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Albemarle reports second quarter growth and raises full year EPS guidance

CHARLOTTE, N.C., Aug. 7, 2019 /PRNewswire/ --

Albemarle Corp. Logo. (PRNewsFoto/Albemarle Corporation)

Second quarter 2019 highlights:

  • Net sales were $885.1 million, an increase of 4% over the prior year; earnings were $1.45 per diluted share
  • Adjusted diluted EPS was $1.55, an increase of 14% over the prior year
  • Adjusted EBITDA increased 6%, excluding currency exchange impacts
  • Revised agreement with Mineral Resources Limited to acquire a 60% interest in the Wodgina hard rock lithium mine project
  • Raised full year outlook of adjusted diluted earnings per share to between $6.25 and $6.65

Albemarle Corporation (ALB) reported second quarter 2019 results.


Three Months Ended June 30,

In thousands, except per share amounts

2019


2018


$ Change


% Change

Net sales

$

885,052



$

853,874



$

31,178



3.7

%

  • Favorable pricing in all reportable segments and increased volume in Lithium and Bromine Specialties
  • Lower volume in Catalysts
  • Growth of 6% excluding unfavorable currency exchange impacts

Net income attributable to Albemarle Corporation

$

154,198



$

302,461



$

(148,263)



(49.0)

%

  • 2018 included $176.7 million after tax gain on sale of the polyolefin catalysts and components portion
    of the Performance Catalyst Solutions ("PCS") business
  • Increased depreciation and amortization expense due to increased capital projects put into service
  • Lower interest and financing expenses from higher capitalized interest due to increased capital
    expenditures
  • Lower taxes resulting from the geographic mix of earnings

Adjusted EBITDA(a)

$

261,900



$

258,562



$

3,338



1.3

%

  • Increased earnings in Bromine Specialties and All Other
  • Decreased earnings in Catalysts from lower volume, as well as an increase in Corporate costs for
    professional services

Diluted earnings per share

$

1.45



$

2.73



$

(1.28)



(46.9)

%

   Non-operating pension and OPEB items(a)

(0.01)



(0.02)






   Non-recurring and other unusual items(a)

0.10



(1.36)






Adjusted diluted earnings per share(b)

$

1.55



$

1.36



$

0.19



14.0

%


(a)    See Non-GAAP Reconciliations for further details.

(b)    Totals may not add due to rounding.

 

"In the second quarter, Albemarle delivered adjusted diluted EPS of $1.55, an increase of 14% compared to the second quarter of 2018. All of our businesses met or exceeded our expectations this quarter with volume and pricing providing year-over-year growth in Lithium and Bromine," said Luke Kissam, Albemarle's CEO. "The recently announced amendments to our transaction with Mineral Resources Limited and our decision to delay indefinitely certain lithium expansion projects will allow us to reduce capital expenditures significantly while still meeting the commitments we have made to our customers."

Outlook

With first half 2019 performance as expected, we reconfirm our net sales and adjusted EBITDA guidance, while increasing our adjusted EPS guidance to the following:


2019 Outlook


vs Full Year 2018

Net sales

$3.65 - $3.85 billion


8% - 14%

Adjusted EBITDA

$1,070 - $1,140 million


6% - 13%

Adjusted EPS (per diluted share)

$6.25 - $6.65


13% - 21%


Quarterly Segment Results

Lithium

In millions

Q2 2019


Q2 2018


$ Change


% Change

Net Sales

$

324.8


$

317.6


$

7.2


2.3

%

  • Favorable price impacts and increased sales volume
  • $7.3 million of unfavorable currency exchange

Adjusted EBITDA

$

141.8


$

141.6


$

0.2


0.1

%

  • Favorable price impacts and increased sales volume
  • Higher tolled product costs and investment to support future operational savings

Bromine Specialties

In millions

Q2 2019


Q2 2018


$ Change


% Change

Net Sales

$

255.4


$

220.5


$

34.9


15.8

%

  • Increased sales volume and favorable price impacts
  • $3.4 million of unfavorable currency exchange

Adjusted EBITDA

$

81.3


$

69.4


$

12.0


17.2

%

  • Increased sales volume and favorable price impacts
  • $2.1 million of unfavorable currency impacts

Catalysts

In millions

Q2 2019


Q2 2018


$ Change


% Change

Net Sales

$

266.3


$

285.0


$

(18.7)


(6.5)

%

  • Lower sales volume and $5.4 million of unfavorable
    currency exchange impacts
  • Favorable pricing impacts

Adjusted EBITDA

$

66.9


$

75.1


$

(8.2)


(11.0)

