2Q15 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) August 5, 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 August 5, 2015, Albemarle Corporation (the “Company”) issued a press release regarding its results for the second quarter ended June 30, 2015. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 6, 2015, the Company will hold a teleconference for analysts and media to discuss results for the second quarter ended June 30, 2015. 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, 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, EBITDA, adjusted EBITDA and adjusted effective income tax rates should not be considered as alternatives to net income attributable to Albemarle Corporation (“earnings”), diluted earnings per share and effective income tax rates as determined in accordance with GAAP. Further, EBITDA margin and adjusted EBITDA margin should not be considered as alternatives to earnings 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 August 5, 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: August 5, 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 August 5, 2015, issued by the Company.
 
 
 



2Q15 Earnings Release Exhibit 99.1

Exhibit 99.1
Contact:
 
Matt Juneau
225.388.7940





Albemarle reports second quarter 2015 results



BATON ROUGE, LA - August 5, 2015

Second quarter 2015 highlights:
Adjusted earnings of $0.84 per share.
Three core business units grew constant currency revenue by 7% and adjusted EBITDA by 10% from prior year, and achieved adjusted EBITDA margins of 30%.
Actions taken to date will result in $50 million in acquisition synergies, in line with expectations.
Full year EPS guidance reaffirmed at $3.65 to $4.05.
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
In thousands, except per share amounts
2015
 
2014
 
2015
 
2014
Net sales
$
931,485

 
$
604,721

 
$
1,815,889

 
$
1,204,564

Adjusted EBITDA
$
230,081

 
$
144,688

 
$
495,709

 
$
280,718

Net income from continuing operations
$
59,366

 
$
89,404

 
$
106,515

 
$
155,408

Net income attributable to Albemarle Corporation
$
52,147

 
$
22,447

 
$
95,262

 
$
79,030

Diluted earnings per share
$
0.46

 
$
0.28

 
$
0.86

 
$
0.99

   Non-operating pension and OPEB items(a)
(0.01
)
 
(0.01
)
 
(0.03
)
 
0.10

   Special items(b)
0.39

 
0.07

 
1.18

 
0.21

   Discontinued operations(c)

 
0.76

 

 
0.78

Adjusted diluted earnings per share
$
0.84

 
$
1.10

 
$
2.01

 
$
2.08


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


Albemarle Corporation (NYSE: ALB) reported second quarter 2015 earnings of $52.1 million, or $0.46 per share, compared to second quarter 2014 earnings of $22.4 million, or $0.28 per share. Second quarter 2015 adjusted earnings were $95.1 million, or $0.84 per share, compared to $86.8 million, or $1.10 per share, for the second quarter of 2014 (see notes to the condensed consolidated financial information). The Company reported net sales of $931.5 million in the second quarter of 2015, up from net sales of $604.7 million in the second quarter of 2014, driven primarily by the acquisition of Rockwood Holdings, Inc. (“Rockwood”), which closed January 12, 2015.

Earnings for the six months ended June 30, 2015 were $95.3 million, or $0.86 per share, compared to $79.0 million, or $0.99 per share, for the same period in 2014. Adjusted earnings for the six months ended June 30, 2015 (including $52.4 million in non-cash currency transaction gains from the first quarter) were $222.3 million, or $2.01 per share, compared to $165.2 million, or $2.08 per share, for 2014. Net sales for the six months ended June 30, 2015 were $1.82 billion, up from net sales of $1.20 billion, driven primarily by the acquisition of Rockwood.


1


“All of Albemarle’s core businesses, with the exception of Clean Fuels Technologies, delivered outstanding results in the second quarter. EBITDA margins in our core businesses were 30% for the quarter and 29% for the first half of the year,” said Albemarle President and CEO, Luke Kissam. “Our integration team has initiated actions which will result in our achieving at least $50 million in cost savings in 2015. Finally, we demonstrated the superior cash generating power of our businesses, with first half free cash flow on track with our expectations. Based on our performance year to date, we are reaffirming our full year EPS guidance of $3.65 - $4.05.”

