Press Releases

Albemarle exceeds second quarter 2016 expectations and raises guidance

August 3, 2016

CHARLOTTE, N.C., Aug. 3, 2016 /PRNewswire/ --

Second quarter 2016 highlights:

  • Signed definitive agreement to sell Chemetall® Surface Treatment business to BASF SE
  • Due to a non-recurring, non-cash tax charge of $416.7 million related to the decision to sell the Chemetall Surface Treatment business, second quarter results in a loss of $314.8 million, or $2.78 per diluted share 
  • Adjusted net income, including the results of the Chemetall Surface Treatment business, was $123.1 million, or $1.09 per diluted share; adjusted net income from continuing operations was $105.1 million, or $0.93 per diluted share
  • Second quarter adjusted EBITDA was $190.5 million, an increase of 11% over the prior year, excluding the impact of currency and divestitures

 


Three Months Ended


Six Months Ended


June 30,


June 30,

In thousands, except per share amounts

2016


2015


2016


2015

Net sales

$

669,327



$

718,290



$

1,326,538



$

1,410,603


Adjusted EBITDA

$

190,471



$

181,358



$

382,504



$

400,858


Net income from continuing operations

$

95,586



$

49,218



$

313,822



$

98,471


Net (loss) income attributable to Albemarle Corporation

$

(314,821)



$

52,147



$

(86,635)



$

95,262


Diluted earnings per share from continuing operations

$

0.74



$

0.37



$

2.61



$

0.79


Diluted (loss) earnings per share attributable to Albemarle Corporation

$

(2.78)



$

0.46



$

(0.77)



$

0.86


   Non-operating pension and OPEB items(a)



(0.01)





(0.02)


   Non-recurring and other unusual items(b)

0.19



0.37



(0.73)



1.02


Discontinued operations(c)

3.52



(0.09)



3.38



(0.07)


Adjusted diluted earnings per share from continuing
operations(d)

$

0.93



$

0.73



$

1.88



$

1.80


















See accompanying notes (a) through (d) to the condensed consolidated financial information and non-GAAP reconciliations.

 

Albemarle Corp. Logo.

Albemarle Corporation (NYSE: ALB) reported net income from continuing operations for the second quarter 2016 of $95.6 million, or $0.74 per diluted share (after income attributable to noncontrolling interests), compared to $49.2 million, or $0.37 per diluted share in the second quarter 2015. Including a non-recurring, non-cash tax charge of $416.7 million related to the decision to sell our Chemetall Surface Treatment business (see notes to the condensed consolidated financial information), the Company reported a second quarter 2016 net loss attributable to Albemarle Corporation of $(314.8) million, or $(2.78) per diluted share, compared to net income attributable to Albemarle Corporation of $52.1 million, or $0.46 per diluted share, for second quarter 2015. Second quarter 2016 adjusted net income from continuing operations was $105.1 million, or $0.93 per diluted share, compared to $82.2 million, or $0.73 per diluted share, for second quarter 2015 (see notes to the condensed consolidated financial information). The Company reported net sales of $669.3 million in second quarter 2016, down from net sales of $718.3 million in the second quarter of 2015, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favorable price and mix impacts in certain businesses and favorable currency exchange impacts.

Net income from continuing operations for the six months ended June 30, 2016 was $313.8 million, or $2.61 per diluted share (after income attributable to noncontrolling interests), compared to $98.5 million, or $0.79 per diluted share, in the second quarter 2015. Including a non-recurring, non-cash tax charge of $416.7 million related to our decision to sell our Chemetall Surface Treatment business, partially offset by gains on sales of businesses of $122.3 million (see notes to the condensed consolidated financial information), the Company reported a net loss attributable to Albemarle Corporation of $(86.6) million, or $(0.77) per diluted share, for the six months ended June 30, 2016, compared to net income attributable to Albemarle Corporation of $95.3 million, or $0.86 per diluted share for the six months ended June,30, 2015. Adjusted net income from continuing operations for the six months ended June 30, 2016 was $212.2 million, or $1.88 per diluted share, compared to $198.6 million, or $1.80 per diluted share, for the same period 2015 (see notes to the condensed consolidated financial information). Net sales for the six months ended June 30, 2016 were $1.33 billion, down from net sales of $1.41 billion, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favorable price and mix impacts in certain businesses and favorable currency exchange impacts.

