3Q14 ER 8K


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 22, 2014
 
_________________________________
ALBEMARLE CORPORATION
(Exact name of Registrant as specified in charter)
_________________________________

Virginia
 
001-12658
 
54-1692118
(State or other jurisdiction
of incorporation)
 
(Commission
file number)
 
(IRS employer
identification no.)
 
 
 
 
 
451 Florida Street, Baton Rouge, Louisiana
 
70801
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code
(225) 388-8011
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 October 22, 2014, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the fiscal quarter ended September 30, 2014. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on October 23, 2014, the Company will hold a teleconference for analysts and media to discuss results for the fiscal quarter ended September 30, 2014. The teleconference is webcast on the Company’s website at www.albemarle.com.
The press release attached as Exhibit 99.1 includes presentations of adjusted net income attributable to Albemarle Corporation (“adjusted earnings”), adjusted diluted earnings per share, adjusted effective income tax rates, segment operating profit, segment income, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin. These are financial measures that are not required by, nor presented in accordance with, accounting principles generally accepted in the United States (“GAAP”), but are included to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance.
Our presentations of adjusted earnings, adjusted diluted earnings per share, segment operating profit and adjusted effective income tax rates should not be considered as alternatives to earnings, earnings per share, operating profit and effective income tax rates, respectively, as determined in accordance with GAAP. Also, segment income, adjusted earnings, EBITDA and adjusted EBITDA should not be considered as alternatives to net income attributable to Albemarle Corporation as determined in accordance with GAAP. Further, EBITDA margin and adjusted EBITDA margin should not be considered as alternatives to net income attributable to Albemarle Corporation as a percentage of our consolidated net sales as would be determined in accordance with GAAP. The Company has included in the press release certain reconciliation information for these measures to their most directly comparable financial measures calculated and reported in accordance with GAAP.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.


Section 9 - Financial Statements and Exhibits

Item 9.01.    Financial Statements and Exhibits.

(d) Exhibits.

99.1    Press release, dated October 22, 2014, 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 22, 2014

ALBEMARLE CORPORATION
By:
/s/ Karen G. Narwold
 
Karen G. Narwold
 
Senior Vice President, General Counsel, Corporate and
 
Government Affairs, Corporate Secretary






EXHIBIT INDEX

Exhibit
 
 
Number
 
Exhibit
99.1
 
Press release, dated October 22, 2014, issued by the Company.
 
 
 



3Q14 ER Exhibit 99.1

Exhibit 99.1
Contact:
 
Lorin Crenshaw
225.388.7322





Albemarle reports third quarter 2014 results



BATON ROUGE, LA - October 22, 2014

Third quarter 2014 highlights:
Adjusted earnings of $1.14 per share, up 5% versus third quarter 2013.
Net sales grew 9% to $642.4 million versus third quarter 2013, with an adjusted EBITDA margin of 23%.
Year to date cash flow from operations of $430.5 million, up 36% versus 2013 on lower working capital.
Successful startup of Heavy Oil Upgrading capacity expansion in Bayport, TX.
Closed sale of antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc.

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
In thousands, except per share amounts
2014
 
2013
 
2014
 
2013
Net sales
$
642,418

 
$
591,196

 
$
1,846,982

 
$
1,754,635

Segment income
$
140,126

 
$
136,717

 
$
411,963

 
$
395,338

Net income from continuing operations
$
88,019

 
$
97,313

 
$
243,427

 
$
273,494

Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238

Diluted earnings per share
$
0.93

 
$
1.11

 
$
1.91

 
$
3.02

   Non-operating pension and OPEB items(a)
0.01

 
(0.01
)
 
0.11

 
(0.04
)
   Special items(b)(c)(d)(e)
0.12

 

 
0.32

 

   Discontinued operations(f)
0.08

 
(0.01
)
 
0.87

 
(0.06
)
Adjusted diluted earnings per share
$
1.14

 
$
1.09

 
$
3.21

 
$
2.92


See accompanying notes and reconciliations to the condensed consolidated financial information.


