Albemarle Reports Third Quarter Results
CHARLOTTE, N.C., Nov. 4, 2020 /PRNewswire/ -- Albemarle Corporation (NYSE: ALB) today announced its results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights
(Unless otherwise stated, all percent changes are based on year-over-year comparisons)
-- Net income of $98 million, or $0.92 per diluted share; Adjusted diluted
EPS of $1.09
-- Net sales of $747 million decreased by 15%, in-line with Q3 2020 outlook
-- Adjusted EBITDA of $216 million decreased by 15%, exceeding the high-end
of Q3 2020 outlook by 14%
-- Our plants continue to operate without material impact from the COVID-19
pandemic
-- Increased cost savings: approximately $80 million of sustainable cost
savings to be achieved in 2020
-- Maintained our quarterly dividend of $0.385 per share, an increase of
approximately 5% over the quarterly dividend paid in 2019
"Albemarle reported another solid quarter with Q3 2020 net sales in the upper end of our outlook range and adjusted EBITDA exceeding outlook. Our performance was driven by operating teams committed to running our businesses safely and efficiently in the face of pandemic-related economic weakness, and to our successful sustainable cost savings initiative," said Albemarle CEO Kent Masters. "We now expect to realize approximately $80 million of cost savings this year and to reach an annual savings rate of $120 million or more by the end of 2021. We expect these savings to represent a first wave of ongoing operational improvements that will reap notable benefits for the company."
Outlook
Albemarle anticipates that its full year 2020 performance will be lower year-over-year based on reduced global economic activity due to the global pandemic.
FY 2020 Outlook
Net sales
$3.05 - $3.15 billion
Adjusted EBITDA
$780 - $810 million
Adjusted EBITDA Margin 25% - 26%
Adj. Diluted EPS
$3.80 - $4.15
Net Cash from Operations
$660 - $710 million
Capital Expenditures
$850 - $900 million
COVID-19 Response
Albemarle's cross-functional Global Response Team continues to meet biweekly to assess the situation and take necessary actions to address employee health and safety and operational challenges. Our first priority is always the health and well-being of our employees, customers, and communities. Beyond that, our focus has shifted from managing an immediate crisis to building in the flexibility needed to adjust for regional differences and changing conditions. 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, employees are able to return to their work sites. Other regions, including most of North and South America, remain on work-from-home protocols for non-essential personnel.
Third Quarter Results
In millions,
except per
share amounts Q3 2020 Q3 2019
$ Change % Change
Net sales $
746.9 $
879.7 $
(132.9) (15.1)
%
Net income
attributable %
to Albemarle
Corporation $
98.3 $
155.1 $
(56.8) (36.6)
Adjusted $
216.1 $
254.4 $
(38.3) (15.1)
EBITDA(a) %
Diluted
earnings per %
share $
0.92 $
1.46 $
(0.54) (37.0)
Non-operating
pension and
OPEB items(a) (0.02) (0.01)
Non-recurring
and other
unusual
items(a) 0.19 0.08
Adjusted
diluted %
earnings per
share(b) $
1.09 $
1.53 $
(0.44) (28.8)
(a) See Non-GAAP Reconciliations for
further details.
(b) Totals may not add due to rounding.
Net sales of $746.9 million decreased by $132.9 million compared to the prior year quarter, primarily driven by the Catalysts and Lithium business segments as discussed below.
Adjusted EBITDA of $216.1 million decreased by $38.3 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 $98.3 million decreased by $56.8 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.
We have increased our sustainable cost savings and now expect to achieve approximately $80 million of sustainable savings in 2020, up from previous estimates of $50 to $70 million. We now expect these savings to reach a run-rate of more than $120 million by year-end 2021, up from previous estimates of more than $100 million. We continue to take short-term cash management measures and delay capital expenditures. Short-term savings are expected to average approximately $25 to $40 million per quarter. Full-year 2020 capital spending is now expected to be approximately $850 to $900 million.
The effective income tax rate for Q3 2020 was 25.2% compared to 15.5% in the same period in 2019. The difference is largely due to a change in the geographic mix of earnings and foreign uncertain tax positions and foreign return to accrual adjustments recorded in Q3 2020. On an adjusted basis, the effective income tax rates were 16.7% and 15.0% for the third quarter of 2020 and 2019, respectively.