On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale is subject to regulatory approvals and other customary closing conditions, and is expected to close in the fourth quarter of 2016. In the second quarter of 2016, the Company determined the business qualified for discontinued operations treatment, and as such began accounting for the assets as held for sale. The financial results of the disposal group have been presented as discontinued operations in the consolidated statements of income and excluded from segment results for all periods presented.

"Our great start to 2016 continued in the second quarter as we announced the strategic sale of Chemetall® Surface Treatment at a very healthy multiple, coupled with year over year adjusted EBITDA growth of 11% in the businesses we will operate after the sale is completed," said Luke Kissam, Albemarle's president and CEO. "Our businesses have exceeded our first half expectations, and we continue to deliver outstanding results despite a relatively weak macroeconomic environment."

On January 12, 2015, we completed the acquisition of Rockwood Holdings, Inc. ("Rockwood"). The results of Rockwood from January 1, 2015 to January 12, 2015 ("stub period") are excluded from the year-to-date 2015 financial results presented herein. Excluded net sales and adjusted EBITDA for the stub period were $13.6 million and $1.1 million, respectively.

Quarterly Segment Results

Effective January 1, 2016, our former Performance Chemicals reportable segment was split into two separate reportable segments: (1) Lithium and Advanced Materials, which includes Lithium and Performance Catalyst Solutions and Curatives ("PCS"), and (2) Bromine Specialties. For comparison purposes, prior year periods have been reclassified to conform to the current segments. This split did not affect the Refining Solutions reportable segment, which is presented the same as in the prior year.

Lithium and Advanced Materials reported net sales of $233.4 million in the second quarter of 2016, an increase of 9.6% from second quarter 2015 net sales of $213.0 million. Net sales were impacted by $2.3 million of favorable currency exchange impacts as compared to the prior year. The remaining $18.1 million increase in net sales was primarily due to increased lithium sales volumes and favorable pricing impacts partially offset by lower PCS sales. Adjusted EBITDA for Lithium and Advanced Materials was $82.7 million, an increase of 3.4% from second quarter 2015 results of $80.0 million. Adjusted EBITDA was impacted by $1.3 million of favorable currency exchange impacts as compared to the prior year. The remaining $1.4 million increase in adjusted EBITDA was primarily due to higher overall sales volumes and favorable pricing.

Bromine Specialties reported net sales of $206.9 million in the second quarter of 2016, a decrease of 7.6% from second quarter 2015 net sales of $224.0 million. Net sales were impacted by $0.9 million of favorable currency exchange impacts as compared to the prior year. The remaining $18.0 million decrease in net sales was primarily due to lower sales volumes of Methyl Bromide partially offset by higher sales volumes of other Bromine products. Adjusted EBITDA for Bromine Specialties was $66.6 million, a decrease of 3.1% from second quarter 2015 results of $68.7 million. Adjusted EBITDA was impacted by $0.8 million of favorable currency exchange impacts as compared to the prior year. The remaining $2.9 million decrease in adjusted EBITDA was primarily driven by lower overall sales volumes partially offset by lower raw material and utility costs as well as lower selling, general, and administrative expenses.

Refining Solutions reported net sales of $178.0 million in the second quarter of 2016, an increase of 8.2% from net sales of $164.6 million in the second quarter of 2015. Net sales were impacted by $0.5 million of favorable currency exchange impacts as compared to the prior year. The remaining $12.9 million increase in net sales was primarily driven by higher Heavy Oil Upgrading and Clean Fuels Technology volumes. Adjusted EBITDA for Refining Solutions was $61.6 million in the second quarter of 2016, an increase of 27.8% from second quarter 2015 results of $48.2 million. Adjusted EBITDA was impacted by $0.7 million of favorable currency exchange impacts as compared to the prior year. The remaining $12.7 million increase in adjusted EBITDA was primarily due to higher sales volumes, and higher net income reported by our joint venture Nippon Ketjen Company Limited.

On January 4, 2016, we closed the sale of the metal sulfides business, and on February 1, 2016, we closed the sale of the minerals-based flame retardants and specialty chemicals business. The divestiture of these businesses reduced net sales and adjusted EBITDA for the second quarter of 2016 as compared to the prior year period by $66.8 million and $9.4 million, respectively.

