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) October 18, 2006

 


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 1 3e-4(c) under the Exchange Act (17 CFR 240.1 3e-4(c))

 



Section 2— Financial Information

Item 2.02. Results of Operations and Financial Condition.

On October 18, 2006, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the third quarter and nine months ended September 30, 2006. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on October 19, 2006, the Company will hold a teleconference for analysts and media to discuss results for the third quarter ended September 30, 2006. 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 the charge that relates to the divestiture of the Thann, France facility and certain other special items. Net income excluding the Thann charge and other 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 the Thann charge and other special items because management believes that this financial measure is more reflective of the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Net income excluding the Thann charge and other 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 the Thann charge and other special items, a non-GAAP financial measure, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP.

The press release attached as Exhibit 99.1 also includes net debt, which is a financial measure that is not required by, or presented in accordance with, GAAP. The Company has presented net debt because management believes that net debt is helpful in analyzing leverage and uses it as a performance measure. Net debt should not be considered as an alternative to total debt determined in accordance with GAAP. The Company has included in the press release a reconciliation of net debt, a non-GAAP financial measure, to total debt, 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 Statements and Exhibits.

 

  (c) Exhibits.

 

  99.1 Press release, dated October 18, 2006, issued by the Company.


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: October 18, 2006

 

ALBEMARLE CORPORATION
By:  

/s/ Luther C. Kissam, IV

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


EXHIBIT INDEX

 

Exhibit
Number

  

Exhibit

99.1    Press release, dated October 18, 2006, issued by the Company.
Press Release

Exhibit 99.1

 

LOGO    Contact:   
   Nicole Daniel    804.788.6096
   Sherry Knapp    804.788.6107

Albemarle Announces Third-Quarter 2006 Results

 

Net sales for the quarter were a record $607.8 million, up 20 percent over the same period last year.

 

Quarterly net income of $2.3 million, or 5 cents per-share, includes $1.20 per-share charge related to the disposition of the Thann facility.

 

Excluding the Thann charge, quarterly net income was a record $60.7 million, or $1.25 per-share, up 131 percent over the same period last year.

RICHMOND, Va., - October 18 — Albemarle Corporation (NYSE: ALB) reported record third-quarter 2006 net income, excluding the charge that relates to the divestiture of the Thann, France facility, of $60.7 million, or $1.25 per-share, up from $26.3 million, or 55 cents per-share, for third-quarter 2005 due to strong performance in each of the Company’s three business segments. Including the $89.2 million ($58.4 million after income taxes, or $1.20 per-share) Thann charge, net income for third-quarter 2006 was $2.3 million, or 5 cents per-share. The Company reported record quarterly net sales in the third-quarter of 2006 totaling $607.8 million, up $101.2 million, a 20 percent increase from third-quarter 2005.

Net income, excluding the Thann charge and other special items, for the nine months of 2006 was $138.4 million, or $2.85 per-share, up from $80.5 million, or $1.69 per-share, for the nine months of 2005 due to strong performance in each of the Company’s three business segments. Including the Thann charge and other special items, net income for the nine months of 2006 was $80.0 million, or $1.65 per-share, down from $82.7 million, or $1.74 per-share, for the nine months of 2005. Net sales for the nine months of 2006 were $1.784 billion, up $265 million, a 17 percent increase from the nine months of 2005.

Commenting on results, Mark C. Rohr, President and CEO of Albemarle Corporation stated, “Our team executed flawlessly this quarter. All three of our segments saw continued revenue growth and improved profitability, with both Catalysts and Polymer Additives achieving segment income margins above our 15% corporate goal. Our strategic focus on improvements to our Fine Chemicals segment allowed us to complete the disposition of our Thann, France facility and acquire additional cGMP capacity through our DSM fine chemicals acquisition. Both of these were critical steps to improve the profitability and sustainability of this segment. Overall, demand and pricing for our products remains strong. Our fourth quarter has begun on a strong note and we look forward to another successful year in 2007.”

Quarterly Segment Results

The Polymer Additives segment recorded net sales for third-quarter 2006 of $240.7 million, up $45.4 million, or 23 percent, versus third-quarter 2005. Our mineral flame retardant and brominated flame retardant portfolios saw both volume and pricing improvements. Net sales improved in our stabilizers and curatives

 

1


business on flat volumes. Polymer Additives segment income for third-quarter 2006 amounted to $38.6 million, up $16.8 million, or 77 percent, versus third-quarter 2005, due mainly to higher pricing, partially offset by increased raw material and manufacturing costs.

