Attached files
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| 8-K - 8-K - ALBEMARLE CORP | a2q17earningsrelease8k.htm |
Exhibit 99.1
Contact: | |
Matt Juneau | 225.388.7940 |
Albemarle growth story continues with strong second quarter performance
CHARLOTTE, NC - August 7, 2017 –
Second quarter 2017 highlights:
• | Second quarter net sales were $737.3 million, an increase of 10% over the prior year |
• | Second quarter earnings were $103.3 million, or $0.92 per diluted share |
• | Second quarter adjusted EBITDA was $218.9 million, an increase of 15% over the prior year; adjusted diluted earnings per share from continuing operations of $1.13, an increase of 22% over the prior year |
• | Completed the $250 million accelerated share repurchase program, retiring approximately 2.3 million shares during the first half of 2017 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
In thousands, except per share amounts | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net sales | $ | 737,258 | $ | 669,327 | $ | 1,459,321 | $ | 1,326,538 | |||||||
Net income from continuing operations | $ | 113,689 | $ | 95,586 | $ | 176,346 | $ | 313,822 | |||||||
Net income (loss) attributable to Albemarle Corporation | $ | 103,333 | $ | (314,821 | ) | $ | 154,546 | $ | (86,635 | ) | |||||
Adjusted EBITDA | $ | 218,941 | $ | 190,471 | $ | 430,317 | $ | 382,504 | |||||||
Diluted earnings (loss) per share attributable to Albemarle Corporation | $ | 0.92 | $ | (2.78 | ) | $ | 1.37 | $ | (0.77 | ) | |||||
Non-operating pension and OPEB items(a) | (0.01 | ) | — | (0.01 | ) | — | |||||||||
Non-recurring and other unusual items(b) | 0.21 | 0.19 | 0.82 | (0.73 | ) | ||||||||||
Discontinued operations(c) | — | 3.52 | — | 3.38 | |||||||||||
Adjusted diluted earnings per share from continuing operations(d) | $ | 1.13 | $ | 0.93 | $ | 2.18 | $ | 1.88 | |||||||
See accompanying notes (a) through (d) to the condensed consolidated financial information and non-GAAP reconciliations.
Albemarle Corporation (NYSE: ALB) reported second quarter 2017 net sales of $737.3 million, earnings of $103.3 million and adjusted EBITDA of $218.9 million.
"The Albemarle team delivered another quarter of year over year growth while meeting important milestones toward our long-term growth strategy," said Luke Kissam, Albemarle's Chairman, President and CEO. "Total company adjusted EBITDA grew 15% and adjusted diluted EPS grew 22% over the second quarter of last year. This marks the sixth consecutive quarter of year over year revenue growth for the corporation. Our Lithium business continues to deliver strong year over year volume growth, and our major lithium capital expansion projects and exploration for new lithium resources remain on schedule."
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Outlook
Based on our strong performance in the first half of 2017, we confirm our guidance of $2.90 to $3.05 billion in net sales, adjusted EBITDA of $835 to $875 million, and adjusted EPS per diluted share of $4.20 to $4.40.
Results
Second quarter 2017 earnings were $103.3 million, or $0.92 per diluted share, compared to a net loss of ($314.8) million, or ($2.78) per diluted share in the second quarter 2016. The increase in 2017 was primarily related to a loss from discontinued operations of $3.52 per diluted share in 2016, as well as the increase in results of our Lithium and Advanced Materials segment. Second quarter 2017 adjusted EBITDA increased by $28.5 million compared to the prior year. Second quarter 2017 adjusted net income from continuing operations was $126.5 million, or $1.13 per diluted share, compared to $105.1 million, or $0.93 per diluted share, for second quarter 2016. See notes to the condensed consolidated financial information for further details. The Company reported net sales of $737.3 million in second quarter 2017, up from net sales of $669.3 million in the second quarter of 2016, driven by the favorable impact of higher sales volumes and pricing impacts of our Lithium and Advanced Materials segment, partially offset by the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business and unfavorable currency exchange impacts.
For the six months ended June 30, 2017, earnings were $154.5 million, or $1.37 per diluted share, compared to a net loss of ($86.6) million, or ($0.77) per diluted share for the six months ended June 30, 2016. The increase in 2017 was primarily driven by a loss from discontinued operations of $3.38 per diluted share in 2016, as well as earnings growth in our Lithium and Advanced Materials segment. For the six months ended June 30, 2017, adjusted EBITDA was $430.3 million compared to $382.5 million for the same period 2016. For the six months ended June 30, 2017, adjusted net income from continuing operations was $245.5 million, or $2.18 per diluted share, compared to $212.2 million, or $1.88 per diluted share, for the same period 2016. See notes to the condensed consolidated financial information for further details. The Company reported net sales for the six months ended June 30, 2017 of $1.46 billion, up from net sales of $1.33 billion, driven by the favorable impact of higher sales volumes in each of our three reportable segments and pricing impacts of our Lithium and Advanced Materials segment, partially offset by the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business and unfavorable currency exchange impacts.