All Other net sales were $50.6 million in the second quarter of 2016, a decrease of 55.4% from net sales of $113.4 million in the second quarter of 2015. Excluding the impact of the divested businesses, All Other net sales increased by $4.0 million compared to the prior year due to higher sales volumes from the fine chemistry services business. All Other adjusted EBITDA was $0.9 million in the second quarter of 2016, a decrease of 91.0% from second quarter 2015 results of $9.7 million. Excluding the impact of the divested businesses, All Other adjusted EBITDA increased by $0.6 million compared to the prior year due to higher overall fine chemistry services sales volumes.

In summary, total net sales of $669.3 million in the second quarter of 2016, a decrease of $49.0 million, or 6.8%, from second quarter 2015 net sales of $718.3 million, were negatively impacted by the divestiture of our metal sulfides and minerals-based flame retardants and specialty chemicals business, which reduced revenues versus the prior year by $66.8 million, partially offset by favorable currency impacts of $3.7 million. Excluding currency exchange impacts and the impact of the divested businesses, net sales for the period increased 2.2% as compared to the prior year. Total adjusted EBITDA of $190.5 million in the second quarter of 2016, an increase of $9.2 million, or 5.0%, from second quarter 2015 adjusted EBITDA of $181.4 million, was unfavorably impacted by $1.1 million currency exchange (including $3.9 million of unfavorable currency exchange impacts on corporate results) as well as the divestiture of our metal sulfides and minerals-based flame retardants and specialty chemicals business which reduced adjusted EBITDA versus the prior year by $9.4 million. Excluding currency exchange impacts and the impact of the divested businesses, adjusted EBITDA for the second quarter 2016 increased 11.1% as compared to the prior year.

Corporate Results

Corporate adjusted EBITDA was a loss of $21.2 million in the second quarter of 2016 compared to a loss of $25.2 million in the second quarter of 2015. The improvement in Corporate adjusted EBITDA was primarily due to realized synergies from the acquisition of Rockwood, partially offset by $3.9 million of unfavorable currency exchange impacts.

Income Taxes

Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 16.2% and 28.9% for the second quarter of 2016 and 2015, respectively. Our effective tax rate continued to be influenced by the level and geographic mix of income, and benefits from a favorable mix of income in lower tax jurisdictions.

Cash Flow

Our cash flow from operations was approximately $252.5 million for the six months ended June 30, 2016, up 90% versus the same period in 2015. We had $193.7 million in cash and cash equivalents at June 30, 2016, as compared to $213.7 million at December 31, 2015. Cash on hand, cash provided by operations, net borrowings and net proceeds from divestitures, funded $382.2 million of debt repayments, $99.5 million of capital expenditures for plant, machinery and equipment and dividends to shareholders of $66.8 million during the six months ended June 30, 2016.

Outlook

Favorable performance in Lithium, Refining Solutions and Bromine Specialties continues to outpace headwinds in our other businesses. Based on this, and the impact of a lower effective tax rate, we are raising our annual guidance for continuing operations as follows:

 


Previous Outlook


Increase


Current Outlook

Net sales

$2.5 - $2.7 billion


$0.0 - $0.1 billion


$2.5 - $2.8 billion

Adjusted EBITDA

$700 - $745 million


$5 million


$705 - $750 million

Adjusted EPS (per diluted share)

$3.25 - $3.50


$0.10


$3.35 - $3.60

 

Earnings Call

The Company's performance for the second quarter ended June 30, 2016 will be discussed on a conference call at 9:00 AM Eastern time on August 4, 2016. The call can be accessed by dialing 888-679-8033 (International Dial-In # 617-213-4846), and entering conference ID 54465035. The Company's earnings presentation and supporting material can be accessed through Albemarle's website under Investors at www.albemarle.com.

About Albemarle

Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine, refining catalysts and applied surface treatments. We power the potential of companies in many of the world's largest and most critical industries, from energy and communications to aerospace 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 6,900 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 and the conference call and discussions that follow, including, without limitation, statements with respect to the sale of the Chemetall Surface Treatment business and the anticipated consequences and benefits of the transaction, 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. There can be no assurance that actual results will not differ materially. 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, including the integration of Rockwood's operations, and realize estimated synergies; 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,


2016


2015


2016


2015

Net sales

$

669,327



$

718,290



$

1,326,538



$

1,410,603


Cost of goods sold(a)(b)

421,223



506,259



835,900



1,007,188


Gross profit

248,104



212,031



490,638



403,415


Selling, general and administrative expenses(a)

