Document
false0000915913 0000915913 2019-11-06 2019-11-06


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) November 6, 2019
 
_________________________________
ALBEMARLE CORPORATION
(Exact name of Registrant as specified in charter)
_________________________________

Virginia
 
001-12658
 
54-1692118
(State or other jurisdiction
of incorporation)
 
(Commission
file number)
 
(IRS employer
identification no.)
4250 Congress Street, Suite 900
Charlotte, North Carolina 28209
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code
(980) 299-5700
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2)
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
COMMON STOCK, $.01 Par Value
 
ALB
 
New York Stock Exchange






Section 2 - Financial Information

Item 2.02.    Results of Operations and Financial Condition.
On November 6, 2019, Albemarle Corporation (the “Company”) issued a press release reporting its results for the third quarter ended September 30, 2019. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on November 7, 2019, the Company will hold a teleconference for analysts and media to discuss results for the third quarter ended September 30, 2019. The teleconference will be webcast on the Company’s website at www.albemarle.com.
The press release includes presentations of adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin. These are financial measures that are not required by, nor presented in accordance with, accounting principles generally accepted in the United States (“GAAP”), but are included to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance.
Our presentations of adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA and adjusted effective income tax rates should not be considered as alternatives to Net income attributable to Albemarle Corporation (“earnings”), diluted earnings per share and effective income tax rates as determined in accordance with GAAP. Further, EBITDA margin and adjusted EBITDA margin should not be considered as alternatives to earnings as a percentage of our consolidated net sales as would be determined in accordance with GAAP. The Company has included in the press release certain reconciliation information for these measures to their most directly comparable financial measures 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 Statements and Exhibits.

(d) Exhibits.

Exhibit
 
 
Number
 
Exhibit
 
 
 
 






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: November 6, 2019

ALBEMARLE CORPORATION
By:
/s/ Karen G. Narwold
 
Karen G. Narwold
 
Executive Vice President and Chief Administrative Officer






Exhibit
Exhibit 99.1
Contact:
 
Dave Ryan
980.299.5641

https://cdn.kscope.io/f89a5ae3f268d3fc06b6b026fefa4aad-a3q19earningsreleasimagea02.jpg




Albemarle Reports Third Quarter Growth



CHARLOTTE, N.C. - Nov. 6, 2019 - Albemarle Corporation (NYSE: ALB) today announced its results for the third quarter ended Sept. 30, 2019.

Third Quarter 2019 Highlights
(Based on year-over-year comparisons unless otherwise noted)
Net sales of $879.7 million increased 14%, excluding foreign exchange impact of 1%, largely driven by strong volume and favorable pricing
Earnings were $1.46 per diluted share, an increase of 22%
Adjusted EPS were $1.53 per diluted share, an increase of 17%
Adjusted EBITDA was $254.4 million, an increase of 8%

Notable Developments
Completed previously announced lithium joint venture with Mineral Resources Limited on Oct. 31, 2019; funded Wodgina mine project and other general corporate projects with $1 billion, borrowed from new $1.2 billion unsecured credit facility
Previously announced Company’s full year 2019 adjusted diluted EPS outlook is $6.00 - $6.20 from $6.25 - $6.65
Initiating cost management program targeting over $100 million in savings over a two-year period

“During the third quarter, Albemarle grew net sales by 14%, adjusted EBITDA by 12%, and adjusted earnings per share by 22% over the prior year, excluding currency impacts, due to solid growth across all businesses,” said Luke Kissam, Albemarle CEO. “We have recently made several strategic decisions to further position Albemarle for long-term success and remain confident in the long-term growth prospects of our business.”

Third Quarter Results
In millions, except per share amounts
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Net sales
$
879.7

 
$
777.7

 
$
102.0

 
13.1
%
Net income attributable to Albemarle Corporation
$
155.1

 
$
129.7

 
$
25.3

 
19.5
%
Adjusted EBITDA(a)
$
254.4

 
$
235.1

 
$
19.3

 
8.2
%
Diluted earnings per share
$
1.46

 
$
1.20

 
$
0.26

 
21.7
%
   Non-operating pension and OPEB items(a)
(0.01
)
 
(0.02
)
 
 
 
 
   Non-recurring and other unusual items(a)
0.08

 
0.13

 
 
 
 
Adjusted diluted earnings per share(b)
$
1.53

 
$
1.31

 
$
0.22

 
16.8
%

(a)
See Non-GAAP Reconciliations for further details.
(b)
Totals may not add due to rounding.


