News

Albemarle Reports Third Quarter Growth


November 6, 2019


CHARLOTTE, N.C., Nov. 6, 2019 /PRNewswire/ -- Albemarle Corporation (NYSE: ALB) today announced its results for the third quarter ended Sept. 30, 2019.

Albemarle Corp. Logo. (PRNewsFoto/Albemarle Corporation)

Third Quarter 2019 Highlights
(Based on year-over-year comparisons unless otherwise noted)

  • Net sales of $879.7 million increased 14%, excluding foreign exchange impact of 1%, largely driven by strong volume and favorable pricing
  • Earnings were $1.46 per diluted share, an increase of 22%
  • Adjusted EPS were $1.53 per diluted share, an increase of 17%
  • Adjusted EBITDA was $254.4 million, an increase of 8%

Notable Developments

  • Completed previously announced lithium joint venture with Mineral Resources Limited on Oct. 31, 2019; funded Wodgina mine project and other general corporate projects with $1 billion, borrowed from new $1.2 billion unsecured credit facility
  • Previously announced Company's full year 2019 adjusted diluted EPS outlook is $6.00 - $6.20 from $6.25 - $6.65
  • Initiating cost management program targeting over $100 million in savings over a two-year period

"During the third quarter, Albemarle grew net sales by 14%, adjusted EBITDA by 12%, and adjusted earnings per share by 22% over the prior year, excluding currency impacts, due to solid growth across all businesses," said Luke Kissam, Albemarle CEO. "We have recently made several strategic decisions to further position Albemarle for long-term success and remain confident in the long-term growth prospects of our business."

Third Quarter Results

In millions, except per share amounts

Q3 2019


Q3 2018


$ Change


% Change

Net sales

$

879.7



$

777.7



$

102.0



13.1

%

Net income attributable to Albemarle Corporation

$

155.1



$

129.7



$

25.3



19.5

%

Adjusted EBITDA(a)

$

254.4



$

235.1



$

19.3



8.2

%

Diluted earnings per share

$

1.46



$

1.20



$

0.26



21.7

%

   Non-operating pension and OPEB items(a)

(0.01)



(0.02)






   Non-recurring and other unusual items(a)

0.08



0.13






Adjusted diluted earnings per share(b)

$

1.53



$

1.31



$

0.22



16.8

%

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

  • Net sales increased 14%, in constant currencies, due to increased volume in all reportable segments and favorable pricing in Lithium and Bromine Specialties.
  • The Company's earnings increased as a result of earnings growth from each of the businesses, lower interest and financing expenses, and a lower effective tax rate. The increase was partially offset by unfavorable currency exchange, higher corporate costs for professional services, and increased depreciation and amortization due to increased capital projects put into service.

Third Quarter Business Segment Results

Lithium

In millions

Q3 2019


Q3 2018


$ Change


% Change

Net Sales

$

330.4



$

270.9



$

59.5



21.9

%

Adjusted EBITDA

$

127.5



$

113.6



$

13.8



12.2

%

  • Net sales and adjusted EBITDA growth were driven by increased volume and slightly favorable pricing of 1%, which more than offset deferred shipments due to disruption caused by Typhoon Tapah in late September. As previously communicated, impacted volume is expected to be fully recovered in the fourth quarter.
  • Net sales reflects unfavorable currency exchange of 1%. Adjusted EBITDA reflects favorable currency exchange of 4% resulting from a weaker Chilean Peso.
  • Cost of goods sold increased, mainly due to higher tolling product costs to meet customer commitments and address operating issues in La Negra, Chile.
  • Out-of-period non-cash expense of $7.0 million recorded in the third quarter of 2019 in cost of goods sold was due to an adjustment of lithium carbonate inventory values from the second quarter of 2019.
  • Please see press release issued Oct. 24, 2019 for additional information.

Bromine Specialties

In millions

Q3 2019


Q3 2018


$ Change


% Change

Net Sales

$

256.3



$

232.6



$

23.7



10.2

%

Adjusted EBITDA

$

88.8



$

78.6



$

10.2



13.0

%

  • Net sales and adjusted EBITDA growth reflects favorable price impacts and increased volume, more than offsetting unfavorable currency exchange of 1%.

