Document


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 3, 2016
 
_________________________________
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.)
 
 
 
 
 
4350 Congress Street, Suite 700, Charlotte, North Carolina
 
28209
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code
(980) 299-5700
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 3, 2016, Albemarle Corporation (the “Company”) issued a press release regarding its results for the second quarter ended June 30, 2016. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 4, 2016, the Company will hold a teleconference for analysts and media to discuss results for the second quarter ended June 30, 2016. The teleconference will be 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 from continuing operations, 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 from continuing operations, EBITDA, adjusted EBITDA and adjusted effective income tax rates should not be considered as alternatives to net (loss) 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 3, 2016, 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 3, 2016

ALBEMARLE CORPORATION
By:
/s/ Karen G. Narwold
 
Karen G. Narwold
 
Executive Vice President and Chief Administrative Officer






EXHIBIT INDEX

Exhibit
 
 
Number
 
Exhibit
99.1
 
Press release, dated August 3, 2016, issued by the Company.
 
 
 



Exhibit

Exhibit 99.1
Contact:
 
Matt Juneau
225.388.7940





Albemarle exceeds second quarter 2016 expectations and raises guidance



CHARLOTTE, NC - August 3, 2016

Second quarter 2016 highlights:
Signed definitive agreement to sell Chemetall® Surface Treatment business to BASF SE
Due to a non-recurring, non-cash tax charge of $416.7 million related to the decision to sell the Chemetall Surface Treatment business, second quarter results in a loss of $314.8 million, or $2.78 per diluted share
Adjusted net income, including the results of the Chemetall Surface Treatment business, was $123.1 million, or $1.09 per diluted share; adjusted net income from continuing operations was $105.1 million, or $0.93 per diluted share
Second quarter adjusted EBITDA was $190.5 million, an increase of 11% over the prior year, excluding the impact of currency and divestitures
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
In thousands, except per share amounts
2016
 
2015
 
2016
 
2015
Net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

Adjusted EBITDA
$
190,471

 
$
181,358

 
$
382,504

 
$
400,858

Net income from continuing operations
$
95,586

 
$
49,218

 
$
313,822

 
$
98,471

Net (loss) income attributable to Albemarle Corporation
$
(314,821
)
 
$
52,147

 
$
(86,635
)
 
$
95,262

Diluted earnings per share from continuing operations
$
0.74

 
$
0.37

 
$
2.61

 
$
0.79

Diluted (loss) earnings per share attributable to Albemarle Corporation
$
(2.78
)
 
$
0.46

 
$
(0.77
)
 
$
0.86

   Non-operating pension and OPEB items(a)

 
(0.01
)
 

 
(0.02
)
   Non-recurring and other unusual items(b)
0.19

 
0.37

 
(0.73
)
 
1.02

Discontinued operations(c)
3.52

 
(0.09
)
 
3.38

 
(0.07
)
Adjusted diluted earnings per share from continuing operations(d)
$
0.93

 
$
0.73

 
$
1.88

 
$
1.80


See accompanying notes (a) through (d) to the condensed consolidated financial information and non-GAAP reconciliations.

Albemarle Corporation (NYSE: ALB) reported net income from continuing operations for the second quarter 2016 of $95.6 million, or $0.74 per diluted share (after income attributable to noncontrolling interests), compared to $49.2 million, or $0.37 per diluted share in the second quarter 2015. Including a non-recurring, non-cash tax charge of $416.7 million related to the decision to sell our Chemetall Surface Treatment business (see notes to the condensed consolidated financial information), the Company reported a second quarter 2016 net loss attributable to Albemarle Corporation of $(314.8) million, or $(2.78) per diluted share, compared to net income attributable to Albemarle Corporation of $52.1 million, or $0.46 per diluted share, for second quarter 2015. Second quarter 2016 adjusted net income from continuing operations was $105.1 million, or $0.93 per diluted share, compared to $82.2 million, or $0.73 per diluted share, for second quarter 2015 (see notes to the condensed consolidated financial information). The Company reported net sales of $669.3 million in second quarter 2016,

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down from net sales of $718.3 million in the second quarter of 2015, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favorable price and mix impacts in certain businesses and favorable currency exchange impacts.

