alb-20201104
false000091591300009159132020-11-042020-11-04

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 4, 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 November 4, 2020, Albemarle Corporation (the “Company”) issued a press release reporting its results for the third quarter ended September 30, 2020. A copy of this release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on November 5, 2020, the Company will hold a teleconference for analysts and media to discuss results for the third quarter ended September 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: November 4, 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/3880d6bd1ce2de73d564f59c9071e0f2-albemarlelogo1a.jpg


Albemarle Reports Third Quarter Results


CHARLOTTE, N.C. - Nov. 4, 2020 - Albemarle Corporation (NYSE: ALB) today announced its results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights
(Unless otherwise stated, all percent changes are based on year-over-year comparisons)
Net income of $98 million, or $0.92 per diluted share; Adjusted diluted EPS of $1.09
Net sales of $747 million decreased by 15%, in-line with Q3 2020 outlook
Adjusted EBITDA of $216 million decreased by 15%, exceeding the high-end of Q3 2020 outlook by 14%
Our plants continue to operate without material impact from the COVID-19 pandemic
Increased cost savings: approximately $80 million of sustainable cost savings to be achieved in 2020
Maintained our quarterly dividend of $0.385 per share, an increase of approximately 5% over the quarterly dividend paid in 2019

“Albemarle reported another solid quarter with Q3 2020 net sales in the upper end of our outlook range and adjusted EBITDA exceeding outlook. Our performance was driven by operating teams committed to running our businesses safely and efficiently in the face of pandemic-related economic weakness, and to our successful sustainable cost savings initiative,” said Albemarle CEO Kent Masters. “We now expect to realize approximately $80 million of cost savings this year and to reach an annual savings rate of $120 million or more by the end of 2021. We expect these savings to represent a first wave of ongoing operational improvements that will reap notable benefits for the company.”

Outlook

Albemarle anticipates that its full year 2020 performance will be lower year-over-year based on reduced global economic activity due to the global pandemic.

FY 2020 Outlook
Net sales$3.05 - $3.15 billion
Adjusted EBITDA$780 - $810 million
Adjusted EBITDA Margin25% - 26%
Adj. Diluted EPS$3.80 - $4.15
Net Cash from Operations$660 - $710 million
Capital Expenditures$850 - $900 million

COVID-19 Response

Albemarle’s cross-functional Global Response Team continues to meet biweekly to assess the situation and take necessary actions to address employee health and safety and operational challenges. Our first priority is always
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the health and well-being of our employees, customers, and communities. Beyond that, our focus has shifted from managing an immediate crisis to building in the flexibility needed to adjust for regional differences and changing conditions. 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, employees are able to return to their work sites. Other regions, including most of North and South America, remain on work-from-home protocols for non-essential personnel.

Third Quarter Results
In millions, except per share amountsQ3 2020Q3 2019$ Change% Change
Net sales$746.9 $879.7 $(132.9)(15.1)%
Net income attributable to Albemarle Corporation$98.3 $155.1 $(56.8)(36.6)%
Adjusted EBITDA(a)
$216.1 $254.4 $(38.3)(15.1)%
Diluted earnings per share$0.92 $1.46 $(0.54)(37.0)%
   Non-operating pension and OPEB items(a)
(0.02)(0.01)
   Non-recurring and other unusual items(a)
0.19 0.08 
Adjusted diluted earnings per share(b)
$1.09 $1.53 $(0.44)(28.8)%

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

Net sales of $746.9 million decreased by $132.9 million compared to the prior year quarter, primarily driven by the Catalysts and Lithium business segments as discussed below.

Adjusted EBITDA of $216.1 million decreased by $38.3 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 $98.3 million decreased by $56.8 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.

We have increased our sustainable cost savings and now expect to achieve approximately $80 million of sustainable savings in 2020, up from previous estimates of $50 to $70 million. We now expect these savings to reach a run-rate of more than $120 million by year-end 2021, up from previous estimates of more than $100 million. We continue to take short-term cash management measures and delay capital expenditures. Short-term savings are expected to average approximately $25 to $40 million per quarter. Full-year 2020 capital spending is now expected to be approximately $850 to $900 million.

