Albemarle delivers revenue growth for the 11th consecutive quarter
CHARLOTTE, N.C., Nov. 7, 2018 /PRNewswire/ --
Third quarter 2018 highlights:
-- Third quarter net sales were $777.7 million, an increase of 3% over the
prior year; earnings were $129.7 million, or $1.20 per diluted share, an
increase of 13% over the prior year
-- Third quarter adjusted EBITDA was $235.1 million, an increase of 12%
over the prior year; adjusted diluted earnings per share was $1.31, an
increase of 21% over the prior year
-- Completed our May 2018 accelerated share repurchase ("ASR") program and
initiated an additional $250 million ASR program, retiring approximately
4.7 million shares during the first nine months of 2018
Three Months Ended
Nine Months Ended
September 30,
September 30,
In thousands, except per share amounts 2018 2017 2018 2017
--- ---
Net sales $
777,748 $
754,866 $
2,453,251 $
2,214,187
Net income attributable to Albemarle Corporation $
129,745 $
118,670 $
563,966 $
273,216
Adjusted EBITDA $
235,082 $
209,383 $
742,362 $
639,700
Diluted earnings per share $
1.20 $
1.06 $
5.11 $
2.43
Non-operating pension and OPEB items(a) (0.02) (0.01) (0.05) (0.02)
Non-recurring and other unusual item(a) 0.13 0.02 (1.10) 0.84
Adjusted diluted earnings per share(b) $
1.31 $
1.08 $
3.96 $
3.26
(a) See Non-GAAP Reconciliations for a description of the Non-operating pension and OPEB items and Non-recurring and other unusual items.
(b) Totals may not add due to rounding.
Albemarle Corporation (NYSE: ALB) reported third quarter 2018 net sales of $777.7 million, earnings of $129.7 million and adjusted EBITDA of $235.1 million.
"Albemarle's third quarter adjusted EBITDA was up 18% over the same period in 2017, excluding divested businesses, our eighth consecutive quarter of double-digit year over year growth," said Luke Kissam, Albemarle's CEO. "Pricing in lithium continued as expected with prices up versus prior year. We also continue to make meaningful progress on extending our long-term lithium supply agreements. While unexpected shut downs at three of our lithium manufacturing sites resulted in volume shortfalls during the quarter, all facilities are now back on line and operating at forecasted rates."
Outlook
Based on our strong performance throughout the year, we are confirming our previous guidance, as follows:
2018 Outlook vs Full Year 2017
Net sales
$3.3 - $3.5 billion 7% - 14%
Adjusted EBITDA
$990 - $1,020 million 12% - 15%
Adjusted EPS (per
diluted share)
$5.30 - $5.50 15% - 20%
Results
Third quarter 2018 earnings were $129.7 million, or $1.20 per diluted share, compared to $118.7 million, or $1.06 per diluted share in the third quarter 2017. The increase in 2018 was primarily driven by earnings growth in our Bromine Specialties and Catalysts reportable segments and lower costs in Corporate, in addition to strong performance in our fine chemistry solutions business. Third quarter 2018 adjusted EBITDA increased by $25.7 million, or 12.3%, compared to the prior year. Third quarter 2018 adjusted net income was $141.5 million, or $1.31 per diluted share, compared to $120.6 million, or $1.08 per diluted share, for third quarter 2017, an increase of 21.3%. See Non-GAAP Reconciliations for further details. The Company reported net sales of $777.7 million in third quarter 2018, up 3.0% from net sales of $754.9 million in the third quarter of 2017, driven by the impact of sales pricing in each of our reportable segments and increased sales volumes in our Bromine Specialties and Catalysts segments, partially offset by lower lithium volumes due to unexpected shut downs at three of our manufacturing sites and the impact of the divestiture of the polyolefin catalysts and components portion of the Performance Catalyst Solutions ("PCS") business ("Polyolefin Catalysts Divestiture").
For the nine months ended September 30, 2018, earnings were $564.0 million, or $5.11 per diluted share, compared to $273.2 million, or $2.43 per diluted share for the nine months ended September 30, 2017. The increase in 2018 was primarily driven by the $1.60 per diluted share gain on sale of the Polyolefin Catalysts Divestiture, earnings growth in each of our reportable segments, and a loss on early extinguishment of debt of $0.34 per diluted share recorded in 2017. For the nine months ended September 30, 2018, adjusted EBITDA increased by $102.7 million, or 16.0%, compared to the same period in 2017. For the nine months ended September 30, 2018, adjusted net income was $436.6 million, or $3.96 per diluted share, compared to $366.0 million, or $3.26 per diluted share, for the same period 2017, an increase of 21.5%. See Non-GAAP Reconciliations for further details. The Company reported net sales for the nine months ended September 30, 2018 of $2.45 billion, up from net sales of $2.21 billion for the nine months ended September 30, 2017, driven by the favorable impact of higher sales volumes, favorable pricing and currency exchange impacts in each of our reportable segments, partially offset by the impact of the Polyolefin Catalysts Divestiture.
