Albemarle ends 2018 strong; projecting continued growth in 2019
CHARLOTTE, N.C., Feb. 20, 2019 /PRNewswire/ --
Fourth quarter 2018 highlights:
-- Fourth quarter net sales were $921.7 million, an increase of 7% over the
prior year; earnings were $129.6 million, or $1.21 per diluted share, an
increase of 162% over the prior year
-- Fourth quarter adjusted EBITDA was $264.3 million, an increase of 8%
over the prior year; adjusted diluted earnings per share was $1.53, an
increase of 14% over the prior year
-- Lithium increased net sales on pricing increases of 4% and 9% in the
fourth quarter and full year 2018, respectively, and volume increases
compared to prior year
-- Signed definitive agreement with Mineral Resources Limited to form
lithium joint venture in Western Australia
-- Completed our second accelerated share repurchase program of 2018,
retiring a total of approximately 5.3 million shares during the year
-- Expect adjusted diluted earnings per share in 2019 between $6.10 and
$6.50, an increase of 11% to 19% over 2018
Three Months Ended
Twelve Months Ended
December 31,
December 31,
In thousands, except per share amounts 2018 2017 2018 2017
---
Net sales $
921,699 $
857,789 $
3,374,950 $
3,071,976
Net income (loss) attributable to Albemarle Corporation $
129,596 $
(218,366) $
693,562 $
54,850
Adjusted EBITDA $
264,302 $
245,780 $
1,006,664 $
885,480
Diluted earnings (loss) per share $
1.21 $
(1.95) $
6.34 $
0.49
Non-operating pension and OPEB items(a) 0.08 (0.08) 0.03 (0.09)
Non-recurring and other unusual items(a) 0.24 3.36 (0.88) 4.20
Adjusted diluted earnings per share(b) $
1.53 $
1.34 $
5.48 $
4.59
(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 fourth quarter 2018 net sales of $921.7 million, earnings of $129.6 million and adjusted EBITDA of $264.3 million.
"2018 was a successful year for Albemarle on many fronts. Excluding divested businesses, we delivered full year, total company adjusted EBITDA growth of 17%, adjusted diluted EPS growth of 23% and we finished the year strong as all of our reportable segments delivered growth in the fourth quarter. In addition, we returned significant value to shareholders through increased dividends of $145 million and $500 million in share repurchases, while continuing significant growth investment in our Lithium platform," said Luke Kissam, Albemarle's CEO. "Lithium contributed just over 50% of our adjusted EBITDA, driven by 10% volume growth and 9% pricing compared to 2017."
Outlook
Our 2018 performance and execution on our lithium growth projects have positioned Albemarle for another year of growth in 2019. We expect net sales to range between $3.65 billion and $3.85 billion, representing growth of approximately 8% to 14%, with adjusted EBITDA between $1,070 million and $1,140 million, up approximately 6% to 13%, and adjusted diluted earnings per share between $6.10 and $6.50, growth of approximately 11% to 19%. Our growth will be driven by increased volume in our core lithium business, while our Bromine Specialties and Catalysts businesses will be stable. We are not forecasting any significant macroeconomic headwinds and have not seen any decline in our customer demand forecasts.
Results
Fourth quarter 2018 earnings were $129.6 million, or $1.21 per diluted share, compared to a loss of $218.4 million, or $1.95 per diluted share in the fourth quarter 2017. Earnings were negatively impacted by U.S. tax reform of $3.27 per diluted share in the fourth quarter of 2017. In the fourth quarter of 2018, earnings were negatively impacted by adjustments to indemnifications of divested businesses and a decrease to our previously recorded gain on sale of business totaling $0.29 per diluted share. The fourth quarter of 2018 also saw earnings growth in our Lithium and Bromine Specialties reportable segments, which more than offset lower Catalysts earnings and increased Corporate costs. Fourth quarter 2018 adjusted EBITDA increased by $18.5 million, or 7.5%, compared to the prior year. Fourth quarter 2018 adjusted net income was $163.7 million, or $1.53 per diluted share, compared to $149.8 million, or $1.34 per diluted share, for fourth quarter 2017, an increase of 14.2%. See Non-GAAP Reconciliations for further details. The Company reported net sales of $921.7 million in fourth quarter 2018, up 7.5% from net sales of $857.8 million in the fourth quarter of 2017, driven by increased sales volumes and the favorable impact of sales pricing in each of our reportable segments, partially offset by the impact of the divestiture of the polyolefin catalysts and components portion of the Performance Catalyst Solutions ("PCS") business to W.R. Grace & Co. during 2018 ("Polyolefin Catalysts Divestiture").
