Element Solutions Inc (ESI) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Platform Specialty Products Corporation fourth-quarter and full- year 2014 results conference call.

(Operator Instructions)

As a reminder, today's call is being recorded. I would now turn the call over to Kelly Gawlik, Vice President at Weber Shandwick. Please go ahead.

Good morning. Please note that in accordance with Regulation FD or fair disclosure, we are webcasting this conference call. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Platform is strictly prohibited.

Before we begin, please take note of Platform's cautionary statement regarding forward-looking statements at the end of the earnings release issued earlier today. Some of the statements made during today's conference call will be considered forward-looking. All forward-looking statements are based on currently available information. Platform's actual results could differ materially from those predicted. However Platform undertakes no obligation to update any such statements whether as a result of new information, future events or otherwise. Please refer to Platform's SEC filings for a more detailed description of the risk factors that may affect Platform's results.

Please note Platform has posted supplemental financial data slides to its website at www.PlatformSpecialtyProducts.com. In accordance with Regulation G, Platform is providing reconciliation of certain non-GAAP to comparable GAAP financial measures in its earnings release, its current report on form 8-K relating to the earnings release and in the supplemental slides. The supplemental slides can be downloaded in the Investor Relations section on Platform's website under Events and Presentations.

Following Management's remarks, there will be time allotted for Q&A. Now I would like to turn the call over to Platform Specialty Products Corporation's CEO, Dan Leever. Dan, please go ahead.

Thanks, Kelly, and good morning everyone. Our fourth quarter was an exciting one in a very exciting year for Platform. We closed two significant acquisitions in the quarter, Agriphar in October and Chemtura in November, and began integrating them.

In October, we also announced another transaction, what was then the pending acquisition of Arysta Life Sciences. Through all this, our MacDermid business continued to perform remarkably well. We posted a record quarter and year for MacDermid in adjusted EBITDA and began to see a strong contribution from two of these three agricultural acquisitions.

For the combined entity in Q4, we grew revenues and adjusted EBITDA by approximately 47% over last year despite the major foreign exchange headwind. For the year, our currency growth was 13% and adjusted EBITDA growth was 18%.

In 2014, we generated recurring free cash flow of $148.2 million which represented a growth of $50.3 million or 51.4% over last year. Recurring free cash flow represented 70% of our adjusted EBITDA for the year.

Recurring free cash flow per share was $0.77. This per share calculation includes equity issued to help our acquisitions of Agriphar and Arysta, but does not include the full year contribution from CAS and Agriphar and includes no contribution from Arysta which we closed in February 2015.

Importantly, we added depth in the management and completed successful financing to support our acquisitions. I am pleased to be joined today on the call by, in addition to Frank Monteiro, our CFO, Wayne Hewett, the former CEO of Arysta and now Platform's Group President.

Wayne has a strong and relevant background in both agricultural chemicals and operating local businesses. He's at the helm of our integration efforts and will discuss our synergy realization plan on the phone today.

Wayne would not be here had we not called the Arysta transaction in mid February. The Arysta acquisition was by far the largest of the three transactions we announced last year.

In addition to the strong results and transformative acquisition, there are other important highlights to mention. We promoted Scott Benson to be President of MacDermid. Scott succeeds me after 25 years of leading MacDermid. Scott is a seasoned member of our MacDermid plan, and I can think of no better person to lead MacDermid as it enters this new phase.

We settled a long time litigation for $25 million payment, which we expect to -- sorry, we expect to receive the funds with a settlement of the settlement in early Q2. We also received an approximate $60 million judgment in a separate litigation with the potential for higher judgment in the future.

We continued to add depth of the corporate team and have added a Senior VP of Human Resources. Ben Foulk joins us from Boehringer Ingleheim. Ben has the critical task of helping us to identify, develop and retain talent as we continue our growth strategy.

As we say regularly, our best assets go home every night, and Ben has the important task of making sure we have the right people in the right roles to execute against our ambitious plans. With that, I will turn you over to Frank to walk you through the financial results in more detail.

Thank you, Dan. Good morning, everyone. We are pleased to report a record quarter and year-end for Platform Specialty Products.

Today I will be discussing our results for the quarter and the full year-to-date using numbers on an as-adjusted basis as we believe our recorded results do not fairly represent the true and ongoing operations of the Company as they include deal-related costs and purchase accounting adjustments associated with the acquisition strategy that was undertaken during calendar year 2014. We believe that our investors will find that our adjusted results will provide a cleaner picture of our underlying businesses that are within the growing portfolio of Platform.

The fourth quarter saw the debut of our newly formed AgroSolutions segment. Agriphar closed in October and was quickly followed by the Chemtura closing in early November.

The period saw only a partial contribution from the segment. The Agriphar operations are predominantly a northern hemisphere or what we call a European-based business, and Q4 represents the low point of their revenue cycle. The Chemtura business contributed profitably for the two month stub period, and we expect big things from them as we move forward.

