Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) February 3, 2005

 


 

ALBEMARLE CORPORATION

(Exact name of Registrant as specified in charter)

 


 

Virginia   1-12658   54-1692118

(State or other jurisdiction

of incorporation)

  (Commission file number)  

(IRS employer

identification no.)

 

330 South Fourth Street, Richmond, Virginia   23219
(Address of principal executive offices)   (Zip code)

 

Registrant’s telephone number, including area code (804) 788-6000

 

Not applicable

(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Section 2 — Financial Information

 

Item 2.02. Results of Operations and Financial Condition.

 

On February 3, 2005, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the fourth quarter and year ended December 31, 2004. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on February 3, 2005, the Company will hold a teleconference for analysts and media to discuss results for the fourth quarter and year ended December 31, 2004. The teleconference will be webcast on the Company’s website at www.albemarle.com.

 

The press release attached as Exhibit 99.1 includes net income and related per share amounts excluding certain special items. Net income excluding special items is a financial measure that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). The Company has reported net income excluding special items because management believes that this financial measure is more reflective of the Company’s performance as it presents investors with information about the impact of certain non-recurring items on the Company, including the Company’s acquisition of the refinery catalysts business of Akzo Nobel on July 31, 2004, and, in doing so, improves transparency to investors and enhances period-to-period comparability of financial performance. Net income excluding special items should not be considered as an alternative to net income determined in accordance with GAAP. The Company has included in the press release a reconciliation of net income excluding special items, a non-GAAP financial measure, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01. Financial Statement and Exhibits.

 

  (c) Exhibits.

 

  99.1 Press release, dated February 3, 2005, issued by the Company.

 

 

2


SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: February 3, 2005

 

ALBEMARLE CORPORATION
By:  

/s/ Luther C. Kissam, IV


    Luther C. Kissam, IV
    Vice President, General Counsel and Secretary

 

 

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EXHIBIT INDEX

 

Exhibit

Number


 

Exhibit


99.1   Press release, dated February 3, 2005, issued by the Company.

 

 

4

Press release

Exhibit 99.1

 

 
Contact:    

Laura Ruiz

Danielle Paquette

 

804.788.6005

804.788.6045

 

Albemarle Announces Preliminary Fourth-Quarter 2004 Unaudited Results

 

    Net sales for the quarter, which include the results from the acquisition of the refinery catalysts business, increased 52.8 percent versus 2003

 

    Excluding special items, net income increased 6.7 percent from fourth-quarter 2003

 

RICHMOND, Va., February 3 — Albemarle Corporation (NYSE: ALB) reported net income for the fourth quarter of 2004 of $19.6 million, or 46 cents per diluted share. Fourth-quarter 2003 net income, excluding special items, was $18.4 million, or 44 cents per diluted share. Special items for fourth-quarter 2003 totaling $1.6 million after income tax, or 4 cents per diluted share, are outlined in the reconciliation below.

 

Excluding special items, net income for the year ended December 31, 2004 was $75.7 million, or $1.78 per diluted share, compared to $66.8 million, or $1.59 per diluted share, in the same period of 2003. Inclusive of special items, primarily related to the acquisition of Akzo Nobel’s refinery catalysts business, net income for 2004 was $54.8 million, or $1.29 per diluted share, versus $71.9 million, or $1.71 per diluted share for 2003.

 

Net sales for the fourth quarter ending December 31, 2004 were $451.1 million, compared with net sales of $295.1 million for the same quarter last year. Net sales for the year ended December 31, 2004, were $1.51 billion as compared with $1.11 billion in the same period of 2003.

 

Average common shares used to compute fourth-quarter and year 2004 diluted earnings per share were 43,083,000 and 42,527,000, up slightly from 42,113,000 and 42,146,000, respectively, for the corresponding periods in 2003, primarily due to the exercise of stock options.

 

Below is selected data related to our net income and related per share amounts for the fourth quarter ended December 31, 2004. Selected data for the year ended December 31, 2004 is included following the notes to the condensed financial statements. It should be noted that net income excluding special items is a financial measure that should not be considered as an alternative to net income determined in accordance with

 

1


GAAP. It is provided here because management believes that this financial measure is more reflective of the Company’s performance as it presents investors with information that excludes the impact of certain non-recurring items on the Company, improves transparency to investors and enables period-to-period comparability of financial performance.

