Element Solutions Inc (ESI) Q4 2014 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and 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 will 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 material 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 that Platform has posted supplemental financial data slides through 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 & Presentations. Following management's remarks, there will be time allotted for Q&A. Now I would like to turn the call over to Platform's 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 2 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 LifeSciences. Through all these, our MacDermid business continue to perform remarkably well. We posted a record quarter and year for MacDermid in adjusted EBITDA and began to see a strong contribution from 2 of these 3 agricultural acquisitions. For the combined entity in Q4, we grew revenues and adjusted EBITDA by approximately 47% over last year, despite a 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 acquisition of CAS, Agriphar and Arysta, but does not include the full year contribution from CAS and Agriphar and it includes no contribution from Arysta, which we closed in February 2015. Importantly, we added depth in the management and completed successful financings this quarter 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 of both agricultural, chemicals and operating global 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 closed the Arysta transaction in mid-February. The Arysta acquisition was, by far, the largest of the 3 transactions we announced last year. In addition to strong results and transformative acquisition, there are other important highlights to mention. We promoted Scot Benson, and be of President of MacDermid. Scot succeeds me after 25 years of leading MacDermid. Scot is a seasoned member of our MacDermid plant, and I can't think of no better person to lead MacDermid as it enters this new phase. We settled a law [indiscernible] litigation for $25 million payment, which we'll receive -- sorry, we expect to receive the fund with the settlement -- of the settlement in early Q2. We also received an approximately $60 million judgment in a separate litigation with a potential for a higher judgment in the future. We continue to add depths on the corporate team and have added Senior VP of Human Resources. Ben Foulk joins us from Boehringer Ingelheim, I probably butchered that one, sorry. 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'll turn you over to Frank to walk you through the financial results in more detail.

Thank you, Dan, and good morning, everyone. We are pleased to report a record quarter and year-end for Platform Specialty Products. Today, I'll be -- we'll be discussing our results for the quarter and the full year to date using numbers on an adjusted basis, as we believe that 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 would find and our adjusted results will provide a clearer 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 in 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 2-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 Graphics 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 Graphics Solutions was moderated in the quarter due to the strengthening U.S. dollars, which represented approximately $5 million of headwind to the top line. The Performance Material operational gains that we have been experiencing for the first 9 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 markets and demand for our Electronic 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 segments, 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 Graphics Solution. The company experienced continued headwinds in the Graphics Solutions segment on a year-over-year comparison with its flexographic newspaper plate product line, but this revenue was replaced for 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 currencies. For the full year 2014, Platform revenue was $843.2 million, up $97.2 million or 13% from the $746 million that 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 was only in for the quarter, contributing the $88 million. Top line growth from our MacDermid operations, which, again, is the Performance Materials and Graphics Solutions segment, was moderated in the year by the strengthening U.S. 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 2 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 USD 1.1 billion bonds and EUR 350 million worth of euro bonds, a USD 500 million through an incremental term loan and an additional EUR 83 million and $150 million of bank debt financing through our existing credit facility. At December 31, 2014, pro forma for the closing of Arysta would have had $3.4 billion of net debt outstanding. Although our current leverage multiple is outside of our target, we have communicated previously a 4.5x 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 4.5x 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. Our strategy of building a portfolio of excellent asset-lite, high-touch businesses focused on niche markets is one that resonates with me deeply. The Ag business, as 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 business in general, each of the 3 Ag efforts Platform 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 3 businesses. And when you adjust the currency effect, the growth rate over 2013 was 6.9%. Foreign exchange continues to be a headwind in 2015. Over the first 2 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 in niche categories, especially sectors by BioSolutions and seed treatment and high-growth geographies, helps to insulate us from the broader weakness in the market. If there's one thing I've learned about the agrochemical market over the last 5 years is that you'll never have perfect conditions. But on the flip side, you will not have adverse conditions everywhere. So overall, the agrochemical market is off to a start more consistent with the 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 on the market. Water concerns in California and a heavy long-lived midwest winter will further contribute to this pressure, but we expect to have both a normal spring for cereals as well as strong spring wheat campaign to help offset and alleviate destocking 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 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 fruits and vegetable production in Central Europe and, hence, we are switching our hope [ph] into different segments and 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 3 assets, is extremely compelling. They're complementary in terms of products and geographies has been referred to frequently and cannot be understated. However, as Dan frequently says, collecting asset is not enough. We must make them better. We have communicated a plan to realize an estimated $65 million of synergies from the integration of these businesses by 2017. In the months since we closed the Arysta transaction and we're 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 3-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 3-year solicited target is now $80 million. We will continue to analyze other opportunities and instinctively feel there maybe 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 businesses and its management team. While we anticipate foreign exchange will be headwind to our reported earnings growth for 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 portfolios 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 baskets, currency is about 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 would 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 shouldn't dimensionalize what we are facing as the dollar continues to strengthen. We have some hedges in place in the form of euro-denominated 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 3 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. And when I answer these questions, I often say that, in 2015, if we do a few smart deals and realized a [indiscernible] 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 home than Platform. We cannot dictate the deal flow, and we'll continue to evaluate opportunities that fit our criteria. We are very busy. The only -- 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. There will always be room for improvement. I look forward to updating all of you in our progress on future calls. With that, we'd be happy to take your questions. Operator?

