Albemarle finishes strong - guiding to continued growth in 2018

CHARLOTTE, N.C., Feb. 27, 2018 /PRNewswire/ --

Fourth quarter 2017 highlights:

• Fourth quarter net sales were $857.8 million, an increase of 23% over the prior year
• Fourth quarter loss of $218.4 million, or $1.95 per diluted share, included $366.9 million of income tax expense related to the new U.S. tax reform laws
• Fourth quarter adjusted EBITDA was $245.8 million, an increase of 31% over the prior year; adjusted diluted earnings per share from continuing operations of $1.34, an increase of 72% over the prior year
• Signed definitive agreement to sell the polyolefin catalysts and components portion of its PCS business
• Expect adjusted diluted earnings per share in 2018 between $5.00 and $5.40, an increase of 9% to 18% over 2017

Albemarle Corporation (NYSE: ALB) reported fourth quarter 2017 net sales of $857.8 million, a net loss of $218.4 million and adjusted EBITDA of $245.8 million.

"Albemarle grew 2017 adjusted EBITDA by 17% and the Lithium business exceeded expectations delivering 56% adjusted EBITDA growth over 2016. Both Bromine Specialties and Refining Solutions generated strong cash flow throughout the year," said Luke Kissam, Albemarle's Chairman, President and CEO. "We made progress on our lithium capital projects consistent with our plans and continued to demonstrate our focus on portfolio management with the announced divestiture of our polyolefin catalysts and components business. After surpassing our financial goals for 2017, we are excited to continue growing in 2018. Our goals for 2018 are clear: deliver the cash flow needed to fund growth and execute on our capital plan to meet the increasing needs of our customers."

Outlook

Our 2017 performance and strategic actions have positioned Albemarle for another strong year of growth in 2018. We expect net sales to range between $3.2 billion and $3.4 billion, with adjusted EBITDA between $955 million and $1,005 million, and adjusted diluted earnings per share between $5.00 and $5.40.

Results

Net (loss) income from continuing operations for the fourth quarter 2017 was $(207.1) million, or $(1.95) per diluted share (after income attributable to noncontrolling interests), compared to $50.3 million, or $0.37 per diluted share in the fourth quarter 2016. Loss per share and adjusted earnings per share were both negatively impacted by hurricane Harvey by $0.02 per diluted share. Excluding the impact of hurricane Harvey, the decrease in 2017 was primarily related to $3.27 per diluted share of a net negative impact from the U.S. tax reform enacted in December 2017, partially offset by earnings growth in each of our reportable segments and an increase in mark-to-market actuarial gains of $0.23 per diluted share. Fourth quarter 2017 adjusted EBITDA increased by $58.4 million, or 31.2%, compared to the prior year. Fourth quarter 2017 adjusted net income from continuing operations was $149.8 million, or $1.34 per diluted share, compared to $88.8 million, or $0.78 per diluted share, for fourth quarter 2016, an increase of 71.8%. See notes to the condensed consolidated financial information for further details. The Company reported net sales of $857.8 million in fourth quarter 2017, up 23.1% from net sales of $696.7 million in the fourth quarter of 2016, driven by the favorable impact of higher sales volumes and pricing impacts across each of our reportable segments and favorable currency exchange impacts.

Net income from continuing operations for the full year 2017 was $99.5 million, or $0.49 per diluted share (after income attributable to noncontrolling interests), compared to $478.6 million, or $3.90 per diluted share for the full year 2016. Earnings per share and adjusted earnings per share were both negatively impacted by hurricane Harvey by $0.09 per diluted share. Excluding the impact of hurricane Harvey, the decrease in 2017 was primarily driven by $3.26 per diluted share of a net negative impact from the U.S. tax reform laws enacted in December 2017, gains related to the sales of the metal sulfides and minerals-based flame retardants and specialty chemicals businesses of $1.02 per diluted share in 2016, as well as a loss on early extinguishment of debt of $0.30 per diluted share in 2017. This was partially offset by earnings growth in our Lithium and Advanced Materials and Bromine Specialties segments. For the full year 2017, adjusted EBITDA was $885.5 million, up 16.8% compared to $758.2 million for the full year 2016. For the full year 2017, adjusted net income from continuing operations was $515.9 million, or $4.59 per diluted share, compared to $403.8 million, or $3.57 per diluted share, for the full year 2016, an increase of 28.6%. See notes to the condensed consolidated financial information for further details. The Company reported net sales for the full year 2017 of $3.07 billion, up 14.7% from net sales of $2.68 billion, driven by the favorable impact of higher sales volumes in each of our three reportable segments and pricing impacts mainly in our Lithium segment, partially offset by the impact of the divestiture of the minerals-based flame retardants and specialty chemicals business and unfavorable currency exchange impacts.

On December 14, 2017, we signed a definitive agreement to sell the polyolefin catalysts and components portion of the PCS business to W.R. Grace & Co. for proceeds of approximately $416 million in cash. 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 sale is expected to close in the first quarter of 2018, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities.

Quarterly Segment Results

During the first quarter of 2018, the PCS product category will merge with the Refining Solutions reportable segment to form a global business focused on catalysts and be reported in a separate reportable segment. The results below are reported to reflect how our segments were managed during 2017.