As previously announced, as a result of the completion of the acquisition of Rockwood, the Company has realigned its global business units. The new structure aligns the Company’s strategic assets and businesses to be market-focused and allows it to more effectively leverage its combined resources on innovation and growth. The new reporting structure consists of three reportable operating segments, or global business units (“GBUs”): Performance Chemicals, Refining Solutions and Chemetall Surface Treatment. Three businesses that the Company previously announced it intends to sell will be reported together in the “All Other” category.

The acquisition of Rockwood was completed on January 12, 2015 for a purchase price of approximately $5.7 billion. The cash consideration was funded with proceeds from senior notes we issued in 2014 and borrowings under our term loan credit agreement, cash bridge facility and revolving credit agreement. The results of Rockwood from January 1, 2015 to January 12, 2015 (“stub period”) are excluded from the year-to-date financial results presented herein. Excluded net sales and adjusted EBITDA for the stub period were $33.2 million and $3.4 million, respectively.

Quarterly Segment Results

In order to provide a meaningful comparison of the results of operations, where applicable, segment results for the second quarter and six months ended June 30, 2015 are compared to pro forma segment results for the comparative periods of 2014. The 2014 pro forma segment results are based on the historical combined consolidated financial statements of Albemarle and Rockwood and were prepared to illustrate the effects of the integration of the Rockwood business, as well as the change in reporting structure discussed above. This supplemental pro forma financial information is also located on our website and in Albemarle’s Current Report on Form 8-K which was filed on April 13, 2015.

Performance Chemicals reported net sales of $437.0 million in the second quarter of 2015, an increase of 10.0% from second quarter 2014 pro forma net sales of $397.1 million. Excluding $21.8 million of unfavorable currency exchange impacts, net sales increased by 15.5% from the second quarter of 2014 primarily due to higher sales volumes for Bromine, Lithium and PCS as well as favorable price impacts. Adjusted EBITDA for Performance Chemicals was $148.7 million, an increase of 24.5% from second quarter 2014 pro forma results of $119.5 million. Excluding $6.5 million of unfavorable currency exchange impacts, adjusted EBITDA increased by 29.9%. The increase was primarily driven by higher overall sales volumes, favorable Bromine and Lithium pricing, and the addition of our Talison joint venture on May 28th, 2014. Net sales and adjusted EBITDA for the second quarter were both favorably impacted by the delivery of a large Bromine related order that was previously expected to be delivered in the third quarter.

Refining Solutions generated net sales of $164.6 million in the second quarter of 2015, a decrease of 19.7% from net sales of $205.0 million in the second quarter of 2014. Excluding $7.2 million of unfavorable currency exchange impacts, net sales decreased by 16.2% primarily driven by unfavorable Clean Fuels Technology volumes partly offset by favorable Heavy Oil Upgrading volumes. Adjusted EBITDA for Refining Solutions was $48.2 million in the second quarter of 2015, a decrease of 27.6% from second quarter 2014 results of $66.6 million. Excluding $1.0 million of unfavorable currency exchange impacts, Adjusted EBITDA decreased by 26.1% due primarily to lower Clean Fuels Technology sales volumes partly offset by favorable Heavy Oil Upgrading volumes.

Chemetall Surface Treatment reported net sales of $213.2 million in the second quarter of 2015, an increase of 0.4% from second quarter 2014 pro forma net sales of $212.4 million. Excluding $29.2 million of unfavorable currency exchange impacts, net sales increased by 14.1% primarily due to increased sales volumes related to the acquisition of the remaining shares of the Chemetall Shanghai joint venture in February of this year and favorable pricing. Adjusted EBITDA for Chemetall Surface Treatment was $48.4 million in the second quarter of 2015, a decrease of 1.3% from second quarter 2014 pro forma results of $49.1 million. Excluding $4.9 million of unfavorable currency exchange impacts, adjusted EBITDA increased by 8.6% due primarily to higher overall sales volumes and favorable pricing offset slightly by increased selling, general, and administrative expenses primarily associated with the Chemetall Shanghai joint venture acquisition.

2



All Other net sales were $113.4 million in the second quarter of 2015, a decrease of 24.0% from pro forma net sales of $149.2 million in the second quarter of 2014. Excluding $10.3 million of unfavorable currency exchange impacts, net sales decreased by 17.1% primarily due to unfavorable Fine Chemistry Services volumes and pricing . All Other adjusted EBITDA was $9.7 million in the second quarter of 2015, a decrease of 66.1% from second quarter 2014 pro forma results of $28.6 million. Excluding $2.2 million of unfavorable currency exchange impacts, adjusted EBITDA decreased by 58.3% due primarily to lower overall sales volumes and unfavorable Fine Chemistry Services pricing.