[Operator Instructions] Our first question is from Jon Tanwanteng of CJS Securities.

Can you talk a little bit more about the focus on acquisitions versus the 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 that an office of the Chairman. And the office of the Chairman were made up of Martin Franklin, Wayne Hewett and Dan Leever, myself. And within that office of the Chairman, there's going to be a primary focus, I guess I would call it, of each of us. But the ability to fill in from the other person depending on what the workload happens to be at the time, so it's going to be a pretty fluid kind of dynamic. And within that, to make to the short story long, Wayne has really the primary responsibility for the execution of the plan on day-to-day basis. I have the primary responsibility 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 primarily -- primary activity is really the firm architecture, number one, and the deal side. So all 3 of us are involved in the deal side. All 3 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, in 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 deal pursual or the hunt, if you will.

Great. That's helpful. And then 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 the rising interest rate impact the 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 our hurdle rates. But we've done so far, and we have reason to believe we'll be able to do it again. We really need to remember that we have a pretty unique focus. 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 on 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 environment, we really believe it lowers multiples and gives us the same opportunity.

Great. And Wayne, can you just give us a little bit more color on what gives you the confidence and growth forecast for the Ag business, I guess, kind of x currency?

Yes. On an x currency basis, and I think that as you saw by the comments that I just made that all 3 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 row crops, as well as we're very focused in the high-growth markets where we actually have a chance to have a lot more differentiation and get a lot closer to our customers, focusing customer solutions. So I think that's what you're seeing coming through in results. That's what we're seeing as we sit here today in Q1, and that's what gives us confidence for going forward in 2015.

Okay. And then just finally on the MacDermid side. You had a record quarter in terms of margins. I'm just wondering how sustainable that is? And what you're expecting from the oil services side of the business as energy prices kind of keep turning down here?

The January and February in -- for offshore fluids business were record months. So what we're seeing realtime is continuing robust business conditions, all right? We may not get -- 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. We -- and there has been a lot of CapEx spend over the last 5 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 that, that moderates over time, for sure. But I think that we can find 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 margins in MacDermid. They had an amazing year last year, I got to tell you. I mean, the fact that so much of our time was spent on other things last year, the management team here did an amazing job, and they had an extraordinary year last year. And I don't see any -- it's exciting, I think they're forecasting a much better year this year. So far, so good. Currency is a problem. Then you'll recognize that when we think about the business, we think about business on a constant-dollar basis because that's what really what we can control at the end of the day, but there are -- there's definitely currency headwinds.

Our next question is from John Roberts of UBS.

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 in 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 and 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 and CAS whether you look at the individual pieces or as a whole up, we -- we're expecting or one would expect that quarter 1/quarter 2 would like 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'll 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 3 being great from an electronic standpoint, and quarter 1 being good for this and quarter 2 to being good for that. The peaks in the Ag cycle is a little bit different between the growing seasons of the 2 hemispheres.

But -- again, back to the -- $0.35 was largely MacDermid. Can we multiply that times 4 to get sort of a base and build the 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'll 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, was it $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, just give me one second, John, I'm 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. It's how the $0.77 broke down. So I would use kind of 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 new to that number.

Yes. So how much is the working capital? So what would be the MacDermid base from 2014 that Ag would build on?

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

Okay, that's fine. That's good. 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'll have to wait until of the end of a full season to see what the full year numbers are?

