ROHSTOFF INTERNATIONAL

12:30 | 14.03.2018
AgroFresh Solutions Reports Preliminary Results for Fourth Quarter and Full Year 2017

AgroFresh Solutions, Inc. (“AgroFresh” or the “Company”) (NASDAQ: AGFS),
a global leader in produce freshness solutions, announced preliminary
unaudited financial results for the fourth quarter and full year ended
December 31, 2017.

Jordi Ferre, Chief Executive Officer, commented, “I am pleased to report
a solid finish to 2017 and strong momentum as we enter a new growth
phase for AgroFresh in 2018. Our core business is healthy. The enhanced
overall service offering of our SmartFresh™ Quality System has enabled
us to provide our customers with superior product performance, increase
penetration into other crops beyond apples and diversify our revenue
base. Harvista continues to grow at double-digit rates, and RipeLock is
starting to make inroads with large retailers. In the fourth quarter of
2017, we announced the strategic acquisition of Tecnidex Fruit
Protection S.A.U., a global leader in the citrus market. As a result of
the diversification we have achieved through the Tecnidex acquisition,
our increased penetration into new crops, and the success of our
SmartFresh™ Quality System, we believe our franchise has never been
stronger or better prepared to thrive in a competitive market. In
addition, we made a strategic investment in Food Freshness Technologies
(“FFT”), which provides us with access to complementary technology that
we believe will help us expand into new crops such as berries and
avocados, as well as connect with FFT’s roster of leading retailers.

“This is the beginning of what we expect to be a period of renewed
growth at AgroFresh, both organically and through acquisition. Our goal
is to significantly grow our share of the highly-fragmented post-harvest
food preservation and waste reduction market and introduce new solutions
and technologies that can effectively expand the addressable market.

“We believe that we are well-positioned to achieve this objective, with
a core business that generates strong cash flow, a virtually
unparalleled IP portfolio, over 20 years of institutional R & D
knowledge, and 3,000 direct customers, all of which provide us unique
competitive advantages to grow in each stage of the food supply chain.
In 2018, we are setting out on an ambitious plan to grow our revenues to
as much as $500 million in the next five years as we develop a track
record of organic growth and acquisitions. And, our success in 2017
illustrates the strength and long-term potential of the AgroFresh
franchise to achieve this goal.”
Financial Highlights for the Fourth Quarter and
Full Year 2017
Net sales for the fourth quarter of 2017 were $54 million, up from $52
million in the fourth quarter of 2016 primarily due to the contribution
of Tecnidex, acquired in December 2017. Net sales for the full year 2017
were $164 million, up from $160 million in 2016, driven by the
contribution of Tecnidex and increased sales of Harvista.

Operating margins were 79 percent in the fourth quarter of 2017 compared
to 78 percent in the fourth quarter of 2016. Operating margins for full
year 2017 were 80 percent compared to 81 percent in 2016, excluding the
impact of inventory step-up amortization in the first half of 2016. The
full year 2017 margins reflect the impact of product mix.

Research and development costs of $4 million in the fourth quarter of
2017 were flat compared to the fourth quarter of 2016. Selling, general
and administrative expenses were $18 million in the quarter, up from $13
million a year ago, primarily due to costs associated with the
acquisition of Tecnidex, an increase in incentive compensation, along
with litigation and SAP implementation related costs.

Interest expense for the fourth quarter of 2017 of $8 million was down
$6 million from the fourth quarter of 2016, driven by lower accretion of
contingent consideration on the Company’s Tax Receivables Agreement with
The Dow Chemical Company (“Dow”) associated with the divestiture of the
AgroFresh business by Dow. Cash interest expense in the fourth quarter
of 2017 was up slightly from the same period a year ago due to higher
interest rates. AgroFresh hedged the majority of its variable rate debt
in the fourth quarter, which we expect will mitigate future exposure to
rising interest rates.
Balance Sheet and Cash Flow
The Company continues to generate strong cash flow, with cash from
operations of $39 million in 2017 versus $30 million of cash generated
by operations in 2016. As of December 31, 2017, the company had cash on
hand of $64 million.

