Element Solutions Inc (ESI) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Platform Specialty Products Corporation first-quarter 2016 financial results. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Carey Dorman, Director of Corporate Development. Mr. Dorman, you may begin.

Thank you and good afternoon. On the call today we have our CEO, Rakesh Sachdev; CFO, Sanjiv Khattri; Ben Gliklich, EVP of Strategy and Operations; Scot Benson, President of Performance Solutions; and Diego Lopez Casanello, President of Agricultural Solutions. We are also pleased to have our Chairman, Martin E. Franklin, joining us today.

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 format 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 in the press release and web deck issued and posted today in connection with this conference call. Some of the statements made today will be considered forward-looking. All forward-looking statements are based on currently available information, and Platform's reported results could differ materially from those predicted. Except as required by applicable law, Platform undertakes no obligation to update such statements as a result of new information, future events, or otherwise. Please refer to Platform's SEC filings, including its annual report on Form 10-K for the fiscal year ended December 31, 2015, for a more detailed description of the risk factors that may affect Platform's results.

Please note that in the press release and the web deck, Platform has provided financial information that has not been prepared in accordance with US GAAP. In accordance with Regulation G, Platform is providing reconciliations of these non-GAAP measures to comparable GAAP financial measures in both the press release and the supplemental slides, which can be found on Platform's website at www.platformspecialtyproducts.com in the investor relations section under events and presentations.

As a reminder, for the purposes of this call, Platform will be comparing the same periods in 2016 in 2015 on a pro forma and a pro forma constant currency basis, as management believes that these figures provide a better comparison and understanding of the underlying business results for its operations. Please review the press release and the web deck for a reconciliation and further information.

It is now my pleasure to introduce Rakesh Sachdev, Platform's CEO, for opening remarks. Rakesh?

Thanks, Carey; and good afternoon, everyone, and thank you for participating in our first-quarter 2016 earnings call. This is my second earnings call as the CEO of Platform, and I'm pleased to update you on our progress of my first four months at the Company.

We've made tremendous amount of progress internally on clarifying our business strategy, building a strong management team, and on the execution and integration of our businesses. We are still faced with some challenged end markets and a difficult currency environment, but we are weathering these quite successfully, as demonstrated by our most recent results.

We plan to address all of this with you on the call today. On our last earnings call, I spent some time reviewing my initial observations as well as our priorities for 2016. Today you will hear that these priorities are unchanged. And, importantly, our internal focus on our customers, operations, integration, and synergy realization remain front and center.

Now let's walk through the results first. Page 3 of the web deck posted on our website shows highlights from our first-quarter 2016 financial performance, and I'm pleased to report first-quarter 2016 revenues of $824 million and adjusted EBITDA of $168 million. This result was in line with our expectations as we started the year and with our full-year guidance.

Sales grew 54% year-over-year, driven largely by our acquisitions. Our pro forma sales this quarter compared to a year ago were negatively impacted by the strong dollar. Sales declined 8%. But on a constant currency basis, our pro forma revenues declined by 3%. And if you exclude the impact of M&A and a small change from metal prices, our performance sales declined organically by only 1% this quarter.

In the quarter, we saw continued strength in the automotive markets; but the electronics market, particularly in Asia, was weak. We saw our ag revenues grow in several regions despite general market softness. North America, however, continued to be challenging. On an organic basis, our ag sales were flat year-over-year despite the fact that we had an unusually strong Q1 last year in 2015.

We have increased the organization's attention to organic sales growth, something that I'm very focused on. And although the 1% decline in Q1 is below our long-term growth expectations, this is a relatively encouraging result in light of the weakness in the ag, electronics, and the oil and gas end markets globally.

Turning to our profitability metrics relative to a year ago, our adjusted EBITDA on a constant currency basis was essentially flat. Excluding the impact of increased corporate costs, both our business segments saw constant currency adjusted EBITDA growth in the quarter.

As we experienced in 2015, our business continues to demonstrate the power of its highly variable cost structure as well as our ability to capture cost synergies from our acquisitions. The tough Q1 comp and continued end market softness was more than offset by the benefit of synergies. The integration and synergy capture in the performance solutions business is also off to a very encouraging start. We have taken synergy actions with an estimated run rate saving impact of more than $20 million.

And I'm also excited by the revenue synergy opportunities that we have identified from both cross-selling efforts and market share gains that we see ahead of us. And Ben will take you through more details on our integration progress later in the call.

GAAP EPS in the quarter was negative $0.59, while adjusted EPS was a positive $0.11. The big items affecting our GAAP results were acquisition-related expenses, restructuring charges, and purchase price amortization. This quarter we simplified our adjusted EPS calculation, and Sanjiv will explain this in more detail later in the call.

We've been laying the foundation to drive organic growth, expand margins, and maximize free cash flow. Each of our business segments has been developing detailed strategic and execution plans to achieve these goals, and we are scheduling an investor day on September 12 in New York. At the investor day, we will share with you our roadmap to drive organic growth faster than our end markets and how we plan to position ourselves within our industry to ultimately drive shareholder value.

