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) January 28, 2008

 

 

ALBEMARLE CORPORATION

(Exact name of Registrant as specified in charter)

 

 

 

Virginia   1-12658   54-1692118

(State or other jurisdiction

of incorporation)

  (Commission file number)  

(IRS employer

identification no.)

 

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

Registrant’s telephone number, including area code

(804) 788-6000

Not applicable

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

 

 

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

 

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

 

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

 

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

 

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

 

 

 


Section 2—Financial Information

 

Item 2.02. Results of Operations and Financial Condition.

On January 28, 2008, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the fourth quarter and year ended December 31, 2007. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on January 29, 2008, the Company will hold a teleconference for analysts and media to discuss results for the fourth quarter and year ended December 31, 2007. 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 excluding the charge that relates to the closure of the Dayton fine chemistry facility and net income excluding the charge related to the divestiture of the Thann, France facility. Net income excluding the Dayton charge and net income excluding the Thann charge are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). They are presented to exclude the impact of certain non-recurring items on the Company’s results. The Company has reported net income excluding the Dayton charge and net income excluding the Thann charge because management believes that these financial measures are more reflective of the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Neither net income excluding the Dayton charge nor net income excluding the Thann charge should 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 Dayton charge and net income excluding the Thann charge, non-GAAP financial measures, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP.

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

Section 9—Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits.

 

  (c) Exhibits.

 

99.1

   Press release, dated January 28, 2008, 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: January 28, 2008

 

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 January 28, 2008, issued by the Company.
Press Release

Exhibit 99.1

 

LOGO       Contact:   
      Sandra Rodriguez    225.388.7654
      Sherry Knapp    804.788.6107

Albemarle Reports Fourth Quarter and Full Year 2007 Results

Full year and fourth quarter highlights:

 

 

Record annual net income of $230 million

 

 

Record annual operating profit of $310 million

 

 

Record annual Catalyst sales and segment income of $894 million and $155 million, up 6.6% and 25.2%, respectively

 

 

Fourth quarter fully diluted earnings per share (EPS) of $0.60/share

 

 

Fourth quarter net sales increased 2.5% year over year and 2.6% sequentially

 

 

Fourth quarter operating profit up 0.9% year over year

 

     Three Months Ended
December 31,
  

Year Ended

December 31,

In thousands, except per share amounts

   2007    2006    2007    2006

Net Sales

   $ 599,156    $ 584,537    $ 2,336,187    $ 2,368,506

Operating Profit

   $ 77,500    $ 76,841    $ 309,887    $ 177,484

Net Income

   $ 58,620    $ 62,977    $ 229,690    $ 142,969

Diluted EPS

   $ 0.60    $ 0.65    $ 2.36    $ 1.47

RICHMOND, Va.,—January 28—Albemarle Corporation (NYSE: ALB) reported fourth quarter 2007 net income of $58.6 million, or 60 cents per share, down from $63.0 million, or 65 cents per share, for the fourth quarter of 2006. This decline was principally due to tax benefits recorded in 2006 for changes in foreign statutory tax rates. Operating profit increased to $77.5 million as record performance in the Company’s Catalysts business segment and corporate cost reductions were partially offset by declines in the Polymer Additives and Fine Chemicals business segments. The Company reported net sales in the fourth quarter of 2007 totaling $599 million compared to fourth quarter 2006 net sales of $585 million.

Net income for 2007 was $229.7 million, or $2.36 per share, up 61 percent from $143.0 million, or $1.47 per share, for 2006. Excluding the second quarter charge related to the closure of our Dayton fine chemistry facility, net income for 2007 was $232.9 million, or $2.40 per share. Net income for 2006, excluding the third quarter charge related to the divestiture of the Thann, France facility, was $201.4 million, or $2.07 per share. Net sales for 2007 were $2.34 billion compared to $2.37 billion for 2006.

