' new Credit Agreement, dated as of January 31, 2019, among, inter alia, Element Solutions and MacDermid, as borrowers, certain subsidiaries of Element Solutions and MacDermid from time to time parties thereto, the lenders from time to time parties thereto, and Barclays Bank PLC, as administrative agent and collateral agent.
NYSE
 
New York Stock Exchange.
OEM
 
Original Equipment Manufacturer.
PDH
 
Platform Delaware Holdings, Inc., a former subsidiary of Element Solutions.
PDH Common Stock
 
Shares of common stock of PDH.
Prior Senior Notes
 
Element Solutions' 6.00% EUR Notes due 2023 and 6.50% USD Notes due 2022, collectively.
Prior Senior Notes Indenture
 
The indenture, dated as of February 2, 2015, governing the Prior Senior Notes.
Quarterly Report
 
This quarterly report on Form 10-Q for the three months ended March 31, 2019.
Retaining Holder
 
Each Holder whose equity interest of MacDermid Holdings, LLC, held immediately prior to the closing of the MacDermid Acquisition, was converted into PDH Common Stock pursuant to a Retaining Holder Securityholders’ Agreement dated October 31, 2013.
Revolving Credit Facility
 
Revolving credit facility (in U.S. dollars or multicurrency) available under the Credit Agreement.
SEC
 
Securities and Exchange Commission.


i


GLOSSARY OF DEFINED TERMS


Terms    
 
Definitions
Series A Preferred Stock
 
2,000,000 shares of Element Solutions' Series A convertible preferred stock held by the Founder Entities and convertible into shares of Element Solutions' common stock, on a one-for-one basis, at any time at the option of the Founder Entities.
UPL
 
UPL Corporation Ltd., a Mauritius public limited company and a wholly-owned subsidiary of UPL Limited.
2018 Annual Report
 
Element Solutions' annual report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 28, 2019.
5.875% USD Notes Indenture
 
The indenture, dated November 24, 2017, governing the 5.875% USD Notes due 2025.
5.875% USD Notes due 2025
 
Element Solutions' $800 million aggregate principal amount of 5.875% senior notes due 2025, denominated in U.S. dollars, issued on November 24, 2017.
6.00% EUR Senior Notes due 2023
 
Element Solutions’ €350,000,000 aggregate principal amount of 6.00% senior notes due 2023, denominated in euros, issued on February 2, 2015 and redeemed on February 1, 2019.
6.50% USD Senior Notes due 2022
 
Element Solutions’ $1,100,000,000 aggregate principal amount of 6.50% senior notes due 2022, denominated in U.S. dollars, issued on February 2, 2015 and redeemed on February 1, 2019.


ii


Discontinued Operations
Unless otherwise specified, the results and disclosures presented in this Quarterly Report exclude discontinued operations. Discontinued operations relate to the former Agricultural Solutions business of Element Solutions which consisted of Arysta and its subsidiaries. Accordingly, Agricultural Solutions' assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the unaudited interim Condensed Consolidated Financial Statements. The Arysta Sale was completed on January 31, 2019. See Note 3, Discontinued Operations, to the unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report for further information.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements that can be identified by words such as "expect," "anticipate," "project," "will," "should," "believe," "intend," "plan," "estimate," "predict," "seek," "continue," "outlook," "may," "might," "can have," "likely," "potential," "target" or "hope" and variations of such words and similar expressions. Examples of forward looking statements include, but are not limited to, statements, beliefs, projections and expectations regarding our corporate reorganization; business strategy and potential shares repurchases; cost savings and efficiencies relating to the Arysta Sale or otherwise; the impact of new accounting standards and accounting changes; our dividend policy; the effects of global economic conditions on our business and financial condition; our hedging activities; timing and outcome of environmental and legal matters; our goodwill and other intangible assets; price volatility and cost environment; our liquidity and capital resources; our funding sources; our capital expenditures; our debt; off-balance sheet arrangements and contractual obligations; general views about future operating results; our risk management programs; our business and management strategies; future prospects; and other events or developments that we expect or anticipate will occur in the future.
Forward-looking statements are not guarantees of future performance, actions or events and are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying estimates, assumptions or expectations prove to be inaccurate or are unrealized, actual results may differ materially from those contemplated by these statements. A discussion of such risks and uncertainties include, without limitation, the risks set forth in Part I, Item 1A, Risk Factors, of our 2018 Annual Report. Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date on which it is made. The Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Please consult any further disclosures on related subjects in the Company’s Form 10-K, 10-Q and 8-K reports filed with the SEC.
Non-GAAP Financial Measures
This Quarterly Report contains non-GAAP financial measures, such as operating results on a constant currency and organic basis. Non-GAAP financial measures should not be considered in isolation from, as a substitute for, or superior to, performance measures calculated in accordance with GAAP. For definitions of these non-GAAP financial measures and additional information on why we present them, their respective limitations and reconciliations to the most comparable applicable GAAP measures, see "Non-GAAP Financial Measures" in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in Part I, Item 2, and Note 15, Segment Information, to the unaudited interim Condensed Consolidated Financial Statements, both included in this Quarterly Report.