Business Segment Results
Lithium
In
millions Q3 2020 Q3 2019
$ Change % Change
Net $
265.6 $
330.4 $
(64.7) (19.6)
Sales %
Adjusted $
97.8 $
127.5 $
(29.7) (23.3)
EBITDA %
Lithium net sales of $265.6 million declined $64.7 million primarily due to lower contract and market pricing. Lower contract pricing reflects 2020 battery-grade price adjustments that were agreed to in late 2019. Adjusted EBITDA of $97.8 million declined by $29.7 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 Q4 2020 adjusted EBITDA to be up between 10% and 20% compared to Q3 2020 as customers continue to meet planned volume commitments for FY 2020. We anticipate FY 2021 volumes to be relatively flat as plants are effectively sold out given volume constraints. Our Kemerton and La Negra expansion projects are expected to be commissioned in 2021 with sales volume beginning in 2022. FY 2021 pricing is expected to be down slightly primarily due to lower average realized pricing for carbonate and technical grade products.
Bromine Specialties
In
millions Q3 2020 Q3 2019
$ Change % Change
Net $
237.2 $
256.3 $
(19.1) (7.4)
Sales
%
Adjusted $
79.4 $
88.8 $
(9.4) (10.5)
EBITDA %
Bromine net sales of $237.2 million declined $19.1 million primarily due to lower volumes driven by the recent economic downturn related to the COVID-19 pandemic. Adjusted EBITDA of $79.4 million declined $9.4 million due to lower net sales, partially offset by cost savings initiatives.
Current Trends: We expect Q4 2020 adjusted EBITDA to be similar to Q3 2020. Stabilization in electronics and building and construction helps offset weakness in other end use markets. We expect FY 2021 results to improve slightly assuming continued economic recovery and on-going cost savings initiatives.
Catalysts
In
millions Q3 2020 Q3 2019
$ Change % Change
Net $
197.9 $
261.3 $
(63.4) (24.3)
Sales %
Adjusted $
37.8 $
66.9 $
(29.1) (43.5)
EBITDA %
Catalysts net sales of $197.9 million declined $63.4 million due primarily to lower volumes. Fluid Catalytic Cracking (FCC) volume improved sequentially, but remains below prior year due to lower transportation fuel consumption as a result of travel restrictions. Hydroprocessing Catalysts (HPC) volume was also down compared to the prior year due to normal lumpiness of shipments and softness related to lower oil prices and reduced fuel demand. Adjusted EBITDA of $37.8 million declined $29.1 million as a result of lower net sales offset by cost savings initiatives and efficiency improvements.
Current Trends: We expect Q4 2020 adjusted EBITDA to be down between 20% and 30% sequentially due to HPC volume and mix. FCC demand is expected to continue to gradually recover in line with increased travel and depletion of global gasoline inventories. HPC demand tends to be lumpier than FCC demand and is also expected to continue to be negatively impacted as refiners defer spending into 2021 and 2022. We expect FY 2021 results to continue to improve from the very low levels seen in FY 2020, but to remain well below pre-COVID demand levels, assuming a slow recovery of refinery capacity utilization and margins.
All Other
In
millions Q3 2020 Q3 2019
$ Change % Change
Net $
46.1 $
31.7 $
14.4 45.2
Sales %
Adjusted $
25.0 $
10.4 $
14.5 139.1
EBITDA
%
Other operations represents our Fine Chemistry Services (FCS) business. FCS net sales of $46.1 million increased $14.4 million and adjusted EBITDA of $25.0 million increased $14.5 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 September 30, 2020, Albemarle had estimated liquidity of over $1.5 billion, including $702 million of cash and equivalents, $610 million remaining under our $1 billion revolver, and $223 million on other available credit lines. Total debt was $3.5 billion, representing net debt to adjusted EBITDA of approximately 3.2 times.
Cash Flow and Capital Deployment
Cash from operations for the nine months ended September 30, 2020, of $461.7 million, increased $116.1 million versus the prior year as reduced working capital outflows and cost savings more than offset lower revenues. Capital expenditures of $621.4 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 October, 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 proceeding despite on-going travel restrictions.