For the quarter ended December 2014, total Platform reported revenue was $273.6 million versus $185.3 million in the prior year, an increase of $88.3 million or 47.7%. In terms of our reportable segment, performance materials revenue was $145.4 million versus $145 million, and graphic solutions contributed revenues of $40.2 million versus $40.3 million last year.

The AgroSolutions segment reported revenue of $88 million. The top line growth from our MacDermid operations which includes performance materials and graphic solutions was moderated in the quarter due to the strengthening US dollar, which represented approximately $5 million of headwind to the top line.

The performance material operational gains that we've been experiencing for the first nine months of 2014 continued into Q4, and we finished the year on a high note. Even with the traditional holiday season that occurs in December, demand for our core industrial solutions product offerings in North America and Europe, which are focused in the automotive related end market, and demand for our electronics solutions product offerings in Asia, which are focused towards the Smartphone and tablet markets were very strong. The offshore solutions product offerings, which focus on deep sea oil and gas operations, finished 2014 with record revenues in Q4.

Platform adjusted EBITDA for Q4 2014 was $65.7 million, which is up $21.2 million or 47.6% from the $45.5 million we recorded in the period last year. MacDermid adjusted EBITDA was $49.6 million, up $5.1 million or 11.5% over the prior period.

In terms of our segment, performance materials contributed $37.3 million versus $35.7 million last year, and our graphics solutions segment contributed $12.3 million versus the $8.8 million last year. Our newly formed AgroSolutions business reported adjusted EBITDA of $16 million in the quarter.

The MacDermid business unit adjusted EBITDA benefited strongly from product mix in the quarter. As you can see from the above, the EBITDA margins were enhanced by sales within our more profitable product lines of performance materials and graphic solutions. The Company experienced continued headwinds in the graphic solutions segment on a year-over-year comparison with its flexographic newspaper plate product line, but this revenue was replaced with more profitable offerings from the packaging products that we do offer.

Similar mix shifts occurred within the performance materials segment, which on a combined basis further enhanced the Company's gross profit margin and dropped directly to the EBITDA line. This momentum was the driver in the MacDermid business posting a record quarterly margin at the EBITDA line of 26.7% without adjusting for any currency.

For the full year 2014, Platform revenue was $843.2 million, up $97.2 million or 13% from the $746 million we recorded in 2013. Of this amount, the MacDermid businesses were $755.2 million, which were up $9.2 million or 1.2%. In segment terms, performance materials 2014 revenue was $589.3 million versus the $574.5 million in the prior period with graphic solutions revenue coming in at $165.9 million versus $171.5 million, and of course AgroSolutions, which is was only in for the quarter contributing the $88 million.

Top line growth from our MacDermid operations, which again is the performance materials and graphic solutions segment, was moderated in the year by the strengthening US dollar which represented an approximately $11.9 million of headwind, $5 million of which did happen in Q4. Platform adjusted EBITDA for 2014 was $212.2 million, which is up $32.1 million or 17.8% over the $180.1 million we reported in 2013. The MacDermid business contributed $196.2 million of that, which is up $16.1 million or 8.9% over the $180.1 million we reported last year.

In segment terms, performance materials adjusted EBITDA was $148.7 million versus $136.6 million. Graphic solutions adjusted EBITDA was $47.5 million versus $43.5 million, and of course, the AgroSolutions business which was only in for the quarter was $16 million. Adjusted EBITDA margin for the MacDermid business was 26%, a record for the business, and for the combined entity this year, Platform's adjusted EBITDA margin was 25.2%.

Our adjusted EBITDA for 2014 included approximately $3.3 million of infrastructure expenses related to our growth plans that we incurred prior to our acquisition closing. We believe that our record margins despite this overhead are a testament to the strong momentum in our underlying business.

From a balance sheet perspective in Q4, we raised $1.05 billion in new equity to fund the closing of CAS and to raise additional capital which funded a portion of the Arysta transaction. This was in the form of a $650 million pipe offering in October and a more traditional $400 million registered equity offering in the month of November.

Platform also completed two bank debt offerings, one for $300 million which occurred in October and another for $405 million in November, and we ended the year with $1.41 billion of gross debt and just under $1 billion of cash. In early January, Platform returned to the debt and capital markets to finance our acquisition of Arysta where we raised $2.1 billion between bank loans and bonds in the form of $1.1 billion US dollar bonds and EUR350 million worth of Euro bonds, $500 million US to an incremental term loan and an additional EUR83 million and [EUR]150 million of bank debt financing through our existing credit facility.

At December 31, 2014, pro forma for the closing of Arysta, we would have had $3.4 billion of net debt outstanding. Although our current leverage multiple is outside of our target, we have communicated previously of 4.5 times net debt to trailing EBITDA, we remain committed to this target. Our existing business operations can comfortably sustain the current debt levels, but our goal of course is to return inside of 4.5 in the near term.

I would now like to turn you over to Wayne Hewett, Platform's President, to discuss our new AgroSolutions segment in more detail. Wayne?

Thank you, Frank and good morning, everyone. I'm very pleased to be here as part of the Platform team, where a strategy of building a portfolio of excellent asset-light, high touch-businesses focused on niche markets is one that resonates with me deeply.