Quarterly Segment Results
Lithium and Advanced Materials reported net sales of $317.9 million in the second quarter of 2017, an increase of 36.2% from second quarter 2016 net sales of $233.4 million. The $84.5 million increase in net sales as compared to prior year was primarily due to favorable pricing impacts and increased sales volumes, partially offset by $1.8 million of unfavorable currency exchange impacts. Adjusted EBITDA for Lithium and Advanced Materials was $132.5 million, an increase of 60.3% from second quarter 2016 results of $82.7 million. The $49.9 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes and favorable pricing impacts, partially offset by higher selling, general and administrative costs and $1.7 million of unfavorable currency exchange impacts.
Bromine Specialties reported net sales of $203.9 million in the second quarter of 2017, a decrease of 1.4% from second quarter 2016 net sales of $206.9 million. The $2.9 million decrease in net sales as compared to the prior year was primarily due to lower pricing impacts and $0.6 million of unfavorable currency exchange impacts. Adjusted EBITDA for Bromine Specialties was $62.1 million, a decrease of 6.7% from second quarter 2016 results of $66.6 million. The $4.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to lower volume and pricing impacts, unfavorable product mix and higher selling, general and administrative costs.
Refining Solutions reported net sales of $184.2 million in the second quarter of 2017, an increase of 3.5% from net sales of $178.0 million in the second quarter of 2016. The $6.2 million increase in net sales as compared to the prior year was primarily due to higher sales volumes, partially offset by unfavorable pricing impacts due to customer and product mix, and $1.4 million of unfavorable currency exchange impacts. Adjusted EBITDA for Refining Solutions was $50.1 million in the second quarter of 2017, a decrease of 18.7% from second quarter 2016 results of $61.6 million. The $11.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to unfavorable mix impacts and higher costs.
All Other net sales were $30.7 million in the second quarter of 2017, a decrease of 39.4% from net sales of $50.6 million in the second quarter of 2016. The $19.9 million decrease in net sales as compared to the prior year
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was primarily due to the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business of $12.9 million, as well as lower sales volumes and a change in the pricing contract formula for the fine chemistry services business. All Other adjusted EBITDA was $2.4 million in the second quarter of 2017, an increase of 179.0% from second quarter 2016 results of $0.9 million. The $1.6 million increase in adjusted EBITDA as compared to the prior year was primarily due to lower selling, general and administrative costs, partially offset by the impact of the divestiture of $0.6 million.
In summary, total net sales were $737.3 million in the second quarter of 2017, an increase of $67.9 million, or 10.1%, from second quarter 2016 net sales of $669.3 million. The increase in net sales as compared to prior year was primarily due to favorable pricing impacts and higher sales volumes in our Lithium and Advanced Materials segment, partially offset by the divestiture of the minerals-based flame retardants and specialty chemicals business of $12.9 million and unfavorable currency exchange impacts of $3.8 million. Total adjusted EBITDA was $218.9 million in the second quarter of 2017, an increase of $28.5 million, or 14.9%, from second quarter 2016 adjusted EBITDA of $190.5 million. The increase in adjusted EBITDA as compared to prior year was primarily due to the impact of higher sales volumes and favorable pricing impacts, partially offset by higher selling, general and administrative costs and the divestiture of the minerals-based flame retardants and specialty chemicals business of $0.6 million.
Corporate Results
Corporate adjusted EBITDA was a loss of $28.2 million in the second quarter of 2017 compared to a loss of $21.2 million in the second quarter of 2016. The decrease in Corporate adjusted EBITDA was primarily due to increased selling, general and administrative costs.
Income Taxes
Our effective income tax rates for the second quarter of 2017 and 2016 of 19.0% and 22.4%, respectively, are influenced by non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 19.1% and 16.2% for the second quarter of 2017 and 2016, respectively, and continue to be influenced by the level and geographic mix of income. The decrease in the effective tax rate in the second quarter of 2017 compared to 2016 was impacted by a variety of factors, primarily stemming from the discrete tax item in 2016 related to a change in the Company’s assertion over book and tax basis differences of $7.6 million driven by the announced sale of the Chemetall® Surface Treatment business. Our effective income tax rates for the six months ended June 30, 2017 and 2016 were 20.0% and 14.8%, respectively, and our adjusted effective income tax rates for the six months ended June 30, 2017 and 2016 were 20.7% and 18.6%, respectively. The effective tax rate in 2016 was driven down by a variety of factors, primarily low tax gains from the sale of the minerals-based flame retardant business.
Cash Flow
Our cash outflow from operations was approximately ($54.5) million for the six months ended June 30, 2017, down $307.3 million versus the same period in 2016 primarily due to changes in working capital, including the payment of approximately $255 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017. We had $1.01 billion in cash and cash equivalents at June 30, 2017, as compared to $2.27 billion at December 31, 2016. During the first six months of 2017, cash on hand, cash provided by operations and net borrowings funded $751.2 million of debt repayments, primarily related to the senior notes, $97.8 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $69.8 million and a $250.0 million accelerated share repurchase program. As a result of the program, we received and retired approximately 2.3 million shares of our common stock during the six months ended June 30, 2017.