iii



PART I. FINANCIAL INFORMATION



Item 1. Condensed Consolidated Financial Statements
 
ELEMENT SOLUTIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in millions, except per share amounts)
 
Three Months Ended March 31,
 
2019
 
2018
Net sales
$
459.8

 
$
492.5

Cost of sales
261.5

 
281.4

Gross profit
198.3

 
211.1

Operating expenses:
 

 
 
Selling, technical, general and administrative
142.4

 
140.8

Research and development
10.8

 
11.4

Total operating expenses
153.2

 
152.2

Operating profit
45.1

 
58.9

Other expense:
 

 
 

Interest expense, net
(38.1
)
 
(77.2
)
Foreign exchange gain
27.1

 
7.5

Other (expense) income, net
(48.0
)
 
11.8

Total other expense
(59.0
)
 
(57.9
)
(Loss) income before income taxes and non-controlling interests
(13.9
)
 
1.0

Income tax benefit (expense)
10.4

 
(9.9
)
Net loss from continuing operations
(3.5
)
 
(8.9
)
Income from discontinued operations, net of tax
27.4

 
46.9

Net income
23.9

 
38.0

Net income attributable to the non-controlling interests
(0.7
)
 
(0.7
)
Net income attributable to common stockholders
$
23.2

 
$
37.3

 
 
 
 
(Loss) earnings per share
 

 
 

Basic from continuing operations
$
(0.02
)
 
$
(0.04
)
Basic from discontinued operations
0.11

 
0.17

Basic attributable to common stockholders
$
0.09

 
$
0.13

 
 
 
 
Diluted from continuing operations
$
(0.02
)
 
$
(0.04
)
Diluted from discontinued operations
0.11

 
0.17

Diluted attributable to common stockholders
$
0.09

 
$
0.13

 
 
 
 
Weighted average common shares outstanding
 

 
 
Basic
268.2

 
287.9

Diluted
268.2

 
287.9


See accompanying notes to the Condensed Consolidated Financial Statements


1


ELEMENT SOLUTIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(dollars in millions)
 
 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
23.9

 
$
38.0

 
 

 
 

Other comprehensive (loss) income
 
 
 
Foreign currency translation:
 
 
 
Other comprehensive income before reclassifications, net of tax expense of $0.7 and $0.0 for the three months ended March 31, 2019 and 2018, respectively
94.2

 
59.2

Reclassifications, net of tax of $0.0 for the three months ended March 31, 2019 and 2018
479.8

 

Total foreign currency translation adjustments
574.0

 
59.2

Pension and post-retirement plans:
 
 
 
Reclassifications, net of tax of $0.0 for the three months ended March 31, 2019 and 2018
(2.1
)
 

Total pension and post-retirement plans
(2.1
)
 

Derivative financial instruments:
 
 
 
Other comprehensive loss before reclassifications, net of tax (benefit) expense of $(2.4) and $2.2 for the three months ended March 31, 2019 and 2018, respectively
(9.2
)
 
(2.7
)
Reclassifications, net of tax of $1.4 and $0.0 for the three months ended March 31, 2019 and 2018, respectively
(5.7
)
 
8.8

Total unrealized (loss) gain arising on qualified hedging derivatives
(14.9
)
 
6.1

Other comprehensive income
557.0

 
65.3

Comprehensive income
580.9

 
103.3

Comprehensive income attributable to the non-controlling interests
(40.2
)
 