Now let's turn to the business units. You will see on page 4, our performance solutions segment reported first-quarter 2016 revenue of $420 million and adjusted EBITDA of $83 million. First-quarter sales declined 4% on a constant currency basis.

Our organic sales declined 2% year-over-year, which excludes the impact of the partial period contribution from our OMG Malaysia acquisition and excludes the impact of lower metal prices in our Alpha business. These metals prices are essentially a pass-through to our customers. This 2% decline was driven primarily by continued softness in our Asia electronics business, weaker demand in the European industrial markets, and low oil prices affecting our offshore fluids business, and was partially offset by growth in the automotive markets.

Despite the decline in the top line, constant currency adjusted EBITDA in our performance solutions business increased 1% in the quarter, excluding the impact of increased corporate allocations. This was driven by primarily by a combination of positive mix shift in electronic chemical sales as well as global expense management.

Automotive demand has been strong so far in 2016, and we expect that trend to continue. This benefited our North America business in the quarter, and we expect to see this follow through into our Western and Eastern European auto businesses as the year progresses. In addition to our organic sales growth initiatives, we are bringing the same disciplined cost management approach to the combined performance solutions business that we executed in legacy MacDermid.

On page 5, the agricultural solutions segment reported first-quarter 2016 revenue of $404 million and adjusted EBITDA of $85 million. Year-over-year declines in our major non-US dollar currencies negatively impacted sales by about 8% in the quarter. Q1 2016 sales declined only 1% year-over-year on a constant currency basis, once again highlighting the relative strength of our specialty focused ag business in what was another very tough quarter for the industry.

We sold a small business in Japan, and taking that into account, organic sales were essentially flat year-over-year. This is an impressive accomplishment and a testament to our business model and our people. The industry as a whole was negatively impacted by lower commodity prices and continued high channel inventories.

Our business saw many of the headwinds that our larger peers experienced in traditional crop protection in North America. On the other hand, we benefited from our outsized presence in Europe, our success in Latin America with our alternatives for weed-resistant crops, and our increased focus on the higher growth biosolutions business around the world.

Constant currency adjusted EBITDA in our ag business increased 3% in the quarter and grew an impressive 7%, excluding the impact of increased corporate allocations. This was despite a difficult Q1 2015 comparison.

Good weather conditions in most of Europe, which contributed to an early spring in that region, helped volumes and adjusted EBITDA, given the relatively higher margins in that region. Latin America also benefited from good weather.

We continued to successfully push through price increases, primarily in the Latin America and Eastern European markets. And demand for our biosolutions family of products as well as some of our key selective herbicides was a significant tailwind to performance in the quarter, driven specifically by increasing glyphosate resistance in multiple regions.

Synergy realization and execution continued to be important to our adjusted EBITDA growth in the quarter as well. We reported $13 million of realized synergies in the quarter, an increase of $8 million over Q1 of 2015. We also continued to outperform our stated time frame to achieve our estimated $80 million target. Given the market context, we are pleased with our Q1 ag results, both on the top line and in terms of profitability.

Before I turn the call over, there is one other topic to mention. As we disclosed in our 10-K in March, we recently uncovered activity in part of our West African ag business that caused us to investigate further in the context of the US Foreign Corrupt Practices Act. The relevant business is not material to our financial results; nevertheless, we have been very focused on it. As a company, ensuring compliance and ethical practices globally is of the utmost importance.

In the case of the West African business, we quickly notified authorities and have been conducting a thorough investigation while in frequent dialogue with the regulators. Although the investigation is continuing, we've already begun to revise policies and implement best practices.

The West African business came to Platform through its acquisition of Arysta, and we are actively considering all of our legal alternatives for recompense.

I would now like to turn the call over to our business segment Presidents, Scot Benson and Diego Lopez Casanello, for a few words about what they are seeing in the businesses and in the market. Scot?

Thank you, Rakesh. Good afternoon. It's a pleasure to be here today.

We had a busy quarter with a focus on the integration of our commercial teams around the world in our electronics and industrial businesses. I'm happy to say that this effort has gone well. We have effectively combined our selling and technical organizations, have very experienced leadership in place, and are on track with our targeted commercial synergy plans. Our customers have been overwhelmingly supportive of the new organization.

We are also well into the process of identifying and prioritizing operational efficiencies, including manufacturing footprint, office and support locations, and the other administrative synergies. We will be putting action plans in place throughout the remainder of 2016 and into 2017. Although we do have some lingering headwinds in some of our end markets, I am cautiously optimistic about the remainder of 2016. The global automotive outlook remains positive, which helps offset a weaker electronics industry, and oil and gas remains challenging.

We are well positioned to gain share with the new organization and have already begun to see progress in this regard. And with the recent news about some of our competitors possibly being sold, this position will only strengthen.

Now I would like to turn it over to Diego.

Thank you, Scot. Hello, everyone. It has been an exciting first quarter in our agricultural solutions business, which goes to market as Arysta LifeScience. Let me give you a brief market update.