Earnings Call
The Company’s performance for the second quarter ended June 30, 2017 will be discussed on a conference call at 9:00 AM Eastern time on August 8, 2017. The call can be accessed by dialing 888-713-4214 (International Dial-In # 617-213-4866), and entering conference ID 17470353. The Company’s earnings presentation and supporting material can be accessed through Albemarle’s website under Investors at www.albemarle.com.
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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 4,500 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, product development, changes in productivity, market trends, price, expected growth and earnings, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, portfolio diversification, 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 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; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; changes in the cost of raw materials and energy; 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 proceedings, claims or litigation; the occurrence of cybersecurity 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; 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; volatility and substantial uncertainties in the debt and equity markets; technology or intellectual property infringement; 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.
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Albemarle Corporation and Subsidiaries
Consolidated Statements of Income (Loss)
(In Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 737,258 | $ | 669,327 | $ | 1,459,321 | $ | 1,326,538 | |||||||
Cost of goods sold(a)(b) | 465,164 | 421,223 | 932,139 | 835,900 | |||||||||||
Gross profit | 272,094 | 248,104 | 527,182 | 490,638 | |||||||||||
Selling, general and administrative expenses(a)(b) | 115,686 | 86,055 | 223,687 | 168,686 | |||||||||||
Research and development expenses(b) | 17,337 | 20,500 | 41,660 | 40,372 | |||||||||||
Gain on sales of businesses, net(b) | — | (974 | ) | — | (122,298 | ) | |||||||||
Acquisition and integration related costs(b) | — | 19,030 | — | 37,588 | |||||||||||
Operating profit | 139,071 | 123,493 | 261,835 | 366,290 | |||||||||||
Interest and financing expenses(b) | (14,590 | ) | (15,800 | ) | (83,103 | ) | (30,914 | ) | |||||||
Other expenses, net(b) | (2,710 | ) | (2,297 | ) | (3,504 | ) | (2,250 | ) | |||||||
Income from continuing operations before income taxes and equity in net income of unconsolidated investments | 121,771 | 105,396 | 175,228 | 333,126 | |||||||||||
Income tax expense(b) | 23,130 | 23,656 | 35,101 | 49,141 | |||||||||||
Income from continuing operations before equity in net income of unconsolidated investments | 98,641 | 81,740 | 140,127 | 283,985 | |||||||||||
Equity in net income of unconsolidated investments (net of tax) | 15,048 | 13,846 | 36,219 | 29,837 | |||||||||||
Net income from continuing operations | 113,689 | 95,586 | 176,346 | 313,822 | |||||||||||
Loss from discontinued operations (net of tax)(c) | — | (398,340 | ) | — | (381,028 | ) | |||||||||
Net income (loss) | 113,689 | (302,754 | ) | 176,346 | (67,206 | ) | |||||||||
Net income attributable to noncontrolling interests | (10,356 | ) | (12,067 | ) | (21,800 | ) | (19,429 | ) | |||||||
Net income (loss) attributable to Albemarle Corporation | $ | 103,333 | $ | (314,821 | ) | $ | 154,546 | $ | (86,635 | ) | |||||
Basic earnings (loss) per share: | |||||||||||||||
Continuing operations | $ | 0.93 | $ | 0.74 | $ | 1.39 | $ | 2.62 | |||||||
Discontinued operations | — | (3.54 | ) | — | (3.39 | ) | |||||||||
$ | 0.93 | $ | (2.80 | ) | $ | 1.39 | $ | (0.77 | ) | ||||||
Diluted earnings (loss) per share: | |||||||||||||||
Continuing operations | $ | 0.92 | $ | 0.74 | $ | 1.37 | $ | 2.61 | |||||||
Discontinued operations | — | (3.52 | ) | — | (3.38 | ) | |||||||||
$ | 0.92 | $ | (2.78 | ) | $ | 1.37 | $ | (0.77 | ) | ||||||
Weighted-average common shares outstanding – basic | 110,686 | 112,339 | 111,336 | 112,300 | |||||||||||
Weighted-average common shares outstanding – diluted | 112,105 | 113,175 | 112,697 | 112,973 | |||||||||||
See accompanying notes to the condensed consolidated financial information.
