alb-20200805
false000091591300009159132020-08-052020-08-05

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 8-K
_________________________________
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) August 5, 2020
 
_________________________________
ALBEMARLE CORPORATION
(Exact name of Registrant as specified in charter)
_________________________________

Virginia001-1265854-1692118
(State or other jurisdiction
of incorporation)
(Commission
file number)
(IRS employer
identification no.)
4250 Congress Street, Suite 900
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.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
COMMON STOCK, $.01 Par ValueALBNew York Stock Exchange




Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition.
On August 5, 2020, Albemarle Corporation (the “Company”) issued a press release reporting its results for the second quarter ended June 30, 2020. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 6, 2020, the Company will hold a teleconference for analysts and media to discuss results for the second quarter ended June 30, 2020. The teleconference will be webcast on the Company’s website at www.albemarle.com.
The press release includes presentations of adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin. These are financial measures that are not required by, nor presented in accordance with, accounting principles generally accepted in the United States (“GAAP”), but are included to provide additional useful measurements to review our operations, provide transparency to investors and enable period-to-period comparability of financial performance.
Our presentations of adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA and adjusted effective income tax rates should not be considered as alternatives to Net income attributable to Albemarle Corporation (“earnings”), diluted earnings per share and effective income tax rates as determined in accordance with GAAP. Further, EBITDA margin and adjusted EBITDA margin should not be considered as alternatives to earnings as a percentage of our consolidated net sales as would be determined in accordance with GAAP. The Company has included in the press release certain reconciliation information for these measures to their most directly comparable financial measures calculated and reported in accordance with GAAP.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Section 9 - Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
NumberExhibit




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 5, 2020

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





Document

Exhibit 99.1
Contact:
Meredith Bandy980.999.5168


https://cdn.kscope.io/d14361078b493b2ebd6f4162d8d81973-albemarlelogo11.jpg


Albemarle Reports Second Quarter Results


CHARLOTTE, N.C. - Aug. 5, 2020 - Albemarle Corporation (NYSE: ALB) today announced its results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights
(Unless otherwise stated, all percent changes are based on year-over-year comparisons)
Net income of $86 million, or $0.80 per diluted share; Adjusted diluted EPS of $0.86
Net sales of $764 million decreased by 14%, in-line with Q2 2020 outlook
Adjusted EBITDA of $185 million decreased by 29%, in-line with Q2 2020 outlook
Our plants continue to operate without material impact from the COVID-19 pandemic
Maintained our quarterly dividend of $0.385 per share, an increase of approximately 5% over the quarterly dividend paid in 2019
Continued actions to bolster our balance sheet and enhance financial flexibility include the previously announced covenant amendment
Cost savings initiatives remain on track: realization of between $50 and $70 million of sustainable cost savings in 2020; implementation of short-term cash management actions to save between $25 and $40 million per quarter; and deferral of 2020 capital spending by about $150 million from plan

“We are pleased that our net sales and adjusted EBITDA were at the upper range of our outlook this quarter. These results are due in no small part to the diligence of our global teams who continue to operate our businesses safely and efficiently,” said Albemarle CEO Kent Masters. “We remain confident that we have the right strategy in place to deliver value to our stakeholders by investing in and growing our Lithium business. While our strategy has not materially changed, the environment in which we operate has changed dramatically. Our response must be to focus on operational discipline in terms of manufacturing, business, and capital project excellence.”

Outlook

Albemarle anticipates that its third quarter 2020 performance will be lower year-over-year based on reduced global economic activity due to the global pandemic. As previously disclosed, we have withdrawn full-year 2020 outlook given the uncertainty around the duration and economic impact of the pandemic. We intend to reintroduce our full-year outlook as the situation allows. In an effort to help investors better understand our business, we have temporarily introduced a quarterly outlook.
Q3 2020 Outlook
Net sales$700 - $775 million
Adjusted EBITDA$140 - $190 million



1


COVID-19 Response

Albemarle’s cross-functional Global Response Team continues to meet weekly to assess the situation and take necessary actions to address employee health and safety and operational challenges. Protocols including restricted travel, shift adjustments, increased hygiene, and social distancing for the essential workers at our plants remain in place at all locations. In some regions, including China, Australia, and Europe, our employees have returned to work. Other regions, including most of North and South America, remain on work-from-home protocols for non-essential personnel.