%

  • Lower sales volume, higher material costs and $2.3 million of unfavorable
    currency exchange impacts
  • Favorable pricing impacts

All Other

In millions

Q2 2019


Q2 2018


$ Change


% Change

Net Sales

$

38.6


$

30.7


$

7.8


25.4

%

•   Increased sales volume and favorable pricing in our fine chemistry services business

Adjusted EBITDA

$

11.2


$

(0.1)


$

11.3


11,228.7

%

•   Increased sales volume and favorable pricing in our fine chemistry services business


Corporate Results

In millions

Q2 2019


Q2 2018


$ Change


% Change

Adjusted EBITDA

$

(39.3)


$

(27.4)


$

(11.9)


43.4

%

•   $8.1 million of unfavorable currency exchange impacts and higher selling, general and administrative
spending for professional services













Income Taxes

Our effective income tax rates for the second quarter of 2019 and 2018 of 18.2% and 21.5%, respectively, are influenced by non-recurring, other unusual and non-operating pension and OPEB items (see Non-GAAP Reconciliations). The decrease in the effective tax rate in the second quarter of 2019 compared to 2018 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 18.4% and 24.4% for the second quarter of 2019 and 2018, respectively, and continue to be influenced by the level and geographic mix of income.

Cash Flow

Our cash from operations was approximately $199.3 million for the six months ended June 30, 2019, a decrease of $24.6 million versus the same period in 2018, primarily due to increased inventory purchases to meet higher forecasted sales, the timing on collection of certain receivables, lower cash earnings in our Catalysts reportable segment and higher cash taxes paid. These were partially offset by higher dividends received from unconsolidated investments and increased cash earnings from Bromine Specialties. Capital expenditures were $415.6 million as compared to $280.9 million in the first six months of 2018, with the increase driven largely by expansion in our Lithium business.

We had $398.2 million in cash and cash equivalents at June 30, 2019, as compared to $555.3 million at December 31, 2018. During the first six months of 2019, cash on hand, cash provided by operations and commercial paper note borrowings funded dividends to shareholders of $74.3 million, in addition to capital expenditures.

Earnings Call

The Company's performance for the second quarter ended June 30, 2019 will be discussed on a conference call at 9:00 AM Eastern time on August 8, 2019. The call can be accessed by dialing 844-347-1034 (International Dial-In # 209-905-5910), and entering conference ID 4270876. 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 (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 5,600 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


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net sales

$

885,052



$

853,874



$

1,717,116



$

1,675,503


Cost of goods sold

559,138



542,518



1,107,716



1,059,168


Gross profit

325,914



311,356



609,400



616,335


Selling, general and administrative expenses

126,715



123,637



240,070



225,007


Research and development expenses

13,462



16,074



28,439



37,060


Gain on sale of business



(218,705)





(218,705)


Operating profit

185,737



390,350



340,891



572,973


Interest and financing expenses

(11,601)



(13,308)



(24,187)



(26,846)


Other (expenses) income, net

(7,065)



(5,223)



4,226



(35,699)


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

167,071



371,819



320,930



510,428


Income tax expense

30,411



80,102



67,925



100,463


Income before equity in net income of unconsolidated
investments

136,660



291,717



253,005



409,965


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

38,310



18,969



73,491



39,646


Net income

174,970



310,686



326,496



449,611


Net income attributable to noncontrolling interests

(20,772)



(8,225)



(38,729)



(15,390)


Net income attributable to Albemarle Corporation

$

154,198



$

302,461



$

287,767



$

434,221


Basic earnings per share

$

1.46



$

2.76



$

2.72



$

3.94


Diluted earnings per share

$

1.45



$

2.73



$

2.71



$

3.90










Weighted-average common shares outstanding – basic

105,961



109,671



105,880



110,176


Weighted-average common shares outstanding – diluted

106,316



110,659



106,336



111,263


 

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


June 30,


December 31,


2019


2018

ASSETS




Current assets:




Cash and cash equivalents

$

398,183



$

555,320


Trade accounts receivable

624,808



605,712


Other accounts receivable

105,207



52,059


Inventories

814,022



700,540


Other current assets

94,417



84,790


Total current assets

2,036,637



1,998,421


Property, plant and equipment

5,248,994



4,799,063


Less accumulated depreciation and amortization

1,858,369



1,777,979


Net property, plant and equipment

3,390,625



3,021,084


Investments

541,014



528,722


Other assets

186,592



80,135


Goodwill

1,566,464



1,567,169


Other intangibles, net of amortization

373,082



386,143


Total assets

$

8,094,414



$

7,581,674


LIABILITIES AND EQUITY




Current liabilities:




