4Q14 Earnings Release 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) January 28, 2015
 
_________________________________
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 January 28, 2015, Albemarle Corporation (the “Company”) issued a press release regarding its earnings for the fourth quarter and fiscal year ended December 31, 2014. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on January 29, 2015, the Company will hold a teleconference for analysts and media to discuss results for the fourth quarter and fiscal year ended December 31, 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, adjusted EBITDA by operating segment, 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, adjusted EBITDA by operating segment 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 January 28, 2015, 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, 2015

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 January 28, 2015, issued by the Company.
 
 
 



4Q14 Earnings Release Exhibit 99.1

Exhibit 99.1
Contact:
 
Lorin Crenshaw
225.388.7322





Albemarle reports fourth quarter and full year 2014 results



BATON ROUGE, LA - January 28, 2015

Fourth quarter 2014 highlights:
Full year adjusted earnings of $4.20 per share, up 5% versus 2013; fourth quarter 2014 adjusted earnings of $0.99 per share.
Net sales of $2.45 billion for full year 2014, up 2% versus 2013; adjusted EBITDA grew 1% to $562 million, a 23% margin.
2014 cash flow from operations of $459.2 million, up 6% versus 2013 on lower working capital.
Completed acquisition of Rockwood on January 12, forming a premier specialty chemical company with leading positions in attractive end markets.
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
In thousands, except per share amounts
2014
 
2013
 
2014
 
2013
Net sales
$
598,566

 
$
639,635

 
$
2,445,548

 
$
2,394,270

Segment income
$
127,212

 
$
138,325

 
$
539,175

 
$
533,663

Net (loss) income from continuing operations
$
(12,990
)
 
$
162,232

 
$
230,437

 
$
435,726

Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171

Diluted (loss) earnings per share
$
(0.24
)
 
$
1.91

 
$
1.69

 
$
4.90

   Non-operating pension and OPEB items(a)
0.90

 
(1.09
)
 
1.01

 
(1.10
)
   Special items(b)(c)(d)(e)(f)
0.30

 
0.27

 
0.62

 
0.26

   Discontinued operations(g)
0.02

 
0.01

 
0.88

 
(0.05
)
Adjusted diluted earnings per share(h)
$
0.99

 
$
1.09

 
$
4.20

 
$
4.01


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


Albemarle Corporation (NYSE: ALB) reported a fourth quarter 2014 loss of $(18.5) million, or $(0.24) per share, compared to fourth quarter 2013 earnings of $155.9 million, or $1.91 per share. Fourth quarter 2014 included a mark-to-market (MTM) actuarial loss of $0.91 per share, mainly resulting from a lower discount rate and updated mortality tables included in the actuarial assumptions of the annual remeasurement of our pension and OPEB plans. We currently do not expect any required cash contributions to to our pension plans until 2021. Fourth quarter 2013 included a MTM actuarial gain of $1.08 per share, which reflected actuarial assumptions at the time of the remeasurement. Fourth quarter 2014 adjusted earnings were $77.4 million, or $0.99 per share, compared to $89.3 million, or $1.09 per share, for the fourth quarter of 2013 (see notes to the condensed consolidated financial information). The Company reported net sales of $598.6 million in the fourth quarter of 2014, down from net sales of $639.6 million in the fourth quarter of 2013, driven mainly by unfavorable currency exchange and pricing impacts across all our businesses, and lower volumes in Performance Chemicals.


1


Earnings for the full year 2014 were $133.3 million, or $1.69 per share, compared to $413.2 million, or $4.90 per share, for the full year 2013. Adjusted earnings for the full year 2014 were $332.1 million, or $4.20 per share, compared to $338.2 million, or $4.01 per share, for the full year 2013. Net sales for the full year 2014 were $2.45 billion, up from $2.39 billion for the full year 2013, driven mainly by favorable Catalyst Solutions pricing and volumes on strong demand, partly offset by lower volumes and pricing in Performance Chemicals and the unfavorable effects of currency exchange.

