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ALBemarle Corporation (NYSE: ALB) today announced its results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter 2020 and Recent Highlights
(Unless otherwise stated, all percent changes represent year-over-year comparisons)
- Net income of $84.6 million , or $0.79 per diluted share; Adjusted diluted EPS of $1.17
- Net sales of $879 million , which was at the high-end of previous outlook, a year-over-year decrease of 11%
- Adjusted EBITDA of $221 million , which exceeded the high-end of previous outlook, a year-over-year decrease of 25%
- Our plants continue to operate without material impact from the COVID-19 pandemic
- Approximately $80 million of sustainable cost savings achieved in 2020
- Maintained our quarterly dividend of $0.385 per share, an increase of approximately 5% over 2019
- Completed $1.5 billion underwritten public equity offering to accelerate profitable growth
" Albemarle reported another solid quarter with Q4 2020 adjusted EBITDA exceeding outlook. This performance is due to the hard work and diligence of our operating teams who ran our businesses safely and efficiently throughout this challenging year," said Albemarle CEO Kent Masters . "As we continue to rebound from last year's pandemic-related lows, we are accelerating high-return growth in our Lithium and Bromine businesses and maintaining our focus on operational discipline to drive cost and efficiency improvements."
Outlook
Albemarle anticipates that its full year 2021 operating performance will improve modestly relative to full year 2020 assuming continued recovery following reduced global economic activity due to the global pandemic.
| | FY 2021 Outlook |
| Net sales | $3.2 - $3.3 billion |
| Adjusted EBITDA | $810 - $860 million |
| Adjusted EBITDA Margin | 25% - 26% |
| Adj. Diluted EPS | $3.25 - $3.65 |
| Net Cash from Operations | $475 - $575 million |
| Capital Expenditures | $850 - $950 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 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.
Fourth Quarter Results
| In millions, except per share amounts | Q4 2020 | | Q4 2019 | | $ Change | | % Change | |||||||
| Net sales | $ | 879.1 | | | $ | 992.6 | | | $ | (113.5) | | | (11.4) | % |
| Net income attributable to Albemarle Corporation | $ | 84.6 | | | $ | 90.4 | | | $ | (5.8) | | | (6.4) | % |
| Adjusted EBITDA (a) | $ | 221.1 | | | $ | 294.7 | | | $ | (73.6) | | | (25.0) | % |
| Diluted earnings per share | $ | 0.79 | | | $ | 0.85 | | | $ | (0.06) | | | (7.1) | % |
| Non-operating pension and OPEB items (a) | 0.35 | | | 0.19 | | | | | | |||||
| Non-recurring and other unusual items (a) | 0.03 | | | 0.69 | | | | | | |||||
| Adjusted diluted earnings per share (b) | $ | 1.17 | | | $ | 1.73 | | | $ | (0.56) | | | (32.4) | % |
| | |
| (a) | See Non-GAAP Reconciliations for further details. |
| (b) | Totals may not add due to rounding. |
Net sales of $879.1 million decreased by $113.5 million compared to the prior year quarter, driven by lower results in the Catalysts and Lithium business segments partially offset by improvement in Bromine and other business segments as discussed below.
Adjusted EBITDA of $221.1 million decreased by $73.6 million from the prior year quarter due to lower net sales, which was offset by productivity and cost improvements. Similarly, net income attributable to Albemarle of $84.6 million decreased by $5.8 million from the prior year. Corporate costs including SG&A were down compared to the prior year period as a result of sustainable cost savings initiatives and short-term austerity measures.
We have increased our sustainable cost savings and achieved approximately $80 million of sustainable savings in 2020. We expect these savings to reach a run-rate of more than $120 million by year-end 2021. We also took short-term cash management measures and delayed capital expenditures. Short-term savings averaged approximately $25 to $40 million per quarter in 2020. Some of the expenses related to these short-term savings are expected to come back later in 2021, for example assuming increased travel expenses later in the year. Full-year 2020 capital spending was $850 million , in-line with the low-end of previous outlook.
The effective income tax rate for Q4 2020 was (20.9)% compared to (6.5)% in the same period in 2019. The difference is largely due to a change in the geographic mix of earnings. Q4 2020 includes discrete tax benefits for uncertain tax positions for statute of limitation expirations, excess tax benefits realized from stock-based compensation arrangements, and return to accrual adjustments. Q4 2019 includes a $19 million tax benefit for uncertain tax positions primarily related to seeking treaty relief from the competent authority to prevent double taxation. On an adjusted basis, the effective income tax rates were 12.8% and 18.4% for the fourth quarter of 2020 and 2019, respectively.