Second Quarter Results
In millions, except per share amountsQ2 2020Q2 2019$ Change% Change
Net sales$764.0  $885.1  $(121.0) (13.7)%
Net income attributable to Albemarle Corporation$85.6  $154.2  $(68.6) (44.5)%
Adjusted EBITDA(a)
$185.2  $261.9  $(76.7) (29.3)%
Diluted earnings per share$0.80  $1.45  $(0.65) (44.8)%
   Non-operating pension and OPEB items(a)
(0.02) (0.01) 
   Non-recurring and other unusual items(a)
0.07  0.10  
Adjusted diluted earnings per share(b)
$0.86  $1.55  $(0.69) (44.5)%

(a) See Non-GAAP Reconciliations for further details.
(b) Totals may not add due to rounding.

Net sales of $764.0 million decreased by $121.0 million compared to the prior year quarter, primarily driven by the Catalysts and Lithium business segments as discussed below.

Adjusted EBITDA of $185.2 million decreased by $76.7 million from the prior year quarter due to lower net sales, which were partially offset by productivity and cost improvements. Similarly, net income attributable to Albemarle of $85.6 million decreased by $68.6 million from the prior year. Corporate costs including SG&A were down compared to the prior year period as a result of cost savings initiatives.

The effective income tax rate for Q2 2020 was 17.5% compared to 18.2% in the same period in 2019. The difference is largely due to a change in the geographic mix of earnings. On an adjusted basis, the effective income tax rates were 18.9% and 18.4% for the second quarter of 2020 and 2019, respectively.

Business Segment Results

Lithium
In millionsQ2 2020Q2 2019$ Change% Change
Net Sales$283.7  $324.8  $(41.0) (12.6)%
Adjusted EBITDA
$94.5  $141.8  $(47.2) (33.3)%

Lithium net sales of $283.7 million declined $41.0 million primarily due to lower market and contract pricing. Lower contract pricing reflects 2020 battery-grade price adjustments that were agreed to in late 2019. Adjusted EBITDA of $94.5 million declined by $47.2 million primarily due to reduced net sales as well as reduced Talison equity income. The decline was partially offset by cost savings initiatives and efficiency improvements.

Current Trends: We expect the impact of low OEM automotive production to be felt more acutely in Q3 2020. At the same time, we are seeing impacts of lower market prices, higher inventory in the battery channel, and reduced demand in the glass and ceramics markets. As a result, we expect Q3 2020 EBITDA to be down about 10% to 20% compared to Q2 2020.


2


Bromine Specialties
In millionsQ2 2020Q2 2019$ Change% Change
Net Sales$232.8  $255.4  $(22.7) (8.9)%
Adjusted EBITDA
$73.0  $81.3  $(8.3) (10.2)%

Bromine net sales of $232.8 million declined $22.7 million primarily due to lower volumes driven by COVID-19 related impacts. Adjusted EBITDA of $73.0 million declined $8.3 million due to lower net sales, which were partially offset by cost savings initiatives.

Current Trends: Third quarter 2020 EBITDA is expected to be similar to Q2 2020. Due to our position in the supply chain, the impact of COVID-19 related weakness began in Q2 2020 and is expected to continue into Q3 2020. Strong demand for surfactants and stabilization in building and construction helps offset weakness in other end use markets.

Catalysts
In millionsQ2 2020Q2 2019$ Change% Change
Net Sales$197.1  $266.3  $(69.2) (26.0)%
Adjusted EBITDA
$22.8  $66.9  $(44.1) (65.9)%

Catalysts net sales of $197.1 million declined $69.2 million due primarily to lower volumes. Fluid Catalytic Cracking (FCC) volume was down primarily from lower transportation fuel consumption as a result of stay-at-home orders and travel restrictions. Hydroprocessing Catalysts (HPC) volumes were also down due to normal lumpiness of shipments and some softness related to lower oil prices and reduced fuel demand. Adjusted EBITDA of $22.8 million declined $44.1 million as a result of lower net sales and a net $12 million correction of out-of-period errors regarding inventory values and freight accruals. The errors primarily relate to Q1 2020 results (see note to the income statement). Adjusted EBITDA was favorably impacted by cost savings initiatives and efficiency improvements.

