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 7, 2017
 
_________________________________
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2)
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Section 2 - Financial Information

Item 2.02.    Results of Operations and Financial Condition.
On August 7, 2017, Albemarle Corporation (the “Company”) issued a press release reporting its results for the second quarter ended June 30, 2017. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 8, 2017, the Company will hold a teleconference for analysts and media to discuss results for the second quarter ended June 30, 2017. The teleconference will be webcast on the Company’s website at www.albemarle.com.
The press release includes presentations of adjusted net income from continuing operations, 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 net income from continuing operations, 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 income (loss) 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 7, 2017, 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 7, 2017

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 7, 2017 issued by the Company.
 
 
 



Exhibit

Exhibit 99.1
Contact:
 
Matt Juneau
225.388.7940

https://cdn.kscope.io/f91f1a13522d52efdfe75582bf83fa9b-a2q17earningsreleasimagea01.jpg




Albemarle growth story continues with strong second quarter performance



CHARLOTTE, NC - August 7, 2017

Second quarter 2017 highlights:
Second quarter net sales were $737.3 million, an increase of 10% over the prior year
Second quarter earnings were $103.3 million, or $0.92 per diluted share
Second quarter adjusted EBITDA was $218.9 million, an increase of 15% over the prior year; adjusted diluted earnings per share from continuing operations of $1.13, an increase of 22% over the prior year
Completed the $250 million accelerated share repurchase program, retiring approximately 2.3 million shares during the first half of 2017
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
In thousands, except per share amounts
2017
 
2016
 
2017
 
2016
Net sales
$
737,258

 
$
669,327

 
$
1,459,321

 
$
1,326,538

Net income from continuing operations
$
113,689

 
$
95,586

 
$
176,346

 
$
313,822

Net income (loss) attributable to Albemarle Corporation
$
103,333

 
$
(314,821
)
 
$
154,546

 
$
(86,635
)
Adjusted EBITDA
$
218,941

 
$
190,471

 
$
430,317

 
$
382,504

Diluted earnings (loss) per share attributable to Albemarle Corporation
$
0.92

 
$
(2.78
)
 
$
1.37

 
$
(0.77
)
   Non-operating pension and OPEB items(a)
(0.01
)
 

 
(0.01
)
 

   Non-recurring and other unusual items(b)
0.21

 
0.19

 
0.82

 
(0.73
)
Discontinued operations(c)

 
3.52

 

 
3.38

Adjusted diluted earnings per share from continuing operations(d)
$
1.13

 
$
0.93

 
$
2.18

 
$
1.88


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

Albemarle Corporation (NYSE: ALB) reported second quarter 2017 net sales of $737.3 million, earnings of $103.3 million and adjusted EBITDA of $218.9 million.

"The Albemarle team delivered another quarter of year over year growth while meeting important milestones toward our long-term growth strategy," said Luke Kissam, Albemarle's Chairman, President and CEO. "Total company adjusted EBITDA grew 15% and adjusted diluted EPS grew 22% over the second quarter of last year. This marks the sixth consecutive quarter of year over year revenue growth for the corporation. Our Lithium business continues to deliver strong year over year volume growth, and our major lithium capital expansion projects and exploration for new lithium resources remain on schedule."

1


Outlook

Based on our strong performance in the first half of 2017, we confirm our guidance of $2.90 to $3.05 billion in net sales, adjusted EBITDA of $835 to $875 million, and adjusted EPS per diluted share of $4.20 to $4.40.

Results

Second quarter 2017 earnings were $103.3 million, or $0.92 per diluted share, compared to a net loss of ($314.8) million, or ($2.78) per diluted share in the second quarter 2016. The increase in 2017 was primarily related to a loss from discontinued operations of $3.52 per diluted share in 2016, as well as the increase in results of our Lithium and Advanced Materials segment. Second quarter 2017 adjusted EBITDA increased by $28.5 million compared to the prior year. Second quarter 2017 adjusted net income from continuing operations was $126.5 million, or $1.13 per diluted share, compared to $105.1 million, or $0.93 per diluted share, for second quarter 2016. See notes to the condensed consolidated financial information for further details. The Company reported net sales of $737.3 million in second quarter 2017, up from net sales of $669.3 million in the second quarter of 2016, driven by the favorable impact of higher sales volumes and pricing impacts of our Lithium and Advanced Materials segment, partially offset by the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business and unfavorable currency exchange impacts.