On April 3, 2018, we closed the Polyolefin Catalysts Divestiture to W.R. Grace & Co. for net cash proceeds of approximately $413.5 million and recorded an after-tax gain of $176.7 million related to the sale of this business. The transaction includes Albemarle's Product Development Center located in Baton Rouge, Louisiana, and operations at the Yeosu, South Korea site. The transaction does not include the organometallics or curatives portion of the PCS business. The assets and liabilities of this business are included in Assets held for sale and Liabilities held for sale in the consolidated balance sheets as of December 31, 2017.
Quarterly Segment Results
During 2018, the PCS product category merged with the Refining Solutions reportable segment to form a global business focused on catalysts. As a result, our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. For comparison purposes, prior year periods have been reclassified to conform to the current presentation.
Lithium reported net sales of $270.9 million in the third quarter of 2018, an increase of 0.6% from third quarter 2017 net sales of $269.2 million. The $1.7 million increase in net sales as compared to prior year was primarily due to approximately $16.2 million in pricing increases, partially offset by lower sales volumes due to temporary operational issues. Adjusted EBITDA for Lithium was $113.6 million, an increase of 0.6% from third quarter 2017 results of $112.9 million. The $0.7 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts, partially offset by higher royalty payments and decreased sales volumes.
Bromine Specialties reported net sales of $232.6 million in the third quarter of 2018, an increase of 9.2% from third quarter 2017 net sales of $212.9 million. The $19.7 million increase in net sales as compared to the prior year was primarily due to favorable pricing impacts and increased sales volumes. Adjusted EBITDA for Bromine Specialties was $78.6 million, an increase of 22.9% from third quarter 2017 results of $63.9 million. The $14.6 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts and increased sales volumes, partially offset by higher raw material pricing.
Catalysts reported net sales of $251.1 million in the third quarter of 2018, an increase of 2.7% from net sales of $244.6 million in the third quarter of 2017. The $6.5 million increase in net sales as compared to the prior year was primarily due to increased sales volume and favorable pricing impacts, which more than offset the $27.0 million impact of the Polyolefin Catalysts Divestiture. Adjusted EBITDA for Catalysts was $62.6 million in the third quarter of 2018, an increase of 3.7% from third quarter 2017 results of $60.4 million. The $2.2 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes and favorable pricing, partially offset by higher material costs and $1.9 million of unfavorable currency exchange impacts. Additionally, the impact of the Polyolefin Catalysts Divestiture of $10.5 million was more than offset by the $10.9 million year over year impact of Hurricane Harvey, which affected the Company in the third quarter of 2017. This includes a partial insurance claim reimbursement of $2.2 million received in the third quarter of 2018.
All Other net sales were $23.1 million in the third quarter of 2018, a decrease of 17.7% from net sales of $28.0 million in the third quarter of 2017. The $5.0 million decrease in net sales as compared to the prior year was primarily due to decreased sales volumes and unfavorable pricing impacts in our fine chemistry services business. All Other adjusted EBITDA was $4.0 million in the third quarter of 2018, an increase from third quarter 2017 results of $0.3 million. The $3.7 million increase in adjusted EBITDA as compared to the prior year was primarily due to a $2.1 million gain in the fair value of our investment in private equity securities and favorable impact of product mix, partially offset by unfavorable pricing impacts in our fine chemistry services business.
Corporate Results
Corporate adjusted EBITDA was a charge of $23.7 million in the third quarter of 2018 compared to a charge of $28.2 million in the third quarter of 2017. The improvement in Corporate adjusted EBITDA was primarily due to lower selling, general and administrative spend, partially offset by $3.5 million of unfavorable currency exchange impacts.
Income Taxes
In December 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted, requiring companies, among other things, to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reducing the U.S. federal corporate income tax rate from 35% to 21%. The SEC staff issued SAB 118, which will allow us to record provisional amounts during a measurement period, which should not extend beyond one year from the enactment date. In the nine months ended September 30, 2018, we recorded a discrete tax benefit of $2.8 million to adjust amounts previously recorded for the one-time transition tax and a discrete tax benefit of $2.0 million for other adjustments.