(2.2
)
Comprehensive income attributable to common stockholders
$
540.7

 
$
101.1

 
See accompanying notes to the Condensed Consolidated Financial Statements


2


ELEMENT SOLUTIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in millions)
 
March 31,
 
December 31,
 
2019
 
2018
Assets
 
 
 
Cash and cash equivalents
$
230.4

 
$
233.6

Accounts receivable, net of allowance for doubtful accounts of $6.9 and $7.7 at March 31, 2019 and December 31, 2018, respectively
380.3

 
382.4

Inventories
202.4

 
188.1

Prepaid expenses
19.9

 
14.3

Other current assets
53.6

 
42.5

Current assets of discontinued operations
115.1

 
1,621.3

Total current assets
1,001.7

 
2,482.2

Property, plant and equipment, net
263.0

 
266.9

Goodwill
2,191.4

 
2,182.6

Intangible assets, net
999.9

 
1,024.5

Other assets
109.5

 
32.9

Non-current assets of discontinued operations
6.7

 
3,412.4

Total assets
$
4,572.2

 
$
9,401.5

Liabilities and stockholders' equity
 

 
 

Accounts payable
$
110.0

 
$
100.9

Current installments of long-term debt and revolving credit facilities
128.0

 
25.3

Accrued expenses and other current liabilities
138.0

 
189.5

Current liabilities of discontinued operations
80.1

 
826.8

Total current liabilities
456.1

 
1,142.5

Debt
1,516.5

 
5,350.7

Pension and post-retirement benefits
48.6

 
49.5

Deferred income taxes
128.5

 
133.0

Other liabilities
167.3

 
128.5

Non-current liabilities of discontinued operations

 
416.2

Total liabilities
2,317.0

 
7,220.4

Commitments and contingencies (Note 12)


 


Stockholders' Equity
 

 
 

Preferred stock - Series A

 

Common stock: 400.0 shares authorized (2019: 258.0 shares issued; 2018: 289.3 shares issued)
2.6

 
2.9

Additional paid-in capital
4,105.1

 
4,062.1

Treasury stock (2019: 0.5 shares; 2018: 0.3 shares)
(5.4
)
 
(3.5
)
Accumulated deficit
(1,605.5
)
 
(1,195.4
)
Accumulated other comprehensive loss
(240.1
)
 
(756.9
)
Total stockholders' equity
2,256.7

 
2,109.2

Non-controlling interests
(1.5
)
 
71.9

Total equity
2,255.2

 
2,181.1

Total liabilities and stockholders' equity
$
4,572.2

 
$
9,401.5


See accompanying notes to the Condensed Consolidated Financial Statements


3


ELEMENT SOLUTIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in millions)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 

 
Net income
$
23.9

 
$
38.0

Net income from discontinued operations, net of tax
27.4

 
46.9

Net loss from continuing operations
(3.5
)
 
(8.9
)
Reconciliation of net loss from continuing operations to net cash flows used in operating activities:
 

 
 

Depreciation and amortization
38.7

 
40.2

Deferred income taxes
(2.0
)
 
(0.6
)
Foreign exchange gain
(33.0
)
 
(8.6
)
Other, net
75.4

 
(4.5
)
Changes in assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
2.8

 
(11.7
)
Inventories
(14.3
)
 
(17.0
)
Accounts payable
9.5

 
4.9

Accrued expenses
(67.3
)
 
(39.5
)
Prepaid expenses and other current assets
(4.6
)
 
6.1

Other assets and liabilities
(33.7
)
 
(9.8
)
Net cash flows used in operating activities of continuing operations
(32.0
)
 
(49.4
)
Cash flows from investing activities:
 

 
 

Capital expenditures
(6.7
)
 
(4.8
)
Proceeds from Arysta Sale (net of cash $148.7 million)
4,192.3

 

Proceeds from the sale of equity investment

 
25.0

Other, net
8.5

 
(0.8
)
Net cash flows provided by investing activities of continuing operations
4,194.1

 
19.4

Cash flows from financing activities:
 

 
 

Debt proceeds, net of discount
749.1

 

Repayments of borrowings
(4,601.0
)
 
(0.1
)
Change in lines of credit, net
95.3

 
52.0

Repurchase of common stock
(433.6
)
 

Payment of financing fees
(39.5
)
 
(0.6
)
Other, net
(10.8
)
 