Cash Flow and Capital Deployment
Cash from operations for the year ended December 31, 2020, of $798.9 million , increased $79.5 million versus the prior year as reduced working capital outflows, deferred tax payments as allowed by various jurisdictions during the pandemic and cost savings more than offset lower revenues. Capital expenditures of $850.5 million were in-line with the prior year as progress continued on our Lithium expansion projects.
Our primary capital allocation priorities are to grow profitably, fund our dividend, and maintain financial flexibility and our investment grade credit rating.
In February 2021 , we raised $1.5 billion in an equity offering to fund growth capital projects, focused on accelerating high return growth projects in Lithium and Bromine. In the short-term, the use of proceeds include funding growth capital expenditures, debt repayment and other general corporate purposes.
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.
Balance Sheet and Liquidity
As of December 31, 2020, Albemarle had estimated liquidity of over $2.1 billion , including $747 million of cash and equivalents, $675 million remaining under our $1 billion revolver, $500 million remaining under our delayed draw term loan and $196 million on other available credit lines. Total debt was $3.6 billion , representing net debt to adjusted EBITDA of approximately 3.4 times.
Business Segment Results
Lithium
| In millions | Q4 2020 | | Q4 2019 | | $ Change | | % Change | |||||||
| Net Sales | $ | 358.6 | | | $ | 411.1 | | | $ | (52.5) | | | (12.8) | % |
| Adjusted EBITDA | $ | 122.1 | | | $ | 140.1 | | | $ | (17.9) | | | (12.8) | % |
Lithium net sales of $358.6 million declined $52.5 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 $122.1 million declined by $17.9 million primarily due to reduced net sales. Stronger volumes, as customers held to contractual commitments, partially offset price declines.
Current Trends: We anticipate FY 2021 volumes to be higher due to North American restarts and efficiency improvements. We expect mechanical completion of our La Negra and Kemerton expansion projects in 2021 and expect to see increased sales volumes from these projects beginning in 2022. We expect FY 2021 pricing to be down slightly, primarily due to anticipated lower average realized pricing for carbonate and technical grade products. Longer-term, we expect lithium demand to grow in line with greater EV adoption. We are accelerating our lithium growth projects to capitalize on this trend and generate strong investment returns.
Bromine Specialties
| In millions | Q4 2020 | | Q4 2019 | | $ Change | | % Change | |||||||
| Net Sales | $ | 263.4 | | | $ | 243.5 | | | $ | 19.9 | | | 8.2 | % |
| Adjusted EBITDA | $ | 87.9 | | | $ | 79.7 | | | $ | 8.1 | | | 10.2 | % |
Bromine net sales of $263.4 million increased $19.9 million primarily due to a rebound in demand following the recent economic downturn related to the COVID-19 pandemic. Adjusted EBITDA of $87.9 million increased $8.1 million due to higher net sales volume and pricing, partially offset by higher input costs related to the higher sales volume.
Current Trends: We expect FY 2021 results to improve modestly year-over-year assuming continued economic recovery following the pandemic. Further recovery and positive long-term trends in electronics and automotive end markets are expected to continue to drive demand across our product portfolio.
Catalysts
| In millions | Q4 2020 | | Q4 2019 | | $ Change | | % Change | |||||||
| Net Sales | $ | 195.7 | | | $ | 282.5 | | | $ | (86.8) | | | (30.7) | % |
| Adjusted EBITDA | $ | 22.1 | | | $ | 76.7 | | | $ | (54.7) | | | (71.3) | % |
Catalysts net sales of $195.7 million declined $86.8 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. Lower Hydroprocessing Catalysts (HPC) volume reflects normal lumpiness of shipments and reduced fuel demand. Adjusted EBITDA of $22.1 million declined $54.7 million as a result of lower net sales offset by cost savings initiatives and efficiency improvements.
Current Trends: We expect total Catalysts to be flat year-over-year, with PCS improving from 2020 levels. We expect lower year-over-year refining catalysts volumes resulting from a recent change in customer order patterns in North America , with Q1 expected to be the strongest quarter of the year. Strategically, we continue to position the Catalysts business to take advantage of growth in emerging markets, renewable fuels, and crude-to-chemicals.
All Other
| In millions | Q4 2020 | | Q4 2019 | | $ Change | | % Change | |||||||
| Net Sales | $ | 61.4 | | | $ | 55.4 | | | $ | 6.0 | | | 10.8 | % |
| Adjusted EBITDA | $ | 18.4 | | | $ | 20.7 | | | $ | (2.3) | | | (11.0) | % |
Other operations represent our Fine Chemistry Services (FCS) business. FCS net sales of $61.4 million increased $6.0 million and adjusted EBITDA of $18.4 million decreased $2.3 million . The FCS business tends to be contract driven. Recent contracts include life sciences products, which are typically anti-cyclical.
