Albemarle reports second quarter 2014 results
Second quarter 2014 highlights:
- Adjusted earnings of
$86.8 million , or$1.10 per share, up 10% from second quarter 2013. - Net sales grew 5% to
$604.7 million as compared to 2013, with an Adjusted EBITDA margin of 24 percent. - Cash flow from operations of
$146.0 million , up 82 percent from second quarter 2013. - Signed definitive agreement to sell antioxidant, ibuprofen and propofol businesses and assets to
SI Group, Inc. - Announced an agreement on
July 15, 2014 to acquireRockwood Holdings, Inc. for a cash and stock value of approximately$6.2 billion .
Three Months Ended |
Six Months Ended |
||||||||||
June 30, |
June 30, |
||||||||||
In thousands, except per share amounts |
2014 |
2013 |
2014 |
2013 |
|||||||
Net sales |
$ |
604,721 |
$ |
576,842 |
$ |
1,204,564 |
$ |
1,163,439 |
|||
Segment income |
$ |
140,900 |
$ |
126,285 |
$ |
271,837 |
$ |
258,621 |
|||
Net income from continuing operations |
$ |
89,404 |
$ |
88,500 |
$ |
155,408 |
$ |
176,181 |
|||
Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
|||
Diluted earnings per share |
$ |
0.28 |
$ |
0.98 |
$ |
0.99 |
$ |
1.92 |
|||
Non-operating pension and OPEB items(a) |
(0.01) |
(0.01) |
0.10 |
(0.03) |
|||||||
Special items(b) |
0.07 |
— |
0.21 |
— |
|||||||
Discontinued operations(c) |
0.76 |
(0.03) |
0.78 |
(0.05) |
|||||||
Adjusted diluted earnings per share(d) |
$ |
1.10 |
$ |
0.94 |
$ |
2.08 |
$ |
1.84 |
See accompanying notes and reconciliations to the condensed consolidated financial information.
Earnings for the six months ended
On
"Improved trends drove stronger than expected results in Catalyst Solutions where we experienced stronger customer demand across the portfolio and very high operating rates at our Bayport FCC facility in advance of a planned August turnaround. The strength in Catalyst Solutions more than offset weaker Performance Chemicals results, which were hurt by lower clear completion fluid volumes," said Albemarle's president and CEO
On
Quarterly Segment Results
Performance Chemicals reported net sales of
Catalyst Solutions generated net sales of
Corporate and Other
Corporate and other expense was
Interest and financing expenses were
Our adjusted effective income tax rates, which exclude discontinued operations, special and non-operating pension and OPEB items, were 22.6 percent and 20.3 percent for the second quarter of 2014 and 2013, respectively. Our effective tax rate continues 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
Earnings Call
The Company's performance for the second quarter ended June 30, 2014 will be discussed on a conference call at
About Albemarle
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 product development, changes in productivity, market trends, price, volume and mix changes, expected growth and earnings, input costs, surcharges, tax rates, stock repurchases, dividends, 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 and in our ability to pass through such increases; acquisitions and divestitures, and changes in performance of acquired companies; 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 claims or litigation; the occurrence of natural disasters; the inability to maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest affecting the global economy, including adverse effects from terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and substantial 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; and the other factors detailed from time to time in the reports we file with the