Albemarle Corporation (NYSE: ALB) reported third quarter 2014 earnings of $72.8 million, or $0.93 per share, compared to third quarter 2013 earnings of $90.5 million, or $1.11 per share. Third quarter 2014 adjusted earnings were $89.5 million, or $1.14 per share, compared to $88.9 million, or $1.09 per share, for the third quarter of 2013 (see notes to the condensed consolidated financial information). The Company reported net sales of $642.4 million in the third quarter of 2014, up from net sales of $591.2 million in the third quarter of 2013, driven mainly by higher volumes across Catalyst Solutions and bromine products due to strong market demand and favorable pricing in Catalyst Solutions.


1


Earnings for the nine months ended September 30, 2014 were $151.8 million, or $1.91 per share, compared to $257.2 million, or $3.02 per share, for the same period in 2013. Adjusted earnings for the nine months ended September 30, 2014 were $254.7 million, or $3.21 per share, compared to $248.9 million, or $2.92 per share, for the same period in 2013. Net sales for the nine months ended September 30, 2014 were $1.85 billion, up from $1.75 billion for the same period in 2013, driven mainly by favorable Catalyst Solutions pricing and volumes on strong demand, and the favorable impact of a stronger European Union Euro, partly offset by lower pricing in Performance Chemicals.

On September 1, 2014, the Company closed the sale of its antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc and received net proceeds of $104.7 million and a receivable of $8.5 million, subject to post-closing adjustments expected to be finalized in the fourth quarter of 2014. Financial results of the disposed group have been presented as discontinued operations in the consolidated statements of income for all periods presented. Included in (Loss) income from discontinued operations are pre-tax charges of $4.8 million ($3.6 million after income taxes, or $0.05 per share) recorded in the third quarter of 2014 and $85.5 million ($64.6 million after income taxes, or $0.82 per share) recorded in the nine months ended September 30, 2014 related to the loss on the sale of the disposed group, representing the difference between the carrying value of the related assets and their fair value as determined by the sales price less estimated costs to sell. The loss is primarily attributable to goodwill, intangibles and long-lived assets, net of cumulative foreign currency translation gains of $17.8 million.

“We delivered better than forecast growth in net sales, earnings and cash flow this quarter driven by continued strength in Catalyst Solutions, and our full year will be well within the range of our guidance,” said Albemarle president and CEO Luke Kissam. “We are also making excellent progress on the plan for integrating Rockwood and delivering the synergies of the combination once the transaction closes.”

On July 15, 2014, Albemarle entered into the merger agreement with Rockwood Holdings Inc. (“Rockwood”), pursuant to which Albemarle will acquire Rockwood for consideration of $50.65 in cash and 0.4803 of a share of Albemarle common stock per outstanding share of Rockwood common stock. Upon closing of the transaction, Albemarle shareholders will own approximately 70% of the combined company and Rockwood shareholders will own approximately 30% of the combined company. The boards of directors of both Albemarle and Rockwood have approved the transaction. A special shareholder meeting will be held on November 14, 2014 to vote on the issuance of Albemarle shares of common stock in connection with the proposed acquisition of Rockwood. The transaction is also subject to regulatory approvals and other customary closing conditions and is expected to close by the end of the first quarter of 2015.

Quarterly Segment Results

Performance Chemicals reported net sales of $364.5 million in the third quarter of 2014, a slight decrease as compared to net sales of $365.2 million in the third quarter of 2013 , on unfavorable Fine Chemistry Services volumes and Fire Safety Solutions pricing, offset by favorable pricing and volumes in Specialty Chemicals and volumes in Fire Safety Solutions. Segment income for Performance Chemicals was $80.2 million in the third quarter of 2014, a 7 percent decline from $85.9 million in the third quarter of 2013, driven by unfavorable Fire Safety Solutions pricing and higher manufacturing costs, partly offset by favorable pricing and volumes in Specialty Chemicals and volumes in Fire Safety Solutions.

