Albemarle Reports Second Quarter Results
CHARLOTTE, N.C., Aug. 5, 2020 /PRNewswire/ -- Albemarle Corporation (NYSE: ALB) today announced its results for the second quarter ended June 30, 2020.
Second Quarter 2020 Highlights
(Unless otherwise stated, all percent changes are based on year-over-year comparisons)
-- Net income of $86 million, or $0.80 per diluted share; Adjusted diluted
EPS of $0.86
-- Net sales of $764 million decreased by 14%, in-line with Q2 2020 outlook
-- Adjusted EBITDA of $185 million decreased by 29%, in-line with Q2 2020
outlook
-- Our plants continue to operate without material impact from the COVID-19
pandemic
-- Maintained our quarterly dividend of $0.385 per share, an increase of
approximately 5% over the quarterly dividend paid in 2019
-- Continued actions to bolster our balance sheet and enhance financial
flexibility include the previously announced covenant amendment
-- Cost savings initiatives remain on track: realization of between $50 and
$70 million of sustainable cost savings in 2020; implementation of
short-term cash management actions to save between $25 and $40 million
per quarter; and deferral of 2020 capital spending by about $150 million
from plan
"We are pleased that our net sales and adjusted EBITDA were at the upper range of our outlook this quarter. These results are due in no small part to the diligence of our global teams who continue to operate our businesses safely and efficiently," said Albemarle CEO Kent Masters. "We remain confident that we have the right strategy in place to deliver value to our stakeholders by investing in and growing our Lithium business. While our strategy has not materially changed, the environment in which we operate has changed dramatically. Our response must be to focus on operational discipline in terms of manufacturing, business, and capital project excellence."
Outlook
Albemarle anticipates that its third quarter 2020 performance will be lower year-over-year based on reduced global economic activity due to the global pandemic. As previously disclosed, we have withdrawn full-year 2020 outlook given the uncertainty around the duration and economic impact of the pandemic. We intend to reintroduce our full-year outlook as the situation allows. In an effort to help investors better understand our business, we have temporarily introduced a quarterly outlook.
Q3 2020 Outlook
Net sales
$700 - $775 million
Adjusted EBITDA
$140 - $190 million
COVID-19 Response
Albemarle's cross-functional Global Response Team continues to meet weekly to assess the situation and take necessary actions to address employee health and safety and operational challenges. Protocols including restricted travel, shift adjustments, increased hygiene, and social distancing for the essential workers at our plants remain in place at all locations. In some regions, including China, Australia, and Europe, our employees have returned to work. Other regions, including most of North and South America, remain on work-from-home protocols for non-essential personnel.
Second Quarter Results
In millions,
except per
share amounts Q2 2020 Q2 2019
$ Change % Change
Net sales $
764.0 $
885.1 $
(121.0) (13.7)
%
Net income
attributable %
to Albemarle
Corporation $
85.6 $
154.2 $
(68.6) (44.5)
Adjusted $
185.2 $
261.9 $
(76.7) (29.3)
EBITDA(a) %
Diluted
earnings per %
share $
0.80 $
1.45 $
(0.65) (44.8)
Non-operating
pension and
OPEB items(a) (0.02) (0.01)
Non-recurring
and other
unusual
items(a) 0.07 0.10
Adjusted
diluted %
earnings per
share(b) $
0.86 $
1.55 $
(0.69) (44.5)
(a) See Non-GAAP Reconciliations for further details.
(b) Totals may not add due to rounding.
Net sales of $764.0 million decreased by $121.0 million compared to the prior year quarter, primarily driven by the Catalysts and Lithium business segments as discussed below.
Adjusted EBITDA of $185.2 million decreased by $76.7 million from the prior year quarter due to lower net sales, which were partially offset by productivity and cost improvements. Similarly, net income attributable to Albemarle of $85.6 million decreased by $68.6 million from the prior year. Corporate costs including SG&A were down compared to the prior year period as a result of cost savings initiatives.