For the full year 2018, earnings were $693.6 million, or $6.34 per diluted share, compared to $54.9 million, or $0.49 per diluted share for the full year 2017. The increase was primarily driven by the 2017 impacts of $3.26 per diluted share from the U.S tax reform laws, a loss on early extinguishment of debt of $0.30 per diluted share and $0.09 per diluted share from Hurricane Harvey, as well as the 2018 recognition of $1.55 per diluted share gain on sale of the Polyolefin Catalysts Divestiture, and earnings growth in each of our reportable segments. For the full year 2018, adjusted EBITDA increased by $121.2 million, or 13.7%, compared to the full year 2017. For the full year 2018, adjusted net income was $600.4 million, or $5.48 per diluted share, compared to $515.9 million, or $4.59 per diluted share, for the full year 2017, an increase of 19.4%. See Non-GAAP Reconciliations for further details. The Company reported net sales for the full year 2018 of $3.37 billion, up from net sales of $3.07 billion for the full year 2017, driven by increased sales volumes, favorable sales pricing and currency exchange impacts in each of our reportable segments, partially offset by the impact of the Polyolefin Catalysts Divestiture.
On December 14, 2018, we entered into a definitive agreement to acquire a 50 percent interest in Mineral Resources Limited's Wodgina hard rock lithium project ("Wodgina Project") in Western Australia and form a joint venture with Mineral Resources Limited to own and operate the Wodgina Project to produce spodumene concentrate and battery grade lithium hydroxide, for a purchase price of $1.15 billion. The joint venture will ultimately construct a battery grade lithium hydroxide plant at the resource site. This transaction is subject to regulatory approvals and other customary closing conditions, and is expected to close in the second half of 2019.
Quarterly Segment Results
Effective January 1, 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 $341.6 million in the fourth quarter of 2018, an increase of 18.0% from fourth quarter 2017 net sales of $289.6 million. The $52.1 million increase in net sales as compared to prior year was primarily due to increased sales volumes and favorable pricing impacts, partially offset by $1.4 million of unfavorable currency exchange impacts. Adjusted EBITDA for Lithium was $144.5 million, an increase of 21.8% from fourth quarter 2017 results of $118.7 million. The $25.9 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes, favorable pricing impacts and $1.6 million of favorable currency exchange impacts.
Bromine Specialties reported net sales of $239.1 million in the fourth quarter of 2018, an increase of 9.1% from fourth quarter 2017 net sales of $219.1 million. The $20.0 million increase in net sales as compared to the prior year was primarily due to increased sales volumes and favorable pricing, partially offset by $1.3 million of unfavorable currency exchange impacts. Adjusted EBITDA for Bromine Specialties was $70.2 million, an increase of 9.0% from fourth quarter 2017 results of $64.4 million. The $5.8 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts, higher sales volumes and lower selling, general and administrative costs.
Catalysts reported net sales of $304.7 million in the fourth quarter of 2018, a decrease of 2.1% from net sales of $311.2 million in the fourth quarter of 2017. The $6.4 million decrease in net sales as compared to the prior year was primarily due to the $26.2 million impact of the Polyolefin Catalysts Divestiture and $1.6 million of unfavorable currency exchange impacts, partially offset by higher sales volumes and favorable pricing impacts. Adjusted EBITDA for Catalysts was $78.8 million in the fourth quarter of 2018, a decrease of 8.7% from fourth quarter 2017 results of $86.3 million. The $7.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to the $10.2 million impact of the Polyolefin Catalysts Divestiture, partially offset by higher sales volumes.