Katherine Harper, CFO, said, “In fiscal 2017, we grew revenues for the
first time since 2014, while maintaining our strong margins and
generating attractive cash flow. The integration of Tecnidex is going
very well, and we expect Tecnidex to grow and create synergies,
especially in strengthening our SmartFreshtm Quality System
fungicide program that started in 2017 with ActiMist. Costs remain a
focus, although a majority of the variance from our expectations this
year was due to unusual items, primarily legal and consulting expenses
associated with the Tecnidex acquisition and other investments and
transactions in 2017. And, despite using $20 million of cash in the
Tecnidex acquisition and $10 million for the FFT investment, we still
ended the year with $64 million of cash, illustrating the significant
cash-flow generation capability of our asset-light model. The evolution
of new technologies and the rising cost of food waste is creating a
growing demand for new solutions to address the challenge of
post-harvest food preservation. Our long history of delivering
cost-effective solutions that help get more food from the farm to the
table puts us in a unique position to capitalize on the need for
creative solutions to more efficiently feed the world.”
Conference Call
The Company will conduct a conference call to discuss its fourth quarter
and full year 2017 results at 8:30 a.m. Eastern Time on March 14, 2018.
To access the call, please dial 1-877-883-0383 from
the U.S. or 1-412-902-6506 from
outside the U.S. The conference call I.D. number is 8314389. The call
will also be available as a live webcast with an accompanying slide
presentation, which will be accessible via the “Events” and
“Presentations” pages of the Investor Relations section of the Company’s
website at www.agrofresh.com.
All participants should call or access the website approximately 10
minutes before the conference call begins.

A telephone replay of the conference call will be available by dialing 1-877-344-7529
(US) or 412-317-0088 (International)
until Wednesday, March 28, 2018. The replay I.D. number is 10117161.
Non-GAAP Financial Measures
This press release contains the non-GAAP financial measure EBITDA. The
Company believes this non-GAAP financial measure provides meaningful
supplemental information as it is used by the Company’s management to
evaluate the Company’s performance. Management believes that this
measure enhances a reader’s understanding of the financial performance
of the Company, is more indicative of operating performance of the
Company, and facilitates a better comparison between fiscal periods, as
the non-GAAP measure excludes items that are not considered core to the
Company’s operations.

The Company does not intend for the non-GAAP financial measure contained
in this release to be a substitute for any GAAP financial information.
Readers of this press release should use this non-GAAP financial measure
only in conjunction with the comparable GAAP financial measure.
Reconciliations of the non-GAAP financial measure EBITDA to the most
comparable GAAP measure are provided in the table at the end of this
press release.
About AgroFresh
AgroFresh Solutions, Inc. (NASDAQ: AGFS) is a global leader in
delivering innovative food preservation and waste reduction solutions
for fresh produce. The company is empowering the food industry with
Smarter Freshness™, a new range of integrated solutions designed to help
growers, packers and retailers improve produce freshness and quality,
reducing waste. AgroFresh’s solutions range from pre-harvest with
HarvistaTM and LandSpringTM to its marquee
SmartFresh QualityTM System, which includes SmartFreshTM,
AdvanStoreTM and ActiMistTM, working together to
maintain the quality of stored produce. AgroFresh has a controlling
interest in Tecnidex, a leading provider of post-harvest fungicides,
waxes and biocides for the citrus market. Additionally, the company’s
initial retail solution, RipeLockTM, optimizes banana
ripening for the benefit of retailers and consumers. AgroFresh has key
products registered in over 45 countries, with approximately 3,000
direct customers and services over 25,000 storage rooms globally. For
more information, please visit www.agrofresh.com
(1) EBITDA is a non-GAAP financial measure. Please see the
information under “Non-GAAP Financial Measures” below for a description
of EBITDA and the tables at the end of this press release for a
reconciliation of Non-GAAP financial measures to GAAP results.
Forward-Looking Statements
In addition to historical information, this release may contain
“forward-looking statements” within the meaning of the “safe harbor”
provisions of the United States Private Securities Litigation Reform Act
of 1995. All statements, other than statements of historical facts,
included in this release that address activities, events or developments
that the Company expects or anticipates will or may occur in the future
are forward-looking statements and are identified with, but not limited
to, words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”,
“outlook”, and “project” and other similar expressions (or the negative
versions of such words or expressions). Forward-looking statements
include, without limitation, information concerning the Company’s
possible or assumed future results of operations (including the results
of operations of Tecnidex), including all statements regarding financial
guidance, anticipated future growth, business strategies, competitive
position, market acceptance of new products, anticipated benefits of
acquisitions and investments, industry environment, potential growth
opportunities and the effects of regulation. These statements are based
on management’s current expectations and beliefs, as well as a number of
assumptions concerning future events. Such forward-looking statements
are subject to known and unknown risks, uncertainties, assumptions and
other important factors, many of which are outside the Company’s
management’s control that could cause actual results to differ
materially from the results discussed in the forward-looking statements.
These risks include, without limitation, the risk of increased
competition; the ability of the business to grow and manage growth
profitably; costs related to operating AgroFresh as a stand-alone public
company; changes in applicable laws or regulations, and the possibility
that the Company may be adversely affected by other economic, business,
and/or competitive factors. Additional risks and uncertainties are
identified and discussed in the Company’s filings with the SEC, which
are available at the SEC’s website at www.sec.gov.