Earnings Call
Date: Thursday, November 5, 2020
Time: 9:00 AM Eastern time
Dial-in (U.S.):
844-347-1034
Dial-in (International):
209-905-5910
Passcode: 6829479
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 Nine Months Ended
September 30,
September 30,
2020 2019 2020 2019
Net sales $
746,868 $
879,747 $
2,249,762 $
2,596,863
Cost of goods sold 492,812 569,880 1,520,329 1,677,596
Gross profit 254,056 309,867 729,433 919,267
Selling, general and
administrative
expenses 96,092 108,135 304,918 348,205
Research and
development expenses 13,532 15,585 43,839 44,024
Operating profit 144,432 186,147 380,676 527,038
Interest and financing
expenses (19,227) (11,108) (53,964) (35,295)
Other expenses, net (3,661) (11,316) (1,620) (7,090)
Income before income
taxes and equity in
net income of
unconsolidated
investments 121,544 163,723 325,092 484,653
Income tax expense 30,653 25,341 64,526 93,266
Income before equity
in net income of
unconsolidated
investments 90,891 138,382 260,566 391,387
Equity in net income
of unconsolidated
investments (net of
tax) 26,154 33,236 83,872 106,727
Net income 117,045 171,618 344,438 498,114
Net income
attributable to
noncontrolling
interests (18,744) (16,548) (53,309) (55,277)
Net income
attributable to
Albemarle Corporation $
98,301 $
155,070 $
291,129 $
442,837
Basic earnings per
share $
0.92 $
1.46 $
2.74 $
4.18
Diluted earnings per
share $
0.92 $
1.46 $
2.73 $
4.16
Weighted-average
common shares
outstanding - basic 106,386 105,999 106,314 105,920
Weighted-average
common shares
outstanding - diluted 106,873 106,299 106,640 106,324
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
September 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $
702,073 $
613,110
Trade accounts receivable 516,166 612,651
Other accounts receivable 61,522 67,551
Inventories 828,080 768,984
Other current assets 119,171 162,813
Total current assets 2,227,012 2,225,109
Property, plant and
equipment 7,284,575 6,817,843
Less accumulated
depreciation and
amortization 2,041,851 1,908,370
Net property, plant and
equipment 5,242,724 4,909,473
Investments 603,745 579,813
Other assets 211,534 213,061
Goodwill 1,603,049 1,578,785
Other intangibles, net of
amortization 343,919 354,622
Total assets $
10,231,983 $
9,860,863
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $
465,644 $
574,138
Accrued expenses 477,510 576,297
Current portion of long-
term debt 603,787 187,336
Dividends payable 40,787 38,764
Income taxes payable 25,011 32,461
Total current liabilities 1,612,739 1,408,996
Long-term debt 2,940,533 2,862,921
Postretirement benefits 49,926 50,899
Pension benefits 285,942 292,073
Other noncurrent
liabilities 612,013 754,536
Deferred income taxes 405,449 397,858
Commitments and
contingencies
Equity:
Albemarle Corporation
shareholders' equity:
Common stock 1,065 1,061
Additional paid-in
capital 1,410,534 1,383,446
Accumulated other
comprehensive loss (398,467) (395,735)
Retained earnings 3,111,749 2,943,478
Total Albemarle
Corporation shareholders'
equity 4,124,881 3,932,250
Noncontrolling interests 200,500 161,330
Total equity 4,325,381 4,093,580
Total liabilities and
equity $
10,231,983 $
9,860,863
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Nine Months Ended
September 30,
2020 2019
Cash and cash equivalents at
beginning of year $
613,110 $
555,320
Cash flows from operating
activities:
Net income 344,438 498,114
Adjustments to reconcile net
income to cash flows from
operating activities:
Depreciation and amortization 170,214 156,718
Gain on sale of property (11,079)
Stock-based compensation and
other 15,864 15,169
Equity in net income of
unconsolidated investments (net
of tax) (83,872) (106,727)
Dividends received from
unconsolidated investments and
nonmarketable securities 61,309 62,982
Pension and postretirement
(benefit) expense (4,975) 1,641
Pension and postretirement