The Catalysts segment recorded net sales for third-quarter 2006 of $217.4 million, up $43.9 million, or 25 percent, versus third-quarter 2005, due mainly to higher pricing and volumes in refinery catalysts (both FCC and HPC catalysts) and higher pricing in polyolefin catalysts. Catalysts segment income for third-quarter 2006 amounted to $38.2 million, up $23.5 million, or 159 percent, from third-quarter 2005, due to higher pricing and volumes partially offset by increased raw material cost.

Fine Chemicals segment net sales for third-quarter 2006 were $149.7 million, up $12.0 million, or 9 percent, versus third-quarter 2005. Excluding the Thann charge, Fine Chemicals segment income for third-quarter 2006 was $16.2 million, up $4.1 million, or 34 percent, from third-quarter 2005, due mainly to improved pricing partially offset by reduced volumes and increased raw material and manufacturing costs. Including the Thann divestiture charge of $89.2 million, the Fine Chemicals segment loss for third-quarter 2006 was $73.0 million.

During the quarter, interest and financing expenses were $10.8 million versus third-quarter 2005 of $10.9 million. Our net debt decreased $5.4 million from June 30, 2006 and $73.7 million from December 31, 2005 due mainly to strong cash flows from operations partially offset by cash outlays related to the Thann facility divestiture and the acquisition of the DSM South Haven, Michigan plant. Our third-quarter 2006 effective income tax rate on a reported basis, excluding the tax benefit related to the Thann divestiture charge, was 10.8 percent.

Selected data related to net income, special items and related per-share amounts for the third-quarters and nine months ended September 30, 2006 and 2005 are shown in the Additional Information section below, as well as a reconciliation of net income excluding special items and net debt.

Earnings Call

The Company’s performance for the third quarter ended September 30, 2006 will be discussed on a conference call at 10:00 AM Eastern Daylight Time on October 19, 2006, 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.

 

2


Forward-Looking Statements

Some of the information presented in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations as reflected are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially. Factors that could cause actual results to differ from expectations include, without limitation: the inability to pass through increases in costs and expenses for raw materials and energy; competition from other manufacturers; changes in demand for our products; the gain or loss of significant customers; fluctuations in foreign currencies; and increased government regulation of our operations or our products. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2005 and in our other public filings with the Securities and Exchange Commission. Readers are urged to review and consider carefully the disclosures we make in our filings with the Securities and Exchange Commission.

 

3


Albemarle Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(In Thousands of Dollars, Except Share and Per-Share Amounts) (Unaudited)

 

     Third Quarter Ended
September 30,
    Nine Months Ended
September 30,
 
     2006     2005 (a)     2006     2005 (a)  

Net sales

   $ 607,818     $ 506,605     $ 1,783,969     $ 1,519,324  

Cost of goods sold

     459,590       406,994       1,381,904       1,207,224  
                                

Gross profit

     148,228       99,611       402,065       312,100  

Selling, general and administrative expenses

     58,000       50,423       178,055       161,118  

Research and development expenses

     11,549       10,107       34,192       31,429  

Loss on Thann facility divestiture

     89,175 (b)     —         89,175 (b)     —    

Benefit plan curtailment gain and other special charges

     —         —         —         (4,868 )(c-d)
                                

Operating (loss) profit

     (10,496 )     39,081       100,643       124,421  

Interest and financing expenses

     (10,759 )     (10,882 )     (33,415 )     (31,270 )(e)

Other income (expenses), net

     1,007       534       (370 )     1,100  
                                

(Loss) income before income taxes, minority interests and equity in net income of unconsolidated investments

     (20,248 )     28,733       66,858       94,251  

Income tax benefit (expense)

     23,330       (4,502 )     952       (29,590 )
                                

Income before minority interests and equity in

net income of unconsolidated investments

     3,082       24,231       67,810       64,661  

Minority interests in income of consolidated subsidiaries

     (5,176 )     (2,063 )     (8,795 )     (4,575 )

Equity in net income of unconsolidated investments

     4,383       4,124       20,977       22,583  
                                

Net income

   $ 2,289     $ 26,292     $ 79,992     $ 82,669  
                                

Basic earnings per-share

   $ 0.05     $ 0.56     $ 1.69     $ 1.79  

Diluted earnings per-share

   $ 0.05     $ 0.55     $ 1.65     $ 1.74  

Weighted-average common shares outstanding - Basic

     47,377       46,607       47,266       46,242  

Weighted-average common shares outstanding - Diluted

     48,649       48,014       48,504       47,642  
                                

See accompanying notes to the condensed consolidated financial information.