On January 12, 2015, Albemarle Corporation completed its acquisition of Rockwood Holdings, Inc., a Delaware corporation (“Rockwood”). Pursuant to the terms of the previously announced Agreement and Plan of Merger (the “Merger Agreement”), Rockwood became a wholly-owned subsidiary of Albemarle.

At the effective time of the merger, each outstanding share of Rockwood common stock, par value $0.01 per share (other than shares owned, directly or indirectly, by Albemarle, Rockwood or the Merger Sub, as defined in the Merger Agreement, and shares with respect to which appraisal rights were properly exercised and not withdrawn), was converted into the right to receive (a) $50.65 in cash, without interest, and (b) 0.4803 of a share of common stock, par value $0.01 per share, of Albemarle.

“Our fourth quarter financial results, driven by strong Catalyst Solutions performance, allowed us to deliver 5% adjusted earnings per share growth in 2014 – well within the range of our guidance,” said Albemarle president and CEO Luke Kissam. “In addition, we closed the Rockwood acquisition in early January and have already captured approximately $30 million in annualized synergies, which is in line with our expectations.”

Quarterly Segment Results

Performance Chemicals reported net sales of $302.6 million in the fourth quarter of 2014, a decrease of 9 percent from net sales in the fourth quarter of 2013 of $333.5 million, primarily on unfavorable Fine Chemistry Services and Specialty Chemicals volumes, Fire Safety Solutions pricing, and unfavorable impacts from currency exchange, partly offset by favorable volumes in Fire Safety Solutions. Segment income for Performance Chemicals was $60.2 million in the fourth quarter of 2014, a decrease of 8 percent from $65.7 million in the fourth quarter of 2013, driven by unfavorable Fire Safety Solutions pricing and higher manufacturing costs, partly offset by favorable volumes in Fire Safety Solutions.

Catalyst Solutions generated net sales of $295.9 million in the fourth quarter of 2014, a decrease of 3 percent from net sales in the fourth quarter of 2013 of $306.2 million, primarily on unfavorable mix and pricing in general, unfavorable Clean Fuels Technology volumes, and unfavorable currency impacts, partly offset by favorable Heavy Oil Upgrading and Performance Catalyst Solutions volumes. Catalyst Solutions segment income was $67.0 million in the fourth quarter of 2014, a decrease of 8 percent from fourth quarter 2013 results of $72.6 million, due primarily to unfavorable mix and pricing and higher variable costs, partly offset by favorable volume impacts and favorable results from our unconsolidated joint ventures.

Income Taxes

Our adjusted effective income tax rates, which exclude discontinued operations, special and non-operating pension and OPEB items, were 24.0 percent and 19.7 percent for the fourth quarter of 2014 and 2013, respectively, and 22.3 percent and 21.7 percent for the full year 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 $459.2 million for the year ended December 31, 2014, up 6 percent versus the same period in 2013 on lower working capital. We had $2.5 billion in cash and cash equivalents at December 31, 2014, of which approximately $1.9 billion related to net proceeds from the issuance of senior notes during the fourth quarter 2014 in anticipation of the Rockwood acquisition. During the year ending December 31, 2014, cash on hand and cash provided by operations funded capital expenditures for plant, machinery and equipment of approximately $110.6 million, dividends to shareholders of $84.1 million, dividends to noncontrolling interests of $15.5 million and $150.0 million for repurchases of approximately 2.2 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

2


and assets for net proceeds of $104.7 million. A post-closing working capital settlement of $7.6 million was received in the first quarter of 2015.

