Solid fourth quarter leads to year-over-year
growth and strong momentum headed into 2018
- Net sales for 2017 of $164 million, up
from $160 million in 2016
- GAAP net income of $23 million for 2017
compared to a GAAP net loss of $112 million for 2016
- 2017 EBITDA[1] of $99 million,
including $25 million from tax-related benefits, compared to $33
million of EBITDA in 2016
- Net sales for the fourth quarter of
2017 of $54 million, versus $52 million for the fourth quarter of
2016
- GAAP net income of $23 million for the
fourth quarter of 2017 compared to a GAAP net loss of $69 million
in the fourth quarter of 2016; with 2017 results benefitting from
the new U.S. tax laws
- Fourth quarter 2017 EBITDA[1] of $50
million, including $24 million from tax-related benefits, compared
to a negative $4 million in the same period last year
- $39 million of cash generated from
operations in 2017 compared to $30 million in 2016
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, 2016 ASSETS 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,
2016
GAAP 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/
AgroFresh Solutions, Inc.Katherine Harper, CFOinvestorrelations@AgroFresh.com
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