Our effective income tax rates for the third quarter of 2018 and 2017 of 21.5% and 14.3%, respectively, are influenced by non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). The increase in the effective tax rate in the third quarter of 2018 compared to 2017 was impacted by a variety of factors, primarily stemming from a change in the geographic mix of earnings. Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 18.9% and 17.0% for the third quarter of 2018 and 2017, respectively, and continue to be influenced by the level and geographic mix of income. Our effective income tax rates for the nine months ended September 30, 2018 and 2017 were 20.1% and 17.6%, respectively, and our adjusted effective income tax rates for the nine months ended September 30, 2018 and 2017 were 22.2% and 19.5%, respectively.
Cash Flow
Our cash from operations was approximately $376.9 million for the nine months ended September 30, 2018, an increase of $302.1 million versus the same period in 2017, primarily due to changes in working capital, including the payment of approximately $255 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017, as well as increased earnings in each of our reportable segments and increased dividends received from unconsolidated investments in 2018. Capital expenditures were $471.7 million as compared to $187.5 million in the first nine months of 2017, with the increase driven largely by expansion investment in our Lithium business.
We had $641.2 million in cash and cash equivalents at September 30, 2018, as compared to $1.14 billion at December 31, 2017. During the first nine months of 2018, cash on hand, cash provided by operations and net proceeds from divestitures funded $135.8 million of commercial paper note repayments, net of borrowings, $471.7 million of capital expenditures for plant, machinery and equipment, and mining resource development, dividends to shareholders of $108.9 million and $500.0 million of accelerated share repurchase programs. Under our accelerated share repurchase programs we received and retired approximately 4.7 million shares of our common stock during the first nine months of 2018, approximately 2.3 million shares of which were received and retired during the third quarter of 2018. Any remaining shares to be delivered under the August 2018 accelerated share repurchase program is expected to be received and retired by the end of 2018.
Earnings Call
The Company's performance for the third quarter ended September 30, 2018 will be discussed on a conference call at 9:00 AM Eastern time on November 8, 2018. The call can be accessed by dialing 800-230-3019 (International Dial-In # 617-597-5413), and entering conference ID 98486204. The Company's earnings presentation and supporting material can be accessed through Albemarle's website under Investors at www.albemarle.com.
About Albemarle
Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We power the potential of companies in many of the world's largest and most critical industries, from energy and communications to transportation and electronics. Working side-by-side with our customers, we develop value-added, customized solutions that make them more competitive. Our solutions combine the finest technology and ingredients with the knowledge and know-how of our highly experienced and talented team of operators, scientists and engineers.
Discovering and implementing new and better performance-based sustainable solutions is what motivates all of us. We think beyond business-as-usual to drive innovations that create lasting value. Albemarle employs approximately 5,000 people and serves customers in approximately 100 countries. We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.
Forward-Looking Statements
Some of the information presented in this press release, the conference call and discussions that follow, including, without limitation, information related to product development, production capacity, committed volumes, market trends, pricing, expected growth, earnings and demand for our products, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause actual results to differ materially from the outlook expressed or implied in any forward-looking statement include, without limitation: changes in economic and business conditions; changes in financial and operating performance of our major customers and industries and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in the demand for our products or the end-user markets in which our products are sold; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; increases in the cost of raw materials and energy, and our ability to pass through such increases to our customers; changes in our markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting our operations or our products; the occurrence of regulatory actions, proceedings, claims or litigation; the occurrence of cyber-security breaches, terrorist attacks, industrial accidents, natural disasters or climate change; the inability to maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest affecting the global economy, including adverse effects form terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions we may make in the future; the ability to successfully execute, operate and integrate acquisitions and divestitures; and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. We assume no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.
Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
Net sales $
777,748 $
754,866 $
2,453,251 $
2,214,187
Cost of goods sold 497,211 479,210 1,556,379 1,411,614
Gross profit 280,537 275,656 896,872 802,573
Selling, general and administrative
expenses 100,167 106,471 325,174 331,984
Research and development expenses 16,610 21,763 53,670 63,423
Gain on sale of business - (218,705)
Operating profit 163,760 147,422 736,733 407,166
Interest and financing expenses (12,988) (15,792) (39,834) (98,895)
Other income (expenses), net 3,793 (1,986) (31,906) (3,399)
Income before income taxes and
equity in net income of
unconsolidated investments 154,565 129,644 664,993 304,872
Income tax expense 33,167 18,495 133,630 53,596
Income before equity in net income
of unconsolidated investments 121,398 111,149 531,363 251,276
Equity in net income of
unconsolidated investments (net of
tax) 22,081 19,044 61,727 55,263
Net income 143,479 130,193 593,090 306,539
Net income attributable to
noncontrolling interests (13,734) (11,523) (29,124) (33,323)
Net income attributable to Albemarle
Corporation $
129,745 $
118,670 $
563,966 $
273,216
Basic earnings per share $
1.21 $
1.07 $
5.16 $
2.46
Diluted earnings per share $
1.20 $
1.06 $
5.11 $
2.43
Weighted-average common shares
outstanding - basic 107,315 110,476 109,223 111,049
Weighted-average common shares
outstanding - diluted 108,302 111,975 110,276 112,456
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
September 30, December 31,
2018 2017
---
ASSETS
Cash and cash
equivalents $
641,226 $
1,137,303
Other current assets 1,418,351 1,301,108
Assets held for sale - 39,152
Total current assets 2,059,577 2,477,563
Property, plant and
equipment 4,571,779 4,124,335
Less accumulated
depreciation and
amortization 1,746,414 1,631,025
Net property, plant
and equipment 2,825,365 2,493,310
Noncurrent assets
held for sale - 139,813
Other assets and
intangibles 2,602,253 2,640,086
Total assets $
7,487,195 $
7,750,772
LIABILITIES AND EQUITY
Current portion of
long-term debt $
286,188 $
422,012
Other current
liabilities 840,821 776,975
Liabilities held for
sale - 1,938
Total current
liabilities 1,127,009 1,200,925
Long-term debt 1,411,605 1,415,360
Noncurrent
liabilities held
for sale - 614
Other noncurrent
liabilities 883,820 945,788
Deferred income
taxes 378,484 370,389
Albemarle
Corporation
shareholders'
equity 3,528,844 3,674,549
Noncontrolling
interests 157,433 143,147
Total liabilities
and equity $
7,487,195 $
7,750,772
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Nine Months Ended
September 30,
2018 2017
Cash and cash equivalents
at beginning of year $
1,137,303 $
2,269,756
Cash and cash equivalents
at end of period $
641,226 $
1,045,339
Sources of cash and cash equivalents:
Net income $
593,090 $
306,539
Cash proceeds from
divestitures, net 413,479 6,857
Proceeds from borrowings of
long-term debt - 27,000
Other borrowings, net - 79,203
Dividends received from
unconsolidated investments
and nonmarketable
securities 32,794 11,900
Proceeds from exercise of
stock options 2,302 7,011
Uses of cash and cash equivalents:
Working capital changes (131,813) (398,913)
Capital expenditures (471,675) (187,519)
Acquisitions, net of cash
acquired (11,403) (45,406)
Repayments of long-term
debt - (753,209)
Repurchases of common stock (500,000) (250,000)
Repayments of other
borrowings, net (134,505)
Pension and postretirement
contributions (11,068) (9,607)
Dividends paid to
shareholders (108,922) (105,205)
Fees related to early
extinguishment of debt - (46,959)
Dividends paid to
noncontrolling interests (14,756) (27,791)
Non-cash and other items:
Depreciation and
amortization 150,511 144,087
Gain on sale of business (218,705)
Gain on acquisition - (6,025)
Pension and postretirement
(benefit) expense (2,708) 67
Loss on early
extinguishment of debt - 52,801
Deferred income taxes 43,400 4,677
Equity in net income of
unconsolidated investments
(net of tax) (61,727) (55,263)
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
---
Net sales:
Lithium $
270,928 $
269,238 $
886,523 $
729,288
Bromine Specialties 232,616 212,923 678,769 636,059
Catalysts 251,139 244,594 796,822 756,407
All Other 23,065 28,021 90,978 91,144
Corporate - 90 159 1,289
Total net sales $
777,748 $
754,866 $
2,453,251 $
2,214,187
Adjusted EBITDA:
Lithium $
113,629 $
112,944 $
386,260 $
327,996
Bromine Specialties 78,585 63,936 217,921 194,499
Catalysts 62,602 60,394 205,534 197,570
All Other 3,968 306 7,729 7,906
Corporate (23,702) (28,197) (75,082) (88,271)
Total adjusted EBITDA $
235,082 $
209,383 $
742,362 $
639,700
See accompanying non-GAAP reconciliations below.
Additional Information
It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These non-GAAP measures should not be considered as alternatives to Net income attributable to Albemarle Corporation ("earnings"). These measures are presented here to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance. The Company's chief operating decision maker uses these measures to assess the ongoing performance of the Company and its segments, as well as for business and enterprise planning purposes.
A description of other non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP can be found on the following pages of this press release, which is also posted in the Investors section of our website at www.albemarle.com. The Company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the Company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the Company's results calculated in accordance with GAAP.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited)
See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net income attributable to Albemarle Corporation ("earnings"), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted earnings is defined as earnings before the non-recurring, other unusual and non-operating pension and OPEB items as listed below. EBITDA is defined as earnings before interest and financing expenses, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA and the non-recurring, other unusual and non-operating pension and OPEB items as listed below.