 

4


Albemarle Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands of Dollars)

 

     September 30,
2006
  

December 31,

2005

     (Unaudited)     

ASSETS

     

Cash and cash equivalents

   $ 89,575    $ 58,570

Other current assets

     851,005      815,093
             

Total current assets

     940,580      873,663
             

Property, plant and equipment

     2,131,189      2,194,878

Less accumulated depreciation and amortization

     1,166,838      1,228,061
             

Net property, plant and equipment

     964,351      966,817

Other assets and intangibles

     716,102      706,763
             

Total assets

   $ 2,621,033    $ 2,547,243
             

LIABILITIES & SHAREHOLDERS’ EQUITY

     

Current liabilities

   $ 423,489    $ 421,917

Long-term debt

     733,248      775,889

Other noncurrent liabilities

     236,635      225,212

Deferred income taxes

     197,958      193,950

Shareholders’ equity

     1,029,703      930,275
             

Total liabilities & shareholders’ equity

   $ 2,621,033    $ 2,547,243
             

See accompanying notes to the condensed consolidated financial information.

 

5


Albemarle Corporation and Subsidiaries

Selected Cash Flows Data

(In Thousands of Dollars) (Unaudited)

 

     Nine months Ended
September 30,
 
     2006     2005  

Cash and cash equivalents at beginning of year

   $ 58,570     $ 46,390  

Cash and cash equivalents at end of period

   $ 89,575     $ 47,859  

Sources of cash and cash equivalents:

    

Net income

     79,992       82,669  

Loss on Thann facility divestiture

     89,175       —    

Depreciation and amortization

     86,015       86,197  

Proceeds from issuance of senior notes

     —         324,665  

Proceeds from issuance of common stock

     —         147,862  

Proceeds from borrowings

     133,810       147,639  

Proceeds from exercise of stock options

     13,694       2,893  

Proceeds from liquidation of equity method investment and sale of nonmarketable security

     —         1,058  

Uses of cash and cash equivalents:

    

Capital expenditures

     (73,103 )     (50,594 )

Purchases of common stock

     (14,694 )     —    

Distributions related to the Thann facility divestiture

     (13,800 )     —    

Investments in joint ventures and other corporate investments

     (168 )     (3,088 )

Acquisitions of assets/business

     (25,000 )(f)     (7,553 )

Repayments of long-term debt

     (184,181 )     (617,897 )

Dividends paid to shareholders

     (23,086 )     (18,992 )

Dividends paid to minority interest

     (3,600 )     (2,200 )

See accompanying notes to the condensed consolidated financial information.

 

6


Albemarle Corporation and Subsidiaries

Consolidated Summary of Segment Results

(In Thousands of Dollars) (Unaudited)

 

     Third Quarter Ended
September 30,
    Nine Months Ended
September 30,
 
     2006     2005 (a)     2006     2005 (a)  

Segment net sales:

        

Polymer Additives

   $ 240,746     $ 195,356     $ 691,176     $ 597,893  

Catalysts

     217,366       173,501       646,767       493,629  

Fine Chemicals

     149,706       137,748       446,026       427,802  
                                

Total segment net sales

   $ 607,818     $ 506,605     $ 1,783,969     $ 1,519,324  
                                

(Loss) on Thann facility divestiture and other special items (charges):

        

Polymer Additives

   $ —       $ —       $ —       $ 2,181 (c)

Catalysts

     —         —         —         560 (c)

Fine Chemicals

     (89,175 )(b)     —         (89,175 )(b)     2,240 (c)

Corporate & Other

     —         —         —         (113 )(c-d)
                                

Total (loss) on Thann facility divestiture and other special items (charges)

   $ (89,175 )   $ —       $ (89,175 )   $ 4,868  
                                

Segment operating (loss) profit:

        

Polymer Additives

   $ 40,736     $ 21,860     $ 112,100     $ 70,460  

Catalysts

     35,032       12,837       75,677       52,075  

Fine Chemicals

     (71,150 )     11,836       (45,543 )     34,377  

Corporate & Other

     (15,114 )     (7,452 )     (41,591 )     (32,491 )
                                