For the six months ended June 30, 2017, earnings were $154.5 million, or $1.37 per diluted share, compared to a net loss of ($86.6) million, or ($0.77) per diluted share for the six months ended June 30, 2016. The increase in 2017 was primarily driven by a loss from discontinued operations of $3.38 per diluted share in 2016, as well as earnings growth in our Lithium and Advanced Materials segment. For the six months ended June 30, 2017, adjusted EBITDA was $430.3 million compared to $382.5 million for the same period 2016. For the six months ended June 30, 2017, adjusted net income from continuing operations was $245.5 million, or $2.18 per diluted share, compared to $212.2 million, or $1.88 per diluted share, for the same period 2016. See notes to the condensed consolidated financial information for further details. The Company reported net sales for the six months ended June 30, 2017 of $1.46 billion, up from net sales of $1.33 billion, driven by the favorable impact of higher sales volumes in each of our three reportable segments and pricing impacts of our Lithium and Advanced Materials segment, partially offset by the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business and unfavorable currency exchange impacts.

Quarterly Segment Results

Lithium and Advanced Materials reported net sales of $317.9 million in the second quarter of 2017, an increase of 36.2% from second quarter 2016 net sales of $233.4 million. The $84.5 million increase in net sales as compared to prior year was primarily due to favorable pricing impacts and increased sales volumes, partially offset by $1.8 million of unfavorable currency exchange impacts. Adjusted EBITDA for Lithium and Advanced Materials was $132.5 million, an increase of 60.3% from second quarter 2016 results of $82.7 million. The $49.9 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes and favorable pricing impacts, partially offset by higher selling, general and administrative costs and $1.7 million of unfavorable currency exchange impacts.

Bromine Specialties reported net sales of $203.9 million in the second quarter of 2017, a decrease of 1.4% from second quarter 2016 net sales of $206.9 million. The $2.9 million decrease in net sales as compared to the prior year was primarily due to lower pricing impacts and $0.6 million of unfavorable currency exchange impacts. Adjusted EBITDA for Bromine Specialties was $62.1 million, a decrease of 6.7% from second quarter 2016 results of $66.6 million. The $4.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to lower volume and pricing impacts, unfavorable product mix and higher selling, general and administrative costs.

Refining Solutions reported net sales of $184.2 million in the second quarter of 2017, an increase of 3.5% from net sales of $178.0 million in the second quarter of 2016. The $6.2 million increase in net sales as compared to the prior year was primarily due to higher sales volumes, partially offset by unfavorable pricing impacts due to customer and product mix, and $1.4 million of unfavorable currency exchange impacts. Adjusted EBITDA for Refining Solutions was $50.1 million in the second quarter of 2017, a decrease of 18.7% from second quarter 2016 results of $61.6 million. The $11.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to unfavorable mix impacts and higher costs.

All Other net sales were $30.7 million in the second quarter of 2017, a decrease of 39.4% from net sales of $50.6 million in the second quarter of 2016. The $19.9 million decrease in net sales as compared to the prior year

2


was primarily due to the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business of $12.9 million, as well as lower sales volumes and a change in the pricing contract formula for the fine chemistry services business. All Other adjusted EBITDA was $2.4 million in the second quarter of 2017, an increase of 179.0% from second quarter 2016 results of $0.9 million. The $1.6 million increase in adjusted EBITDA as compared to the prior year was primarily due to lower selling, general and administrative costs, partially offset by the impact of the divestiture of $0.6 million.