All Other net sales were $36.2 million in the fourth quarter of 2018, a decrease of 4.1% from net sales of $37.8 million in the fourth quarter of 2017. The $1.6 million decrease in net sales as compared to the prior year was primarily due to lower sales volumes and unfavorable pricing in our fine chemistry services business. All Other adjusted EBITDA was $6.4 million in the fourth quarter of 2018, an increase from fourth quarter 2017 results of $6.0 million.
Corporate Results
Corporate adjusted EBITDA was a charge of $35.5 million in the fourth quarter of 2018 compared to a charge of $29.6 million in the fourth quarter of 2017. The change was primarily due to higher selling, general and administrative spending for professional services, partially offset by $2.8 million of favorable currency exchange impacts.
Income Taxes
Our effective income tax rates for the fourth quarter of 2018 and 2017 of 8.6% and 266.5%, respectively, were influenced by the Tax Cuts and Jobs Act ("TCJA") enacted in December 2017, as well as, non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). The TCJA resulted in net tax benefits of $39.8 million and net provisional expenses of $366.9 million during the fourth quarter of 2018 and 2017, respectively. The remaining decrease in the effective tax rate in the fourth 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 19.9% and 16.8% for the fourth 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 year ended December 31, 2018 and 2017 were 18.2% and 96.6%, respectively, with the decrease primarily driven by the impact of the TCJA. Our adjusted effective income tax rates for the year ended December 31, 2018 and 2017 were 21.6% and 18.8%, respectively.
Cash Flow
Our cash from operations was $546.2 million for the year ended December 31, 2018, an increase of $242.2 million versus the same period in 2017 primarily due to changes in working capital, including the payment of approximately $257 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 $700.0 million as compared to $317.7 million for the full year 2017, with the increase driven largely by expansion in our Lithium business.
We had $555.3 million in cash and cash equivalents at December 31, 2018, as compared to $1.14 billion at December 31, 2017. During the year ended December 31, 2018, cash on hand, cash provided by operations and $413.6 million net proceeds from divestitures funded $114.7 million of commercial paper note repayments, net of borrowings, $700.0 million of capital expenditures for plant, machinery and equipment, and mining resource development, dividends to shareholders of $144.6 million and $500.0 million accelerated share repurchase programs. Under our accelerated share repurchase programs we received and retired approximately 5.3 million shares of our common stock during 2018, approximately 0.6 million shares of which were received and retired during the fourth quarter of 2018.
Earnings Call
The Company's performance for the fourth quarter ended December 31, 2018 will be discussed on a conference call at 9:00 AM Eastern time on February 21, 2019. The call can be accessed by dialing 844-347-1034 (International Dial-In # 209-905-5910), and entering conference ID 5229789. 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 5,600 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 from 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 (Loss)
(In Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 2018 2017
---
Net sales $
921,699 $
857,789 $
3,374,950 $
3,071,976
Cost of goods sold 601,315 554,086 2,157,694 1,965,700
Gross profit 320,384 303,703 1,217,256 1,106,276
Selling, general and administrative expenses 120,916 118,302 446,090 450,286
Research and development expenses 16,384 20,907 70,054 84,330
Loss (gain) on sale of business 8,277 (210,428)
Operating profit 174,807 164,494 911,540 571,660
Interest and financing expenses (12,571) (16,455) (52,405) (115,350)
