Lorin Crenshaw - Vice President of Investor Relations and Treasurer Luther C. Kissam - Chief Executive Officer, President and Director Scott A. Tozier - Chief Financial Officer, Chief Risk Officer and Senior Vice President Matthew K. Juneau - Senior Vice President and President of Performance Chemicals D.

Michael Wilson - Senior Vice President and President of Catalyst Solutions.

Ryan Berney - Goldman Sachs Group Inc., Research Division Ramanan Sivalingam - Deutsche Bank AG, Research Division Matthew Andrejkovics - Morgan Stanley, Research Division Kevin W. McCarthy - BofA Merrill Lynch, Research Division George D'Angelo - Jefferies LLC, Research Division Dmitry Silversteyn - Longbow Research LLC Michael J.

Sison - KeyBanc Capital Markets Inc., Research Division Benjamin J. Kallo - Robert W. Baird & Co. Incorporated, Research Division Aleksey V. Yefremov - BofA Merrill Lynch, Research Division.

Good day, ladies and gentlemen, and welcome to the Q4 2014 Albermarle Corporation Earnings Conference Call. My name is Glen, and I will be your event manager for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr.

Lorin Crenshaw, Vice President, Treasurer and Investor Relations. Please proceed, sir..

Thank you, and welcome, everyone, to Albermarle's Fourth Quarter 2014 Earnings Conference Call. Our earnings were released after the close of the market yesterday and you'll find our press release, earnings presentation and non-GAAP reconciliations posted on our website under the Investors section at albermarle.com.

Joining me on the call today are Luke Kissam, Chief Executive Officer; Scott Tozier, Chief Financial Officer; Matt Juneau, President, Performance Chemicals; and Michael Wilson, President, Catalyst Solutions.

As a reminder, some of the statements made during this conference call about the future performance of the company may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about our forward-looking statements contained in our press release. That same language applies to this call.

Please note that our comments today regarding our financial results exclude all nonoperating or special items, and reconciliations related to any non-GAAP financial measures discussed may be found in our press release or earnings presentation, which are posted on our website. With that, I'll turn the call over to Luke..

minerals, which includes flame retardants and specialties; Fine Chemistry Services; and metal sulfides. In aggregate, in 2014, these businesses generated revenue in the range of $550 million and adjusted EBITDA in the range of $100 million. 2015 revenue and adjusted EBITDA would be very similar for these businesses.

Given our priority on our 4 core businesses, we believe that selling the minerals, Fine Chemistry Services and metal sulfide businesses represents the optimal choice for maximizing value to our shareholders and giving the management and employees of these 3 businesses the best opportunity for future growth and market success.

We will use the proceeds from these sales to pay down debt. With that, I'll turn the call over to Scott..

Thanks, Luke, and good morning, everyone. Before I get into the details, you'll notice a change in how we will be reporting and discussing GBU results going forward. We will be using adjusted EBITDA as opposed to segment income, which should provide additional clarity on the businesses' performance.

The non-GAAP reconciliation give you the details on how to bridge to reported GAAP numbers. Today, the financial discussion will be primarily around Albermarle's Q4 and 2014 results prior to the acquisition of Rockwood.

While I will share some high-level comments around Rockwood's full year results, as the Rockwood transaction closed only a few weeks ago, the results discussed and shown in the earnings deck are indicative, preliminary results.

The acquisition and reorganization will make comparisons challenging, but we will strive to provide you information to restate our segments and align reporting definitions anticipating a complete view by our first quarter 2015 earnings call.

Financially, we ended 2014 by delivering fourth quarter net income of $77 million or $0.99 per share excluding special items. Our U.S. GAAP basis earnings were a loss of $19 million or $0.24 per share including special items.

Two special items in particular impacted our results, the largest related to an approximately $0.90 pension-related mark-to-market loss. This noncash loss reflects the actuarial impact of a lower discount rate and longer projected life expectancies partially offset by better-than-expected asset performance.

This has no immediate cash impact as we expect our current funding to be adequate for the next 6 years. We also reported $0.30 per share acquisition and financing costs associated with the Rockwood transaction, and other items amounted to a $0.02 per share loss.