Commenting on results, Mark C. Rohr, President and CEO, stated, “We ended 2007 with solid results in a tough economic environment. Achieving record annual earnings, 16 percent above 2006 excluding the Thann and Dayton charges, demonstrates the value of our strategy to drive earnings growth and value for our shareholders. All three business segments executed well in the face of raw material inflation and soft demand in some of our consumer-related products. Our diverse portfolio, geographic balance, and commitment to operational excellence position us to achieve solid earnings growth in 2008.”

 

1


Quarterly Segment Results

Fine Chemicals net sales for the fourth quarter of 2007 were $131.1 million, a 20 percent decrease versus the fourth quarter of 2006. This decline is due primarily to reduced revenue from clear brines volumes and the absence of TAMIFLU® intermediates sales that positively impacted fourth quarter 2006 revenue. Segment income for the fourth quarter of 2007 decreased 22 percent versus the fourth quarter of 2006 to $17.7 million due to reduced volume and higher costs in Performance Chemicals partially offset by improved pricing and costs in Fine Chemistry Services. Fine Chemicals full year segment income of $86.9 million improved 40 percent over 2006.

Polymer Additives recorded net sales for fourth quarter 2007 of $233.6 million, a 2 percent increase versus the fourth quarter of 2006. Net sales increased in our stabilizers and curatives portfolio due primarily to improved pricing. Flame retardants net sales declined year over year primarily due to reduced volumes in brominated flame retardants, partially offset by improvements in mineral flame retardants sales, pricing and product mix. Polymer Additives segment income for the fourth quarter of 2007 declined 21 percent from the fourth quarter of 2006 to $30.3 million due primarily to lower brominated flame retardant sales volumes and higher raw material costs, partially offset by improved product pricing and mix.

Catalysts recorded net sales for the fourth quarter of 2007 of $234.6 million, an increase of 22 percent versus fourth quarter 2006, due primarily to improved pricing in FCC and Polyolefin Catalysts and higher volumes in HPC Catalysts. Catalysts segment income for the fourth quarter of 2007 increased 37 percent versus the fourth quarter of 2006 to $41.7 million, a quarterly record. The Catalysts segment had record annual sales and segment income for 2007.

Cash Flow

In 2007, our cash and cash flow from operations funded capital expenditures for plant machinery and equipment of $99 million, stock repurchases of $101 million, dividends to shareholders of $40 million, and net repayments of long-term debt of $26 million. During the quarter, interest and financing expenses were $9.5 million versus fourth quarter 2006 expenses of $10.5 million.

Taxes

Our fourth quarter 2007 effective income tax rate was 17.1 percent, and benefited from a favorable mix of earnings from foreign operations. Our income tax expense for the fourth quarter of 2006 included benefits from changes in foreign statutory tax rates. The full year 2007 effective income tax rate was 19.8 percent.

 

2


Outlook

The first weeks of 2008 have been solid for our business, and we have not experienced any material weakness that might be attributed to the risk in the U.S. and global economic outlooks. Our business serves many diverse end markets and we expect continued Asian and Middle East growth to compensate for slower market growth in the U.S. We are continuing to increase our presence in China with expansions underway that will help us grow flame retardants, antioxidants and fine chemicals in 2008. Absent a major global recession, we expect oil demand to remain strong and we have the catalyst production capacity on line to meet this growth in demand for 2008 and 2009. While our general business conditions are not indicating an economic slowdown, we continue to see dramatic inflation in raw materials and energy. Passing these costs through remains a challenge and area of focus for Albemarle.

Earnings Call

The Company’s performance for the fourth quarter ended December 31, 2007 will be discussed on a conference call at 9:00 AM Eastern Standard Time on January 29, 2008, 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.