The effective income tax rate for Q3 2020 was 25.2% compared to 15.5% in the same period in 2019. The difference is largely due to a change in the geographic mix of earnings and foreign uncertain tax positions and foreign return to accrual adjustments recorded in Q3 2020. On an adjusted basis, the effective income tax rates were 16.7% and 15.0% for the third quarter of 2020 and 2019, respectively.

Business Segment Results

Lithium
In millionsQ3 2020Q3 2019$ Change% Change
Net Sales$265.6 $330.4 $(64.7)(19.6)%
Adjusted EBITDA
$97.8 $127.5 $(29.7)(23.3)%

Lithium net sales of $265.6 million declined $64.7 million primarily due to lower contract and market pricing. Lower contract pricing reflects 2020 battery-grade price adjustments that were agreed to in late 2019. Adjusted EBITDA of $97.8 million declined by $29.7 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 Q4 2020 adjusted EBITDA to be up between 10% and 20% compared to Q3 2020 as customers continue to meet planned volume commitments for FY 2020. We anticipate FY 2021 volumes to be relatively flat as plants are effectively sold out given volume constraints. Our Kemerton and La Negra expansion projects are expected to be commissioned in 2021 with sales volume beginning in 2022. FY 2021 pricing is expected to be down slightly primarily due to lower average realized pricing for carbonate and technical grade products.
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Bromine Specialties
In millionsQ3 2020Q3 2019$ Change% Change
Net Sales$237.2 $256.3 $(19.1)(7.4)%
Adjusted EBITDA
$79.4 $88.8 $(9.4)(10.5)%

Bromine net sales of $237.2 million declined $19.1 million primarily due to lower volumes driven by the recent economic downturn related to the COVID-19 pandemic. Adjusted EBITDA of $79.4 million declined $9.4 million due to lower net sales, partially offset by cost savings initiatives.

Current Trends: We expect Q4 2020 adjusted EBITDA to be similar to Q3 2020. Stabilization in electronics and building and construction helps offset weakness in other end use markets. We expect FY 2021 results to improve slightly assuming continued economic recovery and on-going cost savings initiatives.

Catalysts
In millionsQ3 2020Q3 2019$ Change% Change
Net Sales$197.9 $261.3 $(63.4)(24.3)%
Adjusted EBITDA
$37.8 $66.9 $(29.1)(43.5)%

Catalysts net sales of $197.9 million declined $63.4 million due primarily to lower volumes. Fluid Catalytic Cracking (FCC) volume improved sequentially, but remains below prior year due to lower transportation fuel consumption as a result of travel restrictions. Hydroprocessing Catalysts (HPC) volume was also down compared to the prior year due to normal lumpiness of shipments and softness related to lower oil prices and reduced fuel demand. Adjusted EBITDA of $37.8 million declined $29.1 million as a result of lower net sales offset by cost savings initiatives and efficiency improvements.

Current Trends: We expect Q4 2020 adjusted EBITDA to be down between 20% and 30% sequentially due to HPC volume and mix. FCC demand is expected to continue to gradually recover in line with increased travel and depletion of global gasoline inventories. HPC demand tends to be lumpier than FCC demand and is also expected to continue to be negatively impacted as refiners defer spending into 2021 and 2022. We expect FY 2021 results to continue to improve from the very low levels seen in FY 2020, but to remain well below pre-COVID demand levels, assuming a slow recovery of refinery capacity utilization and margins.

All Other
In millionsQ3 2020Q3 2019$ Change% Change
Net Sales$46.1 $31.7 $14.4 45.2 %
Adjusted EBITDA
$25.0 $10.4 $14.5 139.1 %

Other operations represents our Fine Chemistry Services (FCS) business. FCS net sales of $46.1 million increased $14.4 million and adjusted EBITDA of $25.0 million increased $14.5 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 September 30, 2020, Albemarle had estimated liquidity of over $1.5 billion, including $702 million of cash and equivalents, $610 million remaining under our $1 billion revolver, and $223 million on other available credit lines. Total debt was $3.5 billion, representing net debt to adjusted EBITDA of approximately 3.2 times.