Earnings Call
| Date: | Thursday, Feb. 18, 2020 |
| Time: | 9:00 AM Eastern time |
| Dial-in (U.S.): | 844-347-1034 |
| Dial-in (International): | 209-905-5910 |
| Passcode: | 6989169 |
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 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 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.
Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)
| | Three Months Ended | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| Net sales | $ | 879,147 | | | $ | 992,564 | | | $ | 3,128,909 | | | $ | 3,589,427 | |
| Cost of goods sold | 613,727 | | | 654,053 | | | 2,134,056 | | | 2,331,649 | | ||||
| Gross profit | 265,420 | | | 338,511 | | | 994,853 | | | 1,257,778 | | ||||
| Selling, general and administrative expenses | 124,909 | | | 185,163 | | | 429,827 | | | 533,368 | | ||||
| Research and development expenses | 15,375 | | | 14,263 | | | 59,214 | | | 58,287 | | ||||
| Operating profit | 125,136 | | | 139,085 | | | 505,812 | | | 666,123 | | ||||
| Interest and financing expenses | (19,152) | | | (22,400) | | | (73,116) | | | (57,695) | | ||||
| Other expenses, net | (57,557) | | | (38,388) | | | (59,177) | | | (45,478) | | ||||
| Income before income taxes and equity in net income of | 48,427 | | | 78,297 | | | 373,519 | | | 562,950 | | ||||
| Income tax (benefit) expense | (10,101) | | | (5,105) | | | 54,425 | | | 88,161 | | ||||
| Income before equity in net income of unconsolidated | 58,528 | | | 83,402 | | | 319,094 | | | 474,789 | | ||||
| Equity in net income of unconsolidated investments (net of | 43,649 | | | 22,841 | | | 127,521 | | | 129,568 | | ||||
| Net income | 102,177 | | | 106,243 | | | 446,615 | | | 604,357 | | ||||
| Net income attributable to noncontrolling interests | (17,542) | | | (15,852) | | | (70,851) | | | (71,129) | | ||||
| Net income attributable to Albemarle Corporation | $ | 84,635 | | | $ | 90,391 | | | $ | 375,764 | | | $ | 533,228 | |
| Basic earnings per share: | $ | 0.79 | | | $ | 0.85 | | | $ | 3.53 | | | $ | 5.03 | |
| Diluted earnings per share: | $ | 0.79 | | | $ | 0.85 | | | $ | 3.52 | | | $ | 5.02 | |
| | | | | | | | | ||||||||
| Weighted-average common shares outstanding – basic | 106,665 | | | 106,037 | | | 106,402 | | | 105,949 | | ||||
| Weighted-average common shares outstanding – diluted | 107,312 | | | 106,314 | | | 106,808 | | | 106,321 | | ||||
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
| | December 31, | | December 31, | ||||
| | 2020 | | 2019 | ||||
| ASSETS | | | | ||||
| Current assets: | | | | ||||
| Cash and cash equivalents | $ | 746,724 | | | $ | 613,110 | |
| Trade accounts receivable | 530,838 | | | 612,651 | | ||
| Other accounts receivable | 61,958 | | | 67,551 | | ||
| Inventories | 750,237 | | | 768,984 | | ||
| Other current assets | 116,427 | | | 162,813 | | ||
| Total current assets | 2,206,184 | | | 2,225,109 | | ||
| Property, plant and equipment | 7,427,641 | | | 6,817,843 | | ||
| Less accumulated depreciation and amortization | 2,073,016 | | | 1,908,370 | | ||
| Net property, plant and equipment | 5,354,625 | | | 4,909,473 | | ||
| Investments | 656,244 | | | 579,813 | | ||
| Other assets | 219,268 | | | 213,061 | | ||
| Goodwill | 1,665,520 | | | 1,578,785 | | ||
| Other intangibles, net of amortization | 349,105 | | | 354,622 | | ||
| Total assets | $ | 10,450,946 | | | $ | 9,860,863 | |
| LIABILITIES AND EQUITY | | | | ||||
| Current liabilities: | | | | ||||
| Accounts payable | $ | 483,221 | | | $ | 574,138 | |
| Accrued expenses | 440,763 | | | 576,297 | | ||
| Current portion of long-term debt | 804,677 | | | 187,336 | | ||
| Dividends payable | 40,937 | | | 38,764 | | ||
| Income taxes payable | 32,251 | | | 32,461 | | ||
| Total current liabilities | 1,801,849 | | | 1,408,996 | | ||