Net income from continuing operations for the six months ended June 30, 2016 was $313.8 million, or $2.61 per diluted share (after income attributable to noncontrolling interests), compared to $98.5 million, or $0.79 per diluted share, in the second quarter 2015. Including a non-recurring, non-cash tax charge of $416.7 million related to our decision to sell our Chemetall Surface Treatment business, partially offset by gains on sales of businesses of $122.3 million (see notes to the condensed consolidated financial information), the Company reported a net loss attributable to Albemarle Corporation of $(86.6) million, or $(0.77) per diluted share, for the six months ended June 30, 2016, compared to net income attributable to Albemarle Corporation of $95.3 million, or $0.86 per diluted share for the six months ended June,30, 2015. Adjusted net income from continuing operations for the six months ended June 30, 2016 was $212.2 million, or $1.88 per diluted share, compared to $198.6 million, or $1.80 per diluted share, for the same period 2015 (see notes to the condensed consolidated financial information). Net sales for the six months ended June 30, 2016 were $1.33 billion, down from net sales of $1.41 billion, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favorable price and mix impacts in certain businesses and favorable currency exchange impacts.

On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale is subject to regulatory approvals and other customary closing conditions, and is expected to close in the fourth quarter of 2016. In the second quarter of 2016, the Company determined the business qualified for discontinued operations treatment, and as such began accounting for the assets as held for sale. The financial results of the disposal group have been presented as discontinued operations in the consolidated statements of income and excluded from segment results for all periods presented.

"Our great start to 2016 continued in the second quarter as we announced the strategic sale of Chemetall® Surface Treatment at a very healthy multiple, coupled with year over year adjusted EBITDA growth of 11% in the businesses we will operate after the sale is completed,” said Luke Kissam, Albemarle's president and CEO. "Our businesses have exceeded our first half expectations, and we continue to deliver outstanding results despite a relatively weak macroeconomic environment.”

On January 12, 2015, we completed the acquisition of Rockwood Holdings, Inc. ("Rockwood"). The results of Rockwood from January 1, 2015 to January 12, 2015 (“stub period”) are excluded from the year-to-date 2015 financial results presented herein. Excluded net sales and adjusted EBITDA for the stub period were $13.6 million and $1.1 million, respectively.

Quarterly Segment Results

Effective January 1, 2016, our former Performance Chemicals reportable segment was split into two separate reportable segments: (1) Lithium and Advanced Materials, which includes Lithium and Performance Catalyst Solutions and Curatives (“PCS”), and (2) Bromine Specialties. For comparison purposes, prior year periods have been reclassified to conform to the current segments. This split did not affect the Refining Solutions reportable segment, which is presented the same as in the prior year.

Lithium and Advanced Materials reported net sales of $233.4 million in the second quarter of 2016, an increase of 9.6% from second quarter 2015 net sales of $213.0 million. Net sales were impacted by $2.3 million of favorable currency exchange impacts as compared to the prior year. The remaining $18.1 million increase in net sales was primarily due to increased lithium sales volumes and favorable pricing impacts partially offset by lower PCS sales. Adjusted EBITDA for Lithium and Advanced Materials was $82.7 million, an increase of 3.4% from second quarter 2015 results of $80.0 million. Adjusted EBITDA was impacted by $1.3 million of favorable currency exchange impacts as compared to the prior year. The remaining $1.4 million increase in adjusted EBITDA was primarily due to higher overall sales volumes and favorable pricing.

Bromine Specialties reported net sales of $206.9 million in the second quarter of 2016, a decrease of 7.6% from second quarter 2015 net sales of $224.0 million. Net sales were impacted by $0.9 million of favorable currency exchange impacts as compared to the prior year. The remaining $18.0 million decrease in net sales was primarily due to lower sales volumes of Methyl Bromide partially offset by higher sales volumes of other Bromine

2


products. Adjusted EBITDA for Bromine Specialties was $66.6 million, a decrease of 3.1% from second quarter 2015 results of $68.7 million. Adjusted EBITDA was impacted by $0.8 million of favorable currency exchange impacts as compared to the prior year. The remaining $2.9 million decrease in adjusted EBITDA was primarily driven by lower overall sales volumes partially offset by lower raw material and utility costs as well as lower selling, general, and administrative expenses.

