ALBEMARLE CORPORATION 
By BATON ROUGE, La., April 16, 2014 /PRNewswire/ --
First quarter 2014 highlights:
-- Earnings of $76.7 million, or $0.96 per share, excluding special and
non-operating items.
-- Net sales of $656.7 million and EBITDA margin, excluding special and
non-operating items, of 21 percent.
-- Cash flow from operations of $149 million, an increase of 51% from 1st
quarter of 2013.
-- Initiated reduction of high cost aluminum alkyls supply capacity.
-- Reached agreement to sell antioxidants and certain pharmaceuticals
businesses.
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Three Months
Ended
March 31,
---------
In thousands, except per
share amounts 2014 2013
------------------------ ---- ----
Net sales $656,679 $641,625
Segment income $128,418 $134,840
Net income attributable to
Albemarle Corporation $56,583 $83,987
Diluted earnings per share $0.71 $0.94
Non-operating pension and
OPEB items(a) 0.11 (0.01)
Special items(b) 0.14 -
---- ---
Diluted earnings per share,
excluding special and non-
operating pension $0.96 $0.93
and OPEB items
See accompanying notes and reconciliations to the condensed
consolidated financial information.
Albemarle Corporation (NYSE: ALB) reported first quarter 2014 earnings of $56.6 million, or $0.71 per share, compared to first quarter 2013 earnings of $84.0 million, or $0.94 per share. Excluding special and non-operating pension and OPEB items (see notes to the condensed consolidated financial information), first quarter 2014 earnings were $76.7 million, or $0.96 per share, compared to $82.7 million, or $0.93 per share, for the first quarter of 2013. The Company reported net sales of $656.7 million in the first quarter of 2014, up from net sales of $641.6 million in the first quarter of 2013, driven mainly by higher volumes in both operating segments partly offset by lower pricing in Performance Chemicals.
As previously announced, effective January 1, 2014, the Company's assets and businesses were aligned under two Global Business Units: Performance Chemicals, including Fire Safety Solutions, Specialty Chemicals and Fine Chemistry Services, and Catalyst Solutions, including Refinery Catalyst Solutions, Performance Catalyst Solutions and Antioxidants.
On April 15, 2014, the Company signed a definitive agreement to sell its antioxidant, ibuprofen and propofol businesses and assets to SI Group. Any potential impairment charge related to this agreement that may be reported in our Form 10-Q for the quarterly period ended March 31, 2014 is not reflected in the financial results included herein as the outcome of such analysis is pending completion.
"Despite the impact of inclement weather on our operations, first quarter results were generally consistent with our expectations," stated Luke Kissam, President and CEO. "Cash generation was higher than our expectations, driven largely by improvements in working capital, pointing once again to the strength of our business portfolio. During the quarter, we used this cash to fund organic growth opportunities, repurchase approximately $50 million worth of stock and increase our dividend for the 20th year in a row. We also announced earlier today that we have entered into a contract with the SI Group for the sale of our antioxidants, ibuprofen and propofol businesses, a transaction that will, upon closing, increase our overall margin rates and allow us to continue to focus more sharply on our core businesses."
Quarterly Segment Results
Performance Chemicals reported net sales of $360.5 million in the first quarter of 2014, a decrease of less than 1 percent compared to net sales in the first quarter of 2013, on unfavorable pricing impacts mainly in Fire Safety Solutions, partly offset by higher volumes mainly in Specialty Chemicals. Segment income for Performance Chemicals was $71.2 million in the first quarter of 2014, an 11 percent decline from $79.7 million in the first quarter of 2013, driven by unfavorable pricing due to market conditions, unfavorable utilities pricing and higher manufacturing costs, partly offset by favorable sales volumes due to market demand.
Catalyst Solutions generated net sales of $296.1 million in the first quarter of 2014, a 6 percent increase from net sales in the first quarter of 2013, primarily on favorable volumes and pricing in Refinery Catalysts Solutions, partly offset by unfavorable Performance Catalyst Solutions pricing. Catalyst Solutions segment income was $57.2 million in the first quarter of 2014, up 4 percent from first quarter 2013 results of $55.1 million, due primarily to strong volumes and pricing in Refinery Catalyst Solutions partly offset by higher manufacturing costs and commissions.
Corporate and Other
Corporate and other expense was $34.8 million ($20.7 million excluding non-operating pension and OPEB items) for the first quarter of 2014. The $19.5 million increase from the comparable period in 2013 was due primarily to higher pension and OPEB costs and incentive compensation costs.
Interest and financing expenses were $8.8 million for the first quarter of 2014 compared to $5.2 million for the first quarter of 2013, due primarily to decreases in interest capitalized on lower average construction work in progress balances in the 2014 period.