0.2

Net cash flows (used in) provided by financing activities of continuing operations
(4,240.5
)
 
51.5

Cash flows from discontinued operations:
 
 
 
Net cash flows used in operating activities of discontinued operations
(115.9
)
 
(111.7
)
Net cash flows used in investing activities of discontinued operations
(5.0
)
 
(12.6
)
Net cash flows provided by financing activities of discontinued operations
4.8

 
22.7

Net cash flows used in discontinued operations
(116.1
)
 
(101.6
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
9.4

 
14.1

Net decrease in cash, cash equivalents and restricted cash
(185.1
)
 
(66.0
)
Cash, cash equivalents and restricted cash at beginning of period (1)
415.5

 
483.9

Cash, cash equivalents and restricted cash at end of period (2)
$
230.4

 
$
417.9

(1) Includes cash, cash equivalents and restricted cash of discontinued operations of $181.9 million and $225.4 million at December 31, 2018 and 2017, respectively.
(2) Includes cash, cash equivalents and restricted cash of discontinued operations of $155.9 million at March 31, 2018.

 See accompanying notes to the Condensed Consolidated Financial Statements


4


ELEMENT SOLUTIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(dollars in millions, except share amounts)
 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total
Stockholders'
Equity
 
Non-
controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2018
2,000,000

 
$

 
289,316,170

 
$
2.9

 
$
4,062.1

 
341,967

 
$
(3.5
)
 
$
(1,195.4
)
 
$
(756.9
)
 
$
2,109.2

 
$
71.9

 
$
2,181.1

Net income

 

 

 

 

 

 

 
23.2

 

 
23.2

 
0.7

 
23.9

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 
67.4

 
67.4

 

 
67.4

Arysta Sale

 

 

 

 
(5.7
)
 

 

 

 
463.3

 
457.6

 
(46.6
)
 
411.0

Exercise/ vesting of share based compensation

 

 
1,592,815

 

 

 
170,989

 
(1.9
)
 

 

 
(1.9
)
 

 
(1.9
)
Conversion of PDH Common Stock into common stock

 

 
4,019,710

 
0.1

 
41.1

 

 

 

 
(13.9
)
 
27.3

 
(27.3
)
 

Issuance of common stock under ESPP

 

 
26,398

 

 
0.3

 

 

 

 

 
0.3

 

 
0.3

Share repurchase

 

 
(37,000,000
)
 
(0.4
)
 

 

 

 
(433.3
)
 

 
(433.7
)
 

 
(433.7
)
Equity compensation expense

 

 

 

 
7.3

 

 

 

 

 
7.3

 

 
7.3

Changes in non-controlling interests

 

 

 

 

 

 

 

 

 

 
(0.2
)
 
(0.2
)
Balance at March 31, 2019
2,000,000

 
$

 
257,955,093

 
$
2.6

 
$
4,105.1

 
512,956

 
$
(5.4
)
 
$
(1,605.5
)
 
$
(240.1
)
 
$
2,256.7

 
$
(1.5
)
 
$
2,255.2


 
Preferred Stock
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Accumulated Other Comprehensive (Loss) Income
 
Total
Stockholders'
Equity
 
Non-
controlling Interests
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2017
2,000,000

 
$

 
287,405,939

 
$
2.9

 
$
4,032.0

 
6,618

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

 
$
116.9

 
$
2,860.0

Impact of ASU 2016-01 adoption

 

 

 

 

 

 

 
(1.3
)
 
1.3

 

 

 

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

 

 
287,405,939

 
2.9

 
4,032.0

 
6,618

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

 
116.9

 
2,860.0

Net income

 

 

 

 

 

 

 
37.3

 

 
37.3

 
0.7

 
38.0

Other comprehensive income, net of taxes

 

 

 

 

 

 

 


 
63.8

 
63.8

 
1.5

 
65.3

Exercise/ vesting of share based compensation

 

 
15,000

 

 

 

 

 

 

 

 

 

Conversion of PDH Common Stock into common stock

 

 
657,541

 

 
8.2

 

 

 

 

 
8.2

 
(8.2
)
 

Issuance of common stock under ESPP

 

 
37,364

 

 
0.3

 

 

 

 

 
0.3

 

 
0.3

Equity compensation expense

 

 

 

 
3.1

 

 

 

 