Refining Solutions reported net sales of $178.0 million in the second quarter of 2016, an increase of 8.2% from net sales of $164.6 million in the second quarter of 2015. Net sales were impacted by $0.5 million of favorable currency exchange impacts as compared to the prior year. The remaining $12.9 million increase in net sales was primarily driven by higher Heavy Oil Upgrading and Clean Fuels Technology volumes. Adjusted EBITDA for Refining Solutions was $61.6 million in the second quarter of 2016, an increase of 27.8% from second quarter 2015 results of $48.2 million. Adjusted EBITDA was impacted by $0.7 million of favorable currency exchange impacts as compared to the prior year. The remaining $12.7 million increase in adjusted EBITDA was primarily due to higher sales volumes, and higher net income reported by our joint venture Nippon Ketjen Company Limited.

On January 4, 2016, we closed the sale of the metal sulfides business, and on February 1, 2016, we closed the sale of the minerals-based flame retardants and specialty chemicals business. The divestiture of these businesses reduced net sales and adjusted EBITDA for the second quarter of 2016 as compared to the prior year period by $66.8 million and $9.4 million, respectively.

All Other net sales were $50.6 million in the second quarter of 2016, a decrease of 55.4% from net sales of $113.4 million in the second quarter of 2015. Excluding the impact of the divested businesses, All Other net sales increased by $4.0 million compared to the prior year due to higher sales volumes from the fine chemistry services business. All Other adjusted EBITDA was $0.9 million in the second quarter of 2016, a decrease of 91.0% from second quarter 2015 results of $9.7 million. Excluding the impact of the divested businesses, All Other adjusted EBITDA increased by $0.6 million compared to the prior year due to higher overall fine chemistry services sales volumes.

In summary, total net sales of $669.3 million in the second quarter of 2016, a decrease of $49.0 million, or 6.8%, from second quarter 2015 net sales of $718.3 million, were negatively impacted by the divestiture of our metal sulfides and minerals-based flame retardants and specialty chemicals business, which reduced revenues versus the prior year by $66.8 million, partially offset by favorable currency impacts of $3.7 million. Excluding currency exchange impacts and the impact of the divested businesses, net sales for the period increased 2.2% as compared to the prior year. Total adjusted EBITDA of $190.5 million in the second quarter of 2016, an increase of $9.2 million, or 5.0%, from second quarter 2015 adjusted EBITDA of $181.4 million, was unfavorably impacted by $1.1 million currency exchange (including $3.9 million of unfavorable currency exchange impacts on corporate results) as well as the divestiture of our metal sulfides and minerals-based flame retardants and specialty chemicals business which reduced adjusted EBITDA versus the prior year by $9.4 million. Excluding currency exchange impacts and the impact of the divested businesses, adjusted EBITDA for the second quarter 2016 increased 11.1% as compared to the prior year.

Corporate Results

Corporate adjusted EBITDA was a loss of $21.2 million in the second quarter of 2016 compared to a loss of $25.2 million in the second quarter of 2015. The improvement in Corporate adjusted EBITDA was primarily due to realized synergies from the acquisition of Rockwood, partially offset by $3.9 million of unfavorable currency exchange impacts.

Income Taxes

Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 16.2% and 28.9% for the second quarter of 2016 and 2015, respectively. Our effective tax rate continued 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 $252.5 million for the six months ended June 30, 2016, up 90% versus the same period in 2015. We had $193.7 million in cash and cash equivalents at June 30, 2016, as

3


compared to $213.7 million at December 31, 2015. Cash on hand, cash provided by operations, net borrowings and net proceeds from divestitures, funded $382.2 million of debt repayments, $99.5 million of capital expenditures for plant, machinery and equipment and dividends to shareholders of $66.8 million during the six months ended June 30, 2016.

Outlook

Favorable performance in Lithium, Refining Solutions and Bromine Specialties continues to outpace headwinds in our other businesses. Based on this, and the impact of a lower effective tax rate, we are raising our annual guidance for continuing operations as follows:
 