Accounts payable

$

558,839



$

522,516


Accrued expenses

268,666



257,323


Current portion of long-term debt

490,691



307,294


Dividends payable

38,733



35,169


Current operating lease liability

19,441




Income taxes payable

23,611



60,871


Total current liabilities

1,399,981



1,183,173


Long-term debt

1,398,419



1,397,916


Postretirement benefits

46,025



46,157


Pension benefits

279,342



285,396


Other noncurrent liabilities

609,209



526,942


Deferred income taxes

387,035



382,982


Commitments and contingencies




Equity:




Albemarle Corporation shareholders' equity:




Common stock

1,059



1,056


Additional paid-in capital

1,373,213



1,368,897


Accumulated other comprehensive loss

(349,411)



(350,682)


Retained earnings

2,775,940



2,566,050


Total Albemarle Corporation shareholders' equity

3,800,801



3,585,321


Noncontrolling interests

173,602



173,787


Total equity

3,974,403



3,759,108


Total liabilities and equity

$

8,094,414



$

7,581,674


 

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


Six Months Ended
 June 30,


2019


2018

Cash and cash equivalents at beginning of year

$

555,320



$

1,137,303


Cash flows from operating activities:




Net income

326,496



449,611


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




Depreciation and amortization

102,231



100,804


Gain on sale of business



(218,705)


Gain on sale of property

(11,079)




Stock-based compensation and other

10,136



8,076


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

(73,491)



(39,646)


Dividends received from unconsolidated investments and nonmarketable
securities

60,291



30,045


Pension and postretirement expense (benefit)

1,055



(1,793)


Pension and postretirement contributions

(7,778)



(7,089)


Unrealized gain on investments in marketable securities

(577)



(625)


Deferred income taxes

3,570



30,708


Working capital changes

(223,238)



(91,189)


Other, net

11,672



(36,340)


Net cash provided by operating activities

199,288



223,857


Cash flows from investing activities:




Acquisitions, net of cash acquired



(7,643)


Capital expenditures

(415,626)



(280,945)


Cash proceeds from divestitures, net



416,711


Proceeds from sale of property and equipment

10,356




Sales of marketable securities, net

908



(439)


Investments in equity and other corporate investments

(2,549)



(1,979)


Net cash (used in) provided by investing activities

(406,911)



125,705


Cash flows from financing activities:




Other borrowings (repayments), net

183,052



(211,833)


Dividends paid to shareholders

(74,313)



(72,484)


Dividends paid to noncontrolling interests

(38,962)



(7,378)


Repurchases of common stock



(250,000)


Proceeds from exercise of stock options

3,205



1,288


Withholding taxes paid on stock-based compensation award distributions

(10,570)



(16,460)


Other

(445)




Net cash provided by (used in) financing activities

61,967



(556,867)


Net effect of foreign exchange on cash and cash equivalents

(11,481)



(21,854)


Decrease in cash and cash equivalents

(157,137)



(229,159)


Cash and cash equivalents at end of period

$

398,183



$

908,144


 

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


Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net sales:








Lithium

$

324,758



$

317,563



$

616,644



$

615,595


Bromine Specialties

255,433



220,514



504,485



446,153


Catalysts

266,301



284,966



517,949



545,683


All Other

38,560



30,748



78,038



67,913


Corporate



83





159


Total net sales

$

885,052



$

853,874



$

1,717,116



$

1,675,503










Adjusted EBITDA:








Lithium

$

141,779



$

141,617



$

257,395



$

272,631


Bromine Specialties

81,332



69,367



159,929



139,336


Catalysts

66,875



75,102



126,946



142,932


All Other

11,240



(101)



18,483



3,761


Corporate

(39,326)



(27,423)



(74,986)



(51,380)


Total adjusted EBITDA

$

261,900



$

258,562



$

487,767



$

507,280


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 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.


Three Months Ended


Six Months Ended


June 30,


June 30,

In thousands, except percentages and per share amounts

2019


2018


2019


2018

Net income attributable to Albemarle Corporation

$

154,198



$

302,461



$

287,767



$

434,221


Add back:








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

(693)



(1,873)



(1,262)



(3,739)


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

10,754



(150,618)



8,742



(135,299)


Adjusted net income attributable to Albemarle Corporation

$

164,259



$

149,970



$

295,247



$

295,183










Adjusted diluted earnings per share

$

1.55



$

1.36



$

2.78



$

2.65










Weighted-average common shares outstanding – diluted

106,316



110,659



106,336



111,263










Net income attributable to Albemarle Corporation

$

154,198



$

302,461



$

287,767



$

434,221


Add back:








