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 27, 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 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 27, 2008, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the third quarter ended September 30, 2008. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on October 28, 2008, the Company will hold a teleconference for analysts and media to discuss results for the third quarter ended September 30, 2008. 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 special items that relate either to severance in conjunction with personnel reductions at the Company’s Richmond headquarters and Singapore sales office or the closure of the Dayton, Ohio fine chemistry facility. Net income excluding special items is a financial measure that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). It is presented to exclude the impact of certain non-recurring items on the Company’s results. The Company has reported net income excluding special items because management believes that this financial measures is more reflective of the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Net income excluding special items should not be considered as an alternative to net income determined in accordance with GAAP. The Company has included in the press release a reconciliation of net income excluding special items, a non-GAAP financial measure, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP.

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

Section 9 — Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits.

 

  (c) Exhibits.

99.1 Press release, dated October 27, 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: October 27, 2008

 

ALBEMARLE CORPORATION
By:  

/s/ Nicole C. Daniel

  Nicole C. Daniel
  Assistant General Counsel and
  Assistant Secretary


EXHIBIT INDEX

 

Exhibit
Number

 

Exhibit

99.1   Press release, dated October 27, 2008, issued by the Company.
Press Release

Exhibit 99.1

LOGO      

 

Contact:

Sandra Rodriguez         225.388.7654

 

  
           

 

Albemarle Reports Third Quarter 2008 Results

 

 

Third quarter highlights:

   

Net sales of $660.5 million, up 13% year over year and 6% sequentially

   

Earnings per share of $0.61, comparable to prior year despite an approximate $11 million pretax ($0.07 per share) impact from two hurricanes and year over year increases in raw materials exceeding $50 million

   

Record quarterly Fine Chemicals net sales of $167.2 million, up 24% year over year and 10% sequentially resulting in segment income of $24.7 million, up 21% year over year

   

Record quarterly Polymer Additives net sales of $261.7 million, up 12% year over year supported by strong brominated flame retardant volumes

 

     Third Quarter Ended    Nine Months Ended  
     September 30,    September 30,  
In thousands, except per share amounts    2008    2007    2008     2007  

Net Sales

   $ 660,463    $ 583,981    $ 1,949,390     $ 1,737,031  

Operating Profit

   $ 76,892    $ 76,536    $ 238,496     $ 232,387  

Net Income

   $ 56,175    $ 59,099    $ 181,091     $ 171,070  

Diluted earnings per share

   $ 0.61    $ 0.61    $ 1.95     $ 1.76  

Diluted earnings per share – special item

   $ —      $ —      $ (0.02 )   $ (0.03 )

Diluted earnings per share excluding special item

   $ 0.61    $ 0.61    $ 1.97     $ 1.79  
   

BATON ROUGE, La., — October 27 — Albemarle Corporation (NYSE: ALB) reported third quarter 2008 net income of $56.2 million, or 61 cents per share, compared to $59.1 million, or 61 cents per share, for the third quarter of 2007. Operating profit was $76.9 million as strong performance in the Company’s Fine Chemicals business segment and reductions in corporate expenses were partially offset by declines in the Catalysts and Polymer Additives business segments. The Company estimates the impact of Hurricanes Gustav and Ike at approximately $11 million pretax, ($0.07 per share), principally in the Catalysts and Fine Chemicals segments due to incremental costs and margin on lost revenue. The Company reported net sales in the third quarter of 2008 totaling $660.5 million compared to third quarter 2007 net sales of $584.0 million.

Net income for the first nine months of 2008 was $181.1 million, or $1.95 per share, up from $171.1 million, or $1.76 per share, for the first nine months of 2007. Excluding the first quarter 2008 charge related to severance in conjunction with personnel reductions at the Company’s Richmond headquarters and Singapore sales office, net income for the first nine months of 2008 was $183.2 million, or $1.97 per share. Net income, excluding the charge related to the closure of our Dayton fine chemistry facility, for the first nine months of 2007 was $174.2 million, or $1.79 per share. Net sales for the first nine months of 2008 were $1.95 billion compared to $1.74 billion for the first nine months of 2007, an increase of 12 percent.