Other expenses, net (32,528) (6,113) (64,434) (9,512)
Income before income taxes and equity in net income of unconsolidated investments 129,708 141,926 794,701 446,798
Income tax expense 11,196 378,221 144,826 431,817
Income (loss) before equity in net income of unconsolidated investments 118,512 (236,295) 649,875 14,981
Equity in net income of unconsolidated investments (net of tax) 27,537 29,224 89,264 84,487
Net income (loss) 146,049 (207,071) 739,139 99,468
Net income attributable to noncontrolling interests (16,453) (11,295) (45,577) (44,618)
Net income (loss) attributable to Albemarle Corporation $
129,596 $
(218,366) $
693,562 $
54,850
Basic earnings (loss) per share: $
1.22 $
(1.98) $
6.40 $
0.49
Diluted earnings (loss) per share: $
1.21 $
(1.95) $
6.34 $
0.49
Weighted-average common shares outstanding - basic 106,042 110,510 108,427 110,914
Weighted-average common shares outstanding - diluted 107,005 112,152 109,458 112,380
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
December 31, December 31,
2018 2017
---
ASSETS
Cash and cash
equivalents $
555,320 $
1,137,303
Other current assets 1,443,101 1,301,108
Assets held for sale - 39,152
Total current assets 1,998,421 2,477,563
Property, plant and
equipment 4,799,063 4,124,335
Less accumulated
depreciation and
amortization 1,777,979 1,631,025
Net property, plant
and equipment 3,021,084 2,493,310
Noncurrent assets
held for sale - 139,813
Other assets and
intangibles 2,562,169 2,640,086
Total assets $
7,581,674 $
7,750,772
LIABILITIES AND EQUITY
Current portion of
long-term debt $
307,294 $
422,012
Other current
liabilities 875,879 776,975
Liabilities held for
sale - 1,938
Total current
liabilities 1,183,173 1,200,925
Long-term debt 1,397,916 1,415,360
Noncurrent
liabilities held
for sale - 614
Other noncurrent
liabilities 858,495 945,788
Deferred income
taxes 382,982 370,389
Albemarle
Corporation
shareholders'
equity 3,585,321 3,674,549
Noncontrolling
interests 173,787 143,147
Total liabilities
and equity $
7,581,674 $
7,750,772
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Year Ended
December 31,
2018 2017
---
Cash and cash equivalents
at beginning of year $
1,137,303 $
2,269,756
Cash and cash equivalents
at end of period $
555,320 $
1,137,303
Sources of cash and cash equivalents:
Net income $
739,139 $
99,468
Cash proceeds from
divestitures, net 413,569 6,857
Proceeds from borrowings of
long-term debt - 27,000
Other borrowings, net - 138,751
Dividends received from
unconsolidated investments
and nonmarketable
securities 57,415 39,386
Proceeds from exercise of
stock options 3,633 8,238
Uses of cash and cash equivalents:
Working capital changes (151,965) (392,263)
Capital expenditures (699,991) (317,703)
Acquisitions, net of cash
acquired (11,403) (44,367)
Repayments of long-term
debt - (778,209)
Repurchases of common stock (500,000) (250,000)
Repayments of other
borrowings, net (113,567)
Pension and postretirement
contributions (15,236) (13,341)
Dividends paid to
shareholders (144,596) (140,557)
Fees related to early
extinguishment of debt - (46,959)
Dividends paid to
noncontrolling interests (14,756) (36,756)
Non-cash and other items:
Depreciation and
amortization 200,698 196,928
Gain on sale of business (210,428)
Gain on acquisition - (6,221)
Pension and postretirement
expense (benefit) 10,410 (12,436)
Loss on early
extinguishment of debt - 52,801
Deferred income taxes 49,164 (41,941)
Equity in net income of
unconsolidated investments
(net of tax) (89,264) (84,487)
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 2018 2017
---
Net sales:
Lithium $
341,648 $
289,597 $
1,228,171 $
1,018,885
Bromine Specialties 239,111 219,084 917,880 855,143
Catalysts 304,732 311,165 1,101,554 1,067,572
All Other 36,208 37,770 127,186 128,914
Corporate - 173 159 1,462
Total net sales $
921,699 $
857,789 $
3,374,950 $
3,071,976
Adjusted EBITDA:
Lithium $
144,513 $
118,656 $
530,773 $
446,652
