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) November 8, 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 November 8, 2017, Albemarle Corporation (the “Company”) issued a press release reporting its results for the third quarter ended September 30, 2017. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on November 9, 2017, the Company will hold a teleconference for analysts and media to discuss results for the third quarter ended September 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 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 November 8, 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: November 8, 2017

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






EXHIBIT INDEX

Exhibit
 
 
Number
 
Exhibit
 
 
 
 



Exhibit

Exhibit 99.1
Contact:
 
Matt Juneau
225.388.7940

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11880947&doc=3




Albemarle continues double digit growth in third quarter



CHARLOTTE, NC - November 8, 2017

Third quarter 2017 highlights:
Third quarter net sales were $754.9 million, an increase of 15% over the prior year
Third quarter earnings were $118.7 million, or $1.06 per diluted share
Third quarter adjusted EBITDA was $209.4 million, an increase of 11% over the prior year; adjusted diluted earnings per share from continuing operations of $1.08, an increase of 19% over the prior year
Delivered double digit growth despite the impact of hurricane Harvey, which reduced adjusted EBITDA by $11 million and adjusted diluted earnings per share by $0.07
Announced technology innovation to increase efficiency of lithium extraction in Chile under existing pumping rates by 50% and requested related quota increase from CORFO
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
In thousands, except per share amounts
2017
 
2016
 
2017
 
2016
Net sales
$
754,866

 
$
654,010

 
$
2,214,187

 
$
1,980,548

Net income from continuing operations
$
130,193

 
$
114,512

 
$
306,539

 
$
428,334

Net income attributable to Albemarle Corporation
$
118,670

 
$
128,220

 
$
273,216

 
$
41,585

Adjusted EBITDA
$
209,383

 
$
188,329

 
$
639,700

 
$
570,833

Diluted earnings per share attributable to Albemarle Corporation
$
1.06

 
$
1.13

 
$
2.43

 
$
0.37

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

 
(0.02
)
 

   Non-recurring and other unusual items(b)
0.02

 
(0.02
)
 
0.84

 
(0.75
)
   Discontinued operations(c)

 
(0.20
)
 

 
3.16

Adjusted diluted earnings per share from continuing operations(d)
$
1.08

 
$
0.91

 
$
3.26

 
$
2.78


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

Albemarle Corporation (NYSE: ALB) reported third quarter 2017 net sales of $754.9 million, earnings of $118.7 million and adjusted EBITDA of $209.4 million.

"In the third quarter, we delivered the seventh consecutive quarter of year over year revenue growth excluding divested businesses,” said Luke Kissam, Albemarle's Chairman, President and CEO. “Our revenue, adjusted EBITDA and adjusted diluted EPS grew by 15%, 11% and 19%, respectively, compared to third quarter of 2016. Lithium led the way and is now forecasted to grow adjusted EBITDA by over 50% versus 2016. Our Wave 1 expansion projects in lithium remain on schedule, and our work related to lithium yield improvements and exploration of new resources is producing preliminary results meeting our expectations."

1


Outlook

Based on our strong performance through the third quarter of 2017, we are increasing our guidance as outlined below:
 
Previous Outlook
 
Current Outlook
Net sales
$2.90 - $3.05 billion
 
$3.00 - $3.05 billion
Adjusted EBITDA
$835 - $875 million
 
$860 - $875 million
Adjusted EPS (per diluted share)
$4.20 - $4.40
 
$4.40 - $4.50

Results

Third quarter 2017 earnings were $118.7 million, or $1.06 per diluted share, compared to $128.2 million, or $1.13 per diluted share in the third quarter 2016. Earnings per share and adjusted earnings per share were both negatively impacted by hurricane Harvey by $0.07 per diluted share. Excluding the impact of hurricane Harvey, the decrease in 2017 was primarily related to income from discontinued operations of $0.20 per diluted share in 2016, partially offset by earnings growth of our Lithium and Advanced Materials and Bromine Specialties segments. Third quarter 2017 adjusted EBITDA increased by $21.1 million, or 11.2%, compared to the prior year. Third quarter 2017 adjusted net income from continuing operations was $120.6 million, or $1.08 per diluted share, compared to $102.7 million, or $0.91 per diluted share, for third quarter 2016, an increase of 18.7%. See notes to the condensed consolidated financial information for further details. The Company reported net sales of $754.9 million in third quarter 2017, up 15.4% from net sales of $654.0 million in the third quarter of 2016, driven by the favorable impact of higher sales volumes and pricing impacts of our Lithium and Advanced Materials and Bromine segments and favorable currency exchange impacts.