Previous Outlook
 
Increase
 
Current Outlook
Net sales
$2.5 - $2.7 billion
 
$0.0 - $0.1 billion
 
$2.5 - $2.8 billion
Adjusted EBITDA
$700 - $745 million
 
$5 million
 
$705 - $750 million
Adjusted EPS (per diluted share)
$3.25 - $3.50
 
$0.10
 
$3.35 - $3.60

Earnings Call

The Company’s performance for the second quarter ended June 30, 2016 will be discussed on a conference call at 9:00 AM Eastern time on August 4, 2016. The call can be accessed by dialing 888-679-8033 (International Dial-In # 617-213-4846), and entering conference ID 54465035. 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 (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine, refining catalysts and applied surface treatments. We power the potential of companies in many of the world’s largest and most critical industries, from energy and communications to aerospace and electronics. Working side-by-side with our customers, we develop value-added, customized solutions that make them more competitive. Our solutions combine the finest technology and ingredients with the knowledge and know-how of our highly experienced and talented team of operators, scientists and engineers. Discovering and implementing new and better performance-based sustainable solutions is what motivates all of us. We think beyond business-as-usual to drive innovations that create lasting value. Albemarle employs approximately 6,900 people and serves customers in approximately 100 countries. We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

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 sale of the Chemetall Surface Treatment business 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 regulatory proceedings, claims or litigation; the occurrence of cybersecurity breaches, terrorist attacks, industrial accidents, natural disasters or climate change; 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

4


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 execute, operate and integrate acquisitions and divestitures, including the integration of 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 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.


5



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,
 
2016
 
2015
 
2016
 
2015
Net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

Cost of goods sold(a)(b)
421,223

 
506,259

 
835,900

 
1,007,188

Gross profit
248,104

 
212,031

 
490,638

 
403,415

Selling, general and administrative expenses(a)
86,055

 
88,010

 
168,686

 
171,660

Research and development expenses
20,500

 
21,925

 
40,372

 
45,421

Gain on sales of businesses, net(b)
(974
)
 

 
(122,298
)
 

Acquisition and integration related costs(b)
19,030

 
22,832

 
37,588

 
80,657

Operating profit
123,493

 
79,264

 
366,290

 
105,677

Interest and financing expenses(b)
(15,800
)
 
(20,599
)
 
(30,914
)
 
(42,899
)
Other (expenses) income, net(b)
(2,297
)
 
286

 
(2,250
)
 
50,110

Income from continuing operations before income taxes and equity in net income of unconsolidated investments
105,396

 
58,951

 
333,126

 
112,888

Income tax expense(b)
23,656

 
14,851

 
49,141

 
28,636

Income from continuing operations before equity in net income of unconsolidated investments
81,740

 
44,100

 
283,985

 
84,252

Equity in net income of unconsolidated investments (net of tax)(b)
13,846

 
5,118

 
29,837

 
14,219

Net income from continuing operations
95,586

 
49,218

 
313,822

 
98,471

(Loss) income from discontinued operations (net of tax)(c)
(398,340
)
 
10,122

 
(381,028
)
 
8,024

Net (loss) income
(302,754
)
 
59,340

 
(67,206
)
 
106,495

Net income attributable to noncontrolling interests
(12,067
)
 
(7,193
)
 
(19,429
)
 
(11,233
)
Net (loss) income attributable to Albemarle Corporation
$
(314,821
)
 
$
52,147

 
$
(86,635
)
 
$
95,262

Basic earnings (loss) per share

 

 

 

Continuing operations
$
0.74

 
$
0.37

 
$
2.62

 
$
0.79

Discontinued operations
(3.54
)
 
0.09

 
(3.39
)
 
0.07

 
$
(2.80
)
 
$
0.46

 
$
(0.77
)
 
$
0.86

Diluted earnings (loss) per share

 

 

 

Continuing operations
$
0.74


$
0.37


$
2.61


$
0.79

Discontinued operations
(3.52
)

0.09


(3.38
)

0.07

 
$
(2.78
)

$
0.46


$
(0.77
)

$
0.86

Weighted-average common shares outstanding – basic
112,339

 
112,189

 
112,300

 
110,160

Weighted-average common shares outstanding – diluted
113,123

 
112,607

 
112,947

 
110,536


See accompanying notes to the condensed consolidated financial information.