 
3.1

 

 
3.1

Changes in non-controlling interests

 

 

 

 

 

 

 

 

 

 
0.3

 
0.3

Balance at March 31, 2018
2,000,000

 
$

 
288,115,844

 
$
2.9

 
$
4,043.6

 
6,618

 
$
(0.1
)
 
$
(833.7
)
 
$
(356.9
)
 
$
2,855.8

 
$
111.2

 
$
2,967.0


See accompanying notes to the Condensed Consolidated Financial Statements


5


ELEMENT SOLUTIONS INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION
Background
Element Solutions was incorporated in Delaware in January 2014 and its shares of common stock, par value $0.01 per share, trade on the NYSE under the ticker symbol “ESI.”
Element Solutions is a leading global specialty chemicals company whose operating businesses formulate a broad range of solutions that enhance the performance of products people use every day. Developed in multi-step technological processes, the innovative solutions of the Company's businesses enable customers' manufacturing processes in several key industries, including electronic circuitry, semiconductor, communications infrastructure, automotive systems, industrial surface finishing, consumer packaging and offshore energy. Element Solutions delivers its products to customers through its sales and service workforce, regional distributors and manufacturing representatives.
Basis of Presentation
The accompanying unaudited interim Condensed Consolidated Financial Statements and related information in this Quarterly Report include the accounts of Element Solutions and all of its controlled subsidiaries, and have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s 2018 Annual Report. In the opinion of management, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments that are normal, recurring and necessary for a fair presentation of the Company's financial position, results of operations and cash flows for interim periods, but are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2019. 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 2018 Annual Report.
On January 31, 2019, the Company completed the Arysta Sale for an aggregate purchase price of approximately $4.20 billion in cash, subject to certain post-closing adjustments. Agricultural Solutions' assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the unaudited interim Condensed Consolidated Financial Statements. See Note 3, Discontinued Operations, for additional information. Subject to the covenants, events of default and provisions discussed in Note 7, Debt, the Company's Prior Senior Notes, 5.875% USD Notes due 2025 and term loans then outstanding under the Credit Agreement were not required to be immediately redeemed or repaid in connection with the Arysta Sale. As such, the related liabilities and interest expense are not included in discontinued operations and therefore fully burdened continuing operations.
The process of preparing the Company’s unaudited interim Condensed Consolidated Financial Statements requires the use of estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses. These estimates and judgments are based on historical experience, future expectations and other factors as well as assumptions the Company believes to be reasonable under the circumstances. These estimates and judgments are reviewed on an ongoing basis and revised as necessary. Actual amounts may differ materially from these estimates.
Certain other prior year amounts have been reclassified to conform to the current year’s presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
Leases (Topic 842) - In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This ASU requires lessees to recognize most leases in their balance sheets, but to continue to record expenses on their income statements in a manner similar to current accounting. The ASU is required to be applied to leases in existence as of the date of initial application using a modified retrospective