Cash Flow and Capital Deployment

Cash from operations for the nine months ended September 30, 2020, of $461.7 million, increased $116.1 million versus the prior year as reduced working capital outflows and cost savings more than offset lower revenues. Capital expenditures of $621.4 million were in-line with the prior year as progress continued on our Lithium expansion projects.

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

In October, 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 proceeding despite on-going travel restrictions.

Earnings Call

Date:Thursday, November 5, 2020
Time:9:00 AM Eastern time
Dial-in (U.S.):844-347-1034
Dial-in (International):209-905-5910
Passcode:6829479

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 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
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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 EndedNine Months Ended
September 30,September 30,
2020201920202019
Net sales$746,868 $879,747 $2,249,762 $2,596,863 
Cost of goods sold492,812 569,880 1,520,329 1,677,596 
Gross profit
254,056 309,867 729,433 919,267 
Selling, general and administrative expenses96,092 108,135 304,918 348,205 
Research and development expenses13,532 15,585 43,839 44,024 
Operating profit
144,432 186,147 380,676 527,038 
Interest and financing expenses(19,227)(11,108)(53,964)(35,295)
Other expenses, net(3,661)(11,316)(1,620)(7,090)
Income before income taxes and equity in net income of unconsolidated investments121,544 163,723 325,092 484,653 
Income tax expense30,653 25,341 64,526 93,266 
Income before equity in net income of unconsolidated investments90,891 138,382 260,566 391,387 
Equity in net income of unconsolidated investments (net of tax)26,154 33,236 83,872 106,727 
Net income117,045 171,618 344,438 498,114 
Net income attributable to noncontrolling interests(18,744)(16,548)(53,309)(55,277)
Net income attributable to Albemarle Corporation$98,301 $155,070 $291,129 $442,837 
Basic earnings per share$0.92 $1.46 $2.74 $4.18 
Diluted earnings per share$0.92 $1.46 $2.73 $4.16 
Weighted-average common shares outstanding – basic106,386 105,999 106,314 105,920 
Weighted-average common shares outstanding – diluted106,873 106,299 106,640 106,324 


6


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

September 30,December 31,
20202019
ASSETS
Current assets:
Cash and cash equivalents$702,073 $613,110 
Trade accounts receivable516,166 612,651 
Other accounts receivable61,522 67,551 
Inventories828,080 768,984 
Other current assets119,171 162,813 
Total current assets
2,227,012 2,225,109 
Property, plant and equipment7,284,575 6,817,843 
Less accumulated depreciation and amortization2,041,851 1,908,370 
Net property, plant and equipment
5,242,724 4,909,473 
Investments603,745 579,813 
Other assets211,534 213,061 
Goodwill1,603,049 1,578,785 
Other intangibles, net of amortization343,919 354,622 
Total assets
$10,231,983 $9,860,863 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$465,644 $574,138 
Accrued expenses477,510 576,297 
Current portion of long-term debt603,787 187,336 
Dividends payable40,787 38,764 
Income taxes payable25,011 32,461 
Total current liabilities
1,612,739 1,408,996 
Long-term debt2,940,533 2,862,921 
Postretirement benefits49,926 50,899 
Pension benefits285,942 292,073 
Other noncurrent liabilities612,013 754,536 
Deferred income taxes405,449 397,858 
Commitments and contingencies
Equity:
Albemarle Corporation shareholders’ equity:
Common stock1,065 1,061 
Additional paid-in capital1,410,534 1,383,446 
Accumulated other comprehensive loss(398,467)(395,735)
Retained earnings3,111,749 2,943,478 
Total Albemarle Corporation shareholders’ equity4,124,881 3,932,250 
Noncontrolling interests200,500 161,330 
Total equity4,325,381 4,093,580 
Total liabilities and equity$10,231,983 $9,860,863 


