Albemarle reports strong growth and raises guidance - Lithium powers ahead

CHARLOTTE, N.C., Aug. 7, 2018 /PRNewswire/ --

Second quarter 2018 highlights:

• Second quarter net sales were $853.9 million, an increase of 16% over the prior year; earnings were $302.5 million, or $2.73 per diluted share, an increase of 197% over the prior year
• Second quarter adjusted EBITDA was $258.6 million, an increase of 18% over the prior year; adjusted diluted earnings per share was $1.36, an increase of 20% over the prior year
• Closed the sale of the polyolefin catalysts and components portion of the PCS business to W.R. Grace & Co. for net cash proceeds of approximately $417 million on April 3, 2018
• Initiated $250 million accelerated share repurchase program, retiring approximately 2.4 million shares in the second quarter

Albemarle Corporation (NYSE: ALB) reported second quarter 2018 net sales of $853.9 million, earnings of $302.5 million and adjusted EBITDA of $258.6 million.

"We saw strength in all three businesses in the second quarter, with each delivering double-digit adjusted EBITDA growth," said Luke Kissam, Albemarle's Chairman, President and CEO. "The company grew adjusted diluted EPS by 28% over 2017, excluding divested businesses. Our lithium capital projects continue to progress on plan. We are confident in a strong 2018 and are raising our guidance for the full year to $5.30 to $5.50 per diluted share."

Outlook

Based on our strong performance in the first half of 2018, we are increasing our guidance as follows:

Results

Second quarter 2018 earnings were $302.5 million, or $2.73 per diluted share, compared to $103.3 million, or $0.92 per diluted share in the second quarter 2017. The increase in 2018 was primarily driven by the $1.60 per diluted share gain on sale of the polyolefin catalysts and components portion of the PCS business, as well as earnings growth in each of our reportable segments. Second quarter 2018 adjusted EBITDA increased by $39.6 million, or 18.1%, compared to the prior year. Second quarter 2018 adjusted net income was $150.0 million, or $1.36 per diluted share, compared to $126.5 million, or $1.13 per diluted share, for second quarter 2017, an increase of 20.4%. See notes to the condensed consolidated financial information for further details. The Company reported net sales of $853.9 million in second quarter 2018, up 15.8% from net sales of $737.3 million in the second quarter of 2017, driven by the favorable impact of higher sales volumes, pricing and currency exchange impacts in each of our reportable segments, partially offset by the impact of the divestiture of the polyolefin catalysts and components portion of the Performance Catalyst Solutions ("PCS") business.

For the six months ended June 30, 2018, earnings were $434.2 million, or $3.90 per diluted share, compared to $154.5 million, or $1.37 per diluted share for the six months ended June 30, 2017. The increase in 2018 was primarily driven by the $1.59 per diluted share gain on sale of the polyolefin catalysts and components portion of the PCS business, earnings growth in each of our reportable segments, and a loss on early extinguishment of debt of $0.34 per diluted share recorded in 2017. For the six months ended June 30, 2018, adjusted EBITDA increased by $77.0 million, or 17.9%, compared to the same period 2017. For the six months ended June 30, 2018, adjusted net income was $295.2 million, or $2.65 per diluted share, compared to $245.5 million, or $2.18 per diluted share, for the same period 2017, an increase of 21.6%. See notes to the condensed consolidated financial information for further details. The Company reported net sales for the six months ended June 30, 2018 of $1.68 billion, up from net sales of $1.46 billion for the six months ended June 30, 2017, driven by the favorable impact of higher sales volumes in our Lithium and Catalysts segments, as well as favorable price and currency exchange impacts in each of our reportable segments, partially offset by the impact of the divestiture of the polyolefin catalysts and components portion of the PCS business.

On April 3, 2018, we closed the sale of the polyolefin catalysts and components portion of the PCS business to W.R. Grace & Co. for net cash proceeds of approximately $416.7 million and recorded an after-tax gain of $176.7 million related to the sale of this business. The transaction includes Albemarle's Product Development Center located in Baton Rouge, Louisiana, and operations at the Yeosu, South Korea site. The transaction does not include the organometallics or curatives portion of the PCS business. The assets and liabilities of this business are included in Assets held for sale and Liabilities held for sale in the consolidated balance sheets as of December 31, 2017.

Quarterly Segment Results

During 2018, the PCS product category merged with the Refining Solutions reportable segment to form a global business focused on catalysts. As a result, our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. For comparison purposes, prior year periods have been reclassified to conform to the current presentation.

Lithium reported net sales of $317.6 million in the second quarter of 2018, an increase of 30.2% from second quarter 2017 net sales of $243.8 million. The $73.7 million increase in net sales as compared to prior year was primarily due to favorable pricing impacts, increased sales volumes and $7.7 million of favorable currency exchange impacts. Adjusted EBITDA for Lithium was $141.6 million, an increase of 22.9% from second quarter 2017 results of $115.2 million. The $26.4 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts, increased sales volumes and $0.8 million of favorable currency exchange impacts, partially offset by higher royalty payments.