These items net to a loss of approximately $1.22 per share, which when added back to our reported EPS of a $0.24 loss, gets you to our adjusted EPS of $0.99 for the quarter.

Net sales totaled $599 million, and adjusted EBITDA was $137 million for the quarter, while profitability, as measured by adjusted EBITDA margin, was 23%, slightly up from Q4 2013. Revenue was down 6.4% in Q4 and was impacted by the strengthening dollar by about $10 million, or 1.6%, mostly from the euro and yen.

Earnings per share were impacted negatively by foreign exchange by almost $0.02. Fourth quarter earnings were hurt by about $0.05 per share on a higher-than-expected tax rate due to geographic mix of our revenues in the quarter, primarily due to the lower drilling fluid shipments out of Jordan.

Finally, lower share count due to share repurchases in the first half of the year contributed $0.04 per share.

At this time, for the combined company, we expect our effective tax rate, excluding special items, nonoperating pension and OPEB items for 2015, to be 25% or so, again, driven by the level and geographical mix of our profits including those generated as a result of the recently completed Rockwood acquisition.

Our diluted shares outstanding after the acquisition are about 113 million. Free cash flow defined as cash flow from operations, adding back pension and post retirement contributions and subtracting CapEx, was $361 million for 2014, up 24% from 2013 and the strongest in our company's history.

The growth was driven by improved working capital and more normalized CapEx spend that was at $111 million or 4.5% of revenue. For the newly combined company, we expect CapEx to be between 4% and 6% of revenue. And in 2015, we will be managing to the higher end of the range as synergy projects are executed to deliver cost savings.

At the beginning of 2014, we established a goal to reduce working capital by $100 million by the end of 2015. We ended 2014 with networking capital down to 23% of revenue, down nearly 5 percentage points representing a savings of approximately $120 million.

Our team has accomplished a great deal and will face new opportunities with Rockwood, which has an even longer cash conversion cycle than Albermarle's. In 2015, our focus will be on pushing that rate below 23% and ensuring those gains are sustainable as we look at setting our next milestone.

The strength of our balance sheet is a source of pride at Albermarle and allowed us to execute the Rockwood acquisition and remain investment grade. We are committed to aggressively deleveraging and have a goal of achieving leverage as measured by net debt to adjusted EBITDA in the range of 2 to 2.5x by the end of 2017.

Executing the divestitures that Luke discussed will certainly aid us in this objective. During the quarter, we raised $1.9 billion in debt in preparation to fund the Rockwood acquisition. However, net debt to adjusted EBITDA remained low at 0.78x as of year end as the cash proceeds from the offerings remained on our books.

We expect that ratio to increase to around 4x when we report our first quarter results, in line with our expectations, and expect to end 2015 at 3.7x before the impact of any divestitures.

Although the transaction has only been closed for 2 weeks, the repatriation of our cash has already begun with over $1 billion in cash having been repatriated from overseas as of today. We have already taken out 75% of the bridge loans and expect to remainder to be taken out by mid-February.

On another positive cash flow note, we previously estimated that as much as $400 million of our 2015 free cash flow would likely go to onetime tax payments to repatriate that foreign cash. However, we now estimate a onetime cash tax outlay in 2015 of much less at $150 million to return over $3 billion in cash to the U.S.

Roughly half of the cash will be repatriated in 2015 with the rest returning as we earn it over time. While the impact of foreign exchange on total company sales and earnings in 2014 was very modest, as we enter 2015, the steep depreciation of both the euro and the Japanese yen represent a major financial headwind.

Our earnings are exposed to the movement of these 2 currencies versus the dollar. Specifically, on the combined company, we estimate that every $0.01 change in the euro-dollar exchange rate will have an impact of approximately $1.5 million to $2 million EBITDA.

And every JPY 1 change in the yen-dollar exchange rate will have an EBITDA impact of approximately $0.5 million to $1 million. To put that in perspective, ranging the euro between $1.12 and $1.18, and the yen to between JPY 117 and JPY 121, we would expect to see a $40 million to $50 million headwind to EBITDA in 2015, or about $0.20 per share.