7


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

Nine Months Ended
September 30,
20202019
Cash and cash equivalents at beginning of year$613,110 $555,320 
Cash flows from operating activities:
Net income344,438 498,114 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization170,214 156,718 
Gain on sale of property— (11,079)
Stock-based compensation and other15,864 15,169 
Equity in net income of unconsolidated investments (net of tax)(83,872)(106,727)
Dividends received from unconsolidated investments and nonmarketable securities61,309 62,982 
Pension and postretirement (benefit) expense(4,975)1,641 
Pension and postretirement contributions(10,323)(10,728)
Unrealized gain on investments in marketable securities(3,377)(1,701)
Deferred income taxes7,920 7,726 
Working capital changes(167,436)(289,587)
Other, net131,952 23,110 
Net cash provided by operating activities461,714 345,638 
Cash flows from investing activities:
Acquisitions, net of cash acquired(22,572)— 
Capital expenditures(621,371)(608,456)
Proceeds from sale of property and equipment— 10,356 
Sales of marketable securities, net1,208 1,177 
Investments in equity and other corporate investments(786)(2,569)
Net cash used in investing activities(643,521)(599,492)
Cash flows from financing activities:
Repayments of borrowings from credit agreements(250,000)— 
Proceeds from borrowings of credit agreements452,163 — 
Other borrowings, net202,786 232,183 
Dividends paid to shareholders(120,836)(113,321)
Dividends paid to noncontrolling interests(14,286)(57,212)
Proceeds from exercise of stock options16,925 4,814 
Withholding taxes paid on stock-based compensation award distributions(4,803)(10,774)
Debt financing costs(2,751)— 
Other— (445)
Net cash provided by financing activities279,198 55,245 
Net effect of foreign exchange on cash and cash equivalents(8,428)(38,888)
Increase (decrease) in cash and cash equivalents88,963 (237,497)
Cash and cash equivalents at end of period$702,073 $317,823 



8


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

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Net sales:
Lithium$265,646 $330,386 $786,186 $947,030 
Bromine Specialties237,193 256,267 701,564 760,752 
Catalysts197,919 261,346 602,179 779,295 
All Other46,110 31,748 159,833 109,786 
Total net sales$746,868 $879,747 $2,249,762 $2,596,863 
Adjusted EBITDA:
Lithium$97,789 $127,459 $270,962 $384,854 
Bromine Specialties79,448 88,814 235,751 248,743 
Catalysts37,834 66,944 108,081 193,890 
All Other24,985 10,448 66,407 28,931 
Corporate(24,001)(39,314)(83,588)(114,300)
Total adjusted EBITDA$216,055 $254,351 $597,613 $742,118 

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 EndedNine Months Ended

September 30,September 30,
In thousands, except percentages and per share amounts
2020201920202019
Net income attributable to Albemarle Corporation
$98,301 

$155,070 

$291,129 

$442,837 
Add back:
Non-operating pension and OPEB items (net of tax)
(2,294)

(543)

(6,904)

(1,805)
Non-recurring and other unusual items (net of tax)
20,278 

8,497 

29,678 

17,239 
Adjusted net income attributable to Albemarle Corporation
$116,285 

$163,024 

$313,903 

$458,271 








Adjusted diluted earnings per share
$1.09 

$1.53 

$2.94 

$4.31 








Weighted-average common shares outstanding – diluted
106,873 106,299 106,640 106,324 








Net income attributable to Albemarle Corporation
$98,301 

$155,070 

$291,129 

$442,837 
Add back:







Interest and financing expenses
19,227 

11,108 

53,964 

35,295 
Income tax expense
30,653 

25,341 

64,526 

93,266 
Depreciation and amortization
58,679 

54,487 

170,214 

156,718 
EBITDA
206,860 

246,006 

579,833 

728,116 
Non-operating pension and OPEB items
(2,901)

(551)

(8,704)