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Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
June 30, | December 31, | ||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 1,006,945 | $ | 2,269,756 | |||
Other current assets | 1,197,503 | 1,036,862 | |||||
Total current assets | 2,204,448 | 3,306,618 | |||||
Property, plant and equipment | 4,049,070 | 3,910,522 | |||||
Less accumulated depreciation and amortization | 1,632,241 | 1,550,382 | |||||
Net property, plant and equipment | 2,416,829 | 2,360,140 | |||||
Other assets and intangibles | 2,670,712 | 2,494,449 | |||||
Total assets | $ | 7,291,989 | $ | 8,161,207 | |||
LIABILITIES AND EQUITY | |||||||
Current portion of long-term debt | $ | 307,109 | $ | 247,544 | |||
Other current liabilities | 676,553 | 892,559 | |||||
Total current liabilities | 983,662 | 1,140,103 | |||||
Long-term debt | 1,421,468 | 2,121,718 | |||||
Other noncurrent liabilities | 560,504 | 544,043 | |||||
Deferred income taxes | 426,564 | 412,739 | |||||
Albemarle Corporation shareholders’ equity | 3,760,830 | 3,795,062 | |||||
Noncontrolling interests | 138,961 | 147,542 | |||||
Total liabilities and equity | $ | 7,291,989 | $ | 8,161,207 | |||
See accompanying notes to the condensed consolidated financial information.
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Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Six Months Ended | |||||||
June 30, | |||||||
2017 | 2016 | ||||||
Cash and cash equivalents at beginning of year | $ | 2,269,756 | $ | 213,734 | |||
Cash and cash equivalents at end of period | $ | 1,006,945 | $ | 193,661 | |||
Sources of cash and cash equivalents: | |||||||
Net income (loss) | $ | 176,346 | $ | (67,206 | ) | ||
Cash proceeds from divestitures, net | 6,857 | 310,599 | |||||
Other borrowings, net | 58,886 | 67,865 | |||||
Dividends received from unconsolidated investments and nonmarketable securities | 8,454 | 31,522 | |||||
Proceeds from exercise of stock options | 3,337 | 4,939 | |||||
Uses of cash and cash equivalents: | |||||||
Working capital changes | (353,138 | ) | (108,016 | ) | |||
Capital expenditures | (97,765 | ) | (99,509 | ) | |||
Acquisitions, net of cash acquired | (39,525 | ) | — | ||||
Cash payments related to acquisitions and other | — | (81,988 | ) | ||||
Repayments of long-term debt | (751,209 | ) | (382,162 | ) | |||
Repurchases of common stock | (250,000 | ) | — | ||||
Pension and postretirement contributions | (6,288 | ) | (9,524 | ) | |||
Dividends paid to shareholders | (69,762 | ) | (66,791 | ) | |||
Fees related to early extinguishment of debt | (46,959 | ) | — | ||||
Dividends paid to noncontrolling interests | (17,930 | ) | (17,052 | ) | |||
Non-cash and other items: | |||||||
Depreciation and amortization | 94,192 | 128,505 | |||||
Gain on sales of businesses, net | — | (122,298 | ) | ||||
Gain on acquisition | (7,433 | ) | — | ||||
Pension and postretirement (benefit) expense | (7 | ) | 3,390 | ||||
Loss on early extinguishment of debt | 52,801 | — | |||||
Deferred income taxes | (3,204 | ) | 414,736 | ||||
Equity in net income of unconsolidated investments (net of tax) | (36,219 | ) | (30,861 | ) | |||
See accompanying notes to the condensed consolidated financial information.
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Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales: | |||||||||||||||
Lithium and Advanced Materials | $ | 317,859 | $ | 233,353 | $ | 602,234 | $ | 449,526 | |||||||
Bromine Specialties | 203,945 | 206,863 | 423,136 | 403,416 | |||||||||||
Refining Solutions | 184,217 | 178,012 | 369,629 | 348,591 | |||||||||||
All Other | 30,704 | 50,626 | 63,123 | 122,715 | |||||||||||
Corporate | 533 | 473 | 1,199 | 2,290 | |||||||||||
Total net sales | $ | 737,258 | $ | 669,327 | $ | 1,459,321 | $ | 1,326,538 | |||||||
Adjusted EBITDA: | |||||||||||||||
Lithium and Advanced Materials | $ | 132,549 | $ | 82,668 | $ | 252,571 | $ | 169,142 | |||||||
Bromine Specialties | 62,075 | 66,562 | 130,563 | 128,170 | |||||||||||
Refining Solutions | 50,078 | 61,586 | 99,657 | 116,660 | |||||||||||
All Other | 2,444 | 876 | 7,600 | 9,340 | |||||||||||
Corporate(a) | (28,205 | ) | (21,221 | ) | (60,074 | ) | (40,808 | ) | |||||||
Total adjusted EBITDA | $ | 218,941 | $ | 190,471 | $ | 430,317 | $ | 382,504 | |||||||
Lithium and Advanced Materials - details by product category:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales: | |||||||||||||||
Lithium | $ | 243,821 | $ | 157,713 | $ | 460,050 | $ | 294,273 | |||||||
PCS | 74,038 | 75,640 | 142,184 | 155,253 | |||||||||||
Total Lithium and Advanced Materials | $ | 317,859 | $ | 233,353 | $ | 602,234 | $ | 449,526 | |||||||
Adjusted EBITDA: | |||||||||||||||
Lithium | $ | 115,200 | $ | 64,146 | $ | 215,052 | $ | 127,980 | |||||||
PCS | 17,349 | 18,522 | 37,519 | 41,162 | |||||||||||
Total Lithium and Advanced Materials | $ | 132,549 | $ | 82,668 | $ | 252,571 | $ | 169,142 | |||||||
See accompanying notes to the condensed consolidated financial information and non-GAAP reconciliations below.