Bromine Specialties 70,195 64,402 288,116 258,901
Catalysts 78,773 86,313 284,307 283,883
All Other 6,362 5,972 14,091 13,878
Corporate (35,541) (29,563) (110,623) (117,834)
Total adjusted EBITDA $
264,302 $
245,780 $
1,006,664 $
885,480
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 (loss) 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 (loss) 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
Year Ended
December 31,
December 31,
In thousands, except percentages and per share amounts 2018 2017 2018 2017
---
Net income (loss) attributable to Albemarle Corporation $
129,596 $
(218,366) $
693,562 $
54,850
Add back:
Non-operating pension and OPEB items (net of tax) 8,829 (8,455) 3,234 (10,548)
Non-recurring and other unusual items (net of tax) 25,291 376,641 (96,440) 471,559
Adjusted net income attributable to Albemarle Corporation $
163,716 $
149,820 $
600,356 $
515,861
Adjusted diluted earnings per share $
1.53 $
1.34 $
5.48 $
4.59
Weighted-average common shares outstanding - diluted 107,005 112,152 109,458 112,380
Net income (loss) attributable to Albemarle Corporation $
129,596 $
(218,366) $
693,562 $
54,850
Add back:
Interest and financing expenses 12,571 16,455 52,405 115,350
Income tax expense 11,196 378,221 144,826 431,817
Depreciation and amortization 50,187 52,841 200,698 196,928
EBITDA 203,550 229,151 1,091,491 798,945
Non-operating pension and OPEB items 11,881 (12,981) 5,285 (16,125)
Non-recurring and other unusual items (excluding items associated with interest expense) 48,871 29,610 (90,112) 102,660
Adjusted EBITDA $
264,302 $
245,780 $
1,006,664 $
885,480
Net sales $
921,699 $
857,789 $
3,374,950 $
3,071,976
EBITDA margin 22.1
% 26.7
% 32.3
% 26.0
%
Adjusted EBITDA margin 28.7
% 28.7
% 29.8
% 28.8
%
See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income (loss) 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 Corporate Consolidated % of Net
Specialties Sales
Segments Other Total
Total
Three months ended December 31, 2018:
Net income (loss) attributable to Albemarle Corporation $
112,273 $
59,333 $
58,566 $
230,172 $
4,359 $
(104,935) $
129,596 14.1
%
Depreciation and amortization 23,433 10,862 11,930 46,225 2,003 1,959 50,187 5.4
%
Non-recurring and other unusual items 8,807 8,277 17,084 31,787 48,871 5.3
%
Interest and financing expenses 12,571 12,571 1.4
%
Income tax expense 11,196 11,196 1.2
%
Non-operating pension and OPEB items 11,881 11,881 1.3
%
Adjusted EBITDA $
144,513 $
70,195 $
78,773 $
293,481 $
6,362 $
(35,541) $
264,302 28.7
%
Three months ended December 31, 2017:
Net income (loss) attributable to Albemarle Corporation $
93,814 $
54,646 $
71,859 $
220,319 $
3,899 $
(442,584) $
(218,366) (25.5)
%
Depreciation and amortization 25,038 9,756 14,454 49,248 2,073 1,520 52,841 6.2
%
Non-recurring and other unusual items (196) (196) 29,806 29,610 3.5
%
Interest and financing expenses 16,455 16,455 1.9
%
Income tax expense 378,221 378,221 44.1
%
Non-operating pension and OPEB items (12,981) (12,981) (1.5)
%
Adjusted EBITDA $
118,656 $
64,402 $
86,313 $
269,371 $
5,972 $
(29,563) $
245,780 28.7
%
Year ended December 31, 2018:
Net income (loss) attributable to Albemarle Corporation $
428,212 $
246,509 $
445,604 $
1,120,325 $
6,018 $
(432,781) $
693,562 20.6
%
Depreciation and amortization 95,193 41,607 49,131 185,931 8,073 6,694 200,698 5.9
%
Non-recurring and other unusual items 7,368 (210,428) (203,060) 112,948 (90,112) (2.7)
%
Interest and financing expenses 52,405 52,405 1.5
%
Income tax expense 144,826 144,826 4.3
%
Non-operating pension and OPEB items 5,285 5,285 0.2
%
Adjusted EBITDA $
530,773 $
288,116 $
284,307 $
1,103,196 $
14,091 $
(110,623) $
1,006,664 29.8
%
Year ended December 31, 2017:
Net income (loss) attributable to Albemarle Corporation $
342,992 $
218,839 $
230,665 $
792,496 $
5,521 $
(743,167) $
54,850 1.8
%
Depreciation and amortization 87,879 40,062 54,468 182,409 8,357 6,162 196,928 6.4
%