The Ag businesses that we acquired in 2014 and early 2015 fit that model, and together with the new Ag leadership team, I am thrilled by the opportunities in front of us. The results of our Ag business in 2014 speak to its niche specialty nature.

Despite a difficult year for Ag businesses in general, each of the three Ag assets Platforms acquired achieved record adjusted EBITDA numbers with CAS generating $103 million, Agriphar generating $44 million and Arysta generating $299 million for a combined total of $446 million in adjusted EBITDA. This represents growth of 2.4% over 2013 for these three businesses, and when you adjust for currency effect, the growth rate over 2013 was 6.9%.

Foreign exchange continues to be a headwind in 2015. Over the first two months of 2015, our global currency basket weakened approximately 10% against the dollar. We have taken further price actions in local markets around the world to preserve gross margins.

From a growth perspective, though commodity price pressure continues to be a headwind, we are expecting constant currency growth from our Ag portfolio. Our concentration niche categories, specialty factors like bio solutions and heat treatment and high growth geographies helped insulate us from the broader weakness in the market.

If there's one thing I've learned about the agrichemical market over the last five years, is that you will never have perfect conditions, but on the flip side, you will not have adverse conditions everywhere. Overall, the agrichemical market is off to a start more consistent with a positive end of the spectrum of conditions. However, we do have some pockets of pressure around the world.

In our largest market, Latin America, we are currently having very good weather in Brazil, but the late start to their summer season due to last year's drought has reduced the overall size of the second harvest. This delay has contributed to high inventory levels, especially in corn and cotton crops where Arysta has not typically had large exposures. Mexico and Colombia, a couple of our other larger markets in Latin America, are both off to a good start for the year.

In North America, high channel inventories continue to put pressure in the market. Water concerns in California and a heavy, long lived Midwest winter will further contribute to this pressure, but we expect to have a normal spring for cereals as well as strong spring weed campaign to help offset and alleviate these challenges.

If we move on to Europe, Western Europe is having a repeat of the weather it enjoyed last year, and we have seen our business start out quite positively. In central and Eastern Europe, the season has started slightly earlier than usual, and we are well positioned to benefit from this. In the CIS countries, we are observing currency fluctuations carefully and are minimizing the impact through selective price increases and instant receivable conversions.

Sanctions between the EU and Russia are affecting fruit and vegetable production in Central Europe, and hence we are switching to different segments in crops. As you all know, we have a very significant concentration in Africa, and we've seen a very positive start in the African market. Overall, it is very early in the year, and there are no guarantees that this general positive start will carry through for the rest of the year, but it is certainly a good signal.

Lastly, a few comments on synergies and integration. We believe the opportunity to build a bigger, better Ag business by combining these three assets is extremely compelling. Their complementarity in terms of products and geographies has been referred to frequently and cannot be understated.

However, as Dan frequently says, collecting assets is not enough. We must make them better. We have communicated a plan to relate an estimated $65 million of synergies from the integration of these businesses by 2017.

In the months since we closed the Arysta transaction and were able to begin our deep dive in integration, we believe that we may exceed that number. We have already successfully taken $20 million of G&A costs out of CAS on an annualized basis. We are therefore increasing our three year G&A target to $40 million from $25 million where it has been previously.

We're keeping our other targets the same, $20 million from distribution and $20 million from other cost of goods sold. And now our revised estimated three year estimated target is now $80 million.

We will continue to analyze other opportunities and instinctively feel there may be additional opportunities to uncover. We look forward to updating you as our synergy work continues.

With that, I will turn it over to Dan for concluding remarks.

Thank you, Wayne. Our quarterly and annual results obviously represent a high watermark for the Company. These results testify to the quality and specialty nature of the underlying business and its management team.

While we anticipate foreign exchange will be a headwind to our reported earnings growth in 2015, we believe our underlying specialty niche markets remain healthy and that our constant currency results will demonstrate this. Similar of the business across MacDermid and the Agro portfolio had strong revenue months in January and signs point to continued strength in Q1.

However, foreign exchange is a real concern. As Wayne mentioned based on our currency basket, currency is about a 10% headwind right now. Based on our current outlook for Q1 on a constant currency basis, we would show growth of about 8.5%, but based on today's rates, that will translate reported dollars to a year-over-year down 2.5%.

Do note that the major currency devaluation against the dollar happened in the latter part of 2014, so our Q1 comps are the worst of the year. But this should dimensionalize what we are facing as the dollar continues to strengthen.

We have some hedges in place in the form of Euro dominated debt and are focusing on incrementally protecting our cash flow generation from currency swings in the form of hedges. Now that we have finally closed our three AgroSolutions acquisitions, we are starting to get a lot of questions about our future acquisition pipeline about what vertical might be next and what to expect in the next big deal.

When I answer these questions, I often say that in 2015, if we do a few smart deals and realize a modicum of synergies, we lose. But if we do more acquisitions or do no more acquisitions and beat our synergy target and demonstrate our ability to execute, we still win. This will dictate our priorities.

That having been said, we must be and we are by our very nature opportunistic. There are businesses out there that have no better long term only platform.