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Notes to the Condensed Consolidated Financial Information
(a) | Non-operating pension and OPEB items, consisting of MTM actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our reportable segments and are included in the Corporate category. Although non-operating pension and OPEB items are included in Cost of goods sold and Selling, general and administrative expenses in accordance with GAAP, 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. Non-operating pension and OPEB items included in Cost of goods sold and Selling, general and administrative expenses were as follows (in millions): |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cost of goods sold: | |||||||||||||||
Interest cost and expected return on assets, net | $ | (0.2 | ) | $ | (0.2 | ) | $ | (0.3 | ) | $ | (0.3 | ) | |||
Total | $ | (0.2 | ) | $ | (0.2 | ) | $ | (0.3 | ) | $ | (0.3 | ) | |||
Selling, general and administrative expenses: | |||||||||||||||
Interest cost and expected return on assets, net | $ | (0.9 | ) | $ | (0.1 | ) | $ | (1.8 | ) | $ | (0.2 | ) | |||
Total | $ | (0.9 | ) | $ | (0.1 | ) | $ | (1.8 | ) | $ | (0.2 | ) | |||
(b) | In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items from continuing operations 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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Utilization of inventory markup(1) | $ | 0.08 | $ | — | $ | 0.16 | $ | — | |||||||
Restructuring and other, net(2) | 0.02 | — | 0.11 | — | |||||||||||
Acquisition and integration related costs(3) | 0.04 | 0.11 | 0.15 | 0.23 | |||||||||||
Gain on sales of businesses, net(4) | — | — | — | (1.02 | ) | ||||||||||
Gain on acquisition(5) | — | — | (0.05 | ) | — | ||||||||||
Loss on extinguishment of debt(6) | — | — | 0.34 | — | |||||||||||
Multiemployer plan shortfall contributions(7) | 0.03 | — | 0.03 | — | |||||||||||
Other(8) | 0.02 | — | 0.05 | — | |||||||||||
Discrete tax items(9) | 0.02 | 0.08 | 0.03 | 0.06 | |||||||||||
Total non-recurring and other unusual items | $ | 0.21 | $ | 0.19 | $ | 0.82 | $ | (0.73 | ) | ||||||
(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 $23.0 million. The inventory markup is being expensed over the estimated remaining selling period. For the three and six months ended June 30, 2017, $11.9 million and $22.5 million ($8.9 million and $17.5 million after income taxes, or $0.08 and $0.16 per share), respectively, was included in Cost of goods sold related to the utilization of the inventory markup. |
(2) | Included in Selling, general and administrative expenses for the three months ended June 30, 2017 is $4.2 million ($2.8 million after income taxes, or $0.02 per share) related to restructuring costs at several locations. Included in Cost of goods sold, Selling, general and administrative expenses and Research and development expenses for the six months ended June 30, 2017 is $2.9 million, $8.4 million and $5.8 million, respectively, related to restructuring costs in each of our reportable segments at several locations, |
9
primarily at our Lithium site in Germany. After income taxes, these charges totaled $13.0 million, or $0.11 per share.
(3) | Acquisition and integration related costs for the three and six months ended June 30, 2017 of $1.8 million and $10.7 million, respectively, were included in Cost of goods sold and $4.7 million and $10.1 million, respectively, were included in Selling, general and administrative expenses primarily resulting from the acquisition of Jiangli New Materials. After income taxes, these charges totaled $4.8 million, or $0.04 per share, and $17.6 million, or $0.15 per share, for the three and six months ended June 30, 2017, respectively. |
Included in Acquisition and integration related costs for the three and six months ended June 30, 2016 is $18.4 million and $36.1 million, respectively, of integration costs resulting from the acquisition of Rockwood, and $0.6 million and $1.5 million, respectively, in connection with other significant projects. After income taxes, these charges totaled $13.1 million, or $0.11 per share and $26.4 million, or $0.23 per share, for the three and six months ended June 30, 2016, respectively.