We see a mixed picture. Europe had a solid season start. The winter there was short, and rains were in general normal. In North America, in contrast, the USDA is estimating that the net cash income of US farmers will drop once more in 2016, reaching its lowest value since 2011.

In the Southern Hemisphere, we are still in the low season. And with the current political uncertainty in Brazil, farmers are being very cautious to take early positions in Q2.

In summary, the picture is consistent with what we reported last quarter. We are sticking to our view that the ag market will be down in the single digits in 2016. I am therefore pleased with the very strong performance of our team in Q1 in this difficult industry environment.

Some highlights were our sales of bio solutions, with products like Biozyme that showed robust growth in Q1 versus Q1 last year. Our surprising performance in LatAm, where we managed to offset around 75% of the currency headwinds through price increases and through savings in cost of sales, as well as the continued growth in herbicides to manage glyphosate weed resistance.

In my time with the Company so far, I have had a chance to visit several of our key regions and to talk to many people in my team. The level of ag expertise in Arysta is quite unique in the industry. The team has high energy. I have come away quite impressed with the strong presence in specialty segments that are growing above the average of the agrochemical market. These are segments like crop establishment, where we protect the plant in its early stages; or the management of niche pests, like mites and bacterial diseases.

I am also glad to be part of the business that is a leader in biostimulants, a technology that helps boost the metabolism of the plant to increase yields. This is a segment that is growing and has great potential.

We have set three priorities for 2016. We're pleased to say that we are leaving the difficult part of the integration of the legacy companies behind, and our first priority now is to drive organic growth in our target segments. Secondly, we will continue to improve profitability through pricing excellence, synergy capture, and strict cost management. And third, we will have finalized our winning strategy for the new Arysta by Q3.

The market conditions are challenging, but sticking to these priorities will put us on a good path to deliver us our targets this year. Now I'm happy to introduce Ben, who will now review our integration efforts across the business. Ben?

Thanks, Diego, and good afternoon. The first quarter was a critical one for our performance solutions segment's integration. Looking at page 6, you can see that we made meaningful progress against our synergy targets through actions taken this quarter. The integration effort is now in full swing, with our focus remaining on preserving customers in the short-term and share gains in the medium- to long-term.

In line with our stated plan, we took thoughtful yet timely steps to complete the organizational design process in the quarter. This was the right thing to do for both our employees and our customers, ensuring the continuity and clarity that all stakeholders deserve.

Besides people-related initiatives, with also made significant progress on product rationalization planning and execution as we focused on margin improvement opportunities in the combined portfolio. We gained some very exciting products from the OM and Alent acquisitions. And now that we have the time to analyze what we have, we're making efficiency decisions that will benefit both our customers and our bottom line.

We are focusing on R&D prioritization and identifying the best technologies from within each of the businesses to back to accelerate growth. In many cases, MacDermid was developing competitors to Enthone or OM products, or vice versa. These are easy R&D savings.

There are also meaningful COGS synergies we are starting to exploit. We have been focused on rationalizing the supply chain and procurement, having already successfully renegotiated some of our global procurement agreements. These initiatives will all contribute to our cost synergy achievement efforts.

More specifically, we realized $3 million of synergies in the quarter, executing opportunities that will contribute to $12 million of new estimated savings on a full-year run rate basis. These actions were focused on the previously mentioned procurement initiatives and organizational design activities that occurred late in the quarter.

On a run rate basis, we have secured $21 million of synergies -- well on our way to our $70 million target. The remainder of 2016 will continue to see a focus on G&A and supply chain.

Page 7 outlines the continued success of our agricultural solutions integration. Synergy realization in our ag business has been well ahead of schedule and is run-rating $59 million as of the end of the quarter.

While 2015 was focused on commercial opportunities and rationalizing G&A, 2016 and 2017 are going to be more heavily focused on growth initiatives and supply chain efficiencies. Our legal entity consolidation project, which will drive our ability to generate revenue synergies through cross-selling and bringing existing registrations into new markets, is progressing well.

We achieved $8 million of new synergies in Q1 2016 compared to Q1 2015. Much of this increase was due to the run rate impact of actions taken in 2015, but we also benefited from a series of procurement, freight, and tolling synergy actions taken in North America and Europe. There were of low-hanging fruit opportunities in the supply chains of our combined ag businesses, but generally these tend have longer lead times, though they'll be the main contributor to incremental cost synergies. We are still confident in our ability to achieve these estimated $80 million -- our estimated $80 million target by the end of 2017.

As Rakesh mentioned before, we are equally excited about the revenue synergy opportunities that lie ahead of us for this business. Our portfolio is much more complete, offering brought solutions across many crop categories that include traditional crop protection chemicals, seed treatment, and plant nutrition products. We are already seeing meaningful contribution from cross-selling, and we have initiatives focused precisely on this to ensure that the full force of the combined Company is behind our combined portfolio.

Now that both integrations are underway, we are seeing the benefit of best-practice sharing across the two segments. We have frequently said that buying good businesses and making them better is a prerequisite, a necessary core competency, for our strategy -- hence a swift and successful integration of both business units is critical. We are happy with our progress in that regard.