86,055



88,010



168,686



171,660


Research and development expenses

20,500



21,925



40,372



45,421


Gain on sales of businesses, net(b)

(974)





(122,298)




Acquisition and integration related costs(b)

19,030



22,832



37,588



80,657


Operating profit

123,493



79,264



366,290



105,677


Interest and financing expenses(b)

(15,800)



(20,599)



(30,914)



(42,899)


Other (expenses) income, net(b)

(2,297)



286



(2,250)



50,110


Income from continuing operations before income taxes and equity in net income of unconsolidated investments

105,396



58,951



333,126



112,888


Income tax expense(b)

23,656



14,851



49,141



28,636


Income from continuing operations before equity in net income of unconsolidated investments

81,740



44,100



283,985



84,252


Equity in net income of unconsolidated investments (net of
tax)(b)

13,846



5,118



29,837



14,219


Net income from continuing operations

95,586



49,218



313,822



98,471


(Loss) income from discontinued operations (net of tax)(c)

(398,340)



10,122



(381,028)



8,024


Net (loss) income

(302,754)



59,340



(67,206)



106,495


Net income attributable to noncontrolling interests

(12,067)



(7,193)



(19,429)



(11,233)


Net (loss) income attributable to Albemarle Corporation

$

(314,821)



$

52,147



$

(86,635)



$

95,262


Basic earnings (loss) per share








Continuing operations

$

0.74



$

0.37



$

2.62



$

0.79


Discontinued operations

(3.54)



0.09



(3.39)



0.07



$

(2.80)



$

0.46



$

(0.77)



$

0.86


Diluted earnings (loss) per share








Continuing operations

$

0.74



$

0.37



$

2.61



$

0.79


Discontinued operations

(3.52)



0.09



(3.38)



0.07



$

(2.78)



$

0.46



$

(0.77)



$

0.86


Weighted-average common shares outstanding – basic

112,339



112,189



112,300



110,160


Weighted-average common shares outstanding – diluted

113,123



112,607



112,947



110,536














See accompanying notes to the condensed consolidated financial information.

 

 

Albemarle Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands) (Unaudited)






June 30,


December 31,


2016


2015

ASSETS




Cash and cash equivalents

$

193,661



$

213,734


Other current assets

1,078,158



975,336


Assets held for sale

255,941



641,932


Total current assets

1,527,760



1,831,002


Property, plant and equipment

3,846,686



3,700,472


Less accumulated depreciation and amortization

1,500,554



1,379,377


Net property, plant and equipment

2,346,132



2,321,095


Noncurrent assets held for sale

2,944,071



2,971,455


Other assets and intangibles

2,494,418



2,474,402


Total assets

$

9,312,381



$

9,597,954


LIABILITIES AND EQUITY




Current portion of long-term debt

$

493,705



$

674,994


Other current liabilities

520,084



612,093


Liabilities held for sale

145,269



329,598


Total current liabilities

1,159,058



1,616,685


Long-term debt

3,019,478



3,142,163


Noncurrent liabilities held for sale

455,452



464,207


Other noncurrent liabilities

573,038



588,734


Deferred income taxes

799,009



384,852


Albemarle Corporation shareholders' equity

3,156,615



3,254,392


Noncontrolling interests

149,731



146,921


Total liabilities and equity

$

9,312,381



$

9,597,954










See accompanying notes to the condensed consolidated financial information.

 

 

Albemarle Corporation and Subsidiaries

Selected Consolidated Cash Flow Data

(In Thousands) (Unaudited)




Six Months Ended


June 30,


2016


2015

Cash and cash equivalents at beginning of year

$

213,734



$

2,489,768


Cash and cash equivalents at end of period

$

193,661



$

207,238


Sources of cash and cash equivalents:




Net (loss) income

$

(67,206)



$

106,495


Cash proceeds from divestitures, net

310,599




Proceeds from borrowings of long-term debt



1,000,000


Other borrowings, net

67,865



133,699


Dividends received from unconsolidated investments and nonmarketable securities

31,522



45,526


Decrease in restricted cash



57,550


Uses of cash and cash equivalents:




Working capital changes

(108,016)



(44,932)


Capital expenditures

(99,509)



(111,723)


Acquisition of Rockwood, net of cash acquired



(2,051,645)


Other acquisitions, net of cash acquired



(48,845)