Three Months Ended
Nine Months Ended
September 30,
September 30,
In thousands, except percentages and per share amounts 2018 2017 2018 2017
---
Net income attributable to Albemarle Corporation $
129,745 $
118,670 $
563,966 $
273,216
Add back:
Non-operating pension and OPEB items (net of tax) (1,856) (694) (5,595) (2,093)
Non-recurring and other unusual items (net of tax) 13,568 2,575 (121,731) 94,918
Adjusted net income attributable to Albemarle Corporation $
141,457 $
120,551 $
436,640 $
366,041
Adjusted diluted earnings per share $
1.31 $
1.08 $
3.96 $
3.26
Weighted-average common shares outstanding - diluted 108,302 111,975 110,276 112,456
Net income attributable to Albemarle Corporation $
129,745 $
118,670 $
563,966 $
273,216
Add back:
Interest and financing expenses 12,988 15,792 39,834 98,895
Income tax expense 33,167 18,495 133,630 53,596
Depreciation and amortization 49,707 49,895 150,511 144,087
EBITDA 225,607 202,852 887,941 569,794
Non-operating pension and OPEB items (2,195) (1,028) (6,596) (3,144)
Non-recurring and other unusual items (excluding items associated with interest expense) 11,670 7,559 (138,983) 73,050
Adjusted EBITDA $
235,082 $
209,383 $
742,362 $
639,700
Net sales $
777,748 $
754,866 $
2,453,251 $
2,214,187
EBITDA margin 29.0
% 26.9
% 36.2
% 25.7
%
Adjusted EBITDA margin 30.2
% 27.7
% 30.3
% 28.9
%
See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reporting in accordance with GAAP (in thousands, except percentages).
Lithium Bromine Catalysts Reportable All Other Corporate Consolidated % of Net
Specialties Segments Total Total Sales
Three months ended September 30, 2018:
Net income (loss) attributable to Albemarle Corporation $
90,313 $
67,967 $
50,491 $
208,771 $
1,978 $
(81,004) $
129,745 16.7
%
Depreciation and amortization 23,370 10,618 12,111 46,099 1,990 1,618 49,707 6.4
%
Non-recurring and other unusual items (54) (54) 11,724 11,670 1.5
%
Interest and financing expenses 12,988 12,988 1.7
%
Income tax expense 33,167 33,167 4.2
%
Non-operating pension and OPEB items (2,195) (2,195) (0.3)
%
Adjusted EBITDA $
113,629 $
78,585 $
62,602 $
254,816 $
3,968 $
(23,702) $
235,082 30.2
%
Three months ended September 30, 2017:
Net income (loss) attributable to Albemarle Corporation $
89,745 $
53,760 $
47,846 $
191,351 $
(1,776) $
(70,905) $
118,670 15.7
%
Depreciation and amortization 22,316 10,176 13,798 46,290 2,082 1,523 49,895 6.6
%
Non-recurring and other unusual items 883 (1,250) (367) 7,926 7,559 1.0
%
Interest and financing expenses 15,792 15,792 2.1
%
Income tax expense 18,495 18,495 2.4
%
Non-operating pension and OPEB items (1,028) (1,028) (0.1)
%
Adjusted EBITDA $
112,944 $
63,936 $
60,394 $
237,274 $
306 $
(28,197) $
209,383 27.7
%
Nine months ended September 30, 2018:
Net income (loss) attributable to Albemarle Corporation $
315,939 $
187,176 $
387,038 $
890,153 $
1,659 $
(327,846) $
563,966 23.0
%
Depreciation and amortization 71,760 30,745 37,201 139,706 6,070 4,735 150,511 6.2
%
Non-recurring and other unusual items (1,439) (218,705) (220,144) 81,161 (138,983) (5.7)
%
Interest and financing expenses 39,834 39,834 1.6
%
Income tax expense 133,630 133,630 5.5
%
Non-operating pension and OPEB items (6,596) (6,596) (0.3)
%
Adjusted EBITDA $
386,260 $
217,921 $
205,534 $
809,715 $
7,729 $
(75,082) $
742,362 30.3
%
Nine months ended September 30, 2017:
Net income (loss) attributable to Albemarle Corporation $
249,178 $
164,193 $
158,806 $
572,177 $
1,622 $
(300,583) $
273,216 12.3
%
Depreciation and amortization 62,841 30,306 40,014 133,161 6,284 4,642 144,087 6.5
%
Non-recurring and other unusual items (excluding items associated with interest 15,977 (1,250) 14,727 58,323 73,050 3.3
expense)
%
Interest and financing expenses 98,895 98,895 4.5
%
Income tax expense 53,596 53,596 2.4
%
Non-operating pension and OPEB items (3,144) (3,144) (0.1)
%
Adjusted EBITDA $
327,996 $
194,499 $
197,570 $
720,065 $
7,906 $
(88,271) $
639,700 28.9
%