The effective income tax rate for Q2 2020 was 17.5% compared to 18.2% in the same period in 2019. The difference is largely due to a change in the geographic mix of earnings. On an adjusted basis, the effective income tax rates were 18.9% and 18.4% for the second quarter of 2020 and 2019, respectively.
Business Segment Results
Lithium
In
millions Q2 2020 Q2 2019
$ Change % Change
Net $
283.7 $
324.8 $
(41.0) (12.6)
Sales %
Adjusted $
94.5 $
141.8 $
(47.2) (33.3)
EBITDA %
Lithium net sales of $283.7 million declined $41.0 million primarily due to lower market and contract pricing. Lower contract pricing reflects 2020 battery-grade price adjustments that were agreed to in late 2019. Adjusted EBITDA of $94.5 million declined by $47.2 million primarily due to reduced net sales as well as reduced Talison equity income. The decline was partially offset by cost savings initiatives and efficiency improvements.
Current Trends: We expect the impact of low OEM automotive production to be felt more acutely in Q3 2020. At the same time, we are seeing impacts of lower market prices, higher inventory in the battery channel, and reduced demand in the glass and ceramics markets. As a result, we expect Q3 2020 EBITDA to be down about 10% to 20% compared to Q2 2020.
Bromine Specialties
In
millions Q2 2020 Q2 2019
$ Change % Change
Net Sales $
232.8 $
255.4 $
(22.7) (8.9)
%
Adjusted $
73.0 $
81.3 $
(8.3) (10.2)
EBITDA %
Bromine net sales of $232.8 million declined $22.7 million primarily due to lower volumes driven by COVID-19 related impacts. Adjusted EBITDA of $73.0 million declined $8.3 million due to lower net sales, which were partially offset by cost savings initiatives.
Current Trends: Third quarter 2020 EBITDA is expected to be similar to Q2 2020. Due to our position in the supply chain, the impact of COVID-19 related weakness began in Q2 2020 and is expected to continue into Q3 2020. Strong demand for surfactants and stabilization in building and construction helps offset weakness in other end use markets.
Catalysts
In
millions Q2 2020 Q2 2019
$ Change % Change
Net $
197.1 $
266.3 $
(69.2) (26.0)
Sales %
Adjusted $
22.8 $
66.9 $
(44.1) (65.9)
EBITDA %
Catalysts net sales of $197.1 million declined $69.2 million due primarily to lower volumes. Fluid Catalytic Cracking (FCC) volume was down primarily from lower transportation fuel consumption as a result of stay-at-home orders and travel restrictions. Hydroprocessing Catalysts (HPC) volumes were also down due to normal lumpiness of shipments and some softness related to lower oil prices and reduced fuel demand. Adjusted EBITDA of $22.8 million declined $44.1 million as a result of lower net sales and a net $12 million correction of out-of-period errors regarding inventory values and freight accruals. The errors primarily relate to Q1 2020 results (see note to the income statement). Adjusted EBITDA was favorably impacted by cost savings initiatives and efficiency improvements.
Current Trends: We expect FCC demand to partially recover in H2 2020 as travel begins to increase and global gasoline inventories deplete. Conversely, we expect that HPC will be negatively impacted in H2 2020 as refiners defer spending into 2021 and 2022. As a result, Q3 2020 EBITDA is expected to remain down about 50% to 60% from prior year.
All Other
In
millions Q2 2020 Q2 2019
$ Change % Change
Net $
50.5 $
38.6 $
11.9 31.0
Sales
%
Adjusted $
18.6 $
11.2 $
7.4 65.5
EBITDA
%
Other operations represents our Fine Chemistry Services (FCS) business. FCS net sales of $50.5 million increased $11.9 million and adjusted EBITDA of $18.6 million increased $7.4 million. The FCS business tends to be contract driven. Recent contracts include life sciences products which are typically anti-cyclical.
Balance Sheet and Liquidity
As of June 30, 2020, Albemarle had estimated liquidity of over $1.5 billion, including $737 million of cash and equivalents, $550 million remaining under our $1 billion revolver, and $220 million on other available credit lines. Total debt was $3.5 billion, representing net debt to adjusted EBITDA of approximately 3.2 times.