| Long-term debt | 2,767,381 | | | 2,862,921 | | ||
| Postretirement benefits | 48,075 | | | 50,899 | | ||
| Pension benefits | 340,818 | | | 292,073 | | ||
| Other noncurrent liabilities | 629,377 | | | 754,536 | | ||
| Deferred income taxes | 394,852 | | | 397,858 | | ||
| Commitments and contingencies | | | | ||||
| Equity: | | | | ||||
| Albemarle Corporation shareholders' equity: | | | | ||||
| Common stock | 1,069 | | | 1,061 | | ||
| Additional paid-in-capital | 1,438,038 | | | 1,383,446 | | ||
| Accumulated other comprehensive loss | (326,132) | | | (395,735) | | ||
| Retained earnings | 3,155,252 | | | 2,943,478 | | ||
| Total Albemarle Corporation shareholders' equity | 4,268,227 | | | 3,932,250 | | ||
| Noncontrolling interests | 200,367 | | | 161,330 | | ||
| Total equity | 4,468,594 | | | 4,093,580 | | ||
| Total liabilities and equity | $ | 10,450,946 | | | $ | 9,860,863 | |
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
| | Year Ended | ||||||
| | December 31, | ||||||
| | 2020 | | 2019 | ||||
| Cash and cash equivalents at beginning of year | $ | 613,110 | | | $ | 555,320 | |
| Cash flows from operating activities: | | | | ||||
| Net income | 446,615 | | | 604,357 | | ||
| Adjustments to reconcile net income to cash flows from operating activities: | | | | ||||
| Depreciation and amortization | 231,984 | | | 213,484 | | ||
| Gain on sale of joint venture | (7,168) | | | — | | ||
| Gain on sale of property | — | | | (14,411) | | ||
| Stock-based compensation and other | 22,837 | | | 19,680 | | ||
| Equity in net income of unconsolidated investments (net of tax) | (127,521) | | | (129,568) | | ||
| Dividends received from unconsolidated investments and nonmarketable | 88,161 | | | 71,746 | | ||
| Pension and postretirement expense | 45,658 | | | 31,515 | | ||
| Pension and postretirement contributions | (16,434) | | | (16,478) | | ||
| Unrealized gain on investments in marketable securities | (4,635) | | | (2,809) | | ||
| Loss on early extinguishment of debt | — | | | 4,829 | | ||
| Deferred income taxes | (1,976) | | | 14,394 | | ||
| Changes in current assets and liabilities, net of effects of acquisitions and | | | | ||||
| Decrease (increase) in accounts receivable | 100,118 | | | (18,220) | | ||
| Decrease (increase) in inventories | 51,978 | | | (46,304) | | ||
| Decrease (increase) in other current assets | 7,902 | | | (32,941) | | ||
| (Decrease) in accounts payable | (31,519) | | | (12,234) | | ||
| (Decrease) in accrued expenses and income taxes payable | (215,011) | | | (4,640) | | ||
| Other, net | 207,925 | | | 36,974 | | ||
| Net cash provided by operating activities | 798,914 | | | 719,374 | | ||
| Cash flows from investing activities: | | | | ||||
| Acquisitions, net of cash acquired | (22,572) | | | (820,000) | | ||
| Capital expenditures | (850,477) | | | (851,796) | | ||
| Proceeds from sale of joint venture | 11,000 | | | — | | ||
| Proceeds from sale of property and equipment | — | | | 10,356 | | ||
| Sales of marketable securities, net | 903 | | | 384 | | ||
| Investments in equity and other corporate investments | (2,427) | | | (2,569) | | ||
| Net cash used in investing activities | (863,573) | | | (1,663,625) | | ||
| Cash flows from financing activities: | | | | ||||
| Proceeds from borrowings of other long-term debt | 452,163 | | | 1,597,807 | | ||
| Repayments of long-term debt | (250,000) | | | (175,215) | | ||
| Other borrowings (repayments), net | 137,635 | | | (126,364) | | ||
| Fees related to early extinguishment of debt | — | | | (4,419) | | ||
| Dividends paid to shareholders | (161,818) | | | (152,204) | | ||
| Dividends paid to noncontrolling interests | (32,061) | | | (83,187) | | ||
| Proceeds from exercise of stock options | 40,437 | | | 4,814 | | ||