In total, the unfavorable currency exchange impact was $68.5 million in net sales and $12.7 million in adjusted EBITDA (including $1.9 million of favorable currency exchange impacts on Corporate results).

Corporate Results

Corporate adjusted EBITDA was $(25.0) million in the second quarter of 2015 compared to $(33.4) million pro forma adjusted EBITDA in the second quarter of 2014. The $8.4 million improvement is primarily related to achieved synergies and $1.9 million of favorable impacts from currency exchange.

Income Taxes

Our adjusted effective income tax rates, which exclude discontinued operations, special and non-operating pension and OPEB items, were 28.4% and 22.6% for the second quarter of 2015 and 2014, 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. The effective tax rate increase compared to the prior year is primarily driven by the Rockwood acquisition, which caused a reduction in various benefits in our effective tax rate.

Cash Flow

Our cash flow from operations was approximately $133.2 million for the six months ended June 30, 2015, down 55% versus the same period in 2014 primarily due to significant cash expenses in the current period related to the Rockwood acquisition, including acquisition fees, costs to deliver synergy projects, and tax payments to repatriate cash from overseas. We had $207.2 million in cash and cash equivalents at June 30, 2015 as compared to $2.5 billion at December 31, 2014. Cash on hand, cash provided by operations and proceeds from borrowings funded $2.1 billion for acquisitions, $111.7 million of capital expenditures for plant, machinery and equipment and dividends to shareholders of $54.2 million during the six months ended June 30, 2015.

Earnings Call

The Company’s performance for the second quarter ended June 30, 2015 will be discussed on a conference call at 9:00 AM Eastern time on August 6, 2015. The call can be accessed by dialing 888-680-0869 (International Dial-In # 617-213-4854), and entering conference ID 45458728. 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 bromine 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
931,485

 
$
604,721

 
$
1,815,889

 
$
1,204,564

Cost of goods sold(a)(b)
630,919

 
397,358

 
1,256,857

 
801,602

Gross profit
300,566

 
207,363

 
559,032

 
402,962

Selling, general and administrative expenses(a)
147,712

 
67,011

 
283,477

 
145,115

Research and development expenses
25,336

 
21,937

 
51,828

 
44,509

Restructuring and other charges, net(b)

 
3,332

 

 
20,332

Acquisition and integration related costs(b)
24,166

 
4,843

 
83,689

 
4,843

Operating profit
103,352

 
110,240

 
140,038

 
188,163

Interest and financing expenses(b)
(33,182
)
 
(8,733
)
 
(68,928
)
 
(17,506
)
Other income (expenses), net(b)
541

 
(979
)
 
50,498

 
164

Income from continuing operations before income taxes and equity in net income of unconsolidated investments
70,711

 
100,528

 
121,608

 
170,821

Income tax expense(b)
17,139

 
21,773

 
31,279

 
34,963

Income from continuing operations before equity in net income of unconsolidated investments
53,572

 
78,755

 
90,329

 
135,858

Equity in net income of unconsolidated investments (net of tax)(b)
5,794

 
10,649

 
16,186

 
19,550

Net income from continuing operations
59,366

 
89,404

 
106,515

 
155,408

Loss from discontinued operations (net of tax)(c)

 
(60,025
)
 

 
(61,794
)
Net income
59,366

 
29,379

 
106,515

 
93,614

Net income attributable to noncontrolling interests
(7,219
)
 
(6,932
)
 
(11,253
)
 
(14,584
)
Net income attributable to Albemarle Corporation
$
52,147

 
$
22,447

 
$
95,262

 
$
79,030

Basic earnings (loss) per share

 

 

 

     Continuing operations
$
0.46

 
$
1.05

 
$
0.86

 
$
1.78

     Discontinued operations

 
(0.76
)
 

 
(0.78
)
 
$
0.46

 
$
0.29

 
$
0.86

 
$
1.00

Diluted earnings (loss) per share

 

 

 

     Continuing operations
$
0.46

 
$
1.04

 
$
0.86

 
$
1.77

     Discontinued operations

 
(0.76
)
 

 
(0.78
)
 
$
0.46

 
$
0.28

 
$
0.86

 
$
0.99

Weighted-average common shares outstanding – basic
112,189

 
78,662

 
110,160

 
79,199

Weighted-average common shares outstanding – diluted
112,607

 
79,091

 
110,536

 
79,602


See accompanying notes to the condensed consolidated financial information.