During the fourth quarter of 2014, we issued a series of senior notes consisting of (i) $250 million aggregate principal amount of 3.000% senior notes due 2019, (ii) $425 million aggregate principal amount of 4.150% senior notes due 2024, (iii) $350 million aggregate principal amount of 5.450% senior notes due 2044 and (iv) €700 million aggregate principal amount of 1.875% senior notes due 2021. The net proceeds from the issuance of the senior notes, together with other borrowings, have been used primarily to finance the aggregate cash consideration of Rockwood acquisition, pay related fees and expenses and will also be used to repay our $325 million senior notes which mature on February 1, 2015. Also in the fourth quarter of 2014, we settled a forward starting interest rate swap which resulted in a payment of $33.4 million.

The Company ended the fourth quarter of 2014 with a Consolidated Leverage Ratio of approximately 2.5x, as defined by the first amendment to the Credit Agreement dated as of February 7, 2014. This amendment, dated August 15, 2014, among other changes, revised the definition of Consolidated Funded Debt to exclude Specified Senior Notes to the extent such notes include a “special mandatory redemption” provision requiring the Company to redeem them if (i) the Rockwood Acquisition was not consummated on or prior to May 15, 2015 or (ii) the Rockwood Acquisition Agreement terminated in accordance with its terms. Of the $1.9 billion of senior notes the Company raised during the fourth quarter of 2014, approximately $1.4 billion are Specified Senior Notes and excluded from Consolidated Funded Debt for the quarter ending December 31, 2014 for covenant purposes. This amendment effectively enabled the Company to pre-fund the financing required to close the Rockwood acquisition.

Earnings Call

The Company’s performance for the fourth quarter and full year ended December 31, 2014 will be discussed on a conference call at 10:00 AM Eastern time on January 29, 2015. The call can be accessed by dialing 888-713-4209 (International Dial-In # 617-213-4863), and entering conference ID 68967608. 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 premier specialty chemicals company with leading positions in attractive end markets around the world. With a broad customer reach and diverse end markets, Albemarle develops, manufactures and markets technologically advanced and high value added products, including lithium and lithium compounds, bromine and derivatives, catalysts and surface treatment chemistries used in a wide range of applications including consumer electronics, flame retardants, metal processing, plastics, contemporary and alternative transportation vehicles, refining, pharmaceuticals, agriculture, construction and custom chemistry services. Albemarle is focused on delivering differentiated, performance-based technologies that deliver innovative and sustainable solutions to its customers. The Company employs approximately 6,900 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 it serves.



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 transaction with Rockwood and the anticipated consequences and benefits of 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 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 joint proxy statement / prospectus we filed in connection with the 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
 
Year Ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Net sales
$
598,566

 
$
639,635

 
$
2,445,548

 
$
2,394,270

Cost of goods sold(a)
436,126

 
386,356

 
1,674,700

 
1,543,799

Gross profit
162,440

 
253,279

 
770,848

 
850,471

Selling, general and administrative expenses(a)
144,008

 
(28,479
)
 
355,135

 
158,189

Research and development expenses
21,394

 
21,287

 
88,310

 
82,246

Restructuring and other charges, net(b)
5,322

 
33,361

 
25,947

 
33,361

Acquisition and integration related costs(c)
15,054

 

 
30,158

 

Operating (loss) profit
(23,338
)
 
227,110

 
271,298

 
576,675

Interest and financing expenses(d)
(15,103
)
 
(9,224
)
 
(41,358
)
 
(31,559
)
Other expenses, net(e)
(10,307
)
 
(527
)
 
(16,761
)
 
(6,674
)
(Loss) income from continuing operations before income taxes and equity in net income of unconsolidated investments
(48,748
)
 
217,359

 
213,179

 
538,442

Income tax (benefit) expense(f)
(28,216
)
 
61,548

 
18,484

 
134,445

(Loss) income from continuing operations before equity in net income of unconsolidated investments
(20,532
)
 
155,811

 
194,695

 
403,997

Equity in net income of unconsolidated investments (net of tax)
7,542

 
6,421

 
35,742

 
31,729

Net (loss) income from continuing operations
(12,990
)
 