Current Trends: We expect FCC demand to partially recover in H2 2020 as travel begins to increase and global gasoline inventories deplete. Conversely, we expect that HPC will be negatively impacted in H2 2020 as refiners defer spending into 2021 and 2022. As a result, Q3 2020 EBITDA is expected to remain down about 50% to 60% from prior year.

All Other
In millionsQ2 2020Q2 2019$ Change% Change
Net Sales$50.5  $38.6  $11.9  31.0 %
Adjusted EBITDA
$18.6  $11.2  $7.4  65.5 %

Other operations represents our Fine Chemistry Services (FCS) business. FCS net sales of $50.5 million increased $11.9 million and adjusted EBITDA of $18.6 million increased $7.4 million. The FCS business tends to be contract driven. Recent contracts include life sciences products which are typically anti-cyclical.

Balance Sheet and Liquidity

As of June 30, 2020, Albemarle had estimated liquidity of over $1.5 billion, including $737 million of cash and equivalents, $550 million remaining under our $1 billion revolver, and $220 million on other available credit lines. Total debt was $3.5 billion, representing net debt to adjusted EBITDA of approximately 3.2 times.

As previously disclosed, we recently negotiated a covenant amendment to ensure ongoing financial flexibility. The revised covenant is based on net debt to adjusted EBITDA, with a maximum ratio of 4.5 times for the third quarter 2020 through third quarter 2021, decreasing to 4.0 times in the fourth quarter of 2021, and 3.5 times thereafter.

Cash Flow and Capital Deployment

Cash from operations for the six months ended June 30, 2020, of $207.9 million, increased $8.6 million versus the prior year as reduced working capital outflows in 2020 offset lower earnings. Capital expenditures of $419.0 million were in-line with the prior year as progress continued on our Lithium expansion projects.
3



Our primary capital allocation priorities are to maintain our investment grade rating and our quarterly dividend while preserving our long-term growth profile.

In order to preserve cash and align with the current economic environment, we have accelerated our previously announced cost savings initiatives, implemented short-term cash management tactics, and delayed capital expenditures. We continue to anticipate realizing $50 to $70 million of sustainable cost savings in 2020. Expected full-year 2020 capital spending remains approximately $850 to $950 million.

In May, the board declared a quarterly dividend of $0.385 per share, an increase of approximately 5% over the quarterly dividend paid in 2019. We expect 2020 to be our 26th consecutive year of dividend increase, and the company remains committed to shareholder returns.

Our share repurchase authorization remains in place; however, there are no near-term plans to execute share buybacks. Divestiture activity is ongoing but has been slowed as travel restrictions have delayed due diligence processes.

Earnings Call

Date:Thursday, August 6, 2020
Time:9:00 AM Eastern time
Dial-in (U.S.):844-347-1034
Dial-in (International):209-905-5910
Passcode:3673986

The Company’s earnings presentation and supporting material are available on Albemarle’s website at https://investors.albemarle.com.

About Albemarle

Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, N.C., is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We think beyond business-as-usual to power the potential of companies in many of the world's largest and most critical industries, such as energy, electronics, and transportation. We actively pursue a sustainable approach to managing our diverse global footprint of world-class resources. In conjunction with our highly experienced and talented global teams, our deep-seated values, and our collaborative customer relationships, we create value-added and performance-based solutions that enable a safer and more sustainable future.

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, information related to product development, production capacity, committed volumes, market trends, pricing, expected growth, earnings and demand for our products, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, 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 from the outlook expressed or implied in any forward-looking statement 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 or the end-user markets in which our products are sold; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; increases in the cost of raw materials and energy, and our ability to pass through such increases to our customers; changes in our markets in general; fluctuations in foreign currencies; changes in laws and government
4


regulation impacting our operations or our products; the occurrence of regulatory actions, proceedings, claims or litigation; the occurrence of cyber-security 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, including adverse effects from terrorism or hostilities; 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 that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions we may make in the future; the ability to successfully execute, operate and integrate acquisitions and divestitures; uncertainties as to the duration and impact of the coronavirus (COVID-19) pandemic; and the other factors detailed from time to time in the reports we file with the SEC, including those described under “Risk Factors” in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. We assume no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