And now I will turn to each GBU's 2014 financial performance. For the full year, Catalyst reported net sales of $1.1 billion, up 9% year-over-year; and adjusted EBITDA of $300 million, up 12% year-over-year; and adjusted EBITDA margins of 27%.

The strong revenue growth in 2014 was driven by volume and price increases and favorable mix within Heavy Oil Upgrading and Clean Fuel Technologies. Of particular note were new customer wins in Heavy Oil Upgrading and a large first-ever sale of AlkyClean, a solid asset alkylation catalyst designed to increase a refinery's octane yield in clean fuels.

This growth was partially offset by continued pricing pressure in Performance Catalyst, predominantly in aluminum alkyls in catalyst precursors. In the fourth quarter, with a drop in oil price, we saw evidence of higher operating rate at some of our customers that we think benefited our HOU business.

However, we also saw what may be the beginning of a shift by refiners into cost management mode. Catalyst Solutions' 12% growth in adjusted EBITDA was the biggest source of earnings growth for the entire company. Refinery Catalyst was the main driver with double-digit growth and margin expansion driven by volume and pricing gains.

And Performance Catalyst Solutions' full year revenue and volumes rose year-over-year, reflecting solid underlying polyolefins market demand, offset by soft pricing and lower utilization rates at our facilities, which we believe is consistent with utilization rates across the organometallics industry.

For the full year, Performance Chemicals reported net sales of $1.4 billion, down 3% year-over-year and adjusted EBITDA of $337 million, down 6% year-over-year on adjusted EBITDA margins of 25%. The year-over-year weakness was primarily driven by lower Fire Safety Solutions results and the loss of a large custom services contract.

Within Fire Safety Solutions, revenue and profits were down, despite higher volumes on lower pricing within certain pockets of brominated flame retardants, or particularly in insulation foam, where product transition is occurring, and continued soft pricing in China.

We believe that the higher volumes were predominantly reflective of an ongoing mix shift towards server and automotive electronics markets, offsetting continued sluggish demand in the TV and PC markets.

Fine Chemistry Services finished the full year with a modest profit increase, despite unexpectedly losing a major contract during the year on strong results within the pharmaceutical and electronic materials applications and aided by a onetime event related to supply of a pharmaceutical active ingredient in the third quarter.

Specialty Chemicals finished the year with modest profit growth on flat volumes. Year-over-year results were driven by strong methyl bromide sales volumes, which we do not expect to continue in 2015, and curatives which delivered record profits.

Drilling completion fluids were solid as this business benefited from another year during which the backdrop for offshore deepwater completions remain quite favorable.

However, during the fourth quarter, amid the steep decline in crude prices and announcements of CapEx reductions by drillers, we began to experience significantly weaker order patterns for completion fluids. In total, overall bromine-based product volumes were flat year-over-year with a drop in oilfield being a year-end surprise.

Brominated flame retardant volumes were up about 5% for the year, but mix shifts to lower-end products and continued weak pricing meant that earnings were down. EBITDA margins for bromine were flat versus 2013, north of 35%. Now let me provide some perspective on a legacy Rockwood business performance.

As a reminder, these numbers for lithium and surface treatment are based on Rockwood's historical reporting practices. For the full year, lithium had an estimated net sales of $474 million, down 1% year-over-year and adjusted EBITDA of $199 million, up 9% year-over-year, resulting in margins of 42%.

The primary performance drivers were battery grade applications rising over 20% year-over-year on growing demand within the consumer electronics market in particular; the acquisition of Talison, which contributed nearly $30 million to full year adjustment EBITDA; and GDP-type growth in most technical grade applications offset by weaker butyllithium and potash results.

Excluding potash, lithium's adjusted EBITDA would have been up 15% year-over-year. Surface treatment had estimated net sales of $940 million, up 6% year-over-year and adjusted EBITDA of $220 million, up 11% year-over-year, resulting in margins of 23%.

The business had a great year on all measures benefiting from broad-based volume growth and pricing gains in most end markets, particularly driven by higher automotive OEM and automotive components, general industry, coil and cold forming applications and aerospace applications.