In summary, total net sales were $737.3 million in the second quarter of 2017, an increase of $67.9 million, or 10.1%, from second quarter 2016 net sales of $669.3 million. The increase in net sales as compared to prior year was primarily due to favorable pricing impacts and higher sales volumes in our Lithium and Advanced Materials segment, partially offset by the divestiture of the minerals-based flame retardants and specialty chemicals business of $12.9 million and unfavorable currency exchange impacts of $3.8 million. Total adjusted EBITDA was $218.9 million in the second quarter of 2017, an increase of $28.5 million, or 14.9%, from second quarter 2016 adjusted EBITDA of $190.5 million. The increase in adjusted EBITDA as compared to prior year was primarily due to the impact of higher sales volumes and favorable pricing impacts, partially offset by higher selling, general and administrative costs and the divestiture of the minerals-based flame retardants and specialty chemicals business of $0.6 million.

Corporate Results

Corporate adjusted EBITDA was a loss of $28.2 million in the second quarter of 2017 compared to a loss of $21.2 million in the second quarter of 2016. The decrease in Corporate adjusted EBITDA was primarily due to increased selling, general and administrative costs.

Income Taxes

Our effective income tax rates for the second quarter of 2017 and 2016 of 19.0% and 22.4%, respectively, are influenced by non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 19.1% and 16.2% for the second quarter of 2017 and 2016, respectively, and continue to be influenced by the level and geographic mix of income. The decrease in the effective tax rate in the second quarter of 2017 compared to 2016 was impacted by a variety of factors, primarily stemming from the discrete tax item in 2016 related to a change in the Company’s assertion over book and tax basis differences of $7.6 million driven by the announced sale of the Chemetall® Surface Treatment business. Our effective income tax rates for the six months ended June 30, 2017 and 2016 were 20.0% and 14.8%, respectively, and our adjusted effective income tax rates for the six months ended June 30, 2017 and 2016 were 20.7% and 18.6%, respectively. The effective tax rate in 2016 was driven down by a variety of factors, primarily low tax gains from the sale of the minerals-based flame retardant business.

Cash Flow

Our cash outflow from operations was approximately ($54.5) million for the six months ended June 30, 2017, down $307.3 million versus the same period in 2016 primarily due to changes in working capital, including the payment of approximately $255 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017. We had $1.01 billion in cash and cash equivalents at June 30, 2017, as compared to $2.27 billion at December 31, 2016. During the first six months of 2017, cash on hand, cash provided by operations and net borrowings funded $751.2 million of debt repayments, primarily related to the senior notes, $97.8 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $69.8 million and a $250.0 million accelerated share repurchase program. As a result of the program, we received and retired approximately 2.3 million shares of our common stock during the six months ended June 30, 2017.

Earnings Call

The Company’s performance for the second quarter ended June 30, 2017 will be discussed on a conference call at 9:00 AM Eastern time on August 8, 2017. The call can be accessed by dialing 888-713-4214 (International Dial-In # 617-213-4866), and entering conference ID 17470353. The Company’s earnings presentation and supporting material can be accessed through Albemarle’s website under Investors at www.albemarle.com.


3


About Albemarle

Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We power the potential of companies in many of the world’s largest and most critical industries, from energy and communications to transportation 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 4,500 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, the conference call and discussions that follow, including, without limitation, 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. Actual results could differ materially from the views expressed. 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 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; 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.


4


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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
737,258

 
$
669,327

 
$
1,459,321

 
$
1,326,538

Cost of goods sold(a)(b)
465,164

 
421,223

 
932,139

 
835,900

Gross profit
272,094

 
248,104

 
527,182

 
490,638

Selling, general and administrative expenses(a)(b)
115,686

 
86,055

 
223,687

 
168,686

Research and development expenses(b)
17,337

 
20,500

 
41,660

 
40,372

Gain on sales of businesses, net(b)

 
(974
)
 

 
(122,298
)
Acquisition and integration related costs(b)

 
19,030

 

 
37,588

Operating profit
139,071

 
123,493

 
261,835

 
366,290

Interest and financing expenses(b)
(14,590
)
 
(15,800
)
 
(83,103
)
 
(30,914
)
Other expenses, net(b)
(2,710
)
 
(2,297
)
 
(3,504
)
 