5


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

 
June 30,
 
December 31,
 
2015
 
2014
ASSETS
 
 
 
Cash and cash equivalents
$
207,238

 
$
2,489,768

Other current assets
1,446,843

 
859,082

Total current assets
1,654,081

 
3,348,850

Property, plant and equipment
4,073,722

 
2,620,670

Less accumulated depreciation and amortization
1,455,185

 
1,388,802

Net property, plant and equipment
2,618,537

 
1,231,868

Other assets and intangibles
5,498,191

 
642,385

Total assets
$
9,770,809

 
$
5,223,103

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
428,000

 
$
711,096

Other current liabilities
940,078

 
428,790

Total current liabilities
1,368,078

 
1,139,886

Long-term debt
3,562,308

 
2,223,035

Other noncurrent liabilities
757,800

 
314,663

Deferred income taxes
766,713

 
56,884

Albemarle Corporation shareholders’ equity
3,179,077

 
1,359,465

Noncontrolling interests
136,833

 
129,170

Total liabilities and equity
$
9,770,809


$
5,223,103


See accompanying notes to the condensed consolidated financial information.

6


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

 
Six Months Ended
 
June 30,
 
2015
 
2014
Cash and cash equivalents at beginning of year
$
2,489,768

 
$
477,239

Cash and cash equivalents at end of period
$
207,238

 
$
515,119

Sources of cash and cash equivalents:
 
 
 
Net income
$
106,515

 
$
93,614

Proceeds from borrowings of long-term debt
1,000,000

 

Proceeds from other borrowings, net
133,699

 

Dividends received from unconsolidated investments and nonmarketable securities
45,526

 
11,944

Decrease in restricted cash
57,550

 

Working capital changes

 
63,235

Uses of cash and cash equivalents:
 
 
 
Working capital changes
(44,932
)
 

Capital expenditures
(111,723
)
 
(46,670
)
Acquisition of Rockwood, net of cash acquired
(2,051,645
)
 

Other acquisitions, net of cash acquired
(48,845
)
 

Repurchases of common stock

 
(150,000
)
Repayments of long-term debt
(1,331,648
)
 
(3,016
)
Repayments of other borrowings, net

 
(13,083
)
Pension and postretirement contributions
(10,973
)
 
(4,717
)
Dividends paid to shareholders
(54,238
)
 
(41,316
)
Non-cash and other items:
 
 
 
Depreciation and amortization
131,469

 
52,714

Write-offs associated with restructuring and other

 
6,333

Impairment of assets of discontinued operations

 
80,711

Pension and postretirement (benefit) expense
(1,071
)
 
17,917

Deferred income taxes
(41,207
)
 
(16,114
)
Equity in net income of unconsolidated investments (net of tax)
(16,186
)
 
(19,550
)

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
 
Six Months Ended
 
June 30,
 
June 30,
 
Actual
 
Actual
 
Pro forma
 
Actual
 
Actual
 
Pro forma
 
2015
 
2014
 
2014
 
2015
 
2014
 
2014
Net sales:
 
 
 
 
 
 
 
 
 
 
 
Performance Chemicals
$
436,962

 
$
280,377

 
$
397,146

 
$
825,328

 
$
556,274

 
$
788,818

Refining Solutions
164,573

 
205,024

 
205,024

 
343,739

 
399,685

 
399,685

Chemetall Surface Treatment
213,195

 

 
212,371

 
405,286

 

 
416,112

All Other
113,404

 
119,320

 
149,229

 
235,773

 
248,605

 
310,388

Corporate
3,351

 

 
3,256

 
5,763

 

 
6,363

Total net sales
$
931,485

 
$
604,721

 
$
967,026

 
$
1,815,889

 
$
1,204,564

 
$
1,921,366

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
Performance Chemicals
$
148,682