For the nine-month period ended September 30, 2017, earnings were $273.2 million, or $2.43 per diluted share, compared to $41.6 million, or $0.37 per diluted share for the nine-month period ended September 30, 2016. Earnings per share and adjusted earnings per share were both negatively impacted by hurricane Harvey by $0.07 per diluted share. Excluding the impact of hurricane Harvey, the increase in 2017 was primarily driven by a loss from discontinued operations of $3.16 per diluted share in 2016, as well as earnings growth in our Lithium and Advanced Materials and Bromine Specialties segments. For the nine-month period ended September 30, 2017, adjusted EBITDA was $639.7 million, up 12.1% compared to $570.8 million for the same period in 2016. For the nine-month period ended September 30, 2017, adjusted net income from continuing operations was $366.0 million, or $3.26 per diluted share, compared to $315.0 million, or $2.78 per diluted share, for the same period in 2016, an increase of 17.3%. See notes to the condensed consolidated financial information for further details. The Company reported net sales for the nine-month period ended September 30, 2017 of $2.21 billion, up 11.8% from net sales of $1.98 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 $343.6 million in the third quarter of 2017, an increase of 42.9% from third quarter 2016 net sales of $240.4 million. The $103.1 million increase in net sales as compared to prior year was primarily due to favorable pricing impacts, increased sales volumes and $1.6 million of favorable currency exchange impacts. Adjusted EBITDA for Lithium and Advanced Materials was $130.2 million, an increase of 42.0% from third quarter 2016 results of $91.7 million. The $38.5 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts and increased sales volumes, partially offset by Lithium growth spending, a $3.9 million negative impact from hurricane Harvey on Performance Catalyst Solutions (“PCS”) and $0.2 million of unfavorable currency exchange impacts.

Bromine Specialties reported net sales of $212.9 million in the third quarter of 2017, an increase of 9.5% from third quarter 2016 net sales of $194.5 million. The $18.4 million increase in net sales as compared to the prior year was primarily due to increased sales volumes related to flame retardants and favorable pricing impacts. Adjusted EBITDA for Bromine Specialties was $63.9 million, an increase of 23.4% from third quarter 2016 results of $51.8 million. The $12.1 million increase in adjusted EBITDA as compared to the prior year was primarily due to higher volume and favorable pricing impacts, partially offset by higher selling, general and administrative costs and a $2.7 million negative impact from hurricane Harvey.

2



Refining Solutions reported net sales of $170.3 million in the third quarter of 2017, a decrease of 10.6% from net sales of $190.5 million in the third quarter of 2016. The $20.2 million decrease in net sales as compared to the prior year was primarily due to lower sales volumes and unfavorable pricing impacts due to customer and product mix, partially offset by $1.4 million of favorable currency exchange impacts. Adjusted EBITDA for Refining Solutions was $43.1 million in the third quarter of 2017, a decrease of 33.6% from third quarter 2016 results of $65.0 million. The $21.8 million decrease in adjusted EBITDA as compared to the prior year was primarily due to unfavorable volume and mix impacts, as well as a $4.8 million negative impact from hurricane Harvey.

All Other net sales were $28.0 million in the third quarter of 2017, a decrease of 0.9% from net sales of $28.3 million in the third quarter of 2016. The $0.3 million decrease in net sales as compared to the prior year was primarily due to lower sales volumes partially offset by favorable pricing for the fine chemistry services business. All Other adjusted EBITDA was $0.3 million in the third quarter of 2017, a decrease of 94.4% from third quarter 2016 results of $5.5 million. The $5.2 million decrease in adjusted EBITDA as compared to the prior year was primarily due to a $2.9 million gain in the fair value of our investment in private equity securities for the three-month period ended September 30, 2016 and the impact of the divestiture of $1.3 million. Excluding these items, adjusted EBITDA decreased $1.0 million due to lower volume and slightly higher costs in the fine chemistry services business.