(1,810)
Non-recurring and other unusual items
12,096 

8,896 

26,484 

15,812 
Adjusted EBITDA
$216,055 

$254,351 

$597,613 

$742,118 








Net sales
$746,868 

$879,747 

$2,249,762 

$2,596,863 
EBITDA margin
27.7 %

28.0 %

25.8 %

28.0 %
Adjusted EBITDA margin
28.9 %

28.9 %

26.6 %

28.6 %

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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 September 30, 2020
Net income (loss) attributable to Albemarle Corporation$69,102 $66,548 $25,176 $160,826 $22,798 $(85,323)$98,301 13.2 %
Depreciation and amortization28,687 12,900 12,658 54,245 2,187 2,247 58,679 7.9 %
Non-recurring and other unusual items— — — — — 12,096 12,096 1.6 %
Interest and financing expenses— — — — — 19,227 19,227 2.6 %
Income tax expense— — — — — 30,653 30,653 4.1 %
Non-operating pension and OPEB items— — — — — (2,901)(2,901)(0.4)%
Adjusted EBITDA$97,789 $79,448 $37,834 $215,071 $24,985 $(24,001)$216,055 28.9 %
Three months ended September 30, 2019
Net income (loss) attributable to Albemarle Corporation$102,136 $75,224 $54,345 $231,705 $8,305 $(84,940)$155,070 17.6 %
Depreciation and amortization25,212 12,448 12,599 50,259 2,143 2,085 54,487 6.2 %
Non-recurring and other unusual items111 1,142 — 1,253 — 7,643 8,896 1.0 %
Interest and financing expenses— — — — — 11,108 11,108 1.3 %
Income tax expense— — — — — 25,341 25,341 2.9 %
Non-operating pension and OPEB items— — — — — (551)(551)(0.1)%
Adjusted EBITDA$127,459 $88,814 $66,944 $283,217 $10,448 $(39,314)$254,351 28.9 %
Nine months ended September 30, 2020
Net income (loss) attributable to Albemarle Corporation$188,380 $198,905 $70,770 $458,055 $60,069 $(226,995)$291,129 12.9 %
Depreciation and amortization82,582 36,846 37,311 156,739 6,338 7,137 170,214 7.6 %
Non-recurring and other unusual items— — — — — 26,484 26,484 1.2 %
Interest and financing expenses— — — — — 53,964 53,964 2.4 %
Income tax expense— — — — — 64,526 64,526 2.9 %
Non-operating pension and OPEB items— — — — — (8,704)(8,704)(0.4)%
Adjusted EBITDA$270,962 $235,751 $108,081 $614,794 $66,407 $(83,588)$597,613 26.6 %
Nine months ended September 30, 2019
Net income (loss) attributable to Albemarle Corporation$312,609 $212,320 $156,328 $681,257 $22,629 $(261,049)$442,837 17.1 %
Depreciation and amortization71,669 35,281 37,562 144,512 6,302 5,904 156,718 6.0 %
Non-recurring and other unusual items576 1,142 — 1,718 — 14,094 15,812 0.6 %
Interest and financing expenses— — — — — 35,295 35,295 1.4 %
Income tax expense— — — — — 93,266 93,266 3.6 %
Non-operating pension and OPEB items— — — — — (1,810)(1,810)(0.1)%
Adjusted EBITDA$384,854 $248,743 $193,890 $827,487 $28,931 $(114,300)$742,118 28.6 %

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 EndedNine Months Ended
September 30,September 30,
2020201920202019
Interest cost $7,164 $8,863 $21,452 $26,501 
Expected return on assets(10,065)(9,414)(30,156)(28,311)
Total$(2,901)$(551)$(8,704)$(1,810)

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 EndedNine Months Ended
September 30,September 30,
2020201920202019
Restructuring and other(1)
$0.02 $— $0.08 $0.05 
Acquisition and integration related costs(2)
0.04 0.03 0.10 0.10 
Gain on sale of property(3)
— — — (0.08)
Other(4)
0.02 0.05 0.01 0.07 
Discrete tax items(5)
0.11 — 0.09 0.02 
Total non-recurring and other unusual items$0.19 $0.08 $0.28 $0.16 