Results also reflect continued market share gains and the impact of the acquisition of the remaining 50% interest in its previously unconsolidated joint venture in India. With that, I'll turn the call back over to Luke to talk further about our outlook..

one, seamless, effective and efficient integration of the businesses that achieves our stated synergy targets; two, actions to accelerate growth in our core businesses; and three, generation of strong cash flow that allows us to rapidly deleverage, invest in organic growth opportunities in our core businesses, return capital to shareholders via dividends and share buybacks and where appropriate, opportunistic, small bolt-on acquisitions to accelerate EBITDA growth in our core businesses.

We are better positioned today than we were a year ago to deliver long-term value for our shareholders and have the people and resources in place to execute that strategy. With that, I'll turn the call over to Lorin for your questions..

Operator, we're ready to open the lines for Q&A. [Operator Instructions] You can proceed..

[Operator Instructions] And your first question comes from the line of Bob Koort with Goldman Sachs..

This is Ryan Berney on for Bob Koort. I was hoping you could provide a little bit of background on the surface treatment business just for us here. If I recall correctly, a lot of their sales are to Europe, especially into Germany.

Could you give us a little bit of a break out there geographically on where else that business sells into?.

Yes. I think, it's predominantly European business. And then you would see other sales in the United States would be the second most, with Asia Pacific and Latin America coming in at a distant third.

So there's opportunity for growth there, and that's one of the reasons where you'll see in the first quarter the acquisition of that joint venture partner in Asia..

Great. And then as a follow-up, we've been following some bromine pricing recently. And it looks like China maybe is getting slightly better.

Could you comment there versus kind of what you're seeing, and if your comments on the lower China bromine pricing are more kind of year-over-year versus sequential?.

Yes, go ahead, Matt..

Yes, I'll take that. Ryan, we have not yet seen a significant change in China. But remember, in our businesses at beginning in the year, you've always got the impact of Chinese New Year, so they tend to start pretty slow for us in China in the first quarter.

And Chinese New Year is mid-February this year, so it's about where we expect it in January, but I would not say we see a pickup..

And your next question comes from the line of David Begleiter with Deutsche Bank..

This is actually Ram Sivalingam, sitting in for Dave. Luke, just a quick question. Could you perhaps give us bromine utilization rates by region? Just to give us a sense for how loose or tight that is? [ph].

Yes. It will be tough for me to do it by region. But I can tell you that in 2014 overall, we were in the high 60s for bromine utilization rates when you're looking at absolute bromine. So -- and it was about the same for JVC as it was for Magnolia. It's roughly the same, within a couple of percentage points, one way or the other.

We can move production around based on where the derivative demand is. But roughly, if you look at that blended rate, it's in the high 60s..

Got it, that's very helpful. And then in the past, given some demand erosion in legacy TV panels, you've talked about reapplications for bromine. Any progress there, just in terms of demand for products? [ph].

Yes, yes. We've made some progress in that. We've developed some particularly as it relates into the oil field where there's the most promising for the shorter term and seeing good results there. Some of the longer-term projects have not panned out from a last scale standpoint, so we've reallocated those resources. So we're making progress.

There's nothing -- but everybody needs to understand, this is a long term view. We need to do this, but I don't -- well, there's nothing built into our 2015 numbers relative to these new products. It is a development product at this time..

And your next question comes from the line of Vincent Andrews with Morgan Stanley..

Yes, actually, it's Matt Andrejkovics on for Vincent.

Could you just help just clarify some of the competitive dynamics that you're seeing in the Performance Catalyst business? Like, what's driving the soft pricing while you're seeing increase in demand? And then additionally, can you help us understand the decision to move that segment into the Performance Chemicals GBU?.

Yes, let me take the second one first, if you don't mind, to move that into Performance Chemicals, and then I'll let Michael talk a little bit about competition. Essentially for competition, he'll go into more detail, but it's overcapacity in the market.

We tried to address that somewhat by taking out our highest cost production in Europe last year, but that's essentially what it is.

The second question you had is why move it into that? Because when you look at putting the lithium business together with the lithium alkyls business, they have butyllithium and such, along with our aluminum alkyls, that's where we thought we could get synergies not only from a customer overlap, but from a production overlap, from an asset overlap, from the way those markets go to business.

So we thought it was the most efficient way to do it. You don't get those efficiencies in the refining catalyst business. So that decision was made to do that.