Catalyst Solutions generated net sales of $277.9 million in the third quarter of 2014, a 23 percent increase from net sales in the third quarter of 2013 of $226.0 million, primarily on favorable Clean Fuels Technology and Performance Catalyst Solutions volumes and overall favorable Refinery Catalyst Solutions pricing, partly offset by unfavorable Heavy Oil Upgrading volumes. Catalyst Solutions segment income was $59.9 million in the third quarter of 2014, up 18 percent from third quarter 2013 results of $50.8 million, due primarily to favorable pricing (partly driven by higher metals surcharges), higher equity in income from unconsolidated investments and strong Clean Fuels Technology and Performance Catalyst Solutions volumes on market demand, partly offset by lower Heavy Oil Upgrading volumes due to our capacity expansion startup in Bayport, TX.



2


Corporate and Other

Corporate and other expense was $23.0 million ($21.6 million excluding non-operating pension and OPEB items) for the third quarter of 2014. The $13.1 million increase from the comparable period in 2013 was due primarily to higher incentive compensation and pension costs.

Interest and financing expenses were $8.7 million for the third quarter of 2014 compared to $9.5 million for the third quarter of 2013, due primarily to higher capitalized interest in the 2014 period caused by the timing and costs of capital expenditures.

Our adjusted effective income tax rates, which exclude discontinued operations, special and non-operating pension and OPEB items, were 18.9 percent and 22.5 percent for the third 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 $430.5 million for the nine months ended September 30, 2014, up 36 percent versus the same period in 2013, and we had $653.1 million in cash and cash equivalents at September 30, 2014. During the nine months ending September 30, 2014, cash on hand and cash provided by operations funded capital expenditures for plant, machinery and equipment of approximately $76.7 million, dividends to shareholders of $62.8 million and $150.0 million for repurchases of approximately 2.0 million shares of our common stock pursuant to the terms of our accelerated share repurchase programs entered into in the first and second quarters of 2014. Additionally, in the third quarter of 2014 we closed the sale of our antioxidant, ibuprofen and propofol businesses and assets for net proceeds of $104.7 million and a receivable of $8.5 million, subject to post-closing adjustments expected to be finalized in the fourth quarter of 2014.

Earnings Call

The Company’s performance for the third quarter ended September 30, 2014 will be discussed on a conference call at 9:00 AM Eastern time on October 23, 2014. The call can be accessed by dialing 888-680-0869 (International Dial-In # 617-213-4854), and entering conference ID 48092946. The Company’s earnings presentation and supporting material can be accessed through Albemarle’s website under Investors at www.albemarle.com.

About Albemarle

Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a leading global developer, manufacturer, and marketer of highly-engineered specialty chemicals for consumer electronics, petroleum refining, utilities, packaging, construction, automotive/transportation, pharmaceuticals, crop protection, food-safety and custom chemistry services. The Company is committed to global sustainability and is advancing its eco-practices and solutions in its two global business units: Performance Chemicals and Catalyst Solutions. Corporate Responsibility Magazine selected Albemarle to its prestigious “100 Best Corporate Citizens” list for 2010, 2011 and 2013. Albemarle employs approximately 3,200 people and serves customers in approximately 100 countries. Albemarle regularly posts information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, Regulation G reconciliations, SEC filings, and other information regarding the Company, its businesses and the markets we serve.



3


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 the proposed transaction with Rockwood and the anticipated consequences and benefits of the transaction, the targeted close date for the transaction, product development, changes in productivity, market trends, price, expected growth and earnings, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, portfolio diversification, 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; 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; 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; volatility and substantial uncertainties in the debt and equity markets; technology or intellectual property infringement; decisions we may make in the future; the receipt and timing of necessary regulatory approvals for the proposed transaction with Rockwood; the ability to finance the proposed transaction with Rockwood; the ability to successfully operate and integrate Rockwood’s operations and realize estimated synergies; and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in the preliminary joint proxy statement / prospectus we filed in connection with the proposed transaction with Rockwood, and in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. We assume no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.