With that, I'll now turn the call over to Sanjiv to walk you through the financial results.

Thank you, Ben, and good afternoon, everyone. As I've now done for a few quarters, I plan to spend some time going over the financial performance in the quarter, but also updating you on our progress and addressing some key questions we have been receiving lately.

Some housekeeping first: as a reminder, due to all of the acquisition activity, we are again providing numbers on both a reported and a pro forma basis. Our pro forma results demonstrate business performance as if we had owned all six of the acquired businesses beginning on January 1, 2015.

Finally, as usual, we compare certain results on a constant currency basis in order to illustrate the impact translational currency headwinds have had on our financial performance. This quarter we are providing a more traditional methodology for constant currency that we believe should be much more familiar to all of you, given it is the way most other companies do constant currency reporting.

Now and going forward, in order to calculate constant currency, we take our actual prior-period rates -- in this case, Q1 2015 -- and apply them to our Q1 2016 performance. This approach means that the prior-period numbers are the same as the reported results, and the current period is the only one that is different.

Additionally, as Rakesh mentioned, we updated our definition of adjusted EPS for the current quarter and the comparable period of 2015. Our new definition is much simpler and more in line with our peers. You can see all the details in the appendix on page 21.

What we are doing is taking out all of the adjustments we used to get to adjusted EBITDA and then subtracting depreciation, interest expense, tax assuming a 35% tax rate, and current-period registration capitalized expense. The net impact of all this is an adjusted EPS that we believe is a fairer assessment of our earnings power going forward. If there are any questions about the calculations, we are always available to answer them.

Now onto the numbers; I am on page 9. Rakesh already took you through the highlights, so no reason to repeat them here. I'm sure you will all agree that it was a solid quarter, especially in light of the macro conditions. We are reaffirming our guidance; no surprises there.

In terms of key cash flow drivers for 2016, nothing has changed on this guidance from last quarter. And again, the important thing to point out here is that we are prioritizing initiatives to reduce these cash outflows in the future.

A quick comment on the $100 million in cash interest for Q1. This outflow is consistent with the full-year outlook of $340 million, as the payments on our high-yield debt are biannual, making both Q1 and Q3 cash outflows lumpy.

We believe CapEx synergies exist for the combined business but will take some time to materialize. We also wanted to clarify that our CapEx guidance includes the cash spend expected on ag registrations. The ag spend is not incremental to the outlook of $100 million to $125 million.

Finally, we are continuing to dedicate significant attention and resource to tax, but there is still work to be done. We have a complicated tax ownership structure that will take some time to rationalize.

A quick comment on cash flow seasonality, which is largely driven by our ag segment: as we have previously indicated, the ag business typically builds working capital in Q1 and into the first half of Q2 before releasing it over the balance of the year. This is due to both the timing of the cash conversion cycles for Southern Hemisphere business we did in the latter part of 2015 as well as the buildup in inventory that occurs as the North American and European seasons ramp up. This quarter, we saw a similar pattern.

However, on a sequential basis from Q4, the buildup looks larger than normal, partially due to FX -- more specifically, the Brazilian real and the impact it had on receivables in Q4 2015 relative to their US dollar value in Q1 2016. The buildup was also exaggerated by late March sales trends in the European ag business, which resulted in much higher receivables.

The inventory position picked up rather significantly in March as we prepare for the European major selling season. As expected, we saw an additional buildup in the first few weeks Q2, too, but that has already begun to unwind. Q3 and Q4 should see a reversal of this trend as working capital continues to release into cash.

This cyclicality is very typical in the ag end market. Working capital management and all the drivers that impact cash flow are huge priorities for all of us and something I personally focus on. Important to note that our outlook for the full-year cash flow remains unchanged.

Page 10 provides a walk from our pro forma Q1 net sales of $897 million to our reported Q1 2016 net sales of $824 million. The strong dollar has continued to be a headwind to our reported results, with a $49 million translational FX headwind in the quarter. We were able to offset some of this FX exposure, particularly in our ag business, through pricing to the degree of about $18 million.

Finally, we saw some underlying weakness in the end markets, particularly in North America ag and European industrial surface treatment. Given this weakness, we believe an $8 million organic decline is a relatively strong performance.

Page 11 shows a similar walk from Q1 2015 pro forma adjusted EBITDA of $178 million to Q1 2016 adjusted EBITDA of $168 million. Again, as a reminder, these totals include the impact of all the acquisitions to date and the assumed contribution for the full period. Although we saw some encouraging strength in some of our key non-US dollar currencies this quarter, the Q1 2016 over Q1 2015 impact from FX was a negative $35 million, including both translational and transactional impacts -- the product pricing actions we took in the quarter to offset more than half of the currency headwind.

In addition, as Ben described, we achieved $11 million of new year-over-year synergies in the quarter. Organic volumes and mix contribution to EBITDA was slightly lower than Q1 2015, in line with what Rakesh already indicated. Finally, the increase in corporate costs of $7 million is in line with the higher number you saw in Q4 of 2015 and the full-year guidance we provided to you.