6


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

 
June 30,
 
December 31,
 
2016
 
2015
ASSETS
 
 
 
Cash and cash equivalents
$
193,661

 
$
213,734

Other current assets
1,078,158

 
975,336

Assets held for sale
255,941

 
641,932

Total current assets
1,527,760

 
1,831,002

Property, plant and equipment
3,846,686

 
3,700,472

Less accumulated depreciation and amortization
1,500,554

 
1,379,377

Net property, plant and equipment
2,346,132

 
2,321,095

Noncurrent assets held for sale
2,944,071

 
2,971,455

Other assets and intangibles
2,494,418

 
2,474,402

Total assets
$
9,312,381

 
$
9,597,954

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
493,705

 
$
674,994

Other current liabilities
520,084

 
612,093

Liabilities held for sale
145,269

 
329,598

Total current liabilities
1,159,058

 
1,616,685

Long-term debt
3,019,478

 
3,142,163

Noncurrent liabilities held for sale
455,452

 
464,207

Other noncurrent liabilities
573,038

 
588,734

Deferred income taxes
799,009

 
384,852

Albemarle Corporation shareholders’ equity
3,156,615

 
3,254,392

Noncontrolling interests
149,731

 
146,921

Total liabilities and equity
$
9,312,381


$
9,597,954


See accompanying notes to the condensed consolidated financial information.

7


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

 
Six Months Ended
 
June 30,
 
2016
 
2015
Cash and cash equivalents at beginning of year
$
213,734

 
$
2,489,768

Cash and cash equivalents at end of period
$
193,661

 
$
207,238

Sources of cash and cash equivalents:
 
 
 
Net (loss) income
$
(67,206
)
 
$
106,495

Cash proceeds from divestitures, net
310,599

 

Proceeds from borrowings of long-term debt

 
1,000,000

Other borrowings, net
67,865

 
133,699

Dividends received from unconsolidated investments and nonmarketable securities
31,522

 
45,526

Decrease in restricted cash

 
57,550

Uses of cash and cash equivalents:
 
 
 
Working capital changes
(108,016
)
 
(44,932
)
Capital expenditures
(99,509
)
 
(111,723
)
Acquisition of Rockwood, net of cash acquired

 
(2,051,645
)
Other acquisitions, net of cash acquired

 
(48,845
)
Cash payments related to acquisitions and other
(81,988
)
 

Repayments of long-term debt
(382,162
)
 
(1,331,648
)
Pension and postretirement contributions
(9,524
)
 
(10,973
)
Dividends paid to shareholders
(66,791
)
 
(54,238
)
Dividends paid to noncontrolling interests
(17,052
)
 
(8,282
)
Non-cash and other items:
 
 
 
Depreciation and amortization
128,505

 
131,469

Gain on sales of businesses, net
(122,298
)
 

Pension and postretirement expense (benefit)
3,390

 
(1,071
)
Deferred income taxes
414,736

 
(41,207
)
Equity in net income of unconsolidated investments (net of tax)
(30,861
)
 
(16,186
)

See accompanying notes to the condensed consolidated financial information.


8


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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Net sales:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
233,353

 
$
213,003

 
$
449,526

 
$
411,777

Bromine Specialties
206,863

 
223,959

 
403,416

 
413,551

Refining Solutions
178,012

 
164,573

 
348,591

 
343,739

All Other
50,626

 
113,404

 
122,715

 
235,773

Corporate
473

 
3,351

 
2,290

 
5,763

Total net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
82,668

 
$
79,985

 
$
169,142

 
$
157,580

Bromine Specialties
66,562

 
68,697

 
128,170

 
121,630

Refining Solutions
61,586

 
48,200

 
116,660

 
90,393

All Other
876

 
9,714

 
9,340

 
23,278

Corporate(a)
(21,221
)
 
(25,238
)
 
(40,808
)
 
7,977

Total adjusted EBITDA
$
190,471

 
$
181,358

 
$
382,504

 
$
400,858


Lithium and Advanced Materials - details by product category:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Net sales:
 
 
 
 
 
 
 
Lithium
$
157,713

 
$
127,021

 
$
294,273

 
$
241,407

PCS
75,640

 
85,982

 
155,253

 
170,370

Total Lithium and Advanced Materials
$
233,353

 
$
213,003

 
$
449,526

 
$
411,777

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium
$
64,146

 
$
53,645

 
$
127,980

 
$
104,223

PCS
18,522

 
26,340

 
41,162

 
53,357

Total Lithium and Advanced Materials
$
82,668

 
$
79,985

 
$
169,142

 
$
157,580


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

9


Notes to the Condensed Consolidated Financial Information

(a)
Non-operating pension and OPEB items, consisting of 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,
 
2016
 
2015
 
2016
 
2015
Cost of goods sold:
 
 
 
 
 
 
 
MTM actuarial gain
$

 
$
(0.1
)
 