Corporate Results

Corporate adjusted EBITDA was a loss of $28.2 million in the third quarter of 2017 compared to a loss of $25.6 million in the third quarter of 2016. The decrease in Corporate adjusted EBITDA was primarily due to $2.1 million of unfavorable currency exchange impacts.

Income Taxes

Our effective income tax rates for the third quarter of 2017 and 2016 of 14.3% and 11.1%, 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 17.0% and 18.2% for the third quarter of 2017 and 2016, respectively, and continue to be influenced by the level and geographic mix of income. The increase in the effective tax rate in the third quarter of 2017 compared to 2016 was impacted by a variety of factors, primarily stemming from the discrete tax benefit in 2016 related to accrual to return adjustments of $6.1 million driven mainly by adjustments to our Chilean entity. Our effective income tax rates for the nine months ended September 30, 2017 and 2016 were 17.6% and 13.8%, respectively, and our adjusted effective income tax rates for the nine months ended September 30, 2017 and 2016 were 19.5% and 18.5%, 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 from operations was approximately $74.8 million for the nine months ended September 30, 2017, down $379.3 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 $1.05 billion in cash and cash equivalents at September 30, 2017, as compared to $2.27 billion at December 31, 2016. During the first nine months of 2017, cash on hand, cash provided by operations and net borrowings funded $753.2 million of debt repayments, primarily related to the senior notes, $187.5 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $105.2 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 in the second quarter of 2017.

Earnings Call

The Company’s performance for the third quarter ended September 30, 2017 will be discussed on a conference call at 9:00 AM Eastern time on November 9, 2017. The call can be accessed by dialing 888-713-4199 (International Dial-In # 617-213-4861), and entering conference ID 31692592. 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
(In Thousands Except Per Share Amounts) (Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
754,866

 
$
654,010

 
$
2,214,187

 
$
1,980,548

Cost of goods sold(a)(b)
479,077

 
415,038

 
1,411,216

 
1,250,938

Gross profit
275,789

 
238,972

 
802,971

 
729,610

Selling, general and administrative expenses(a)(b)
105,582

 
86,302

 
329,269

 
254,988

Research and development expenses(b)
21,763

 
21,012

 
63,423

 
61,384

Gain on sales of businesses, net(b)

 

 

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

 
6,749

 

 
44,337

Operating profit
148,444

 
124,909

 
410,279

 
491,199

Interest and financing expenses(b)
(15,792
)
 
(15,946
)
 
(98,895
)
 
(46,860
)
Other (expenses) income, net(b)
(3,008
)
 
2,990

 
(6,512
)
 
740

Income from continuing operations before income taxes and equity in net income of unconsolidated investments
129,644

 
111,953

 
304,872

 
445,079

Income tax expense(b)
18,495

 
12,394

 
53,596

 
61,535

Income from continuing operations before equity in net income of unconsolidated investments
111,149

 
99,559

 
251,276

 
383,544

Equity in net income of unconsolidated investments (net of tax)
19,044

 
14,953

 
55,263

 
44,790

Net income from continuing operations
130,193

 
114,512

 
306,539

 
428,334

Income (loss) from discontinued operations (net of tax)(c)

 
23,185

 

 
(357,843
)
Net income
130,193

 
137,697

 
306,539

 
70,491

Net income attributable to noncontrolling interests
(11,523
)
 
(9,477
)
 
(33,323
)
 
(28,906
)
Net income attributable to Albemarle Corporation
$
118,670

 
$
128,220

 
$
273,216

 
$
41,585

Basic earnings (loss) per share:

 

 

 

Continuing operations
$
1.07

 
$
0.93

 
$
2.46

 
$
3.56

Discontinued operations

 
0.21

 

 
(3.19
)
 
$
1.07

 
$
1.14

 
$
2.46

 
$
0.37

Diluted earnings (loss) per share:

 

 

 

Continuing operations
$
1.06


$
0.93


$
2.43


$
3.53

Discontinued operations


0.20




(3.16
)
 
$
1.06


$
1.13


$
2.43


$
0.37

Weighted-average common shares outstanding – basic
110,476

 
112,429

 
111,049

 
112,343

Weighted-average common shares outstanding – diluted
111,975

 
113,448

 
112,456

 
113,131


See accompanying notes to the condensed consolidated financial information.