(4) | Included in Gain on sales of businesses, net, for the six months ended June 30, 2016 is $11.5 million ($11.3 million after income taxes, or $0.10 per share) related to the sale of the metal sulfides business and $112.3 million ($105.8 million after income taxes, or $0.93 per share) related to the sale of the minerals-based flame retardants and specialty chemicals businesses. In addition, Gain on sales of businesses, net, for the six months ended June 30, 2016 includes a loss of $1.5 million, or $0.01 per share, on the sale of our wafer reclaim business. |
(5) | Included in Other expenses, net, for the six months ended June 30, 2017 is $7.4 million ($6.0 million after income taxes, or $0.05 per share) relating to the acquisition of the remaining 50% interest in the Sales de Magnesio Ltda. joint venture in Chile. The gain was calculated based on the difference between the purchase price and the book value of the investment. |
(6) | Included in Interest and financing expenses for the six months ended June 30, 2017 is a loss on early extinguishment of debt of $52.8 million ($38.1 million after income taxes, or $0.34 per share) related to the tender premiums, fees, unamortized discounts and unamortized deferred financings costs from the redemption of the 3.00% Senior notes, €307.0 million of the 1.875% Senior notes and $174.7 million of the 4.50% Senior notes. |
(7) | Included in Selling, general and administrative expenses for the three and six months ended June 30, 2017 is $2.0 million ($1.4 million after income taxes, or $0.01 per share) for increased capital reserve contributions to a multiemployer plan, which is subject to a financial improvement plan. In addition, capital reserve contributions for this multiemployer plan of $2.9 million ($2.2 million after income taxes, or $0.02 per share), included in Other expenses, net, have been made to indemnify previously divested businesses. |
(8) | Other adjustments for the three and six months ended June 30, 2017 included amounts recorded in (1) Selling, general and administrative expenses related to a reversal of an accrual recorded as part of purchase accounting from a previous acquisition of $1.0 million; and (2) Other expenses, net related to final settlement claims associated with the previous disposal of a business of $2.0 million and the revision of tax indemnification expenses of $1.2 million primarily related to a competent authority agreement for a previously disposed business. Also included in Other expenses, net, for the six months ended June 30, 2017 is $3.2 million of asset retirement obligation charges related to the revision of an estimate at a site formerly owned by Albemarle and a loss of $2.1 million associated with the previous disposal of a business. After income taxes, these charges totaled $1.6 million, or $0.02 per share, and $5.6 million, or $0.05 per share, for the three and six months ended June 30, 2017, respectively. |
(9) | Included in Income tax expense for the three and six months ended June 30, 2017 are discrete net tax expenses of $2.2 million, or $0.02 per share, and $3.1 million, or $0.03 per share, respectively. The net expense for the three months is primarily related to foreign rate changes of $13.9 million, partially offset by a $9.8 million benefit from the release of valuation allowances due to a foreign restructuring plan. The net expense for the six months is primarily related to foreign rate changes of $13.1 million and a loss from prior year true up of $5.1 million, partially offset by a $9.8 million benefit from the release of valuation allowances due to a foreign restructuring plan and a $4.7 million benefit from excess tax benefits realized from stock-based compensation arrangements. Included in Income tax expense for the three and six |
10
months ended June 30, 2016 are expense items of $8.7 million, or $0.08 per share, and $7.1 million, or $0.06 per share, respectively, related mainly to a change in the Company’s assertion over book and tax basis differences of a foreign entity.
(c) On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE. On December 14, 2016, the Company closed the sale of this business for cash proceeds of approximately $3.1 billion, net of purchase price adjustments. Loss from discontinued operations (net of tax) in the consolidated statements of income (loss) for the second quarter of 2016 includes a discrete non-cash charge of $381.5 million due to a change in the Company’s assertion over book and tax basis differences related to a U.S. entity being sold, as well as a discrete non-cash charge of $35.2 million related to a change in the Company’s assertion over reinvestment of foreign undistributed earnings.
(d) | Totals may not add due to rounding. |
Additional Information
It should be noted that adjusted net income from continuing operations, adjusted diluted earnings per share attributable to Albemarle Corporation, adjusted diluted earnings per share from continuing operations, 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 in the Investors section of our website at www.albemarle.com, under “Non-GAAP Reconciliations” under “Financials.” Also, see the following pages for supplemental reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP. 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.