| Withholding taxes paid on stock-based compensation award distributions | (5,143) | | | (11,031) | | ||
| Debt financing costs | (3,952) | | | (7,514) | | ||
| Net cash provided by (used in) financing activities | 177,261 | | | 1,042,687 | | ||
| Net effect of foreign exchange on cash and cash equivalents | 21,012 | | | (40,646) | | ||
| Increase in cash and cash equivalents | 133,614 | | | 57,790 | | ||
| Cash and cash equivalents at end of period | $ | 746,724 | | | $ | 613,110 | |
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
| | Three Months Ended | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| Net sales: | | | | | | | | ||||||||
| Lithium | $ | 358,592 | | | $ | 411,140 | | | $ | 1,144,778 | | | $ | 1,358,170 | |
| Bromine Specialties | 263,398 | | | 243,464 | | | 964,962 | | | 1,004,216 | | ||||
| Catalysts | 195,735 | | | 282,522 | | | 797,914 | | | 1,061,817 | | ||||
| All Other | 61,422 | | | 55,438 | | | 221,255 | | | 165,224 | | ||||
| Total net sales | $ | 879,147 | | | $ | 992,564 | | | $ | 3,128,909 | | | $ | 3,589,427 | |
| | | | | | | | | ||||||||
| Adjusted EBITDA: | | | | | | | | ||||||||
| Lithium | $ | 122,131 | | | $ | 140,080 | | | $ | 393,093 | | | $ | 524,934 | |
| Bromine Specialties | 87,854 | | | 79,714 | | | 323,605 | | | 328,457 | | ||||
| Catalysts | 22,053 | | | 76,734 | | | 130,134 | | | 270,624 | | ||||
| All Other | 18,414 | | | 20,697 | | | 84,821 | | | 49,628 | | ||||
| Corporate | (29,327) | | | (22,562) | | | (112,915) | | | (136,862) | | ||||
| Total adjusted EBITDA | $ | 221,125 | | | $ | 294,663 | | | $ | 818,738 | | | $ | 1,036,781 | |
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 | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| In thousands, except percentages and per share amounts | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| Net income attributable to Albemarle Corporation | $ | 84,635 | | | $ | 90,391 | | | $ | 375,764 | | | $ | 533,228 | |
| Add back: | | | | | | | | ||||||||
| Non-operating pension and OPEB items (net of tax) | 37,572 | | | 20,453 | | | 30,668 | | | 18,648 | | ||||
| Non-recurring and other unusual items (net of tax) | 3,409 | | | 73,430 | | | 33,087 | | | 90,669 | | ||||
| Adjusted net income attributable to Albemarle Corporation | $ | 125,616 | | | $ | 184,274 | | | $ | 439,519 | | | $ | 642,545 | |
| | | | | | | | | ||||||||
| Adjusted diluted earnings per share | $ | 1.17 | | | $ | 1.73 | | | $ | 4.12 | | | $ | 6.04 | |
| | | | | | | | | ||||||||
| Weighted-average common shares outstanding – diluted | 107,312 | | | 106,314 | | | 106,808 | | | 106,321 | | ||||
| | | | | | | | | ||||||||
| Net income attributable to Albemarle Corporation | $ | 84,635 | | | $ | 90,391 | | | $ | 375,764 | | | $ | 533,228 | |
| Add back: | | | | | | | | ||||||||
| Interest and financing expenses | 19,152 | | | 22,400 | | | 73,116 | | | 57,695 | | ||||
| Income tax (benefit) expense | (10,101) | | | (5,105) | | | 54,425 | | | 88,161 | | ||||
| Depreciation and amortization | 61,770 | | | 56,766 | | | 231,984 | | | 213,484 | | ||||
| EBITDA | 155,456 | | | 164,452 | | | 735,289 | | | 892,568 | | ||||
| Non-operating pension and OPEB items | 49,372 | | | 28,780 | | | 40,668 | | | 26,970 | | ||||
| Non-recurring and other unusual items (excluding items | 16,297 | | | 101,431 | | | 42,781 | | | 117,243 | | ||||
| Adjusted EBITDA | $ | 221,125 | | | $ | 294,663 | | | $ | 818,738 | | | $ | 1,036,781 | |
| | | | | | | | | ||||||||
| Net sales | $ | 879,147 | | | $ | 992,564 | | | $ | 3,128,909 | | | $ | 3,589,427 | |
| EBITDA margin | 17.7 | % | | 16.6 | % | | 23.5 | % | | 24.9 | % | ||||
| Adjusted EBITDA margin | 25.2 | % | | 29.7 | % | | 26.2 | % | | 28.9 | % | ||||
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).