We cannot dictate the deal flow and will continue to evaluate opportunities that fit our criteria. We are very busy. We will only consider opportunities that fit that criteria.

In the meantime integration, Strategic Planning, tax optimization, cost control to ensure maximum cash flow generation will remain our primary focus. With a great year behind us, we are not resting at all. The team is focused on different paths to realizing significant accretion to our intrinsic value per share, and there will always be room for improvement.

I look forward to updating all of you on our progress on future calls. With that, we would be happy to take your questions. Operator?

(Operator Instructions)

Our first question is from Jon Tanwanteng of CJS Securities.

Good morning, gentlemen. Nice quarter, and thank you for taking my questions.

Thank you.

Can you talk a little bit more about the focus on acquisitions versus integration of what you have in hand right now? Is there a division of responsibility within the management team, or is everyone focused on integration?

Well, one of the things that we have done recently is we've internally announced an Office of the Chairman. And the Office of the Chairman will be made up of Martin Franklin, Wayne Hewett, and Dan Leever, myself.

And within that Office of the Chairman, there is going to be a primary focus, I guess I would call it, of each of us, but the ability to fill in for the other person depending on what the work load happens to be at the time. So, it's going to be a pretty fluid dynamic.

And within that, to make a short story long, Wayne has really the primary responsibility for the execution of the plan on a day-to-day basis. I have the primary responsibility really for the strategic side of the Business, and making sure that anything we do fits within the overall strategy that we've outlined in the past. And Martin's primary activity is really the firm architecture, number one, and the deal side.

So, all three of us are involved in the deal side; all three of us have some involvement in each of these different areas, but those are primary responsibilities. So, I would say there is a fairly good division of responsibilities.

And the primary hunter, if you will, [on the team] really is Martin. I try to be supportive. Ben Gliklich, who is here with us today, is also heavily involved on the deal side. But I can tell you that there's not a lot of grass growing under Martin's feet, relative to the deal pursual, or the hunt, if you will.

Great, that's helpful.

Can you talk a little bit more about the actual M&A environment in terms of valuations? What are you seeing out there, and would a rising interest rate impact your ability to pursuing the targets?

Well, we really believe that a rising interest rate will reduce multiples. And at the end of the day, I'm not sure it makes a lot of difference relative to the ability to do accretive deals. I think rising interest rates just mean that you pay less for deals.

For sure, it's a fairly frothy market, and I don't know that it's easy to execute deals at levels that we've indicated are our hurdle rates. But we've done it so far, and we have reason to believe we will be able to do it again.

We really -- you need to remember that have a pretty unique focus, and I don't know if there's anyone out there doing what we do, which is a hyper focus on high-cash-flow businesses. And as a result, we can afford to pay what appear to be, on the surface, high multiples. But when you look at the cash-flow generation, the cash-on-cash returns, after synergies particularly, it's very, very attractive. So, rising interest rate environment, we really believe it lowers multiples, and gives us the same opportunity.

Great, thanks, Dan.

And, Wayne, can you just give us a little bit more color on what gives you the confidence in growth forecast for the Ag business, ex-currency?

On an ex-currency basis, and I think that, as you saw by the comments that I just made, that all three businesses in a pretty tough environment were able to post record years in 2014, in spite of the currency headwind. I think it speaks to the underlying nature of our Business, in that we're very, very focused on niche crops and much more specialty crops as opposed to the [rural] crops, as well as we're very focused on high-growth markets where we actually have a chance to have a lot more differentiation and get a lot closer to our customers -- focus on customer solutions.

So, I think that's what you're seeing come through in results, is what we're seeing as we sit here today in Q1. And that's what gives us confidence for going forward in 2015.

Okay, thanks.

And finally, on the MacDermid side, you had a record quarter in terms of margins. Just wondering how sustainable that is, and what you're expecting from the oil services side of the business, as energy prices keep trending down here?

January and February for our offshore fluids business were record months. So, what we're seeing realtime is continuing robust business conditions.

You need to remember that 80% of the revenues in our offshore fluids business is in production, not drilling. So, 80% of those revenues are pretty well protected in producing wells. And there's been a lot of CapEx spend over the last five years, so that is really a growing business from that standpoint.

So far, we haven't seen a big decline in the drilling side. It would make sense if that moderates over time, for sure, but I think that we can fight our way through to decent results in that business.

But I think, what we're seeing in MacDermid is, again, record EBITDA as a percent of sales, continuing growth in the Asian electronics business at extremely attractive rates, and overall growth in the higher-margin parts of the business. I don't think we've seen the top of that peak, relative to our ability to generate margin at MacDermid. And they had an amazing year last year, I have to tell you. The fact that so much of our time was spent on other things last year, the management team there did an amazing job, and they had an extraordinary year last year, and I don't see any end in sight. They are forecasting a much better year this year; and so far, so good.

Currency is a problem though. And recognize that when we think about the business, we think about business on a constant-dollar basis because that's really what we can control at the end of the day. But there's definitely currency headwinds.

Got you. Thank you very much.

My pleasure.