contributions (10,323) (10,728)
Unrealized gain on investments
in marketable securities (3,377) (1,701)
Deferred income taxes 7,920 7,726
Working capital changes (167,436) (289,587)
Other, net 131,952 23,110
Net cash provided by operating
activities 461,714 345,638
Cash flows from investing
activities:
Acquisitions, net of cash
acquired (22,572)
Capital expenditures (621,371) (608,456)
Proceeds from sale of property
and equipment 10,356
Sales of marketable securities,
net 1,208 1,177
Investments in equity and other
corporate investments (786) (2,569)
Net cash used in investing
activities (643,521) (599,492)
Cash flows from financing
activities:
Repayments of borrowings from
credit agreements (250,000)
Proceeds from borrowings of
credit agreements 452,163
Other borrowings, net 202,786 232,183
Dividends paid to shareholders (120,836) (113,321)
Dividends paid to noncontrolling
interests (14,286) (57,212)
Proceeds from exercise of stock
options 16,925 4,814
Withholding taxes paid on stock-
based compensation award
distributions (4,803) (10,774)
Debt financing costs (2,751)
Other (445)
Net cash provided by financing
activities 279,198 55,245
Net effect of foreign exchange
on cash and cash equivalents (8,428) (38,888)
Increase (decrease) in cash and
cash equivalents 88,963 (237,497)
Cash and cash equivalents at end
of period $
702,073 $
317,823
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended Nine Months Ended
September 30,
September 30,
2020 2019 2020 2019
Net sales:
Lithium $
265,646 $
330,386 $
786,186 $
947,030
Bromine Specialties 237,193 256,267 701,564 760,752
Catalysts 197,919 261,346 602,179 779,295
All Other 46,110 31,748 159,833 109,786
Total net sales $
746,868 $
879,747 $
2,249,762 $
2,596,863
Adjusted EBITDA:
Lithium $
97,789 $
127,459 $
270,962 $
384,854
Bromine Specialties 79,448 88,814 235,751 248,743
Catalysts 37,834 66,944 108,081 193,890
All Other 24,985 10,448 66,407 28,931
Corporate (24,001) (39,314) (83,588) (114,300)
Total adjusted
EBITDA $
216,055 $
254,351 $
597,613 $
742,118
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
Nine Months Ended
September 30,
September 30,
In thousands, except
percentages and per
share amounts 2020 2019 2020 2019
---
Net income
attributable to
Albemarle Corporation $
98,301 $
155,070 $
291,129 $
442,837
Add back:
Non-operating pension
and OPEB items (net
of tax) (2,294) (543) (6,904) (1,805)
Non-recurring and
other unusual items
(net of tax) 20,278 8,497 29,678 17,239
Adjusted net income
attributable to
Albemarle Corporation $
116,285 $
163,024 $
313,903 $
458,271
Adjusted diluted
earnings per share $
1.09 $
1.53 $
2.94 $
4.31
Weighted-average
common shares
outstanding - diluted 106,873 106,299 106,640 106,324
Net income
attributable to
Albemarle Corporation $
98,301 $
155,070 $
291,129 $
442,837
Add back:
Interest and financing
expenses 19,227 11,108 53,964 35,295
Income tax expense 30,653 25,341 64,526 93,266
Depreciation and
amortization 58,679 54,487 170,214 156,718
EBITDA 206,860 246,006 579,833 728,116
Non-operating pension
and OPEB items (2,901) (551) (8,704) (1,810)
Non-recurring and
other unusual items 12,096 8,896 26,484 15,812
Adjusted EBITDA $
216,055 $
254,351 $
597,613 $
742,118
Net sales $
746,868 $
879,747 $
2,249,762 $
2,596,863
EBITDA margin 27.7
% 28.0
% 25.8
% 28.0
%
Adjusted EBITDA margin 28.9
% 28.9
% 26.6
% 28.6
%
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 Net
Specialties Segments Total Total Sales
Three months ended
September 30, 2020
Net income (loss) $
69,102 $
66,548 $
25,176 $
160,826 $
22,798 $
(85,323) $
98,301 13.2
attributable to
Albemarle Corporation %
Depreciation and 28,687 12,900 12,658 54,245 2,187 2,247 58,679 7.9
amortization
%
Non-recurring and 12,096 12,096 1.6
other unusual items
%
Interest and financing 19,227 19,227 2.6
expenses
%
Income tax expense 30,653 30,653 4.1
%