(2,250
)
Income from continuing operations before income taxes and equity in net income of unconsolidated investments
121,771

 
105,396

 
175,228

 
333,126

Income tax expense(b)
23,130

 
23,656

 
35,101

 
49,141

Income from continuing operations before equity in net income of unconsolidated investments
98,641

 
81,740

 
140,127

 
283,985

Equity in net income of unconsolidated investments (net of tax)
15,048

 
13,846

 
36,219

 
29,837

Net income from continuing operations
113,689

 
95,586

 
176,346

 
313,822

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

 
(398,340
)
 

 
(381,028
)
Net income (loss)
113,689

 
(302,754
)
 
176,346

 
(67,206
)
Net income attributable to noncontrolling interests
(10,356
)
 
(12,067
)
 
(21,800
)
 
(19,429
)
Net income (loss) attributable to Albemarle Corporation
$
103,333

 
$
(314,821
)
 
$
154,546

 
$
(86,635
)
Basic earnings (loss) per share:

 

 

 

Continuing operations
$
0.93

 
$
0.74

 
$
1.39

 
$
2.62

Discontinued operations

 
(3.54
)
 

 
(3.39
)
 
$
0.93

 
$
(2.80
)
 
$
1.39

 
$
(0.77
)
Diluted earnings (loss) per share:

 

 

 

Continuing operations
$
0.92


$
0.74


$
1.37


$
2.61

Discontinued operations


(3.52
)



(3.38
)
 
$
0.92


$
(2.78
)

$
1.37


$
(0.77
)
Weighted-average common shares outstanding – basic
110,686

 
112,339

 
111,336

 
112,300

Weighted-average common shares outstanding – diluted
112,105

 
113,175

 
112,697

 
112,973


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,
 
2017
 
2016
ASSETS
 
 
 
Cash and cash equivalents
$
1,006,945

 
$
2,269,756

Other current assets
1,197,503

 
1,036,862

Total current assets
2,204,448

 
3,306,618

Property, plant and equipment
4,049,070

 
3,910,522

Less accumulated depreciation and amortization
1,632,241

 
1,550,382

Net property, plant and equipment
2,416,829

 
2,360,140

Other assets and intangibles
2,670,712

 
2,494,449

Total assets
$
7,291,989

 
$
8,161,207

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
307,109

 
$
247,544

Other current liabilities
676,553

 
892,559

Total current liabilities
983,662

 
1,140,103

Long-term debt
1,421,468

 
2,121,718

Other noncurrent liabilities
560,504

 
544,043

Deferred income taxes
426,564

 
412,739

Albemarle Corporation shareholders’ equity
3,760,830

 
3,795,062

Noncontrolling interests
138,961

 
147,542

Total liabilities and equity
$
7,291,989


$
8,161,207


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,
 
2017
 
2016
Cash and cash equivalents at beginning of year
$
2,269,756

 
$
213,734

Cash and cash equivalents at end of period
$
1,006,945

 
$
193,661

Sources of cash and cash equivalents:
 
 
 
Net income (loss)
$
176,346

 
$
(67,206
)
Cash proceeds from divestitures, net
6,857

 
310,599

Other borrowings, net
58,886

 
67,865

Dividends received from unconsolidated investments and nonmarketable securities
8,454

 
31,522

Proceeds from exercise of stock options
3,337

 
4,939

Uses of cash and cash equivalents:
 
 
 
Working capital changes
(353,138
)
 
(108,016
)
Capital expenditures
(97,765
)
 
(99,509
)
Acquisitions, net of cash acquired
(39,525
)
 

Cash payments related to acquisitions and other

 
(81,988
)
Repayments of long-term debt
(751,209
)
 
(382,162
)
Repurchases of common stock
(250,000
)
 

Pension and postretirement contributions
(6,288
)
 
(9,524
)
Dividends paid to shareholders
(69,762
)
 
(66,791
)
Fees related to early extinguishment of debt
(46,959
)
 

Dividends paid to noncontrolling interests
(17,930
)
 
(17,052
)
Non-cash and other items:
 