5


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

 
September 30,
 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Cash and cash equivalents
$
1,045,339

 
$
2,269,756

Other current assets
1,281,985

 
1,036,862

Total current assets
2,327,324

 
3,306,618

Property, plant and equipment
4,167,065

 
3,910,522

Less accumulated depreciation and amortization
1,682,780

 
1,550,382

Net property, plant and equipment
2,484,285

 
2,360,140

Other assets and intangibles
2,711,691

 
2,494,449

Total assets
$
7,523,300

 
$
8,161,207

LIABILITIES AND EQUITY
 
 
 
Current portion of long-term debt
$
382,358

 
$
247,544

Other current liabilities
720,659

 
892,559

Total current liabilities
1,103,017

 
1,140,103

Long-term debt
1,407,171

 
2,121,718

Other noncurrent liabilities
559,506

 
544,043

Deferred income taxes
414,034

 
412,739

Albemarle Corporation shareholders’ equity
3,898,819

 
3,795,062

Noncontrolling interests
140,753

 
147,542

Total liabilities and equity
$
7,523,300


$
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)

 
Nine Months Ended
 
September 30,
 
2017
 
2016
Cash and cash equivalents at beginning of year
$
2,269,756

 
$
213,734

Cash and cash equivalents at end of period
$
1,045,339

 
$
233,599

Sources of cash and cash equivalents:
 
 
 
Net income
$
306,539

 
$
70,491

Cash proceeds from divestitures, net
6,857

 
310,599

Proceeds from borrowings of long-term debt
27,000

 

Other borrowings, net
79,203

 

Dividends received from unconsolidated investments and nonmarketable securities
11,900

 
34,982

Proceeds from exercise of stock options
7,011

 
6,779

Uses of cash and cash equivalents:
 
 
 
Working capital changes
(398,913
)
 
(79,684
)
Capital expenditures
(187,519
)
 
(141,301
)
Acquisitions, net of cash acquired
(45,406
)
 

Cash payments related to acquisitions and other

 
(81,988
)
Repayments of long-term debt
(753,209
)
 
(382,730
)
Repurchases of common stock
(250,000
)
 

Repayments of other borrowings, net

 
(9,026
)
Pension and postretirement contributions
(9,607
)
 
(13,649
)
Dividends paid to shareholders
(105,205
)
 
(101,061
)
Fees related to early extinguishment of debt
(46,959
)
 

Dividends paid to noncontrolling interests
(27,791
)
 
(23,873
)
Non-cash and other items:
 
 
 
Depreciation and amortization
144,087

 
176,499

Gain on sales of businesses, net

 
(122,298
)
Gain on acquisition
(6,025
)
 

Pension and postretirement expense
67

 
7,911

Loss on early extinguishment of debt
52,801

 

Deferred income taxes
4,677

 
404,728

Equity in net income of unconsolidated investments (net of tax)
(55,263
)
 
(46,224
)

See accompanying notes to the condensed consolidated financial information.


7


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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net sales:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
343,557

 
$
240,424

 
$
945,791

 
$
689,950

Bromine Specialties
212,923

 
194,496

 
636,059

 
597,912

Refining Solutions
170,275

 
190,453

 
539,904

 
539,044

All Other
28,021

 
28,272

 
91,144

 
150,987

Corporate
90

 
365

 
1,289

 
2,655

Total net sales
$
754,866

 
$
654,010

 
$
2,214,187

 
$
1,980,548

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
130,218

 
$
91,719

 
$
382,789

 
$
260,861

Bromine Specialties
63,936

 
51,807

 
194,499

 
179,977

Refining Solutions
43,120

 
64,960

 
142,777

 
181,620

All Other
306

 
5,470

 
7,906

 
14,810

Corporate(a)
(28,197
)
 
(25,627
)
 
(88,271
)
 
(66,435
)
Total adjusted EBITDA
$
209,383

 
$
188,329

 
$
639,700

 
$
570,833


Lithium and Advanced Materials - details by product category:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net sales:
 
 
 
 
 