Excluding special and non-operating pension and OPEB items, our effective income tax rates were 23.7 percent and 24.6 percent for the first quarter of 2014 and 2013, respectively. Our effective tax rate continues to be influenced by the level and geographic mix of income, and benefits from a favorable mix of income in lower tax jurisdictions.
During the first quarter of 2014 we initiated action to reduce high cost supply capacity of certain aluminum alkyl products, primarily through the termination of a third party manufacturing contract. Based on the contract termination, we estimate costs of approximately $14.0 million for contract termination and volume commitments. Additionally, we have recorded an impairment charge of $3.0 million for certain capital project costs also related to aluminum alkyls capacity which we do not expect to recover. After income taxes, these charges were approximately $11.1 million, or $0.14 per share.
Cash Flow
Our cash flow from operations was approximately $149 million for the three months ended March 31, 2014, up 51 percent from the same period in 2013, and we had $524 million in cash and cash equivalents at March 31, 2014. During the first quarter of 2014, cash on hand and cash provided by operations funded capital expenditures for plant, machinery and equipment of approximately $24 million, dividends to shareholders of $19.6 million and $50.0 million for repurchases of approximately 0.6 million shares of our common stock pursuant to the terms of our accelerated share repurchase program entered into in the first quarter.
Earnings Call
The Company's performance for the first quarter ended March 31, 2014 will be discussed on a conference call at 9:00 AM Eastern Daylight time on April 17, 2014. The call can be accessed by dialing 888-713-4217 (International Dial-In # 617-213-4869), and entering conference ID 79868036. The Company's earnings presentation and supporting material can be accessed through Albemarle's website under Investors at www.albemarle.com.
About Albemarle
Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a leading global developer, manufacturer, and marketer of highly-engineered specialty chemicals for consumer electronics, petroleum refining, utilities, packaging, construction, automotive/transportation, pharmaceuticals, crop protection, food-safety and custom chemistry services. The Company is committed to global sustainability and is advancing its eco-practices and solutions in its two global business units: Performance Chemicals and Catalyst Solutions. Corporate Responsibility Magazine selected Albemarle to its prestigious "100 Best Corporate Citizens" list for 2010, 2011 and 2013. Albemarle employs approximately 3,900 people and serves customers in approximately 100 countries. Albemarle regularly posts information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, Regulation G reconciliations, SEC filings, and other information regarding the Company, its businesses and the markets we serve.
Forward-Looking Statements
Some of the information presented in this press release and the conference call and discussions that follow, including, without limitation, statements with respect to product development, changes in productivity, market trends, price, volume and mix changes, expected growth and earnings, input costs, surcharges, tax rates, stock repurchases, dividends, 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. There can be no assurance that actual results will not differ materially. Factors that could cause actual results to differ materially include, without limitation: changes in economic and business conditions; changes in financial and operating performance of our major customers and industries and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in the demand for our products; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; changes in the cost of raw materials and energy and in our ability to pass through such increases; acquisitions and divestitures, and changes in performance of acquired companies; 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 claims or litigation; the occurrence of natural disasters; 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 substantial 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; 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.
Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)
Three Months
Ended
March 31,
---------
2014 2013
---- ----
Net sales $656,679 $641,625
Cost of goods sold(a) 462,393 442,035
------- -------
Gross profit 194,286 199,590
Selling, general and
administrative expenses(a) 79,310 64,750
Research and development
expenses 22,572 19,953
Restructuring and other
charges, net(b) 17,000 -
------ ---
Operating profit 75,404 114,887
Interest and financing
expenses (8,773) (5,231)
Other income (expenses), net 1,149 (4,209)
----- ------
Income before income taxes and
equity in net income of
unconsolidated investments 67,780 105,447
Income tax expense 12,446 26,192
------ ------
Income before equity in net
income of unconsolidated
investments 55,334 79,255
Equity in net income of
unconsolidated investments
(net of tax) 8,901 10,261
----- ------
Net income 64,235 89,516
Net income attributable to
noncontrolling interests (7,652) (5,529)
------ ------
Net income attributable to
Albemarle Corporation $56,583 $83,987
======= =======
Basic earnings per share $0.71 $0.95
Diluted earnings per share $0.71 $0.94
Weighted-average common
shares outstanding - basic 79,735 88,719
Weighted-average common
shares outstanding - diluted 80,112 89,236
See accompanying notes to the condensed consolidated financial
information.