Non-recurring and other unusual items (excluding items associated with interest 15,781 (1,250) 14,531 88,129 102,660 3.3
expense) %
Interest and financing expenses 115,350 115,350 3.7
%
Income tax expense 431,817 431,817 14.1
%
Non-operating pension and OPEB items (16,125) (16,125) (0.5)
%
Adjusted EBITDA $
446,652 $
258,901 $
283,883 $
989,436 $
13,878 $
(117,834) $
885,480 28.8
%
Non-operating pension and OPEB items, consisting of mark-to-market ("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 expenses, net. Non-operating pension and OPEB items were as follows (in thousands):
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 2018 2017
MTM actuarial loss (gain) $
14,001 $
(11,413) $
14,001 $
(11,413)
Interest cost 8,480 9,344 34,116 36,082
Expected return on assets (10,600) (10,912) (42,832) (40,794)
Total $
11,881 $
(12,981) $
5,285 $
(16,125)
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 Year Ended
December 31, December 31,
2018 2017 2018 2017
Utilization of inventory markup(1)
$
$
$ $
0.15
Restructuring and other(2) (0.01) 0.03 0.11
Acquisition and integration related costs(3) 0.05 0.06 0.14 0.24
Albemarle Foundation contribution(4) 0.11
Gain on sale of business(5) 0.06 (1.55)
Gain on acquisition(6) 0.01 (0.04)
Legal accrual(7) 0.21
Environmental accrual(8) 0.11
Loss on extinguishment of debt(9) (0.04) 0.30
Indemnification adjustments(10) 0.23 0.23
Note receivable reserve(11) 0.18 0.18
Other(12) 0.07 (0.02) 0.11 0.06
Discrete tax items(13) (0.17) 3.18 (0.27) 3.20
Total non-recurring and other unusual items $
0.24 $
3.36 $
(0.88) $
4.20
(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 year ended
December 31, 2017, $23.1 million
($17.3 million after income taxes,
or $0.15 per share) 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
year ended December 31, 2018 is
$3.7 million (or $0.03 per share)
related to expected severance
payments as part of a business
reorganization plan.
The year ended December 31, 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 (loss) as follows (in
millions):
Year Ended
December 31,
2017
Restructuring and other costs:
Cost of goods sold $
2.9
Selling, general and administrative
expenses 8.4
Research and development expenses 5.7
Total $
17.0
Total restructuring and other costs,
after income taxes $
12.1
Total restructuring and other costs,
per diluted share $
0.11
(3) Acquisition and integration
related costs for the three
months and year ended December
31, 2018 and 2017 related to
various significant projects.
Acquisition and integration
related costs are included in
the consolidated statements of
income (loss) as follows (in
millions, except per share
amounts):
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Acquisition and integration related costs:
Cost of goods sold $
0.9 $
1.8 $
3.7 $
14.3
Selling, general and administrative expenses 5.5 5.8 15.7 19.6
Total $
6.4 $
7.6 $
19.4 $
33.9
Total acquisition and integration related costs, after income taxes $
5.1 $
6.7 $
15.7 $
26.8
Total acquisition and integration related costs, per diluted share $
0.05 $
0.06 $
0.14 $
0.24
(4) Included in
Selling, general
and administrative
expenses for the
year ended
December 31, 2018
is a $15.0 million
($11.5 million
after income
taxes, or $0.11
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 year ended
December 31, 2018
is $210.4 million
($169.9 million
after discrete
income taxes, or
$1.55 per share)
related to the
Polyolefin
Catalysts
Divestiture.
During the three
months ended
December 31, 2018
we adjusted the
gain, originally
recorded in the
second quarter of
2018, to reduce it
by $8.3 million
($6.8 million
after discrete
income taxes, or
$0.06 per share).
(6) Included in Other
expenses, net, for
the three months
and year ended
December 31, 2017
is a pre-tax gain
of $0.2 million
and $6.2 million,
respectively,
related to the
acquisition of the
remaining 50%
interest in the
Sales de Magnesio
Ltda. joint
venture in Chile.