Catalysts

In millions

Q3 2019


Q3 2018


$ Change


% Change

Net Sales

$

261.3



$

251.1



$

10.2



4.1

%

Adjusted EBITDA

$

66.9



$

62.6



$

4.3



6.9

%

  • Favorable pricing in Fluid Catalytic Cracking (FCC) Catalysts was offset by lower volumes related to delays in the start-up of new FCC units.
  • Clean Fuel Technology, or HPC, benefited from higher sales volume and a favorable product mix.
  • Net sales reflects unfavorable currency exchange of 1%.
  • Results also reflect a partial insurance claim reimbursement of $2.2 million received in 2018.

All Other

In millions

Q3 2019


Q3 2018


$ Change


% Change

Net Sales

$

31.7



$

23.1



$

8.7



37.6

%

Adjusted EBITDA

$

10.4



$

4.0



$

6.5



163.3

%

  • Net sales growth reflects increased sales volume of $9.3 million in our fine chemistry services business.
  • Results also reflect a $4.4 million decrease from the re-measurement of the fair value of our investment in private equity securities.

Corporate Results

In millions

Q3 2019


Q3 2018


$ Change


% Change

Adjusted EBITDA

$

(39.3)



$

(23.7)



$

(15.6)



65.9

%
















  • Results reflect higher selling, general and administrative spending for professional services and $11.3 million of unfavorable currency exchange impacts.

Income Taxes

The effective income tax rate for the third quarter of 2019 was 15.5% compared to 21.5% in the same period in 2018, largely due to change in geographic earnings mix. On an adjusted basis, the effective income tax rates were 15.0% and 18.9% for the third quarter of 2019 and 2018, respectively.

Cash Flow and Capital Deployment

Cash from operations was $345.6 million for the nine months ended Sept. 30, 2019, a decrease of $31.3 million versus the same period in 2018. The result was primarily due to the timing on payables and the collection of certain receivables, lower cash earnings in Catalysts, and higher cash taxes. This was partially offset by higher dividends received from unconsolidated investments and increased cash earnings from Bromine Specialties.

Capital expenditures were $608.5 million as compared to $471.7 million in the first nine months of 2018, with the increase driven largely by expansion in our Lithium business. As previously announced in the second quarter, Albemarle reduced its multi-year capital expenditure plan to approximately $3.5 billion from $5.0 billion over the next five years. This adjustment reflects the Company's commitment to generating free cash in 2021 and investing capital where customer volume and price commitments provide an attractive return.

During the nine months ended Sept. 30, 2019, Albemarle deployed dividends to shareholders totaling $113.3 million.

Cash and cash equivalents were $317.8 million at Sept. 30, 2019, as compared to $555.3 million at Dec. 31, 2018.

Full Year 2019 Outlook

As previously announced on Oct. 24, 2019, discrete and operational items impacting Lithium will likely cause the business's fourth quarter 2019 performance to be lower than previously forecasted. The Company expects continued upside in Bromine Specialties and Catalysts in the fourth quarter, but does not expect this to offset the impact from Lithium on total Company results.

As a result, Albemarle is reaffirming its full year 2019 guidance as follows:


Current  Outlook


vs Pro Forma

Full Year 2018(a)

Net sales

$3.6 - $3.7 billion


7% - 10%

Adjusted EBITDA

$1.02 - $1.06 billion


2% - 6%

Adjusted EPS (per diluted share)

$6.00 - $6.20


10% - 14%

(a) Pro forma excludes the impact of the polyolefin catalysts and components business sold on April 1, 2018.

Additionally, the Company expects its full year 2019 income tax rate to be between 18% and 19%.

Earnings Call

Date:

Thursday, Nov. 7, 2019

Time:

9:00 AM Eastern time

Dial-in (U.S.):

844-347-1034

Dial-in (International):

209-905-5910

Passcode:

6199517

The Company's earnings presentation and supporting material is 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 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 5,600 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, 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 form 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; 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.