As previously disclosed, we recently negotiated a covenant amendment to ensure ongoing financial flexibility. The revised covenant is based on net debt to adjusted EBITDA, with a maximum ratio of 4.5 times for the third quarter 2020 through third quarter 2021, decreasing to 4.0 times in the fourth quarter of 2021, and 3.5 times thereafter.
Cash Flow and Capital Deployment
Cash from operations for the six months ended June 30, 2020, of $207.9 million, increased $8.6 million versus the prior year as reduced working capital outflows in 2020 offset lower earnings. Capital expenditures of $419.0 million were in-line with the prior year as progress continued on our Lithium expansion projects.
Our primary capital allocation priorities are to maintain our investment grade rating and our quarterly dividend while preserving our long-term growth profile.
In order to preserve cash and align with the current economic environment, we have accelerated our previously announced cost savings initiatives, implemented short-term cash management tactics, and delayed capital expenditures. We continue to anticipate realizing $50 to $70 million of sustainable cost savings in 2020. Expected full-year 2020 capital spending remains approximately $850 to $950 million.
In May, the board declared a quarterly dividend of $0.385 per share, an increase of approximately 5% over the quarterly dividend paid in 2019. We expect 2020 to be our 26th consecutive year of dividend increase, and the company remains committed to shareholder returns.
Our share repurchase authorization remains in place; however, there are no near-term plans to execute share buybacks. Divestiture activity is ongoing but has been slowed as travel restrictions have delayed due diligence processes.
Earnings Call
Date: Thursday, August 6, 2020
Time: 9:00 AM Eastern time
Dial-in (U.S.):
844-347-1034
Dial-in (International):
209-905-5910
Passcode: 3673986
The Company's earnings presentation and supporting material are available on Albemarle's website at https://investors.albemarle.com.
About Albemarle
Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, N.C., is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We think beyond business-as-usual to power the potential of companies in many of the world's largest and most critical industries, such as energy, electronics, and transportation. We actively pursue a sustainable approach to managing our diverse global footprint of world-class resources. In conjunction with our highly experienced and talented global teams, our deep-seated values, and our collaborative customer relationships, we create value-added and performance-based solutions that enable a safer and more sustainable future.
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; uncertainties as to the duration and impact of the coronavirus (COVID-19) pandemic; 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
Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Net sales $
764,049 $
885,052 $
1,502,894 $
1,717,116
Cost of goods sold(1) 530,690 559,138 1,027,517 1,107,716
Gross profit 233,359 325,914 475,377 609,400
Selling, general and
administrative
expenses 106,949 126,715 208,826 240,070
Research and
development expenses 14,210 13,462 30,307 28,439
Operating profit 112,200 185,737 236,244 340,891
Interest and financing
expenses (17,852) (11,601) (34,737) (24,187)
Other (expenses)
income, net (6,273) (7,065) 2,041 4,226
Income before income
taxes and equity in
net income of
unconsolidated
investments 88,075 167,071 203,548 320,930
Income tax expense 15,431 30,411 33,873 67,925
Income before equity
in net income of
unconsolidated
investments 72,644 136,660 169,675 253,005
Equity in net income
of unconsolidated
investments (net of
tax) 31,114 38,310 57,718 73,491
Net income 103,758 174,970 227,393 326,496
Net income
attributable to
noncontrolling
interests (18,134) (20,772) (34,565) (38,729)
Net income
attributable to
Albemarle Corporation $
85,624 $
154,198 $
192,828 $
287,767
Basic earnings per
share $
0.81 $
1.46 $
1.81 $
2.72
Diluted earnings per
share $
0.80 $
1.45 $
1.81 $
2.71
Weighted-average
common shares
outstanding - basic 106,329 105,961 106,278 105,880
Weighted-average
common shares
outstanding - diluted 106,535 106,316 106,524 106,336
(1) Cost of goods sold for the three-month period ended June 30, 2020 includes a net expense of $9.8 million for the correction of out-of-period errors regarding understated cost of goods sold for inventory values within the Catalysts segment and overstated freight accruals primarily within the Lithium and Catalysts segments.