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, 2006 and our 2007 Quarterly Reports on Form 10-Q 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

Consolidated Statements of Income

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

 

     Fourth Quarter Ended
December 31,
    Year Ended
December 31,
 
     2007     2006     2007     2006  

Net sales

   $ 599,156     $ 584,537     $ 2,336,187     $ 2,368,506  

Cost of goods sold

     442,798       435,788       1,713,696       1,817,692  
                                

Gross profit

     156,358       148,749       622,491       550,814  

Selling, general and administrative expenses

     62,224       59,801       244,969       237,856  

Research and development expenses

     16,634       12,107       62,691       46,299  

Dayton facility closure charge

     —         —         4,944 (a)     —    

Loss on Thann facility divestiture

     —         —         —         89,175 (b)
                                

Operating profit

     77,500       76,841       309,887       177,484  

Interest and financing expenses

     (9,505 )     (10,549 )     (38,332 )     (43,964 )

Other income (expenses), net

     2,853       236       6,264       (134 )
                                

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

     70,848       66,528       277,819       133,386  

Income tax expense

     (12,124 )     (3,144 )     (55,078 )     (2,192 )
                                

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

     58,724       63,384       222,741       131,194  

Minority interests in income of consolidated subsidiaries (net of tax)

     (5,322 )     (4,463 )     (17,632 )     (13,258 )

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

     5,218       4,056       24,581       25,033  
                                
Net income    $ 58,620     $ 62,977     $ 229,690     $ 142,969  
                                

Basic earnings per share

   $ 0.62     $ 0.66     $ 2.41     $ 1.51  

Diluted earnings per share

   $ 0.60     $ 0.65     $ 2.36     $ 1.47  

Weighted-average common shares outstanding—Basic

     95,209       94,897       95,254       94,624  

Weighted-average common shares outstanding—Diluted

     96,998       97,517       97,216       97,136  
                                

See accompanying notes to the condensed consolidated financial information.

 

4


Albemarle Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands of Dollars) (Unaudited)

 

     December 31,
2007
   December 31,
2006

ASSETS

     

Cash and cash equivalents

   $ 130,551    $ 149,499

Other current assets

     924,310      811,355
             

Total current assets

     1,054,861      960,854
             

Property, plant and equipment

     2,314,509      2,169,433

Less accumulated depreciation and amortization

     1,275,966      1,188,858
             

Net property, plant and equipment

     1,038,543      980,575

Other assets and intangibles

     744,995      588,939
             

Total assets

   $ 2,838,399    $ 2,530,368
             

LIABILITIES & SHAREHOLDERS’ EQUITY

     

Current portion of long-term debt

   $ 16,627    $ 50,731

Other current liabilities

     386,290      432,218
             

Total current liabilities

     402,917      482,949
             

Long-term debt

     707,311      681,859

Other noncurrent liabilities

     341,354      236,594

Deferred income taxes

     108,512      100,868

Shareholders’ equity

     1,278,305      1,028,098
             

Total liabilities & shareholders’ equity

   $ 2,838,399    $ 2,530,368
             

See accompanying notes to the condensed consolidated financial information.

 

5


Albemarle Corporation and Subsidiaries

Selected Cash Flows Data

(In Thousands of Dollars) (Unaudited)

 

     Year Ended
December 31,
 
     2007     2006  

Cash and cash equivalents at beginning of year

   $ 149,499     $ 58,570  

Cash and cash equivalents at end of period

   $ 130,551     $ 149,499  
Sources of cash and cash equivalents:     

Net income

     229,690       142,969  

Proceeds from borrowings

     107,949       134,287  

Proceeds from exercise of stock options

     21,949       21,395  
Uses of cash and cash equivalents:     

Capital expenditures

     (98,740 )     (99,847 )

Purchases of common stock

     (101,209 )     (31,837 )

Repayments of long-term debt

     (133,506 )     (239,257 )

Acquisitions, net of cash acquired in 2007

     (17,929 )(c)     (25,970 )

Dividends paid to shareholders

     (40,031 )     (31,582 )

Dividends paid to minority interests

     (14,328 )     (6,796 )
Non-cash items:     

Dayton facility closure charge

     4,944       —    

Loss on Thann facility divestiture

     —         89,175  

Depreciation and amortization

     106,855       112,950  

See accompanying notes to the condensed consolidated financial information.