1


Net sales increased 14%, in constant currencies, due to increased volume in all reportable segments and favorable pricing in Lithium and Bromine Specialties.
The Company’s earnings increased as a result of earnings growth from each of the businesses, lower interest and financing expenses, and a lower effective tax rate. The increase was partially offset by unfavorable currency exchange, higher corporate costs for professional services, and increased depreciation and amortization due to increased capital projects put into service.

Third Quarter Business Segment Results

Lithium
In millions
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Net Sales
$
330.4

 
$
270.9

 
$
59.5

 
21.9
%
Adjusted EBITDA
$
127.5

 
$
113.6

 
$
13.8

 
12.2
%
Net sales and adjusted EBITDA growth were driven by increased volume and slightly favorable pricing of 1%, which more than offset deferred shipments due to disruption caused by Typhoon Tapah in late September. As previously communicated, impacted volume is expected to be fully recovered in the fourth quarter.
Net sales reflects unfavorable currency exchange of 1%. Adjusted EBITDA reflects favorable currency exchange of 4% resulting from a weaker Chilean Peso.
Cost of goods sold increased, mainly due to higher tolling product costs to meet customer commitments and address operating issues in La Negra, Chile.
Out-of-period non-cash expense of $7.0 million recorded in the third quarter of 2019 in cost of goods sold was due to an adjustment of lithium carbonate inventory values from the second quarter of 2019.
Please see press release issued Oct. 24, 2019 for additional information.

Bromine Specialties
In millions
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Net Sales
$
256.3

 
$
232.6

 
$
23.7

 
10.2
%
Adjusted EBITDA
$
88.8

 
$
78.6

 
$
10.2

 
13.0
%
Net sales and adjusted EBITDA growth reflects favorable price impacts and increased volume, more than offsetting unfavorable currency exchange of 1%.

Catalysts
In millions
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Net Sales
$
261.3

 
$
251.1

 
$
10.2

 
4.1
%
Adjusted EBITDA
$
66.9

 
$
62.6

 
$
4.3

 
6.9
%
Favorable pricing in Fluid Catalytic Cracking (FCC) Catalysts was offset by lower volumes related to delays in the start-up of new FCC units.
Clean Fuel Technology, or HPC, benefited from higher sales volume and a favorable product mix.
Net sales reflects unfavorable currency exchange of 1%.
Results also reflect a partial insurance claim reimbursement of $2.2 million received in 2018.

All Other
In millions
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Net Sales
$
31.7

 
$
23.1

 
$
8.7

 
37.6
%
Adjusted EBITDA
$
10.4

 
$
4.0

 
$
6.5

 
163.3
%
Net sales growth reflects increased sales volume of $9.3 million in our fine chemistry services business.
Results also reflect a $4.4 million decrease from the re-measurement of the fair value of our investment in private equity securities.


2


Corporate Results
In millions
Q3 2019
 
Q3 2018
 
$ Change
 
% Change
Adjusted EBITDA
$
(39.3
)
 
$
(23.7
)
 
$
(15.6
)
 
65.9
%
Results reflect higher selling, general and administrative spending for professional services and $11.3 million of unfavorable currency exchange impacts.

Income Taxes

The effective income tax rate for the third quarter of 2019 was 15.5% compared to 21.5% in the same period in 2018, largely due to change in geographic earnings mix. On an adjusted basis, the effective income tax rates were 15.0% and 18.9% for the third quarter of 2019 and 2018, respectively.

Cash Flow and Capital Deployment

Cash from operations was $345.6 million for the nine months ended Sept. 30, 2019, a decrease of $31.3 million versus the same period in 2018. The result was primarily due to the timing on payables and the collection of certain receivables, lower cash earnings in Catalysts, and higher cash taxes. This was partially offset by higher dividends received from unconsolidated investments and increased cash earnings from Bromine Specialties.