Page 12 shows our current capital structure. As of March 31, 2016, Platform net debt was $5.2 billion, which includes $330 million of unrestricted cash. First lien net debt was $3.2 billion, with $115 million drawn on our revolver to partially fund the working capital buildup in Q1.

As you can see, we still have significant liquidity available to fund our business and no maturities on the horizon. There have been no significant changes to our capital structure since we reported full-year results. Furthermore, we are still committed to taking excess cash flow we generate in 2016 to reduce our obligations. On page 16 in the appendix, we have laid out our covenant calculations and our significant head room.

When we think specifically about the Series B, our message is the same as it has been previously. We understand the overhang the note creates on other securities, and we will resolve it at the appropriate time. We have ample liquidity to handle the maturity and have quite a bit of optionality around it.

Furthermore, as we execute against our 2016 plan, the cash liability should be lower in the next several quarters than it is today. We have about $330 million of cash on the balance sheet, albeit some of it is overseas; and we expect to continue to generate meaningful positive free cash flow for the balance of 2016.

In addition, we $385 million of revolver capacity and ample head room under our debt covenants to finance a portion of a potential cash payment. Given the existing liability and already issued shares, we would expect any action we take to resolve the maturity will be a net positive for our balance sheet.

Turning to page 13, I wanted to spend a couple of minutes on the outlook for the rest of the year. As you all know, due primarily to ag, our overall financial results are highly seasonal, with the second and fourth quarters typically bigger than the first and third. It is important to keep this in mind as you compare our Q1 results with the full-year guidance we have provided in our form today.

For your benefit, we have included some history of first-half and second-half EBITDA breakdown on a pro forma basis for 2015, 2014, and 2016 outlook. At this time, due to both seasonality and timing of synergy attainment, we expect the second half of 2016 to be much larger than the first half. We have also included on page 13 some commentary on year-over-year drivers impacting our 2016 quarterly outlook when compared to pro forma 2015. In addition, in the appendix on page 17 we have included the actual pro forma sales and adjusted EBITDA results by quarter for 2014 and 2015. This should all help with your modeling.

Finally, to highlight the impact year-over-year FX changes will have on our results, we have included a chart on page 18 with some history of how volatile our major currencies have been over the last several quarters. Specifically, in terms of adjusted EBITDA outlook, we expect Q2 to be strong sequentially but lower than Q2 2015 in light of significant year-over-year FX headwinds and the timing of Q1/Q2 sales in Europe. All this is consistent with the full-year guidance of $725 million to $775 million of adjusted EBITDA.

Now it is my pleasure to return the call to Rakesh before we turn the call over for questions. Rakesh?

Thanks, Sanjiv. We remain cautiously opportunistic about the opportunity ahead of us as we continue to improve both of our business segments through strategy execution and synergy realization. For the Platform thesis to continue to succeed, we need to grow our top line faster than our end markets while still efficiently managing our costs. This quarter, we demonstrated our ability to do both. And we believe we will remain well positioned for the future as our end markets inevitably begin to recover.

As I said at the beginning of the year, our priorities for 2016 were clear and simple: successfully integrate, realize synergies, and find an operating strategy and rhythm to drive business performance to exceed end market growth. I think we achieved all of these to varying degrees in Q1.

We made a few more personnel changes that should help us succeed. And I now feel very good about our senior management team. Other than that, we have been and will continue to be focused on executing against our near-term priorities and developing the framework to achieve our longer-term objectives. In this environment, the back-to-basics approach is what we will need to do to drive cash flow generation and shareholder value. And I look forward to working hard for you all to get that done.

So with that, operator, please open the line for questions.

(Operator Instructions) Christopher Parkinson, Credit Suisse.

It's actually Matt Freedman on for Chris. In terms of your auto exposure, can you describe the demand trends by geography you saw in the first quarter, and any readthroughs you may have on production for the second quarter so far?

I'll let Scot answer that, but clearly our automotive business is pretty large in Asia, but also in the rest of the world as well. Scot, do you want to expand a little more on that?

Sure. We see the global demand increasing from 2015, and the globalization efforts are spread fairly equally throughout the world. So we're pretty confident that we are going to see continued growth in those markets in all three of our regions for the rest of the year.

Just to add, when it comes to the automotive business, we have a correlation to both the number of vehicles produced for the non-electronics piece, because we still sell a lot of chemicals to the automotives for non-electronics; and then, of course, the electronic content itself in a car that is increasing, even if the number of cars remain constant. So both those are actually helping us today.

That's helpful, thank you. And also, can you guys parse out your comment on the weakness you saw in European industrial? And was the softness attributed to any countries or products in particular?

There were a couple of product lines that remain to be under a little bit of pressure, particularly -- PET recycling is under pressure, for which we have a pretty significant presence in Europe. And then some of our business into some of the developing areas, primarily that go through Turkey; we had a little bit of a slow start there. But we've seen a nice rebound already in this quarter.