162,232

 
230,437

 
435,726

(Loss) income from discontinued operations (net of tax)(g)
(1,058
)
 
(886
)
 
(69,531
)
 
4,108

Net (loss) income
(14,048
)
 
161,346

 
160,906

 
439,834

Net income attributable to noncontrolling interests
(4,460
)
 
(5,413
)
 
(27,590
)
 
(26,663
)
Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171

Basic (loss) earnings per share

 

 

 

     Continuing operations
$
(0.22
)
 
$
1.93

 
$
2.57

 
$
4.88

     Discontinued operations
(0.02
)
 
(0.01
)
 
(0.88
)
 
0.05

 
$
(0.24
)
 
$
1.92

 
$
1.69

 
$
4.93

Diluted (loss) earnings per share

 

 

 

     Continuing operations
$
(0.22
)
 
$
1.92

 
$
2.57

 
$
4.85

     Discontinued operations
(0.02
)
 
(0.01
)
 
(0.88
)
 
0.05

 
$
(0.24
)
 
$
1.91

 
$
1.69

 
$
4.90

Weighted-average common shares outstanding – basic
78,144

 
81,226

 
78,696

 
83,839

Weighted-average common shares outstanding – diluted
78,545

 
81,713

 
79,102

 
84,322


See accompanying notes to the condensed consolidated financial information.


5


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

 
December 31,
 
December 31,
 
2014
 
2013
ASSETS
 
 
 
Cash and cash equivalents
$
2,489,768

 
$
477,239

Other current assets
859,082

 
1,005,676

Total current assets
3,348,850

 
1,482,915

Property, plant and equipment
2,620,670

 
2,972,084

Less accumulated depreciation and amortization
1,388,802

 
1,615,015

Net property, plant and equipment
1,231,868

 
1,357,069

Other assets and intangibles
642,385

 
744,813

Total assets
$
5,223,103

 
$
3,584,797

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
711,096

 
$
24,554

Other current liabilities
428,790

 
411,809

Total current liabilities
1,139,886

 
436,363

Long-term debt
2,223,035

 
1,054,310

Other noncurrent liabilities
314,663

 
222,160

Deferred income taxes
56,884

 
129,188

Albemarle Corporation shareholders’ equity
1,359,465

 
1,627,361

Noncontrolling interests
129,170

 
115,415

Total liabilities and equity
$
5,223,103


$
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)

 
Year Ended
 
December 31,
 
2014
 
2013
Cash and cash equivalents at beginning of year
$
477,239

 
$
477,696

Cash and cash equivalents at end of year
$
2,489,768

 
$
477,239

Sources of cash and cash equivalents:
 
 
 
Net income
$
160,906

 
$
439,834

Cash proceeds from divestitures
104,718

 

Proceeds from issuance of senior notes
1,888,197

 

Proceeds from borrowings of other long-term debt

 
117,000

Proceeds from other borrowings, net

 
398,544

Dividends received from unconsolidated investments and nonmarketable securities
40,688

 
21,632

Working capital changes
57,160

 

Uses of cash and cash equivalents:
 
 
 
Working capital changes

 
(31,003
)
Capital expenditures
(110,576
)
 
(155,346
)
Repurchases of common stock
(150,000
)
 
(582,298
)
Repayments of long-term debt
(6,017
)
 
(135,733
)
Payment for settlement of interest rate swap
(33,425
)
 

Dividends paid to shareholders
(84,102
)
 
(78,107
)
Dividends paid to noncontrolling interests
(15,535
)
 
(10,014
)
Pension and postretirement contributions
(13,916
)
 
(13,294
)
Non-cash and other items:
 
 
 
Depreciation and amortization
103,572

 
107,370

Loss on disposal of businesses
85,515

 

Pension and postretirement expense (benefit)
133,681

 
(132,707
)
Equity in net income of unconsolidated investments
(35,742
)
 