Capital expenditures were $608.5 million as compared to $471.7 million in the first nine months of 2018, with the increase driven largely by expansion in our Lithium business. As previously announced in the second quarter, Albemarle reduced its multi-year capital expenditure plan to approximately $3.5 billion from $5.0 billion over the next five years. This adjustment reflects the Company’s commitment to generating free cash in 2021 and investing capital where customer volume and price commitments provide an attractive return.

During the nine months ended Sept. 30, 2019, Albemarle deployed dividends to shareholders totaling $113.3 million.

Cash and cash equivalents were $317.8 million at Sept. 30, 2019, as compared to $555.3 million at Dec. 31, 2018.

Full Year 2019 Outlook

As previously announced on Oct. 24, 2019, discrete and operational items impacting Lithium will likely cause the business’s fourth quarter 2019 performance to be lower than previously forecasted. The Company expects continued upside in Bromine Specialties and Catalysts in the fourth quarter, but does not expect this to offset the impact from Lithium on total Company results.

As a result, Albemarle is reaffirming its full year 2019 guidance as follows:
 
Current Outlook
 
vs Pro Forma
Full Year 2018(a)
Net sales
$3.6 - $3.7 billion
 
7% - 10%
Adjusted EBITDA
$1.02 - $1.06 billion
 
2% - 6%
Adjusted EPS (per diluted share)
$6.00 - $6.20
 
10% - 14%
(a) Pro forma excludes the impact of the polyolefin catalysts and components business sold on April 1, 2018.

Additionally, the Company expects its full year 2019 income tax rate to be between 18% and 19%.


3


Earnings Call

Date:
Thursday, Nov. 7, 2019
Time:
9:00 AM Eastern time
Dial-in (U.S.):
844-347-1034
Dial-in (International):
209-905-5910
Passcode:
6199517

The Company’s earnings presentation and supporting material is available on Albemarle’s website at https://investors.albemarle.com.

About Albemarle

Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, N.C., is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We 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 5,600 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, information related to product development, production capacity, committed volumes, market trends, pricing, expected growth, earnings and demand for our products, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause actual results to differ materially from the outlook expressed or implied in any forward-looking statement include, without limitation: changes in economic and business conditions; changes in financial and operating performance of our major customers and industries and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in the demand for our products or the end-user markets in which our products are sold; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; increases in the cost of raw materials and energy, and our ability to pass through such increases to our customers; changes in our markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting our operations or our products; the occurrence of regulatory actions, proceedings, claims or litigation; the occurrence of cyber-security breaches, terrorist attacks, industrial accidents, natural disasters or climate change; the inability to maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest affecting the global economy, including adverse effects form terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions we may make in the future; the ability to successfully execute, operate and integrate acquisitions and divestitures; 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

4


provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.


5


Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
879,747

 
$
777,748

 
$
2,596,863

 
$
2,453,251

Cost of goods sold
569,880

 
497,211

 
1,677,596

 
1,556,379

Gross profit
309,867

 
280,537

 
919,267

 
896,872

Selling, general and administrative expenses
108,135

 
100,167

 
348,205

 
325,174

Research and development expenses
15,585

 
16,610

 
44,024

 
53,670

Gain on sale of business

 

 

 
(218,705
)
Operating profit
186,147

 
163,760

 
527,038

 
736,733

Interest and financing expenses
(11,108
)
 
(12,988
)
 
(35,295
)
 
(39,834
)
Other (expenses) income, net
(11,316
)
 
3,793

 
(7,090
)
 
(31,906
)
Income before income taxes and equity in net income of unconsolidated investments
163,723

 
154,565

 
484,653

 
664,993

Income tax expense
25,341

 
33,167

 
93,266

 
133,630

Income before equity in net income of unconsolidated investments
138,382

 
121,398

 
391,387

 
531,363

Equity in net income of unconsolidated investments (net of tax)
33,236

 
22,081

 
106,727

 
61,727

Net income
171,618

 
143,479

 
498,114

 
593,090

Net income attributable to noncontrolling interests
(16,548
)
 
(13,734
)
 
(55,277
)
 