Mike, do you want to talk a little bit about the competitive dynamics?.

Yes, Matt. I think Luke largely answered the question. We've talked about this for most of the past year, and it's just supply and demand. There's overcapacity on the alkyl side of the business. Part of that, we've acknowledged, we've added capacity over the last couple of years, and there were a couple of new competitive entrants.

So the good news is, is that demand is continuing to grow. So as that capacity utilization tightens up, we should get back to a point of having some pricing leverage. And of course, as Luke pointed out, we took a significant step last year by taking capacity off-line in Europe..

Great. And just as a follow-up.

Have you guys earmarked the net proceeds that you think you would gather from some of these divestitures that you're contemplating?.

Well, I certainly have a number in my head that I think we should have, but I think the market will say what that is, and we'll make a decision on whether we divest or do it.

I don't think it makes a whole lot of sense for me to throw a number out there because it sets a floor or a ceiling, and I want to maximize what we can get out of these assets because they're great assets.

And in the right hands, they'll be able to grow and be market leaders in each of their respective markets, and we're looking forward to getting through that process..

Your next question comes from the line of Kevin McCarthy with Bank of America..

Luke, can you give us a sense for your rationale in choosing to divest the 3 businesses that you called out as well as a feel for how the $100 million in aggregate EBITDA might be disaggregated among those 3 businesses?.

We've got 4 core businesses, and we need to focus on those 4 core businesses and to continue to drive them because we've got great opportunities in that, and we need to deploy resources both from a capital standpoint as well as from a people standpoint to drive the growth opportunities we have there.

It was going to be taking away from that for us to continue to try to develop these businesses. They're solid businesses. They generate nice EBITDA, but they're not going to be a strategic focus for Albermarle in the long run and they're not big enough to move the needle.

So we decide -- we made that point that we thought it was in the best interest of our shareholders to divest these businesses at this time, to take the proceeds to allow us to deleverage more rapidly and move forward with our strategy. So that was the thought process behind it, and Scott can give you a little more details on the numbers..

Yes. So on the 3 businesses, Kevin, minerals is the largest, at roughly $250 million and roughly 10% EBITDA margins. The Fine Chemistry Services is the next the largest, around $200 million, and they've got margins that are up in the -- EBITDA margins in the upper 20s.

And the metal sulfide business is roughly $100 million with kind of a high-teen level type EBITDA margin. So that kind of breaks it down a little bit as to where they are..

Great, that's very helpful. Second question, Luke, on lithium. Chile's National Lithium Commission seems to be reevaluating policy as it relates to long term development of the resource there.

What is your view of that? Can you maybe elaborate on any discussions or view on how policy might change in Chile, and what, if anything, that would mean for Albermarle?.

Right. That's a great question. The lithium commission issued their findings yesterday, and so we've had a chance to review them. I'd also say that the week of the 19th, I was actually in Chile and met with a number of officials in the mining industry and other government officials about the business there to understand their thinking.

I think, number one, lithium is a non-concessible mineral so that remains unchanged, which is a good progress. Number two, the existing contracts don't change, so the existing contracts to the SQM and that Rockwood have are remained unchanged, and I was assured time after time that those contracts will be honored.

Going forward, I think they are going to establish a state entity to manage the development of future lithium projects, and they are looking for participants that are interested in doing that with a track record in the industry, which is very positive, we believe, from an Albermarle and Rockwood standpoint.

So we applaud the government for taking these steps. We look forward to the collaboration, not only for the exploitation of the Salar for the development of lithium, but they also talked about the collaboration from an R&D perspective to drive new uses for lithium, similar is what Albermarle's trying to do for bromine.

So we stand ready and able and think we're in the best position to collaborate with them with new uses as well as in the long run, allow us to be their preferred partner. And if you'll allow me, I just -- the agreement that we have, Kevin, we have the right for 2000 metric tons of lithium.

We started operating there in 1984, it was the first carbonate production, and we've used essentially 80,000 metric tons of lithium through the end of 2014, which leaves us over 120,000 metric tons of lithium, which at our current extraction rates, allows us to operate under the existing agreement that we have into the 2030 kind of timeframe.