4


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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Net sales
$
642,418

 
$
591,196

 
$
1,846,982

 
$
1,754,635

Cost of goods sold(a)
436,972

 
381,585

 
1,238,574

 
1,157,443

Gross profit
205,446

 
209,611

 
608,408

 
597,192

Selling, general and administrative expenses(a)
66,012

 
61,368

 
211,127

 
186,668

Research and development expenses
22,407

 
19,441

 
66,916

 
60,959

Restructuring and other charges, net(b)
293

 

 
20,625

 

Acquisition and integration related costs(c)
10,261

 

 
15,104

 

Operating profit
106,473

 
128,802

 
294,636

 
349,565

Interest and financing expenses
(8,749
)
 
(9,496
)
 
(26,255
)
 
(22,335
)
Other expenses, net(d)
(6,618
)
 
(368
)
 
(6,454
)
 
(6,147
)
Income from continuing operations before income taxes and equity in net income of unconsolidated investments
91,106

 
118,938

 
261,927

 
321,083

Income tax expense(e)
11,737

 
26,963

 
46,700

 
72,897

Income from continuing operations before equity in net income of unconsolidated investments
79,369

 
91,975

 
215,227

 
248,186

Equity in net income of unconsolidated investments (net of tax)
8,650

 
5,338

 
28,200

 
25,308

Net income from continuing operations
88,019

 
97,313

 
243,427

 
273,494

(Loss) income from discontinued operations (net of tax)(f)
(6,679
)
 
531

 
(68,473
)
 
4,994

Net income
81,340

 
97,844

 
174,954

 
278,488

Net income attributable to noncontrolling interests
(8,546
)
 
(7,332
)
 
(23,130
)
 
(21,250
)
Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238

Basic earnings (loss) per share

 

 

 

     Continuing operations
$
1.02

 
$
1.10

 
$
2.79

 
$
2.98

     Discontinued operations
(0.09
)
 
0.01

 
(0.87
)
 
0.06

 
$
0.93

 
$
1.11

 
$
1.92

 
$
3.04

Diluted earnings (loss) per share

 

 

 

     Continuing operations
$
1.01

 
$
1.10

 
$
2.78

 
$
2.96

     Discontinued operations
(0.08
)
 
0.01

 
(0.87
)
 
0.06

 
$
0.93

 
$
1.11

 
$
1.91

 
$
3.02

Weighted-average common shares outstanding – basic
78,244

 
81,385

 
78,880

 
84,711

Weighted-average common shares outstanding – diluted
78,659

 
81,852

 
79,287

 
85,192


See accompanying notes to the condensed consolidated financial information.


5


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

 
September 30,
 
December 31,
 
2014
 
2013
ASSETS
 
 
 
Cash and cash equivalents
$
653,120

 
$
477,239

Other current assets
855,187

 
1,005,676

Total current assets
1,508,307

 
1,482,915

Property, plant and equipment
2,623,271

 
2,972,084

Less accumulated depreciation and amortization
1,392,997

 
1,615,015

Net property, plant and equipment
1,230,274

 
1,357,069

Other assets and intangibles
654,885

 
744,813

Total assets
$
3,393,466

 
$
3,584,797

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
368,268

 
$
24,554

Other current liabilities
444,442

 
411,809

Total current liabilities
812,710

 
436,363

Long-term debt
684,107

 
1,054,310

Other noncurrent liabilities
214,263

 
222,160

Deferred income taxes
95,115

 
129,188

Albemarle Corporation shareholders’ equity
1,456,741

 
1,627,361

Noncontrolling interests
130,530

 
115,415

Total liabilities and equity
$
3,393,466


$
3,584,797


See accompanying notes to the condensed consolidated financial information.