(29,124
)
Net income attributable to Albemarle Corporation
$
155,070

 
$
129,745

 
$
442,837

 
$
563,966

Basic earnings per share
$
1.46

 
$
1.21

 
$
4.18

 
$
5.16

Diluted earnings per share
$
1.46

 
$
1.20

 
$
4.16

 
$
5.11

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic
105,999

 
107,315

 
105,920

 
109,223

Weighted-average common shares outstanding – diluted
106,299

 
108,302

 
106,324

 
110,276





6


Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)

 
September 30,
 
December 31,
 
2019
 
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
317,823

 
$
555,320

Trade accounts receivable
637,037

 
605,712

Other accounts receivable
86,556

 
52,059

Inventories
802,434

 
700,540

Other current assets
125,902

 
84,790

Total current assets
1,969,752

 
1,998,421

Property, plant and equipment
5,406,123

 
4,799,063

Less accumulated depreciation and amortization
1,882,086

 
1,777,979

Net property, plant and equipment
3,524,037

 
3,021,084

Investments
551,657

 
528,722

Other assets
200,858

 
80,135

Goodwill
1,534,241

 
1,567,169

Other intangibles, net of amortization
361,058

 
386,143

Total assets
$
8,141,603

 
$
7,581,674

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
527,052

 
$
522,516

Accrued expenses
273,709

 
257,323

Current portion of long-term debt
539,960

 
307,294

Dividends payable
38,678

 
35,169

Current operating lease liability
24,606

 

Income taxes payable
17,238

 
60,871

Total current liabilities
1,421,243

 
1,183,173

Long-term debt
1,381,984

 
1,397,916

Postretirement benefits
45,752

 
46,157

Pension benefits
272,345

 
285,396

Other noncurrent liabilities
618,822

 
526,942

Deferred income taxes
393,120

 
382,982

Commitments and contingencies
 
 
 
Equity:
 
 
 
Albemarle Corporation shareholders’ equity:
 
 
 
Common stock
1,060

 
1,056

Additional paid-in capital
1,379,419

 
1,368,897

Accumulated other comprehensive loss
(435,977
)
 
(350,682
)
Retained earnings
2,892,057

 
2,566,050

Total Albemarle Corporation shareholders’ equity
3,836,559

 
3,585,321

Noncontrolling interests
171,778

 
173,787

Total equity
4,008,337

 
3,759,108

Total liabilities and equity
$
8,141,603


$
7,581,674




7


Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)

 
Nine Months Ended 
 September 30,
 
2019
 
2018
Cash and cash equivalents at beginning of year
$
555,320

 
$
1,137,303

Cash flows from operating activities:
 
 
 
Net income
498,114

 
593,090

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
Depreciation and amortization
156,718

 
150,511

Gain on sale of business

 
(218,705
)
Gain on sale of property
(11,079
)
 

Stock-based compensation and other
15,169

 
11,785

Equity in net income of unconsolidated investments (net of tax)
(106,727
)
 
(61,727
)
Dividends received from unconsolidated investments and nonmarketable securities
62,982

 
32,794

Pension and postretirement expense (benefit)
1,641

 
(2,708
)
Pension and postretirement contributions
(10,728
)
 
(11,068
)
Unrealized gain on investments in marketable securities
(1,701
)
 
(1,615
)
Deferred income taxes
7,726

 
43,400

Working capital changes
(289,587
)
 
(131,813
)
Other, net
23,110

 
(27,003
)
Net cash provided by operating activities
345,638

 
376,941

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired

 
(11,403
)
Capital expenditures
(608,456
)
 
(471,675
)
Cash proceeds from divestitures, net

 
413,479

Proceeds from sale of property and equipment
10,356

 

Sales of (investments in) marketable securities, net
1,177

 
(761
)
Investments in equity and other corporate investments
(2,569
)
 
(5,346
)
Net cash used in investing activities
(599,492
)
 
(75,706
)
Cash flows from financing activities:
 
 
 
Other borrowings (repayments), net
232,183

 
(134,505
)
Dividends paid to shareholders
(113,321
)
 
(108,922
)
Dividends paid to noncontrolling interests
(57,212
)
 