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
June 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $
736,696 $
613,110
Trade accounts receivable 517,626 612,651
Other accounts receivable 76,957 67,551
Inventories 851,256 768,984
Other current assets 109,874 162,813
Total current assets 2,292,409 2,225,109
Property, plant and
equipment 7,138,969 6,817,843
Less accumulated
depreciation and
amortization 2,002,612 1,908,370
Net property, plant and
equipment 5,136,357 4,909,473
Investments 614,145 579,813
Other assets 213,223 213,061
Goodwill 1,571,280 1,578,785
Other intangibles, net of
amortization 342,839 354,622
Total assets $
10,170,253 $
9,860,863
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $
523,160 $
574,138
Accrued expenses 399,456 553,160
Current portion of long-
term debt 406,201 187,336
Dividends payable 40,728 38,764
Current operating lease
liability 21,808 23,137
Income taxes payable 29,450 32,461
Total current liabilities 1,420,803 1,408,996
Long-term debt 3,132,191 2,862,921
Postretirement benefits 50,362 50,899
Pension benefits 284,480 292,073
Other noncurrent
liabilities 670,001 754,536
Deferred income taxes 406,255 397,858
Commitments and
contingencies
Equity:
Albemarle Corporation
shareholders' equity:
Common stock 1,064 1,061
Additional paid-in
capital 1,400,105 1,383,446
Accumulated other
comprehensive loss (431,131) (395,735)
Retained earnings 3,054,434 2,943,478
Total Albemarle
Corporation shareholders'
equity 4,024,472 3,932,250
Noncontrolling interests 181,689 161,330
Total equity 4,206,161 4,093,580
Total liabilities and
equity $
10,170,253 $
9,860,863
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Six Months Ended
June 30,
2020 2019
Cash and cash equivalents at
beginning of year $
613,110 $
555,320
Cash flows from operating
activities:
Net income 227,393 326,496
Adjustments to reconcile net
income to cash flows from
operating activities:
Depreciation and amortization 111,535 102,231
Gain on sale of property (11,079)
Stock-based compensation and
other 9,765 10,136
Equity in net income of
unconsolidated investments (net
of tax) (57,718) (73,491)
Dividends received from
unconsolidated investments and
nonmarketable securities 12,984 60,291
Pension and postretirement
(benefit) expense (3,312) 1,055
Pension and postretirement
contributions (6,692) (7,778)
Unrealized gain on investments
in marketable securities (1,278) (577)
Deferred income taxes 8,990 3,570
Working capital changes (156,579) (223,238)
Other, net 62,829 11,672
Net cash provided by operating
activities 207,917 199,288
Cash flows from investing
activities:
Acquisitions, net of cash
acquired (22,572)
Capital expenditures (418,991) (415,626)
Proceeds from sale of property
and equipment 10,356
Sales of marketable securities,
net 1,496 908
Investments in equity and other
corporate investments (486) (2,549)
Net cash used in investing
activities (440,553) (406,911)
Cash flows from financing
activities:
Proceeds from borrowings of
credit agreements 452,163
Other borrowings, net 12,956 183,052
Dividends paid to shareholders (79,909) (74,313)
Dividends paid to noncontrolling
interests (14,286) (38,962)
Proceeds from exercise of stock
options 10,809 3,205
Withholding taxes paid on stock-
based compensation award
distributions (4,019) (10,570)
Debt financing costs (2,669)
Other (445)
Net cash provided by financing
activities 375,045 61,967
Net effect of foreign exchange
on cash and cash equivalents (18,823) (11,481)
Increase (decrease) in cash and
cash equivalents 123,586 (157,137)
Cash and cash equivalents at end
of period $
736,696 $
398,183