In addition,
during the three
months ended
December 31, 2017,
we adjusted the
income taxes on
this gain by $1.0
million. After
income taxes, we
recorded a loss of
$0.8 million, or
$0.01 per share,
and a gain of $4.6
million, or $0.04
per share for the
three months and
year ended
December 31, 2017,
respectively. The
gain was
calculated based
on the difference
between the
purchase price and
the book value of
the investment.
(7) Included in Other
expenses, net, for
the year ended
December 31, 2018
is a charge of
$10.8 million (or
$0.10 per share as
there was no
income tax
impact), related
to a legal expense
resulting from a
settlement in a
legal matter
related to
guarantees from a
previously
disposed business
and a charge of
$16.2 million
($12.5 million
after income
taxes, or $0.11
per share) for a
legal expense
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 year
ended December 31,
2018.
(8) Increase in
environmental
reserve of $15.6
million ($12.0
million after
income taxes, or
$0.11 per share)
to indemnify the
buyer of a
formerly owned
site recorded in
Other expenses,
net. As defined in
the agreement of
sale, this
indemnification
has a set cutoff
date in 2024, at
which point we
will no longer be
required to
provide financial
coverage.
(9) Included in
Interest and
financing expenses
for the year ended
December 31, 2017
is a loss on early
extinguishment of
debt of $52.8
million ($33.4
million after
income taxes, or
$0.30 per share)
related to the
tender premiums,
fees, unamortized
discounts and
unamortized
deferred financing
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. During the
three months ended
December 31, 2017,
we adjusted the
income taxes on
this loss by $4.7
million, or $0.04
per share.
(10) Included in Other
expenses, net for
the three months
and year ended
December 31, 2018
is $19.7 million
(or $0.19 per
share and $0.18
per share for the
three months and
year ended
December 31, 2018,
respectively, due
to differences in
the weighted
average share
count between
periods) related
to the proposed
settlement of an
ongoing audit of a
previously
disposed business
in Germany, as
well as $4.6
million (or $0.04
per share) related
to the revision of
indemnifications
previously
recorded from
disposed
businesses. In
addition, for the
year ended
December 31, 2018,
$0.9 million ($0.7
million after
income taxes, or
$0.01 per share)
is included in
Other expenses,
net related to the
revision of
previously
recorded expenses
of disposed
businesses.
(11) Included in Other
expenses, net for
the three months
and year ended
December 31, 2017
is a $28.7 million
($20.2 million
after income
taxes, or $0.18
per share) reserve
recorded against a
note receivable in
one of our
European entities
no longer deemed
probable of
collection.
(12) Other adjustments
for the three
months ended
December 31, 2018
included amounts
recorded in:
-- Cost of goods sold - $8.8 million
related to non-routine labor and
compensation related costs in Chile
that are outside normal compensation
arrangements.
-- Selling, general and administrative
expenses -$2.3 million of shortfall
contributions for our multiemployer
plan financial improvement plan.
-- Other expenses, net -$1.4 million gain
related to the reversal of previously
recorded liabilities of a disposed
business.
After income taxes,
these charges
totaled $6.9
million, or $0.07
per share.
Other adjustments
for the year ended
December 31, 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 and $8.8
million related to non-routine labor
and compensation related costs in
Chile that are outside normal
compensation arrangements.
Selling, general and administrative
expenses - $2.3 million of shortfall
contributions for our multiemployer
plan financial improvement plan and 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. This was partially offset
by a $1.5 million gain related to a
refund from Chilean authorities due to
an overpayment made in a prior year.
--
-- Other expenses, net -$1.5 million gain
related to the reversal of previously
recorded liabilities of disposed
businesses.
After income taxes,
these charges
totaled $11.6
million, or $0.11
per share.
Other adjustments
for the three
months ended
December 31, 2017
included amounts
recorded in:
-- Selling, general and administrative
expenses -$1.3 million of shortfall
contributions for our multiemployer
plan financial improvement plan.
-- Other expenses, net -$1.8 million
charge for the revision of tax
indemnification expenses and a $1.0
million charge related to the
settlement of a legal claim, partially
offset by a $10.6 million gain related
to the reversal of a liability
associated with the purchase
accounting of a previous acquisition.