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, |
|||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||
Net sales |
$ |
604,721 |
$ |
576,842 |
$ |
1,204,564 |
$ |
1,163,439 |
||||||
Cost of goods sold(a) |
397,358 |
385,172 |
801,602 |
775,858 |
||||||||||
Gross profit |
207,363 |
191,670 |
402,962 |
387,581 |
||||||||||
Selling, general and administrative expenses(a) |
67,011 |
61,725 |
145,115 |
125,300 |
||||||||||
Research and development expenses |
21,937 |
21,565 |
44,509 |
41,518 |
||||||||||
Restructuring and other charges, net(b) |
8,175 |
— |
25,175 |
— |
||||||||||
Operating profit |
110,240 |
108,380 |
188,163 |
220,763 |
||||||||||
Interest and financing expenses |
(8,733) |
(7,608) |
(17,506) |
(12,839) |
||||||||||
Other (expenses) income, net |
(979) |
(1,585) |
164 |
(5,779) |
||||||||||
Income from continuing operations before income taxes and equity in net income of unconsolidated investments |
100,528 |
99,187 |
170,821 |
202,145 |
||||||||||
Income tax expense |
21,773 |
20,396 |
34,963 |
45,934 |
||||||||||
Income from continuing operations before equity in net income of unconsolidated investments |
78,755 |
78,791 |
135,858 |
156,211 |
||||||||||
Equity in net income of unconsolidated investments (net of tax) |
10,649 |
9,709 |
19,550 |
19,970 |
||||||||||
Net income from continuing operations |
89,404 |
88,500 |
155,408 |
176,181 |
||||||||||
(Loss) income from discontinued operations (net of tax)(c) |
(60,025) |
2,628 |
(61,794) |
4,463 |
||||||||||
Net income |
29,379 |
91,128 |
93,614 |
180,644 |
||||||||||
Net income attributable to noncontrolling interests |
(6,932) |
(8,389) |
(14,584) |
(13,918) |
||||||||||
Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
||||||
Basic earnings (loss) per share |
||||||||||||||
Continuing operations |
$ |
1.05 |
$ |
0.95 |
$ |
1.78 |
$ |
1.88 |
||||||
Discontinued operations |
(0.76) |
0.03 |
(0.78) |
0.05 |
||||||||||
$ |
0.29 |
$ |
0.98 |
$ |
1.00 |
$ |
1.93 |
|||||||
Diluted earnings (loss) per share |
||||||||||||||
Continuing operations |
$ |
1.04 |
$ |
0.95 |
$ |
1.77 |
$ |
1.87 |
||||||
Discontinued operations |
(0.76) |
0.03 |
(0.78) |
0.05 |
||||||||||
$ |
0.28 |
$ |
0.98 |
$ |
0.99 |
$ |
1.92 |
|||||||
Weighted-average common shares outstanding – basic |
78,662 |
84,028 |
79,199 |
86,374 |
||||||||||
Weighted-average common shares outstanding – diluted |
79,091 |
84,489 |
79,602 |
86,862 |
See accompanying notes to the condensed consolidated financial information.
Albemarle Corporation and Subsidiaries |
|||||
Condensed Consolidated Balance Sheets |
|||||
(In Thousands) (Unaudited) |
|||||
June 30, |
December 31, |
||||
2014 |
2013 |
||||
ASSETS |
|||||
Cash and cash equivalents |
$ |
515,119 |
$ |
477,239 |
|
Other current assets |
1,010,764 |
1,005,676 |
|||
Total current assets |
1,525,883 |
1,482,915 |
|||
Property, plant and equipment |
2,628,376 |
2,972,084 |
|||
Less accumulated depreciation and amortization |
1,388,790 |
1,615,015 |
|||
Net property, plant and equipment |
1,239,586 |
1,357,069 |
|||
Other assets and intangibles |
689,063 |
744,813 |
|||
Total assets |
$ |
3,454,532 |
$ |
3,584,797 |
|
LIABILITIES AND EQUITY |
|||||
Current portion of long-term debt |
$ |
377,521 |
$ |
24,554 |
|
Other current liabilities |
438,393 |
411,809 |
|||
Total current liabilities |
815,914 |
436,363 |
|||
Long-term debt |
685,845 |
1,054,310 |
|||
Other noncurrent liabilities |
221,247 |
222,160 |
|||
Deferred income taxes |
106,436 |
129,188 |
|||
Albemarle Corporation shareholders' equity |
1,502,981 |
1,627,361 |