Lithium and Advanced Materials reported net sales of $362.4 million in the fourth quarter of 2017, an increase of 30.2% from fourth quarter 2016 net sales of $278.3 million. The $84.1 million increase in net sales as compared to prior year was primarily due to favorable pricing impacts, increased sales volumes and $3.1 million of favorable currency exchange impacts. Adjusted EBITDA for Lithium and Advanced Materials was $135.7 million, an increase of 32.4% from fourth quarter 2016 results of $102.5 million. The $33.2 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts, increased sales volumes and $2.9 million of favorable currency exchange impacts, partially offset by Lithium growth spending.

Bromine Specialties reported net sales of $219.1 million in the fourth quarter of 2017, an increase of 12.6% from fourth quarter 2016 net sales of $194.5 million. The $24.6 million increase in net sales as compared to the prior year was primarily due to increased sales volumes and favorable pricing impacts. Adjusted EBITDA for Bromine Specialties was $64.4 million, an increase of 37.2% from fourth quarter 2016 results of $46.9 million. The $17.5 million increase in adjusted EBITDA as compared to the prior year was primarily due to higher volume and favorable pricing impacts, partially offset by higher selling, general and administrative costs.

Refining Solutions reported net sales of $238.4 million in the fourth quarter of 2017, an increase of 23.5% from net sales of $193.1 million in the fourth quarter of 2016. The $45.3 million increase in net sales as compared to the prior year was primarily due to higher sales volumes, favorable pricing impacts and $4.3 million of favorable currency exchange impacts. Adjusted EBITDA for Refining Solutions was $69.2 million in the fourth quarter of 2017, an increase of 20.7% from fourth quarter 2016 results of $57.3 million. The $11.9 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased volume and pricing, partially offset by $5.5 million negative impact from hurricane Harvey.

All Other net sales were $37.8 million in the fourth quarter of 2017, an increase of 25.9% from net sales of $30.0 million in the fourth quarter of 2016. The $7.8 million increase in net sales as compared to the prior year was primarily due to higher sales volumes in our fine chemistry services business. All Other adjusted EBITDA was $6.0 million in the fourth quarter of 2017, an increase from fourth quarter 2016 results of a loss of less than $0.1 million. The $6.0 million increase in adjusted EBITDA as compared to the prior year was primarily due to the volume increase in our fine chemistry services business and the impact of the minerals divestiture of $0.6 million.

Corporate Results

Corporate adjusted EBITDA was a charge of $29.6 million in the fourth quarter of 2017 compared to a charge of $19.4 million in the fourth quarter of 2016. The increased charge for 2017 was primarily due to $9.0 million of unfavorable currency exchange impacts.

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%. As a result, in the fourth quarter of 2017, we made a reasonable estimate of these impacts, and have recorded a provisional income tax expense of $429.2 million and an income tax benefit of $62.3 million for the transition tax and reduced U.S. federal corporate tax rate on our existing deferred tax balances, respectively, as a component of Income tax expense.

Our effective income tax rates for the fourth quarter of 2017 and 2016 of 266.5% and 49.5%, respectively, are influenced by the TCJA as noted above, as well as, non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 16.8% and 28.3% for the fourth quarter of 2017 and 2016, respectively, and continue to be influenced by the level and geographic mix of income. The increase in the effective income tax rate in the fourth quarter of 2017 compared to 2016 was impacted by a variety of factors, primarily the impact of the TCJA as noted above. Our effective income tax rates for the year ended December 31, 2017 and 2016 were 96.6% and 18.7%, respectively, with the increase driven by the impact of the TCJA. Our adjusted effective income tax rates for the year ended December 31, 2017 and 2016 were 18.8% and 20.8%, respectively.

Cash Flow

Our cash from operations was approximately $304.0 million for the year ended December 31, 2017, down $431.5 million versus the same period in 2016 primarily due to changes in working capital, including the payment of approximately $257 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017 and the build-up of inventory in our Lithium business. We had $1.14 billion in cash and cash equivalents at December 31, 2017, as compared to $2.27 billion at December 31, 2016. During the year ended December 31, 2017, cash on hand, cash provided by operations and net borrowings funded $778.2 million of debt repayments, primarily related to the senior notes, $317.7 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $140.6 million and a $250.0 million accelerated share repurchase program. As a result of the program, we received and retired approximately 2.3 million shares of our common stock in the second quarter of 2017.

Earnings Call

The Company's performance for the fourth quarter ended December 31, 2017 will be discussed on a conference call at 9:00 AM Eastern time on February 28, 2018. The call can be accessed by dialing 888-268-4181 (International Dial-In # 617-597-5486), and entering conference ID 95469520. 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 and earnings, 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.

Additional Information

It should be noted that adjusted net income from continuing operations, adjusted diluted earnings per share attributable to Albemarle Corporation, adjusted diluted earnings per share from continuing operations, 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 in the Investors section of our website at www.albemarle.com, under "Non-GAAP Reconciliations" under "Financials." Also, see the following pages for supplemental reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP. 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
(In Thousands)
(Unaudited)

See below for a reconciliation of adjusted net income from continuing operations, 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 discontinued operations, 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.

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 reportable segments and are included in the Corporate category. Although non-operating pension and OPEB items are included in Cost of goods sold and Selling, general and administrative expenses in accordance with GAAP, we believe that these components of pension cost are mainly driven by market performance, and we manage these separately from the operational performance of our businesses. Non-operating pension and OPEB items included in Cost of goods sold and Selling, general and administrative expenses were as follows (in millions):

In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items from continuing operations 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):