 

1


Commenting on results, Mark C. Rohr, President and CEO, stated, “Our operating results for the quarter were solid despite the negative operating impact from Hurricanes Gustav and Ike and continued raw materials pressures. The resilience demonstrated by our employees who were personally impacted by the Gulf of Mexico hurricanes is a testament to the unparalleled energy and commitment these individuals bring to our company.” Rohr added, “This performance in today’s challenging economic environment provides measurable evidence of the strength of our diversified portfolio, where weakness in one market served can be offset by strength in another. All three of our operating segments saw increased sales revenues over the same period last year, with the Polymer Additives and Fine Chemicals segments achieving record quarterly sales revenues. Looking forward, we expect economic turbulence will continue to create near-term challenges for our businesses, but we believe our strong technology and operating excellence will bode well for favorable performance next year and set the stage for achieving our long-term objectives.”

Quarterly Segment Results

Polymer Additives delivered record net sales for the third quarter of 2008 of $261.7 million, a 12 percent increase versus the third quarter of 2007. Net sales increased in our flame retardants primarily due to higher volumes and favorable foreign currency exchange rates. Polymer Additives segment income for the third quarter of 2008 declined 7 percent from the third quarter of 2007 to $27.4 million due primarily to higher raw material costs, partially offset by improved brominated flame retardant product volumes and improved phosphorus flame retardant product pricing and mix.

Catalysts generated net sales for the third quarter of 2008 of $231.6 million, a 7 percent increase versus the third quarter of 2007 due primarily to improved pricing and favorable foreign currency exchange rates. Catalysts segment income for the third quarter of 2008 declined 11 percent versus the third quarter of 2007 to $36.5 million due primarily to reduced sales and production volumes caused by the hurricanes and refineries postponing unit outages.

Fine Chemicals delivered record net sales for the third quarter of 2008 of $167.2 million, a 24 percent increase versus the third quarter of 2007 due primarily to strength in fine chemistry services and higher volumes and improved pricing from our bromine portfolio. Segment income for the third quarter of 2008 improved 21 percent versus the third quarter of 2007 to $24.7 million due primarily to higher volumes and improved pricing partially offset by higher raw material and energy costs.

Cash Flow

In the first nine months of 2008, our cash and cash flow from operations funded capital expenditures for plant machinery and equipment of $63 million, acquisitions of $57 million and dividends to shareholders of $31 million. We utilized availability under our credit agreement for repurchases of 4.4 million shares of our common stock for an aggregate cost of approximately $164 million. During the quarter, interest and financing expenses were $9.8 million versus third quarter 2007 expenses of $9.5 million. Primarily as a result of foreign currency exchange losses, other expenses were $2.7 million in the third quarter of 2008 versus other income of $0.8 million in the third quarter of 2007.

 

2


At the end of the third quarter of 2008, we had $207 million in cash. Currently, approximately 70 percent of our cash is in US Treasury or equivalent securities. In addition, we have untapped lines of credit in excess of $280 million available. With strong cash generative businesses and no significant debt maturities before 2013, the Company has a solid liquidity position.

Taxes

Our third quarter 2008 effective income tax rate was 15.3 percent and the full year effective tax rate is expected to be approximately 18.6 percent, which is slightly less than our full year effective tax rate in 2007. The tax rate continues to be influenced by the level and mix of income and has benefited from a more favorable mix of income in lower tax jurisdictions.

Outlook

In spite of the tremendous uncertainty in financial markets, our long-term outlook remains favorable. While downturns in refinery margins have driven a number of refineries to postpone unit outages negatively impacting short term catalyst volumes, increased sales of regenerated catalyst and a strong outlook for 2009 should support improved segment profits. We expect weak consumer spending and continued softness in the automotive and construction sectors to weigh negatively on demand for certain of our Polymer Additives products as we end this year and begin 2009. Efforts in this segment to consolidate operations and introduce new products to the market should help moderate the ongoing impact of weak markets. At the same time, we believe our Sorbent mercury removal technology coupled with continued demand for our bromine fine chemicals and custom manufacturing services positions our Fine Chemicals segment for additional growth and improved margins. Some relief from lower crude and natural gas prices is starting to be reflected in our earnings; however, full year raw material and energy costs remain significantly higher than the prior year (approximately $190 million). We are confident in our ability to weather the near-term macro-economic issues and stand well positioned to execute our long-term growth objectives with a strong balance sheet and solid cash flow generation that allow us to create value for our shareholders through organic growth, acquisitions and share repurchases.