6


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

 
Nine Months Ended
 
September 30,
 
2014
 
2013
Cash and cash equivalents at beginning of year
$
477,239

 
$
477,696

Cash and cash equivalents at end of period
$
653,120

 
$
401,427

Sources of cash and cash equivalents:
 
 
 
Net income
$
174,954

 
$
278,488

Cash proceeds from divestitures
104,718

 

Proceeds from borrowings of long-term debt

 
117,000

Proceeds from other borrowings, net

 
357,379

Proceeds from exercise of stock options
2,713

 
4,510

Working capital changes
87,936

 

Uses of cash and cash equivalents:
 
 
 
Working capital changes

 
(39,353
)
Capital expenditures
(76,682
)
 
(135,028
)
Repurchases of common stock
(150,000
)
 
(582,298
)
Repayments of long-term debt
(3,023
)
 
(93,913
)
Repayments of other borrowings, net
(23,554
)
 

Dividends paid to shareholders
(62,827
)
 
(58,574
)
Dividends paid to noncontrolling interests
(7,612
)
 
(10,014
)
Pension and postretirement contributions
(10,718
)
 
(9,892
)
Long-term advances to joint venture
(7,499
)
 

Non-cash and other items:
 
 
 
Depreciation and amortization
78,344

 
79,477

Write-offs associated with restructuring and other
6,333

 

Loss on disposal of businesses
85,515

 

Pension and postretirement expense
21,946

 
4,730

Equity in net income of unconsolidated investments
(28,200
)
 
(25,308
)

See accompanying notes to the condensed consolidated financial information.


7


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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Net sales:
 
 
 
 
 
 
 
Performance Chemicals
$
364,517

 
$
365,154

 
$
1,048,961

 
$
1,059,202

Catalyst Solutions
277,901

 
226,042

 
798,021

 
695,433

Total net sales
$
642,418

 
$
591,196

 
$
1,846,982

 
$
1,754,635

Segment operating profit:
 
 
 
 
 
 
 
Performance Chemicals
$
86,983

 
$
91,506

 
$
244,724

 
$
265,665

Catalyst Solutions
53,039

 
47,205

 
162,169

 
125,615

Total segment operating profit
140,022

 
138,711

 
406,893

 
391,280

Equity in net income of unconsolidated investments:
 
 
 
 
 
 
 
Performance Chemicals
1,744

 
1,735

 
7,321

 
6,371

Catalyst Solutions
6,906

 
3,603

 
20,879

 
18,937

Total equity in net income of unconsolidated investments
8,650

 
5,338

 
28,200

 
25,308

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
Performance Chemicals
(8,546
)
 
(7,332
)
 
(23,130
)
 
(21,250
)
Total net income attributable to noncontrolling interests
(8,546
)
 
(7,332
)
 
(23,130
)
 
(21,250
)
Segment income:
 
 
 
 
 
 
 
Performance Chemicals
80,181

 
85,909

 
228,915

 
250,786

Catalyst Solutions
59,945

 
50,808

 
183,048

 
144,552

Total segment income
140,126

 
136,717

 
411,963

 
395,338

Corporate & other(a)
(22,995
)
 
(9,909
)
 
(76,528
)
 
(41,715
)
Restructuring and other charges, net(b)
(293
)
 

 
(20,625
)
 

Acquisition and integration related costs(c)
(10,261
)
 

 
(15,104
)
 

Interest and financing expenses
(8,749
)
 
(9,496
)
 
(26,255
)
 
(22,335
)
Other expenses, net(d)
(6,618
)
 
(368
)
 
(6,454
)
 
(6,147
)
Income tax expense(e)
(11,737
)
 
(26,963
)
 
(46,700
)
 
(72,897
)
(Loss) income from discontinued operations (net of tax)(f)
(6,679
)
 
531

 
(68,473
)
 
4,994

Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238


See accompanying notes to the condensed consolidated financial information.