 
 
Depreciation and amortization
94,192

 
128,505

Gain on sales of businesses, net

 
(122,298
)
Gain on acquisition
(7,433
)
 

Pension and postretirement (benefit) expense
(7
)
 
3,390

Loss on early extinguishment of debt
52,801

 

Deferred income taxes
(3,204
)
 
414,736

Equity in net income of unconsolidated investments (net of tax)
(36,219
)
 
(30,861
)

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,
 
2017
 
2016
 
2017
 
2016
Net sales:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
317,859

 
$
233,353

 
$
602,234

 
$
449,526

Bromine Specialties
203,945

 
206,863

 
423,136

 
403,416

Refining Solutions
184,217

 
178,012

 
369,629

 
348,591

All Other
30,704

 
50,626

 
63,123

 
122,715

Corporate
533

 
473

 
1,199

 
2,290

Total net sales
$
737,258

 
$
669,327

 
$
1,459,321

 
$
1,326,538

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
132,549

 
$
82,668

 
$
252,571

 
$
169,142

Bromine Specialties
62,075

 
66,562

 
130,563

 
128,170

Refining Solutions
50,078

 
61,586

 
99,657

 
116,660

All Other
2,444

 
876

 
7,600

 
9,340

Corporate(a)
(28,205
)
 
(21,221
)
 
(60,074
)
 
(40,808
)
Total adjusted EBITDA
$
218,941

 
$
190,471

 
$
430,317

 
$
382,504


Lithium and Advanced Materials - details by product category:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Net sales:
 
 
 
 
 
 
 
Lithium
$
243,821

 
$
157,713

 
$
460,050

 
$
294,273

PCS
74,038

 
75,640

 
142,184

 
155,253

Total Lithium and Advanced Materials
$
317,859

 
$
233,353

 
$
602,234

 
$
449,526

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium
$
115,200

 
$
64,146

 
$
215,052

 
$
127,980

PCS
17,349

 
18,522

 
37,519

 
41,162

Total Lithium and Advanced Materials
$
132,549

 
$
82,668

 
$
252,571

 
$
169,142


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 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,
 
2017
 
2016
 
2017
 
2016
Cost of goods sold:
 
 
 
 
 
 
 
Interest cost and expected return on assets, net
$
(0.2
)
 
$
(0.2
)
 
$
(0.3
)
 
$
(0.3
)
Total
$
(0.2
)
 
$
(0.2
)
 
$
(0.3
)
 
$
(0.3
)
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
Interest cost and expected return on assets, net
$
(0.9
)
 
$
(0.1
)
 
$
(1.8
)
 
$
(0.2
)
Total
$
(0.9
)
 
$
(0.1
)
 
$
(1.8
)
 
$
(0.2
)

(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,
 
2017
 
2016
 
2017
 
2016
Utilization of inventory markup(1)
$
0.08

 
$

 
$
0.16

 
$

Restructuring and other, net(2)
0.02

 

 
0.11

 

Acquisition and integration related costs(3)
0.04

 
0.11

 
0.15

 
0.23

Gain on sales of businesses, net(4)

 

 

 
(1.02
)
Gain on acquisition(5)

 

 
(0.05
)
 

Loss on extinguishment of debt(6)

 

 
0.34

 

Multiemployer plan shortfall contributions(7)
0.03

 

 
0.03

 

Other(8)
0.02

 

 
0.05

 

Discrete tax items(9)
0.02

 
0.08

 
0.03

 
0.06

Total non-recurring and other unusual items
$
0.21

 
$
0.19

 
$
0.82

 
$
(0.73
)

(1)
In connection with the acquisition of the lithium hydroxide and lithium carbonate conversion business of Jiangxi Jiangli New Materials Science and Technology Co. Ltd. (“Jiangli New Materials”), the Company valued inventory purchased from Jiangli New Materials at fair value, which resulted in a markup of the underlying net book value of the inventory totaling approximately $23.0 million. The inventory markup is being expensed over the estimated remaining selling period. For the three and six months ended June 30, 2017, $11.9 million and $22.5 million ($8.9 million and $17.5 million after income taxes, or $0.08 and $0.16 per share), respectively, was included in Cost of goods sold related to the utilization of the inventory markup.

