Progress across Strategic Initiatives
Generates Significant Increases in Year-to-Date Net Income and Cash
from Operations
- Net sales for the first nine months of
2017 of $110 million, up $2 million from the same period last
year
- Net income of $0.1 million for the
first nine months of 2017 compared to a net loss of $43 million for
the first nine months of 2016
- First nine months of 2017 EBITDA[1] of
$49 million compared to $37 million in the first nine months of
2016
- Net sales for the third quarter of $61
million, flat versus a year ago during the same period. Lower
SmartFresh revenues in North America were driven by a later than
normal North American apple harvest, and were offset by an earlier
European crop
- Net income of $10 million for the third
quarter of 2017 compared to $7 million in the third quarter of last
year
- Third quarter 2017 EBITDA[1] of $33
million compared to $37 million in the same period last year
- $15 million of cash generated from
operations for the first nine months of 2017 compared to the use of
$5 million in the first nine months of 2016
- Cash of $75 million at September 30,
2017 up $31 million from September 30, 2016
AgroFresh Solutions, Inc. ("AgroFresh" or the "Company")
(NASDAQ: AGFS), a global leader in produce freshness solutions,
announced financial results for the third quarter and first nine
months of fiscal 2017, ended September 30, 2017.
Jordi Ferre, Chief Executive Officer, commented, "Results
throughout fiscal 2017 have consistently demonstrated the strength
of the AgroFresh franchise. Over the past three months, this has
enabled us to adapt to volatility in both the timing of the harvest
and the size of the apple crop across the Northern Hemisphere to
drive improvements across our profitability measures. Having
enhanced our overall service offering, penetrated new crops and
expanded our global penetration of core crops, we are accomplishing
our goal of stabilizing SmartFresh™ performance this year as the
key to a solid foundation that will support our strategic growth
initiatives. Our growth platforms continue to gain traction. The
ongoing success of Harvista, the addition of a new signature
RipeLock client in the retail food distribution market, along with
other promising, ongoing RipeLock retail trials, and further
progress in our crop diversification efforts are all extremely
encouraging. Efficiency continues to improve, with a further
reduction in overhead this quarter. And, with the strong cash flow
generated over the first three quarters of the year, we are
building the resources available to fund our growth strategy, both
organically as well as through acquisitions.
I am extremely proud of the success we have achieved in reducing
our sensitivity to end market volatility and generating performance
that should deliver the relatively stable results we expect this
year.”
Financial Highlights for the Third
Quarter and First Nine Months of 2017
Net sales for the third quarter of 2017 were $61 million, flat
versus the third quarter of 2016. Revenues in the quarter reflect a
later crop harvest in North America, offset by an earlier harvest
in Europe, where the total 2017 harvest is expected to be down
double digits as a result of a historic spring frost. Net sales for
the first nine months of 2017 were $110 million, up from $108
million in the first nine months of 2016, driven by increased sales
of Harvista.
Operating margins were 81 percent in the third quarter of 2017
compared to 85 percent in the third quarter of 2016. Operating
margins for the first nine month of 2017 were 81 percent compared
to 83 percent in the same period last year, when excluding the
impact of inventory step-up amortization in the first half of 2016.
Both the third quarter and year-to-date 2017 margins reflect the
impact of a shift in product mix.
Research and development costs of $3 million in the third
quarter of 2017 were up slightly compared to the third quarter of
2016 due to timing. Selling, general and administrative expenses
were $14 million, down approximately $1 million from a year ago,
primarily due to a decrease in administrative expenses. Total
operating costs in the third quarter of 2017 reflect approximately
$2 million of temporary cost increases, primarily legal and M&A
consulting.
Interest expense for the current quarter of $9 million was down
$6 million from the third quarter of 2016, driven by lower
accretion of contingent consideration. Cash interest expense in the
third quarter of 2017 was up slightly from the same period a year
ago driven by higher interest rates.
Balance Sheet and Cash
Flow
The Company continues to generate strong cash flow, with cash
from operations of $15 million in the first nine months of 2017
versus a $5 million use of cash in the same period of the prior
year. As of September 30, 2017, the company had cash on hand of $75
million.