 

In thousands except per-share amounts (Unaudited)

   Fourth Quarter Ended December 31, 2004

    Fourth Quarter Ended December 31, 2003

 
   As
Reported


    Special Items *

   Excluding
Special Items


    As
Reported


    Special
Items *


    Excluding
Special Items


 

Net sales

   $ 451,065     $ —      $ 451,065     $ 295,124     $ —       $ 295,124  

Cost of goods sold (a)

     (355,436 )     —        (355,436 )     (231,396 )     —         (231,396 )
    


 

  


 


 


 


Gross profit

     95,629       —        95,629       63,728               63,728  

Selling, general and administrative expenses (including FAS No.2 R&D)

     (64,164 )     —        (64,164 )     (36,478 )     —         (36,478 )

Special item

     —         —        —         (2,546 )     2,546 (b)     —    
    


 

  


 


 


 


Operating profit **

     31,465       —        31,465       24,704       2,546       27,250  

Interest and financing expenses

     (8,182 )     —        (8,182 )     (1,333 )     —         (1,333 )

Equity in unconsolidated investments

     1,913       —        1,913       274       —         274  

Other (expense), net including minority interest

     (1,268 )     —        (1,268 )     (261 )     —         (261 )
    


 

  


 


 


 


Income before income Taxes

     23,928       —        23,928       23,384       2,546       25,930  

Income tax expense

     4,291       —        4,291       6,596       924 (b)     7,520  
    


 

  


 


 


 


Net income

   $ 19,637       —      $ 19,637     $ 16,788     $ 1,622     $ 18,410  
    


 

  


 


 


 


Diluted earnings per share

   $ 0.46       —      $ 0.46     $ 0.40     $ 0.04     $ 0.44  
    


 

  


 


 


 



*       See footnotes below

                                               

**     Operating profit by segment:

                                               

Polymer Additives

   $ 18,420       —      $ 18,420     $ 14,464     $ —       $ 14,464  

Catalysts

     13,027       —        13,027       4,062       —         4,062  

Fine Chemicals

     12,811       —        12,811       14,604       —         14,604  

Corporate and other expenses

     (12,793 )     —        (12,793 )     (8,426 )     2,546       (5,880 )
    


 

  


 


 


 


Total

   $ 31,465       —      $ 31,465     $ 24,704     $ 2,546     $ 27,250  
    


 

  


 


 


 


 

Quarterly Results

 

Polymer Additives segment net sales, which now excludes the polyolefin catalysts business, were up 24.7 percent for fourth-quarter 2004 as compared to the corresponding period in 2003. This represents the eighth-straight quarter of record sales and can be attributed primarily to continued strong performance in brominated flame retardants volume and pricing. Polymer Additives operating profit improved 27.4 percent to $18.4 million, while operating margin in this segment improved by 21 basis points year over year.

 

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Catalysts segment net sales were $129.6 million, up $109.6 million for fourth-quarter 2004 as compared to the corresponding period in 2003, due primarily to the acquisition of the refinery catalysts business from Akzo Nobel. Catalysts operating profit for fourth-quarter 2004 amounted to $13.0 million, up $9.0 million from the 2003 fourth-quarter period, due to the acquisition of the refinery catalysts business from Akzo Nobel and strong performance of the polyolefin catalysts business. However, these gains failed to offset fully increased raw materials and energy costs experienced during the quarter.

 

Fine Chemicals segment net sales were up 7.3 percent for fourth-quarter 2004 as compared to the corresponding period in 2003, driven by improved product mix in the Fine Chemistry Services and Intermediates product area and improved demand and pricing in bromine and derivatives. Fine Chemicals operating profit was down 12.3 percent to $12.8 million, compared to fourth-quarter 2003, due to higher raw material costs and product mix effects in agricultural actives.