 

6


Albemarle Corporation and Subsidiaries

Consolidated Summary of Segment Results

(In Thousands of Dollars) (Unaudited)

 

     Fourth Quarter Ended
December 31,
    Year Ended
December 31,
 
     2007     2006     2007     2006  
Segment net sales:         

Polymer Additives

   $ 233,550     $ 229,275     $ 904,519     $ 920,451  

Catalysts

     234,555       192,201       894,229       838,968  

Fine Chemicals

     131,051       163,061       537,439       609,087  
                                

Total segment net sales

   $ 599,156     $ 584,537     $ 2,336,187     $ 2,368,506  
                                
Segment operating profit (loss):         

Polymer Additives

   $ 31,624     $ 39,161     $ 134,365     $ 151,261  

Catalysts

     37,851       27,738       135,341       103,415  

Fine Chemicals (a)

     20,608       24,937       95,880       68,569  

Corporate & Other

     (12,583 )     (14,995 )     (50,755 )     (56,586 )
                                

Total segment operating profit

     77,500       76,841       314,831       266,659  
                                
Minority interests in income of consolidated subsidiaries:         

Polymer Additives

     (2,650 )     (2,238 )     (9,060 )     (8,944 )

Catalysts

     —         —         —         —    

Fine Chemicals

     (2,946 )     (2,416 )     (9,013 )     (6,388 )

Corporate & Other

     274       191       441       2,074  
                                

Total minority interests in income of consolidated subsidiaries

     (5,322 )     (4,463 )     (17,632 )     (13,258 )
                                
Equity in net income of unconsolidated investments:         

Polymer Additives

     1,352       1,350       5,389       5,012  

Catalysts

     3,876       2,664       19,231       20,074  

Fine Chemicals

     —         —         —         —    

Corporate & Other

     (10 )     42       (39 )     (53 )
                                

Total equity in net income of unconsolidated investments

     5,218       4,056       24,581       25,033  
                                
Segment income (loss):         

Polymer Additives

     30,326       38,273       130,694       147,329  

Catalysts

     41,727       30,402       154,572       123,489  

Fine Chemicals (a)

     17,662       22,521       86,867       62,181  

Corporate & Other

     (12,319 )     (14,762 )     (50,353 )     (54,565 )
                                

Total segment income

     77,396       76,434       321,780       278,434  

Dayton facility closure charge

     —         —         (4,944 )     —    

Loss on Thann facility divestiture

     —         —         —         (89,175 )

Interest and financing expenses

     (9,505 )     (10,549 )     (38,332 )     (43,964 )

Other income (expenses), net

     2,853       236       6,264       (134 )

Income tax expense

     (12,124 )     (3,144 )     (55,078 )     (2,192 )
                                

Net income

   $ 58,620     $ 62,977     $ 229,690     $ 142,969  
                                

 

(a)

Excludes the Thann facility divestiture charge and the Dayton facility closure charge.

See accompanying notes to the condensed consolidated financial information.

 

7


Notes to the Condensed Consolidated Financial Information

 

(a) The year ended December 31, 2007, includes a charge amounting to $4.9 million ($3.1 million after income taxes, or 3 cents per share) that relates to the closure of our Dayton, Ohio fine chemistry facility.

 

(b) The year ended December 31, 2006, includes a charge amounting to $89.2 million ($58.4 million after income taxes, or 60 cents per share) that relates to the divestiture of the Thann, France facility effective August 31, 2006.

 

(c) On July 31, 2007, we acquired controlling interests in our two antioxidant joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Co., Ltd. and Shanghai Jinhai Albemarle Fine Chemicals Co., Ltd. Our ownership interests increased from 25 percent to 75 percent.

Additional Information

It should be noted that net income excluding the Dayton charge and net income excluding the Thann charge are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. They are presented here to exclude the impact of certain non-recurring items on our results. We believe these measures are more reflective of our operations, provide transparency to investors and enable period-to-period comparability of financial performance.

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.”

 

8