8


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, were included in Corporate & other as follows:

For the three months ended September 30, 2014 and 2013, net charges (benefits) amounted to $1.4 million ($0.9 million after income taxes, or $0.01 per share) and $(1.8) million ($1.1 million after income taxes, or $0.01 per share), respectively. The MTM actuarial loss for the three months ended September 30, 2014 was $2.8 million ($1.8 million after income taxes, or $0.02 per share) and resulted from a required remeasurement of the assets and obligations of one of our U.S. defined benefit plans in connection with the September 1, 2014 sale of our antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc. There were no MTM actuarial gains/losses recorded during the three months ended September 30, 2013.
For the nine months ended September 30, 2014 and 2013, net charges (benefits) amounted to $14.1 million ($9.0 million after income taxes, or $0.11 per share) and $(5.4) million ($3.4 million after income taxes, or $0.04 per share), respectively. The MTM actuarial loss in 2014 was $18.2 million ($11.6 million after income taxes, or $0.15 per share) and resulted from a $15.4 million remeasurement of the assets and obligations of one of our U.S. defined benefit pension plans and our supplemental executive retirement plan during the first quarter in connection with our workforce reduction plan initiated in the fourth quarter of 2013 and a $2.8 million remeasurement of the assets and obligations of one of our U.S. defined benefit pension plans during the third quarter in connection with the sale of our antioxidant, ibuprofen and propofol businesses and assets. There were no MTM actuarial gains/losses recorded during the nine months ended September 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 were as follows (in millions):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Cost of goods sold:
 
 
 
 
 
 
 
MTM actuarial loss
$
2.8

 
$

 
$
5.7

 
$

Interest cost and expected return on assets, net
(0.5
)
 
(0.8
)
 
(1.5
)
 
(2.3
)
Total
$
2.3

 
$
(0.8
)
 
$
4.2

 
$
(2.3
)
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
MTM actuarial loss
$

 
$

 
$
12.5

 
$

Interest cost and expected return on assets, net
(0.9
)
 
(1.0
)
 
(2.6
)
 
(3.1
)
Total
$
(0.9
)
 
$
(1.0
)
 
$
9.9

 
$
(3.1
)

(b)
Restructuring and other charges consisted of the following:

For the three months ended September 30, 2014 -
Other charges of $0.3 million ($0.2 million after income taxes).

For the nine months ended September 30, 2014 -
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.
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.
Other charges of $0.3 million ($0.2 million after income taxes).

(c)
Acquisition and integration related costs consisted of the following:

For the three months ended September 30, 2014 -
Transaction and integration fees related to the proposed acquisition of Rockwood of $9.3 million ($5.9 million after income taxes, or $0.08 per share).

9


Certain significant acquisition-related costs of $1.0 million ($0.6 million after income taxes, or $0.01 per share).

For the nine months ended September 30, 2014 -
Transaction and integration fees related to the proposed acquisition of Rockwood of $9.3 million ($5.9 million after income taxes, or $0.07 per share).
Certain significant acquisition-related costs of $5.8 million ($3.7 million after income taxes, or $0.05 per share).

(d)
Included in Other expenses, net for the three and nine months ended September 30, 2014 was $7.0 million ($4.5 million after income taxes, or $0.06 per share) for amortization of bridge facility fees and other financing fees, related to the proposed acquisition of Rockwood.

(e)
Included in Income tax expense for the three and nine months ended September 30, 2014 were discrete net tax benefit items of $2.1 million, or $0.03 per share, related principally to the expiration of statue of limitations.

(f)
On September 1, 2014, the Company closed the sale of its antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc and received net proceeds of $104.7 million and a receivable of $8.5 million, subject to post-closing adjustments expected to be finalized in the fourth quarter of 2014. Financial results of the disposal group have been presented as discontinued operations in the consolidated statements of income for all periods presented. Included in (Loss) income from discontinued operations are pre-tax charges of $4.8 million ($3.6 million after income taxes, or $0.05 per share) recorded in the third quarter of 2014 and $85.5 million ($64.6 million after income taxes, or $0.82 per share) recorded in the nine months ended September 30, 2014 related to the loss on the sale of the disposal group, representing the difference between the carrying value of the related assets and their fair value as determined by the sales price less estimated costs to sell. The loss is primarily attributable to goodwill, intangibles and long-lived assets, net of cumulative foreign currency translation gains of $17.8 million.