| | Lithium | | Bromine | | Catalysts | | Reportable | | All | | Corporate | | Consolidated | | % of | |||||||||||||||
| Three months ended December 31, 2020: | | | | | | | | | | | | | | | | |||||||||||||||
| Net income (loss) attributable to | $ | 89,331 | | | $ | 75,590 | | | $ | 9,379 | | | $ | 174,300 | | | $ | 16,254 | | | $ | (105,919) | | | $ | 84,635 | | | 9.6 | % |
| Depreciation and amortization | 30,272 | | | 13,464 | | | 12,674 | | | 56,410 | | | 2,160 | | | 3,200 | | | 61,770 | | | 7.0 | % | |||||||
| Non-recurring and other unusual | 2,528 | | | (1,200) | | | — | | | 1,328 | | | — | | | 14,969 | | | 16,297 | | | 1.9 | % | |||||||
| Interest and financing expenses | — | | | — | | | — | | | — | | | — | | | 19,152 | | | 19,152 | | | 2.2 | % | |||||||
| Income tax benefit | — | | | — | | | — | | | — | | | — | | | (10,101) | | | (10,101) | | | (1.1) | % | |||||||
| Non-operating pension and | — | | | — | | | — | | | — | | | — | | | 49,372 | | | 49,372 | | | 5.6 | % | |||||||
| Adjusted EBITDA | $ | 122,131 | | | $ | 87,854 | | | $ | 22,053 | | | $ | 232,038 | | | $ | 18,414 | | | $ | (29,327) | | | $ | 221,125 | | | 25.2 | % |
| | | | | | | | | | | | | | | | | |||||||||||||||
| Three months ended December 31, 2019: | | | | | | | | | | | | | | | | |||||||||||||||
| Net income (loss) attributable to | $ | 29,158 | | | $ | 67,625 | | | $ | 63,358 | | | $ | 160,141 | | | $ | 18,559 | | | $ | (88,309) | | | $ | 90,391 | | | 9.1 | % |
| Depreciation and amortization | 27,755 | | | 12,330 | | | 12,582 | | | 52,667 | | | 2,138 | | | 1,961 | | | 56,766 | | | 5.7 | % | |||||||
| Non-recurring and other unusual | 83,167 | | | (241) | | | 794 | | | 83,720 | | | — | | | 17,711 | | | 101,431 | | | 10.2 | % | |||||||
| Interest and financing expenses | — | | | — | | | — | | | — | | | — | | | 22,400 | | | 22,400 | | | 2.3 | % | |||||||
| Income tax benefit | — | | | — | | | — | | | — | | | — | | | (5,105) | | | (5,105) | | | (0.5) | % | |||||||
| Non-operating pension and OPEB items | — | | | — | | | — | | | — | | | — | | | 28,780 | | | 28,780 | | | 2.9 | % | |||||||
| Adjusted EBITDA | $ | 140,080 | | | $ | 79,714 | | | $ | 76,734 | | | $ | 296,528 | | | $ | 20,697 | | | $ | (22,562) | | | $ | 294,663 | | | 29.7 | % |
| | | | | | | | | | | | | | | | | |||||||||||||||
| Year ended December 31, 2020: | | | | | | | | | | | | | | | | |||||||||||||||
| Net income (loss) attributable to Albemarle Corporation | $ | 277,711 | | | $ | 274,495 | | | $ | 80,149 | | | $ | 632,355 | | | $ | 76,323 | | | $ | (332,914) | | | $ | 375,764 | | | 12.0 | % |
| Depreciation and amortization | 112,854 | | | 50,310 | | | 49,985 | | | 213,149 | | | 8,498 | | | 10,337 | | | 231,984 | | | 7.4 | % | |||||||
| Non-recurring and other unusual items | 2,528 | | | (1,200) | | | — | | | 1,328 | | | — | | | 41,453 | | | 42,781 | | | 1.4 | % | |||||||
| Interest and financing expenses | — | | | — | | | — | | | — | | | — | | | 73,116 | | | 73,116 | | | 2.3 | % | |||||||
| Income tax expense | — | | | — | | | — | | | — | | | — | | | 54,425 | | | 54,425 | | | 1.7 | % | |||||||
| Non-operating pension and | — | | | — | | | — | | | — | | | — | | | 40,668 | | | 40,668 | | | 1.3 | % | |||||||
| Adjusted EBITDA | $ | 393,093 | | | $ | 323,605 | | | $ | 130,134 | | | $ | 846,832 | | | $ | 84,821 | | | $ | (112,915) | | | $ | 818,738 | | | 26.2 | % |
| | | | | | | | | | | | | | | | | |||||||||||||||
| Year ended December 31, 2019: | | | | | | | | | | | | | | | | |||||||||||||||
| Net income (loss) attributable to | $ | 341,767 | | | $ | 279,945 | | | $ | 219,686 | | | $ | 841,398 | | | $ | 41,188 | | | $ | (349,358) | | | $ | 533,228 | | | 14.9 | % |
| Depreciation and amortization | 99,424 | | | 47,611 | | | 50,144 | | | 197,179 | | | 8,440 | | | 7,865 | | | 213,484 | | | 5.9 | % | |||||||
| Non-recurring and other unusual | 83,743 | | | 901 | | | 794 | | | 85,438 | | | — | | | 31,805 | | | 117,243 | | | 3.3 | % | |||||||
| Interest and financing expenses | — | | | — | | | — | | | — | | | — | | | 57,695 | | | 57,695 | | | 1.6 | % | |||||||
| Income tax expense | — | | | — | | | — | | | — | | | — | | | 88,161 | | | 88,161 | | | 2.5 | % | |||||||