Thank you. Our next question is from John Roberts of UBS.

Thank you. The $0.35 adjusted free cash flow in the quarter -- how do we annualize that? It was largely MacDermid, which is less seasonal than the Ag business?

So, one of the ways you should look at it is exactly how you just said it. So, the way the Ag cycle works, the peak of their working capital is going to be when they're building up now. So, it's going to be in the period February, March, April, and even part of May. And then, from there, you're going to see it start to come down.

So, based on that, and if you look at Arysta and Agriphar, it has, whether you look at the individual pieces or as a roll-up, we are expecting or one would expect that quarter one/quarter two would be a big outflow from working capital, which, of course, is going to drive that number one way. And then, once you start getting into the back half of Q2 going into Q3, you're going to start having that same receivable effect now coming in. So, you will see the cash flow per share start to pick up because the working capital will become an inflow.

The MacDermid business is pretty constant. You can always bank on quarter three being great from an electronics standpoint, and quarter one being good for this, and quarter two being good for that. The piece in the Ag cycle is a little bit different between the growing seasons of the two hemispheres.

But, again, back to the $0.35 was largely MacDermid. Can we multiply that times 4 to get a base, and build Ag on top of that?

No, you can't.

I didn't think so, but that's what I'm asking.

So, if you look at the supplemental charts that are out there, you will see if you go back and look at it, we have it by quarter. We can easily break it down by quarter for the various pieces.

So, on a full-year basis, we did $0.77 per share in the MacDermid business. And the breakdown of that -- give me one second here -- on a quarter I can tell you -- John's going to pull up that file. So, in 2014, that broke down as $0.14 in Q1; $0.17 in Q2; $0.10 in Q3; and $0.35 in Q4, is how the $0.77 broke down. So, I would use the same percentage breakdown, because all things being equal in the Business, it should be flowing through like that, if you take out deal-related costs.

But the big thing in Q4 was the working capital. Look at that working capital inflow. And that's because the inventory that we brought in from CAS and Agriphar -- a lot of that flushed out -- and Agriphar has their big cash collections in Q4. So, Q4 is skewed -- it's [muted] that number.

Yeah, so, how much is the working capital? What would be the MacDermid base from 2014 that Ag would build on?

I can get you an exact number here, hold on. Take out -- the effect was $37 million in working capital. So, if you take $37 million out of that number, that would be effect that related to Ag in the quarter.

Okay, that's fine, that's good, thank you.

And then, how are you going to communicate that seasonality on the Ag free cash flow? Are you going to give us some guidance on what a full-year free cash flow estimate or pro forma adjusted, or are you going to just let it swing quarter to quarter with the seasonality, and we will have to wait until the end of a full season to see what the full-year numbers are?

As part of our Investor Day, we're going to have break-down charts on that --

Okay.

-- that the investment community, and specifically the analysts, could see the difference between the two businesses, and how that now blends together for Platform.

Okay, we can wait for that; that's fine.

And then, is the currency effect on free cash flow materially less than the currency effect on sales and EBITDA?

If you look at the working capital, it's going to affect that because your working capital is going to be the dollars that you generate in those currencies. So, that's where the biggest effect is going to be, depending on when you're selling, booking the sales, and when you're collecting the AR, and those foreign currencies are converted.

We were looking at an analysis the other day, and there's over 190 currencies that we're going to be transacting in, in one way, shape or form, that will have at least a dollar equivalent of revenue in. So, it's something we have to monitor very closely as we move forward to protect the inflows and the outflows of the Company.

We will try and give you more color on that tomorrow. We certainly don't expect you to be operating in the dark on free cash flow. So, we will try our best to give you some metrics that you can follow, and give you a sense for how it flows out over the year.

Thank you. Our next question comes from Alex [Yefurmob] of Nomura.

Thank you. Good morning. I wanted to ask you about the status of your pipeline for potential acquisitions. I understand that this year you're focusing on executing deals that have already been done, but do you have maybe one or two specific targets in mind that you're waiting on, or are you being opportunistic, as you mentioned?

It's more of an opportunistic strategy. We have clear criteria that we consider.

There are clearly discussions that are happening realtime. I can tell you that, and there always are and there always will be.

And this is a really target-rich environment. So, whether or not we can get to the goal line on some of these remains to be seen, but there's certainly a lot of activity.

Great, thank you. And a follow-up for Wayne: I think you mentioned that you're increasing local prices for crop protection, in cases where FX moved against you. What is the level of success? Do you think you will be able to fully offset the FX effect, or partially offset, and what is the degree of this partial offset?

Yeah, I think we've had a history of this over time. Obviously, the FX movement that we're seeing today is pretty unprecedented in terms of how volatile it's been and how quick it's been. But historically, I would say that we have pretty good success of catching up over the course of six months to a year. There's typically been a time lag in that.

So, that's our expectation going in. Again, still relatively early days, and we've had some successes. But I would actually think that we will be somewhere between six months and one year, in terms of time lag before we see it go all the way through.