5


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

Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Net sales$764,049  $885,052  $1,502,894  $1,717,116  
Cost of goods sold1
530,690  559,138  1,027,517  1,107,716  
Gross profit
233,359  325,914  475,377  609,400  
Selling, general and administrative expenses106,949  126,715  208,826  240,070  
Research and development expenses14,210  13,462  30,307  28,439  
Operating profit
112,200  185,737  236,244  340,891  
Interest and financing expenses(17,852) (11,601) (34,737) (24,187) 
Other (expenses) income, net(6,273) (7,065) 2,041  4,226  
Income before income taxes and equity in net income of unconsolidated investments88,075  167,071  203,548  320,930  
Income tax expense15,431  30,411  33,873  67,925  
Income before equity in net income of unconsolidated investments72,644  136,660  169,675  253,005  
Equity in net income of unconsolidated investments (net of tax)31,114  38,310  57,718  73,491  
Net income103,758  174,970  227,393  326,496  
Net income attributable to noncontrolling interests(18,134) (20,772) (34,565) (38,729) 
Net income attributable to Albemarle Corporation$85,624  $154,198  $192,828  $287,767  
Basic earnings per share$0.81  $1.46  $1.81  $2.72  
Diluted earnings per share$0.80  $1.45  $1.81  $2.71  
Weighted-average common shares outstanding – basic106,329  105,961  106,278  105,880  
Weighted-average common shares outstanding – diluted106,535  106,316  106,524  106,336  

1 Cost of goods sold for the three-month period ended June 30, 2020 includes a net expense of $9.8 million for the correction of out-of-period errors regarding understated cost of goods sold for inventory values within the Catalysts segment and overstated freight accruals primarily within the Lithium and Catalysts segments.

6


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

June 30,December 31,
20202019
ASSETS
Current assets:
Cash and cash equivalents$736,696  $613,110  
Trade accounts receivable517,626  612,651  
Other accounts receivable76,957  67,551  
Inventories851,256  768,984  
Other current assets109,874  162,813  
Total current assets
2,292,409  2,225,109  
Property, plant and equipment7,138,969  6,817,843  
Less accumulated depreciation and amortization2,002,612  1,908,370  
Net property, plant and equipment
5,136,357  4,909,473  
Investments614,145  579,813  
Other assets213,223  213,061  
Goodwill1,571,280  1,578,785  
Other intangibles, net of amortization342,839  354,622  
Total assets
$10,170,253  $9,860,863  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$523,160  $574,138  
Accrued expenses399,456  553,160  
Current portion of long-term debt406,201  187,336  
Dividends payable40,728  38,764  
Current operating lease liability21,808  23,137  
Income taxes payable29,450  32,461  
Total current liabilities
1,420,803  1,408,996  
Long-term debt3,132,191  2,862,921  
Postretirement benefits50,362  50,899  
Pension benefits284,480  292,073  
Other noncurrent liabilities670,001  754,536  
Deferred income taxes406,255  397,858  
Commitments and contingencies
Equity:
Albemarle Corporation shareholders’ equity:
Common stock1,064  1,061  
Additional paid-in capital1,400,105  1,383,446  
Accumulated other comprehensive loss(431,131) (395,735) 
Retained earnings3,054,434  2,943,478  
Total Albemarle Corporation shareholders’ equity4,024,472  3,932,250  
Noncontrolling interests181,689  161,330  
Total equity4,206,161  4,093,580  
Total liabilities and equity$10,170,253  $9,860,863  


7


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

Six Months Ended
June 30,
20202019
Cash and cash equivalents at beginning of year$613,110  $555,320  
Cash flows from operating activities:
Net income227,393  326,496  
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization111,535  102,231  
Gain on sale of property—  (11,079) 
Stock-based compensation and other9,765  10,136  
Equity in net income of unconsolidated investments (net of tax)(57,718) (73,491) 
Dividends received from unconsolidated investments and nonmarketable securities12,984  60,291  
Pension and postretirement (benefit) expense(3,312) 1,055  
Pension and postretirement contributions(6,692) (7,778) 
Unrealized gain on investments in marketable securities(1,278) (577) 
Deferred income taxes8,990  3,570  
Working capital changes(156,579) (223,238) 
Other, net62,829  11,672  
Net cash provided by operating activities207,917  199,288  
Cash flows from investing activities:
Acquisitions, net of cash acquired(22,572) —  
Capital expenditures(418,991) (415,626) 
Proceeds from sale of property and equipment—  10,356  
Sales of marketable securities, net1,496  908  
Investments in equity and other corporate investments(486) (2,549) 
Net cash used in investing activities(440,553) (406,911) 
Cash flows from financing activities:
Proceeds from borrowings of credit agreements452,163  —  
Other borrowings, net12,956  183,052  
Dividends paid to shareholders(79,909) (74,313) 
Dividends paid to noncontrolling interests(14,286) (38,962) 
Proceeds from exercise of stock options10,809  3,205  
Withholding taxes paid on stock-based compensation award distributions(4,019) (10,570) 
Debt financing costs(2,669) —  
Other—  (445) 
Net cash provided by financing activities375,045  61,967  
Net effect of foreign exchange on cash and cash equivalents(18,823) (11,481) 
Increase (decrease) in cash and cash equivalents123,586  (157,137) 
Cash and cash equivalents at end of period$736,696  $398,183  