Bromine Specialties reported net sales of $220.5 million in the second quarter of 2018, an increase of 8.1% from second quarter 2017 net sales of $203.9 million. The $16.6 million increase in net sales as compared to the prior year was primarily due to favorable pricing impacts, increased sales volumes and $3.1 million of favorable currency exchange impacts. Adjusted EBITDA for Bromine Specialties was $69.4 million, an increase of 11.7% from second quarter 2017 results of $62.1 million. The $7.3 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts and $2.7 million of favorable currency exchange impacts, partially offset by higher raw material and production costs.

Catalysts reported net sales of $285.0 million in the second quarter of 2018, an increase of 10.3% from net sales of $258.3 million in the second quarter of 2017. The $26.7 million increase in net sales as compared to the prior year was primarily due to increased sales volume, favorable pricing impacts and $4.8 million of favorable currency exchange impacts, which more than offset the $25.7 million impact of the divestiture of the polyolefin catalysts and components portion of the PCS business. Adjusted EBITDA for Catalysts was $75.1 million in the second quarter of 2018, an increase of 11.4% from second quarter 2017 results of $67.4 million. The $7.7 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes, favorable pricing and $0.3 million of favorable currency exchange impacts, partially offset by higher material costs and the impact of the divestiture of the polyolefin catalysts and components portion of the PCS business of $9.8 million.

All Other net sales were $30.7 million in both the second quarter of 2018 and 2017. All Other adjusted EBITDA was ($0.1) million in the second quarter of 2018, a decrease of 104.1% from second quarter 2017 results of $2.4 million. The $2.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to the unfavorable pricing impacts and product mix in our fine chemistry services business.

Corporate Results

Corporate adjusted EBITDA was a charge of $27.4 million in the second quarter of 2018 compared to a charge of $28.2 million in the second quarter of 2017. The improvement in Corporate adjusted EBITDA was primarily due to lower selling, general and administrative spend.

Income Taxes

In December 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted, requiring companies, among other things, to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reducing the U.S. federal corporate income tax rate from 35% to 21%. The SEC staff issued SAB 118, which will allow us to record provisional amounts during a measurement period, which should not extend beyond one year from the enactment date. In the six months ended June 30, 2018, we recorded a discrete tax benefit of $2.8 million to adjust amounts previously recorded for the one-time transition tax and a discrete tax benefit of $3.7 million for other adjustments.

Our effective income tax rates for the second quarter of 2018 and 2017 of 21.5% and 19.0%, respectively, are influenced by non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). The increase in the effective tax rate in the second quarter of 2018 compared to 2017 was impacted by a variety of factors, primarily stemming from a change in the geographic mix of earnings. Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 24.4% and 19.1% for the second quarter of 2018 and 2017, respectively, and continue to be influenced by the level and geographic mix of income. Our effective income tax rates for the six months ended June 30, 2018 and 2017 were 19.7% and 20.0%, respectively, and our adjusted effective income tax rates for the six months ended June 30, 2018 and 2017 were 23.8% and 20.7%, respectively.

Cash Flow

Our cash from operations was approximately $223.9 million for the six months ended June 30, 2018, an increase of $278.3 million versus the same period in 2017, primarily due to changes in working capital, including the payment of approximately $255 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017, as well as increased earnings in each of our reportable segments and increased dividends received from unconsolidated investments in 2018. Capital expenditures were $280.9 million as compared to $97.8 million in the first six months of 2017, with the increase driven largely by expansion investment in our Lithium business. We had $908.1 million in cash and cash equivalents at June 30, 2018, as compared to $1.14 billion at December 31, 2017. During the first six months of 2018, cash on hand, cash provided by operations and net proceeds from divestitures funded $213.3 million of commercial paper note repayments, net of borrowings, $280.9 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $72.5 million and a $250.0 million accelerated share repurchase program, of which we received and retired approximately 2.4 million shares of our common stock during the second quarter. Any remaining shares to be delivered under this accelerated share repurchase program will be received and retired by the end of the third quarter of 2018.

Earnings Call

The Company's performance for the second quarter ended June 30, 2018 will be discussed on a conference call at 9:00 AM Eastern time on August 8, 2018. The call can be accessed by dialing 800-219-3192 (International Dial-In # 617-597-5412), and entering conference ID 17275571. 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 (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We power the potential of companies in many of the world's largest and most critical industries, from energy and communications to transportation and electronics. Working side-by-side with our customers, we develop value-added, customized solutions that make them more competitive. Our solutions combine the finest technology and ingredients with the knowledge and know-how of our highly experienced and talented team of operators, scientists and engineers.

Discovering and implementing new and better performance-based sustainable solutions is what motivates all of us. We think beyond business-as-usual to drive innovations that create lasting value. Albemarle employs approximately 5,000 people and serves customers in approximately 100 countries. We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

Forward-Looking Statements

Some of the information presented in this press release, the conference call and discussions that follow, including, without limitation, product development, changes in productivity, market trends, price, expected growth, earnings and demand for our products, input costs, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, portfolio diversification, economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause actual results to differ materially 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 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.

Notes to the Condensed Consolidated Financial Information

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 posted in the Investors section of our website at www.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.

See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reporting in accordance with GAAP (in thousands, except percentages).

Non-operating pension and OPEB items, consisting of MTM actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to our 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, net. Non-operating pension and OPEB items were as follows (in thousands):

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):

See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reporting in accordance with GAAP (in thousands, except percentages).

SOURCE Albemarle Corporation

Related Links

http://www.albemarle.com

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