|||
Noncontrolling interests |
122,109 |
115,415 |
|||
Total liabilities and equity |
$ |
3,454,532 |
$ |
3,584,797 |
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, |
|||||
2014 |
2013 |
||||
Cash and cash equivalents at beginning of year |
$ |
477,239 |
$ |
477,696 |
|
Cash and cash equivalents at end of period |
$ |
515,119 |
$ |
314,659 |
|
Sources of cash and cash equivalents: |
|||||
Net income |
$ |
93,614 |
$ |
180,644 |
|
Proceeds from borrowings of long-term debt |
— |
117,000 |
|||
Proceeds from other borrowings, net |
— |
266,248 |
|||
Proceeds from exercise of stock options |
2,355 |
3,917 |
|||
Working capital changes |
63,235 |
— |
|||
Uses of cash and cash equivalents: |
|||||
Working capital changes |
— |
(53,018) |
|||
Capital expenditures |
(46,670) |
(103,168) |
|||
Repurchases of common stock |
(150,000) |
(582,298) |
|||
Repayments of long-term debt |
(3,016) |
(6,380) |
|||
Repayments of other borrowings, net |
(13,083) |
— |
|||
Dividends paid to shareholders |
(41,316) |
(39,049) |
|||
Pension and postretirement contributions |
(4,717) |
(4,246) |
|||
Non-cash and other items: |
|||||
Depreciation and amortization |
52,714 |
51,817 |
|||
Write-offs associated with restructuring and other |
6,333 |
— |
|||
Impairment of assets of discontinued operations |
80,711 |
— |
|||
Pension and postretirement expense |
17,917 |
3,152 |
|||
Equity in net income of unconsolidated investments |
(19,550) |
(19,970) |
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, |
||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||
Net sales: |
|||||||||||||
Performance Chemicals |
$ |
334,187 |
$ |
343,024 |
$ |
684,444 |
$ |
694,048 |
|||||
Catalyst Solutions |
270,534 |
233,818 |
520,120 |
469,391 |
|||||||||
Total net sales |
$ |
604,721 |
$ |
576,842 |
$ |
1,204,564 |
$ |
1,163,439 |
|||||
Segment operating profit: |
|||||||||||||
Performance Chemicals |
$ |
77,265 |
$ |
88,694 |
$ |
157,741 |
$ |
174,159 |
|||||
Catalyst Solutions |
59,918 |
36,271 |
109,130 |
78,410 |
|||||||||
Total segment operating profit |
137,183 |
124,965 |
266,871 |
252,569 |
|||||||||
Equity in net income of unconsolidated investments: |
|||||||||||||
Performance Chemicals |
2,660 |
2,328 |
5,577 |
4,636 |
|||||||||
Catalyst Solutions |
7,989 |
7,381 |
13,973 |
15,334 |
|||||||||
Total equity in net income of unconsolidated investments |
10,649 |
9,709 |
19,550 |
19,970 |
|||||||||
Net income attributable to noncontrolling interests: |
|||||||||||||
Performance Chemicals |
(6,932) |
(8,389) |
(14,584) |
(13,918) |
|||||||||
Total net income attributable to noncontrolling interests |
(6,932) |
(8,389) |
(14,584) |
(13,918) |
|||||||||
Segment income: |
|||||||||||||
Performance Chemicals |
72,993 |
82,633 |
148,734 |
164,877 |
|||||||||
Catalyst Solutions |
67,907 |
43,652 |
123,103 |
93,744 |
|||||||||
Total segment income |
140,900 |
126,285 |
271,837 |
258,621 |
|||||||||
Corporate & other(a) |
(18,768) |
(16,585) |
(53,533) |
(31,806) |
|||||||||
Restructuring and other charges, net(b) |
(8,175) |
— |
(25,175) |
— |
|||||||||
Interest and financing expenses |
(8,733) |
(7,608) |
(17,506) |
(12,839) |
|||||||||
Other (expenses) income, net |
(979) |
(1,585) |
164 |
(5,779) |
|||||||||
Income tax expense |
(21,773) |
(20,396) |
(34,963) |
(45,934) |
|||||||||
(Loss) income from discontinued operations (net of tax)(c) |
(60,025) |
2,628 |
(61,794) |
4,463 |
|||||||||
Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
See accompanying notes to the condensed consolidated financial information.
