2008-07-21 06:00:00
Albemarle Reports Second Quarter 2008 Results
BATON ROUGE, La., July 21 /EMWNews/ -- Second quarter highlights: -- Net sales of $620.8 million, up 10.1% year over year -- Net income of $61.7 million, or $0.67 per share, up 14.5% over the same period last year -- Record quarterly Polymer Additives net sales of $260.5 million, up 16.3% year over year and 6.5% sequentially -- Over 500 basis point year over year improvement in quarterly Catalyst segment income margin Second Quarter Ended Six Months Ended June 30, June 30, In thousands, except per share amounts 2008 2007 2008 2007 Net Sales $620,750 $563,812 $1,288,927 $1,153,050 Operating Profit $77,790 $74,259 $161,604 $155,851 Net Income $61,655 $53,863 $124,916 $111,971 Diluted earnings per share $0.67 $0.55 $1.34 $1.15 Diluted earnings per share - special item $- $(0.03) $(0.02) $(0.03) Diluted earnings per share excluding special item $0.67 $0.59 $1.37 $1.18 Albemarle Corporation (NYSE: ALB) reported second quarter 2008 net income of $61.7 million, or 67 cents per share, up from $53.9 million, or 55 cents per share, for the second quarter of 2007. Excluding the $3.2 million after tax charge, or 3 cents per share, related to the closure of our Dayton fine chemistry facility, second quarter 2007 net income was $57.0 million, or 59 cents per share. Operating profit was $77.8 million as strong performance in the Company's Catalysts and Fine Chemicals business segments was partially offset by declines in the Polymer Additives business segment. The Company reported net sales in the second quarter of 2008 totaling $621 million compared to second quarter 2007 net sales of $564 million. Net income for the first half of 2008 was $124.9 million, or $1.34 per share, up from $112.0 million, or $1.15 per share, for the first half of 2007. Excluding the first quarter 2008 charge related to severance in conjunction with personnel reductions at the Company's Richmond headquarters and Singapore sales office, net income for the first half of 2008 was $127.0 million, or $1.37 per share. Net income, excluding the Dayton charge, for the first half of 2007 was $115.1 million, or $1.18 per share. Net sales for the first half of 2008 were $1.29 billion compared to $1.15 billion for the first half of 2007, an increase of 12 percent. Commenting on results, Mark C. Rohr, President and CEO, stated, "While we are facing very tough inflationary pressures of over $45 million this quarter our businesses have been able to respond and manage margins and profitability very well. Revenue, volume and profit grew year over year demonstrating the fundamental value of our products to customers seeking to manage this tough business environment. Our business fundamentals remain strong and I believe our company is well positioned to face the challenging economic conditions we face today." Quarterly Segment Results Polymer Additives delivered record net sales for second quarter 2008 of $260.5 million, a 16 percent increase versus the second quarter of 2007. Net sales increased in our flame retardants primarily due to higher volumes and favorable foreign currency exchange rates. Net sales increased in our stabilizers and curatives portfolio due primarily to higher volumes. Polymer Additives segment income for the second quarter of 2008 declined 25 percent from the second quarter of 2007 to $26.5 million due primarily to higher raw material costs, partially offset by improved brominated flame retardant product volumes, pricing and mix. Catalysts generated net sales for the second quarter of 2008 of $208.4 million, a nominal increase versus second quarter 2007. Catalysts segment income for the second quarter of 2008 increased 33 percent versus the second quarter of 2007 to $43.0 million due primarily to improved pricing in FCC refinery catalysts and increased earnings from our joint ventures. Fine Chemicals net sales for the second quarter of 2008 were $151.9 million, a 15 percent increase versus the second quarter of 2007 due primarily to higher volumes from our bromine portfolio and improved pricing across fine chemistry services. Segment income margins were 16 percent as compared to 20 percent in the second quarter of 2007. Due to high raw material and energy costs, segment income declined $1.8 million to $24.5 million in the second quarter of 2008 compared to the same period in 2007. Cash Flow In the first six months of 2008, our cash and cash flow from operations funded capital expenditures for plant machinery and equipment of $40 million, acquisitions of $20 million and dividends to shareholders of $20 million. We utilized availability under our credit agreement for repurchases of 4.1 million shares of our common stock for an aggregate cost of approximately $151 million. During the quarter, interest and financing expenses were $8.4 million versus second quarter 2007 expenses of $10.4 million. Taxes Our second quarter 2008 effective income tax rate was 18.1 percent, and the full year effective tax rate is expected to be approximately 20.0 percent, which is comparable to our full year effective tax rate in 2007. The tax rate continues