(2)
Included in Selling, general and administrative expenses for the three months ended June 30, 2017 is $4.2 million ($2.8 million after income taxes, or $0.02 per share) related to restructuring costs at several locations. Included in Cost of goods sold, Selling, general and administrative expenses and Research and development expenses for the six months ended June 30, 2017 is $2.9 million, $8.4 million and $5.8 million, respectively, related to restructuring costs in each of our reportable segments at several locations,

9


primarily at our Lithium site in Germany. After income taxes, these charges totaled $13.0 million, or $0.11 per share.

(3)
Acquisition and integration related costs for the three and six months ended June 30, 2017 of $1.8 million and $10.7 million, respectively, were included in Cost of goods sold and $4.7 million and $10.1 million, respectively, were included in Selling, general and administrative expenses primarily resulting from the acquisition of Jiangli New Materials. After income taxes, these charges totaled $4.8 million, or $0.04 per share, and $17.6 million, or $0.15 per share, for the three and six months ended June 30, 2017, respectively.

Included in Acquisition and integration related costs for the three and six months ended June 30, 2016 is $18.4 million and $36.1 million, respectively, of integration costs resulting from the acquisition of Rockwood, and $0.6 million and $1.5 million, respectively, in connection with other significant projects. After income taxes, these charges totaled $13.1 million, or $0.11 per share and $26.4 million, or $0.23 per share, for the three and six months ended June 30, 2016, respectively.

(4)
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 businesses. 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.

(5)
Included in Other expenses, net, for the six months ended June 30, 2017 is $7.4 million ($6.0 million after income taxes, or $0.05 per share) relating to the acquisition of the remaining 50% interest in the Sales de Magnesio Ltda. joint venture in Chile. The gain was calculated based on the difference between the purchase price and the book value of the investment.

(6)
Included in Interest and financing expenses for the six months ended June 30, 2017 is a loss on early extinguishment of debt of $52.8 million ($38.1 million after income taxes, or $0.34 per share) related to the tender premiums, fees, unamortized discounts and unamortized deferred financings costs from the redemption of the 3.00% Senior notes, €307.0 million of the 1.875% Senior notes and $174.7 million of the 4.50% Senior notes.

(7)
Included in Selling, general and administrative expenses for the three and six months ended June 30, 2017 is $2.0 million ($1.4 million after income taxes, or $0.01 per share) for increased capital reserve contributions to a multiemployer plan, which is subject to a financial improvement plan. In addition, capital reserve contributions for this multiemployer plan of $2.9 million ($2.2 million after income taxes, or $0.02 per share), included in Other expenses, net, have been made to indemnify previously divested businesses.

(8)
Other adjustments for the three and six months ended June 30, 2017 included amounts recorded in (1) Selling, general and administrative expenses related to a reversal of an accrual recorded as part of purchase accounting from a previous acquisition of $1.0 million; and (2) Other expenses, net related to final settlement claims associated with the previous disposal of a business of $2.0 million and the revision of tax indemnification expenses of $1.2 million primarily related to a competent authority agreement for a previously disposed business. Also included in Other expenses, net, for the six months ended June 30, 2017 is $3.2 million of asset retirement obligation charges related to the revision of an estimate at a site formerly owned by Albemarle and a loss of $2.1 million associated with the previous disposal of a business. After income taxes, these charges totaled $1.6 million, or $0.02 per share, and $5.6 million, or $0.05 per share, for the three and six months ended June 30, 2017, respectively.

(9)
Included in Income tax expense for the three and six months ended June 30, 2017 are discrete net tax expenses of $2.2 million, or $0.02 per share, and $3.1 million, or $0.03 per share, respectively. The net expense for the three months is primarily related to foreign rate changes of $13.9 million, partially offset by a $9.8 million benefit from the release of valuation allowances due to a foreign restructuring plan. The net expense for the six months is primarily related to foreign rate changes of $13.1 million and a loss from prior year true up of $5.1 million, partially offset by a $9.8 million benefit from the release of valuation allowances due to a foreign restructuring plan and a $4.7 million benefit from excess tax benefits realized from stock-based compensation arrangements. Included in Income tax expense for the three and six

10


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.