 
$
76,954

 
$
119,453

 
$
279,210

 
$
150,339

 
$
234,639

Refining Solutions
48,200

 
66,551

 
66,551

 
90,393

 
127,585

 
127,585

Chemetall Surface Treatment
48,442

 

 
49,072

 
94,446

 

 
95,516

All Other
9,714

 
21,816

 
28,626

 
23,278

 
42,511

 
56,238

Corporate(a)
(24,957
)
 
(20,633
)
 
(33,350
)
 
8,382

 
(39,717
)
 
(67,276
)
Total adjusted EBITDA
$
230,081

 
$
144,688

 
$
230,352

 
$
495,709

 
$
280,718

 
$
446,702


Performance Chemicals - details by product category:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
Actual
 
Actual
 
Pro forma
 
Actual
 
Actual
 
Pro forma
 
2015
 
2014
 
2014
 
2015
 
2014
 
2014
Net sales:
 
 
 
 
 
 
 
 
 
 
 
Bromine
$
223,959

 
$
195,601

 
$
195,601

 
$
413,551

 
$
398,397

 
$
398,397

Lithium
127,021

 

 
116,769

 
241,407

 

 
232,544

PCS
85,982

 
84,776

 
84,776

 
170,370

 
157,877

 
157,877

Total Performance Chemicals
$
436,962

 
$
280,377

 
$
397,146

 
$
825,328

 
$
556,274

 
$
788,818

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
 
Bromine
$
68,697

 
$
52,530

 
$
52,530

 
$
121,630

 
$
109,247

 
$
109,247

Lithium
53,645

 

 
42,499

 
104,223

 

 
84,300

PCS
26,340

 
24,424

 
24,424

 
53,357

 
41,092

 
41,092

Total Performance Chemicals
$
148,682

 
$
76,954

 
$
119,453

 
$
279,210

 
$
150,339

 
$
234,639


See accompanying notes to the condensed consolidated financial information and non-GAAP reconciliations below.

8


Notes to the Condensed Consolidated Financial Information

(a)
Non-operating pension and OPEB items, consisting of mark-to-market (“MTM”) actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our reportable segments and are included in the Corporate category. 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Cost of goods sold:
 
 
 
 
 
 
 
MTM actuarial (gain) loss
$
(0.1
)
 
$

 
$
(0.1
)
 
$
2.9

Interest cost and expected return on assets, net
(0.5
)
 
(0.5
)
 
(0.7
)
 
(1.0
)
Total
$
(0.6
)
 
$
(0.5
)
 
$
(0.8
)
 
$
1.9

 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
MTM actuarial loss
$

 
$

 
$

 
$
12.5

Settlements/curtailments

 

 
(2.6
)
 

Interest cost and expected return on assets, net
(0.7
)
 
(0.9
)
 
(1.4
)
 
(1.7
)
Total
$
(0.7
)
 
$
(0.9
)
 
$
(4.0
)
 
$
10.8


Settlements/curtailments for the six months ended June 30, 2015 resulted from the termination of a domestic OPEB plan during the first quarter of 2015. The MTM actuarial loss for the six months ended June 30, 2014 resulted from a 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 of 2014 in connection with a workforce reduction plan initiated in the fourth quarter of 2013.

(b)
In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items within the periods presented as special and excluded them from our adjusted earnings calculation. A listing of these items, as well as a detailed description of each follows below (per diluted share):

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Utilization of inventory markup(1)
$
0.25

 
$

 
$
0.59

 
$

Restructuring and other charges, net(2)

 
0.03

 

 
0.17

Acquisition and integration related costs(3)
0.15

 
0.04

 
0.53

 
0.04

Interest and financing expenses related to Rockwood acquisition(4)

 

 
0.01

 

Financing fees related to Rockwood acquisition(5)

 

 
0.03

 

Discrete tax items(6)
(0.01
)
 

 
0.02

 

Total special items
$
0.39

 
$
0.07

 
$
1.18

 
$
0.21


(1)
In connection with the acquisition of Rockwood, the Company valued Rockwood’s existing inventory at fair value as of the acquisition date, which resulted in a markup of the underlying net book value of the inventory. The inventory markup is being expensed over the estimated remaining selling period. For the three months ended June 30, 2015, $27.3 million ($18.5 million after income taxes, or $0.16 per share) was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $10.0 million ($0.09 per share), related to the utilization of the inventory markup. For the six months ended June 30, 2015, $67.6 million ($47.1 million after income taxes, or $0.43 per share) was included in

9


Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $17.9 million ($0.16 per share), related to the utilization of the inventory markup.