6

ELEMENT SOLUTIONS INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



transition approach. The Company adopted the new standard on January 1, 2019. No cumulative-effect adjustment was required to the opening balance of retained earnings on the adoption date.
The Company made updates to its systems, policies and internal controls over financial reporting in preparation of adopting the new guidance. Upon the prospective adoption of ASC 842 during the first quarter of 2019, the Company elected the following package of transition practical expedients:
Not to separate non-lease components from lease components and account for them as a single lease component;
Not to reassess arrangements entered into prior to January 1, 2019 for whether an arrangement is or contains a lease, the lease classification applied or to separate initial direct costs; and
To use hindsight in determining the lease term for lease contracts that have historically been renewed or amended.
At December 31, 2018, the Company was not a lessor to any significant lease agreements and substantially all of the leases under which the Company was a lessee were classified as operating leases under the existing ASC 840 guidance. As such, consistent with the Company's practical expedient election to not reassess lease classification, substantially all the Company's existing leases will continue to be classified as operating leases under ASC 842. As a lessee, the Company categorizes its operating leases into two general categories: real estate and other.
This new standard had no impact on the Company’s Condensed Consolidated Statements of Operations or Cash Flows but its Condensed Consolidated Balance Sheet at March 31, 2019 was impacted by the recognition of right of use (ROU) assets of $67.3 million in "Other Assets" which reflected the present value of remaining operating lease payments under existing lease arrangements, as well as current and non-current lease liabilities of $15.9 million and $52.5 million, reported in "Accrued expenses and other current liabilities" and "Other liabilities", respectively.
See Note 11, Leases, for more information.
Derivatives and Hedging (Topic 815) - In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU improves the financial reporting of hedge relationships by updating hedging designation and measurement guidance. The update also simplifies the application of existing hedge accounting guidance related to assessing hedge effectiveness. The guidance is effective prospectively as of January 1, 2019 and is applied to contracts in existence at the date of adoption. This new guidance did not have a material impact on the Company's unaudited interim Condensed Consolidated Financial Statements.
3. DISCONTINUED OPERATIONS
On July 20, 2018, the Company agreed to sell to UPL 100% of the issued and outstanding shares of common stock of Arysta and its subsidiaries pursuant to the terms and conditions of the Arysta Sale Agreement. The Arysta Sale was completed on January 31, 2019 for an aggregate purchase price of approximately $4.20 billion in cash, subject to certain post-closing adjustments relating to, among other things, cash, indebtedness and working capital as of the closing date.
The Company's former Agricultural Solutions business was previously its own reportable segment and has been presented for all periods as discontinued operations in this Quarterly Report as the Arysta Sale represented a significant strategic shift and was determined to have a major effect on the Company's operations and financial results. Corporate costs previously allocated to the Agricultural Solutions segment were reallocated to the remaining segments for all periods presented as these costs were not clearly identifiable as costs of the former Agricultural Solutions segment.
In the first quarter of 2019, the Company recorded a gain of $21.3 million on the Arysta Sale, for a total loss of $429 million, primarily due to the reclassification of foreign currency translation adjustments from "Accumulated other comprehensive loss" within Stockholders’ Equity into earnings within the Condensed Consolidated Statement of Operations.
In connection with the Arysta Sale, the Company agreed to retain certain liabilities associated with legal and tax proceedings, primarily related to an Arysta subsidiary in Brazil. The Company does not expect to incur any material losses as a result of these proceedings. However, the resolutions of these matters may take several years and, to the extent not covered by insurance, may


7

ELEMENT SOLUTIONS INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



adversely impact our financial position or results of operations. The Company may record an additional gain or loss in the future as it settles certain post-closing adjustments and tax assets and liabilities associated with the Arysta Sale.
The following table details the components comprising net (loss) income from the Company's discontinued operations attributable to common stockholders:
 
Three Months Ended March 31,
 (dollars in millions)
2019 (1)
 
2018
Net sales
$
65.3

 
$
471.6

Cost of sales
(45.5
)
 
(278.0
)
Selling, technical, general and administrative
(36.6
)
 
(136.2
)
Research and development
(4.6
)
 
(12.1
)
Gain on Arysta Sale
21.3

 

Operating (loss) profit
(0.1
)
 
45.3

Other, net
9.3

 
56.7

Income from discontinued operations, before income taxes
9.2

 
102.0

Income tax benefit (expense)
18.2

 
(55.1
)
Income from discontinued operations, net of tax
27.4

 
46.9

Net (income) loss from discontinued operations attributable to the non-controlling interests
(0.1
)
 
0.6

Net income from discontinued operations attributable to common stockholders
$
27.3

 
$
47.5

(1) 
Includes activity through January 31, 2019, when the Arysta Sale was completed.
The carrying value of major classes of assets and liabilities related to the Company's discontinued operations were as follows:
 
March 31,
 
December 31,
 
 (dollars in millions)
2019
 
2018
 
Assets
 
 
 
 
Cash and cash equivalents
$

 
$
177.8

 
Accounts receivable, net

 
919.4

 
Inventories

 
369.1

 
Other current assets
115.1

(1) 
155.0

 
Current assets of discontinued operations
$
115.1

 
$
1,621.3

 
Property, plant and equipment, net
$

 
$
172.0

 
Goodwill

 
1,816.9

 
Intangible assets, net

 
1,797.7

 
Other assets
6.7

 
(374.2
)
(2) 
Non-current assets of discontinued operations
$
6.7

 
$
3,412.4

 
Liabilities
 
 
 
 
Accounts payable
$

 
$
365.7

 
Current installments of revolving credit facilities

 
52.5

 
Accrued expenses and other current liabilities
80.1

 
408.6

 
Current liabilities of discontinued operations
$
80.1

 
$
826.8

 
Deferred income taxes
$

 
$
369.9

 
Other liabilities

 
46.3

 
Non-current liabilities of discontinued operations
$

 
$
416.2

 
(1) 
Primarily comprised of a receivable from UPL associated with certain post-closing adjustments.
(2) 
Includes the impairment loss of $450 million on discontinued operations at December 31, 2018.