(14,756
)
Repurchases of common stock

 
(500,000
)
Proceeds from exercise of stock options
4,814

 
2,302

Withholding taxes paid on stock-based compensation award distributions
(10,774
)
 
(17,047
)
Other
(445
)
 

Net cash provided by (used in) financing activities
55,245

 
(772,928
)
Net effect of foreign exchange on cash and cash equivalents
(38,888
)
 
(24,384
)
Decrease in cash and cash equivalents
(237,497
)
 
(496,077
)
Cash and cash equivalents at end of period
$
317,823

 
$
641,226





8


Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Net sales:
 
 
 
 
 
 
 
Lithium
$
330,386

 
$
270,928

 
$
947,030

 
$
886,523

Bromine Specialties
256,267

 
232,616

 
760,752

 
678,769

Catalysts
261,346

 
251,139

 
779,295

 
796,822

All Other
31,748

 
23,065

 
109,786

 
90,978

Corporate

 

 

 
159

Total net sales
$
879,747

 
$
777,748

 
$
2,596,863

 
$
2,453,251

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium
$
127,459

 
$
113,629

 
$
384,854

 
$
386,260

Bromine Specialties
88,814

 
78,585

 
248,743

 
217,921

Catalysts
66,944

 
62,602

 
193,890

 
205,534

All Other
10,448

 
3,968

 
28,931

 
7,729

Corporate
(39,314
)
 
(23,702
)
 
(114,300
)
 
(75,082
)
Total adjusted EBITDA
$
254,351

 
$
235,082

 
$
742,118

 
$
742,362


See accompanying non-GAAP reconciliations below.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These non-GAAP measures should not be considered as alternatives to Net income attributable to Albemarle Corporation (“earnings”). These measures are presented here to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance. The Company’s chief operating decision maker uses these measures to assess the ongoing performance of the Company and its segments, as well as for business and enterprise planning purposes.

A description of other non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP can be found on the following pages of this press release, which is also is available on Albemarle’s website at https://investors.albemarle.com. The Company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the Company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the Company's results calculated in accordance with GAAP.


9


ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited)
See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net income attributable to Albemarle Corporation (“earnings”), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted earnings is defined as earnings before the non-recurring, other unusual and non-operating pension and OPEB items as listed below. EBITDA is defined as earnings before interest and financing expenses, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA and the non-recurring, other unusual and non-operating pension and OPEB items as listed below.


Three Months Ended

Nine Months Ended

September 30,

September 30,
In thousands, except percentages and per share amounts
2019

2018

2019

2018
Net income attributable to Albemarle Corporation
$
155,070


$
129,745


$
442,837


$
563,966

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items (net of tax)
(543
)

(1,856
)

(1,805
)

(5,595
)
Non-recurring and other unusual items (net of tax)
8,497


13,568


17,239


(121,731
)
Adjusted net income attributable to Albemarle Corporation
$
163,024


$
141,457


$
458,271


$
436,640













Adjusted diluted earnings per share
$
1.53


$
1.31


$
4.31


$
3.96













Weighted-average common shares outstanding – diluted
106,299


108,302


106,324


110,276













Net income attributable to Albemarle Corporation
$
155,070


$
129,745


$
442,837


$
563,966

Add back:











Interest and financing expenses
11,108


12,988


35,295


39,834

Income tax expense
25,341


33,167


93,266


133,630

Depreciation and amortization
54,487


49,707


156,718


150,511

EBITDA
246,006


225,607


728,116


887,941

Non-operating pension and OPEB items
(551
)

(2,195
)

(1,810
)

(6,596
)
Non-recurring and other unusual items
8,896


11,670


15,812


(138,983
)
Adjusted EBITDA
$
254,351


$
235,082


$
742,118


$
742,362













Net sales
$
879,747


$
777,748


$
2,596,863


$
2,453,251

EBITDA margin
28.0
%

29.0
%

28.0
%

36.2
%
Adjusted EBITDA margin
28.9
%

30.2
%

28.6
%

30.3
%


10


See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).
 