 
 
Lithium
$
269,238

 
$
166,406

 
$
729,288

 
$
460,679

PCS
74,319

 
74,018

 
216,503

 
229,271

Total Lithium and Advanced Materials
$
343,557

 
$
240,424

 
$
945,791

 
$
689,950

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium
$
112,944

 
$
68,637

 
$
327,996

 
$
196,617

PCS
17,274

 
23,082

 
54,793

 
64,244

Total Lithium and Advanced Materials
$
130,218

 
$
91,719

 
$
382,789

 
$
260,861


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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Cost of goods sold:
 
 
 
 
 
 
 
Interest cost and expected return on assets, net
$
(0.1
)
 
$
(0.2
)
 
$
(0.4
)
 
$
(0.5
)
Total
$
(0.1
)
 
$
(0.2
)
 
$
(0.4
)
 
$
(0.5
)
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
Interest cost and expected return on assets, net
$
(0.9
)
 
$
(0.1
)
 
$
(2.7
)
 
$
(0.3
)
Total
$
(0.9
)
 
$
(0.1
)
 
$
(2.7
)
 
$
(0.3
)

(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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Utilization of inventory markup(1)
$

 
$

 
$
0.16

 
$

Write-off of research and development fixed assets(2)

 
0.01

 

 
0.01

Restructuring and other, net(3)

 

 
0.11

 

Acquisition and integration related costs(4)
0.02

 
0.03

 
0.18

 
0.26

Gain on sales of businesses, net(5)

 

 

 
(1.02
)
Gain on sales of properties, net(6)

 
(0.01
)
 

 
(0.01
)
Gain on acquisition(7)
0.01

 

 
(0.05
)
 

Loss on extinguishment of debt(8)

 

 
0.34

 

Multiemployer plan shortfall contributions(9)
0.01

 

 
0.04

 

Other(10)
(0.01
)
 

 
0.04

 

Discrete tax items(11)
(0.01
)
 
(0.05
)
 
0.02

 
0.01

Total non-recurring and other unusual items
$
0.02

 
$
(0.02
)
 
$
0.84

 
$
(0.75
)

(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 $23.1 million. The inventory markup was expensed over the estimated remaining selling period. For the three and nine months ended September 30, 2017, $0.6 million and $23.1 million ($0.2 million and $17.8 million after income taxes, or less than $0.01 and $0.16 per share), respectively, was included in Cost of goods sold related to the utilization of the inventory markup.

(2)
Included in Research and development expenses for the three and nine months ended September 30, 2016 is a loss of $1.4 million ($0.6 million after income taxes, or $0.01 per share) resulting from the write-off of research and development fixed assets in China.

9



(3)
The nine months ended September 30, 2017 included restructuring costs in each of our reportable segments at several locations, primarily at our Lithium site in Germany. These restructuring costs are included in the consolidated statements of income as follows (in millions):
 
Nine Months Ended
 
September 30, 2017
Restructuring and other costs:
 
Cost of goods sold
$
2.9

Selling, general and administrative expenses
8.4

Research and development expenses
5.8

Total
$
17.1

Total restructuring and other costs, after income taxes
$
13.0

Total restructuring and other costs, per diluted share
$
0.11


(4)
Acquisition and integration related costs for the three and nine months ended September 30, 2017 primarily resulted from the acquisition of Jiangli New Materials. For the three and nine months ended September 30, 2016, acquisition and integration related costs of $6.3 million and $42.4 million, respectively, related to integration costs resulting from the acquisition of Rockwood, and $0.4 million and $1.9 million, respectively, were in connection with other significant projects. Acquisition and integration related costs are included in the consolidated statements of income as follows (in millions):

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Acquisition and integration related costs:
 
 
 
 
 
 
 
Cost of goods sold
$
1.8

 
$

 
$
12.5

 
$

Selling, general and administrative expenses
3.8

 

 
13.9

 

Acquisition and integration related costs

 
6.7

 

 
44.3

Total
$
5.6

 
$
6.7

 
$
26.4

 
$
44.3

Total acquisition and integration related costs, after income taxes
$
2.6

 
$
3.1

 
$
20.1

 
$
29.5

Total acquisition and integration related costs, per diluted share
$
0.02

 
$
0.03

 
$
0.18

 
$
0.26


(5)
Included in Gain on sales of businesses, net, for the nine months ended September 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 nine months ended September 30, 2016 includes a loss of $1.5 million, or $0.01 per share, on the sale of our wafer reclaim business.