8


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

Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Net sales:
Lithium$283,722  $324,758  $520,540  $616,644  
Bromine Specialties232,779  255,433  464,371  504,485  
Catalysts197,053  266,301  404,260  517,949  
All Other50,495  38,560  113,723  78,038  
Total net sales$764,049  $885,052  $1,502,894  $1,717,116  
Adjusted EBITDA:
Lithium$94,536  $141,779  $173,173  $257,395  
Bromine Specialties73,041  81,332  156,303  159,929  
Catalysts22,777  66,875  70,247  126,946  
All Other18,598  11,240  41,422  18,483  
Corporate(23,759) (39,326) (59,587) (74,986) 
Total adjusted EBITDA$185,193  $261,900  $381,558  $487,767  

See accompanying non-GAAP reconciliations below.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, 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 on the following pages of this press release, which is also is available on Albemarle’s website at https://investors.albemarle.com. 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.

9


ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited)
See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, 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 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 EndedSix Months Ended

June 30,June 30,
In thousands, except percentages and per share amounts
2020201920202019
Net income attributable to Albemarle Corporation
$85,624  

$154,198  

$192,828  

$287,767  
Add back:
Non-operating pension and OPEB items (net of tax)
(2,299) 

(693) 

(4,610) 

(1,262) 
Non-recurring and other unusual items (net of tax)
7,907  

10,754  

9,400  

8,742  
Adjusted net income attributable to Albemarle Corporation
$91,232  

$164,259  

$197,618  

$295,247  








Adjusted diluted earnings per share
$0.86  

$1.55  

$1.86  

$2.78  








Weighted-average common shares outstanding – diluted
106,535  106,316  106,524  106,336  








Net income attributable to Albemarle Corporation
$85,624  

$154,198  

$192,828  

$287,767  
Add back:







Interest and financing expenses
17,852  

11,601  

34,737  

24,187  
Income tax expense
15,431  

30,411  

33,873  

67,925  
Depreciation and amortization
57,841  

52,948  

111,535  

102,231  
EBITDA
176,748  

249,158  

372,973  

482,110  
Non-operating pension and OPEB items
(2,895) 

(676) 

(5,803) 