Notes to the Condensed Consolidated Financial Information
(a) Non-operating pension and OPEB items, consisting of mark-to-market (MTM) actuarial gains/losses as well as interest cost and expected return on assets, are included in Corporate & other as follows:
- For the three months ended June 30, 2014 and 2013, net charges (benefits) amounting to
$(1.4) million ($0.9 million after income taxes, or$0.01 per share) and$(1.5) million ($0.9 million after income taxes, or$0.01 per share), respectively. There were no MTM actuarial gains/losses recorded during the three months endedJune 30, 2014 or 2013. - For the six months ended June 30, 2014 and 2013, net charges (benefits) amounting to
$12.7 million ($8.1 million after income taxes, or$0.10 per share) and$(3.6) million ($2.2 million after income taxes, or$0.03 per share), respectively. The MTM actuarial loss in 2014 was$15.4 million ($9.8 million after income taxes, or$0.12 per share) and resulted from a curtailment related to one of our U.S. defined benefit pension plans and our supplemental executive retirement plan which required a remeasurement of the related assets and obligations during the first quarter. The curtailment was in connection with our workforce reduction plan initiated in the fourth quarter of 2013. There were no MTM actuarial gains/losses recorded during the six months endedJune 30, 2013 .
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 are as follows (in millions):
Three Months Ended |
Six Months Ended |
||||||||||
June 30, |
June 30, |
||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||
Cost of goods sold: |
|||||||||||
MTM actuarial loss |
$ |
— |
$ |
— |
$ |
2.9 |
$ |
— |
|||
Interest cost and expected return on assets, net |
(0.5) |
(0.8) |
(1.0) |
(1.5) |
|||||||
Total |
$ |
(0.5) |
$ |
(0.8) |
$ |
1.9 |
$ |
(1.5) |
|||
Selling, general and administrative expenses: |
|||||||||||
MTM actuarial loss |
$ |
— |
$ |
— |
$ |
12.5 |
$ |
— |
|||
Interest cost and expected return on assets, net |
(0.9) |
(0.7) |
(1.7) |
(2.1) |
|||||||
Total |
$ |
(0.9) |
$ |
(0.7) |
$ |
10.8 |
$ |
(2.1) |
(b) Restructuring and other special items consisted of the following:
Three months ended
- Certain significant acquisition-related costs of
$4.9 million ($3.1 million after income taxes, or$0.04 per share). - Charges of
$3.3 million ($2.1 million after income taxes, or$0.03 per share) related to the write-off of certain multi-product facility project costs that we do not expect to recover in future periods.
Six months ended
- Net charges amounting to
$17.0 million ($11.1 million after income taxes, or$0.14 per share) in connection with a reduction of aluminum alkyls high cost supply capacity. - Certain significant acquisition-related costs of
$4.9 million ($3.1 million after income taxes, or$0.04 per share). - Charges of
$3.3 million ($2.1 million after income taxes, or$0.03 per share) related to the write-off of certain multi-product facility project costs that we do not expect to recover in future periods.
(c) On April 15, 2014, the Company signed a definitive agreement to sell its antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc. for an undisclosed amount of cash. In the second quarter of 2014, the Company began accounting for these assets as held for sale, and as such 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. (Loss) income from discontinued operations (net of tax) in the consolidated statements of income for the second quarter of 2014 includes a pre-tax charge of $80.7 million ($60.3 million after income taxes, or $0.76 per share) related to the expected loss on the anticipated sale of the assets. The expected loss represents the difference between the carrying value of the related assets and their estimated fair value, based on the estimated sales price as outlined in the agreement less estimated costs to sell.
(d) Totals may not add due to rounding.