Katherine Harper, CFO, said, “As a result of the tremendous
progress achieved stabilizing operations and strengthening our
organization, we have increased our cash balances by $31 million
over the past twelve months, representative of our underlying
fundamental earnings power. Revenues remain on track and margins
are little changed, reflecting the unmatched value proposition our
customers see in our products and services. And, we continue to
improve operating leverage, with costs down compared to a year ago.
We expect further progress in this area. We are in a very strong
financial position with significant cash balances, and consistently
strong cash flow. The AgroFresh franchise continues to grow as we
build value for our shareholders.”
Conference Call
The Company will conduct a conference call to discuss its third
quarter and first nine months of 2017 results at 8:30
a.m. Eastern Time on November 8, 2017. To access the
call, please dial 877-883-0383 from the U.S.
or 412-902-6506 from outside the U.S. The conference call
I.D. number is 0398493. 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 877-344-7529 (US) or 412-317-0088
(International) until Wednesday, November 22, 2017. The replay
I.D. number is 10113589.
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. (AGFS) is a global industry leader in
providing innovative data-driven specialty solutions aimed at
enabling growers and packers of fresh produce to preserve and
enhance the freshness, quality and value of fresh produce and to
maximize the percentage of produce supplied to the market relative
to the amount of produce grown. Its flagship product is the
SmartFresh™ Quality System, a freshness protection technology
proven to maintain firmness, texture and appearance of fruits
during storage and transport. SmartFresh is currently
commercialized in over 40 countries worldwide. Additionally the
company has a number of different solutions and application
technologies that have either been launched (Harvista™, RipeLock™,
LandSpring™) or will be launched in the future that will extend its
footprint to other crops and steps of the global produce supply
chain. 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 all statements regarding financial guidance, anticipated
future growth, business strategies, competitive position, 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)
September 30, December 31,
2017 2016 ASSETS Current Assets: Cash
and cash equivalents $ 75,418 $ 77,312 Accounts receivable, net of
allowance for doubtful accounts of $1,502 and $1,242, respectively
78,787 63,675 Inventories 16,952 15,467 Other current assets
14,319 14,047 Total current assets 185,476
170,501 Property and equipment, net 9,299 8,048 Intangible assets,
net 748,793 776,584 Deferred income tax assets 7,694 8,459 Other
assets 2,043 2,252 TOTAL ASSETS
$ 953,305 $ 965,844
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $
14,438 $ 12,133 Current portion of long-term debt 5,313 15,250
Income taxes payable 6,017 3,121 Accrued expenses and other current
liabilities 48,094 66,366 Total current
liabilities 73,862 96,870 Long-term debt 402,333 392,996 Other
noncurrent liabilities 70,397 140,833 Deferred income tax
liabilities 22,790 — Total liabilities
569,382 630,699
Commitments and contingencies
Stockholders’ equity: Common stock, par value $0.0001; 400,000,000
shares authorized, 51,001,395 and 50,698,587 shares issued and
50,340,014 and 50,037,206 shares outstanding at September 30, 2017
and December 31, 2016, respectively 5 5 Preferred stock; par value
$0.0001, 1 share authorized and outstanding at September 30, 2017
and December 31, 2016 — — Treasury stock; par value $0.0001,
661,381 shares at September 30, 2017 and December 31, 2016 (3,885 )
(3,885 ) Additional paid-in capital 532,337 475,598 Accumulated
deficit (132,076 ) (132,200 ) Accumulated other comprehensive loss
(12,458 ) (4,373 ) Total stockholders' equity
383,923 335,145 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 953,305 $ 965,844
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(In thousands, except share and per share
data)
Three Months EndedSeptember 30,
2017 Three Months EndedSeptember 30, 2016