(c) On June 17, 2016, the Company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE. On December 14, 2016, the Company closed the sale of this business for cash proceeds of approximately $3.1 billion, net of purchase price adjustments. Loss from discontinued operations (net of tax) in the consolidated statements of income (loss) 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.

Additional Information

It should be noted that adjusted net income from continuing operations, adjusted diluted earnings per share attributable to Albemarle Corporation, adjusted diluted earnings per share from continuing operations, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted 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 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 and enterprise 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 the following pages for supplemental reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP. The Company does not provide a reconciliation of forward looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the Company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the Company's results calculated in accordance with GAAP.

11


ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)
See below for a reconciliation of adjusted net income from continuing operations, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net income (loss) 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,

2017

2016

2017

2016
Net income (loss) attributable to Albemarle Corporation
$
103,333


$
(314,821
)

$
154,546


$
(86,635
)
Add back:











Loss from discontinued operations (net of tax)

 
398,340

 

 
381,028

Earnings from continuing operations
103,333

 
83,519

 
154,546

 
294,393

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items from continuing operations (net of tax)
(589
)

(225
)

(1,399
)

(106
)
Non-recurring and other unusual items from continuing operations (net of tax)
23,738


21,780


92,343


(82,048
)
Adjusted net income from continuing operations
$
126,482


$
105,074


$
245,490


$
212,239













Adjusted diluted earnings per share from continuing operations
$
1.13


$
0.93


$
2.18


$
1.88













Weighted-average common shares outstanding – diluted
112,105


113,175


112,697


112,973













Net income (loss) attributable to Albemarle Corporation
$
103,333


$
(314,821
)

$
154,546


$
(86,635
)
Add back:











Loss from discontinued operations (net of tax)


398,340




381,028

Interest and financing expenses
14,590


15,800


83,103


30,914

Income tax expense
23,130


23,656


35,101


49,141

Depreciation and amortization
49,122


49,705


94,192


93,314

EBITDA
190,175


172,680


366,942


467,762

Non-operating pension and OPEB items
(1,053
)

(265
)

(2,116
)

(548
)
Non-recurring and other unusual items (excluding items associated with interest expense)
29,819


18,056


65,491


(84,710
)
Adjusted EBITDA
$
218,941


$
190,471


$
430,317


$
382,504













Net sales
$
737,258


$
669,327


$
1,459,321


$
1,326,538

EBITDA margin
25.8
%

25.8
%

25.1
%

35.3
%
Adjusted EBITDA margin
29.7
%

28.5
%

29.5
%

28.8
%


12


See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income 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
 
% of Net Sales
Three months ended June 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
95,350

 
$
51,739

 
$
40,463

 
$
187,552

 
$
152

 
$
(84,371
)
 
$
103,333

 
14.0
 %
Depreciation and amortization
25,278

 
10,336

 
9,615

 
45,229

 
2,292

 
1,601

 
49,122

 
6.7
 %
Non-recurring and other unusual items
11,921

 

 

 
11,921

 

 
17,898

 
29,819

 
4.0
 %
Interest and financing expenses

 

 

 

 

 
14,590

 
14,590

 
2.0
 %
Income tax expense

 

 

 

 

 
23,130

 
23,130

 
3.1
 %
Non-operating pension and OPEB items

 

 

 

 

 
(1,053
)
 
(1,053
)
 
(0.1
)%
Adjusted EBITDA
$
132,549

 
$
62,075

 
$
50,078

 
$
244,702

 
$
2,444

 
$
(28,205
)
 
$
218,941

 
29.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
)
 
(47.0
)%
Depreciation and amortization
25,788

 
9,815

 
9,114

 
44,717

 
3,353

 
1,635

 
49,705

 
7.4
 %
Non-recurring and other unusual items

 