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Net sales:
Lithium $
283,722 $
324,758 $
520,540 $
616,644
Bromine Specialties 232,779 255,433 464,371 504,485
Catalysts 197,053 266,301 404,260 517,949
All Other 50,495 38,560 113,723 78,038
Total net sales $
764,049 $
885,052 $
1,502,894 $
1,717,116
Adjusted EBITDA:
Lithium $
94,536 $
141,779 $
173,173 $
257,395
Bromine Specialties 73,041 81,332 156,303 159,929
Catalysts 22,777 66,875 70,247 126,946
All Other 18,598 11,240 41,422 18,483
Corporate (23,759) (39,326) (59,587) (74,986)
Total adjusted
EBITDA $
185,193 $
261,900 $
381,558 $
487,767
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 is available on Albemarle's website at https://investors.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
Six Months Ended
June 30,
June 30,
In thousands, except
percentages and per
share amounts 2020 2019 2020 2019
---
Net income
attributable to
Albemarle Corporation $
85,624 $
154,198 $
192,828 $
287,767
Add back:
Non-operating pension
and OPEB items (net
of tax) (2,299) (693) (4,610) (1,262)
Non-recurring and
other unusual items
(net of tax) 7,907 10,754 9,400 8,742
Adjusted net income
attributable to
Albemarle Corporation $
91,232 $
164,259 $
197,618 $
295,247
Adjusted diluted
earnings per share $
0.86 $
1.55 $
1.86 $
2.78
Weighted-average
common shares
outstanding - diluted 106,535 106,316 106,524 106,336
Net income
attributable to
Albemarle Corporation $
85,624 $
154,198 $
192,828 $
287,767
Add back:
Interest and financing
expenses 17,852 11,601 34,737 24,187
Income tax expense 15,431 30,411 33,873 67,925
Depreciation and
amortization 57,841 52,948 111,535 102,231
EBITDA 176,748 249,158 372,973 482,110
Non-operating pension
and OPEB items (2,895) (676) (5,803) (1,259)
Non-recurring and
other unusual items 11,340 13,418 14,388 6,916
Adjusted EBITDA $
185,193 $
261,900 $
381,558 $
487,767
Net sales $
764,049 $
885,052 $
1,502,894 $
1,717,116
EBITDA margin 23.1
% 28.2
% 24.8
% 28.1
%
Adjusted EBITDA margin 24.2
% 29.6
% 25.4
% 28.4
%
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 reported in accordance with GAAP (in thousands, except percentages).
Lithium Bromine Catalysts Reportable All Other Corporate Consolidated % of
Specialties Segments Total Net
Total Sales
Three months ended June 30, 2020
Net income (loss) attributable to Albemarle Corporation $
66,038 $
60,692 $
10,702 $
137,432 $
16,425 $
(68,233) $
85,624 11.2
%
Depreciation and amortization 28,498 12,349 12,075 52,922 2,173 2,746 57,841 7.6
%
Non-recurring and other unusual items 11,340 11,340 1.5
%
Interest and financing expenses 17,852 17,852 2.3
%
Income tax expense 15,431 15,431 2.0
%
Non-operating pension and OPEB items (2,895) (2,895) (0.4)
%
Adjusted EBITDA $
94,536 $
73,041 $
22,777 $
190,354 $
18,598 $
(23,759) $
185,193 24.2
%
Three months ended June 30, 2019
Net income (loss) attributable to Albemarle Corporation $
117,303 $
69,616 $
54,124 $
241,043 $
9,118 $
(95,963) $
154,198 17.4
%
Depreciation and amortization 24,365 11,716 12,751 48,832 2,122 1,994 52,948 6.0
%
Non-recurring and other unusual items 111 111 13,307 13,418 1.5
%
Interest and financing expenses 11,601 11,601 1.3
%
Income tax expense 30,411 30,411 3.5
%
Non-operating pension and OPEB items (676) (676) (0.1)
%
Adjusted EBITDA $
141,779 $
81,332 $
66,875 $
289,986 $
11,240 $
(39,326) $
261,900 29.6
%
Six months ended June 30, 2020
Net income (loss) attributable to Albemarle Corporation $
119,278 $
132,357 $
45,594 $
297,229 $
37,271 $
(141,672) $
192,828 12.8
%
Depreciation and amortization 53,895 23,946 24,653 102,494 4,151 4,890 111,535 7.4
%
Non-recurring and other unusual items 14,388 14,388 1.0