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,


2019


2018


2019


2018

Net sales

$

879,747



$

777,748



$

2,596,863



$

2,453,251


Cost of goods sold

569,880



497,211



1,677,596



1,556,379


Gross profit

309,867



280,537



919,267



896,872


Selling, general and administrative expenses

108,135



100,167



348,205



325,174


Research and development expenses

15,585



16,610



44,024



53,670


Gain on sale of business







(218,705)


Operating profit

186,147



163,760



527,038



736,733


Interest and financing expenses

(11,108)



(12,988)



(35,295)



(39,834)


Other (expenses) income, net

(11,316)



3,793



(7,090)



(31,906)


Income before income taxes and equity in net income of
unconsolidated investments

163,723



154,565



484,653



664,993


Income tax expense

25,341



33,167



93,266



133,630


Income before equity in net income of unconsolidated
investments

138,382



121,398



391,387



531,363


Equity in net income of unconsolidated investments (net of
tax)

33,236



22,081



106,727



61,727


Net income

171,618



143,479



498,114



593,090


Net income attributable to noncontrolling interests

(16,548)



(13,734)



(55,277)



(29,124)


Net income attributable to Albemarle Corporation

$

155,070



$

129,745



$

442,837



$

563,966


Basic earnings per share

$

1.46



$

1.21



$

4.18



$

5.16


Diluted earnings per share

$

1.46



$

1.20



$

4.16



$

5.11










Weighted-average common shares outstanding – basic

105,999



107,315



105,920



109,223


Weighted-average common shares outstanding – diluted

106,299



108,302



106,324



110,276


 

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


September 30,


December 31,


2019


2018

ASSETS




Current assets:




Cash and cash equivalents

$

317,823



$

555,320


Trade accounts receivable

637,037



605,712


Other accounts receivable

86,556



52,059


Inventories

802,434



700,540


Other current assets

125,902



84,790


Total current assets

1,969,752



1,998,421


Property, plant and equipment

5,406,123



4,799,063


Less accumulated depreciation and amortization

1,882,086



1,777,979


Net property, plant and equipment

3,524,037



3,021,084


Investments

551,657



528,722


Other assets

200,858



80,135


Goodwill

1,534,241



1,567,169


Other intangibles, net of amortization

361,058



386,143


Total assets

$

8,141,603



$

7,581,674


LIABILITIES AND EQUITY




Current liabilities:




Accounts payable

$

527,052



$

522,516


Accrued expenses

273,709



257,323


Current portion of long-term debt

539,960



307,294


Dividends payable

38,678



35,169


Current operating lease liability

24,606




Income taxes payable

17,238



60,871


Total current liabilities

1,421,243



1,183,173


Long-term debt

1,381,984



1,397,916


Postretirement benefits

45,752



46,157


Pension benefits

272,345



285,396


Other noncurrent liabilities

618,822



526,942


Deferred income taxes

393,120



382,982


Commitments and contingencies




Equity:




Albemarle Corporation shareholders' equity:




Common stock

1,060



1,056


Additional paid-in capital

1,379,419



1,368,897


Accumulated other comprehensive loss

(435,977)



(350,682)


Retained earnings

2,892,057



2,566,050


Total Albemarle Corporation shareholders' equity

3,836,559



3,585,321


Noncontrolling interests

171,778



173,787


Total equity

4,008,337



3,759,108


Total liabilities and equity

$

8,141,603



$

7,581,674


 

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


Nine Months Ended

 September 30,


2019


2018

Cash and cash equivalents at beginning of year

$

555,320



$

1,137,303


Cash flows from operating activities:




Net income

498,114



593,090


Adjustments to reconcile net income to cash flows from operating activities:




Depreciation and amortization

156,718



150,511


Gain on sale of business



(218,705)


Gain on sale of property

(11,079)




Stock-based compensation and other

15,169



11,785


Equity in net income of unconsolidated investments (net of tax)

(106,727)



(61,727)


Dividends received from unconsolidated investments and nonmarketable
securities

62,982



32,794


Pension and postretirement expense (benefit)

1,641



(2,708)


Pension and postretirement contributions

(10,728)



(11,068)


Unrealized gain on investments in marketable securities

(1,701)



(1,615)


Deferred income taxes

7,726



43,400


Working capital changes

(289,587)



(131,813)