(6)
Included in Other (expenses) income, net for the three and nine months ended September 30, 2016 is a net gain of $0.9 million ($0.4 million after income taxes, or $0.01 per share) on the sales of properties.

(7)
Included in Other (expenses) income, net, for the nine months ended September 30, 2017 is a gain of $6.0 million ($5.4 million after income taxes, or $0.05 per share) related to the acquisition of the remaining 50% interest in the Sales de Magnesio Ltda. joint venture in Chile. During the three months ended September 30, 2017 we adjusted this gain to reduce it by $1.4 million ($0.6 million after income taxes, or $0.01 per share). The gain was calculated based on the difference between the purchase price and the book value of the investment.


10


(8)
Included in Interest and financing expenses for the nine months ended September 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.

(9)
Included in Selling, general and administrative expenses for the nine months ended September 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, for the three and nine months ended September 30, 2017, capital reserve contributions for this multiemployer plan of $1.6 million and $4.6 million ($0.6 million and $2.8 million after income taxes, or $0.01 and $0.03 per share), respectively, included in Other (expenses) income, net, have been made to indemnify previously divested businesses.

(10)
Other adjustments for the three months ended September 30, 2017 included amounts recorded in:
Cost of goods sold - $1.3 million reversal of deferred income related to an abandoned project at an unconsolidated investment.
Other (expenses) income, net - $1.1 million related to a reversal of a liability associated with the previous disposal of a property, partially offset by the revision of tax indemnification expenses of $0.7 million primarily related to the filing of tax returns for a previously disposed business.
After income taxes, these net gains totaled $1.1 million, or $0.01 per share.

Other adjustments for the nine months ended September 30, 2017 included amounts recorded in:
Cost of goods sold - $1.3 million reversal of deferred income related to an abandoned project at an unconsolidated investment.
Selling, general and administrative expenses - $1.0 million related to a reversal of an accrual recorded as part of purchase accounting from a previous acquisition.
Other (expenses) income, net - $3.2 million of asset retirement obligation charges related to the revision of an estimate at a site formerly owned by Albemarle, a loss of $2.1 million associated with the previous disposal of a business, final settlement claims associated with the previous disposal of a business of $2.0 million and the revision of tax indemnification expenses of $1.9 million primarily related to the filing of tax returns and a competent authority agreement for a previously disposed business, partially offset by a reversal of a liability associated with the previous disposal of a property of $1.1 million.
After income taxes, these net charges totaled $4.5 million, or $0.04 per share.

(11)
Included in Income tax expense for the three and nine months ended September 30, 2017 are discrete net tax (benefits) expenses of ($0.4) million, or ($0.01) per share, and $2.7 million, or $0.02 per share, respectively. The net benefit for the three months is primarily related to a $2.2 million benefit from the excess tax benefits realized from stock-based compensation arrangements, and $1.0 million from the release of valuation allowances due to a foreign restructure plan, partially offset by expenses from accrual to return and rate changes of $2.8 million. The net expense for the nine months is primarily related to foreign rate changes of $14.8 million and accrual to return adjustments of $7.9 million, partially offset by a $10.8 million benefit from the release of valuation allowances due to a foreign restructuring plan, $2.3 million from release of unrecognized tax benefits, and $6.9 million benefit from excess tax benefits realized from stock-based compensation arrangements. Included in Income tax expense for the three months ended September 30, 2016 are benefits of $5.5 million, or $0.05 per share respectively, related mainly to foreign provision to return adjustments. Included in Income tax expense for the nine months ended September 30, 2016 are expense items of $1.6 million, or $0.01 per share respectively, related mainly to a change in the Company’s assertion over book and tax basis differences of a foreign entity, changes in valuation allowances necessary because of the announced divestiture of the Chemetall Surface Treatment business, and decreased by foreign tax rate changes and provision to return adjustments.

(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. Income (loss) from discontinued operations (net of tax) in the consolidated statements of income for the nine months ended September 30, 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

11


$29.8 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.