%
Interest and financing expenses 34,737 34,737 2.3
%
Income tax expense 33,873 33,873 2.3
%
Non-operating pension and OPEB items (5,803) (5,803) (0.4)
%
Adjusted EBITDA $
173,173 $
156,303 $
70,247 $
399,723 $
41,422 $
(59,587) $
381,558 25.4
%
Six months ended June 30, 2019
Net income (loss) attributable to Albemarle Corporation $
210,472 $
137,096 $
101,983 $
449,551 $
14,324 $
(176,108) $
287,767 16.8
%
Depreciation and amortization 46,457 22,833 24,963 94,253 4,159 3,819 102,231 5.9
%
Non-recurring and other unusual items 466 466 6,450 6,916 0.4
%
Interest and financing expenses 24,187 24,187 1.4
%
Income tax expense 67,925 67,925 4.0
%
Non-operating pension and OPEB items (1,259) (1,259) (0.1)
%
Adjusted EBITDA $
257,395 $
159,929 $
126,946 $
544,270 $
18,483 $
(74,986) $
487,767 28.4
%
Non-operating pension and OPEB items, consisting of mark-to-market 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) income, net. Non-operating pension and OPEB items were as follows (in thousands):
Three Months Ended Six Months Ended
June 30,
June 30,
2020 2019 2020 2019
Interest
cost $
7,133 $
8,769 $
14,288 $
17,638
Expected
return on
assets (10,028) (9,445) (20,091) (18,897)
Total $
(2,895) $
(676) $
(5,803) $
(1,259)
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 Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Restructuring and
other(1) $
0.04 $
0.04 $
0.06 $
0.05
Acquisition and
integration
related costs(2) 0.04 0.04 0.06 0.07
Gain on sale of
property(3) (0.08)
Other(4) (0.01) 0.03 (0.02) 0.02
Discrete tax
items(5) (0.01) (0.01) 0.02
Total non-
recurring and
other unusual
items $
0.07 $
0.10 $
0.09 $
0.08
(1) Severance expenses
of $6.7 million
($4.7 million
after income
taxes, or $0.04
per share)
included in
Selling, general
and administrative
expenses for the
three months ended
June 30, 2020. In
addition, we
recorded severance
expenses in Cost
of goods sold,
Selling, general
and administrative
expenses and Net
income
attributable to
noncontrolling
interest for the
six months ended
June 30, 2020 of
$0.7 million, $8.2
million and a $0.3
million gain ($6.2
million after
income taxes, or
$0.06 per share),
respectively.
These severance
expenses are part
of a business
reorganization
plan, primarily
within our Lithium
business in
Germany, as well
in our Bromine
Specialties
business in 2020.
The balance of
unpaid severance
is recorded in
Accrued expenses
and is expected to
primarily be paid
through the first
quarter of 2021.
During the three
and six months
ended June 30,
2019, severance
expenses of $4.8
million ($4.4
million after
income taxes, or
$0.04 per share)
and $5.3 million
($4.9 million
after income
taxes, or $0.05
per share),
respectively, were
recorded in
Selling, general
and administrative
expenses as part
of a business
reorganization
plan primarily in
Catalysts, Lithium
and Corporate.
(2) Costs related to
the acquisition,
integration and
potential
divestitures for
various
significant
projects, recorded
in Selling,
general and
administrative
expenses for the
three and six
months ended June
30, 2020 of $5.5
million and $8.4
million ($4.2
million and $6.5
million after
income taxes, or
$0.04 and $0.06
per share),
respectively, and
for the three and
six months ended
June 30, 2019 of
$5.0 million and
$10.3 million
($3.8 million and
$7.9 million after
income taxes, or
$0.04 and $0.07
per share),
respectively.
(3) Included in Other
(expenses) income,
net, for the six
months ended June
30, 2019 is a gain
of $11.1 million
($8.5 million
after income
taxes, or $0.08
per share) related
to the sale of
land in Pasadena,
Texas not used as
part of our
operations.