(2)
Restructuring and other charges consisted of the following:

Three months ended June 30, 2014 -

A write-off of $3.3 million ($2.1 million after income taxes, or $0.03 per share) for certain multi-product facility project costs that we do not expect to recover in future periods.

Six months ended June 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.
A write-off of $3.3 million ($2.1 million after income taxes, or $0.03 per share) for certain multi-product facility project costs that we do not expect to recover in future periods.

(3)
Acquisition and integration related costs consisted of the following:

Three months ended June 30, 2015 -

$21.3 million directly related to the acquisition of Rockwood and $2.9 million in connection with other significant projects. After income taxes, these charges totaled $16.4 million, or $0.15 per share.

Six months ended June 30, 2015 -

$78.7 million directly related to the acquisition of Rockwood and $5.0 million in connection with other significant projects. After income taxes, these charges totaled $58.6 million, or $0.53 per share.

Three and six months ended June 30, 2014 -

$4.8 million ($3.1 million after income taxes, or $0.04 per share) in connection with other significant projects.

(4)
Included in Interest and financing expenses for the six months ended June 30, 2015 is $1.6 million ($1.1 million after income taxes, or $0.01 per share) of interest and financing expenses associated with senior notes we issued in the fourth quarter 2014 in connection with the acquisition of Rockwood, which did not close until January 12, 2015.

(5)
Included in Other income (expenses), net, for the six months ended June 30, 2015 is $4.4 million ($3.2 million after income taxes, or $0.03 per share) for amortization of bridge facility fees and other financing fees related to the acquisition of Rockwood.

(6)
Included in Income tax expense for the three and six months ended June 30, 2015 is a benefit of $1.0 million, or $0.01 per share, related mainly to prior year uncertain tax position adjustments associated with lapses in statutes of limitations. Also included in Income tax expense for the six months ended June 30, 2015 are expenses of $3.2 million, or $0.03 per share, associated with U.S. provision to return adjustments, the release of uncertain tax positions associated with a lapse in the statute of limitations, and the inclusion of liabilities for non-indefinitely invested earnings on the announcement that the Company intends to sell its Minerals operating segment, which includes entities in Germany.

(c)
On April 15, 2014, the Company signed a definitive agreement to sell its antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc. Included in the transaction were Albemarle’s manufacturing sites in Orangeburg, South Carolina and Jinshan, China, along with Albemarle’s antioxidant product lines manufactured in Ningbo, China. In the second quarter of 2014, the Company began accounting for these assets as held for sale and recorded a pre-tax charge of $80.7 million ($60.3 million after income taxes, or $0.76 per share) related to the expected loss on the anticipated sale of the assets. The expected loss

10


represented the difference between the carrying value of the related assets and their estimated fair value, based on the estimated sales price as outlined in the agreement less estimated costs to sell. The expected loss and estimated costs to sell, net of related taxes, are included in Loss from discontinued operations (net of tax) in our consolidated statements of income for the three-month and six-month periods ended June 30, 2014.

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, 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 below for supplemental reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP.

11


ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)
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 (“earnings”), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted earnings is defined as earnings before discontinued operations and the special and non-operating pension and OPEB items as listed below. EBITDA is defined as earnings before interest and financing expenses, income taxes, and 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net income attributable to Albemarle Corporation
$
52,147

 
$
22,447

 
$
95,262

 
$
79,030

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items (net of tax)
(862
)
 
(855
)
 
(3,089
)
 
8,089

Special items (net of tax)
43,807

 
5,189

 
130,123

 
16,334

Loss from discontinued operations (net of tax)

 
60,025

 

 
61,794

Adjusted net income attributable to Albemarle Corporation
$
95,092

 
$
86,806

 
$
222,296

 
$
165,247

 
 
 
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
52,147

 
$
22,447

 
$
95,262

 
$
79,030

Add back:
 
 
 
 
 
 
 