(31,729
)

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
 
Year Ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Net sales:
 
 
 
 
 
 
 
Performance Chemicals
$
302,635

 
$
333,462

 
$
1,351,596

 
$
1,392,664

Catalyst Solutions
295,931

 
306,173

 
1,093,952

 
1,001,606

Total net sales
$
598,566

 
$
639,635

 
$
2,445,548

 
$
2,394,270

Segment operating profit:
 
 
 
 
 
 
 
Performance Chemicals
$
61,892

 
$
68,610

 
$
306,616

 
$
334,275

Catalyst Solutions
62,238

 
68,707

 
224,407

 
194,322

Total segment operating profit
124,130

 
137,317

 
531,023

 
528,597

Equity in net income of unconsolidated investments:
 
 
 
 
 
 
 
Performance Chemicals
2,747

 
2,504

 
10,068

 
8,875

Catalyst Solutions
4,795

 
3,917

 
25,674

 
22,854

Total equity in net income of unconsolidated investments
7,542

 
6,421

 
35,742

 
31,729

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
Performance Chemicals
(4,460
)
 
(5,413
)
 
(27,590
)
 
(26,663
)
Total net income attributable to noncontrolling interests
(4,460
)
 
(5,413
)
 
(27,590
)
 
(26,663
)
Segment income:
 
 
 
 
 
 
 
Performance Chemicals
60,179

 
65,701

 
289,094

 
316,487

Catalyst Solutions
67,033

 
72,624

 
250,081

 
217,176

Total segment income
127,212

 
138,325

 
539,175

 
533,663

Corporate & other(a)
(127,092
)
 
123,154

 
(203,620
)
 
81,439

Restructuring and other charges, net(b)
(5,322
)
 
(33,361
)
 
(25,947
)
 
(33,361
)
Acquisition and integration related costs(c)
(15,054
)
 

 
(30,158
)
 

Interest and financing expenses(d)
(15,103
)
 
(9,224
)
 
(41,358
)
 
(31,559
)
Other expenses, net(e)
(10,307
)
 
(527
)
 
(16,761
)
 
(6,674
)
Income tax benefit (expense)(f)
28,216

 
(61,548
)
 
(18,484
)
 
(134,445
)
(Loss) income from discontinued operations (net of tax)(g)
(1,058
)
 
(886
)
 
(69,531
)
 
4,108

Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171


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 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 December 31, 2014 and 2013, net charges (benefits) amounted to $111.3 million ($71.0 million after income taxes, or $0.90 per share) and $(140.8) million ($89.5 million after income taxes, or $1.09 per share), respectively. The MTM actuarial loss (gain) was $112.6 million ($71.8 million after income taxes, or $0.91 per share) and $(139.0) million ($88.3 million after income taxes, or $1.08 per share) for the three months ended December 31, 2014 and 2013, respectively, and resulted from the annual remeasurement of the plans in the fourth quarter. MTM actuarial gains/losses recorded in the fourth quarter may differ from the year-to-date amounts to the extent that remeasurements occurred in previous quarters.
For the year ended December 31, 2014 and 2013, net charges (benefits) amounted to $125.5 million ($80.0 million after income taxes, or $1.01 per share) and $(146.2) million ($92.8 million after income taxes, or $1.10 per share), respectively. The MTM actuarial loss (gain) was $130.8 million ($83.3 million after income taxes, or $1.05 per share) and $(139.0) million ($88.3 million after income taxes, or $1.05 per share) for the years ended December 31, 2014 and 2013, respectively, and resulted from the annual remeasurement of the plans in the fourth quarter.