 

The corporate effective income tax rate (“ETR”) for fourth-quarter 2004 amounted to approximately 18%, down from 29% for the corresponding period in 2003. The fourth-quarter 2004 ETR benefited from $1.5 million related to the reversal of certain income tax reserves and the net favorable effect of $1.1 million in adjustments associated with the reconciliation of certain tax accounts.

 

Commenting on the 2004 fourth quarter results, Mark C. Rohr, President and CEO of Albemarle Corporation said, “Despite higher raw materials and energy costs, which hit particularly hard in the fourth quarter, we are seeing traction on price increases, along with good demand in all three segments, that should allow us to address margin improvement into 2005. Our ability to exceed our preliminary earnings estimate is a direct result of the dedication exhibited by our global team to drive for results in the face of significant headwinds. We continue to be pleased with the strong contribution from the refinery catalysts business as integration proceeds. In the early weeks of 2005, Albemarle announced concurrent public offerings of common stock and senior notes. Both offerings, which closed on January 20, were met with a high degree of interest in the market, allowing us to use the net proceeds to repay in full the $450 million bridge loan incurred in connection with the refinery catalysts acquisition. We issued 4,573,000 shares in the offering.”

 

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The Company’s performance for the fourth quarter and year ended December 31, 2004 will be discussed on a conference call at 1:00 PM Eastern Standard Time on February 3, 2005, which can be accessed through Albemarle’s website under Investor Information at www.albemarle.com.

 

Albemarle Corporation, headquartered in Richmond, Virginia, is a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals for consumer electronics; petroleum and petrochemical processing; transportation and industrial products; pharmaceuticals; agricultural products; construction and packaging materials. The Company operates in three business segments, Polymer Additives, Catalysts and Fine Chemicals, and serves customers in approximately 100 countries.

 

 

4


Forward-Looking Statements

 

Some of the information presented herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on our current expectations, which are in turn based on assumptions that we believe are reasonable based on our current knowledge of our business and operations. We have used words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and variations of such words and similar expressions to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. There can be no assurance, therefore, that our actual results will not differ materially from the results and expectations expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, without limitation: the timing of orders received from customers; changes in the demand for our products; increases in the cost of raw materials and energy, and our inability to pass through such increases; fluctuations in foreign currencies; the occurrence of claims or litigation; changes in accounting standards; changes in interest rates; and the other factors detailed from time to time in the filings we make with the Securities and Exchange Commission, including the factors described under “Risk Factors” in our prospectuses dated January 13, 2005, filed in pursuant to Rule 424(b). We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

 

5


Albemarle Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(In thousands, except per share amounts) (Unaudited)

 

     Fourth Quarter Ended December 31,

 
     2004

    2003

 

Net sales

   $ 451,065     $ 295,124  

Cost of goods sold

     355,436 (a)     231,396 (a)
    


 


Gross profit

     95,629       63,728  

Selling, general and administrative expenses

     51,659       32,200  

Research and development expenses

     12,505       4,278  

Special Item

     —         2,546 (b)
    


 


Operating profit

     31,465       24,704  

Interest and financing expenses

     (8,182 )     (1,333 )

Equity in unconsolidated investments

     1,913       274  

Other (expense), net including minority interest

     (1,268 )     (261 )
    


 


Income before income taxes

     23,928       23,384  

Income taxes

     4,291       6,596  
    


 


Net income

   $ 19,637     $ 16,788  
    


 


Basic earnings per share:

                

Net income

   $ 0.47     $ 0.41  
    


 


Shares used to compute basic earnings per share

     41,777       41,141  
    


 


Diluted earnings per share:

                

Net income

   $ 0.46     $ 0.40  
    


 


Shares used to compute diluted earnings per share

     43,083       42,113  
    


 


 

See accompanying notes to the condensed consolidated financial statements following the balance sheets.