Cash payments related to acquisitions and other

(81,988)




Repayments of long-term debt

(382,162)



(1,331,648)


Pension and postretirement contributions

(9,524)



(10,973)


Dividends paid to shareholders

(66,791)



(54,238)


Dividends paid to noncontrolling interests

(17,052)



(8,282)


Non-cash and other items:




Depreciation and amortization

128,505



131,469


Gain on sales of businesses, net

(122,298)




Pension and postretirement expense (benefit)

3,390



(1,071)


Deferred income taxes

414,736



(41,207)


Equity in net income of unconsolidated investments (net of tax)

(30,861)



(16,186)








See accompanying notes to the condensed consolidated financial information.

 

 

Albemarle Corporation and Subsidiaries

Consolidated Summary of Segment Results

(In Thousands) (Unaudited)






Three Months Ended


Six Months Ended


June 30,


June 30,


2016


2015


2016


2015

Net sales:








Lithium and Advanced Materials

$

233,353



$

213,003



$

449,526



$

411,777


Bromine Specialties

206,863



223,959



403,416



413,551


Refining Solutions

178,012



164,573



348,591



343,739


All Other

50,626



113,404



122,715



235,773


Corporate

473



3,351



2,290



5,763


Total net sales

$

669,327



$

718,290



$

1,326,538



$

1,410,603










Adjusted EBITDA:








Lithium and Advanced Materials

$

82,668



$

79,985



$

169,142



$

157,580


Bromine Specialties

66,562



68,697



128,170



121,630


Refining Solutions

61,586



48,200



116,660



90,393


All Other

876



9,714



9,340



23,278


Corporate(a)

(21,221)



(25,238)



(40,808)



7,977


Total adjusted EBITDA

$

190,471



$

181,358



$

382,504



$

400,858



Lithium and Advanced Materials - details by product category:






Three Months Ended


Six Months Ended


June 30,


June 30,


2016


2015


2016


2015

Net sales:








Lithium

$

157,713



$

127,021



$

294,273



$

241,407


PCS

75,640



85,982



155,253



170,370


Total Lithium and Advanced Materials

$

233,353



$

213,003



$

449,526



$

411,777










Adjusted EBITDA:








Lithium

$

64,146



$

53,645



$

127,980



$

104,223


PCS

18,522



26,340



41,162



53,357


Total Lithium and Advanced Materials

$

82,668



$

79,985



$

169,142



$

157,580


















See accompanying notes to the condensed consolidated financial information and non-GAAP reconciliations below.

 

 

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,


2016


2015


2016


2015

Cost of goods sold:








MTM actuarial gain

$



$

(0.1)



$



$

(0.1)


Interest cost and expected return on assets, net

(0.2)



(0.5)



(0.3)



(0.8)


Total

$

(0.2)



$

(0.6)



$

(0.3)



$

(0.9)










Selling, general and administrative expenses:








Interest cost and expected return on assets, net

$

(0.1)



$

(0.9)



$

(0.2)



$

(1.7)


Total

$

(0.1)



$

(0.9)



$

(0.2)



$

(1.7)


 

(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,


2016


2015


2016


2015

Utilization of inventory markup(1)

$



$

0.23



$



$

0.46


Gain on sales of businesses, net(2)





(1.02)




Acquisition and integration related costs(3)

0.11



0.14



0.23



0.51


Interest and financing expenses related to Rockwood acquisition(4)







0.01


Financing fees related to Rockwood acquisition(5)







0.03


Discrete tax items(6)

0.08



(0.01)



0.06



0.02


Total non-recurring and other unusual items

$

0.19



$

0.36



$

(0.73)



$

1.03


 

(1)   In connection with the acquisition of Rockwood, the Company valued Rockwood's existing inventory at fair value as of the acquisition date, which resulted in a markup of the underlying net book value of the inventory. The inventory markup was expensed over the estimated remaining selling period. For the three months ended June 30, 2015, $24.2 million ($16.5 million after income taxes, or $0.14 per share) was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $10.0 million ($0.09 per share), related to the utilization of the inventory markup. For the six months ended June 30, 2015, $47.5 million ($32.8 million after income taxes, or $0.30 per share) was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $17.9 million ($0.16 per share), related to the utilization of the inventory markup.

(2)   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 business. 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.