11
ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)
See below for a reconciliation of adjusted net income from continuing operations, 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 discontinued operations, 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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 103,333 | $ | (314,821 | ) | $ | 154,546 | $ | (86,635 | ) | |||||
Add back: | |||||||||||||||
Loss from discontinued operations (net of tax) | — | 398,340 | — | 381,028 | |||||||||||
Earnings from continuing operations | 103,333 | 83,519 | 154,546 | 294,393 | |||||||||||
Add back: | |||||||||||||||
Non-operating pension and OPEB items from continuing operations (net of tax) | (589 | ) | (225 | ) | (1,399 | ) | (106 | ) | |||||||
Non-recurring and other unusual items from continuing operations (net of tax) | 23,738 | 21,780 | 92,343 | (82,048 | ) | ||||||||||
Adjusted net income from continuing operations | $ | 126,482 | $ | 105,074 | $ | 245,490 | $ | 212,239 | |||||||
Adjusted diluted earnings per share from continuing operations | $ | 1.13 | $ | 0.93 | $ | 2.18 | $ | 1.88 | |||||||
Weighted-average common shares outstanding – diluted | 112,105 | 113,175 | 112,697 | 112,973 | |||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 103,333 | $ | (314,821 | ) | $ | 154,546 | $ | (86,635 | ) | |||||
Add back: | |||||||||||||||
Loss from discontinued operations (net of tax) | — | 398,340 | — | 381,028 | |||||||||||
Interest and financing expenses | 14,590 | 15,800 | 83,103 | 30,914 | |||||||||||
Income tax expense | 23,130 | 23,656 | 35,101 | 49,141 | |||||||||||
Depreciation and amortization | 49,122 | 49,705 | 94,192 | 93,314 | |||||||||||
EBITDA | 190,175 | 172,680 | 366,942 | 467,762 | |||||||||||
Non-operating pension and OPEB items | (1,053 | ) | (265 | ) | (2,116 | ) | (548 | ) | |||||||
Non-recurring and other unusual items (excluding items associated with interest expense) | 29,819 | 18,056 | 65,491 | (84,710 | ) | ||||||||||
Adjusted EBITDA | $ | 218,941 | $ | 190,471 | $ | 430,317 | $ | 382,504 | |||||||
Net sales | $ | 737,258 | $ | 669,327 | $ | 1,459,321 | $ | 1,326,538 | |||||||
EBITDA margin | 25.8 | % | 25.8 | % | 25.1 | % | 35.3 | % | |||||||
Adjusted EBITDA margin | 29.7 | % | 28.5 | % | 29.5 | % | 28.8 | % | |||||||
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See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reporting in accordance with GAAP.
Lithium and Advanced Materials | Bromine Specialties | Refining Solutions | Reportable Segments Total | All Other | Corporate | Consolidated Total | % of Net Sales | |||||||||||||||||||||||
Three months ended June 30, 2017: | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 95,350 | $ | 51,739 | $ | 40,463 | $ | 187,552 | $ | 152 | $ | (84,371 | ) | $ | 103,333 | 14.0 | % | |||||||||||||
Depreciation and amortization | 25,278 | 10,336 | 9,615 | 45,229 | 2,292 | 1,601 | 49,122 | 6.7 | % | |||||||||||||||||||||
Non-recurring and other unusual items | 11,921 | — | — | 11,921 | — | 17,898 | 29,819 | 4.0 | % | |||||||||||||||||||||
Interest and financing expenses | — | — | — | — | — | 14,590 | 14,590 | 2.0 | % | |||||||||||||||||||||
Income tax expense | — | — | — | — | — | 23,130 | 23,130 | 3.1 | % | |||||||||||||||||||||
Non-operating pension and OPEB items | — | — | — | — | — | (1,053 | ) | (1,053 | ) | (0.1 | )% | |||||||||||||||||||
Adjusted EBITDA | $ | 132,549 | $ | 62,075 | $ | 50,078 | $ | 244,702 | $ | 2,444 | $ | (28,205 | ) | $ | 218,941 | 29.7 | % | |||||||||||||
Three months ended June 30, 2016: | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 56,880 | $ | 56,747 | $ | 52,472 | $ | 166,099 | $ | (1,503 | ) | $ | (479,417 | ) | $ | (314,821 | ) | (47.0 | )% | |||||||||||
Depreciation and amortization | 25,788 | 9,815 | 9,114 | 44,717 | 3,353 | 1,635 | 49,705 | 7.4 | % | |||||||||||||||||||||
Non-recurring and other unusual items | — | — | — | — | (974 | ) | 19,030 | 18,056 | 2.7 | % | ||||||||||||||||||||
Interest and financing expenses | — | — | — | — | — | 15,800 | 15,800 | 2.4 | % | |||||||||||||||||||||
Income tax expense | — | — | — | — | — | 23,656 | 23,656 | 3.5 | % | |||||||||||||||||||||
Loss from discontinued operations (net of tax) | — | — | — | — | — | 398,340 | 398,340 | 59.5 | % | |||||||||||||||||||||
Non-operating pension and OPEB items | — | — | — | — | — | (265 | ) | (265 | ) | — | % | |||||||||||||||||||
Adjusted EBITDA | $ | 82,668 | $ | 66,562 | $ | 61,586 | $ | 210,816 | $ | 876 | $ | (21,221 | ) | $ | 190,471 | 28.5 | % | |||||||||||||