So it's not an issue short term. Long term, we ought to be the preferred partner of that commission, and we're going to work very hard to ensure that we are active participants in the lithium markets in Chile forever..

And your next question comes from the line of Laurence Alexander with Jefferies and Company..

This is actually George D'Angelo in for Laurence.

First question, given the 35% EBITDA margin in bromine, can you just give some puts and takes on what happened in the rest of Performance Chemicals segment and where the weakness was?.

Yes, I think Scott can do that. But essentially -- or Matt, both of them are here. But essentially, what it is, is if you just look at it, those have always historically been lower margin business, so there wasn't a whole lot of year-over-year change from a dramatic standpoint.

But Matt, do you want to comment just a little more?.

That's correct. On a year-over-year basis, if you look at the FCS, it was flat to slightly up, that would be Fine Chemistry Services piece. If you look at the minerals business, it was roughly flat as well with a little bit of upside versus 2013. So what you're seeing, really, reflects the impact in the bromine franchise year-over-year.

So the EBITDA margins would've been somewhat higher, if you will, in 2013 compared to 2014..

Okay.

And can you guys just provide a little bit of a timeline for selling the 3 businesses?.

Yes. We're -- our goal is to divest the businesses by year-end. But obviously, that depends a lot upon the third party.

So we'll launch the process in the month of February, but -- and we've got a plan laid out to be able to close them by the end of the year, but it depends on who the specific purchasers will be, what their hurdles may be and what the -- you got to deal with the third party. So it could take longer, but that's our goal..

Your next question comes from the line of Dmitry Silversteyn with Longbow Research..

A couple of questions, if I may. First of all, in terms of sort of the strategic thinking in -- I'm sorry to be revisiting ancient history here, but Albermarle spent some capital to build its flame retardant business beyond bromine with phosphorus and minerals. You've sold phosphorus a couple of years ago when that business profitably deteriorated.

Now you're selling minerals. So it seems to be kind of a complete about-face from the strategy of, let's say, 10 years ago.

Kind of what -- as you kind of look back on your execution over the market developments, what didn't go right for you in sort of building yourself into a flame retardant powerhouse? And how do you -- what do you see yourselves as going forward if it's not a bromine....

Yes, that's a great question. So I think one thing I'd say is we're a different company today, because of the acquisition, than we were before. So number one, I think in phosphorus, the acquisition that they made was a small phosphorus business, and you could not compete with the Chinese because you just didn't have the volume.

You didn't have a big enough position in phosphorus to get your cost to a level where you could be competitive. So that's ultimately the death of that phosphorus business from an Albermarle perspective. If you look at minerals, minerals has been an excellent, excellent acquisition for Albermarle. It has -- it had an outstanding return overall.

I think we paid $20 million and assumed some debt for that. And you can see the EBITDA that is -- the kind of EBITDA that's throwing off on an annual basis.

So it has been a great -- if I just look forward, it's not going to get the kind -- I don't see the kind of growth for that business that I do in lithium, surface treatment and catalyst and I don't see the profitability.

So I don't know that I'd call -- I'd say it was more of a change in circumstances than it was a failed strategy on the minerals business..

Okay, that's helpful. And then to stay in the flame retardant topic. I thought you -- I heard you say on your prepared remarks that you expect some headwinds on mix or pricing from the European adoption of the new non-styrenic installation.

Can you get a little bit more granular on that, why that's going to be a problem for you? And then also, how will the ICL joint venture in the non-styrenic installation flame retardants work for you when it's active later in 2015?.

Okay. So Dmitry, this is Matt, I'll take that. So the bulk of that headwind actually occurred really this year for us because if you remember, we've been unable to enter the market for the new polymeric flame retardant that is replacing HBCD until late in 2014.

So what we have seen is faster conversion from HBCD toward the polymeric replacement, and that impacted our 2014 numbers fairly significantly, and that's what we referred to in the script. As we look to 2015, with the announced joint venture with ICL, we are already selling GreenCrest with our tradename for that polymeric in the market.

We're entering the market already, and we really don't have the same kind of headwind year-on-year in 2015 that we had in 2014 versus 2013..

Okay, I got it.

So the headwind was really in 2014, and you actually expect it to be a good guide for you in 2015?.