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
March 31, December
31,
2014 2013
---- ----
ASSETS
Cash and cash
equivalents $524,043 $477,239
Other current assets 953,359 1,005,676
------- ---------
Total current assets 1,477,402 1,482,915
--------- ---------
Property, plant and
equipment 2,975,692 2,972,084
Less accumulated
depreciation and
amortization 1,635,354 1,615,015
--------- ---------
Net property, plant
and equipment 1,340,338 1,357,069
Other assets and
intangibles 740,988 744,813
------- -------
Total assets $3,558,728 $3,584,797
======== ========
LIABILITIES AND EQUITY
Current portion of
long-term debt $18,063 $24,554
Other current
liabilities 405,136 411,809
------- -------
Total current
liabilities 423,199 436,363
------- -------
Long-term debt 1,052,790 1,054,310
Other noncurrent
liabilities 227,535 222,160
Deferred income taxes 127,603 129,188
Albemarle Corporation
shareholders' equity 1,604,751 1,627,361
Noncontrolling
interests 122,850 115,415
------- -------
Total liabilities and
equity $3,558,728 $3,584,797
======== ========
See accompanying notes to the condensed consolidated financial
information.
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Three Months
Ended
March 31,
---------
2014 2013
Cash and cash equivalents at
beginning of year $477,239 $477,696
Cash and cash equivalents at
end of period $524,043 $434,904
Sources of cash and cash equivalents:
Net income $64,235 $89,516
Proceeds from exercise of
stock options 1,255 1,720
Working capital changes 39,826 -
Uses of cash and cash equivalents:
Working capital changes - (12,641)
Capital expenditures (23,667) (55,335)
Repurchases of common stock (50,000) (60,798)
Repayments of long-term debt (101) (3,604)
Repayments of other borrowings (8,434) -
Dividends paid to shareholders (19,582) (17,808)
Pension and postretirement
contributions (2,540) (1,741)
Non-cash and other items:
Depreciation and amortization 27,809 25,244
Write-offs associated with
restructuring and other 3,000 -
Pension and postretirement
expense 16,669 1,582
Equity in net income of
unconsolidated investments (8,901) (10,261)
See accompanying notes to the condensed consolidated financial
information.
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months
Ended
March 31,
---------
2014 2013
---- ----
Net sales:
Performance Chemicals $360,543 $361,941
Catalyst Solutions 296,136 279,684
Total net sales $656,679 $641,625
====== ======
Segment operating profit:
Performance Chemicals $75,923 $82,933
Catalyst Solutions 51,246 47,175
Total segment operating
profit 127,169 130,108
------- -------
Equity in net income of
unconsolidated investments:
Performance Chemicals 2,917 2,308
Catalyst Solutions 5,984 7,953
Total equity in net income
of unconsolidated
investments 8,901 10,261
----- ------
Net income attributable to
noncontrolling interests:
Performance Chemicals (7,652) (5,529)
Total net income
attributable to
noncontrolling interests (7,652) (5,529)
------ ------
Segment income:
Performance Chemicals 71,188 79,712
Catalyst Solutions 57,230 55,128
Total segment income 128,418 134,840
Corporate & other(a) (34,765) (15,221)
Restructuring and other
charges, net(b) (17,000) -
Interest and financing
expenses (8,773) (5,231)
Other income (expenses), net 1,149 (4,209)
Income tax expense (12,446) (26,192)
Net income attributable to
Albemarle Corporation $56,583 $83,987
======= =======
See accompanying notes to the condensed consolidated financial
information.
Notes to the Condensed Consolidated Financial Information
(a) Non-operating
pension and OPEB
items, consisting
of mark-to-
market (MTM)
actuarial gains/
losses as well as
interest cost and
expected return on
assets, are
included in
Corporate & other
as follows:
For the three
months ended March
31, 2014 and 2013,
net charges
(benefits)
amounting to $14.1
million ($8.9
million after
income taxes, or
$0.11 per share)
and $(2.1) million
($1.3 million
after income
taxes, or $0.01
per share),
respectively. The
MTM actuarial loss
in 2014 was $15.4
million ($9.8
million after
income taxes, or
$0.12 per share)
and resulted from
a curtailment
related to one of
our U.S. defined
benefit pension
plans and our
supplemental
executive
retirement plan
which required a
remeasurement of
the related assets
and obligations
during the first
quarter. The
curtailment was in
connection with
our workforce
reduction plan
initiated in the
fourth quarter of
2013. There were
no MTM actuarial
gains/losses
recorded during
the three months
ended March 31,
2013.