$

 
$
(0.1
)
Interest cost and expected return on assets, net
(0.2
)
 
(0.5
)
 
(0.3
)
 
(0.8
)
Total
$
(0.2
)
 
$
(0.6
)
 
$
(0.3
)
 
$
(0.9
)
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
Interest cost and expected return on assets, net
$
(0.1
)
 
$
(0.9
)
 
$
(0.2
)
 
$
(1.7
)
Total
$
(0.1
)
 
$
(0.9
)
 
$
(0.2
)
 
$
(1.7
)

(b)
In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items from continuing operations and excluded them from our adjusted net income calculation for the periods presented. 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,
 
2016
 
2015
 
2016
 
2015
Utilization of inventory markup(1)
$

 
$
0.23

 
$

 
$
0.46

Gain on sales of businesses, net(2)

 

 
(1.02
)
 

Acquisition and integration related costs(3)
0.11

 
0.14

 
0.23

 
0.51

Interest and financing expenses related to Rockwood acquisition(4)

 

 

 
0.01

Financing fees related to Rockwood acquisition(5)

 

 

 
0.03

Discrete tax items(6)
0.08

 
(0.01
)
 
0.06

 
0.02

Total non-recurring and other unusual items
$
0.19

 
$
0.36

 
$
(0.73
)
 
$
1.03


(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 was expensed over the estimated remaining selling period. For the three months ended June 30, 2015, $24.2 million ($16.5 million after income taxes, or $0.14 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, $47.5 million ($32.8 million after income taxes, or $0.30 per share) was included in 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)
Included in Gain on sales of businesses, net, for the six months ended June 30, 2016 is $11.5 million ($11.3 million after income taxes, or $0.10 per share) related to the sale of the metal sulfides business and $112.3 million ($105.8 million after income taxes, or $0.93 per share) related to the sale of the minerals-based flame retardants and specialty chemicals business. In addition, Gain on sales of businesses, net, for the six months ended June 30, 2016 includes a loss of $1.5 million, or $0.01 per share, on the sale of our wafer reclaim business.

10



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

Three months ended June 30, 2016 -

$18.4 million of integration costs resulting from the acquisition of Rockwood and $0.6 million in connection with other significant projects. After income taxes, these charges totaled $13.1 million, or $0.11 per share.

Six months ended June 30, 2016 -

$36.1 million of integration costs resulting from the acquisition of Rockwood and $1.5 million in connection with other significant projects. After income taxes, these charges totaled $26.4 million, or $0.23 per share.

Three months ended June 30, 2015 -

$19.9 million directly related to the acquisition of Rockwood and $2.9 million in connection with other significant projects. After income taxes, these charges totaled $15.4 million, or $0.14 per share.

Six months ended June 30, 2015 -

$75.7 million directly related to the acquisition of Rockwood and $5.0 million in connection with other significant projects. After income taxes, these charges totaled $55.8 million, or $0.51 per share.

(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 of 2014 in connection with the acquisition of Rockwood, which did not close until January 12, 2015.

(5)
Included in Other (expenses) income, net, for the six months ended June 30, 2015 is $4.4 million ($3.1 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, 2016 are expense items of $8.7 million, or $0.08 per share, and $7.1 million, or $0.06 per share, respectively, related mainly to a change in the Company’s assertion over book and tax basis differences of a foreign entity and changes in valuation allowances necessary because of the announced divestiture. 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 of the intention to sell the minerals-based flame retardants and specialty chemicals business, which includes entities in Germany.

(c)
On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale is subject to regulatory approvals and other customary closing conditions, and is expected to close in the fourth quarter of 2016. Loss from discontinued operations (net of tax) in the consolidated statements of income for the second quarter of 2016 includes a discrete non-cash charge of $381.5 million due to a change in the Company’s assertion over book and tax basis differences related to a U.S. entity being sold, as well as a discrete non-cash charge of $35.2 million related to a change in the Company’s assertion over reinvestment of foreign undistributed earnings.

(d)
Totals may not add due to rounding.


11


Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation (“adjusted earnings”), adjusted net income from continuing operations, adjusted diluted earnings per share attributable to Albemarle Corporation, adjusted diluted earnings per share from continuing operations, 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 non-GAAP measures should not be considered as alternatives to net income attributable to Albemarle Corporation (“earnings”). 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. The Company’s chief operating decision maker uses these measures to assess the ongoing performance of the Company and its segments, as well as for business planning purposes.