Six months ended June 30, 2017: | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 189,456 | $ | 110,433 | $ | 80,937 | $ | 380,826 | $ | 3,398 | $ | (229,678 | ) | $ | 154,546 | 10.6 | % | |||||||||||||
Depreciation and amortization | 48,021 | 20,130 | 18,720 | 86,871 | 4,202 | 3,119 | 94,192 | 6.4 | % | |||||||||||||||||||||
Non-recurring and other unusual items (excluding items associated with interest expense) | 15,094 | — | — | 15,094 | — | 50,397 | 65,491 | 4.5 | % | |||||||||||||||||||||
Interest and financing expenses | — | — | — | — | — | 83,103 | 83,103 | 5.7 | % | |||||||||||||||||||||
Income tax expense | — | — | — | — | — | 35,101 | 35,101 | 2.4 | % | |||||||||||||||||||||
Non-operating pension and OPEB items | — | — | — | — | — | (2,116 | ) | (2,116 | ) | (0.1 | )% | |||||||||||||||||||
Adjusted EBITDA | $ | 252,571 | $ | 130,563 | $ | 99,657 | $ | 482,791 | $ | 7,600 | $ | (60,074 | ) | $ | 430,317 | 29.5 | % | |||||||||||||
Six months ended June 30, 2016: | ||||||||||||||||||||||||||||||
Net income (loss) attributable to Albemarle Corporation | $ | 120,207 | $ | 108,600 | $ | 98,786 | $ | 327,593 | $ | 129,206 | $ | (543,434 | ) | $ | (86,635 | ) | (6.5 | )% | ||||||||||||
Depreciation and amortization | 48,935 | 19,570 | 17,874 | 86,379 | 3,965 | 2,970 | 93,314 | 7.0 | % | |||||||||||||||||||||
Non-recurring and other unusual items | — | — | — | — | (123,831 | ) | 39,121 | (84,710 | ) | (6.4 | )% | |||||||||||||||||||
Interest and financing expenses | — | — | — | — | — | 30,914 | 30,914 | 2.3 | % | |||||||||||||||||||||
Income tax expense | — | — | — | — | — | 49,141 | 49,141 | 3.7 | % | |||||||||||||||||||||
Loss from discontinued operations (net of tax) | — | — | — | — | — | 381,028 | 381,028 | 28.7 | % | |||||||||||||||||||||
Non-operating pension and OPEB items | — | — | — | — | — | (548 | ) | (548 | ) | — | % | |||||||||||||||||||
Adjusted EBITDA | $ | 169,142 | $ | 128,170 | $ | 116,660 | $ | 413,972 | $ | 9,340 | $ | (40,808 | ) | $ | 382,504 | 28.8 | % | |||||||||||||
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Lithium | PCS | Total Lithium and Advanced Materials | |||||||||
Three months ended June 30, 2017: | |||||||||||
Net income attributable to Albemarle Corporation | $ | 81,819 | $ | 13,531 | $ | 95,350 | |||||
Depreciation and amortization | 21,460 | 3,818 | 25,278 | ||||||||
Non-recurring and other unusual items | 11,921 | — | 11,921 | ||||||||
Adjusted EBITDA | $ | 115,200 | $ | 17,349 | $ | 132,549 | |||||
Three months ended June 30, 2016: | |||||||||||
Net income attributable to Albemarle Corporation | $ | 42,129 | $ | 14,751 | $ | 56,880 | |||||
Depreciation and amortization | 22,017 | 3,771 | 25,788 | ||||||||
Adjusted EBITDA | $ | 64,146 | $ | 18,522 | $ | 82,668 | |||||
Six months ended June 30, 2017: | |||||||||||
Net income attributable to Albemarle Corporation | $ | 159,433 | $ | 30,023 | $ | 189,456 | |||||
Depreciation and amortization | 40,525 | 7,496 | 48,021 | ||||||||
Non-recurring and other unusual items | 15,094 | — | 15,094 | ||||||||
Adjusted EBITDA | $ | 215,052 | $ | 37,519 | $ | 252,571 | |||||
Six months ended June 30, 2016: | |||||||||||
Net income attributable to Albemarle Corporation | $ | 86,475 | $ | 33,732 | $ | 120,207 | |||||
Depreciation and amortization | 41,505 | 7,430 | 48,935 | ||||||||
Adjusted EBITDA | $ | 127,980 | $ | 41,162 | $ | 169,142 | |||||
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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.
Income from continuing operations before income taxes and equity in net income of unconsolidated investments | Income tax expense | Effective income tax rate | ||||||||
Three months ended June 30, 2017: | ||||||||||
As reported | $ | 121,771 | $ | 23,130 | 19.0 | % | ||||
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations | 28,766 | 5,617 | ||||||||
As adjusted | $ | 150,537 | $ | 28,747 | 19.1 | % | ||||
Three months ended June 30, 2016: | ||||||||||
As reported | $ | 105,396 | $ | 23,656 | 22.4 | % | ||||
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations | 17,791 | (3,764 | ) | |||||||
As adjusted | $ | 123,187 | $ | 19,892 | 16.2 | % | ||||
Six months ended June 30, 2017: | ||||||||||
As reported | $ | 175,228 | $ | 35,101 | 20.0 | % | ||||
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations | 116,176 | 25,232 | ||||||||
As adjusted | $ | 291,404 | $ | 60,333 | 20.7 | % | ||||
Six months ended June 30, 2016: | ||||||||||
As reported | $ | 333,126 | $ | 49,141 | 14.8 | % | ||||
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations | (85,258 | ) | (3,104 | ) | ||||||
As adjusted | $ | 247,868 | $ | 46,037 | 18.6 | % | ||||
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