12


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 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

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Net income attributable to Albemarle Corporation
$
118,670


$
128,220


$
273,216


$
41,585

Add back:











(Income) loss from discontinued operations (net of tax)

 
(23,185
)
 

 
357,843

Earnings from continuing operations
118,670

 
105,035

 
273,216

 
399,428

Add back:
 
 
 
 
 
 
 
Non-operating pension and OPEB items from continuing operations (net of tax)
(694
)

(154
)

(2,093
)

(260
)
Non-recurring and other unusual items from continuing operations (net of tax)
2,575


(2,170
)

94,918


(84,218
)
Adjusted net income from continuing operations
$
120,551


$
102,711


$
366,041


$
314,950













Adjusted diluted earnings per share from continuing operations
$
1.08


$
0.91


$
3.26


$
2.78













Weighted-average common shares outstanding – diluted
111,975


113,448


112,456


113,131













Net income attributable to Albemarle Corporation
$
118,670


$
128,220


$
273,216


$
41,585

Add back:











(Income) loss from discontinued operations (net of tax)


(23,185
)



357,843

Interest and financing expenses
15,792


15,946


98,895


46,860

Income tax expense
18,495


12,394


53,596


61,535

Depreciation and amortization
49,895


47,974


144,087


141,288

EBITDA
202,852


181,349


569,794


649,111

Non-operating pension and OPEB items
(1,028
)

(231
)

(3,144
)

(779
)
Non-recurring and other unusual items (excluding items associated with interest expense)
7,559


7,211


73,050


(77,499
)
Adjusted EBITDA
$
209,383


$
188,329


$
639,700


$
570,833













Net sales
$
754,866


$
654,010


$
2,214,187


$
1,980,548

EBITDA margin
26.9
%

27.7
%

25.7
%

32.8
%
Adjusted EBITDA margin
27.7
%

28.8
%

28.9
%

28.8
%


13


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 September 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
103,199

 
$
53,760

 
$
34,392

 
$
191,351

 
$
(1,776
)
 
$
(70,905
)
 
$
118,670

 
15.7
 %
Depreciation and amortization
26,136

 
10,176

 
9,978

 
46,290

 
2,082

 
1,523

 
49,895

 
6.6
 %
Non-recurring and other unusual items
883

 

 
(1,250
)
 
(367
)
 

 
7,926

 
7,559

 
1.0
 %
Interest and financing expenses

 

 

 

 

 
15,792

 
15,792

 
2.1
 %
Income tax expense

 

 

 

 

 
18,495

 
18,495

 
2.4
 %
Non-operating pension and OPEB items

 

 

 

 

 
(1,028
)
 
(1,028
)
 
(0.1
)%
Adjusted EBITDA
$
130,218

 
$
63,936

 
$
43,120

 
$
237,274

 
$
306

 
$
(28,197
)
 
$
209,383

 
27.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
66,166

 
$
41,621

 
$
55,981

 
$
163,768

 
$
3,806

 
$
(39,354
)
 
$
128,220

 
19.6
 %
Depreciation and amortization
25,553

 
10,186

 
8,979

 
44,718

 
1,664

 
1,592

 
47,974

 
7.3
 %
Non-recurring and other unusual items

 

 

 

 

 
7,211

 
7,211

 
1.1
 %
Interest and financing expenses

 

 

 

 

 
15,946

 
15,946

 
2.4
 %
Income tax expense

 

 

 

 

 
12,394

 
12,394

 
1.9
 %
Income from discontinued operations (net of tax)

 

 

 

 

 
(23,185
)
 
(23,185
)
 
(3.5
)%
Non-operating pension and OPEB items

 

 

 

 

 
(231
)
 
(231
)
 
 %
Adjusted EBITDA
$
91,719

 
$
51,807

 
$
64,960

 
$
208,486

 
$
5,470

 
$
(25,627
)
 
$
188,329

 
28.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
292,655

 
$
164,193

 
$
115,329

 
$
572,177

 
$
1,622

 
$
(300,583
)
 