Earnings Call

The Company’s performance for the third quarter ended September 30, 2008 will be discussed on a conference call at 10:00 AM Eastern Daylight time on October 28, 2008, which can be accessed through Albemarle’s website under Investor Information at www.albemarle.com.

Albemarle Corporation, headquartered in Baton Rouge, Louisiana, 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.

 

3


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: deterioration in economic and business conditions; future financial and operating performance of our major customers and industries served by us; 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, 2007 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.

 

4


Albemarle Corporation and Subsidiaries

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,

 
     2008     2007     2008     2007  

Net sales

   $ 660,463     $ 583,981     $ 1,949,390     $ 1,737,031  

Cost of goods sold

     506,280       431,019       1,464,815       1,270,898  
                                

Gross profit

     154,183       152,962       484,575       466,133  

Selling, general and administrative expenses

     59,899       61,004       191,016       182,745  

Research and development expenses

     17,392       15,422       51,785       46,057  

Severance charges

     —         —         3,278 (a)     —    

Dayton facility closure charge

     —         —         —         4,944 (b)
                                

Operating profit

     76,892       76,536       238,496       232,387  

Interest and financing expenses

     (9,815 )     (9,500 )     (28,472 )     (28,827 )

Other (expenses) income, net

     (2,718 )     828       2,066       3,411  
                                

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

     64,359       67,864       212,090       206,971  

Income tax expense

     (9,878 )     (10,433 )     (39,406 )     (42,954 )
                                

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

     54,481       57,431       172,684       164,017  

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

     (4,587 )     (4,613 )     (13,568 )     (12,310 )

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

     6,281       6,281       21,975       19,363  
                                

Net income

   $ 56,175     $ 59,099     $ 181,091     $ 171,070  
                                

Basic earnings per share

   $ 0.62     $ 0.62     $ 1.98     $ 1.80  

Diluted earnings per share

   $ 0.61     $ 0.61     $ 1.95     $ 1.76  

Weighted-average common shares outstanding—Basic

     91,074       95,245       91,535       95,269  

Weighted-average common shares outstanding—Diluted

     92,265       97,106       92,774       97,288  
                                

See accompanying notes to the condensed consolidated financial information.

 

5


Albemarle Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands of Dollars) (Unaudited)

 

     September 30,
2008
   December 31,
2007

ASSETS

     

Cash and cash equivalents

   $ 207,211    $ 130,551

Other current assets

     1,007,359      922,887
             

Total current assets

     1,214,570      1,053,438
             

Property, plant and equipment

     2,365,221      2,314,509

Less accumulated depreciation and amortization

     1,331,404      1,275,966
             

Net property, plant and equipment

     1,033,817      1,038,543

Other assets and intangibles

     773,202      738,469
             

Total assets

   $ 3,021,589    $ 2,830,450
             

LIABILITIES &

SHAREHOLDERS’ EQUITY

     

Current portion of long-term debt

   $ 24,614    $ 16,627

Other current liabilities

     352,796      386,290
             

Total current liabilities

     377,410      402,917
             

Long-term debt

     944,026      707,311

Other noncurrent liabilities

     322,918      334,828

Deferred income taxes

     123,474      107,089

Shareholders’ equity

     1,253,761      1,278,305
             

Total liabilities & shareholders’ equity

   $ 3,021,589    $ 2,830,450
             

See accompanying notes to the condensed consolidated financial information.

 

6


Albemarle Corporation and Subsidiaries

Selected Cash Flows Data

(In Thousands of Dollars) (Unaudited)

 

     Nine Months Ended
September 30,
 
     2008     2007  

Cash and cash equivalents at beginning of year

   $ 130,551     $ 149,499  

Cash and cash equivalents at end of period

   $ 207,211     $ 101,281  

Sources of cash and cash equivalents:

    

Net income

     181,091       171,070  

Proceeds from borrowings

     285,303       78,125  

Proceeds from exercise of stock options

     3,931       20,459  

Uses of cash and cash equivalents:

    

Capital expenditures

     (63,467 )     (71,262 )

Acquisitions, net of cash acquired

     (57,283 )(c)     (17,444 )

Purchases of common stock

     (163,502 )     (51,956 )

Repayments of long-term debt

     (42,605 )     (129,246 )

Dividends paid to shareholders

     (31,394 )     (30,172 )

Dividends paid to minority interests

     (11,836 )     (11,888 )

Non-cash items:

    

Depreciation and amortization

     81,555       79,824  

See accompanying notes to the condensed consolidated financial information.