Interest and financing expenses

11,601



13,308



24,187



26,846


Income tax expense

30,411



80,102



67,925



100,463


Depreciation and amortization

52,948



50,474



102,231



100,804


EBITDA

249,158



446,345



482,110



662,334


Non-operating pension and OPEB items

(676)



(2,204)



(1,259)



(4,401)


Non-recurring and other unusual items

13,418



(185,579)



6,916



(150,653)


Adjusted EBITDA

$

261,900



$

258,562



$

487,767



$

507,280










Net sales

$

885,052



$

853,874



$

1,717,116



$

1,675,503


EBITDA margin

28.2

%


52.3

%


28.1

%


39.5

%

Adjusted EBITDA margin

29.6

%


30.3

%


28.4

%


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 June 30, 2019:
















Net income (loss) attributable to Albemarle
Corporation

$

117,303



$

69,616



$

54,124



$

241,043



$

9,118



$

(95,963)



$

154,198



17.4

%

Depreciation and amortization

24,365



11,716



12,751



48,832



2,122



1,994



52,948



6.0

%

Non-recurring and other unusual items

111







111





13,307



13,418



1.5

%

Interest and financing expenses











11,601



11,601



1.3

%

Income tax expense











30,411



30,411



3.5

%

Non-operating pension and OPEB items











(676)



(676)



(0.1)

%

Adjusted EBITDA

$

141,779



$

81,332



$

66,875



$

289,986



$

11,240



$

(39,326)



$

261,900



29.6

%

















Three months ended June 30, 2018:
















Net income (loss) attributable to Albemarle
Corporation

$

117,292



$

59,673



$

280,887



$

457,852



$

(2,079)



$

(153,312)



$

302,461



35.4

%

Depreciation and amortization

24,325



9,694



12,920



46,939



1,978



1,557



50,474



5.9

%

Non-recurring and other unusual items





(218,705)



(218,705)





33,126



(185,579)



(21.7)

%

Interest and financing expenses











13,308



13,308



1.6

%

Income tax expense











80,102



80,102



9.4

%

Non-operating pension and OPEB items











(2,204)



(2,204)



(0.3)

%

Adjusted EBITDA

$

141,617



$

69,367



$

75,102



$

286,086



$

(101)



$

(27,423)



$

258,562



30.3

%

















Six months ended June 30, 2019:
















Net income (loss) attributable to Albemarle
Corporation

$

210,472



$

137,096



$

101,983



$

449,551



$

14,324



$

(176,108)



$

287,767



16.8

%

Depreciation and amortization

46,457



22,833



24,963



94,253



4,159



3,819



102,231



5.9

%

Non-recurring and other unusual items

466







466





6,450



6,916



0.4

%

Interest and financing expenses











24,187



24,187



1.4

%

Income tax expense











67,925



67,925



4.0

%

Non-operating pension and OPEB items











(1,259)



(1,259)



(0.1)

%

Adjusted EBITDA

$

257,395



$

159,929



$

126,946



$

544,270



$

18,483



$

(74,986)



$

487,767



28.4

%

















Six months ended June 30, 2018:
















Net income (loss) attributable to Albemarle
Corporation

$

225,626



$

119,209



$

336,547



$

681,382



$

(319)



$

(246,842)



$

434,221



25.9

%

Depreciation and amortization

48,390



20,127



25,090



93,607



4,080



3,117



100,804



6.0

%

Non-recurring and other unusual items

(1,385)





(218,705)



(220,090)





69,437



(150,653)



(9.0)

%

Interest and financing expenses











26,846



26,846



1.6

%

Income tax expense











100,463



100,463



6.0

%

Non-operating pension and OPEB items











(4,401)



(4,401)



(0.2)

%

Adjusted EBITDA

$

272,631



$

139,336



$

142,932



$

554,899



$

3,761



$

(51,380)



$

507,280



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


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Interest cost

$

8,769



$

8,558



$

17,638



$

17,127


Expected return on assets

(9,445)



(10,762)



(18,897)



(21,528)


Total

$

(676)



$

(2,204)



$

(1,259)



$

(4,401)


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


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Acquisition and integration related costs(1)

0.04



0.05



$

0.07



$

0.06


Albemarle Foundation contribution(2)



0.11





0.11


Gain on sale of business(3)



(1.60)





(1.59)


Gain on sale of property(4)





(0.08)




Legal accrual(5)



0.07





0.19


Environmental accrual(6)







0.11


Other(7)

0.07



0.01



0.07



0.01


Discrete tax items(8)

(0.01)





0.02



(0.11)