Additional Information
It should be noted that Adjusted net income attributable to
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 attached for a supplemental reconciliation of our Segment operating profit and Segment income amounts to GAAP Operating profit and GAAP Net income attributable to
ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)
Our segment information includes measures we refer to as Segment operating profit, Segment income, EBITDA and Adjusted EBITDA, which are financial measures that are not required by, or presented in accordance with, GAAP. The Company has reported Segment operating profit, Segment income, EBITDA and Adjusted EBITDA because management believes that these financial measures provide transparency to investors and enable period-to-period comparability of financial performance. Segment operating profit, Segment income, EBITDA and Adjusted EBITDA should not be considered as alternatives to Operating profit or Net income attributable to
See below for a reconciliation of Segment operating profit and Segment income, the non-GAAP financial measures, to Operating profit and Net income attributable to
Three Months Ended |
Six Months Ended |
||||||||||
June 30, |
June 30, |
||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||
Total segment operating profit |
$ |
137,183 |
$ |
124,965 |
$ |
266,871 |
$ |
252,569 |
|||
Corporate & other |
(18,768) |
(16,585) |
(53,533) |
(31,806) |
|||||||
Restructuring and other charges, net |
(8,175) |
— |
(25,175) |
— |
|||||||
GAAP Operating profit |
$ |
110,240 |
$ |
108,380 |
$ |
188,163 |
$ |
220,763 |
|||
Total segment income |
$ |
140,900 |
$ |
126,285 |
$ |
271,837 |
$ |
258,621 |
|||
Corporate & other |
(18,768) |
(16,585) |
(53,533) |
(31,806) |
|||||||
Restructuring and other charges, net |
(8,175) |
— |
(25,175) |
— |
|||||||
Interest and financing expenses |
(8,733) |
(7,608) |
(17,506) |
(12,839) |
|||||||
Other (expenses) income, net |
(979) |
(1,585) |
164 |
(5,779) |
|||||||
Income tax expense |
(21,773) |
(20,396) |
(34,963) |
(45,934) |
|||||||
(Loss) income from discontinued operations |
(60,025) |
2,628 |
(61,794) |
4,463 |
|||||||
GAAP Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
See below for a reconciliation of Adjusted net income attributable to
Three Months Ended |
Six Months Ended |
||||||||||||||
June 30, |
June 30, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
|||||||
Add back: |
|||||||||||||||
Non-operating pension and OPEB items (net of tax) |
(855) |
(947) |
8,089 |
(2,244) |
|||||||||||
Special items (net of tax) |
5,189 |
— |
16,334 |
— |
|||||||||||
Loss (income) from discontinued operations (net of tax) |
60,025 |
(2,628) |
61,794 |
(4,463) |
|||||||||||
Adjusted net income attributable to Albemarle Corporation |
$ |
86,806 |
$ |
79,164 |
$ |
165,247 |
$ |
160,019 |
|||||||
Net income attributable to Albemarle Corporation |
$ |
22,447 |
$ |
82,739 |
$ |
79,030 |
$ |
166,726 |
|||||||
Add back: |
|||||||||||||||
Interest and financing expenses |
8,733 |
7,608 |
17,506 |
12,839 |
|||||||||||
Income tax expense (from continuing and discontinued operations) |
1,624 |
21,450 |
14,070 |
47,642 |
|||||||||||
Depreciation and amortization |
24,905 |
26,573 |
52,714 |
51,817 |
|||||||||||
EBITDA |
57,709 |
138,370 |
163,320 |
279,024 |
|||||||||||
Non-operating pension and OPEB items |
(1,370) |
(1,515) |
12,701 |
(3,584) |
|||||||||||
Special items |
8,175 |
— |
25,175 |
— |
|||||||||||
Loss (income) from discontinued operations |
80,174 |
(3,682) |
82,687 |
(6,171) |
|||||||||||
Less depreciation and amortization from discontinued operations |
— |
(3,012) |
(3,165) |
(5,990) |
|||||||||||
Adjusted EBITDA |
$ |
144,688 |
$ |
130,161 |
$ |
280,718 |
$ |
263,279 |
|||||||
Net sales |
$ |
604,721 |
$ |
576,842 |
$ |
1,204,564 |
$ |
1,163,439 |
|||||||
EBITDA Margin |
9.5 |
% |
24.0 |
% |
13.6 |
% |
24.0 |
% |
|||||||
Adjusted EBITDA Margin |
23.9 |
% |
22.6 |
% |
23.3 |
% |
22.6 |
% |
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SOURCE
Lorin Crenshaw, 225.388.7322