(3)   Acquisition and integration related costs consisted of the following:

Three months ended June 30, 2016 -

    • $18.4 million of integration costs resulting from the acquisition of Rockwood and $0.6 million in connection with other significant projects. After income taxes, these charges totaled $13.1 million, or $0.11 per share.

Six months ended June 30, 2016 -

    • $36.1 million of integration costs resulting from the acquisition of Rockwood and $1.5 million in connection with other significant projects. After income taxes, these charges totaled $26.4 million, or $0.23 per share.

Three months ended June 30, 2015 -

    • $19.9 million directly related to the acquisition of Rockwood and $2.9 million in connection with other significant projects. After income taxes, these charges totaled $15.4 million, or $0.14 per share.

Six months ended June 30, 2015 -

    • $75.7 million directly related to the acquisition of Rockwood and $5.0 million in connection with other significant projects. After income taxes, these charges totaled $55.8 million, or $0.51 per share.

(4)  Included in Interest and financing expenses for the six months ended June 30, 2015 is $1.6 million ($1.1 million after income taxes, or $0.01 per share) of interest and financing expenses associated with senior notes we issued in the fourth quarter of 2014 in connection with the acquisition of Rockwood, which did not close until January 12, 2015.

(5)  Included in Other (expenses) income, net, for the six months ended June 30, 2015 is $4.4 million ($3.1 million after income taxes, or $0.03 per share) for amortization of bridge facility fees and other financing fees related to the acquisition of Rockwood.

(6)  Included in Income tax expense for the three and six 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 and changes in valuation allowances necessary because of the announced divestiture. Included in Income tax expense for the three and six months ended June 30, 2015 is a benefit of $1.0 million, or $0.01 per share, related mainly to prior year uncertain tax position adjustments associated with lapses in statutes of limitations. Also included in Income tax expense for the six months ended June 30, 2015 are expenses of $3.2 million, or $0.03 per share, associated with U.S. provision to return adjustments, the release of uncertain tax positions associated with a lapse in the statute of limitations, and the inclusion of liabilities for non-indefinitely invested earnings on the announcement of the intention to sell the minerals-based flame retardants and specialty chemicals business, which includes entities in Germany.

(c)   On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale is subject to regulatory approvals and other customary closing conditions, and is expected to close in the fourth quarter of 2016. Loss from discontinued operations (net of tax) in the consolidated statements of income 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 attributable to Albemarle Corporation ("adjusted earnings"), adjusted net income from continuing operations, adjusted diluted earnings per share attributable to Albemarle Corporation, adjusted diluted earnings per share from continuing operations, 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 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 below for supplemental reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP.

ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)

See below for a reconciliation of adjusted net income attributable to Albemarle Corporation ("adjusted earnings"), adjusted net income from continuing operations, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net (loss) 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 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,


2016


2015


2016


2015

Net (loss) income attributable to Albemarle Corporation

$

(314,821)



$

52,147



$

(86,635)



$

95,262


Add back:








Non-operating pension and OPEB items from continuing operations
(net of tax)

(225)



(998)



(106)



(1,704)


Non-recurring and other unusual items from continuing operations (net of tax)

21,780



41,171



(82,048)



113,105


Loss (income) from discontinued operations (net of tax)

398,340



(10,122)



381,028



(8,024)


Adjusted net income from continuing operations

105,074



82,198



212,239



198,639


(Loss) income from discontinued operations (net of tax)

(398,340)



10,122



(381,028)



8,024


Add back:








Non-operating pension and OPEB items from discontinued operations (net of tax)

67



136



156



(1,385)


Non-recurring and other unusual items from discontinued operations (net of tax)

416,279



2,636



417,514



17,018


Adjusted net income attributable to Albemarle Corporation

$

123,080



$

95,092



$

248,881



$

222,296










Adjusted diluted earnings per share attributable to Albemarle Corporation

$

1.09



$

0.84



$

2.20



$

2.01










Weighted-average common shares outstanding – diluted

113,123



112,607



112,947



110,536










Net (loss) income attributable to Albemarle Corporation

$

(314,821)



$

52,147



$

(86,635)



$

95,262


Add back:








Loss (income) from discontinued operations (net of tax)

398,340



(10,122)



381,028



(8,024)


Interest and financing expenses

15,800



20,599



30,914



42,899


Income tax expense

23,656



14,851



49,141



28,636


Depreciation and amortization

49,705



48,372



93,314



94,162


EBITDA

172,680



125,847



467,762



252,935


Non-operating pension and OPEB items

(265)



(1,522)



(548)



(2,609)


Non-recurring and other unusual items (excluding items associated with interest expense)

18,056



57,033



(84,710)



150,532


Adjusted EBITDA

$

190,471



$

181,358



$

382,504



$

400,858










Net sales

$

669,327



$

718,290



$

1,326,538



$

1,410,603


EBITDA margin

25.8

%


17.5

%


35.3

%


17.9

%

Adjusted EBITDA margin

28.5

%


25.2

%


28.8

%


28.4

%

 

 

See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reporting in accordance with GAAP.