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
 
Year Ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Cost of goods sold:
 
 
 
 
 
 
 
MTM actuarial loss (gain)
$
30.7

 
$
(42.7
)
 
$
36.4

 
$
(42.7
)
Interest cost and expected return on assets, net
(0.4
)
 
(0.8
)
 
(1.9
)
 
(3.1
)
Total
$
30.3

 
$
(43.5
)
 
$
34.5

 
$
(45.8
)
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
MTM actuarial loss (gain)
$
81.9

 
$
(96.3
)
 
$
94.4

 
$
(96.3
)
Interest cost and expected return on assets, net
(0.9
)
 
(1.0
)
 
(3.4
)
 
(4.1
)
Total
$
81.0

 
$
(97.3
)
 
$
91.0

 
$
(100.4
)

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

For the three months ended December 31, 2014 -
Net charges of $6.5 million ($4.3 million after income taxes, or $0.05 per share) in connection with a reduction of aluminum alkyls high cost supply capacity.
Net adjustments of ($1.2) million ($0.9 million after taxes, or $0.01 per share) associated with the finalization of the workforce reduction plan initiated in the fourth quarter of 2013.

For the year ended December 31, 2014 -
Net charges amounting to $23.5 million ($15.5 million after income taxes, or $0.20 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.
Net adjustments of ($1.2) million ($0.9 million after taxes, or $0.01 per share) associated with the finalization of the workforce reduction plan initiated in the fourth quarter of 2013.
Other charges of $0.3 million ($0.2 million after income taxes).


9


For the three months and year ended December 31, 2013 -
Charges of $33.4 million ($21.9 million after income taxes, or $0.27 per share in the fourth quarter and $0.26 per share for the year) for termination benefits related to the workforce reduction plan initiated in the fourth quarter of 2013.

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

For the three months ended December 31, 2014 -
Transaction and integration fees related to the acquisition of Rockwood of $14.3 million ($9.0 million after income taxes, or $0.11 per share).
Acquisition-related costs on other significant projects of $0.8 million ($0.5 million after income taxes, or $0.01 per share).

For the year ended December 31, 2014 -
Transaction and integration fees related to the acquisition of Rockwood of $23.6 million ($14.9 million after income taxes, or $0.19 per share).
Acquisition-related costs on other significant projects of $6.6 million ($4.2 million after income taxes, or $0.05 per share).

(d)
Included in Interest and financing expenses for the three months and year ended December 31, 2014 was $4.5 million ($2.8 million after income taxes, or $0.04 per share) for interest and financing expenses incurred from our new senior notes issued during the fourth quarter 2014 in connection with the acquisition of Rockwood, which did not close until January 2015.

(e)
Included in Other expenses, net for the three months and year ended December 31, 2014 was $10.7 million ($6.7 million after income taxes, or $0.09 per share) and $17.7 million ($11.2 million after income taxes, or $0.14 per share), respectively, for amortization of bridge facility fees and other financing fees related to the acquisition of Rockwood as well as ($0.2) million ($0.1 million after income taxes) for interest income earned on the cash proceeds of the new senior notes issued in connection with the acquisition of Rockwood.

(f)
Included in Income tax (benefit) expense for the three months and year ended December 31, 2014 was $1.6 million, or $0.02 per share, of income tax expense associated with the restructure of a Brazilian entity in anticipation of the acquisition of Rockwood. Also included in Income tax (benefit) expense for the year ended December 31, 2014 were discrete net tax benefit items of ($2.1) million, or ($0.03) per share, related principally to the expiration of statutes of limitations.

(g)
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 post-closing working capital settlement of $7.6 million which was received in the first quarter of 2015. 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 $85.5 million ($65.7 million after income taxes, or $0.83 per share) recorded for the year ended December 31, 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.

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


10


Additional Information

It should be noted that 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, adjusted EBITDA by operating segment, 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 supplemental reconciliations of our segment operating profit and segment income amounts to GAAP Operating (loss) profit and GAAP Net (loss) income attributable to Albemarle Corporation (“earnings”), respectively; adjusted earnings, EBITDA and adjusted EBITDA to Net (loss) income attributable to Albemarle Corporation and adjusted EBITDA by operating segment to GAAP Operating (loss) profit.