to be influenced by the level and mix of income and has benefited from a more favorable mix of income due to higher than anticipated earnings in lower tax jurisdictions. Outlook We remain optimistic that each of our businesses will experience above trend top-line growth based on fundamental business prospects. Demand for our refinery catalysts should continue to increase due to regulations mandating cleaner fuels and the increasing percentage of sour crudes being processed by refiners although we expect season weakness in the third quarter. Our polymer additives business has benefited so far this year from an improved supply demand equation for electronics and we have posted record sales despite prolonged weakness in the automotive and construction markets. Fine Chemicals prospects will be driven by the strength and expansion of our bromine franchise, commercialization of products in our fine chemistry services pipeline and improving utilization of our flexible asset base to deliver solutions to our customers. In addition, we remain focused on expanding our presence in emerging markets as we seek to grow our businesses in the Middle East and Asia. Our Chinese manufacturing base has grown considerably with our Jinhai antioxidants acquisition and the completion of our Nanjing phosphorus flame retardant plant. In 2008, we expect our sales in China to be roughly three times the level in 2005 and are diligently working to expand our geographic footprint. Managing the runaway inflation in raw materials, energy and other costs of doing business is taking significant effort as we work with our customers to preserve the value for our products. For the year we now expect inflation to exceed $220 million year over year with the majority of this occurring in the second half. Margin compression due to the rampant input cost inflation has been the most challenging issue facing our businesses and remains our most important area of focus for the remainder of 2008. Earnings Call The Company's performance for the second quarter ended June 30, 2008 will be discussed on a conference call at 11:00 AM Eastern Daylight time on July 21, 2008, which can be accessed through Albemarle's website under Investor Information at http://www.albemarle.com. Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals for consumer electronics; petroleum and petrochemical processing; transportation and industrial products; pharmaceuticals; agricultural products; construction and packaging materials. The Company operates in three business segments, Polymer Additives, Catalysts and Fine Chemicals and serves customers in approximately 100 countries. Forward-Looking Statements Some of the information presented in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations as reflected are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially. Factors that could cause actual results to differ from expectations include, without limitation: the inability to pass through increases in costs and expenses for raw materials and energy; competition from other manufacturers; changes in demand for our products; the gain or loss of significant customers; fluctuations in foreign currencies; and increased government regulation of our operations or our products. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2007 and in our other public filings with the Securities and Exchange Commission. Readers are urged to review and consider carefully the disclosures we make in our filings with the Securities and Exchange Commission.
Albemarle Corporation and Subsidiaries Consolidated Statements of Income (In Thousands of Dollars, Except Share and Per Share Amounts) (Unaudited) Second Quarter Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Net sales $620,750 $563,812 $1,288,927 $1,153,050 Cost of goods sold 457,769 410,430 958,535 839,879 Gross profit 162,981 153,382 330,392 313,171 Selling, general and administrative expenses 67,598 59,255 131,117 121,741 Research and development expenses 17,593 14,924 34,393 30,635 Severance charges - - 3,278(a) - Dayton facility closure charge - 4,944(b) - 4,944(b) Operating profit 77,790 74,259 161,604 155,851 Interest and financing expenses (8,441) (10,417) (18,657) (19,327) Other income, net 1,938 1,631 4,784 2,583 Income before income tax expense, minority interests and equity in net income of unconsolidated investments 71,287 65,473 147,731 139,107 Income tax expense (12,902) (15,585) (29,528) (32,521) Income before minority interests and equity in net income of unconsolidated investments 58,385 49,888 118,203 106,586 Minority interests in income of consolidated subsidiaries (net of tax) (5,396) (2,746) (8,981) (7,697) Equity in net income of unconsolidated investments (net of tax) 8,666 6,721 15,694 13,082 Net income $61,655 $53,863 $124,916 $111,971 Basic earnings per share $0.68 $0.57 $1.36 $1.18 Diluted earnings per share $0.67 $0.55 $1.34 $1.15 Weighted-average common shares outstanding - Basic 91,182 95,272 91,766 95,280 Weighted-average common shares outstanding - Diluted 92,367 97,256 93,028 97,380 See accompanying notes to the condensed consolidated financial