Thank you.

Duffy Fischer, Barclays.

I apologize for this, but there's going to be a little math behind this. So we did $168 million of adjusted EBITDA in the quarter. You talked about negative $100 million from interest. If I go to the balance sheet, it looks like working capital ate another $158 million, and then $26 million was cash taxes.

So basically that would be negative $116 million. But the actual working or the operating cash number you gave us was negative $210 million. So it seems like there was another $90 million that got eaten up somewhere before operating cash flow. Where did that end up going?

I'll let Sanjiv answer the question, but roughly I think the working capital increased in the quarter by about $200 million. And so I don't know about the math or where you're getting the $120 million.

But having said that, if you look at what we did in Q2, Q3, and Q4 of last year, especially after April, we reduced our working capital by $300 million from May through December. April was still slightly negative last year, but -- we are going to release a bunch of working capital, which is historically kind of what's happened in this business. But to answer your specific question about Q1, our working capital was up about $200 million.

Exactly. Thank you, Rakesh. Hi, Duffy. I think, as you know, a lot of our receivables are denominated and inventory is denominated in non-US dollar. So the weakness of the dollar also affected probably another $50 million --

That's correct.

-- give or take -- affected cash flow. Your numbers on interest and CapEx, of course, are correct. I would just emphasize the seasonality.

So there was an FX component to it. Thanks, Sanjiv, for clarifying.

Okay. That's helpful. And then you walked through on the slide 13 kind of first-half/second-half split for this year. Once we get -- and I guess we'll never get to, like, a steady-state. But once all of the cost-cutting programs kind of roll through, what would be the normal split in your mind for a normal year, first half to second half?

So the second half is typically stronger, because now the ag business is half of the Company -- and as you know, Latin America is very strong in Q4. We have also got certain of Scot's performance businesses that are going to be strong. In fact, we are going to see significant strength in the electronics business.

You know, one of the things that affects the electronics business in Asia, which is a big chunk of our businesses is Chinese New Year in Q1. And you can't just simply take Q1 and project it out. So with the seasonal impact on the electronics business in Asia and the strength in the Southern Hemisphere and the ag business, I think we are always going to see strength in the second half more than the first half, both in terms of sales, but in our case the earnings are even more pronounced, because this year, as you know, we are working towards the tail end of the year with more synergies. So we're going to see more synergies in the second half of the year than in the first half, which is why I think we made the comments that we will see a second-half EBITDA higher than the first-half EBITDA.

Okay, great. And then just last one for me. The sales you talked about getting because of glyphosate resistance -- what geographies and what crops were those on?

I will let Diego answer, but it's mostly in Latin America, mostly Brazil.

Well, I think you answered the question, Rakesh. So it's basically the Americas, where the glyphosate use is the biggest; and especially in Latin America, where we have a very strong position.

Okay. So I'm assuming across soybeans, then?

Crops -- yes, sorry. Soybeans in particular but also in corn.

Okay, great. Thanks, fellas.

John Roberts, UBS.

Thank you. On slide 5, the 7% increase in EBITDA for ag is before currency. And then when you talk about the price increases, those were largely in the currency-depreciated markets. So I assume those price increases are to recover past currency headwinds? So is it a little bit of apples and oranges to have the benefit of pricing in the EBITDA but not the current negative effect from currency?

It's hard to say how -- we normally don't tie that. But you could say that some of the pricing is definitely there for us and which we used to claw back on FX changes. But we had price changes not just in Brazil; we had price changes in Europe as well, so -- in Eastern Europe. So we took price increases in several parts. We aren't going to break out how much comes from which region, but I think we got it across several regions.

Okay. And do you think free cash flow per share this year will be higher than adjusted earnings per share or lower than adjusted earnings per share? I think your cash conversion is supposed to be about 1, kind of, is the way you target it.

I think we don't want to give any specific guidance. I think it's fair to say that free cash flow remains a key priority for us. We've laid out all the drivers for you, and it's for you to do the math. But key priority is generating free cash flow this year.

Thank you.

James Sheehan, SunTrust.

You talked about positive mix effects in ag. Can you give us a little more color about what you're seeing in mix? And are those changes sustainable through the year?

We had positive mix effect both in ag, but also, actually quite equally impressive, in performance solutions, too. So maybe both Scot and Diego can address that.

I think the first effect is our strong Europe business in this first quarter. So we had a very positive business development there, and we have a high margin business in Europe.

The second thing is bio-solutions. Bio-solutions for us is a high margin business. We had double-digit growth in Q1 versus Q1 last year. These two effects are accounting for that increase.

Yes, this is Scot. And on the performance side we continue to see the results of our focus on higher technology and higher demand electronics businesses, which bring us higher margins in general. And then our sales synergies in Asia have also led to higher margins. We've been able to leverage some of the control mechanisms we had in place prior to some of our acquisitions and then been able to improve our business position there as well.

Especially in places like Taiwan.

Yes, exactly.