 

6


Albemarle Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(In thousands, except per share amounts) (Unaudited)

 

     Year Ended December 31,

 
     2004

    2003

 

Net sales

   $ 1,513,737     $ 1,110,237  

Cost of goods sold

     1,201,388 (a,c,d)     871,727 (a)

Acquisition-related cost

     13,400 (e)     —    
    


 


Gross profit

     298,949       238,510  

Selling, general and administrative expenses

     157,737       117,226  

Research and development expenses

     31,273       18,411  

Reduction in-force adjustments and other

     4,858 (f)     10,049 (b)

Purchased in-process R&D charge

     3,000 (g)     —    
    


 


Operating profit

     102,081       92,824  

Interest and financing expenses

     (17,350 )(h)     (5,376 )

Equity in unconsolidated investments

     4,407       (874 )

Other (expense) income, net including minority interest

     (17,294 )(i)     1,481 (i)
    


 


Income before income taxes and cumulative effect of a change in accounting principle, net

     71,844       88,055  

Income taxes

     17,005       13,890 (j)
    


 


Income before cumulative effect of a change in accounting principle, net

     54,839       74,165  

Cumulative effect of a change in accounting principle, net

     —         (2,220 )(k)
    


 


Net income

   $ 54,839     $ 71,945  
    


 


Basic earnings per share:

                

Income before cumulative effect of a change in accounting principle

   $ 1.32     $ 1.79  

Cumulative effect of a change in accounting principle, net

     —         (0.05 )(k)
    


 


Net income

   $ 1.32     $ 1.74  
    


 


Shares used to compute basic earnings per share

     41,567       41,255  
    


 


Diluted earnings per share:

                

Income before cumulative effect of a change in accounting principle

   $ 1.29     $ 1.76  

Cumulative effect of a change in accounting principle, net

     —         (0.05 )(k)
    


 


Net income

   $ 1.29     $ 1.71  
    


 


Shares used to compute diluted earnings per share

     42,527       42,146  
    


 


 

See accompanying notes to the condensed consolidated financial statements following the balance sheets.

 

7


Albemarle Corporation and Subsidiaries

Consolidated Summary of Segment Results

(In thousands) (Unaudited)

 

     Fourth Quarter Ended December 31

 
     2004

    2003 Restated (l)

 
     Net Sales

   Operating
Profit


    Net Sales

   Operating
Profit


 

Polymer Additives

   $ 187,645    $ 18,420     $ 150,460    $ 14,464  

Catalysts

     129,599      13,027       19,989      4,062  

Fine Chemicals

     133,821      12,811       124,675      14,604  
    

  


 

  


Segment totals

   $ 451,065      44,258 (a)   $ 295,124      33,130 (a)
    

          

        

Corporate and other expenses

            (12,793 )            (8,426 )(b)
           


        


Operating profit

            31,465              24,704  

Interest and financing expenses

            (8,182 )            (1,333 )

Equity in unconsolidated investments

            1,913              274  

Other (expense), net including minority interest

            (1,268 )            (261 )
           


        


Income before income taxes

          $ 23,928            $ 23,384  
           


        


     Year Ended December 31,

 
     2004

    2003 Restated (l)

 
     Net Sales

   Operating
Profit


    Net Sales

   Operating
Profit


 

Polymer Additives

   $ 726,275    $ 84,108     $ 547,461    $ 58,527  

Catalysts

     283,394      15,254       82,959      12,305  

Fine Chemicals

     504,068      38,697       479,817      48,526  
    

  


 

  


Segment totals

   $ 1,513,737      138,059 (a,c,d,e,f,g)   $ 1,110,237      119,358 (a,b)
    

          

        

Corporate and other expenses

            (35,978 )            (26,534 )(b)
           


        


Operating profit

            102,081              92,824  

Interest and financing expenses

            (17,350 )(h)            (5,376 )

Equity in unconsolidated investments

            4,407              (874 )

Other (expense) income, net including minority interest

            (17,294 )(i)            1,481 (i)
           


        


Income before income taxes and cumulative effect of a change in accounting principle, net

          $ 71,844            $ 88,055  
           


        


 

See accompanying notes to the condensed consolidated financial statements following the balance sheets.