information. Albemarle Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In Thousands of Dollars) (Unaudited) June 30, December 31, 2008 2007 ASSETS Cash and cash equivalents $168,482 $130,551 Other current assets 1,035,662 922,887 Total current assets 1,204,144 1,053,438 Property, plant and equipment 2,394,230 2,314,509 Less accumulated depreciation and amortization 1,330,795 1,275,966 Net property, plant and equipment 1,063,435 1,038,543 Other assets and intangibles 801,585 738,469 Total assets $3,069,164 $2,830,450 LIABILITIES & SHAREHOLDERS' EQUITY Current portion of long-term debt $21,173 $16,627 Other current liabilities 408,819 386,290 Total current liabilities 429,992 402,917 Long-term debt 869,844 707,311 Other noncurrent liabilities 326,616 334,828 Deferred income taxes 134,031 107,089 Shareholders' equity 1,308,681 1,278,305 Total liabilities & shareholders' equity $3,069,164 $2,830,450 See accompanying notes to the condensed consolidated financial information. Albemarle Corporation and Subsidiaries Selected Cash Flows Data (In Thousands of Dollars) (Unaudited) Six Months Ended June 30, 2008 2007 Cash and cash equivalents at beginning of year $130,551 $149,499 Cash and cash equivalents at end of period $168,482 $200,406 Sources of cash and cash equivalents: Net income 124,916 111,971 Proceeds from borrowings 214,612 74,869 Proceeds from exercise of stock options 3,931 15,955 Uses of cash and cash equivalents: Capital expenditures (40,237) (49,981) Acquisitions (19,965)( c ) - Purchases of common stock (151,137) (47,695) Repayments of long-term debt (50,266) (15,234) Dividends paid to shareholders (20,476) (20,187) Dividends paid to minority interests (7,337) (7,548) Non-cash items: Depreciation and amortization 54,042 53,758 See accompanying notes to the condensed consolidated financial information. Albemarle Corporation and Subsidiaries Consolidated Summary of Segment Results (In Thousands of Dollars) (Unaudited) Second Quarter Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Net sales: Polymer Additives $260,508 $223,950 $505,098 $438,269 Catalysts 208,386 207,448 484,483 443,275 Fine Chemicals 151,856 132,414 299,346 271,506 Total net sales $620,750 $563,812 $1,288,927 $1,153,050 Segment operating profit: Polymer Additives $27,363 $35,311 $57,632 $71,771 Catalysts 35,520 27,435 81,676 62,016 Fine Chemicals 27,673 27,253 51,153 52,500 Subtotal $90,556 $89,999 $190,461 $186,287 Minority interests in income of consolidated subsidiaries: Polymer Additives $(2,116) $(1,807) $(4,105) $(4,059) Catalysts - - - - Fine Chemicals (3,223) (971) (5,158) (3,706) Corporate & other (57) 32 282 68 Total minority interests in income of consolidated subsidiaries $(5,396) $(2,746) $(8,981) $(7,697) Equity in net income of unconsolidated investments: Polymer Additives $1,205 $1,776 $2,677 $3,291 Catalysts 7,488 4,976 13,054 9,800 Fine Chemicals - - - - Corporate & other (27) (31) (37) (9) Total equity in net income of unconsolidated investments $8,666 $6,721 $15,694 $13,082 Segment income: Polymer Additives $26,452 $35,280 $56,204 $71,003 Catalysts 43,008 32,411 94,730 71,816 Fine Chemicals 24,450 26,282 45,995 48,794 Total segment income 93,910 93,973 196,929 191,613 Corporate & other (12,850) (10,795) (25,334) (25,433) Severance charges (a) - - (3,278) - Dayton facility closure charge (b) - (4,944) - (4,944) Interest and financing expenses (8,441) (10,417) (18,657) (19,327) Other income, net 1,938 1,631 4,784 2,583 Income tax expense (12,902) (15,585) (29,528) (32,521) Net income $61,655 $53,863 $124,916 $111,971 See accompanying notes to the condensed consolidated financial information. Notes to the Condensed Consolidated Financial Information (a) The six-month period ended June 30, 2008 includes charges amounting to $3.3 million ($2.1 million after income taxes, or 2 cents per share) that relate to severance in conjunction with personnel reductions at the Company's Richmond headquarters and Singapore sales office. (b) The three and six-month periods ended June 30, 2007 include a charge amounting to $4.9 million ($3.2 million after income taxes, or 3 cents per share) that relates to the closure of our Dayton, Ohio fine chemistry facility. ( c ) On June 30, 2008, we acquired the remaining 25 percent of our majority owned Polymer Additives business segment joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. Additional Information It should be noted that net income excluding special items is a financial measure that is not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. It is presented here to exclude the impact of certain non-recurring items on our results. We believe this measure is more reflective of our operations, provides transparency to investors and enables period-to-period comparability of financial performance. A description of other non-GAAP financial measures that we use to evaluate our operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, can be found in the Investor Information section of our website at http://www.albemarle.com, under "Non-GAAP Reconciliations" under "Investor Relations."
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