Although non-
operating pension
and OPEB items are
included in cost
of goods sold and
selling, general
and administrative
expenses in
accordance with
GAAP, we believe
that these
components of
pension cost are
mainly driven by
market
performance, and
we manage these
separately from
the operational
performance of our
businesses. Non-
operating pension
and OPEB items
included in cost
of goods sold and
selling, general
and administrative
expenses are as
follows (in
millions):
Three
Months
Ended
March 31,
---------
2014 2013
---- ----
Cost of goods sold:
MTM actuarial loss $2.9 $ -
Interest cost and expected return on assets, net (0.5) (0.7)
---- ----
Total $2.4 $(0.7)
==== ====
Selling, general and administrative expenses:
MTM actuarial loss $12.5 $ -
Interest cost and expected return on assets, net (0.8) (1.4)
---- ----
Total $11.7 $(1.4)
=== ====
(b) The three month period
ended March 31, 2014
includes net charges
amounting to $17.0
million ($11.1
million after income
taxes, or $0.14 per
share) in connection
with a reduction of
aluminum alkyls high
cost supply capacity.
Additional Information
It should be noted that Net income attributable to Albemarle Corporation ("earnings"), earnings per share and effective income tax rates which exclude special and non-operating pension and OPEB items, as well as presentations of segment operating profit, segment income, EBITDA, EBITDA excluding special and non-operating pension and OPEB items, EBITDA margin and EBITDA margin excluding special and non-operating pension and OPEB items are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. 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.
A description of other non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, can be found in the Investors section of our website at www.albemarle.com, under "Non-GAAP Reconciliations" under "Financials." Also, see attached for a supplemental reconciliation of our segment operating profit and segment income amounts to GAAP Operating profit and GAAP Net income attributable to Albemarle Corporation, respectively, as well as for a supplemental reconciliation of Net income attributable to Albemarle Corporation excluding special and non-operating pension and OPEB items, EBITDA and EBITDA excluding special and non-operating pension and OPEB items to Net income attributable to Albemarle Corporation.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(In Thousands)
(Unaudited)
Our segment information includes measures we refer to as "Segment operating profit," "Segment income," "EBITDA" and "EBITDA excluding special and non-operating
pension and OPEB items," which are financial measures that are not required by, or presented in accordance with, GAAP. The Company has reported Segment
operating profit, Segment income, EBITDA and EBITDA excluding special and non-operating pension and OPEB items because management believes that these
financial measures provide transparency to investors and enable period-to-period comparability of financial performance. Segment operating profit, Segment
income, EBITDA and EBITDA excluding special and non-operating pension and OPEB items should not be considered as alternatives to operating profit or net
income attributable to Albemarle Corporation, as determined in accordance with GAAP.
See below for a reconciliation of Segment operating profit and Segment income, the non-GAAP financial measures, to Operating profit and Net income attributable
to Albemarle Corporation, respectively, the most directly comparable financial measures calculated and reported in accordance with GAAP.
Three Months
Ended
March 31,
---------
2014 2013
---- ----
Total segment operating profit $127,169 $130,108
Corporate & other (34,765) (15,221)
Restructuring and other charges, net (17,000) -
------- ---
GAAP Operating profit $75,404 $114,887
======= ========
Total segment income $128,418 $134,840
Corporate & other (34,765) (15,221)
Restructuring and other charges, net (17,000) -
Interest and financing expenses (8,773) (5,231)
Other income (expenses), net 1,149 (4,209)
Income tax expense (12,446) (26,192)
------- -------
GAAP Net income attributable to Albemarle Corporation $56,583 $83,987
======= =======
See below for a reconciliation of Net income attributable to Albemarle Corporation excluding special and non-operating pension and OPEB items, EBITDA and EBITDA excluding special and non-operating pension and OPEB items, the non-GAAP financial measures, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP. EBITDA is defined as Net income attributable to Albemarle Corporation before interest and financing expenses, income taxes, depreciation and amortization. EBITDA excluding special and non-operating pension and OPEB items is defined as EBITDA before the special and non-operating pension and OPEB items as listed below.
Three Months Ended
March 31,
---------
2014 2013
---- ----
Net income attributable to Albemarle Corporation $56,583 $83,987
======= =======
Add back:
Non-operating pension and OPEB items (net of tax) 8,944 (1,297)
Special items (net of tax) 11,145 -
Net income attributable to Albemarle Corporation excluding special $76,672 $82,690
and non-operating pension and OPEB items
Net income attributable to Albemarle Corporation $56,583 $83,987
======= =======
Add back:
Interest and financing expenses 8,773 5,231
Income tax expense 12,446 26,192
Depreciation and amortization 27,809 25,244
------ ------
EBITDA 105,611 140,654
Non-operating pension and OPEB items 14,070 (2,069)
Special items 17,000 -
EBITDA excluding special and non-operating pension and $136,681 $138,585
OPEB items
Net sales $656,679 $641,625
====== ======
EBITDA Margin 16.1% 21.9%
==== ====
EBITDA Margin excluding special and non-operating pension and 20.8% 21.6%
OPEB items
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SOURCE Albemarle Corporation