Non-operating pension (2,901) (2,901) (0.4)
and OPEB items
%
Adjusted EBITDA $
97,789 $
79,448 $
37,834 $
215,071 $
24,985 $
(24,001) $
216,055 28.9
%
Three months ended
September 30, 2019
Net income (loss) $
102,136 $
75,224 $
54,345 $
231,705 $
8,305 $
(84,940) $
155,070 17.6
attributable to
Albemarle Corporation %
Depreciation and 25,212 12,448 12,599 50,259 2,143 2,085 54,487 6.2
amortization
%
Non-recurring and 111 1,142 1,253 7,643 8,896 1.0
other unusual items
%
Interest and financing 11,108 11,108 1.3
expenses
%
Income tax expense 25,341 25,341 2.9
%
Non-operating pension (551) (551) (0.1)
and OPEB items
%
Adjusted EBITDA $
127,459 $
88,814 $
66,944 $
283,217 $
10,448 $
(39,314) $
254,351 28.9
%
Nine months ended
September 30, 2020
Net income (loss) $
188,380 $
198,905 $
70,770 $
458,055 $
60,069 $
(226,995) $
291,129 12.9
attributable to
Albemarle Corporation %
Depreciation and 82,582 36,846 37,311 156,739 6,338 7,137 170,214 7.6
amortization
%
Non-recurring and 26,484 26,484 1.2
other unusual items
%
Interest and financing 53,964 53,964 2.4
expenses
%
Income tax expense 64,526 64,526 2.9
%
Non-operating pension (8,704) (8,704) (0.4)
and OPEB items
%
Adjusted EBITDA $
270,962 $
235,751 $
108,081 $
614,794 $
66,407 $
(83,588) $
597,613 26.6
%
Nine months ended
September 30, 2019
Net income (loss) $
312,609 $
212,320 $
156,328 $
681,257 $
22,629 $
(261,049) $
442,837 17.1
attributable to
Albemarle Corporation %
Depreciation and 71,669 35,281 37,562 144,512 6,302 5,904 156,718 6.0
amortization
%
Non-recurring and 576 1,142 1,718 14,094 15,812 0.6
other unusual items
%
Interest and financing 35,295 35,295 1.4
expenses
%
Income tax expense 93,266 93,266 3.6
%
Non-operating pension (1,810) (1,810) (0.1)
and OPEB items
%
Adjusted EBITDA $
384,854 $
248,743 $
193,890 $
827,487 $
28,931 $
(114,300) $
742,118 28.6
%
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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Interest
cost $
7,164 $
8,863 $
21,452 $
26,501
Expected
return on
assets (10,065) (9,414) (30,156) (28,311)
Total $
(2,901) $
(551) $
(8,704) $
(1,810)
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,
2020 2019 2020 2019
Restructuring and
other(1) $
0.02
$ $
0.08 $
0.05
Acquisition and
integration
related costs(2) 0.04 0.03 0.10 0.10
Gain on sale of
property(3) (0.08)
Other(4) 0.02 0.05 0.01 0.07
Discrete tax
items(5) 0.11 0.09 0.02
Total non-
recurring and
other unusual
items $
0.19 $
0.08 $
0.28 $
0.16
(1) In 2020, we
recorded severance
expenses as part
of business
reorganization
plans, impacting
each of our
businesses and
Corporate,
primarily in the
U.S., Germany and
with our Jordanian
joint venture
partner. During
the three months
ended September
30, 2020, we
recorded $2.3
million ($1.7
million after
income taxes, or
$0.02 per share)
of severance
expenses in
Selling, general
and administrative
expenses. During
the nine months
ended September
30, 2020, we
recorded severance
expenses in Cost
of goods sold,
Selling, general
and administrative
expenses and Net
income
attributable to
noncontrolling
interest of $0.7
million, $10.4
million and a $0.3
million gain ($7.9
million after
income taxes, or
$0.08 per share),
respectively. The
balance of unpaid
severance is
recorded in
Accrued expenses
and is expected to
primarily be paid
through 2021.
During the nine
months ended
September 30,
2019, severance
expenses of $5.3
million ($4.9
million after
income taxes, or
$0.05 per share)
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 nine
months ended
September 30, 2020
of $5.9 million
and $14.3 million
($4.6 million and
$11.1 million
after income
taxes, or $0.04
and $0.10 per
share),
respectively, and
for the three and
nine months ended
September 30, 2019
of $4.1 million
and $14.4 million
($3.2 million and
$11.1 million
after income
taxes, or $0.03
and $0.10 per
share),
respectively.