 


Lithium and Advanced Materials


Bromine Specialties


Refining Solutions


Reportable Segments Total


All Other


Corporate


Consolidated Total

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)


Depreciation and amortization

25,788



9,815



9,114



44,717



3,353



1,635



49,705


Non-recurring and other unusual items









(974)



19,030



18,056


Interest and financing expenses











15,800



15,800


Income tax expense











23,656



23,656


Loss from discontinued operations (net of tax)











398,340



398,340


Non-operating pension and OPEB items











(265)



(265)


Adjusted EBITDA

$

82,668



$

66,562



$

61,586



$

210,816



$

876



$

(21,221)



$

190,471
















Three months ended June 30, 2015:














Net income (loss) attributable to Albemarle Corporation

$

22,530



$

60,486



$

39,717



$

122,733



$

3,612



$

(74,198)



$

52,147


Depreciation and amortization

23,632



8,211



8,483



40,326



5,724



2,322



48,372


Non-recurring and other unusual items

33,823







33,823



378



22,832



57,033


Interest and financing expenses











20,599



20,599


Income tax expense











14,851



14,851


Income from discontinued operations (net of tax)











(10,122)



(10,122)


Non-operating pension and OPEB items











(1,522)



(1,522)


Adjusted EBITDA

$

79,985



$

68,697



$

48,200



$

196,882



$

9,714



$

(25,238)



$

181,358
















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)


Depreciation and amortization

48,935



19,570



17,874



86,379



3,965



2,970



93,314


Non-recurring and other unusual items









(123,831)



39,121



(84,710)


Interest and financing expenses











30,914



30,914


Income tax expense











49,141



49,141


Loss from discontinued operations (net of tax)











381,028



381,028


Non-operating pension and OPEB items











(548)



(548)


Adjusted EBITDA

$

169,142



$

128,170



$

116,660



$

413,972



$

9,340



$

(40,808)



$

382,504
















Six months ended June 30, 2015:














Net income (loss) attributable to Albemarle Corporation

$

49,721



$

104,958



$

73,800



$

228,479



$

9,027



$

(142,244)



$

95,262


Depreciation and amortization

45,454



16,672



16,593



78,719



11,222



4,221



94,162


Non-recurring and other unusual items (excluding items associated with interest expense)

62,405







62,405



3,029



85,098



150,532


Interest and financing expenses











42,899



42,899


Income tax expense











28,636



28,636


Income from discontinued operations (net of tax)











(8,024)



(8,024)


Non-operating pension and OPEB items











(2,609)



(2,609)


Adjusted EBITDA

$

157,580



$

121,630



$

90,393



$

369,603



$

23,278



$

7,977



$

400,858


 

 


Lithium


PCS


Total
Lithium and
Advanced
Materials

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








Three months ended June 30, 2015:






Net (loss) income attributable to Albemarle Corporation

$

(213)



$

22,743



$

22,530


Depreciation and amortization

20,035



3,597



23,632


Non-recurring and other unusual items

33,823





33,823


Adjusted EBITDA

$

53,645



$

26,340



$

79,985








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








Six months ended June 30, 2015:






Net income attributable to Albemarle Corporation

$

3,715



$

46,006



$

49,721


Depreciation and amortization

38,103



7,351



45,454


Non-recurring and other unusual items

62,405





62,405


Adjusted EBITDA

$

104,223



$

53,357



$

157,580


 

 

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
(benefit)


Effective income tax
rate

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

%







Three months ended June 30, 2015:






As reported

$

58,951



$

14,851



25.2

%

Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations

45,511



15,338




As adjusted

$

104,462



$

30,189



28.9

%

 

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SOURCE Albemarle Corporation

Matt Juneau, 225.388.7940