(4) Other adjustments
for the three
months ended June
30, 2020 included
amounts recorded
in:
-- Other (expenses) income, net -$0.9
million ($0.6 million after income
taxes, or $0.01 per share) net gain
primarily relating to the sale of idle
properties in Germany.
Other adjustments
for the six months
ended June 30,
2020 included
amounts recorded
in:
-- Other (expenses) income, net -$2.7
million gain resulting from the
settlement of a legal matter related
to a business sold and $0.8 million
net gain primarily relating to the
sale of idle properties in Germany,
partially offset by a $0.8 million
loss resulting from the adjustment of
indemnifications related to previously
disposed businesses.
After income taxes,
this net gain
totaled $1.7
million, or $0.02
per share.
Other adjustments
for the three
months ended June
30, 2019 included
amounts recorded
in:
-- Cost of goods sold - $0.1 million
related to non-routine labor and
compensation related costs in Chile
that are outside normal compensation
arrangements.
-- Selling, general and administrative
expenses -$4.8 million related to
severance payments as part of a
business reorganization plan and $1.0
million of shortfall contributions for
our multiemployer plan financial
improvement plan.
Other (expenses) income, net -$2.5
million of a net loss primarily
resulting from the revision of
indemnifications related to previously
disposed businesses.
After income taxes,
these charges
totaled $3.3
million, or $0.03
per share.
Other adjustments
for the six months
ended June 30,
2019 included
amounts recorded
in:
-- Cost of goods sold - $0.5 million
related to non-routine labor and
compensation related costs in Chile
that are outside normal compensation
arrangements.
-- Selling, general and administrative
expenses -$5.3 million related to
severance payments as part of a
business reorganization plan and $1.0
million of shortfall contributions for
our multiemployer plan financial
improvement plan.
-- Other (expenses) income, net -$0.9
million of a net loss primarily
resulting from the revision of
indemnifications and other liabilities
related to previously disposed
businesses.
After income taxes,
these charges
totaled $2.0
million or $0.02
per share.
(5) Included in Income
tax expense for
the three and six
months ended June
30, 2020 are
discrete net tax
benefits of $0.5
million, or less
than $0.01 per
share, and $1.6
million, or $0.01
per share,
respectively. The
net benefit for
the three months
is primarily
related to lapses
in statute of
limitations. The
net benefit for
the six months is
primarily related
to excess tax
benefits realized
from stock-based
compensation
arrangements.
Included in Income
tax expense for
the three and six
months ended June
30, 2019 are
discrete net tax
benefits of $0.8
million, or $0.01
per share, and
expenses of $2.4
million, or $0.02
per share,
respectively. The
net benefit for
the three months
is primarily
related to foreign
return to accrual
adjustments. The
net expense for
the six months is
primarily related
to expenses for
uncertain tax
positions and
foreign return to
accrual
adjustments,
partially offset
by a benefit for
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 reported in accordance with GAAP (in thousands, except percentages).
Income before Income tax expense Effective income tax
income taxes and rate
equity in net income
of unconsolidated
investments
Three
months
ended
June 30,
2020
As $
88,075 $
15,431 17.5
reported %
Non-
recurring,
other
unusual
and non-
operating
pension
and OPEB
items 8,445 2,837
As $
96,520 $
18,268 18.9
adjusted %
Three
months
ended
June 30,
2019
As $
167,071 $
30,411 18.2
reported %
Non-
recurring,
other
unusual
and non-
operating
pension
and OPEB
items 12,742 2,681
As $
179,813 $
33,092 18.4
adjusted %
Six months
ended
June 30,
2020
As $
203,548 $
33,873 16.6
reported %
Non-
recurring,
other
unusual
and non-
operating
pension
and OPEB
items 8,906 3,795
As $
212,454 $
37,668 17.7
adjusted %
Six months
ended
June 30,
2019
As $
320,930 $
67,925 21.2
reported %
Non-
recurring,
other
unusual
and non-
operating
pension
and OPEB
items 5,657 (1,823)
As $
326,587 $
66,102 20.2
adjusted %
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SOURCE Albemarle Corporation