Lithium
 
Bromine Specialties
 
Catalysts
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
 
% of Net Sales
Three months ended September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
102,136

 
$
75,224

 
$
54,345

 
$
231,705

 
$
8,305

 
$
(84,940
)
 
$
155,070

 
17.6
 %
Depreciation and amortization
25,212

 
12,448

 
12,599

 
50,259

 
2,143

 
2,085

 
54,487

 
6.2
 %
Non-recurring and other unusual items
111

 
1,142

 

 
1,253

 

 
7,643

 
8,896

 
1.0
 %
Interest and financing expenses

 

 

 

 

 
11,108

 
11,108

 
1.3
 %
Income tax expense

 

 

 

 

 
25,341

 
25,341

 
2.9
 %
Non-operating pension and OPEB items

 

 

 

 

 
(551
)
 
(551
)
 
(0.1
)%
Adjusted EBITDA
$
127,459

 
$
88,814

 
$
66,944

 
$
283,217

 
$
10,448

 
$
(39,314
)
 
$
254,351

 
28.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
90,313

 
$
67,967

 
$
50,491

 
$
208,771

 
$
1,978

 
$
(81,004
)
 
$
129,745

 
16.7
 %
Depreciation and amortization
23,370

 
10,618

 
12,111

 
46,099

 
1,990

 
1,618

 
49,707

 
6.4
 %
Non-recurring and other unusual items
(54
)
 

 

 
(54
)
 

 
11,724

 
11,670

 
1.5
 %
Interest and financing expenses

 

 

 

 

 
12,988

 
12,988

 
1.7
 %
Income tax expense

 

 

 

 

 
33,167

 
33,167

 
4.2
 %
Non-operating pension and OPEB items

 

 

 

 

 
(2,195
)
 
(2,195
)
 
(0.3
)%
Adjusted EBITDA
$
113,629

 
$
78,585

 
$
62,602

 
$
254,816

 
$
3,968

 
$
(23,702
)
 
$
235,082

 
30.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
312,609

 
$
212,320

 
$
156,328

 
$
681,257

 
$
22,629

 
$
(261,049
)
 
$
442,837

 
17.1
 %
Depreciation and amortization
71,669

 
35,281

 
37,562

 
144,512

 
6,302

 
5,904

 
156,718

 
6.0
 %
Non-recurring and other unusual items
576

 
1,142

 

 
1,718

 

 
14,094

 
15,812

 
0.6
 %
Interest and financing expenses

 

 

 

 

 
35,295

 
35,295

 
1.4
 %
Income tax expense

 

 

 

 

 
93,266

 
93,266

 
3.6
 %
Non-operating pension and OPEB items

 

 

 

 

 
(1,810
)
 
(1,810
)
 
(0.1
)%
Adjusted EBITDA
$
384,854

 
$
248,743

 
$
193,890

 
$
827,487

 
$
28,931

 
$
(114,300
)
 
$
742,118

 
28.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
315,939

 
$
187,176

 
$
387,038

 
$
890,153

 
$
1,659

 
$
(327,846
)
 
$
563,966

 
23.0
 %
Depreciation and amortization
71,760

 
30,745

 
37,201

 
139,706

 
6,070

 
4,735

 
150,511

 
6.2
 %
Non-recurring and other unusual items
(1,439
)
 

 
(218,705
)
 
(220,144
)
 

 
81,161

 
(138,983
)
 
(5.7
)%
Interest and financing expenses

 

 

 

 

 
39,834

 
39,834

 
1.6
 %
Income tax expense

 

 

 

 

 
133,630

 
133,630

 
5.5
 %
Non-operating pension and OPEB items

 

 

 

 

 
(6,596
)
 
(6,596
)
 
(0.3
)%
Adjusted EBITDA
$
386,260

 
$
217,921

 
$
205,534

 
$
809,715

 
$
7,729

 
$
(75,082
)
 
$
742,362

 
30.3
 %

Non-operating pension and OPEB items, consisting of mark-to-market actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our operating segments and are included in the Corporate category. In addition, we believe that these components of pension cost are mainly driven by market performance, and we manage these separately from the operational performance of our businesses. In accordance with GAAP, these non-operating pension and OPEB items are included in Other (expenses) income, net. Non-operating pension and OPEB items were as follows (in thousands):