As part of our Investor Day tomorrow, we're going to have breakdown charts on that, that the investment community and specifically the analysts could see the difference between the 2 businesses and how that now blend 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 sale. And then when you're collecting the AR in those foreign currencies, they're are converted. I mean, we're 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 $1 of revenue in or $1 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'll try to 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'll 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.

Our next question comes from Alex Yefremov from Nomura.

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 1 or 2 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. I mean, 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 really would be a 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. And a follow-up for Wayne on -- 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'll be able to fully offset the FX effect or partially offset? And what is the degree of this partial offset?

Yes. I think -- I'm thinking, we've had a history of this over time. Obviously, the FX moves 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 6 months to a year. There's typically been a time lag in that. So that's kind of our expectation going in. Again, it's still relatively early days. We've had some successes. But I would actually think that we'll be somewhere between 6 months and 1 year in terms of time lag before we see it go all the way through.

Great. And maybe as a follow-up question on Ag pricing. How do you see sort of the competitive environment. I know 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 a manner which -- maybe it's not exactly the same way we're dealing with it but directionally, they're 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, U.S. competitors. But we clearly see a movement for both to try to get -- really to protect local markets.

Got it. And a 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're 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 view is that in countries like Latin America, 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're 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 3 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 3 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.

Our next question comes from John McNulty of Crédit Suisse.

So maybe a question for Wayne. Now that you've got all 3 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 kind of rolling in and what kind of products you actually have? Any other surprises that you're seeing at this point? And then, I guess, on top of that, with regard to the SG&A, how should we be thinking about the -- where kind of the incremental benefits are coming from that you're identifying now?

Yes. You're talking about...

The higher synergies.

The higher synergies with almost $65 million to $80 million?

Yes.

Yes. If you're talking $65 million to $80 million, quite honestly, we're actually seeing in the near term is really 2 things. Number one, we're realizing that there was a lot more management overlap than we initially thought and actually figured and put in the box, number one. And one of the things that we have done, we actually announced, actually within day 1, 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 2 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 just falling or coming apparently, especially in terms of driving this integrated organization to 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 we start talking about the portfolio discussion and as you know, the synergy targets that we shared with you are in a 3-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 or become medium terms, so they'll maybe beyond that 3-year time horizon. But we're excited about the possibility of portfolio management and portfolio integration and how you can leverage that and those additional molecules, you get additional differentiation. We're much more excited. So I -- again, $80 million in 3 years, we feel very good about. It's still early to tell you about what else we can get in the 3 years, but we feel even more excited about what could be in that 3- to 5-year time frame than we thought coming in.

Okay. No, great. And then with regard to working capital in Ag, I know there's been some concerns about receivables and farmers may be being a little more distressed than receivables getting pushed out. Have you -- can you walk us through kind of what you're seeing there? And then I guess, tied to that, do you see any opportunities now that you've combined all 3 entities to improve working capital or maybe you can squeeze a little bit more juice out of the rag?

Yes. 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 have seen both on the payable side as well as other supplier side -- I'm sorry, on the supplier side as well as the customer side, is that we have very different approaches to -- in terms of suppliers, we have different approaches in terms of target customers. And clearly, we know how that will play out. We're going to do the thing that makes the 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 of this cash, for sure. Absolutely. I think 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, and we just talked about 10% currency weakness in the course of the first few months. As you know, in the Ag sector, most of your receivables are longer than 2 months. So we are watching that very, very closely. We are trying to figure out ways to drive more upfront cash payments. We're trying to figure out ways to get more things to tie to U.S. dollars in terms of how you price, how you collect. So that's what we're focused on right now. That, to me, candidly, is a much bigger concern to the day-to-day running this 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.

Our next question is from Duffy Fischer of Barclays.

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, would that allow you to improve your COGS? How are those contracts set up? Can you capture some of that lower cost that they're experiencing in 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 products 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, I guess the short answer is most likely yes. But I think the way we think about it, at least what I think about it, is you can't look at price and cost independently. We have to be focused on GP, right? So our challenge and the opportunities that we have in front of us is how do we drive harder on the first part of your question to make sure that we do that faster than the second part of your question. And we have an opportunity to do it with a lot more leverage because of the 3 portfolios that we have.