Other, net

23,110



(27,003)


Net cash provided by operating activities

345,638



376,941


Cash flows from investing activities:




Acquisitions, net of cash acquired



(11,403)


Capital expenditures

(608,456)



(471,675)


Cash proceeds from divestitures, net



413,479


Proceeds from sale of property and equipment

10,356




Sales of (investments in) marketable securities, net

1,177



(761)


Investments in equity and other corporate investments

(2,569)



(5,346)


Net cash used in investing activities

(599,492)



(75,706)


Cash flows from financing activities:




Other borrowings (repayments), net

232,183



(134,505)


Dividends paid to shareholders

(113,321)



(108,922)


Dividends paid to noncontrolling interests

(57,212)



(14,756)


Repurchases of common stock



(500,000)


Proceeds from exercise of stock options

4,814



2,302


Withholding taxes paid on stock-based compensation award distributions

(10,774)



(17,047)


Other

(445)




Net cash provided by (used in) financing activities

55,245



(772,928)


Net effect of foreign exchange on cash and cash equivalents

(38,888)



(24,384)


Decrease in cash and cash equivalents

(237,497)



(496,077)


Cash and cash equivalents at end of period

$

317,823



$

641,226


 

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


Three Months Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018

Net sales:








Lithium

$

330,386



$

270,928



$

947,030



$

886,523


Bromine Specialties

256,267



232,616



760,752



678,769


Catalysts

261,346



251,139



779,295



796,822


All Other

31,748



23,065



109,786



90,978


Corporate







159


Total net sales

$

879,747



$

777,748



$

2,596,863



$

2,453,251










Adjusted EBITDA:








Lithium

$

127,459



$

113,629



$

384,854



$

386,260


Bromine Specialties

88,814



78,585



248,743



217,921


Catalysts

66,944



62,602



193,890



205,534


All Other

10,448



3,968



28,931



7,729


Corporate

(39,314)



(23,702)



(114,300)



(75,082)


Total adjusted EBITDA

$

254,351



$

235,082



$

742,118



$

742,362


 

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.

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 Ended


Nine Months Ended


September 30,


September 30,

In thousands, except percentages and per share amounts

2019


2018


2019


2018

Net income attributable to Albemarle Corporation

$

155,070



$

129,745



$

442,837



$

563,966


Add back:








Non-operating pension and OPEB items (net of tax)

(543)



(1,856)



(1,805)



(5,595)


Non-recurring and other unusual items (net of tax)

8,497



13,568



17,239



(121,731)


Adjusted net income attributable to Albemarle Corporation

$

163,024



$

141,457



$

458,271



$

436,640










Adjusted diluted earnings per share

$

1.53



$

1.31



$

4.31



$

3.96










Weighted-average common shares outstanding – diluted

106,299



108,302



106,324



110,276










Net income attributable to Albemarle Corporation

$

155,070



$

129,745



$

442,837



$

563,966


Add back:








Interest and financing expenses

11,108



12,988



35,295



39,834


Income tax expense

25,341



33,167



93,266



133,630


Depreciation and amortization

54,487



49,707



156,718



150,511


EBITDA

246,006



225,607



728,116



887,941


Non-operating pension and OPEB items

(551)



(2,195)



(1,810)



(6,596)


Non-recurring and other unusual items

8,896



11,670



15,812



(138,983)


Adjusted EBITDA

$

254,351



$

235,082



$

742,118



$

742,362










Net sales

$

879,747



$

777,748



$

2,596,863



$

2,453,251


EBITDA margin

28.0

%


29.0

%


28.0

%


36.2

%

Adjusted EBITDA margin

28.9

%


30.2

%


28.6

%


30.3

%

 

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).