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.


12


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”), adjusted net income from continuing operations, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net (loss) 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 the non-recurring, other unusual and non-operating pension and OPEB items as listed below. EBITDA is defined as earnings before discontinued operations, interest and financing expenses, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA and the non-recurring, other unusual and non-operating pension and OPEB items as listed below.

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Net (loss) income attributable to Albemarle Corporation
$
(314,821
)
 
$
52,147

 
$
(86,635
)
 
$
95,262

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items from continuing operations (net of tax)
(225
)
 
(998
)
 
(106
)
 
(1,704
)
Non-recurring and other unusual items from continuing operations (net of tax)
21,780

 
41,171

 
(82,048
)
 
113,105

Loss (income) from discontinued operations (net of tax)
398,340

 
(10,122
)
 
381,028

 
(8,024
)
Adjusted net income from continuing operations
105,074

 
82,198

 
212,239

 
198,639

(Loss) income from discontinued operations (net of tax)
(398,340
)
 
10,122

 
(381,028
)
 
8,024

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items from discontinued operations (net of tax)
67

 
136

 
156

 
(1,385
)
Non-recurring and other unusual items from discontinued operations (net of tax)
416,279

 
2,636

 
417,514

 
17,018

Adjusted net income attributable to Albemarle Corporation
$
123,080

 
$
95,092

 
$
248,881

 
$
222,296

 
 
 
 
 
 
 
 
Adjusted diluted earnings per share attributable to Albemarle Corporation
$
1.09

 
$
0.84

 
$
2.20

 
$
2.01

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – diluted
113,123

 
112,607

 
112,947

 
110,536

 
 
 
 
 
 
 
 
Net (loss) income attributable to Albemarle Corporation
$
(314,821
)
 
$
52,147

 
$
(86,635
)
 
$
95,262

Add back:
 
 
 
 
 
 
 
Loss (income) from discontinued operations (net of tax)
398,340

 
(10,122
)
 
381,028

 
(8,024
)
Interest and financing expenses
15,800

 
20,599

 
30,914

 
42,899

Income tax expense
23,656

 
14,851

 
49,141

 
28,636

Depreciation and amortization
49,705

 
48,372

 
93,314

 
94,162

EBITDA
172,680

 
125,847

 
467,762

 
252,935

Non-operating pension and OPEB items
(265
)
 
(1,522
)
 
(548
)
 
(2,609
)
Non-recurring and other unusual items (excluding items associated with interest expense)
18,056

 
57,033

 
(84,710
)
 
150,532

Adjusted EBITDA
$
190,471

 
$
181,358

 
$
382,504

 
$
400,858

 
 
 
 
 
 
 
 
Net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

EBITDA margin
25.8
%
 
17.5
%
 
35.3
%
 
17.9
%
Adjusted EBITDA margin
28.5
%
 
25.2
%
 
28.8
%
 
28.4
%



13



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.
 
Lithium and Advanced Materials
 
Bromine Specialties
 
Refining Solutions
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
Three months ended June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
56,880

 
$
56,747

 
$
52,472

 
$
166,099

 
$
(1,503
)
 
$
(479,417
)
 
$
(314,821
)
Depreciation and amortization
25,788

 
9,815

 
9,114

 
44,717

 
3,353

 
1,635

 
49,705

Non-recurring and other unusual items

 

 

 

 
(974
)
 
19,030

 
18,056

Interest and financing expenses

 

 

 

 

 
15,800

 
15,800

Income tax expense

 

 

 

 

 
23,656

 
23,656

Loss from discontinued operations (net of tax)

 

 

 

 

 
398,340

 
398,340

Non-operating pension and OPEB items

 

 

 

 

 
(265
)
 
(265
)
Adjusted EBITDA
$
82,668

 
$
66,562

 
$
61,586

 
$
210,816

 
$
876

 
$
(21,221
)
 
$
190,471

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
22,530

 
$
60,486

 
$
39,717

 
$
122,733

 
$
3,612

 
$
(74,198
)
 
$
52,147

Depreciation and amortization
23,632

 
8,211

 
8,483

 
40,326

 
5,724

 
2,322

 
48,372

Non-recurring and other unusual items
33,823

 

 

 
33,823

 
378

 
22,832

 
57,033

Interest and financing expenses

 