Nine Months EndedSeptember 30, 2017
Nine Months EndedSeptember 30, 2016 Net sales $
60,772 $ 61,200 $ 109,891 $ 107,996 Cost of sales (excluding
amortization, shown separately below) 11,620
8,905 21,365 48,558 Gross profit
49,152 52,295 88,526 59,438 Research and development expenses 3,071
2,983 10,103 11,220 Selling, general, and administrative expenses
14,462 15,173 44,328 49,385 Amortization of intangibles 10,445
10,080 31,335 29,878 Change in fair value of contingent
consideration (1,424 ) (1,569 ) (2,420 )
(4,969 ) Operating income (loss) 22,598 25,628 5,180 (26,076
) Other (expense) income (295 ) (38 ) (40 ) 16 (Loss) gain on
foreign currency exchange (487 ) 924 10,584 682 Interest expense,
net (8,638 ) (14,526 ) (27,495 )
(43,850 ) Income (loss) before income taxes 13,178 11,988 (11,771 )
(69,228 ) Income tax expense (benefit) 3,632
4,676 (11,895 ) (26,239 ) Net income (loss)
$ 9,546 $ 7,312 $ 124
$ (42,989 ) Net income (loss) per share: Basic $ 0.19
$ 0.15 $ — $ (0.87 ) Diluted $ 0.19 $ 0.15 $ — $ (0.87 ) Weighted
average shares outstanding: Basic 49,676,923 49,567,735 49,852,337
49,385,733 Diluted 50,169,434 49,627,800 50,134,591 49,385,733
AgroFresh Solutions, Inc. CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in thousands) Nine Months EndedSeptember
30, 2017 Nine Months EndedSeptember 30,
2016 Cash flows from operating activities: Net income
(loss) $ 124 $ (42,989 ) Adjustments to reconcile net loss to net
cash provided by (used in) operating activities: Depreciation and
amortization 33,102 31,777 Provision for bad debts 260 —
Stock-based compensation for equity classified awards 1,318 2,901
Pension expense 227 — Amortization of inventory fair value
adjustment — 30,377 Amortization of deferred financing costs 1,764
1,696 Accretion of contingent consideration 7,297 22,931 Decrease
in fair value of contingent consideration (2,420 ) (4,969 )
Deferred income taxes (16,445 ) (24,910 ) Loss on sales of property
81 21 Other 93 850 Changes in operating assets and liabilities:
Accounts receivable (8,699 ) (8,520 ) Inventories (1,363 ) (2,191 )
Prepaid expenses and other current assets (321 ) (19,627 ) Accounts
payable (9,486 ) 341 Accrued expenses and other liabilities 7,691
5,272 Income taxes payable 3,050 1,206 Other assets and liabilities
(1,354 ) 711 Net cash provided by (used in)
operating activities 14,919 (5,123 )
Cash
flows from investing activities: Cash paid for property and
equipment (5,281 ) (5,449 ) Proceeds from sale of property 99 8
Other investments (1,050 ) — Net cash used in
investing activities (6,232 ) (5,441 )
Cash flows
from financing activities: Payment of Dow liabilities
settlement (10,000 ) — Repayment of long term debt (2,125 ) (3,188
) Repurchase of stock for treasury — (1,488 )
Net cash used in financing activities (12,125 )
(4,676 ) Effect of exchange rate changes on cash and cash
equivalents 1,544 2,152 Net decrease in
cash and cash equivalents (1,894 ) (13,088 ) Cash and cash
equivalents, beginning of period 77,312 57,765
Cash and cash equivalents, end of period $ 75,418
$ 44,677
Supplemental disclosures of
cash flow information: Cash paid for: Cash paid for
interest $ 12,309 $ 18,460 Cash paid for income taxes $ 1,811 $
2,487
Supplemental schedule of non-cash investing and financing
activities: Accrued purchases of property and equipment $ 1,422
$ 35 Settlement of Dow liabilities not resulting from cash payment,
net of deferred income taxes $ 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 EndedSeptember 30, 2017 Three Months
EndedSeptember 30, 2016 Nine Months
EndedSeptember 30, 2017 Nine Months
EndedSeptember 30, 2016 GAAP net income (loss) $
9,546 $ 7,312 $ 124 $ (42,989 ) Income tax expense (benefit) 3,632
4,676 (11,895 ) (26,239 ) Amortization of inventory step-up(1) — —
— 30,377 Interest expense(2) 8,638 14,526 27,495 43,850
Depreciation and amortization 11,056 10,438
33,102 31,777
Non-GAAP
EBITDA $ 32,872 $ 36,952 $
48,826 $ 36,776
__________________________
(1) The amortization of inventory step-up 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/20171108005454/en/
AgroFresh Solutions, Inc.Katherine Harper, CFOinvestorrelations@AgroFresh.com
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