Non-operating pension and OPEB items, consisting of MTM actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our operating segments and are included in the Corporate category. In addition, we believe that these components of pension cost are mainly driven by market performance, and we manage these separately from the operational performance of our businesses. In accordance with GAAP, these non-operating pension and OPEB items are included in Other income (expenses), net. Non-operating pension and OPEB items were as follows (in thousands):
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
Interest
cost $
8,509 $
8,960 $
25,636 $
26,738
Expected
return on
assets (10,704) (9,988) (32,232) (29,882)
Total $
(2,195) $
(1,028) $
(6,596) $
(3,144)
In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items and excluded them from our adjusted net income calculation for the periods presented. A listing of these items, as well as a detailed description of each follows below (per diluted share):
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Utilization of inventory markup(1)
$
$
$ $
0.16
Restructuring and other(2) 0.04 0.04 0.11
Acquisition and integration related costs(3) 0.03 0.02 0.10 0.18
Albemarle Foundation contribution(4) 0.10
Gain on sale of business(5) (1.60)
Gain on acquisition(6) 0.01 (0.05)
Legal accrual(7) 0.02 0.21
Loss on extinguishment of debt(8) 0.34
Multiemployer plan shortfall contributions(9) 0.01 0.04
Other(10) 0.04 (0.01) 0.16 0.04
Discrete tax items(11) (0.01) (0.11) 0.02
Total non-recurring and other unusual items $
0.13 $
0.02 $
(1.10) $
0.84
(1) In connection with the acquisition
of the lithium hydroxide and
lithium carbonate conversion
business of Jiangxi Jiangli New
Materials Science and Technology
Co. Ltd. ("Jiangli New
Materials"), the Company valued
inventory purchased from Jiangli
New Materials at fair value, which
resulted in a markup of the
underlying net book value of the
inventory totaling approximately
$23.1 million. The inventory
markup was expensed over the
estimated remaining selling
period. For the three and nine
months ended September 30, 2017,
$0.6 million and $23.1 million
($0.2 million and $17.8 million
after income taxes, or less than
$0.01 and $0.16 per share),
respectively, was included in Cost
of goods sold related to the
utilization of the inventory
markup.
(2) Included in Selling, general and
administrative expenses for the
three and nine months ended
September 30, 2018 is $3.7 million
(or $0.04 per share) related to
expected severance payments as
part of a business reorganization
plan.
The nine months ended September 30,
2017 included restructuring costs
in each of our reportable segments
at several locations, primarily at
our Lithium site in Germany. These
restructuring costs are included
in the consolidated statements of
income as follows (in millions,
except per share amounts):
Nine Months
Ended
September 30,
2017
Restructuring and other costs:
Cost of goods sold $
2.9
Selling, general and administrative
expenses 8.4
Research and development expenses 5.8
Total $
17.1
Total restructuring and other costs,
after income taxes $
13.0
Total restructuring and other costs,
per diluted share $
0.11
(3) Acquisition and integration
related costs for the three and
nine months ended September 30,
2018 and 2017 related to
various significant projects.
Acquisition and integration
related costs are included in
the consolidated statements of
income as follows (in millions,
except per share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Acquisition and
integration related
costs:
Cost of goods sold $
0.9 $
1.8 $
2.9 $
12.5
Selling, general and
administrative
expenses 3.4 3.8 10.2 13.9
Total $
4.3 $
5.6 $
13.1 $
26.4
Total acquisition
and integration
related costs,
after income taxes $
3.5 $
2.6 $
10.7 $
20.1
Total acquisition
and integration
related costs, per
diluted share $
0.03 $
0.02 $
0.10 $
0.18
(4) Included in
Selling, general
and
administrative
expenses for the
nine months ended
September 30,
2018 is a $15.0
million ($11.5
million after
income taxes, or
$0.10 per share)
charitable
contribution,
using a portion
of the proceeds
received from the
Polyolefin
Catalysts
Divestiture, to
the Albemarle
Foundation, a
non-profit
organization that
sponsors grants,
health and social
projects,
educational
initiatives,
disaster relief,
matching gift
programs,
scholarships and
other charitable
initiatives in
locations where
our employees
live and operate.