(g)
Totals may not add due to rounding. Items included in footnotes (b) through (e) above have been aggregated and are referred to as “special items” in other sections of this press release.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation (“adjusted earnings”), adjusted diluted earnings per share and adjusted effective income tax rates, segment operating profit, segment income, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These measures are presented here to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance.

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, respectively, as well as for a supplemental reconciliation of adjusted earnings, EBITDA and adjusted EBITDA to Net income attributable to Albemarle Corporation.

10


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 Albemarle Corporation, as determined in accordance with GAAP.

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 Albemarle Corporation, respectively, the most directly comparable financial measures calculated and reported in accordance with GAAP.

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Total segment operating profit
$
140,022

 
$
138,711

 
$
406,893

 
$
391,280

Corporate & other
(22,995
)
 
(9,909
)
 
(76,528
)
 
(41,715
)
Restructuring and other charges, net
(293
)
 

 
(20,625
)
 

Acquisition and integration related costs
(10,261
)
 

 
(15,104
)
 

GAAP Operating profit
$
106,473

 
$
128,802

 
$
294,636

 
$
349,565

Total segment income
$
140,126

 
$
136,717

 
$
411,963

 
$
395,338

Corporate & other
(22,995
)
 
(9,909
)
 
(76,528
)
 
(41,715
)
Restructuring and other charges, net
(293
)
 

 
(20,625
)
 

Acquisition and integration related costs
(10,261
)
 

 
(15,104
)
 

Interest and financing expenses
(8,749
)
 
(9,496
)
 
(26,255
)
 
(22,335
)
Other expenses, net
(6,618
)
 
(368
)
 
(6,454
)
 
(6,147
)
Income tax expense
(11,737
)
 
(26,963
)
 
(46,700
)
 
(72,897
)
(Loss) income from discontinued operations
(6,679
)
 
531

 
(68,473
)
 
4,994

GAAP Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238



11


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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238

Add back:
 
 
 
 
 
 
 
  Non-operating pension and OPEB items (net of tax)
927

 
(1,121
)
 
9,016

 
(3,365
)
  Special items (net of tax)
9,066

 

 
25,401

 

  Loss (income) from discontinued operations (net of tax)
6,679

 
(531
)
 
68,473

 
(4,994
)
Adjusted net income attributable to Albemarle Corporation
$
89,466

 
$
88,860

 
$
254,714

 
$
248,879

 
 
 
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
72,794

 
$
90,512

 
$
151,824

 
$
257,238

Add back:
 
 
 
 
 
 
 
  Interest and financing expenses
8,749

 
9,496

 
26,255

 
22,335

  Income tax expense (from continuing and discontinued operations)
10,664

 
27,274

 
24,734

 
74,916

  Depreciation and amortization
25,630

 
27,660

 
78,344

 
79,477

EBITDA
117,837

 
154,942

 
281,157

 
433,966

  Non-operating pension and OPEB items
1,440

 
(1,791
)
 
14,141

 
(5,375
)
  Special items
17,575

 

 
42,750

 

  Loss (income) from discontinued operations
7,752

 
(842
)
 
90,439

 
(7,013
)
  Less depreciation and amortization from discontinued operations

 
(3,079
)
 
(3,165
)
 
(9,069
)
Adjusted EBITDA
$
144,604

 
$
149,230

 
$
425,322

 
$
412,509

 
 
 
 
 
 
 
 
Net sales
$
642,418

 
$
591,196

 
$
1,846,982

 
$
1,754,635

EBITDA Margin
18.3
%
 
26.2
%
 
15.2
%
 
24.7
%
Adjusted EBITDA Margin
22.5
%
 
25.2
%
 
23.0
%
 
23.5
%


12