Great. Now, I assume your foreign exchange rate headwind is much improved today from where it was three or four months ago. And given that, I'm wondering, why wouldn't you increase your full-year guidance? Are you seeing something else that's making you cautious?

Yes, you're right. The FX environment has improved some from when we gave you guidance earlier in the year. Mind you, we still have a fairly significant headwind year-over-year, and you know that.

But in terms of -- you know, why wouldn't we raise guidance? I think it's still too early in the year. We have a lot of moving pieces. We want to be cautiously optimistic.

We want to observe what happens in Brazil. Sometimes it isn't just to change in the currency; it's how fast it changes. It drives a certain behavior with our customers and competitors. So we want to make sure that we can actually bring that to the bottom line before we adjust it.

You know, we give you guys a fairly wide range in our EBITDA guidance for the year. And so for now, we are sticking with that. But we'll continue to monitor the situation, and maybe in the next earnings call, we'll try and refine where we are.

Great. And finally, what are you guys thinking about for the full-year tax rate?

Well, the tax rate is expected to be high -- will likely remain high because of the significant losses we have in certain jurisdictions, where we are not able to get a benefit for the expense. And so you saw that our tax rate for the quarter was a negative 15.9%.

We expect on a book basis to continue that, which is why we -- when we look at our adjusted EPS, we think a stat tax rate for 35% for now is a good metric. We will also continue to be very transparent with you in terms of cash taxes. And clearly, we are focused on several cash tax planning strategies that, over time, will not only reduce our cash taxes but also ultimately reduce our effective tax rate.

Thank you very much.

Alex Yefremov, Nomura.

I wanted to turn to your change in the channel strategy and crop protection in North America. You've had one additional quarter of experience with the new strategy. What are the takeaways? How has your experience been in terms of shelf space with your customers? And also, if we look forward to fourth quarter of 2016 and maybe first quarter of 2017, would you expect some kind of a reversal of the negative impact that we saw last year in Q4?

Thanks for the question. I think the move to change our distribution strategy in Q4 last year was the right move here from the team. You know that we are now in early stages of the use season in North America.

We're starting the season already with significantly lower levels of stocks compared to last year in the channel -- still higher than we like on certain herbicides for wheat. You know that the wheat area in the US is right now down 9%.

But apart on that, fungicides -- on key fungicides we are already at acceptable levels; on insecticides we're at acceptable levels. So we see a significant improvement compared to last year. So we will see a slight rebound from Q4. This is also explaining why we have higher sales in Q4. And of course the full impact will be in 2017.

But I'm very pleased with the efforts that the teams are doing. I think we are doing a great job in North America right now to promote our key brands. And we will see the impact of this also this next year.

Thank you. And then if we turn to your entire portfolio, you mentioned that you had toughest comps in Q1. Is it fair to expect that year-over-year change will -- for entire Company's EBITDA -- will start getting better in the second quarter, and then in the second half you'll maybe see year-over-year growth in EBITDA?

Really, we'll see that in the second half. That's right. I think in Q2, we'll still see some headwinds. But we clearly expect the second half to start seeing a good improvement versus last year.

A final question if I may: could you talk about this commercial organization integration -- your experience there, and -- on the performance side. And how are you changing your go-to-market strategy? And any changes to your sales force strategy, et cetera?

Yes, so I think we have had a great start since we bought Alent and the work Scot has done in reorganizing the whole commercial organization. He's going to just tell you that here in a second. But I would say that not just has it gone well internally, but in the eyes of the customers, I think it's going extremely well as well.

Yes. Our focus was 100% on the customer, making sure the customers are comfortable that they were going to be receiving the same products, serviced and delivered by the same people in general. And that's gone extremely well.

We've spent a lot of time segregating customers, identifying key primary relationships -- who owns it, et cetera. And so that took us some time, but the results have been fantastic. So our go-to-market strategy hasn't changed. We just increased our capability to do it. So we think that we are much better positioned going forward to service our customers even than we were in the past.

This also, then, ties overall to our two-pronged approach to attack not only at the customer level, but to attack what we call the ultimate customer, which is the OEMs, whether it be automotive or electronics OEMs. We have many more resources available to us today to approach both sides of the equation. So I think we're really, really well positioned going forward.

Thank you very much.

Thanks, Alex.

Ian Bennett, Bank of America.

Compared to peers -- many of your peers are reporting point declines in ag, chemicals, double-digit declines, particularly in areas like South America; whereas you organically grew sales. What explains that difference? And how do sales out of the channel compare to Arysta sales into the channel?

Yes. If you look at annual data in the first quarter in LatAm, you will see that Arysta outperformed the market. The market is down by 18%, and our sales were flat year on year in Brazil. I'm talking about Brazil particular.

The reason for this good performance is the fact that we are first of all not as exposed to the insecticide market as other players are. This is a market that is suffering right now from the introduction of the GMO Roundup Ready Intacta from Monsanto. And the fact that we are positioned on segments which are growing above the ag market - bio-solutions is one example.

That explains on top, of course, the good performance in Europe. In particular we are positioned in Eastern Europe and in Southern Europe, where we have good growth and momentum.