(1)In 2020, we recorded severance expenses as part of business reorganization plans, impacting each of our businesses and Corporate, primarily in the U.S., Germany and with our Jordanian joint venture partner. During the three months ended September 30, 2020, we recorded $2.3 million ($1.7 million after income taxes, or $0.02 per share) of severance expenses in Selling, general and administrative expenses. During the nine months ended September 30, 2020, we recorded severance expenses in Cost of goods sold, Selling, general and administrative expenses and Net income attributable to noncontrolling interest of $0.7 million, $10.4 million and a $0.3 million gain ($7.9 million after income taxes, or $0.08 per share), respectively. The balance of unpaid severance is recorded in Accrued expenses and is expected to primarily be paid through 2021. During the nine months ended September 30, 2019, severance expenses of $5.3 million ($4.9 million after income taxes, or $0.05 per share) 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 nine months ended September 30, 2020 of $5.9 million and $14.3 million ($4.6 million and $11.1 million after income taxes, or $0.04 and $0.10 per share), respectively, and for the three and nine months ended September 30, 2019 of $4.1 million and $14.4 million ($3.2 million and $11.1 million after income taxes, or $0.03 and $0.10 per share), respectively.

(3)Included in Other (expenses) income, net, for the nine months ended September 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 September 30, 2020 included amounts recorded in:
Selling, general and administrative expenses - $3.8 million of a net expense primarily relating to the increase of environmental reserves at at non-operating businesses we have previously divested.
Other (expenses) income, net - $0.2 million loss resulting from the settlement of a historical legal matter of an acquired company.
After income taxes, these charges totaled $2.7 million, or $0.02 per share.

Other adjustments for the nine months ended September 30, 2020 included amounts recorded in:
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Selling, general and administrative expenses - $3.8 million of a net expense primarily relating to the increase of environmental reserves at sites that we are no longer operating and are in the process of sellin.
Other expenses, net - $2.5 million net gain resulting from the settlement of legal matters related to a business sold or a site in the process of being 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, these charges totaled $1.0 million, or $0.01 per share.

Other adjustments for the three months ended September 30, 2019 included amounts recorded in:
Cost of goods sold - $0.1 million related to non-routine labor and compensation related costs in Chile that were outside normal compensation arrangements.
Selling, general and administrative expenses - $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialties segment.
Other expenses, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, as well as a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting.
    After income taxes, these charges totaled $5.4 million, or $0.05 per share.

Other adjustments for the nine months ended September 30, 2019 included amounts recorded in:
Cost of goods sold - $0.6 million related to non-routine labor and compensation related costs in Chile that were outside normal compensation arrangements.
Selling, general and administrative expenses - $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan and $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialities segment.
Other expenses, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting, and $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 $7.4 million or $0.07 per share.

(5)    Included in Income tax expense for the three and nine months ended September 30, 2020 are discrete net tax expenses of $11.3 million, or $0.11 per share, and $9.7 million, or $0.09 per share, respectively. The net expense for the three months is primarily related to expenses for foreign uncertain tax positions and foreign return to accrual adjustments. The net expense for the nine months is primarily related to expenses for foreign uncertain tax positions and foreign return to accrual adjustments, partially offset by a benefit for excess tax benefits realized from stock-based compensation arrangements.

Included in Income tax expense for the nine months ended September 30, 2019 are discrete net tax expenses of $2.3 million, or $0.02 per share. This net expense 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 September 30, 2020
As reported$121,544 $30,653 25.2 %
Non-recurring, other unusual and non-operating pension and OPEB items9,195 (8,789)
As adjusted$130,739 $21,864 16.7 %
Three months ended September 30, 2019
As reported$163,723 $25,341 15.5 %
Non-recurring, other unusual and non-operating pension and OPEB items8,345 391 
As adjusted$172,068 $25,732 15.0 %
Nine months ended September 30, 2020
As reported$325,092 $64,526 19.8 %
Non-recurring, other unusual and non-operating pension and OPEB items18,101 (4,994)
As adjusted$343,193 $59,532 17.4 %
Nine months ended September 30, 2019
As reported$484,653 $93,266 19.2 %
Non-recurring, other unusual and non-operating pension and OPEB items14,002 (1,432)
As adjusted$498,655 $91,834 18.4 %

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