 

AgroFresh Solutions, Inc.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands, except share and per share data)

 

Successor
 

 
December 31, 2017
 
December 31, 2016ASSETS

 

Current Assets:

Cash and cash equivalents

$

64,533

$

77,312

Accounts receivable, net of allowance for doubtful accounts of
$1,550 and 1,242, respectively

71,286

63,675

Inventories

24,109

15,467

Other current assets

 

21,759

 

 

14,047

 

Total current assets

181,687

170,501

Property and equipment, net

12,200

8,048

Goodwill

9,402

Intangible assets, net

757,882

776,584

Deferred income tax assets

8,198

8,459

Other assets

 

16,747

 

 

2,252

 

TOTAL ASSETS

 

$

986,116

 

 

$

965,844

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

17,866

$

12,133

Current portion of long-term debt

7,926

15,250

Income taxes payable

8,208

3,121

Accrued expenses and other current liabilities

 

65,810

 

 

66,366

 

Total current liabilities

99,810

96,870

Long-term debt

402,868

392,996

Other noncurrent liabilities

36,228

140,833

Deferred income tax liabilities

 

31,130

 

 

 

Total liabilities

570,036

630,699

 

Commitments and Contingencies (Note 18)

Stockholders’ equity:

Common stock, par value $0.0001; 400,000,000 shares authorized,
50,698,587 and 50,698,587 shares issued and 51,002,234 and
50,037,206 outstanding at December 31, 2017 and December 31, 2016,
respectively

5

5

Preferred stock; par value $0.0001, 1 share authorized and
outstanding at December 31, 2017 and December 31, 2016

Treasury stock; par value $0.0001, 661,381 shares at December 31,
2017 and December 31, 2016, respectively

(3,885

)

(3,885

)

Additional paid-in capital

533,015

475,598

Accumulated deficit

(108,638

)

(132,200

)

Accumulated other comprehensive loss

 

(12,769

)

 

(4,373

)

Total AgroFresh stockholders’ equity

407,728

335,145

Noncontrolling Interest

 

8,352

 

 

 

Total stockholders’ equity

 

416,080

 

 

335,145

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

986,116

 

 

$

965,844

 

 

 

 

 

AgroFresh Solutions, Inc.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)(Unaudited)(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 
For the ThreeMonths EndedDecember 31,2017
 
For the ThreeMonths EndedDecember 31,2016
 
Year EndedDecember 31, 2017
 
Year EndedDecember 31, 2016
Net sales

$

54,135

$

51,673

$

164,026

$

159,669

Cost of sales (excluding amortization, shown separately below)

 

11,290

 

 

11,791

 

 

32,655

 

 

59,977

 

Gross profit

42,845

39,882

131,371

99,692

Research and development expenses

3,676

3,547

13,779

14,767

Selling, general, and administrative expenses

17,519

12,418

61,847

61,892

Amortization of intangibles

10,575

10,449

41,910

40,327

Impairment of long lived assets

10,795

10,795

Goodwill impairment

62,373

62,373

Change in fair value of contingent consideration

 

(24,528

)

 

(48,639

)

 

(26,948

)

 

(53,608

)

Operating income (loss)

35,603

(11,061

)

40,783

(36,854

)

Other (expense) income

651

(189

)

611

(173

)

Loss on foreign currency exchange

2,760

(3,956

)

13,344

(3,274

)

Interest expense, net

 

(8,260

)

 

(14,389

)

 

(35,755

)

 

(58,239

)

Income (loss) before income taxes

30,754

(29,595

)

18,983

(98,540

)

Provision (benefit) for income taxes

 

7,316

 

 

39,259

 

 

(4,579

)

 

13,020

 

Net income (loss) including noncontrolling interests

$

23,438

$

(68,854

)

$

23,562

$

(111,560

)

Less: Net income attributable to noncontrolling interests

 

(91

)

 

 

 

(91

)

 

 

Net income (loss) attributable to AgroFresh Solutions, Inc

 