11


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, adjusted EBITDA and adjusted EBITDA by operating segment, 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, adjusted EBITDA and adjusted EBITDA by operating segment 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, adjusted EBITDA and adjusted EBITDA by operating segment should not be considered as alternatives to Operating (loss) profit or Net (loss) 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 (loss) profit and Net (loss) income attributable to Albemarle Corporation, respectively, the most directly comparable financial measures calculated and reported in accordance with GAAP.

 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Total segment operating profit
$
124,130

 
$
137,317

 
$
531,023

 
$
528,597

Corporate & other
(127,092
)
 
123,154

 
(203,620
)
 
81,439

Restructuring and other charges, net
(5,322
)
 
(33,361
)
 
(25,947
)
 
(33,361
)
Acquisition and integration related costs
(15,054
)
 

 
(30,158
)
 

GAAP Operating (loss) profit
$
(23,338
)
 
$
227,110

 
$
271,298

 
$
576,675

Total segment income
$
127,212

 
$
138,325

 
$
539,175

 
$
533,663

Corporate & other
(127,092
)
 
123,154

 
(203,620
)
 
81,439

Restructuring and other charges, net
(5,322
)
 
(33,361
)
 
(25,947
)
 
(33,361
)
Acquisition and integration related costs
(15,054
)
 

 
(30,158
)
 

Interest and financing expenses
(15,103
)
 
(9,224
)
 
(41,358
)
 
(31,559
)
Other expenses, net
(10,307
)
 
(527
)
 
(16,761
)
 
(6,674
)
Income tax benefit (expense)
28,216

 
(61,548
)
 
(18,484
)
 
(134,445
)
(Loss) income from discontinued operations
(1,058
)
 
(886
)
 
(69,531
)
 
4,108

GAAP Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171



12


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 (loss) 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 (loss) 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 (loss) 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
 
Year Ended
 
December 31,
 
December 31,
 
2014
 
2013
 
2014
 
2013
Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items (net of tax)
70,978

 
(89,464
)
 
79,994

 
(92,829
)
Special items (net of tax)
23,906

 
21,945

 
49,307

 
21,945

Loss (income) from discontinued operations (net of tax)
1,058

 
886

 
69,531

 
(4,108
)
Adjusted net income attributable to Albemarle Corporation
$
77,434

 
$
89,300

 
$
332,148

 
$
338,179

 
 
 
 
 
 
 
 
Net (loss) income attributable to Albemarle Corporation
$
(18,508
)
 
$
155,933

 
$
133,316

 
$
413,171

Add back:
 
 
 
 
 
 
 
Interest and financing expenses
15,103

 
9,224

 
41,358

 
31,559

Income tax (benefit) expense (from continuing and discontinued operations)
(27,158
)
 
61,406

 
(2,424
)
 
136,322

Depreciation and amortization
25,228

 
27,893

 
103,572

 
107,370

EBITDA
(5,335
)
 
254,456

 
275,822

 
688,422

Non-operating pension and OPEB items
111,321

 
(140,818
)
 
125,462

 
(146,193
)
Special items (excluding special items associated with interest expense)
30,847

 
33,361

 
73,597

 
33,361

Loss (income) from discontinued operations

 
1,028

 
90,439

 
(5,985
)
Less depreciation and amortization from discontinued operations

 
(2,985
)
 
(3,165
)
 
(12,054
)
Adjusted EBITDA
$
136,833

 
$
145,042

 
$
562,155

 
$
557,551

 
 
 
 
 
 
 
 
Net sales
$
598,566

 
$
639,635

 
$
2,445,548

 
$
2,394,270

EBITDA Margin
(0.9
)%
 
39.8
%
 
11.3
%
 
28.8
%
Adjusted EBITDA Margin
22.9
 %
 
22.7
%
 
23.0
%
 
23.3
%


13



See below for a reconciliation of adjusted EBITDA by operating segment, the non-GAAP financial measure, to Operating (loss) profit, the most directly comparable financial measure calculated and reporting in accordance with GAAP. Adjusted EBITDA by operating segment is defined as Operating (loss) profit, excluding depreciation and amortization, and adjusted for special and non-operating pension and OPEB items as listed below, plus Equity in net income (loss) of unconsolidated investments, less Net income attributable to noncontrolling interests. Adjusted EBITDA for the Corporate & other segment also includes Other expenses, net.