11


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Interest cost
$
8,863

 
$
8,509

 
$
26,501

 
$
25,636

Expected return on assets
(9,414
)
 
(10,704
)
 
(28,311
)
 
(32,232
)
Total
$
(551
)
 
$
(2,195
)
 
$
(1,810
)
 
$
(6,596
)

In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items and excluded them from our adjusted net income calculation for the periods presented. A listing of these items, as well as a detailed description of each follows below (per diluted share):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Restructuring and other(1)
$

 
$
0.04

 
$

 
$
0.04

Acquisition and integration related costs(2)
0.03

 
0.03

 
0.10

 
0.10

Albemarle Foundation contribution(3)

 

 

 
0.10

Gain on sale of business(4)

 

 

 
(1.60
)
Gain on sale of property(5)

 

 
(0.08
)
 

Legal accrual(6)

 
0.02

 

 
0.21

Environmental accrual(7)

 

 

 
0.11

Other(8)
0.05

 
0.04

 
0.12

 
0.05

Discrete tax items(9)

 

 
0.02

 
(0.11
)
Total non-recurring and other unusual items
$
0.08

 
$
0.13

 
$
0.16

 
$
(1.10
)

(1)
Included in Selling, general and administrative expenses for the three and nine months ended September 30, 2018 is $3.7 million (or $0.04 per share) related to severance payments as part of a business reorganization plan.

(2)
Acquisition and integration related costs for the three and nine months ended September 30, 2019 and 2018 related to various significant projects. Acquisition and integration related costs are included in the consolidated statements of income as follows (in millions, except per share amounts):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Acquisition and integration related costs:
 
 
 
 
 
 
 
Cost of goods sold
$

 
$
0.9

 
$

 
$
2.9

Selling, general and administrative expenses
4.1

 
3.4

 
14.4

 
10.2

Total
$
4.1

 
$
4.3

 
$
14.4

 
$
13.1

Total acquisition and integration related costs, after income taxes
$
3.2

 
$
3.5

 
$
11.1

 
$
10.7

Total acquisition and integration related costs, per diluted share
$
0.03

 
$
0.03

 
$
0.10

 
$
0.10


(3)
Included in Selling, general and administrative expenses for the nine months ended September 30, 2018 is a $15.0 million ($11.5 million after income taxes, or $0.10 per share) charitable contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and operate. This contribution is in addition to the ordinary annual contribution made to the

12


Albemarle Foundation by the Company, and is significant in size and nature in that it is intended to provide more long-term benefits in the communities where we live and operate.

(4)
Included in Gain on sale of business, for the nine months ended September 30, 2018 is $218.7 million ($176.7 million after discrete incomes taxes, or $1.60 per share) related to the sale of the Polyolefin Catalysts Divestiture.

(5)
Included in Other (expenses) income, net, for the nine months ended September 30, 2019 is a gain of $11.1 million ($8.5 million after income taxes, or $0.08 per share) related to the sale of land in Pasadena, Texas not used as part of our operations.

(6)
Included in Other (expenses) income, net, for the three and nine months ended September 30, 2018 are expenses of $0.4 million ($2.8 million including the adjustment of previously recorded income taxes, or $0.03 per share) and $10.8 million (or $0.10 per share), respectively, resulting from a settlement of a legal matter related to guarantees from a previously disposed business. In addition, Other (expenses) income, net, for the three and nine months ended September 30, 2018 include a gain of $1.4 million ($1.1 million after income taxes, or $0.01 per share) and an expense of $16.2 million ($12.5 million after income taxes, or $0.11 per share), respectively, resulting from a jury rendered verdict against Albemarle related to certain business concluded under a 2014 sales agreement for products that Albemarle no longer manufactures. Both matters were resolved and paid in 2018.

(7)
Increase in environmental reserve of $15.6 million ($12.0 million after income taxes, or $0.11 per share) to indemnify the buyer of a formerly owned site recorded in Other (expenses) income, net. As defined in the agreement of sale, this indemnification has a set cutoff date in 2024, at which point we will no longer be required to provide financial coverage.