(1,259) 
Non-recurring and other unusual items
11,340  

13,418  

14,388  

6,916  
Adjusted EBITDA
$185,193  

$261,900  

$381,558  

$487,767  








Net sales
$764,049  

$885,052  

$1,502,894  

$1,717,116  
EBITDA margin
23.1 %

28.2 %

24.8 %

28.1 %
Adjusted EBITDA margin
24.2 %

29.6 %

25.4 %

28.4 %

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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 reported in accordance with GAAP (in thousands, except percentages).
LithiumBromine SpecialtiesCatalystsReportable Segments TotalAll OtherCorporateConsolidated Total% of Net Sales
Three months ended June 30, 2020
Net income (loss) attributable to Albemarle Corporation$66,038  $60,692  $10,702  $137,432  $16,425  $(68,233) $85,624  11.2 %
Depreciation and amortization28,498  12,349  12,075  52,922  2,173  2,746  57,841  7.6 %
Non-recurring and other unusual items—  —  —  —  —  11,340  11,340  1.5 %
Interest and financing expenses—  —  —  —  —  17,852  17,852  2.3 %
Income tax expense—  —  —  —  —  15,431  15,431  2.0 %
Non-operating pension and OPEB items—  —  —  —  —  (2,895) (2,895) (0.4)%
Adjusted EBITDA$94,536  $73,041  $22,777  $190,354  $18,598  $(23,759) $185,193  24.2 %
Three months ended June 30, 2019
Net income (loss) attributable to Albemarle Corporation$117,303  $69,616  $54,124  $241,043  $9,118  $(95,963) $154,198  17.4 %
Depreciation and amortization24,365  11,716  12,751  48,832  2,122  1,994  52,948  6.0 %
Non-recurring and other unusual items111  —  —  111  —  13,307  13,418  1.5 %
Interest and financing expenses—  —  —  —  —  11,601  11,601  1.3 %
Income tax expense—  —  —  —  —  30,411  30,411  3.5 %
Non-operating pension and OPEB items—  —  —  —  —  (676) (676) (0.1)%
Adjusted EBITDA$141,779  $81,332  $66,875  $289,986  $11,240  $(39,326) $261,900  29.6 %
Six months ended June 30, 2020
Net income (loss) attributable to Albemarle Corporation$119,278  $132,357  $45,594  $297,229  $37,271  $(141,672) $192,828  12.8 %
Depreciation and amortization53,895  23,946  24,653  102,494  4,151  4,890  111,535  7.4 %
Non-recurring and other unusual items—  —  —  —  —  14,388  14,388  1.0 %
Interest and financing expenses—  —  —  —  —  34,737  34,737  2.3 %
Income tax expense—  —  —  —  —  33,873  33,873  2.3 %
Non-operating pension and OPEB items—  —  —  —  —  (5,803) (5,803) (0.4)%
Adjusted EBITDA$173,173  $156,303  $70,247  $399,723  $41,422  $(59,587) $381,558  25.4 %
Six months ended June 30, 2019
Net income (loss) attributable to Albemarle Corporation$210,472  $137,096  $101,983  $449,551  $14,324  $(176,108) $287,767  16.8 %
Depreciation and amortization46,457  22,833  24,963  94,253  4,159  3,819  102,231  5.9 %
Non-recurring and other unusual items466  —  —  466  —  6,450  6,916  0.4 %
Interest and financing expenses—  —  —  —  —  24,187  24,187  1.4 %
Income tax expense—  —  —  —  —  67,925  67,925  4.0 %
Non-operating pension and OPEB items—  —  —  —  —  (1,259) (1,259) (0.1)%
Adjusted EBITDA$257,395  $159,929  $126,946  $544,270  $18,483  $(74,986) $487,767  28.4 %

Non-operating pension and OPEB items, consisting of mark-to-market actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our operating segments and are included in the Corporate category. In addition, 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. In accordance with GAAP, these non-operating pension and OPEB items are included in Other (expenses) income, net. Non-operating pension and OPEB items were as follows (in thousands):

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Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Interest cost $7,133  $8,769  $14,288  $17,638  
Expected return on assets(10,028) (9,445) (20,091) (18,897) 
Total$(2,895) $(676) $(5,803) $(1,259) 

In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items 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 EndedSix Months Ended
June 30,June 30,
2020201920202019
Restructuring and other(1)
$0.04  $0.04  $0.06  $0.05  
Acquisition and integration related costs(2)
0.04  0.04  0.06  0.07  
Gain on sale of property(3)
—  —  —  (0.08) 
Other(4)
(0.01) 0.03  (0.02) 0.02  
Discrete tax items(5)
—  (0.01) (0.01) 0.02  
Total non-recurring and other unusual items$0.07  $0.10  $0.09  $0.08  

(1)Severance expenses of $6.7 million ($4.7 million after income taxes, or $0.04 per share) included in Selling, general and administrative expenses for the three months ended June 30, 2020. In addition, we recorded severance expenses in Cost of goods sold, Selling, general and administrative expenses and Net income attributable to noncontrolling interest for the six months ended June 30, 2020 of $0.7 million, $8.2 million and a $0.3 million gain ($6.2 million after income taxes, or $0.06 per share), respectively. These severance expenses are part of a business reorganization plan, primarily within our Lithium business in Germany, as well in our Bromine Specialties business in 2020. The balance of unpaid severance is recorded in Accrued expenses and is expected to primarily be paid through the first quarter of 2021. During the three and six months ended June 30, 2019, severance expenses of $4.8 million ($4.4 million after income taxes, or $0.04 per share) and $5.3 million ($4.9 million after income taxes, or $0.05 per share), respectively, were recorded in Selling, general and administrative expenses as part of a business reorganization plan primarily in Catalysts, Lithium and Corporate.