Total segment operating (loss) profit

   $ (10,496 )   $ 39,081     $ 100,643     $ 124,421  
                                

Minority interests in income of consolidated subsidiaries and Equity in net income of unconsolidated investments: (g)

        

Polymer Additives

   $ (2,140 )   $ (62 )   $ (3,044 )   $ 1,999  

Catalysts

     3,208       1,929       17,410       12,096  

Fine Chemicals

     (1,823 )     231       (3,972 )     4,090  

Corporate & Other

     (38 )     (37 )     1,788       (177 )
                                

Total minority interests in income of consolidated subsidiaries and equity in net income of unconsolidated investments

   $ (793 )   $ 2,061     $ 12,182     $ 18,008  
                                

Segment (loss) income:

        

Polymer Additives

   $ 38,596     $ 21,798     $ 109,056     $ 72,459  

Catalysts

     38,240       14,766       93,087       64,171  

Fine Chemicals

     (72,973 )     12,067       (49,515 )     38,467  

Corporate & Other

     (15,152 )     (7,489 )     (39,803 )     (32,668 )
                                

Total segment (loss) income

     (11,289 )     41,142 (g)     112,825       142,429 (g)

Interest and financing expenses

     (10,759 )     (10,882 )     (33,415 )     (31,270 )(e)

Other income (expenses), net

     1,007       534       (370 )     1,100  

Income tax benefit (expense)

     23,330       (4,502 )     952       (29,590 )
                                

Net income

   $ 2,289     $ 26,292     $ 79,992     $ 82,669  
                                

See accompanying notes to the condensed consolidated financial information.

 

7


Notes to the Condensed Consolidated Financial Information

(In Thousands of Dollars, Except Per-Share Amounts):

 

(a) Certain reclassifications have been made in the condensed consolidated statements of income and consolidated summary of segment results to conform to current presentation.

 

(b) The three and nine-month periods ended September 30, 2006 include a charge amounting to $89,175 ($58,401 after income taxes, or $1.20 per-share) that relates to the divestiture of the Thann, France facility to International Chemical Investors S.A. (ICIG) effective August 31, 2006. The charge is principally due to the write-off of net asset values and other exit costs. The total net after tax cash costs of the transaction are expected to be less than $10,000.

 

(c) The nine-months ended September 30, 2005 included a curtailment gain amounting to $5,603 ($3,569 after income taxes, or 7 cents per-share) that relates to a reduction in our accumulated postretirement benefit obligation (liability) associated with a change in coverage in our unfunded postretirement health care benefits plan for active employees’ future retiree medical premium payments.

 

(d) The nine-months ended September 30, 2005 included a provisional charge of $735 ($468 after income taxes, or 1 cent per-share) for the potential settlement of future legal claims with respect to certain future asbestos premises liability claims.

 

(e) Interest and financing expenses for the nine-months ended September 30, 2005 included the write-off of deferred financing expenses totaling $1,386 ($883 after income taxes, or 2 cents per-share).

 

(f) On September 30, 2006, we acquired the assets and fine chemistry services and pharmachemicals business associated with the South Haven, Michigan facility of DSM Pharmaceutical Products (DSM), a business group of Royal DSM NV for approximately $25,000 subject to final post-closing adjustments.

 

(g) Effective January 1, 2006, we revised the way we evaluate the performance of our segment results to reduce our segment income (loss) for the minority interests in income of consolidated subsidiaries. Segment income (loss) represents operating profit and equity in net income of unconsolidated investments and is reduced by minority interests in income of consolidated subsidiaries. Segment results for the third quarter and nine-months ended September 30, 2005 have been reclassified to conform to the new presentation.