This contribution
is in addition to
the normal annual
contribution made
to the Albemarle
Foundation by the
Company, and is
significant in
size and nature
in that it is
intended to
provide more
long-term
benefits in the
communities where
we live and
operate.
(5) Included in Gain
on sale of
business, for the
nine months ended
September 30,
2018 is $218.7
million ($176.7
million after
discrete income
taxes, or $1.60
per share)
related to the
Polyolefin
Catalysts
Divestiture.
(6) Included in Other
income
(expenses), net
for the nine
months ended
September 30,
2017 is a gain of
$6.0 million
($5.4 million
after income
taxes, or $0.05
per share)
relating to the
acquisition of
the remaining 50%
interest in the
Sales de Magnesio
Ltda. joint
venture in Chile.
During the three
months ended
September 30,
2017 we adjusted
this gain to
reduce it by $1.4
million ($0.6
million after
income taxes, or
$0.01 per share).
The gain was
calculated based
on the difference
between the
purchase price
and the book
value of the
investment.
(7) Included in Other
income
(expenses), net,
for the three and
nine months ended
September 30,
2018 are charges
of $0.4 million
($2.8 million
including the
adjustment of
previously
recorded income
taxes, or $0.03
per share) and
$10.8 million (or
$0.10 per share),
respectively,
related to a
legal accrual
resulting from a
settlement in a
legal matter
related to
guarantees from a
previously
disposed
business. In
addition, Other
income
(expenses), net,
for the three and
nine months ended
September 30,
2018 include a
gain of $1.4
million ($1.1
million after
income taxes, or
$0.01 per share)
and a charge of
$16.2 million
($12.5 million
after income
taxes, or $0.11
per share),
respectively, for
a legal accrual
relating to a
jury rendered
verdict against
Albemarle related
to certain
business
concluded under a
2014 sales
agreement for
products that
Albemarle no
longer
manufactures.
Both matters have
been resolved and
paid during the
three months
ended September
30, 2018.
(8) Included in
Interest and
financing
expenses for the
nine months ended
September 30,
2017 is a loss on
early
extinguishment of
debt of $52.8
million ($38.1
million after
income taxes, or
$0.34 per share)
related to the
tender premiums,
fees, unamortized
discounts and
unamortized
deferred
financings costs
from the
redemption of the
3.00% Senior
notes, EUR307.0
million of the
1.875% Senior
notes and $174.7
million of the
4.50% Senior
notes.
(9) Included in
Selling, general
and
administrative
expenses for the
nine months ended
September 30,
2017 is $2.0
million ($1.4
million after
income taxes, or
$0.01 per share)
for increased
capital reserve
contributions to
a multiemployer
plan, which is
subject to a
financial
improvement plan.
In addition, for
the three and
nine months ended
September 30,
2017, capital
reserve
contributions for
this
multiemployer
plan of $1.6
million and $4.6
million ($0.6
million and $2.8
million after
income taxes, or
$0.01 and $0.03
per share),
respectively,
included in Other
income
(expenses), net,
have been made to
indemnify
previously
divested
businesses.
(10) Other adjustments
for the three
months ended
September 30,
2018 included
amounts recorded
in:
-- Cost of goods sold - $3.8 million
for the write-off of fixed assets
related to a major capacity
expansion in our Jordanian joint
venture.
-- Selling, general and administrative
expenses - $0.1 million gain
related to a refund from Chilean
authorities due to an overpayment
made in a prior year, partially
offset by a $1.2 million
contribution, using a portion of the
proceeds received from the
Polyolefin Catalysts Divestiture, to
schools in the state of Louisiana
for qualified tuition purposes. This
contribution is significant in size
and is intended to provide long-
term benefits for families in the
Louisiana community.
-- Other income (expenses), net -$0.2
million gain related to the revision
of previously recorded expenses of
disposed businesses.
After income taxes, these charges
totaled $4.4 million, or $0.04 per
share.
Other adjustments for the nine
months ended September 30, 2018
included amounts recorded in:
-- Cost of goods sold - $4.9 million
for the write-off of fixed assets
related to a major capacity
expansion in our Jordanian joint
venture.
-- Selling, general and administrative
expenses - $1.5 million gain
related to a refund from Chilean
authorities due to an overpayment
made in a prior year, partially
offset by a $1.2 million
contribution, using a portion of the
proceeds received from the
Polyolefin Catalysts Divestiture, to
schools in the state of Louisiana
for qualified tuition purposes. This
contribution is significant in size
and is intended to provide long-
term benefits for families in the
Louisiana community.
-- Other income (expenses), net -$15.6
million related to environmental
charges related to a site formerly
owned by Albemarle and $0.8 million
of charges related to the revision
of previously recorded expenses of
disposed businesses.