Interest and financing expenses
33,182

 
8,733

 
68,928

 
17,506

Income tax expense (from continuing and discontinued operations)
17,139

 
1,624

 
31,279

 
14,070

Depreciation and amortization
67,483

 
24,905

 
131,469

 
52,714

EBITDA
169,951

 
57,709

 
326,938

 
163,320

Non-operating pension and OPEB items
(1,314
)
 
(1,370
)
 
(4,823
)
 
12,701

Special items (excluding special items associated with interest expense)
61,444

 
8,175

 
173,594

 
25,175

Loss from discontinued operations

 
80,174

 

 
82,687

Less depreciation and amortization from discontinued operations

 

 

 
(3,165
)
Adjusted EBITDA
$
230,081

 
$
144,688

 
$
495,709

 
$
280,718

 
 
 
 
 
 
 
 
Net sales
$
931,485

 
$
604,721

 
$
1,815,889

 
$
1,204,564

EBITDA margin
18.2
%
 
9.5
%
 
18.0
%
 
13.6
%
Adjusted EBITDA margin
24.7
%
 
23.9
%
 
27.3
%
 
23.3
%


12



See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reporting in accordance with GAAP.
 
Performance Chemicals
 
Refining Solutions
 
Chemetall Surface Treatment
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
Three months ended June 30, 2015 (Actual):
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
83,016

 
$
39,717

 
$
26,254

 
$
148,987

 
$
3,612

 
$
(100,452
)
 
$
52,147

Depreciation and amortization
31,843

 
8,483

 
19,111

 
59,437

 
5,724

 
2,322

 
67,483

Special items (excluding special items associated with interest expense)
33,823

 

 
3,077

 
36,900

 
378

 
24,166

 
61,444

Interest and financing expenses

 

 

 

 

 
33,182

 
33,182

Income tax expense

 

 

 

 

 
17,139

 
17,139

Non-operating pension and OPEB items

 

 

 

 

 
(1,314
)
 
(1,314
)
Adjusted EBITDA
$
148,682

 
$
48,200

 
$
48,442

 
$
245,324

 
$
9,714

 
$
(24,957
)
 
$
230,081

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2014 (Actual):
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
63,861

 
$
58,703

 
$

 
$
122,564

 
$
18,393

 
$
(118,510
)
 
$
22,447

Depreciation and amortization
13,093

 
7,848

 

 
20,941

 
3,423

 
541

 
24,905

Special items

 

 

 

 

 
8,175

 
8,175

Interest and financing expenses

 

 

 

 

 
8,733

 
8,733

Income tax expense

 

 

 

 

 
21,773

 
21,773

Loss from discontinued operations (net of tax)

 

 

 

 

 
60,025

 
60,025

Non-operating pension and OPEB items

 

 

 

 

 
(1,370
)
 
(1,370
)
Adjusted EBITDA
$
76,954

 
$
66,551

 
$

 
$
143,505

 
$
21,816

 
$
(20,633
)
 
$
144,688

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2014 (Pro forma):
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
94,304

 
$
58,703

 
$
41,193

 
$
194,200

 
$
24,253

 
$
(149,269
)
 
$
69,184

Depreciation and amortization
25,149

 
7,848

 
7,879

 
40,876

 
4,373

 
5,513

 
50,762

Special items

 

 

 

 

 
7,907

 
7,907

Interest and financing expenses

 

 

 

 

 
22,333

 
22,333

Income tax expense

 

 

 

 

 
34,073

 
34,073

Loss from discontinued operations (net of tax)

 

 

 

 

 
47,425

 
47,425

Non-operating pension and OPEB items

 

 

 

 

 
(1,332
)
 
(1,332
)
Adjusted EBITDA
$
119,453

 
$
66,551

 
$
49,072

 
$
235,076

 
$
28,626

 
$
(33,350
)
 
$
230,352


13


 
Performance Chemicals
 
Refining Solutions
 
Chemetall Surface Treatment
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
Six months ended June 30, 2015 (Actual):
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
154,679

 
$
73,800

 
$
37,109

 
$
265,588

 
$
9,027

 
$
(179,353
)
 
$
95,262

Depreciation and amortization
62,126

 
16,593

 
37,307

 
116,026

 
11,222

 
4,221

 
131,469

Special items (excluding special items associated with interest expense)
62,405

 

 
20,030

 
82,435

 
3,029

 
88,130

 
173,594

Interest and financing expenses

 