Okay. And then just the last one for me, and again, I'm sure you're not going to have a point number, so kind of a rounder number is fine. But if you think about the point when you are modeling the 3 acquisitions in Ag last fall, close on those from that point, obviously, the dollars has increased a lot, how much does that affected the cash flow of those businesses this year versus what you would have had in your plan, October, November, when you are pulling that trigger, do you think? And again, I'm sure you won't have a point, but is it $25 million, $50 million, $75 million? Kind of 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 we talking 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'll likely be today if you just mark the currencies to market today? How much cash flow basically goes away because the currencies relative to what you would have expected?

Yes, I think the short answer and, again, just 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 are really -- again, today, in terms of currencies, we've lost across the platform company about 10 points of currency, given our market basket, 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 to get increased cash and so forth. But in terms of what currency has cost the enterprise since the end of the year, roughly speaking, 10% points.

I think it's important -- 2 things are important to point out. So I think, first and foremost, it's a long game, not a short game. So there's no question that the financial model we ran last year had more cash flow than the current one does. And let's pick a number, $40 million is probably is 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'll be sitting here 18 months from now, and it'll be $40 million higher, $60 million higher. So given that it's a long game, we feel fine about the acquisition we did last year. In fact, better than fine, to be honest with you. We really feel like there are opportunities greater than what we anticipated going in. So the growth rate and the intrinsic value is going to be higher even after the ForEx impact.

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

Yes, just a couple of other questions. One of those in the synergy cost, I wonder if you can just help us get some an idea from a cash cost standpoint, what you may be expecting.

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

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

Yes. It's funny, because one of the things that we were driving from 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 profits, excuse me, is actually coming from new registrations that have been introduced over the course of the prior 3 years. On the Arysta side, that number has been running between 15% and 17%. Interestingly enough, the CAS number, we went through to do the math, but 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 3 companies, even though they call it something different, were very similarly focused on looking at how do you actually get more differentiation in the marketplace? How do you capitalize the opportunities that, therefore, lead to new registration, 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 it's something that we are absolutely 110% committed to finding a way to continue as part of the new company going forward.

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, yes. Again, when you obviously, when you put together 3 companies, there's going to be something, right? I'd be lying if I tell you it was 0. But I can also tell you that based upon everything that we've seen, we see a lot more opportunities. It's probably a factor of 5x the opportunities versus the cannibalization side of it. So from your standpoint, cannibalization, I'd say, is not going to be material.

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

I just had a quick question. I was kind of 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 standalone basis from a revenue and EBITDA perspective?

So 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 of the Arysta numbers all into U.S. GAAP for comparison purposes. So we'll have those out very soon.

[Operator Instructions] Our next question is from Edlain Rodriguez of UBS.

Just a quick question for Wayne, sort of 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 the regions? Or do you think some regions will prove to be more challenging than others in terms of getting prices?

Yes, I think you know the answer. But never plays out exactly the same because you got to go through different competitive tensions in every part of the regions. However, for us, we know the major regions and that the major reasons 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 kind of funny, right, because in a good way, having rapid acceleration of currencies or rapid weaken in the currency actually helps you because if it was more moderate, it would be tougher conversation with customers. But when it's rapid, everybody gets it, everybody gets it. But the short answer is they be different. But in the major regions, we're quite confident because we're already starting to see some success.

Okay, that make sense. And this for Frank. I mean, 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 -- I'll just go back to my notes here. So the pro forma net debt -- let's see, give me one second here, just trying to 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 preregistration and registration costs, as well as what we 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 where we're 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.

And 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're going to present that going forward, as we've 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.

Our next question is from Lauren Gallagher with Credit Suisse.

Just kind of the 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 they were down a little bit year-over-year. I was wondering if you can 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 with 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 wholesale of the transaction, customer wants to make sure he 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 '14, and then you had more normalization in the back half of the year.

Okay, great. And then just clarifying a modeling question. If FX were to stay where it is today, is it fair to assume the impact EBITDA could be, call it, $50 million to $60 million for fiscal '15?

On year-over-year?

Yes, how much? 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 built our 2015 budget and use those rates to restate '14 and so forth, it'd be about $40 million.

I would now like to turn the call back over to Dan Leever for closing remarks.

Great. Well, thank you, all, for all 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, lot more details to go through in 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, et cetera. So we really hope as many as people as possible can come, and we'll 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.