 

8


Albemarle Corporation and Subsidiaries

Selected Cash Flows Data**

(In thousands) (Unaudited)

 

     Year Ended December 31

 
     2004

    2003

 

Cash and cash equivalents at beginning of year

   $ 35,173     $ 47,784  

Cash and cash equivalents at end of year

   $ 46,390     $ 35,173  
Sources of cash and cash equivalents:                 

Net income

     54,839       71,945  

Depreciation and amortization

     97,268       84,014  

Proceeds from borrowings

     1,057,329       119,552  

Proceeds from exercise of stock options

     11,907       1,665  
Uses of cash and cash equivalents:                 

Payments on hedging of anticipated acquisition purchase price (i)

     (12,848 )     —    

Capital expenditures

     (57,652 )     (41,058 )

Investments in joint ventures and nonmarketable securities

     (10,642 )     (11,986 )

Acquisitions of assets/business, net of $34,418 cash acquired (m)

     (782,170 )     (117,767 )

Repayments of long-term debt

     (341,373 )     (83,681 )

Dividends paid

     (25,275 )     (23,194 )

** Unaudited selective cash flow data is presented herein subject to any further purchase price adjustments related to the acquisition of the refinery catalysts business of Akzo Nobel.

 

9


Albemarle Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands) (Unaudited)

 

     December 31,
2004


   December 31,
2003


ASSETS

             

Cash and cash equivalents

   $ 46,390    $ 35,173

Other current assets

     704,071      446,196
    

  

Total current assets

     750,461      481,369
    

  

Property, plant and equipment

     2,064,585      1,605,048

Less accumulated depreciation and amortization

     1,168,601      1,078,043
    

  

Net property, plant and equipment

     895,984      527,005

Other assets and intangibles

     862,061      378,917
    

  

     $ 2,508,506    $ 1,387,291
    

  

LIABILITIES & SHAREHOLDERS’ EQUITY

             

Current portion of long-term debt

   $ 495,047    $ 190

Other current liabilities

     336,963      209,881

Long-term debt

     449,584      228,389

Other noncurrent liabilities

     271,999      168,945

Deferred income taxes

     251,802      143,665

Shareholders’ equity

     703,111      636,221
    

  

     $ 2,508,506    $ 1,387,291
    

  

 

Notes (in thousands, except per share amounts):

 

(a) Cost of goods sold includes foreign exchange transaction (losses) gains of ($1,702) and $1,516, and ($1,960) and $1,424, for the three- and twelve-month periods ended December 31, 2004, and 2003, respectively.

 

(b) The special item for the fourth quarter ended December 31, 2003 related to a Statement on Financial Accounting Standards (“SFAS”) No. 144 charge for real estate held for sale, totaling $2,546 ($1,622 after income taxes, or four cents per diluted share). Special items for 2003 also include a third-quarter 2003 reduction in force adjustment totaling $7,503 ($4,780 after income taxes or 12 cents per diluted share) that resulted from the acceptance of a voluntary separation package offered by the Company by certain domestic salaried employees.

 

(c) Cost of goods sold includes an August 2004 cash settlement whereby the Company and a former insurer settled a dispute related to payments to be made to the Company in connection with certain insurance coverage for the period 1950 through 2000. Pursuant to the agreement, the Company will receive $6,945 ($4,424 after income taxes, or 10 cents per diluted share) with $4,208 paid at the settlement date and future payments to be made on February 1, 2005 and 2006.

 

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(d) Cost of goods sold includes a third-quarter 2004 charge amounting to $3,396 ($2,163 after income taxes, or five cents per diluted share) related to the establishment of a valuation reserve for the potential recoverability of an insurance claim receivable relating to the discontinuance of product support for, and the withdrawal from, a water treatment venture.

 

(e) Acquisition-related cost totaling $13,400 ($8,536 after income taxes, or 20 cents per diluted share) relates to a September 30, 2004 charge for the step-up increase in acquired inventory to fair value associated with the July 31, 2004 acquisition of the Akzo Nobel refinery catalysts business.

 

(f) Special items for 2004 include a September 30 benefit of $199 for the reversal of a reserve for work force reduction and a second-quarter 2004 charge totaling $550 ($350 after income taxes or one cent per diluted share) related to the cleanup of the Pasadena plant zeolite facility and a first-quarter 2004 charge totaling $4,507 ($2,871 after income taxes or seven cents per diluted share) for layoffs at the zeolite facility and associated SFAS No. 88 curtailment charges.