$
273,216

 
12.3
 %
Depreciation and amortization
74,157

 
30,306

 
28,698

 
133,161

 
6,284

 
4,642

 
144,087

 
6.5
 %
Non-recurring and other unusual items (excluding items associated with interest expense)
15,977

 

 
(1,250
)
 
14,727

 

 
58,323

 
73,050

 
3.3
 %
Interest and financing expenses

 

 

 

 

 
98,895

 
98,895

 
4.5
 %
Income tax expense

 

 

 

 

 
53,596

 
53,596

 
2.4
 %
Non-operating pension and OPEB items

 

 

 

 

 
(3,144
)
 
(3,144
)
 
(0.1
)%
Adjusted EBITDA
$
382,789

 
$
194,499

 
$
142,777

 
$
720,065

 
$
7,906

 
$
(88,271
)
 
$
639,700

 
28.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
186,373

 
$
150,221

 
$
154,767

 
$
491,361

 
$
133,012

 
$
(582,788
)
 
$
41,585

 
2.1
 %
Depreciation and amortization
74,488

 
29,756

 
26,853

 
131,097

 
5,629

 
4,562

 
141,288

 
7.1
 %
Non-recurring and other unusual items

 

 

 

 
(123,831
)
 
46,332

 
(77,499
)
 
(3.9
)%
Interest and financing expenses

 

 

 

 

 
46,860

 
46,860

 
2.4
 %
Income tax expense

 

 

 

 

 
61,535

 
61,535

 
3.1
 %
Loss from discontinued operations (net of tax)

 

 

 

 

 
357,843

 
357,843

 
18.1
 %
Non-operating pension and OPEB items

 

 

 

 

 
(779
)
 
(779
)
 
 %
Adjusted EBITDA
$
260,861

 
$
179,977

 
$
181,620

 
$
622,458

 
$
14,810

 
$
(66,435
)
 
$
570,833

 
28.8
 %


14


 
Lithium
 
PCS
 
Total Lithium and Advanced Materials
Three months ended September 30, 2017:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
89,745

 
$
13,454

 
$
103,199

Depreciation and amortization
22,316

 
3,820

 
26,136

Non-recurring and other unusual items
883

 

 
883

Adjusted EBITDA
$
112,944

 
$
17,274

 
$
130,218

 
 
 
 
 
 
Three months ended September 30, 2016:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
46,848

 
$
19,318

 
$
66,166

Depreciation and amortization
21,789

 
3,764

 
25,553

Adjusted EBITDA
$
68,637

 
$
23,082

 
$
91,719

 
 
 
 
 
 
Nine months ended September 30, 2017:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
249,178

 
$
43,477

 
$
292,655

Depreciation and amortization
62,841

 
11,316

 
74,157

Non-recurring and other unusual items
15,977

 

 
15,977

Adjusted EBITDA
$
327,996

 
$
54,793

 
$
382,789

 
 
 
 
 
 
Nine months ended September 30, 2016:
 
 
 
 
 
Net income attributable to Albemarle Corporation
$
133,323

 
$
53,050

 
$
186,373

Depreciation and amortization
63,294

 
11,194

 
74,488

Adjusted EBITDA
$
196,617

 
$
64,244

 
$
260,861




15


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 September 30, 2017:
 
 
 
 
 
As reported
$
129,644

 
$
18,495

 
14.3
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
6,531

 
4,650

 
 
As adjusted
$
136,175

 
$
23,145

 
17.0
%

 
 
 
 
 
Three months ended September 30, 2016:
 
 
 
 
 
As reported
$
111,953

 
$
12,394

 
11.1
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
6,980

 
9,304

 
 
As adjusted
$
118,933

 
$
21,698

 
18.2
%
 
 
 
 
 
 
Nine months ended September 30, 2017:
 
 
 
 
 
As reported
$
304,872

 
$
53,596

 
17.6
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
122,707

 
29,882

 
 
As adjusted
$
427,579

 
$
83,478

 
19.5
%
 
 
 
 
 
 
Nine months ended September 30, 2016:
 
 
 
 
 
As reported
$
445,079

 
$
61,535

 
13.8
%
Non-recurring, other unusual and non-operating pension and OPEB items from continuing operations
(78,278
)
 
6,200

 
 
As adjusted
$
366,801

 
$
67,735

 
18.5
%


16