(2)Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in Selling, general and administrative expenses for the three and six months ended June 30, 2020 of $5.5 million and $8.4 million ($4.2 million and $6.5 million after income taxes, or $0.04 and $0.06 per share), respectively, and for the three and six months ended June 30, 2019 of $5.0 million and $10.3 million ($3.8 million and $7.9 million after income taxes, or $0.04 and $0.07 per share), respectively.

(3)Included in Other (expenses) income, net, for the six months ended June 30, 2019 is a gain of $11.1 million ($8.5 million after income taxes, or $0.08 per share) related to the sale of land in Pasadena, Texas not used as part of our operations.

(4)Other adjustments for the three months ended June 30, 2020 included amounts recorded in:
Other (expenses) income, net - $0.9 million ($0.6 million after income taxes, or $0.01 per share) net gain primarily relating to the sale of idle properties in Germany.

Other adjustments for the six months ended June 30, 2020 included amounts recorded in:
Other (expenses) income, net - $2.7 million gain resulting from the settlement of a legal matter related to a business sold and $0.8 million net gain primarily relating to the sale of idle properties in Germany, partially offset by a $0.8 million loss resulting from the adjustment of indemnifications related to previously disposed businesses.
        After income taxes, this net gain totaled $1.7 million, or $0.02 per share.

Other adjustments for the three months ended June 30, 2019 included amounts recorded in:
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Cost of goods sold - $0.1 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
Selling, general and administrative expenses - $4.8 million related to severance payments as part of a business reorganization plan and $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan.
Other (expenses) income, net - $2.5 million of a net loss primarily resulting from the revision of indemnifications related to previously disposed businesses.
        After income taxes, these charges totaled $3.3 million, or $0.03 per share.

Other adjustments for the six months ended June 30, 2019 included amounts recorded in:
Cost of goods sold - $0.5 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
Selling, general and administrative expenses - $5.3 million related to severance payments as part of a business reorganization plan and $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan.
Other (expenses) income, net - $0.9 million of a net loss primarily resulting from the revision of indemnifications and other liabilities related to previously disposed businesses.
After income taxes, these charges totaled $2.0 million or $0.02 per share.

(5) Included in Income tax expense for the three and six months ended June 30, 2020 are discrete net tax benefits of $0.5 million, or less than $0.01 per share, and $1.6 million, or $0.01 per share, respectively. The net benefit for the three months is primarily related to lapses in statute of limitations. The net benefit for the six months is primarily related to excess tax benefits realized from stock-based compensation arrangements.

Included in Income tax expense for the three and six months ended June 30, 2019 are discrete net tax benefits of $0.8 million, or $0.01 per share, and expenses of $2.4 million, or $0.02 per share, respectively. The net benefit for the three months is primarily related to foreign return to accrual adjustments. The net expense for the six months is primarily related to expenses for uncertain tax positions and foreign return to accrual adjustments, partially offset by a benefit for excess tax benefits realized from stock-based compensation arrangements.

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 reported in accordance with GAAP (in thousands, except percentages).

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Income before income taxes and equity in net income of unconsolidated investmentsIncome tax expenseEffective income tax rate
Three months ended June 30, 2020
As reported$88,075  $15,431  17.5 %
Non-recurring, other unusual and non-operating pension and OPEB items8,445  2,837  
As adjusted$96,520  $18,268  18.9 %
Three months ended June 30, 2019
As reported$167,071  $30,411  18.2 %
Non-recurring, other unusual and non-operating pension and OPEB items12,742  2,681  
As adjusted$179,813  $33,092  18.4 %
Six months ended June 30, 2020
As reported$203,548  $33,873  16.6 %
Non-recurring, other unusual and non-operating pension and OPEB items8,906  3,795  
As adjusted$212,454  $37,668  17.7 %
Six months ended June 30, 2019
As reported$320,930  $67,925  21.2 %
Non-recurring, other unusual and non-operating pension and OPEB items5,657  (1,823) 
As adjusted$326,587  $66,102  20.2 %

14