| Non-operating pension and OPEB items | — | | | — | | | — | | | — | | | — | | | 26,970 | | | 26,970 | | | 0.8 | % | |||||||
| Adjusted EBITDA | $ | 524,934 | | | $ | 328,457 | | | $ | 270,624 | | | $ | 1,124,015 | | | $ | 49,628 | | | $ | (136,862) | | | $ | 1,036,781 | | | 28.9 | % |
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 | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| MTM actuarial loss | $ | 52,269 | | | $ | 29,339 | | | $ | 52,269 | | | $ | 29,339 | |
| Interest cost | 7,178 | | | 8,893 | | | 28,630 | | | 35,394 | | ||||
| Expected return on assets | (10,075) | | | (9,452) | | | (40,231) | | | (37,763) | | ||||
| Total | $ | 49,372 | | | $ | 28,780 | | | $ | 40,668 | | | $ | 26,970 | |
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 | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| Restructuring and other (1) | $ | 0.08 | | | $ | — | | | $ | 0.15 | | | $ | 0.05 | |
| Acquisition and integration related costs (2) | 0.02 | | | 0.05 | | | 0.13 | | | 0.15 | | ||||
| Gain on sale of property (3) | — | | | (0.02) | | | — | | | (0.10) | | ||||
| Stamp duty (4) | — | | | 0.61 | | | — | | | 0.61 | | ||||
| Windfield tax settlement (5) | — | | | 0.16 | | | — | | | 0.16 | | ||||
| Loss on extinguishment of debt (6) | — | | | 0.04 | | | — | | | 0.04 | | ||||
| Other (7) | 0.06 | | | 0.13 | | | 0.07 | | | 0.20 | | ||||
| Discrete tax items (8) | (0.13) | | | (0.28) | | | (0.04) | | | (0.26) | | ||||
| Total non-recurring and other unusual items | $ | 0.03 | | | $ | 0.69 | | | $ | 0.31 | | | $ | 0.85 | |
| (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., Belgium, Germany and with our Jordanian joint venture partner. The balance of unpaid severance is recorded in Accrued expenses and is primarily expected to be paid through 2021. During the year ended December 31, 2019, severance expenses were recorded as part of a business reorganization plan primarily in Catalysts, Lithium and Corporate. Restructuring and other expenses are included in the consolidated statements of income as follows (in millions, except per share amounts): |
| | Three Months Ended | | Year Ended | ||||||||||||
| | December 31, | | December 31, | ||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||||||
| Restructuring and other: | | | | | | | | ||||||||
| Cost of goods sold | $ | — | | | $ | — | | | $ | 0.7 | | | $ | — | |
| Selling, general and administrative expenses | 8.6 | | | 0.6 | | | 19.2 | | | 5.9 | | ||||
| Net income attributable to noncontrolling interests | — | | | — | | | (0.3) | | | — | | ||||
| Total | $ | 8.6 | | | $ | 0.6 | | | $ | 19.6 | | | $ | 5.9 | |
| Total restructuring and other, after income taxes | $ | 8.4 | | | $ | 0.4 | | | $ | 16.3 | | | $ | 5.4 | |
| Total restructuring and other, per diluted share | $ | 0.08 | | | $ | — | | | $ | 0.15 | | | $ | 0.05 | |
| (2) | Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in Selling, general and administrative expenses for the three months and year ended December 31, 2020 of $2.9 million and $17.3 million ($2.3 million and $13.4 million after income taxes, or $0.02 and $0.13 per share), respectively, and for the three months and year ended December 31, 2019 of $6.3 million and $20.7 million ($5.1 million and $16.1 million after income taxes, or $0.05 and $0.15 per share), respectively. |
| | |
| (3) | Included in Selling, general and administrative expenses for the three months and year ended December 31, 2019 is a gain of $3.3 million ($2.4 million after income taxes, or $0.02 per share) related to the release of liabilities as part of the sale of a property. In addition, included in Other expenses, net, for the year ended December 31, 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) | Included in Selling, general and administrative expenses for the three months and year ended December 31, 2019 is $64.8 million (or $0.61 per share as there was no income tax impact) resulting from stamp duties levied on assets purchased related to the Wodgina Project, with the unpaid balance recorded in Accrued expenses as of December 31, 2019. |