 

(g) The purchased in-process R&D charge amounting to $3,000, or seven cents per diluted share, consisted of the write-off of the estimated deferred research and development costs associated with the July 2004 acquisition of the Akzo Nobel refinery catalysts business.

 

(h) Interest and financing expenses include the July 2004 write-off of deferred financing expenses totaling $528 ($336 net of income taxes, or one cent per diluted share) related to the refinancing of the Company’s previous revolving credit agreement.

 

(i) Other income (expense), net include the 2004 mid-year foreign exchange hedging charges totaling $12,848 ($8,184 after income taxes, or 19 cents per diluted share), associated with contracts entered into by the Company to hedge the euro-denominated purchase price for the July 2004 acquisition of the Akzo Nobel refinery catalysts business. Twelve-months ended December 31, 2003 results include the benefit of interest of $2,715 ($1,730 after income taxes) on income tax settlements included in footnote (j) below.

 

(j) Income tax expense for the year-ended December 31, 2003, benefited from the settlement of and internal adjustments related to federal tax years 1996-1999 totaling $11,988.

 

(k) On January 1, 2003, the Company implemented SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addressed financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The cumulative effect of the implementation of this change in accounting principle was $2,220, net of taxes of $1,265, or five cents per diluted share.

 

(l) Following the completion of the refinery catalysts business acquisition on July 31, 2004, the Company transferred its existing polyolefin catalysts business from the Polymer Chemicals segment, which was renamed Polymer Additives, to a newly created Catalysts segment, which includes the refinery catalysts assets that were acquired from Akzo Nobel. The operations of the Company have since been managed and reported as three operating segments: Polymer Additives, Catalysts and Fine Chemicals. Accordingly, certain reclassifications and changes in allocations have been restated in the reported segment results of previous periods herein to conform to the current presentations now being used in three segment operations.

 

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(m) On July 31, 2004, the Company completed the acquisition of the Akzo Nobel refinery catalysts business for approximately $763 million, including expenses. Subsequent to July 31, 2004, an additional cash payment was made totaling $26 million for working capital. Final settlement of working capital is subject to negotiations with the seller. The acquisition was funded by a combination of a bridge loan and long-term financing. Additionally, the Company acquired 50 percent ownership of non-consolidated joint ventures in Brazil, Japan and France (with affiliates in the United States, Saudi Arabia and Italy). Additionally, the opening acquisition balance sheet is subject to final purchase price allocation procedures.

 

Additional information:

 

Set forth below is a reconciliation of net income excluding special items, a non-GAAP financial measure, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP, for the fourth quarter and year ended December 31, 2004. Certain amounts and percentages may not recalculate due to rounding.

 

For a description of the other non-GAAP financial measures, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, used by the Company from time to time to assess its operations, please refer to “Disclosure of Non-GAAP Financial Measures” on the Company’s website at www.albemarle.com.

 

In thousands except per- share amounts (Unaudited)

 

   Fourth Quarter Ended December 31, 2004

    Fourth Quarter Ended December 31, 2003

 
   As
Reported


    Special
Items


   Excluding
Special Items


    As
Reported


    Special
Items *


    Excluding
Special Items


 

Net sales

   $ 451,065     $  —      $ 451,065     $ 295,124     $ —       $ 295,124  

Cost of goods sold (a)

     (355,436 )     —        (355,436 )     (231,396 )     —         (231,396 )
    


 

  


 


 


 


Gross profit

     95,629       —        95,629       63,728               63,728  

Selling, general and administrative expenses (including FAS No.2 R&D)

     (64,164 )     —        (64,164 )     (36,478 )     —         (36,478 )

Special item

     —         —        —         (2,546 )     2,546 (b)     —    
    


 

  


 


 


 


Operating profit **

     31,465       —        31,465       24,704       2,546       27,250  

Interest and financing Expenses

     (8,182 )     —        (8,182 )     (1,333 )     —         (1,333 )

Equity in unconsolidated Investments

     1,913       —        1,913       274       —         274  

Other (expense), net including minority interest

     (1,268 )     —        (1,268 )     (261 )     —         (261 )
    


 

  


 


 


 