 

 

 

 
68,928

 
68,928

Income tax expense

 

 

 

 

 
31,279

 
31,279

Non-operating pension and OPEB items

 

 

 

 

 
(4,823
)
 
(4,823
)
Adjusted EBITDA
$
279,210

 
$
90,393

 
$
94,446

 
$
464,049

 
$
23,278

 
$
8,382

 
$
495,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2014 (Actual):
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
125,190

 
$
111,057

 
$

 
$
236,247

 
$
35,724

 
$
(192,941
)
 
$
79,030

Depreciation and amortization
25,149

 
16,528

 

 
41,677

 
6,787

 
1,085

 
49,549

Special items

 

 

 

 

 
25,175

 
25,175

Interest and financing expenses

 

 

 

 

 
17,506

 
17,506

Income tax expense

 

 

 

 

 
34,963

 
34,963

Loss from discontinued operations (net of tax)

 

 

 

 

 
61,794

 
61,794

Non-operating pension and OPEB items

 

 

 

 

 
12,701

 
12,701

Adjusted EBITDA
$
150,339

 
$
127,585

 
$

 
$
277,924

 
$
42,511

 
$
(39,717
)
 
$
280,718

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2014 (Pro forma):
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
185,907

 
$
111,057

 
$
79,917

 
$
376,881

 
$
47,557

 
$
(319,517
)
 
$
104,921

Depreciation and amortization
48,732

 
16,528

 
15,599

 
80,859

 
8,681

 
11,068

 
100,608

Special items

 

 

 

 

 
31,377

 
31,377

Interest and financing expenses

 

 

 

 

 
45,306

 
45,306

Income tax expense

 

 

 

 

 
60,063

 
60,063

Loss from discontinued operations (net of tax)

 

 

 

 

 
91,694

 
91,694

Non-operating pension and OPEB items

 

 

 

 

 
12,733

 
12,733

Adjusted EBITDA
$
234,639

 
$
127,585

 
$
95,516

 
$
457,740

 
$
56,238

 
$
(67,276
)
 
$
446,702



14


 
Bromine
 
Lithium
 
PCS
 
Total Performance Chemicals
Three months ended June 30, 2015 (Actual):





 
 
Net income (loss) attributable to Albemarle Corporation
$
60,486


$
(213
)

$
22,743

 
$
83,016

Depreciation and amortization
8,211


20,035


3,597

 
31,843

Special items


33,823



 
33,823

Adjusted EBITDA
$
68,697


$
53,645


$
26,340

 
$
148,682

 
 
 
 
 
 
 
 
Three months ended June 30, 2014 (Actual):
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
43,623

 
$

 
$
20,238

 
$
63,861

Depreciation and amortization
8,907

 

 
4,186

 
13,093

Adjusted EBITDA
$
52,530

 
$

 
$
24,424

 
$
76,954

 
 
 
 
 
 
 
 
Three months ended June 30, 2014 (Pro Forma):
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
43,623

 
$
30,443

 
$
20,238

 
$
94,304

Depreciation and amortization
8,907

 
12,056

 
4,186

 
25,149

Adjusted EBITDA
$
52,530

 
$
42,499

 
$
24,424

 
$
119,453

 
 
 
 
 
 
 

Six months ended June 30, 2015 (Actual):
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
104,958

 
$
3,715

 
$
46,006

 
$
154,679

Depreciation and amortization
16,672

 
38,103

 
7,351

 
62,126

Special items

 
62,405

 

 
62,405

Adjusted EBITDA
$
121,630

 
$
104,223

 
$
53,357

 
$
279,210

 
 
 
 
 
 
 
 
Six months ended June 30, 2014 (Actual):
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
91,657

 
$

 
$
33,533

 
$
125,190

Depreciation and amortization
17,590

 

 
7,559

 
25,149

Adjusted EBITDA
$
109,247

 
$

 
$
41,092

 
$
150,339

 
 
 
 
 
 
 
 
Six months ended June 30, 2014 (Pro Forma):
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
91,657

 
$
60,717

 
$
33,533

 
$
185,907

Depreciation and amortization
17,590

 
23,583

 
7,559

 
48,732

Adjusted EBITDA
$
109,247

 
$
84,300

 
$
41,092

 
$
234,639


15