We expect it to start contributing in 2015..

And your next question comes from the line of Mike Sison with KeyBanc..

Luke, when you think about the Rockwood transaction back in July, I think the expectation that you'd hoped to do in '15 was EBITDA over $1 billion and free cash flow closer to $500 million. And at the midpoint, you're about the $100 million off in EBITDA and free cash flow is certainly up quite a bit.

Can you help bridge the gap of -- and I know there's foreign currency, yield services, but just kind of help us bridge the gap of where the delta is? And then I have a follow-up..

Yes. So I'll let Scott talk through the bridge. I think on the cash bridge though, the one thing that's important to remember is, remember that the $500 million was on a full year run rate basis, which did not include the tax payments, okay, that we talked about to repatriate the cash.

The $100 million to $200 million that we talked about today includes that tax payment, so it's not that big of a gap, as Scott can go through.

Scott, can you walk through the bridge, please?.

Yes. So Mike, you've got the numbers, right? So overall, versus what we were expecting, currency plays a big role as you might expect. Roughly $40 million -- as we said, $40 million to $50 million, the same as what it is on a year-over-year basis.

The second key one is a change in reporting that we've made with how Rockwood traditionally reported a JV EBITDA. So traditionally, Albermarle has used a net income from our joint ventures and included that in our EBITDA. Rockwood has used a JV EBITDA rather than the net income. And so we've converted them to that same methodology.

That drives roughly $25 million. And then you get down to business results and business outlooks, and that's roughly the $100 million that you referred to. The predominant side of that is really in Performance Chemicals and the lack of growth and the challenge that we've had with the drilling fluids and dropping off on the bottom of us.

A little bit of lithium but not much. So those are the big drivers. Cash flow, as Luke said, if you would have looked at our free cash flow with that tax payment, it would have been around $100 million in the model, so $500 million less that $400 million tax payment.

We're still forecasting $100 million to $200 million of free cash flow next year on a better tax payment primarily and a little bit better in joint venture dividends..

Okay, great.

And then Luke, when you think about what the -- your earnings potential should be longer term, maybe take us out '17, '18, it might be early, but where do you think the EBITDA potential combined with all the synergy growth potential could be longer term?.

Well, I think we still -- we've got about $50 million of synergies built into this, so there's another $50 million of synergies on top of that. And we've talked about the growth that we would expect.

I think that surface treatment, I see no reason they can't continue with double-digit -- high single, double-digit EBITDA growth as long as they can continue to drive their services. So I see that.

Catalyst, a high oil upgrade, we've always said we've been in a period of time, depending upon the crude slate, but I expect our catalyst business, refining catalyst continue to grow.

And lithium will grow the way we've described it, in the high single digits as well as double-digits once -- mid-double-digits once we see the, really, adoption and proliferation of electronic vehicles. So there's not a reason in this world when we look out '17 and '18, we can't be at $1 billion.

We've got just some issues that are impacting us this year from a macroeconomic trend on that price of oil that I can't tell you where that's going to go, and currency just punched us in the gut. So those are the 2 main factors..

Your next question comes from the line of Ben Kallo with Robert W. Baird..

Real quickly, housekeeping on the EPS, did that include businesses that you're going to divest? And if so, how much EPS, roundabout, does that include?.

Yes. So that does include the businesses that are being divested. So we're not assuming that there's any divestitures at this point in time. It's roughly $100 million of EBITDA, so a roundabout [ph] EPS impact for you..

Okay, got it. And then on some of the commentary on FCC, I know you've addressed this.

But what are you seeing on the FCC catalyst business right now as far as your refiners? Are they in kind of a shock mode in purchasing, where they're still waiting on commodity price changes? So is that what some of the uncertainty is that you're seeing there?.

I think what we're seeing in FCC catalyst is more, right now, we've got some change outs in the first half -- I mean, not change outs, some competitive trials in the first half of the year that will reduce our volume.

We're seeing more in the high oil -- in the clean fuels or the hydro treating catalysts where they seem to be pushing out some trials, pushing out some change outs in running at a little more cost focus.

But, Michael, do you want to address that in a little more detail?.