Income before income Taxes

     23,928       —        23,928       23,384       2,546       25,930  

Income tax expense

     4,291       —        4,291       6,596       924 (b)     7,520  
    


 

  


 


 


 


Net income

   $ 19,637       —      $ 19,637     $ 16,788     $ 1,622     $ 18,410  
    


 

  


 


 


 


Diluted earnings per share

   $ 0.46       —      $ 0.46     $ 0.40     $ 0.04     $ 0.44  
    


 

  


 


 


 



*       See footnotes under balance sheet

                                               

**     Operating profit by segment:

                                               

Polymer Additives

   $ 18,420       —      $ 18,420     $ 14,464     $ —       $ 14,464  

Catalysts

     13,027       —        13,027       4,062       —         4,062  

Fine Chemicals

     12,811       —        12,811       14,604       —         14,604  

Corporate and other expenses

     (12,793 )     —        (12,793 )     (8,426 )     2,546       (5,880 )
    


 

  


 


 


 


Total

   $ 31,465       —      $ 31,465     $ 24,704     $ 2,546     $ 27,250  
    


 

  


 


 


 


 

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     Year Ended December 31, 2004

    Year Ended December 31, 2003

 
    

As

Reported


   

Special

Items *


    Excluding
Special Items


   

As

Reported


    Special
Items *


    Excluding
Special Items


 

Net sales

   $ 1,513,737     $ —       $ 1,513,737     $ 1,110,237     $ —       $ 1,110,237  

Cost of goods sold (a)

     (1,201,388 )     (3,549 )(c,d)     (1,204,937 )     (871,727 )     —         (871,727 )

Acquisition related cost

     (13,400 )     13,400 (e)     —         —         —         —    
    


 


 


 


 


 


Gross profit

     298,949       9,851       308,800       238,510       —         238,510  

Selling, general and administrative expenses (including FAS No.2 R&D)

     (189,010 )     —         (189,010 )     (135,637 )     —         (135,637 )

Reduction in force adjustments and ATC loss

     (4,858 )     4,858 (f)     —         (10,049 )     10,049 (b)     —    

Purchased in-process R&D charge

     (3,000 )     3,000 (g)     —         —         —         —    
    


 


 


 


 


 


Operating profit **

     102,081       17,709       119,790       92,824       10,049       102,873  

Interest and financing expenses

     (17,350 )     528 (h)     (16,822 )     (5,376 )     —         (5,376 )

Equity in unconsolidated investments

     4,407       —         4,407       (874 )     —         (874 )

Other (expense) income, net including minority interest

     (17,294 )     12,848 (i)     (4,446 )     1,481       (2,715 )(i)     (1,234 )
    


 


 


 


 


 


Income before income taxes and cumulative effect

     71,844       31,085       102,929       88,055       7,334       95,389  

Income tax expense

     17,005       10,196       27,201       13,890       (14,650 )(j)     28,540  
    


 


 


 


 


 


Income before cumulative effect

     54,839       20,889       75,728       74,165       (7,316 )     66,849  

Cumulative effect, net of taxes

     —         —         —         (2,220 )     2,220 (k)     —    
    


 


 


 


 


 


Net income

   $ 54,839     $ 20,889     $ 75,728     $ 71,945     $ (5,096 )   $ 66,849  
    


 


 


 


 


 


Diluted earnings per share

   $ 1.29     $ 0.49     $ 1.78     $ 1.71     $ (0.12 )   $ 1.59  
    


 


 


 


 


 



*       See footnotes under balance sheet

                                                

**     Operating profit by segment:

                                                

Polymer Additives

   $ 84,108     $ (3,583 )   $ 80,525     $ 58,527     $ 2,931     $ 61,458  

Catalysts

     15,254       16,400       31,654       12,305       —         12,305  

Fine Chemicals

     38,697       4,892       43,589       48,526       1,814       50,340  

Corporate and other expenses

     (35,978 )     —         (35,978 )     (26,534 )     5,304       (21,230 )
    


 


 


 


 


 


Total

   $ 102,081     $ 17,709     $ 119,790     $ 92,824     $ 10,049     $ 102,873  
    


 


 


 


 


 


 

Source: Albemarle Corporation

 

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