After income taxes,
these net gains
totaled $1.6
million or $0.02
per share.
Other adjustments
for the year ended
December 31, 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 -$3.3 million of shortfall
contributions for our multiemployer
plan financial improvement plan,
partially offset by $1.0 million
related to a reversal of an accrual
recorded as part of purchase
accounting from a previous
acquisition.
-- Other expenses, net -$3.2 million of
asset retirement obligation charges
related to the revision of an estimate
at a site formerly owned by Albemarle,
losses of $8.7 million related to
adjustments of settlements and
indemnifications of previously
disposed businesses, the revision of
tax indemnification expenses of $3.7
million primarily related to the
filing of tax returns and a competent
authority agreement for a previously
disposed business and $1.0 million
related to the settlement of a legal
claim, partially offset by gains of
$10.6 million and $1.1 million related
to the reversal of liabilities
recorded as part of purchase
accounting from a previous acquisition
and the previous disposal of a
property, respectively.
After income taxes,
these charges
totaled $7.1
million or $0.06
per share.
(13) Included in Income
tax expense for
the three months
and year ended
December 31, 2018
are discrete net
tax benefits,
excluding the
discrete tax
expense on the
gain of sale of
business note
above, of $17.9
million, or $0.17
per share, and
$29.5 million, or
$0.27 per share,
respectively. The
net benefit for
the three months
primarily as a
result of a $24.3
million benefit
from U.S. accrual
to return
adjustments,
primarily related
to the one-time
transition tax
calculation
imposed by the
TCJA, partially
offset by a $4.5
million expense
from foreign
accrual to return
adjustments, and a
$2.4 million
expense from U.S.
state rate
changes. The net
benefit for the
year ended
December 31, 2018
is primarily a
result of a $38.6
million benefit
from U.S. accrual
to return
adjustments,
primarily related
to the one-time
transition tax
calculation
imposed by the
TCJA and $5.4
million excess tax
benefits realized
from stock-based
compensation
arrangements,
partially offset
by a $3.0 million
expense from
foreign accrual to
return
adjustments, a
$2.4 million
expense from U.S.
state rate
changes, and a
$6.8 million
expense for
adjustments to
foreign valuation
allowances.
Included in Income
tax expense for
the three months
and year ended
December 31, 2017
are discrete net
income tax
expenses of $356.6
million ($3.18 per
share) and $359.3
million ($3.20 per
share),
respectively. The
discrete net
income tax
expenses are
primarily related
to the enactment
of the TCJA in
December 2017,
resulting in
income tax expense
of $429.2 million
from a one-time
transition tax on
earnings on
certain foreign
subsidiaries that
were previously
tax deferred,
partially offset
by a $62.3 million
income tax benefit
as a result of
reducing the U.S.
federal corporate
income tax rate
from 35% to 21%.
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 expense Effective income
income taxes and tax rate
equity in net income
of unconsolidated
investments
Three months ended December 31, 2018:
As reported $
129,708 $
11,196 8.6
%
Non-recurring, other unusual and non-operating pension and OPEB items 60,752 26,632
As adjusted $
190,460 $
37,828 19.9
%
Three months ended December 31, 2017:
As reported $
141,926 $
378,221 266.5
%
Non-recurring, other unusual and non-operating pension and OPEB items 16,629 (351,557)
As adjusted $
158,555 $
26,664 16.8
%
Year ended December 31, 2018:
As reported $
794,701 $
144,826 18.2
%
Non-recurring, other unusual and non-operating pension and OPEB items (84,827) 8,379
As adjusted $
709,874 $
153,205 21.6
%
Year ended December 31, 2017:
As reported $
446,798 $
431,817 96.6
%
Non-recurring, other unusual and non-operating pension and OPEB items 139,336 (321,675)
As adjusted $
586,134 $
110,142 18.8
%
View original content to download multimedia:http://www.prnewswire.com/news-releases/albemarle-ends-2018-strong-projecting-continued-growth-in-2019-300799171.html
SOURCE Albemarle Corporation