(8)
Other adjustments for the three months ended September 30, 2019 included amounts recorded in:
Cost of goods sold - $0.1 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
Selling, general and administrative expenses - $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialties segment.
Other (expenses) income, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, as well as a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting.
After income taxes, these charges totaled $5.4 million, or $0.05 per share.

Other adjustments for the nine months ended September 30, 2019 included amounts recorded in:
Cost of goods sold - $0.6 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
Selling, general and administrative expenses - Expected severance payments to be made in 2019 as part of a business reorganization plan of $5.3 million, with the unpaid balance recorded in Accrued expenses, $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan, and $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialties segment.
Other (expenses) income, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting, and $0.9 million of a net loss primarily resulting from the revision of indemnifications and other liabilities related to previously disposed businesses.
After income taxes, these charges totaled $12.3 million, or $0.12 per share.

Other adjustments for the three months ended September 30, 2018 included amounts recorded in:
Cost of goods sold - $3.8 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
Selling, general and administrative expenses - $0.1 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to

13


schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
Other (expenses) income, net - $0.2 million gain related to the revision of previously recorded expenses of disposed businesses.
After income taxes, these charges totaled $4.4 million, or $0.04 per share.

Other adjustments for the nine months ended September 30, 2018 included amounts recorded in:
Cost of goods sold - $4.9 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
Selling, general and administrative expenses - $1.5 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
Other (expenses) income, net - $0.8 million related to the revision of previously recorded expenses of disposed businesses.
After income taxes, these charges totaled $5.3 million, or $0.05 per share.

(9)
Included in Income tax expense for the nine months ended September 30, 2019 are discrete net tax expenses of $2.3 million, or $0.02 per share. This net expense is primarily related to expenses for uncertain tax positions and foreign return to accrual adjustments, partially offset by a benefit for excess tax benefits realized from stock-based compensation arrangements.

Included in Income tax expense for the three and nine months ended September 30, 2018 are discrete net tax expenses (benefits), excluding the discrete tax expense on the gain of sale of business noted above, of $0.2 million, or less than $0.01 per share, and ($11.6) million, or ($0.11) per share, respectively. The net expense for the three months is primarily related to $1.9 million expense recorded for stock-based compensation arrangements and $1.7 million expense for adjustments related to the accounting for the TCJA, partially offset by a $2.0 million benefit from foreign accrual to return adjustments and a $1.2 million benefit from the release of foreign valuation allowances. The net benefit for the nine months is primarily related to an $8.0 million benefit for tax accounting method changes, a $4.8 million benefit for adjustments related to the accounting for the TCJA, $5.4 million excess tax benefits realized from stock-based compensation arrangements, and a $2.0 million benefit from foreign accrual to return adjustments, partially offset by $7.3 million expense for adjustments to foreign valuation allowances.

See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).


14


 
Income before income taxes and equity in net income of unconsolidated investments
 
Income tax expense
 
Effective income tax rate
Three months ended September 30, 2019:
 
 
 
 
 
As reported
$
163,723

 
$
25,341

 
15.5
%
Non-recurring, other unusual and non-operating pension and OPEB items
8,345

 
391

 
 
As adjusted
$
172,068

 
$
25,732

 
15.0
%

 
 
 
 
 
Three months ended September 30, 2018:
 
 
 
 
 
As reported
$
154,565

 
$
33,167

 
21.5
%
Non-recurring, other unusual and non-operating pension and OPEB items
9,475

 
(2,237
)
 
 
As adjusted
$
164,040

 
$
30,930

 
18.9
%
 
 
 
 
 
 
Nine months ended September 30, 2019:
 
 
 
 
 
As reported
$
484,653

 
$
93,266

 
19.2
%
Non-recurring, other unusual and non-operating pension and OPEB items
14,002

 
(1,432
)
 
 
As adjusted
$
498,655

 
$
91,834

 
18.4
%
 
 
 
 
 
 
Nine months ended September 30, 2018:
 
 
 
 
 
As reported
$
664,993

 
$
133,630

 
20.1
%
Non-recurring, other unusual and non-operating pension and OPEB items
(145,579
)
 
(18,253
)
 
 
As adjusted
$
519,414

 
$
115,377

 
22.2
%


15