Great. Maybe as a follow-up question on Ag pricing: How do you see the competitive environment? You're pretty unique and niche-y in terms of your crop exposure, but are your competitors sort of reacting in the same way? Are they trying to offset these FX headwinds, and maybe even raise prices further?

Yes, again, we've seen -- just because of the magnitude of it, we've actually seen a lot of competition deal with it in the manner which, maybe it's not exactly the same way we're dealing with it. But directionally, they are also trying to get their prices up, to deal with the FX pressures. Now, again, we've got some European competitors who are feeling the FX differently than, say, US competitors, but we clearly see a movement for folks to really protect local margins.

Got it. And the final question on crop protection: I think, Wayne, you mentioned that the level of crop protection inventory has been elevated for some crops, but those are crops where you are not playing in a big way. For crops that matter most to you, maybe soybeans in Latin America, and some of the fruits and vegetables, how do you see the level of inventory? Do you think this could be an issue, or it's a neutral factor at this point?

Yes, our review is that, in countries like Latin America, when we take a look at the overall year, we think we're going to be fine. We do see some challenges in Q1 because of some of the elevated inventory levels, but given, again, our specialty crop focus, we actually think that we are going to be fine.

And we also think that one of the advantages that we have today is now we have the integrated portfolio. And because we have the integrated portfolio of all three companies, we're actually in a much stronger position to have conversations with our customers going forward about not only current opportunities, but new opportunities. So, it -- I actually think that these three companies coming together at this moment in time actually helps to position us in a much stronger way to have richer conversations with our customers because we're a lot more valuable to our customers right now.

Thank you. Our next question comes from John McNulty of Credit Suisse.

Good morning, thanks for taking my questions. So, maybe a question for Wayne. Now that you've got all three assets together, it sounds like you've got some maybe surprise benefits on the SG&A front. Anything else that we should be thinking about, whether it's around the portfolio or the assets that you're rolling in, and what kind of products you actually have? Any other surprises that you're seeing at this point? And then, on top of that, with regard to the SG&A, how should we be thinking about where the incremental benefits are coming from that you're identifying now?

You're talking about the [hire centers], and ultimately $65 million to $80 million? Yes, if you're talking about $65 million to $80 million, quite honestly, what we're actually seeing in the near term is really two things. Number one, we're realizing that there was a lot more management overlap than we initially thought, and actually put in the box -- number one.

And one of the things that we have done -- we actually announced -- actually within day one, the brand new leadership team of the Organization, and that obviously led to things falling in a lot quicker. And we spent a lot of time over the last two weeks thinking through what is the next layer of the Organization that we have -- our plan is to announce over the course of the next month or so. So, a lot more things are just falling or come in apparently, especially in terms of driving this integrated Organization and really being one face to the customer.

I want to be clear that we are not affecting the sales force, because we want to make sure the sales force stays intact because that's obviously a value-added for us. So, clearly that's something that is better than we thought.

I think when you start talking about the portfolio discussion, and as you know, the synergy targets that we assured with you are in a three-year time frame. But the more we see the portfolio, the more we're excited about: How do you actually get to new formulations, new mixtures? And most of those savings, we think, will be more what we call medium term. So, they'll maybe be beyond that three-year time horizon. But we're more excited about the possibility of portfolio management and portfolio integration, and how you can leverage those additional molecules to get additional differentiation.

Okay, fair --

Much more excited. So, $80 million, three years, I feel very good about. It's still early to tell you about what else we can get in the three years, but we feel even more excited about what could be in that three- to five-year time frame than we thought coming in.

Okay, great. And then, with regard to working capital and Ag, I know there's been some concerns about receivables, and farmers maybe being a little bit more distressed, and receivables getting pushed out. Can you walk us through what you're seeing there? And tied to that, do you see any opportunities, now that you've combined all three entities, to improve working capital or maybe you can squeeze a little bit more juice out of the rag?

The answer is: The $80 million that we talked about are EBITDA savings. We clearly see working capital opportunities, because one of the things that we see both on the payable side, as well as on the supplier side -- I'm sorry, on the supplier side, as well as customer side, is that we have very different approaches to -- in terms of suppliers. We have different approaches in terms of customers. And clearly, we know how that will play out.

We're going to do the thing that makes most sense for us from a Platform perspective. So, absolutely, there will be incremental working capital opportunities that fall out of synergies that are not part of that $80 million because they are just cash -- for sure, absolutely.

In terms of the market today, the areas that we are watching very closely, honestly, is on the FX side, because the FX stuff is moving so fast. As we just talked, about 10% currency weakness in the first two months.

As you know, in the Ag sector, most of your receivables are longer than two months. So, we are watching that very closely. We are trying to figure out ways to drive more up-front cash payments. We're trying to figure out ways to get more things tied to US dollars, in terms of how you price, how you collect.

So, that's what we are focused on right now. That, to me, candidly, is a much bigger concern to the day-to-day running of the Business today than crop prices. It's how do you manage through this FX environment, and that's what we're all over right now.

Got it. Thanks very much for the color.

Thank you. Our next question is from Duffy Fischer of Barclays.