 

 

 
(974
)
 
19,030

 
18,056

 
2.7
 %
Interest and financing expenses

 

 

 

 

 
15,800

 
15,800

 
2.4
 %
Income tax expense

 

 

 

 

 
23,656

 
23,656

 
3.5
 %
Loss from discontinued operations (net of tax)

 

 

 

 

 
398,340

 
398,340

 
59.5
 %
Non-operating pension and OPEB items

 

 

 

 

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

 
$
66,562

 
$
61,586

 
$
210,816

 
$
876

 
$
(21,221
)
 
$
190,471

 
28.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
189,456

 
$
110,433

 
$
80,937

 
$
380,826

 
$
3,398

 
$
(229,678
)
 
$
154,546

 
10.6
 %
Depreciation and amortization
48,021

 
20,130

 
18,720

 
86,871

 
4,202

 
3,119

 
94,192

 
6.4
 %
Non-recurring and other unusual items (excluding items associated with interest expense)
15,094

 

 

 
15,094

 

 
50,397

 
65,491

 
4.5
 %
Interest and financing expenses

 

 

 

 

 
83,103

 
83,103

 
5.7
 %
Income tax expense

 

 

 

 

 
35,101

 
35,101

 
2.4
 %
Non-operating pension and OPEB items

 

 

 

 

 
(2,116
)
 
(2,116
)
 
(0.1
)%
Adjusted EBITDA
$
252,571

 
$
130,563

 
$
99,657

 
$
482,791

 
$
7,600

 
$
(60,074
)
 
$
430,317

 
29.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
)
 
(6.5
)%
Depreciation and amortization
48,935

 
19,570

 
17,874

 
86,379

 
3,965

 
2,970

 
93,314

 
7.0
 %
Non-recurring and other unusual items

 

 

 

 
(123,831
)
 
39,121

 
(84,710
)
 
(6.4
)%
Interest and financing expenses

 

 

 

 

 
30,914

 
30,914

 
2.3
 %
Income tax expense

 

 

 

 

 
49,141

 
49,141

 
3.7
 %
Loss from discontinued operations (net of tax)

 

 

 

 

 
381,028

 
381,028

 
28.7
 %
Non-operating pension and OPEB items

 

 

 

 

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

 
$
128,170

 
$
116,660

 
$
413,972

 
$
9,340

 
$
(40,808
)
 
$
382,504

 
28.8
 %


13


 
Lithium
 
PCS
 
Total Lithium and Advanced Materials
Three months ended June 30, 2017:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
81,819

 
$
13,531

 
$
95,350

Depreciation and amortization
21,460

 
3,818

 
25,278

Non-recurring and other unusual items
11,921

 

 
11,921

Adjusted EBITDA
$
115,200

 
$
17,349

 
$
132,549

 
 
 
 
 
 
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

 
 
 
 
 
 
Six months ended June 30, 2017:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
159,433

 
$
30,023

 
$
189,456

Depreciation and amortization
40,525

 
7,496

 
48,021

Non-recurring and other unusual items
15,094

 

 
15,094

Adjusted EBITDA
$
215,052

 
$
37,519

 
$
252,571

 
 
 
 
 
 
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




14


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
 
Effective income tax rate
Three months ended June 30, 2017:
 
 
 
 
 
As reported
$
121,771

 
$
23,130

 
19.0
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
28,766

 
5,617

 
 
As adjusted
$
150,537

 
$
28,747

 
19.1
%

 
 
 
 
 
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
%
 
 
 
 
 
 
Six months ended June 30, 2017:
 
 
 
 
 
As reported
$
175,228

 
$
35,101

 
20.0
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
116,176

 
25,232

 
 
As adjusted
$
291,404

 
$
60,333

 
20.7
%
 
 
 
 
 
 
Six months ended June 30, 2016:
 
 
 
 
 
As reported
$
333,126

 
$
49,141

 
14.8
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
(85,258
)
 
(3,104
)
 
 
As adjusted
$
247,868

 
$
46,037

 
18.6
%


15