 

7


Albemarle Corporation and Subsidiaries

Consolidated Summary of Segment Results

(In Thousands of Dollars) (Unaudited)

 

     Third Quarter Ended
September 30,
    Nine Months Ended
September 30,
 
     2008     2007     2008     2007  

Net sales:

        

Polymer Additives

   $ 261,746     $ 232,700     $ 766,844     $ 670,969  

Catalysts

     231,562       216,399       716,045       659,674  

Fine Chemicals

     167,155       134,882       466,501       406,388  
                                

Total net sales

   $ 660,463     $ 583,981     $ 1,949,390     $ 1,737,031  
                                

Segment operating profit:

        

Polymer Additives

   $ 28,705     $ 30,970     $ 86,337     $ 102,741  

Catalysts

     30,941       35,474       112,617       97,490  

Fine Chemicals

     26,830       22,772       77,983       75,272  
                                

Subtotal

   $ 86,476     $ 89,216     $ 276,937     $ 275,503  
                                

Minority interests in income of consolidated subsidiaries:

        

Polymer Additives

   $ (2,078 )   $ (2,351 )   $ (6,183 )   $ (6,410 )

Catalysts

     —         —         —         —    

Fine Chemicals

     (2,146 )     (2,361 )     (7,304 )     (6,067 )

Corporate & other

     (363 )     99       (81 )     167  
                                

Total minority interests in income of consolidated subsidiaries

   $ (4,587 )   $ (4,613 )   $ (13,568 )   $ (12,310 )
                                

Equity in net income of unconsolidated investments:

        

Polymer Additives

   $ 777     $ 746     $ 3,454     $ 4,037  

Catalysts

     5,544       5,555       18,598       15,355  

Fine Chemicals

     —         —         —         —    

Corporate & other

     (40 )     (20 )     (77 )     (29 )
                                

Total equity in net income of unconsolidated investments

   $ 6,281     $ 6,281     $ 21,975     $ 19,363  
                                

Segment income:

        

Polymer Additives

   $ 27,404     $ 29,365     $ 83,608     $ 100,368  

Catalysts

     36,485       41,029       131,215       112,845  

Fine Chemicals

     24,684       20,411       70,679       69,205  
                                

Total segment income

     88,573       90,805       285,502       282,418  

Corporate & other

     (9,987 )     (12,601 )     (35,321 )     (38,034 )

Severance charges (a)

     —         —         (3,278 )     —    

Dayton facility closure charge (b)

     —         —         —         (4,944 )

Interest and financing expenses

     (9,815 )     (9,500 )     (28,472 )     (28,827 )

Other (expenses) income, net

     (2,718 )     828       2,066       3,411  

Income tax expense

     (9,878 )     (10,433 )     (39,406 )     (42,954 )
                                

Net income

   $ 56,175     $ 59,099     $ 181,091     $ 171,070  
                                

See accompanying notes to the condensed consolidated financial information.

 

8


Notes to the Condensed Consolidated Financial Information

 

(a) The nine-month period ended September 30, 2008 includes charges amounting to $3.3 million ($2.1 million after income taxes, or 2 cents per share) that relate to severance in conjunction with personnel reductions at the Company’s Richmond headquarters and Singapore sales office.

 

(b) The nine-month period ended September 30, 2007 includes a charge amounting to $4.9 million ($3.2 million after income taxes, or 3 cents per share) that relates to the closure of our Dayton, Ohio fine chemistry facility.

 

(c) On June 30, 2008, we acquired the remaining 25 percent of our majority owned Polymer Additives business segment joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. The acquisition of the remaining interests totaled approximately $19.9 million. During the nine-month period ended September 30, 2008, we also made payments of approximately $15.0 million associated with the prior July 31, 2007 acquisition of controlling interests in the joint ventures. In addition, effective July 31, 2008, we acquired Sorbent Technologies Corporation, a full-service power plant mercury-control provider, for approximately $22.4 million.

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.

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.”

 

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