(3) Included in Other
(expenses) income,
net, for the nine
months ended
September 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
September 30, 2020
included amounts
recorded in:
-- Selling, general and administrative
expenses - $3.8 million of a net
expense primarily relating to the
increase of environmental reserves at
at non-operating businesses we have
previously divested.
-- Other (expenses) income, net -$0.2
million loss resulting from the
settlement of a historical legal
matter of an acquired company.
After income taxes,
these charges
totaled $2.7
million, or $0.02
per share.
Other adjustments
for the nine
months ended
September 30, 2020
included amounts
recorded in:
-- Selling, general and administrative
expenses -$3.8 million of a net
expense primarily relating to the
increase of environmental reserves at
sites that we are no longer operating
and are in the process of sellin.
-- Other expenses, net -$2.5 million net
gain resulting from the settlement of
legal matters related to a business
sold or a site in the process of being
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,
these charges
totaled $1.0
million, or $0.01
per share.
Other adjustments
for the three
months ended
September 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 were outside normal compensation
arrangements.
-- Selling, general and administrative
expenses - $1.1 million of a write-
off of uncollectable accounts
receivable from a terminated
distributor in the Bromine Specialties
segment.
-- Other expenses, net -$3.1 million of
unrecoverable vendor costs outside the
operations of the business related to
the construction of the future
Kemerton production facility, as well
as a net loss of $0.4 million
primarily resulting from the
settlement of legal matters related to
previously disposed businesses or
recorded in purchase accounting.
After income taxes,
these charges
totaled $5.4
million, or $0.05
per share.
Other adjustments
for the nine
months ended
September 30, 2019
included amounts
recorded in:
-- Cost of goods sold - $0.6 million
related to non-routine labor and
compensation related costs in Chile
that were outside normal compensation
arrangements.
-- Selling, general and administrative
expenses - $1.0 million of shortfall
contributions for our multiemployer
plan financial improvement plan and
$1.1 million of a write-off of
uncollectable accounts receivable from
a terminated distributor in the
Bromine Specialities segment.
-- Other expenses, net -$3.1 million of
unrecoverable vendor costs outside the
operations of the business related to
the construction of the future
Kemerton production facility, a net
loss of $0.4 million primarily
resulting from the settlement of legal
matters related to previously disposed
businesses or recorded in purchase
accounting, and $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 $7.4
million or $0.07
per share.
(5) Included in Income
tax expense for
the three and nine
months ended
September 30, 2020
are discrete net
tax expenses of
$11.3 million, or
$0.11 per share,
and $9.7 million,
or $0.09 per
share,
respectively. The
net expense for
the three months
is primarily
related to
expenses for
foreign uncertain
tax positions and
foreign return to
accrual
adjustments. The
net expense for
the nine months is
primarily related
to expenses for
foreign uncertain
tax positions and
foreign return to
accrual
adjustments,
partially offset
by a benefit for
excess tax
benefits realized
from stock-based
compensation
arrangements.
Included in Income
tax expense for
the nine months
ended September
30, 2019 are
discrete net tax
expenses of $2.3
million, or $0.02
per share. This
net expense 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 Effective
income taxes and expense income
equity in net tax rate
income of
unconsolidated
investments
Three months
ended
September 30,
2020
As reported $
121,544 $
30,653 25.2
%
Non-recurring,
other unusual
and non-
operating
pension and
OPEB items 9,195 (8,789)
As adjusted $
130,739 $
21,864 16.7
%
Three months
ended
September 30,
2019
As reported $
163,723 $
25,341 15.5
%
Non-recurring,
other unusual
and non-
operating
pension and
OPEB items 8,345 391
As adjusted $
172,068 $
25,732 15.0
%
Nine months
ended
September 30,
2020
As reported $
325,092 $
64,526 19.8
%
Non-recurring,
other unusual
and non-
operating
pension and
OPEB items 18,101 (4,994)
As adjusted $
343,193 $
59,532 17.4
%
Nine months
ended
September 30,
2019
As reported $
484,653 $
93,266 19.2
%
Non-recurring,
other unusual
and non-
operating
pension and
OPEB items 14,002 (1,432)
As adjusted $
498,655 $
91,834 18.4
%
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SOURCE Albemarle Corporation