How much did bio-solutions grow in the quarter?

The growth quarter by quarter is 30%.

It's still a relatively small piece of our business, but it's becoming increasingly important, because it's, again, a very high margin business.

And longer-term, not being exposed much to Intacta, but how do you think about the range of outcomes as Xtend and Enlist ramp in North and South America?

Longer-term, we have a growing market of glyphosate-resistant weeds, where we are very well positioned. We have also a portfolio that we offer. As you know, with the integration of the three legacy companies, we are also expanding geographically. We're bringing more Agriphar products into the Americas. We're bringing more Chemtura products into Asia and Europe. So I think we have good chances to continue this performance for the next years.

But is the portfolio of herbicides, is it -- would they be directly impacted by Xtend and Enlist? Or are they different modes of action or targeting different types of weeds? I mean, how do you conceptually think about that risk for the business?

Talk to the formulations.

Look, the approach in herbicides is through formulation and through mixes, right? So we have several active ingredients in our portfolio. And what we do is we segment the market; we map the wheat gaps, and we develop mixtures that basically expand our business. So I'm not concerned about our ability to continue to grow in the herbicide market in the Americas right now.

Okay, thank you. And just one last follow-up, if I could. On performance solutions, it was called out -- some second-half strength due to some new business that was already secured. Could you talk about how much of the strength in the second half is already secured and what that new business is?

I can tell you we've had -- without getting too specific about it, we have made some pretty significant headroads into both the automotive supply chain and some major electronics supply chain as result of this OEM approach. So we see that continued growth throughout the second half.

We also have some built-in growth from projects that were won last year. So we're pretty confident about the growth that we projected for the remainder of the year.

Thank you.

Jon Tanwanteng, CJS Securities.

Rakesh, in your first four months on the job, can you tell us what has worked for you and what hasn't so far? Anything surprising to either the negative or the positive side from a management perspective?

Well, listen, I think we've had a great start. For me, it's always about the customers and our people. They come first. I'm feeling good about where we stand with the customers. You always worry about, when you make lots of acquisitions, if you're going to get too distracted and not serve the customer.

But I can tell you, I've been incredibly pleased with how both businesses have been working with our customers. In fact, the fact that we performed the way we did in Q1 is a testament to that.

And I think the second thing is about people. I think, as I've had a chance to now get out and meet the people at all levels, I'm feeling very good about the strength that we have in this Company.

You know, we have clearly got work to do. There is a lot more streamlining we have to do. So there's going to be some heavy lifting over the coming few quarters and all. But I think those are going back to the basics. There is nothing that I see that would come in the way. I want to make sure we address any of the noise around, you know, some of the things that have come up before about balance sheet.

You know, I think we are focused on the right things, and we know what's important in the Company. And I think -- more importantly, I think I'm feeling good that there is alignment within the Company.

I know Martin is sitting here; he hasn't said much. I'll maybe ask Martin what he's thinking about -- you know, that he's been involved with Platform right from the get-go. I've been here only four months, and Martin probably sees the before and after.

Yes, I'll take the after. (laughter) I mean, the reality is just the entire tone of the organization, and the direction, and the focus is exactly as I had hoped it would be. It is becoming much more reminiscent of what I'm used to organizationally from my days in building Jarden.

And as Rakesh, I think quite rightly, said: it's not without things that we have to deal with. But at the end of the day, it's having really good people focused on the right things, driving performance for customers that will get this Company to be the success that we saw it always had the potential to being.

And I think we're a lot further -- we are at light years from where we were four months ago. I think will be light years in eight months from where we are today. And that's a good thing.

Great. Thanks for the color. And any comment on the overall demand environment in both segments heading into Q2, now that we're about halfway through -- especially given headwinds like a mobile device peak, or what appears to be a pretty ugly situation in Brazil right now?

From the performance side, you mentioned mobile demand peak. It clearly has peaked, and nobody is predicting huge growth in that segment. But there's still a lot of mobile devices being manufactured, which is what we care about. So we are going after share gain. We're confident in our ability there. And then the global industrial market we are excited about. We think we're really well positioned for that.

I think on the whole, things -- you know, obviously we have great pockets of strength. I would say the two areas that we are watching -- one is Brazil. I think all you guys know, with the political environment there, that's always something that we have to be cautious about, whether that's going to make our customers little more cautious. So we'll watch that.

And then just the whole North American ag situation. I would say that's always in my mind more of a wildcard than any other region. But on the whole, I think we know the plusses and minuses. And that's how we're managing the business.

Thank you. This concludes today's Q&A session. I would now like to turn the call back over to management for any closing remarks.

Well, first of all, I want to thank again everybody for joining us. I know we usually do this call in the morning, and we are doing in the afternoon this time around. So I appreciate everybody calling in. Hopefully, we'll see many of you in person in September at the investor day.

So have a good evening. Thank you.

Ladies and gentlemen, thank you for participating in today's conference call. This does conclude the program, and you may all disconnect. Everyone have a great day.