Lithium


Bromine
Specialties


Catalysts


Reportable
Segments
Total


All Other


Corporate


Consolidated
Total


% of
Net
Sales

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 amortization

25,212



12,448



12,599



50,259



2,143



2,085



54,487



6.2

%

Non-recurring and other unusual items

111



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

%

















Three months ended September 30, 2018:
















Net income (loss) attributable to Albemarle
Corporation

$

90,313



$

67,967



$

50,491



$

208,771



$

1,978



$

(81,004)



$

129,745



16.7

%

Depreciation and amortization

23,370



10,618



12,111



46,099



1,990



1,618



49,707



6.4

%

Non-recurring and other unusual items

(54)







(54)





11,724



11,670



1.5

%

Interest and financing expenses











12,988



12,988



1.7

%

Income tax expense











33,167



33,167



4.2

%

Non-operating pension and OPEB items











(2,195)



(2,195)



(0.3)

%

Adjusted EBITDA

$

113,629



$

78,585



$

62,602



$

254,816



$

3,968



$

(23,702)



$

235,082



30.2

%

















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 amortization

71,669



35,281



37,562



144,512



6,302



5,904



156,718



6.0

%

Non-recurring and other unusual items

576



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

%

















Nine months ended September 30, 2018:
















Net income (loss) attributable to Albemarle
Corporation

$

315,939



$

187,176



$

387,038



$

890,153



$

1,659



$

(327,846)



$

563,966



23.0

%

Depreciation and amortization

71,760



30,745



37,201



139,706



6,070



4,735



150,511



6.2

%

Non-recurring and other unusual items

(1,439)





(218,705)



(220,144)





81,161



(138,983)



(5.7)

%

Interest and financing expenses











39,834



39,834



1.6

%

Income tax expense











133,630



133,630



5.5

%

Non-operating pension and OPEB items











(6,596)



(6,596)



(0.3)

%

Adjusted EBITDA

$

386,260



$

217,921



$

205,534



$

809,715



$

7,729



$

(75,082)



$

742,362



30.3

%

 

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):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018

Interest cost

$

8,863



$

8,509



$

26,501



$

25,636


Expected return on assets

(9,414)



(10,704)



(28,311)



(32,232)


Total

$

(551)



$

(2,195)



$

(1,810)



$

(6,596)


 

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 Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018

Restructuring and other(1)

$



$

0.04



$



$

0.04


Acquisition and integration related costs(2)

0.03



0.03




0.10




0.10


Albemarle Foundation contribution(3)







0.10


Gain on sale of business(4)







(1.60)


Gain on sale of property(5)





(0.08)




Legal accrual(6)



0.02





0.21


Environmental accrual(7)







0.11


Other(8)

0.05



0.04



0.12



0.05


Discrete tax items(9)





0.02



(0.11)


Total non-recurring and other unusual items

$

0.08



$

0.13



$

0.16



$

(1.10)


















(1)  Included in Selling, general and administrative expenses for the three and nine months ended September 30, 2018 is $3.7 million (or $0.04 per share) related to severance payments as part of a business reorganization plan.

(2)  Acquisition and integration related costs for the three and nine months ended September 30, 2019 and 2018 related to various significant projects. Acquisition and integration related costs are included in the consolidated statements of income as follows (in millions, except per share amounts):


Three Months Ended


Nine Months Ended


September 30,


September 30,


2019


2018


2019


2018

Acquisition and integration related costs:








Cost of goods sold

$



$

0.9



$



$

2.9


Selling, general and administrative expenses

4.1



3.4



14.4



10.2


Total

$

4.1



$

4.3



$

14.4



$

13.1


Total acquisition and integration related costs,
after income taxes

$

3.2



$

3.5



$

11.1



$

10.7


Total acquisition and integration related costs,
per diluted share

$

0.03



$

0.03



$

0.10



$

0.10


(3)  Included in Selling, general and administrative expenses for the nine months ended September 30, 2018 is a $15.0 million ($11.5 million after income taxes, or $0.10 per share) charitable contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and operate. This contribution is in addition to the ordinary annual contribution made to the Albemarle Foundation by the Company, and is significant in size and nature in that it is intended to provide more long-term benefits in the communities where we live and operate.

(4)  Included in Gain on sale of business, for the nine months ended September 30, 2018 is $218.7 million ($176.7 million after discrete incomes taxes, or $1.60 per share) related to the sale of the Polyolefin Catalysts Divestiture.

(5)  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.