Total non-recurring and other unusual items

$

0.10



$

(1.36)



$

0.08



$

(1.22)


(1) Acquisition and integration related costs for the three and six months ended June 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


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Acquisition and integration related costs:








Cost of goods sold

$



$

1.0



$



$

1.9


Selling, general and administrative expenses

5.0



5.5



10.3



6.8


Total

$

5.0



$

6.5



$

10.3



$

8.7


Total acquisition and integration related costs, after income taxes

$

3.8



$

5.2



$

7.9



$

7.1


Total acquisition and integration related costs, per diluted share

$

0.04



$

0.05



$

0.07



$

0.06


(2) Included in Selling, general and administrative expenses for the three and six months ended June 30, 2018 is a $15.0 million ($11.5 million after income taxes, or $0.11 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.

(3) Included in Gain on sale of business, for the three and six months ended June 30, 2018 is $218.7 million ($176.7 million after discrete incomes taxes, or $1.60 per share and $1.59 per share for the three and six months ended June 30, 2018, respectively, due to differences in the weighted average share count between periods) related to the sale of the Polyolefin Catalysts Divestiture.

(4) Included in Other (expenses) income, net, for the six months ended June 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.

(5) Included in Other (expenses) income, net, for the three and six months ended June 30, 2018 is a $10.4 million ($8.0 million after income taxes, or $0.07 per share) expense resulting from a settlement of a legal matter related to guarantees from a previously disposed business. Also included in Other (expenses) income, net, for the six months ended June 30, 2018 is a $17.6 million ($13.6 million after income taxes, or $0.12 per share) expense 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.

(6) 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.

(7) Other adjustments for the three months ended June 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 - Expected severance payments to be made in 2019 as part of a business reorganization plan of $4.8 million, with the unpaid balance recorded in Accrued expenses, and $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan.
  • Other (expenses) income, net - $2.5 million of a net loss primarily resulting from the revision of indemnifications related to previously disposed businesses.

After income taxes, these charges totaled $7.7 million, or 0.07 per share.

Other adjustments for the six months ended June 30, 2019 included amounts recorded in:

  • Cost of goods sold - $0.5 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, and $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan.
  • Other (expenses) income, net - $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 $6.9 million, or $0.07 per share.

Other adjustments for the three months ended June 30, 2018 included charges of $1.2 million ($1.0 million after income taxes, or $0.01 per share) related to the revision of previously recorded expenses of disposed businesses recorded in Other (expenses) income, net.

Other adjustments for the six months ended June 30, 2018 included amounts recorded in:

  • Cost of goods sold - $1.1 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
  • Selling, general and administrative expenses - $1.4 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year.
  • Other (expenses) income, net - $1.0 million related to the revision of previously recorded expenses of disposed businesses.

After income taxes, these charges totaled $0.9 million, or $0.01 per share.

(8) Included in Income tax expense for the three and six months ended June 30, 2019 are discrete net tax benefits of $0.8 million, or $0.01 per share, and expenses of $2.4 million, or $0.02 per share, respectively. The net benefit for the three months is primarily related to foreign return to accrual adjustments. The net expense for the six months 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 six months ended June 30, 2018 are discrete net tax expenses (benefits), excluding the discrete tax expense on the gain of sale of business noted above, of $0.3 million, or less than $0.01 per share, and ($11.8) million, or ($0.11) per share, respectively. The net expense for the three months is primarily related to $8.5 million for a valuation allowance recorded due to a foreign restructuring plan, partially offset by an $8.0 million benefit for tax accounting method changes. The net benefit for the six months is primarily related to an $8.0 million benefit for tax accounting method changes, a $6.5 million benefit for adjustments related to the accounting for the TCJA and $7.2 million excess tax benefits realized from stock-based compensation arrangements, partially offset by $8.5 million for a valuation allowance recorded due to a foreign restructuring plan.

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 June 30, 2019:






As reported

$

167,071



$

30,411



18.2

%

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

12,742



2,681




As adjusted

$

179,813



$

33,092



18.4

%







Three months ended June 30, 2018:






As reported

$

371,819



$

80,102



21.5

%

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

(187,783)



(35,292)




As adjusted

$

184,036



$

44,810



24.4

%







Six months ended June 30, 2019:






As reported

$

320,930



$

67,925



21.2

%

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

5,657



(1,823)




As adjusted

$

326,587



$

66,102



20.2

%







Six months ended June 30, 2018:






As reported

$

510,428



$

100,463



19.7

%

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

(155,054)



(16,016)




As adjusted

$

355,374



$

84,447



23.8

%

 

 

 

Cision

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