Good morning, fellows. First question on Ag: You touched on it a little bit. Now, with your CAS business, you're sourcing from Chemtura for a while; that may be off limits. But from the Agriphar side and Arysta, you're sourcing from areas where they've seen a pretty demonstrable drop in their COGS in a dollar basis as their currencies have gone down. Will that allow you to improve your COGS? How are those contracts set up? Can you capture some of that lower cost that they are experiencing on a dollar basis?

The short answer is yes.

Okay. And then, when you extrapolate that farther, obviously you guys are not alone there when you see product flowing from India, Latin America. Is that going to put overall pricing pressure globally on a dollar basis, do you think, as their costs have come down across the whole pesticide space?

Yes, the short answer is most likely yes. But I think the way we think about it -- at least the way I think about it is you can't look at price and cost independently. What you have to be focused is on GP.

Correct.

Right? So, our challenge, and the opportunity that we have in front of us is: How do we drive harder in the first part of your question, to make sure that we do that faster than the second part of your question.

Okay, fair enough.

And we have an opportunity to do it with a lot more leverage because of the three portfolios that we have.

Okay. And just the last one for me, and again, I'm sure you're not going to have a point number, so a rounder number is fine. But if you think about the point when you are modeling the three acquisitions in Ag last fall -- close on those. From that point, obviously, the dollars has increased a lot. How much has that affected the cash flow of those businesses this year versus what you would have had in your plan October/November when you were pulling the trigger, do you think?

And again, I'm sure you won't have a point, but is it $25 million, $50 million, $75 million? What's the delta versus what the plan would have been last fall versus if you just mark to market currencies today for this year?

Are you talking from a currency point of view, or are you talking from a synergy point of view?

Currency -- so, just currencies. If you went back and thought about the models that you were using when you were making the bids -- what the cash flow from those assets would have been in 2015 versus what they will likely be today if you just mark the currencies to market today. How much cash flow basically goes away because of currencies relative to what you would have expected?

I think the short answer, and again, like you said, there's a lot of stuff that goes into the cash flow conversation. But as we said earlier to you, just between the end of the year, between the end of the year and where we are today in terms of currencies, we've lost, across the Platform Company, about 10 points of currency, given our market [asset]. Okay?

Now, as I said earlier, we're going to do some things to help to improve that, all things like get more synergies, try to figure out ways to drive, get decreased cash and so forth. But in terms of what currency has cost the Enterprise since the end of the year, it's roughly speaking, 10 percent points.

And I think it's important -- two things are important to point out. So, first and foremost is the long game, not a short game. So, there's no question that the financial models we ran last year had more cash flow than the current one does. And that's -- pick a number, $40 million is probably not a bad number from that.

But to be honest with you, I'm not all that stressed about the fact that it's a little less cash flow than we forecasted, because currencies come and currencies go. And we will be sitting here 18 months from now, and it will be $40 million higher or $60 million higher.

So, given that it's a long game, we feel fine about the acquisition we did last year, and in fact, better than fine, to be honest with you. We really feel like there are opportunities greater than what we anticipate going in. So, the growth rate and the intrinsic value is going to be higher even after the ForEx impact.

Thank you. Our next question is from Bill Hoffmann of RBC Capital Markets.

Yes, just a couple other questions. One of those on the synergy costs: Wondering if you can help us get some idea from a cash cost standpoint what you might be expecting?

We're still working through that. The assumptions that we have in our model, which is less than what we told you earlier. I think earlier, initially, we said 1 for 1. Our view is that today it will be somewhere between $0.50 and $0.75 on the dollar. And we're still refining that, so it will be somewhere in that range.

Thanks. And then, one of the things that CAS had been doing over the last couple of years was new product development. I just wonder if you could give us some context of Agriphar/Arysta businesses, and what you see in new product development side of the business, really to offset some of the natural competitive conditions?

Yes, it's funny because one of the things that we were driving, from an Arysta point of view, that echoes very, very well when you have this conversation with the CAS folks, as well as with the Agriphar folks, is this concept that we call new-new. And new-new is really what percent of our revenues -- sorry, what percent of our gross profit is actually coming from new registrations that have been introduced over the course of the prior three years.

On the Arysta side, that number has been running between 15% and 17%. Interestingly enough, the CAS number -- we went and did the math, and that number is 15%, 16%. And we've also done the same math on the Agriphar number; and the Agriphar number is typically somewhere 16%, 17%.

So, you can see all three companies, even though they call it something different, were very similarly focused on looking at how do you actually get more differentiation than the marketplace, how do you capitalize upon opportunities that, therefore, lead to new registrations that lead to your products becoming more relevant to customers. So, very, very similar in terms of where we are in terms of actual performance, and something that we are absolutely 110% committed to finding a way to continue as part of the new Company going forward.

Thanks, Wayne. And is there any way to think about product overlap? Once you get into all these portfolios, how much product overlap do you have?

Yes, obviously, when you put together three companies, there's going to be something. I'd be lying if I told you it was zero. But I can also tell you that, based upon everything that we've seen, we see a lot more opportunities, probably a factor 5 time the opportunities versus the cannibalization side of it. So, from your standpoint, cannibalization I'd say is not going to be material.