(6)  Included in Other (expenses) income, net, for the three and nine months ended September 30, 2018 are expenses of $0.4 million ($2.8 million including the adjustment of previously recorded income taxes, or $0.03 per share) and $10.8 million (or $0.10 per share), respectively, resulting from a settlement of a legal matter related to guarantees from a previously disposed business. In addition, Other (expenses) income, net, for the three and nine months ended September 30, 2018 include a gain of $1.4 million ($1.1 million after income taxes, or $0.01 per share) and an expense of $16.2 million ($12.5 million after income taxes, or $0.11 per share), respectively, resulting from a jury rendered verdict against Albemarle related to certain business concluded under a 2014 sales agreement for products that Albemarle no longer manufactures. Both matters were resolved and paid in 2018.

(7)  Increase in environmental reserve of $15.6 million ($12.0 million after income taxes, or $0.11 per share) to indemnify the buyer of a formerly owned site recorded in Other (expenses) income, net. As defined in the agreement of sale, this indemnification has a set cutoff date in 2024, at which point we will no longer be required to provide financial coverage.

(8)  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 are 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) income, 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 are outside normal compensation arrangements.
  • Selling, general and administrative expenses - Expected severance payments to be made in 2019 as part of a business reorganization plan of $5.3 million, with the unpaid balance recorded in Accrued 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 Specialties segment.
  • Other (expenses) income, 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 $12.3 million, or $0.12 per share.

Other adjustments for the three months ended September 30, 2018 included amounts recorded in:

  • Cost of goods sold - $3.8 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
  • Selling, general and administrative expenses - $0.1 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
  • Other (expenses) income, net - $0.2 million gain related to the revision of previously recorded expenses of disposed businesses.

After income taxes, these charges totaled $4.4 million, or $0.04 per share.

Other adjustments for the nine months ended September 30, 2018 included amounts recorded in:

  • Cost of goods sold - $4.9 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
  • Selling, general and administrative expenses - $1.5 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
  • Other (expenses) income, net - $0.8 million related to the revision of previously recorded expenses of disposed businesses.

After income taxes, these charges totaled $5.3 million, or $0.05 per share.

(9)  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.

Included in Income tax expense for the three and nine months ended September 30, 2018 are discrete net tax expenses (benefits), excluding the discrete tax expense on the gain of sale of business noted above, of $0.2 million, or less than $0.01 per share, and ($11.6) million, or ($0.11) per share, respectively. The net expense for the three months is primarily related to $1.9 million expense recorded for stock-based compensation arrangements and $1.7 million expense for adjustments related to the accounting for the TCJA, partially offset by a $2.0 million benefit from foreign accrual to return adjustments and a $1.2 million benefit from the release of foreign valuation allowances. The net benefit for the nine months is primarily related to an $8.0 million benefit for tax accounting method changes, a $4.8 million benefit for adjustments related to the accounting for the TCJA, $5.4 million excess tax benefits realized from stock-based compensation arrangements, and a $2.0 million benefit from foreign accrual to return adjustments, partially offset by $7.3 million expense for adjustments to foreign valuation allowances.

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).


Income before
income taxes and
equity in net income
of unconsolidated
investments


Income tax expense


Effective income tax
rate

Three months ended September 30, 2019:






As reported

$

163,723



$

25,341



15.5

%

Non-recurring, other unusual and non-operating pension and OPEB
items

8,345



391




As adjusted

$

172,068



$

25,732



15.0

%







Three months ended September 30, 2018:






As reported

$

154,565



$

33,167



21.5

%

Non-recurring, other unusual and non-operating pension and OPEB
ems

9,475



(2,237)




As adjusted

$

164,040



$

30,930



18.9

%







Nine months ended September 30, 2019:






As reported

$

484,653



$

93,266



19.2

%

Non-recurring, other unusual and non-operating pension and OPEB
items

14,002



(1,432)




As adjusted

$

498,655



$

91,834



18.4

%







Nine months ended September 30, 2018:






As reported

$

664,993



$

133,630



20.1

%

Non-recurring, other unusual and non-operating pension and OPEB
items

(145,579)



(18,253)




As adjusted

$

519,414



$

115,377



22.2

%

 

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/albemarle-reports-third-quarter-growth-300953165.html

SOURCE Albemarle Corporation

Dave Ryan, 980.299.5641



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