 

     Third Quarter
Ended
September 30,
    Nine Months Ended
September 30,
 
     2006     2005     2006     2005  

Minority interests in income of consolidated subsidiaries:

        

Polymer Additives

   $ (3,333 )   $ (1,648 )   $ (6,706 )   $ (4,160 )

Catalysts

     —         —         —         —    

Fine Chemicals

     (1,823 )     (415 )     (3,972 )     (415 )

Corporate & Other

     (20 )     —         1,883       —    
                                

Total minority interests in income of consolidated subsidiaries

   $ (5,176 )   $ (2,063 )   $ (8,795 )   $ (4,575 )
                                

Equity in net income of unconsolidated investments:

        

Polymer Additives

   $ 1,193     $ 1,586     $ 3,662     $ 6,159  

Catalysts

     3,208       1,929       17,410       12,096  

Fine Chemicals

     —         646       —         4,505  

Corporate & Other

     (18 )     (37 )     (95 )     (177 )
                                

Total equity in net income of unconsolidated investments

   $ 4,383     $ 4,124     $ 20,977     $ 22,583  
                                

 

8


Additional Information

It should be noted that 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, or GAAP. It is presented here to exclude the impact of certain non-recurring items on our results. We believe this measure is more reflective of our operations, provides transparency to investors and enables period-to-period comparability of financial performance. 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 third quarter and nine months ended September 30, 2006 and 2005.

Net debt is a supplemental financial measure that is not required by, or presented in accordance with GAAP. We believe net debt is helpful in analyzing leverage and as a performance measure. We define net debt as total debt plus the portion of outstanding joint venture indebtedness guaranteed by us (or less the portion of outstanding joint venture indebtedness consolidated but not guaranteed by us), less cash and cash equivalents. Set forth below is a reconciliation of net debt, a non-GAAP financial measure, to total debt, the most directly comparable financial measure calculated and reported in accordance with GAAP, as of December 31, 2005 and for the second and third quarters ended June 30, 2006 and September 30, 2006, respectively.

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 Investor Information section of our website at www.albemarle.com, under “Non-GAAP Reconciliations” under “Investor Relations.”

 

9


ALBEMARLE CORPORATION AND SUBSIDIARIES

(In Thousands, Except Per-Share Amounts)

(Unaudited)

 

    

Third Quarter Ended

September 30, 2006

   

Third Quarter Ended

September 30, 2005

 
     As
Reported
    Special
Items
    Excluding
Special
Items
    As
Reported
   

Special

Items

   Excluding
Special
Items
 

Net sales

   $ 607,818     $ —       $ 607,818     $ 506,605     $ —      $ 506,605  

Cost of goods sold

     (459,590 )     —         (459,590 )     (406,994 )     —        (406,994 )

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

     (69,549 )     —         (69,549 )     (60,530 )     —        (60,530 )

Loss on Thann facility divestiture

     (89,175 )     89,175 (a)     —         —         —        —    

Benefit plan curtailment gain and other special charges

     —         —         —         —         —        —    
                                               

Operating (loss) profit

     (10,496 )     89,175       78,679       39,081       —        39,081  

Interest and financing expenses

     (10,759 )     —         (10,759 )     (10,882 )     —        (10,882 )

Other income, net

     1,007       —         1,007       534       —        534  
                                               

(Loss) income before income taxes, minority interests and equity in net income of unconsolidated investments

     (20,248 )     89,175       68,927       28,733       —        28,733  

Income tax benefit (expense)

     23,330       (30,774 )(a)     (7,444 )     (4,502 )     —        (4,502 )
                                               

Income before minority interests and equity in net income of unconsolidated investments

     3,082       58,401       61,483       24,231       —        24,231  

Minority interests in income of consolidated subsidiaries

     (5,176 )     —         (5,176 )     (2,063 )     —        (2,063 )

Equity in net income of unconsolidated investments

     4,383       —         4,383       4,124       —        4,124  
                                               

Net income

   $ 2,289     $ 58,401     $ 60,690     $ 26,292     $ —      $ 26,292  
                                               

Diluted earnings per-share

   $ 0.05     $ 1.20     $ 1.25     $ 0.55     $ —      $ 0.55  
                                               

Segment income (loss):

             

Polymer Additives

   $ 38,596     $ —       $ 38,596     $ 21,798     $ —      $ 21,798  

Catalysts

     38,240       —         38,240       14,766       —        14,766  

Fine Chemicals

     (72,973 )     89,175       16,202       12,067       —        12,067  

Corporate & Other

     (15,152 )     —         (15,152 )     (7,489 )     —        (7,489 )
                                               

Total

   $ (11,289 )   $ 89,175     $ 77,886     $ 41,142     $ —      $ 41,142  
                                               

 

10


ALBEMARLE CORPORATION AND SUBSIDIARIES

(In Thousands, Except Per-Share Amounts)

(Unaudited)

 

    

Nine Months Ended

September 30, 2006

   