| | |
| (5) | Included in Equity in net income of unconsolidated investments (net of tax) for the three months and year ended December 31, 2019 is $17.3 million (or $0.16 per share) representing our 49% share of a tax settlement between our Windfield joint venture and an Australian taxing authority. This adjustment is offset by a discrete tax benefit from a competent tax authority agreement. See below for a discussion of discrete tax items. |
| | |
| (6) | Included in Interest and financing expenses for the three months and year ended December 31, 2019 is a loss on early extinguishment of debt of $4.8 million ($3.7 million after income taxes, or $0.04 per share) related to tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of the 4.50% senior notes due in 2020. |
| | |
| (7) | Other adjustments for the three months ended December 31, 2020 included amounts recorded in: |
| |
After income taxes, these charges totaled $6.4 million, or $0.06 per share. |
| | |
| | |
| | |
| | |
| | Other adjustments for the year ended December 31, 2020 included amounts recorded in: |
| |
|
| | |
| | |
| | After income taxes, these charges totaled $7.5 million, or $0.07 per share. |
| | |
| | Other adjustments for the three months ended December 31, 2019 included amounts recorded in: |
| |
|
| | |
| | |
| | After income taxes, these charges totaled $14.3 million, or $0.13 per share. |
| | |
| | Other adjustments for the year ended December 31, 2019 included amounts recorded in: |
| |
|
| | |
| | |
| | After income taxes, these charges totaled $21.7 million, or $0.20 per share. |
| | |
| (8) | Included in Income tax (benefit) expense for the three months and year ended December 31, 2020 are discrete net tax benefits of $13.9 million, or $0.13 per share, and $4.3 million, or $0.04 per share, respectively. The net benefit for the three months is primarily related to benefits for uncertain tax positions for statute of limitation expirations, excess tax benefits realized from stock-based compensation arrangements, and return to accrual adjustments. The net benefit for the full year 2020 is primarily related to changes to uncertain tax positions, excess tax benefits realized from stock-based compensation arrangements, and return to accrual adjustments. |
| | |
| | Included in Income tax (benefit) expense for the three months and year ended December 31, 2019 are discrete net tax benefits of $29.8 million, or $0.28 per share, and $27.4 million, or $0.26 per share, respectively. This net benefit is primarily related to benefits for uncertain tax positions primarily related to seeking treaty relief from the competent authority to prevent double taxation, and state rate changes. |
| | |
|
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). | |
| | Income before | | Income tax (benefit) | | Effective income tax | |||||
| Three months ended December 31, 2020: | | | | | | |||||
| As reported | $ | 48,427 | | | $ | (10,101) | | | (20.9) | % |
| Non-recurring, other unusual and non-operating pension and OPEB | 65,669 | | | 24,688 | | | | |||
| As adjusted | $ | 114,096 | | | $ | 14,587 | | | 12.8 | % |
| | | | | | | |||||
| Three months ended December 31, 2019: | | | | | | |||||
| As reported | $ | 78,297 | | | $ | (5,105) | | | (6.5) | % |
| Non-recurring, other unusual and non-operating pension and OPEB | 117,748 | | | 41,157 | | | | |||
| As adjusted | $ | 196,045 | | | $ | 36,052 | | | 18.4 | % |
| | | | | | | |||||
| Year ended December 31, 2020: | | | | | | |||||
| As reported | $ | 373,519 | | | $ | 54,425 | | | 14.6 | % |
| Non-recurring, other unusual and non-operating pension and OPEB | 83,770 | | | 19,694 | | | | |||
| As adjusted | $ | 457,289 | | | $ | 74,119 | | | 16.2 | % |
| | | | | | | |||||
| Year ended December 31, 2019: | | | | | | |||||
| As reported | $ | 562,950 | | | $ | 88,161 | | | 15.7 | % |
| Non-recurring, other unusual and non-operating pension and OPEB | 131,750 | | | 39,725 | | | | |||
| As adjusted | $ | 694,700 | | | $ | 127,886 | | | 18.4 | % |
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SOURCE Albemarle Corporation