Great, thank you.

Thank you. Our next question comes from Marc McDonough of CIFC Asset Management.

Hi, guys. Thanks for the call, and congrats on a great quarter.

I had a quick question. I was in and out of the call, so forgive me if you've already discussed this. Do you have the quarterly results for Agriphar and Chemtura on a stand-alone basis from a revenue and EBITDA perspective?

Chemtura was -- since it was a public entity, their segment footnote has some of that data. But, of course, as we go forward, we're going to put what the numbers were for the combined entity. So, in other words, in order to analyze Q1, we need to give you those Q1 numbers for last year.

The tricky part in regards to Agriphar is that they were Belgian [GAAP], and it was a completely different basis in the prior year. So, we're having all of those converted, as well as the Arysta numbers, all with the US GAAP for comparison purposes. So, we will have those out there, too.

Okay, great, thank you.

(Operator Instructions)

Our next question is from Edlain Rodriguez of UBS.

Thank you, good morning, guys. Just a quick question for Wayne to follow up to what you said before. In terms of getting prices to offset FX, do you expect it to play out the same in all of the regions? Or do you think some regions will prove to be more challenging than others in terms of getting prices?

I think you know the answer. It never plays out exactly the same, because you have to go through different competitive tensions in every part of the regions. However, for us, we know the major regions, and the major regions are the ones that we actually have the highest degree of confidence that it's going to work, and it has been working.

And it's funny because, in a good way, having rapid acceleration of currencies or rapid weakening in currencies actually helps you because it was more moderate, and it will be tougher conversation with customers, but when it's rapid, everybody gets it. But the short answer is it will be different, but in the major regions, we're quite confident because we already started to see some success.

Okay, that makes sense, thank you.

And this is for Frank. Frank, can you just quickly repeat -- I think I missed it -- what the pro forma net debt number is? And also what should we be thinking in terms of CapEx, D&A, and shares outstanding for 2015?

So, the pro forma net debt -- let me find my balance sheet. $3.4 billion was the pro forma net debt outstanding for the Arysta deal and so forth.

From a capital expenditure standpoint, as we previously discussed and announced, the Company's policy is going to be to capitalize the re-registration and registration costs, as well as what we would consider to be normal CapEx. So, in the 2014 year, you were looking at about a combined number of $72 million, plus or take, right around there.

Going into this year, 2015, as part of our Investor Day deck, we're going to lay some stuff out there for thinking it's somewhere between $95 million to $100 million in CapEx, because this will be a heavy year for the [Annex 1] renewals that are due.

In terms of shares outstanding and D&A?

So, from a D&A standpoint, we're still going through the effects of purchase accounting, but we're figuring it's about, call it, $80 million to $85 million on a combined entity basis. And the way we are going to present that going forward, as we also discussed, is going to be showing the base numbers for the D&A in our adjusted. And anything related to purchase accounting, we will adjust out. This way you can truly see the underlying performance of the Business.

And from a share count perspective, if you've taken everything, including the shares that we sent out for Arysta, or the shares that were part of the Arysta convertible preferred there, it's about [226 million], round numbers.

Fair; thank you very much.

Thank you. Our next question is from Lauren Gallagher of Credit Suisse.

Hi, guys. Just flipping back to the Ag segment in the quarter on Chemtura, or CAS and Agriphar, it seems like margins were a little bit pressured in the quarter, or at least it seems like they were down a little bit year over year. I was wondering if you could give any color on that? And it could be just the timing of closing, but just curious if you have any incremental --?

In the case of Agriphar, they were up. In the case of CAS, it was timing and closing. There was a lot of customers that took shipments in October that would have been normal November and/or December orders. It was just timing because of the [hold] sale of the transaction -- customer wants to make sure he has his product and so forth.

Plus, the previous year, in the CAS business, they had a blowout second half. So, in 2013, they had a blowout of Q3/Q4, which went into a great Q1 and Q2 into 2014, and then you had more normalization in the back half of the year.

Okay, great, thank you.

And then, just clarifying a modeling question. If FX were to stay where it is today, is it fair to assume the impact to EBITDA could be $50 million to $60 million for FY15?

On year over year?

Yes.

So, it would be roughly about $40 million.

It's going to be still $40 million?

Yes. It's about $40 million. If you take what we've built our 2015 budget at, and use those rates to restate 2014 and so forth, it would be about $40 million.

Okay, great. Thank you very much.

Thank you. I'd now like to turn the call back over to Dan Leever for closing remarks.

Great. Well, thank you all for all of the great questions, and we hope we get lots more of them tomorrow.

We hope to see as many people as possible at our Investor Day. We've got a lot more detail to go through at the Investor Day, and deep dive in all of our businesses with several members of management there. We really encourage you to be there. We're going to try to lay out pretty clear guidance and expectations for this year and beyond, and our strategy, et cetera. So, we really hope as many people as possible can come. And we will try to be as descriptive as we possibly can, and go into as much detail as we can to help you understand the Business.

With that, thank you so much for joining us. Have a great day. Bye-bye.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day.