After income taxes, these charges
totaled $17.3 million, or $0.16
per share.
Other adjustments for the three
months ended September 30, 2017
included amounts recorded in:
-- Cost of goods sold -$1.3 million
reversal of deferred income related
to an abandoned project at an
unconsolidated investment.
-- Other income (expenses), net -$1.1
million related to a reversal of a
liability associated with the
previous disposal of a property,
partially offset by the revision of
tax indemnification expenses of $0.7
million primarily related to the
filing of tax returns for a
previously disposed business.
After income taxes, these net gains
totaled $1.1 million, or $0.01 per
share.
Other adjustments for the nine
months ended September 30, 2017
included amounts recorded in:
-- Cost of goods sold -$1.3 million
reversal of deferred income related
to an abandoned project at an
unconsolidated investment.
-- Selling, general and administrative
expenses -$1.0 million gain related
to a reversal of an accrual recorded
as part of purchase accounting from
a previous acquisition.
-- Other income (expenses), net -$4.1
million of charges associated with
the final settlements of previously
disposed businesses, $3.2 million of
asset retirement obligation charges
related to the revision of an
estimate at a site formerly owned by
Albemarle and $1.9 million of tax
indemnification expenses primarily
related to a competent authority
agreement for a previously disposed
business, partially offset by a
reversal of a liability associated
with the previous disposal of a
property of $1.1 million.
After income taxes, these charges
totaled $4.5 million, or $0.04 per
share.
(11) Included in Income
tax expense for
the three and
nine months ended
September 30,
2018 are discrete
net tax expenses
(benefits),
excluding the
discrete tax
expense on the
gain of sale of
business noted
above, of $0.2
million, or less
than $0.01 per
share, and
($11.6) million,
or ($0.11) per
share,
respectively. The
net expense for
the three months
is primarily
related to $1.9
million expense
recorded for
stock-based
compensation
arrangements and
$1.7 million
expense for
adjustments
related to the
accounting for
the TCJA,
partially offset
by a $2.0 million
benefit from
foreign accrual
to return
adjustments and a
$1.2 million
benefit from the
release of
foreign valuation
allowances. The
net benefit for
the nine months
is primarily
related to an
$8.0 million
benefit for tax
accounting method
changes, a $4.8
million benefit
for adjustments
related to the
accounting for
the TCJA, $5.4
million excess
tax benefits
realized from
stock-based
compensation
arrangements, and
a $2.0 million
benefit from
foreign accrual
to return
adjustments,
partially offset
by $7.3 million
expense for
adjustments to
foreign valuation
allowances.
Included in Income
tax expense for
the three and
nine months ended
September 30,
2017 are discrete
net tax
(benefits)
expenses of
($0.4) million,
or ($0.01) per
share, and $2.7
million, or $0.02
per share,
respectively. The
net benefit for
the three months
is primarily
related to a $2.2
million benefit
from the excess
tax benefits
realized from
stock-based
compensation
arrangements, and
$1.0 million from
the release of
valuation
allowances due to
a foreign
restructure plan,
partially offset
by expenses from
accrual to return
and rate changes
of $2.8 million.
The net expense
for the nine
months is
primarily related
to foreign rate
changes of $14.8
million and
accrual to return
adjustments of
$7.9 million,
partially offset
by a $10.8
million benefit
from the release
of valuation
allowances due to
a foreign
restructuring
plan, $2.3
million from
release of
unrecognized tax
benefits, and
$6.9 million
benefit from
excess tax
benefits realized
from stock-based
compensation
arrangements.
See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reporting in accordance with GAAP (in thousands, except percentages).
Income before Income tax Effective
income taxes and expense income
equity in net tax rate
income of
unconsolidated
investments
Three months ended September 30, 2018:
As reported $
154,565 $
33,167 21.5
%
Non-recurring, other unusual and non-operating pension and OPEB items 9,475 (2,237)
As adjusted $
164,040 $
30,930 18.9
%
Three months ended September 30, 2017:
As reported $
129,644 $
18,495 14.3
%
Non-recurring, other unusual and non-operating pension and OPEB items 6,531 4,650
As adjusted $
136,175 $
23,145 17.0
%
Nine months ended September 30, 2018:
As reported $
664,993 $
133,630 20.1
%
Non-recurring, other unusual and non-operating pension and OPEB items (145,579) (18,253)
As adjusted $
519,414 $
115,377 22.2
%
Nine months ended September 30, 2017:
As reported $
304,872 $
53,596 17.6
%
Non-recurring, other unusual and non-operating pension and OPEB items 122,707 29,882
As adjusted $
427,579 $
83,478 19.5
%
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SOURCE Albemarle Corporation