Nine Months Ended

September 30, 2005

 
     As Reported     Special
Items
   

Excluding
Special

Items

   

As

Reported

    Special
Items
   

Excluding

Special

Items

 

Net sales

   $ 1,783,969     $ —       $ 1,783,969     $ 1,519,324     $ —       $ 1,519,324  

Cost of goods sold

     (1,381,904 )     —         (1,381,904 )     (1,207,224 )     —         (1,207,224 )

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

     (212,247 )     —         (212,247 )     (192,547 )     —         (192,547 )

Loss on Thann facility divestiture

     (89,175 )     89,175 (a)     —         —         —         —    

Benefit plan curtailment gain and other special charges

     —         —         —         4,868       (4,868 )(b)     —    
                                                

Operating profit

     100,643       89,175       189,818       124,421       (4,868 )     119,553  

Interest and financing expenses

     (33,415 )     —         (33,415 )     (31,270 )     1,386 (c)     (29,884 )

Other (expenses) income, net

     (370 )     —         (370 )     1,100       —         1,100  
                                                

Income before income taxes, minority interests and equity in net income of unconsolidated investments

     66,858       89,175       156,033       94,251       (3,482 )     90,769  

Income tax benefit (expense)

     952       (30,774 )(a)     (29,822 )     (29,590 )     1,264 (b-c)     (28,326 )
                                                

Income before minority interests and equity in net income of unconsolidated investments

     67,810       58,401       126,211       64,661       (2,218 )     62,443  

Minority interests in income of consolidated subsidiaries

     (8,795 )     —         (8,795 )     (4,575 )     —         (4,575 )

Equity in net income of unconsolidated investments

     20,977       —         20,977       22,583       —         22,583  
                                                

Net income

   $ 79,992     $ 58,401     $ 138,393     $ 82,669     $ (2,218 )   $ 80,451  
                                                

Diluted earnings per-share

   $ 1.65     $ 1.20     $ 2.85     $ 1.74     $ (0.05 )   $ 1.69  
                                                

Segment income (loss):

            

Polymer Additives

   $ 109,056     $ —       $ 109,056     $ 72,459     $ (2,181 )   $ 70,278  

Catalysts

     93,087       —         93,087       64,171       (560 )     63,611  

Fine Chemicals

     (49,515 )     89,175       39,660       38,467       (2,240 )     36,227  

Corporate & Other

     (39,803 )     —         (39,803 )     (32,668 )     113       (32,555 )
                                                

Total

   $ 112,825     $ 89,175     $ 202,000     $ 142,429     $ (4,868 )   $ 137,561  
                                                

(a) The three and nine-month periods ended September 30, 2006 include a charge amounting to $89,175 ($58,401 after income taxes, or $1.20 per-share) that relates to the divestiture of the Thann, France facility to International Chemical Investors S.A. (ICIG) effective August 31, 2006. The charge is principally due to the write-off of net asset values and other exit costs. The total net after tax cash costs of the transaction are expected to be less than $10,000.
(b) Special items for the nine-months ended September 30, 2005 included a curtailment gain amounting to $5,603 ($3,569 after income taxes, or 7 cents per-share) that relates to a reduction in our accumulated postretirement benefit obligation (liability) associated with a change in coverage in our unfunded postretirement health care benefits plan for active employees’ future retiree medical premium payments. The nine-months ended September 30, 2005 also included a provisional charge of $735 ($468 after income taxes, or 1 cent per-share) for the potential settlement of future legal claims with respect to certain future asbestos premises liability claims.
(c) Interest and financing expenses for the nine-months ended September 30, 2005 included the write-off of deferred financing expenses totaling $1,386 ($883 after income taxes, or 2 cents per-share).

 

11


ALBEMARLE CORPORATION AND SUBSIDIARIES

Net Debt Reconciliation

(In Thousands of Dollars)

(Unaudited)

 

     Third Quarter
Ended
September 30, 2006
   

Second Quarter

Ended

June 30, 2006

   

Year

Ended

December 31, 2005

 

Total debt

   $ 784,991     $ 799,835     $ 833,453  

JV debt consolidated by the Company but guaranteed by others

     (37,753 )     (37,773 )     (43,510 )

Less: Cash and cash equivalents

     (89,575 )     (98,995 )     (58,570 )
                        

Net Debt

   $ 657,663     $ 663,067     $ 731,373  
                        

 

12