 
Performance Chemicals
 
Catalyst Solutions
 
Corporate
& Other
 
Consolidated
Three months ended December 31, 2014:
 
 
 
 
 
 
 
Operating profit
$
61,892

 
$
62,238

 
$
(147,468
)
 
$
(23,338
)
Depreciation and amortization
11,798

 
12,227

 
1,203

 
25,228

Other expenses, net

 

 
(10,307
)
 
(10,307
)
Special items (excluding special items associated with interest expense)

 

 
30,847

 
30,847

Non-operating pension and OPEB items

 

 
111,321

 
111,321

Equity in net income of unconsolidated investments
2,747

 
4,795

 

 
7,542

Net income attributable to noncontrolling interests
(4,460
)
 

 

 
(4,460
)
Adjusted EBITDA by operating segment
$
71,977

 
$
79,260

 
$
(14,404
)
 
$
136,833

 
 
 
 
 
 
 
 
Three months ended December 31, 2013:
 
 
 
 
 
 
 
Operating profit
$
68,610

 
$
68,707

 
$
89,793

 
$
227,110

Depreciation and amortization
11,347

 
12,961

 
600

 
24,908

Other expenses, net

 

 
(527
)
 
(527
)
Special items (excluding special items associated with interest expense)

 

 
33,361

 
33,361

Non-operating pension and OPEB items

 

 
(140,818
)
 
(140,818
)
Equity in net income of unconsolidated investments
2,504

 
3,917

 

 
6,421

Net income attributable to noncontrolling interests
(5,413
)
 

 

 
(5,413
)
Adjusted EBITDA by operating segment
$
77,048

 
$
85,585

 
$
(17,591
)
 
$
145,042

 
 
 
 
 
 
 
 
Year ended December 31, 2014:
 
 
 
 
 
 
 
Operating profit
$
306,616

 
$
224,407

 
$
(259,725
)
 
$
271,298

Depreciation and amortization
48,233

 
49,622

 
2,552

 
100,407

Other expenses, net

 

 
(16,761
)
 
(16,761
)
Special items (excluding special items associated with interest expense)

 

 
73,597

 
73,597

Non-operating pension and OPEB items

 

 
125,462

 
125,462

Equity in net income of unconsolidated investments
10,068

 
25,674

 

 
35,742

Net income attributable to noncontrolling interests
(27,590
)
 

 

 
(27,590
)
Adjusted EBITDA by operating segment
$
337,327

 
$
299,703

 
$
(74,875
)
 
$
562,155

 
 
 
 
 
 
 
 
Year ended December 31, 2013:
 
 
 
 
 
 
 
Operating profit
$
334,275

 
$
194,322

 
$
48,078

 
$
576,675

Depreciation and amortization
43,472

 
49,656

 
2,188

 
95,316

Other expenses, net

 

 
(6,674
)
 
(6,674
)
Special items (excluding special items associated with interest expense)

 

 
33,361

 
33,361

Non-operating pension and OPEB items

 

 
(146,193
)
 
(146,193
)
Equity in net income of unconsolidated investments
8,875

 
22,854

 

 
31,729

Net income attributable to noncontrolling interests
(26,663
)
 

 

 
(26,663
)
Adjusted EBITDA by operating segment
$
359,959

 
$
266,832

 
$
(69,240
)
 
$
557,551


14