 

 

 

 
20,599

 
20,599

Income tax expense

 

 

 

 

 
14,851

 
14,851

Income from discontinued operations (net of tax)

 

 

 

 

 
(10,122
)
 
(10,122
)
Non-operating pension and OPEB items

 

 

 

 

 
(1,522
)
 
(1,522
)
Adjusted EBITDA
$
79,985

 
$
68,697

 
$
48,200

 
$
196,882

 
$
9,714

 
$
(25,238
)
 
$
181,358

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
120,207

 
$
108,600

 
$
98,786

 
$
327,593

 
$
129,206

 
$
(543,434
)
 
$
(86,635
)
Depreciation and amortization
48,935

 
19,570

 
17,874

 
86,379

 
3,965

 
2,970

 
93,314

Non-recurring and other unusual items

 

 

 

 
(123,831
)
 
39,121

 
(84,710
)
Interest and financing expenses

 

 

 

 

 
30,914

 
30,914

Income tax expense

 

 

 

 

 
49,141

 
49,141

Loss from discontinued operations (net of tax)

 

 

 

 

 
381,028

 
381,028

Non-operating pension and OPEB items

 

 

 

 

 
(548
)
 
(548
)
Adjusted EBITDA
$
169,142

 
$
128,170

 
$
116,660

 
$
413,972

 
$
9,340

 
$
(40,808
)
 
$
382,504

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
49,721

 
$
104,958

 
$
73,800

 
$
228,479

 
$
9,027

 
$
(142,244
)
 
$
95,262

Depreciation and amortization
45,454

 
16,672

 
16,593

 
78,719

 
11,222

 
4,221

 
94,162

Non-recurring and other unusual items (excluding items associated with interest expense)
62,405

 

 

 
62,405

 
3,029

 
85,098

 
150,532

Interest and financing expenses

 

 

 

 

 
42,899

 
42,899

Income tax expense

 

 

 

 

 
28,636

 
28,636

Income from discontinued operations (net of tax)

 

 

 

 

 
(8,024
)
 
(8,024
)
Non-operating pension and OPEB items

 

 

 

 

 
(2,609
)
 
(2,609
)
Adjusted EBITDA
$
157,580

 
$
121,630

 
$
90,393

 
$
369,603

 
$
23,278

 
$
7,977

 
$
400,858



14


 
Lithium
 
PCS
 
Total Lithium and Advanced Materials
Three months ended June 30, 2016:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
42,129

 
$
14,751

 
$
56,880

Depreciation and amortization
22,017

 
3,771

 
25,788

Adjusted EBITDA
$
64,146

 
$
18,522

 
$
82,668

 
 
 
 
 
 
Three months ended June 30, 2015:
 
 
 
 
 
Net (loss) income attributable to Albemarle Corporation
$
(213
)
 
$
22,743

 
$
22,530

Depreciation and amortization
20,035

 
3,597

 
23,632

Non-recurring and other unusual items
33,823

 

 
33,823

Adjusted EBITDA
$
53,645

 
$
26,340

 
$
79,985

 
 
 
 
 
 
Six months ended June 30, 2016:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
86,475

 
$
33,732

 
$
120,207

Depreciation and amortization
41,505

 
7,430

 
48,935

Adjusted EBITDA
$
127,980

 
$
41,162

 
$
169,142

 
 
 
 
 
 
Six months ended June 30, 2015:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
3,715

 
$
46,006

 
$
49,721

Depreciation and amortization
38,103

 
7,351

 
45,454

Non-recurring and other unusual items
62,405

 

 
62,405

Adjusted EBITDA
$
104,223

 
$
53,357

 
$
157,580



See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reporting in accordance with GAAP.

 
Income from continuing operations before income taxes and equity in net income of unconsolidated investments
 
Income tax expense (benefit)
 
Effective income tax rate
Three months ended June 30, 2016:
 
 
 
 
 
As reported
$
105,396

 
$
23,656

 
22.4
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
17,791

 
(3,764
)
 
 
As adjusted
$
123,187

 
$
19,892

 
16.2
%
 
 
 
 
 
 
Three months ended June 30, 2015:
 
 
 
 
 
As reported
$
58,951

 
$
14,851

 
25.2
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
45,511

 
15,338

 
 
As adjusted
$
104,462

 
$
30,189

 
28.9
%


15