No, I mean, I would say on the FCC side for the full year, I mean, we're still expecting a significant volume growth year-over-year. Now the timing of that from a quarter calendarization standpoint, as Luke has pointed out, is going to be stronger in the second half of the year for the reasons that he has given.

But overall, still strong demand growth. And I think that is attributed both to business that we've already won, that's coming on stream and also just the suite of products that we have to offer refiners to solve their problems regardless of what changes they may see in crude dye [ph] or end products.

So I don't really see that much of an issue on HOU. It's going to contribute, I think, strongly both to volume and earnings growth in 2015..

And then my last question.

We understand the foreign currency translation impact, but how is it -- can you run through the business units from a competitive standpoint where you have foreign competitors? And how that changes the competitive landscape because of the currency impact?.

Yes. I think if you look at surface treatment, surface treatment is really very localized and regional. So I don't -- it doesn't have much of an impact on the surface treatment business from a competitive landscape.

It has a big transitional impact for us, but from a competitive landscape, because it so -- such a regional business, it doesn't have as big of an impact. If you look at the bromine businesses from a standpoint that's not a European producer really, so the impact there is -- Chemtura of U.S., they've got kind of the same U.S.

production that we do, probably sell in the same currencies that we do. They probably got the same yen issue that we do. And ICL is about the same, it's a bucket of currencies. So it may give, overall, an edge a little bit to the Chinese, some of those producers. And Tosoh is a Japanese producer, but doesn't really participate outside of that region.

So I don't see that as much of an issue. If you look in our catalyst business, we -- in refining catalysts we sell in the U.S. We got a plant in the U.S. We got a plant in Amsterdam. We've got joint ventures all over the world. W.R. Grace pretty much has the same thing. BASF, their production facilities are the same.

So from a competition standpoint, some of that depends upon where you're building your catalyst and where you have to ship it to. So I don't see a tremendous impact there across the portfolio. And with regard to lithium, not really a huge competitive market.

So while we have about $40 million or $50 million of translational issues that will impact the what -- our earnings, I don't see it creating a huge competitive impact in any region of the country vis-à-vis our major competitors, with maybe the single exception of bromine out of Asia..

And your final question comes from the line of Alex Yefremov with Nomura..

First question on lithium.

What kind of volume growth do you expect there this year and next? And also, what are your plans in regards to lithium carbonate expansion in Chile? What is the status of that expansion?.

Alex, I think what you're kind of -- we can barely hear you. I think what you said was, what are we looking at for lithium volumes in 2015? And then there was a question about lithium carbonate that I just didn't catch..

Mr. Yefremov removed himself from queue, sir..

Okay, go ahead, Michael, I guess from a volume and a lithium standpoint..

Yes, I mean, I think from a volume standpoint we expect to see continued growth in lithium salts. Again, battery applications are going to drive the market growth predominantly, the non-battery applications or more industrial uses that are going to grow more like GDP.

I think what you're going to see us do in terms of the capacity that we have available will increasingly shift that to higher value battery applications away from technical grades.

I do think there is going to be some tightness in the market overall in terms of lithium availability, so -- hence, the guidance that we gave that we expected to see higher pricing in lithium.

If you think about the downstream of lithium and the organolithiums, I think the one issue is on butyllithium, where we talked about the major business that was lost last year by Rockwood as a key synthesis account switched to a different route that eliminated butyllithium from synthesis. We'll see the full year impact of that this year.

Last year was not a full year impact. So I think overall, butyllithium will grow, but we won't completely be able to overcome the loss of that major piece of business that really affected the industry, not just our lithium business..

And Alex, we couldn't hear what the last question was on lithium carbonate..

I think the last question you asked was about the plant in Chile. And from a startup standpoint, we see bringing on that capacity in the second quarter to midyear sort of time frame.

So -- and then what I think you need to recognize is that, that capacity, the lithium carbonate that we've added there, is predominantly targeted for providing for battery grade accounts. So there will be a qualification period associated with that.

So the impact of that from a volume standpoint will come on gradually over time, probably from midyear this year through midyear 2016..

I would now like to turn the call over to Mr. Lorin Crenshaw for closing remarks..

Well, thanks to those listening, and I invite you to call us with any further questions, and -- so you have a good day..

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day..