8

ELEMENT SOLUTIONS INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



4. INVENTORIES
The major components of inventory, on a net basis, were as follows: 
 (dollars in millions)
March 31,
2019
 
December 31,
2018
Finished goods
$
117.8

 
$
109.4

Work in process
17.0

 
15.3

Raw materials and supplies
67.6

 
63.4

Total inventories
$
202.4

 
$
188.1


5. PROPERTY, PLANT AND EQUIPMENT
The major components of property, plant and equipment were as follows:
 (dollars in millions)
March 31,
2019
 
December 31,
2018
Land and leasehold improvements
$
68.0

 
$
67.8

Buildings and improvements
104.3

 
101.0

Machinery, equipment, fixtures and software
212.0

 
207.3

Construction in process
11.1

 
14.9

Total property, plant and equipment
395.4

 
391.0

Accumulated depreciation
(132.4
)
 
(124.1
)
Property, plant and equipment, net
$
263.0

 
$
266.9


For the three months ended March 31, 2019 and 2018, the Company recorded depreciation expense of $10.3 million and $11.7 million, respectively.
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill were as follows:
 (dollars in millions)
Electronics
 
Industrial & Specialty
 
Total
Balance at December 31, 2018
 
 
 
 
 
Goodwill
$
1,226.7

 
$
1,002.5

 
$
2,229.2

Accumulated impairment losses

 
(46.6
)
 
(46.6
)
 
1,226.7

 
955.9

 
2,182.6

Foreign currency translation and other
6.0

 
2.8

 
8.8

Balance at March 31, 2019
 
 
 
 
 
Goodwill
1,232.7

 
1,005.3

 
2,238.0

Accumulated impairment losses

 
(46.6
)
 
(46.6
)
 
$
1,232.7

 
$
958.7

 
$
2,191.4



9

ELEMENT SOLUTIONS INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)



Indefinite-Lived Intangible Assets
The carrying value of indefinite-lived intangible assets other than goodwill which consisted solely of tradenames, was $105 million and $150 million at March 31, 2019 and December 31, 2018, respectively.
During the first quarter of 2019, the Company determined that the useful life of one of its tradenames no longer met the criteria to be considered an indefinite-lived asset and concluded no indication of impairment. Subsequently, the Company started amortizing this tradename over 15 years, consistent with other similar finite-lived assets.
Finite-Lived Intangible Assets
Intangible assets subject to amortization were as follows:
 
March 31, 2019
 
December 31, 2018
 (dollars in millions)
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
Customer lists
$
931.4

 
$
(301.9
)
 
$
629.5

 
$
927.8

 
$
(283.2
)
 
$
644.6

Developed technology
382.8

 
(166.2
)
 
216.6

 
381.3

 
(155.6
)
 
225.7

Tradenames
51.1

 
(2.4
)
 
48.7

 
5.9

 
(1.6
)
 
4.3

Non-compete agreements
1.6

 
(1.4
)
 
0.2

 
1.5

 
(1.3
)
 
0.2

Total
$
1,366.9

 
$
(471.9
)
 
$
895.0

 
$
1,316.5

 
$
(441.7
)
 
$
874.8


For the three months ended March 31, 2019 and 2018, the Company recorded amortization expense on intangible assets of $28.4 million and $28.5 million, respectively.
7.  DEBT
The Company’s debt and capital lease obligations consisted of the following:
 (dollars in millions)
Maturity Date
 
Interest Rate
 
March 31,
2019
 
December 31,
2018
Senior Notes - USD 800 million (1)
2025
 
5.875%
 
$
785.3

 
$
784.9

Senior Notes - USD 1.10 billion (1)
2022
 
6.50%
 

 
1,067.1

Senior Notes - EUR 350 million (1)
2023
 
6.00%
 

 
397.4

USD Term Loans (2)
2026
 
LIBOR plus 2.25%