$

23,347

 

 

$

(68,854

)

 

$

23,471

 

 

$

(111,560

)

 

Income (loss) per share:

Basic

$

0.47

$

(1.40

)

$

0.47

$

(2.26

)

Diluted

$

0.47

$

(1.40

)

$

0.47

$

(2.26

)

Weighted average shares outstanding:

Basic

49,679,292

49,233,468

49,808,600

49,462,205

Diluted

50,137,694

49,233,468

50,191,303

49,462,205

 

AgroFresh Solutions, Inc.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)

 

 

 

 

 
Year EndedDecember 31, 2017
 
Year EndedDecember 31, 2016
 
Cash flows from operating activities:

 

Net (loss) income

$

23,562

$

(111,560

)

Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:

Depreciation and amortization

44,356

42,850

Provision for bad debts

308

1,052

Stock based compensation for equity classified awards

1,886

3,250

Pension expense

(153

)

188

Amortization of inventory fair value adjustment

30,377

Amortization of deferred financing cost

2,368

2,275

Accretion of contingent consideration

8,433

30,197

Decrease in fair value of contingent consideration

(24,924

)

(53,608

)

Deferred income taxes

(12,692

)

13,792

Impairment of long-lived assets

10,795

Goodwill impairment

62,373

Loss (gain) on sales of property

81

22

Other

98

32

Changes in operating assets and liabilities:

Accounts receivable

6,204

(4,101

)

Inventories

(2,496

)

(764

)

Prepaid expenses and other current assets

(8,251

)

(7,788

)

Accounts payable

(11,037

)

6,357

Accrued expenses and other liabilities

18,432

2,341

Income taxes payable

5,121

(376

)

Other assets and liabilities

 

(12,164

)

 

2,780

 

Net cash provided by operating activities

 

39,132

 

 

30,484

 
Cash flows from investing activities:

Cash paid for property and equipment

(7,725

)

(6,004

)

Proceeds from sale of property

99

76

Acquisition of business, net of cash acquired

(18,192

)

Other investments

 

(11,132

)

 

(600

)

Net cash used in investing activities

 

(36,950

)

 

(6,528

)
Cash flows from financing activities:

Payment of Dow liabilities settlement

(13,743

)

Repayment of long term debt

(4,015

)

(4,250

)

Repurchase of stock for treasury

(1,488

)

Payment of withholding taxes related to stock-based compensation to
employees

 

 

 

(331

)

Net cash used in by financing activities

 

(17,758

)

 

(6,069

)

Effect of exchange rate changes on cash and cash equivalents

 

2,797

 

 

1,660

 

Net (decrease) increase in cash and cash equivalents

(12,779

)

19,547

Cash and cash equivalents, beginning of period

 

77,312

 

 

57,765

 

Cash and cash equivalents, end of period

 

$

64,533

 

 

$

77,312

 

 
Supplemental disclosures of cash flow information:

Cash paid for:

Interest

$

18,884

$

24,560

Income taxes

$

3,257

3095

Supplemental schedule of non-cash investing and financing
activities:

Acquisition-related contingent consideration

$

691

$

Settlement of Dow liabilities not resulting from a cash payment

$

55,089

$

GAAP to Non-GAAP Reconciliations
The following is a reconciliation between the non-GAAP financial measure
of EBITDA to its most directly comparable GAAP financial measure, net
income (loss):

 

 

 

 

 

 

 

 

 
(in thousands)
 
Three Months EndedDecember 31, 2017
 
Three Months EndedDecember 31, 2016

Year EndedDecember 31, 2017
 
Year EndedDecember 31, 2016GAAP Net (loss) income

$

23,438

 

$

(68,854

)

$

23,562

 

$

(111,560

)

Provision (benefit) for income taxes

7,316

39,259

(4,579

)

13,020

Amortization of inventory step-up(1)

30,377

Interest expense(2)

8,260

14,389

35,755

58,239

Depreciation and amortization

 

11,254

 

 

11,073

 

44,356

 

 

42,850

 
Non-GAAP adjusted EBITDA
 

$

50,268

 

 

$

(4,133

)

$

99,094

 

 

$

32,926

 

______________________________________________________

(1)

 

The amortization of inventory step-up in 2016 was related to the
acquisition of AgroFresh was charged to income based on the pace of
inventory usage.

(2)

Interest on the term loan and accretion for debt discounts, debt
issuance costs and contingent consideration.

View source version on businesswire.com: http://www.businesswire.com/news/home/20180314005456/en/


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