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Segment Information | 9 Months Ended
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Sep. 30, 2018
Segment Reporting [Abstract] |
Reportable Segments | Segment Information: In the first quarter of 2018, the PCS product category merged with our former Refining Solutions reportable segment to form a global business focused on catalysts. As a result, our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. This business structure aligns with the markets and customers we serve through each of the segments. The structure also facilitates the continued standardization of business processes across the organization, and is consistent with the manner in which information is presently used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions. Summarized financial information concerning our reportable segments is shown in the following tables. Results for 2017 have been recast to reflect the change in segments noted above. The “All Other” category includes only the fine chemistry services business that does not fit into any of our core businesses. The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the operating segments. Pension and OPEB service cost (which represents the benefits earned by active employees during the period) and amortization of prior service cost or benefit are allocated to the reportable segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating pension and OPEB items”) are included in Corporate. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs. The Company’s chief operating decision maker uses adjusted EBITDA (as defined below) to assess the ongoing performance of the Company’s business segments and to allocate resources. The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted on a consistent basis for certain non-recurring or unusual items in a balanced manner and on a segment basis. These non-recurring or unusual items may include acquisition and integration related costs, utilization of inventory markup, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides transparency to investors and enables period-to-period comparability of financial performance. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, or any other financial measure reported in accordance with U.S. GAAP.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In thousands)
Net sales: |  |  |  |  |  |  |
Lithium | $ | 270,928 |  |  | $ | 269,238 |  |  | $ | 886,523 |  |  | $ | 729,288 |
Bromine Specialties | 232,616 |  |  | 212,923 |  |  | 678,769 |  |  | 636,059 |
Catalysts | 251,139 |  |  | 244,594 |  |  | 796,822 |  |  | 756,407 |
All Other | 23,065 |  |  | 28,021 |  |  | 90,978 |  |  | 91,144 |
Corporate | — |  |  | 90 |  |  | 159 |  |  | 1,289 |
Total net sales | $ | 777,748 |  |  | $ | 754,866 |  |  | $ | 2,453,251 |  |  | $ | 2,214,187 |
Adjusted EBITDA: |  |  |  |  |  |  |
Lithium | $ | 113,629 |  |  | $ | 112,944 |  |  | $ | 386,260 |  |  | $ | 327,996 |
Bromine Specialties | 78,585 |  |  | 63,936 |  |  | 217,921 |  |  | 194,499 |
Catalysts | 62,602 |  |  | 60,394 |  |  | 205,534 |  |  | 197,570 |
All Other | 3,968 |  |  | 306 |  |  | 7,729 |  |  | 7,906 |
Corporate | (23,702 | ) |  | (28,197 | ) |  | (75,082 | ) |  | (88,271 | )
Total adjusted EBITDA | $ | 235,082 |  |  | $ | 209,383 |  |  | $ | 742,362 |  |  | $ | 639,700 |
See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, from Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP (in thousands):
| Lithium |  | Bromine Specialties |  | Catalysts |  | Reportable Segments Total |  | All Other |  | Corporate |  | Consolidated Total
Three months ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Albemarle Corporation | $ | 90,313 |  |  | $ | 67,967 |  |  | $ | 50,491 |  |  | $ | 208,771 |  |  | $ | 1,978 |  |  | $ | (81,004 | ) |  | $ | 129,745 |
Depreciation and amortization | 23,370 |  |  | 10,618 |  |  | 12,111 |  |  | 46,099 |  |  | 1,990 |  |  | 1,618 |  |  | 49,707 |
Restructuring and other(a) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,724 |  |  | 3,724 |
Acquisition and integration related costs(b) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,305 |  |  | 4,305 |
Interest and financing expenses | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,988 |  |  | 12,988 |
Income tax expense | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33,167 |  |  | 33,167 |
Non-operating pension and OPEB items | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,195 | ) |  | (2,195 | )
Legal accrual(c) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,017 | ) |  | (1,017 | )
Other(d) | (54 | ) |  | — |  |  | — |  |  | (54 | ) |  | — |  |  | 4,712 |  |  | 4,658 |
Adjusted EBITDA | $ | 113,629 |  |  | $ | 78,585 |  |  | $ | 62,602 |  |  | $ | 254,816 |  |  | $ | 3,968 |  |  | $ | (23,702 | ) |  | $ | 235,082 |
Three months ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Albemarle Corporation | $ | 89,745 |  |  | $ | 53,760 |  |  | $ | 47,846 |  |  | $ | 191,351 |  |  | $ | (1,776 | ) |  | $ | (70,905 | ) |  | $ | 118,670 |
Depreciation and amortization | 22,316 |  |  | 10,176 |  |  | 13,798 |  |  | 46,290 |  |  | 2,082 |  |  | 1,523 |  |  | 49,895 |
Utilization of inventory markup(e) | 568 |  |  | — |  |  | — |  |  | 568 |  |  | — |  |  | — |  |  | 568 |
Adjustment to gain on acquisition(f) | 1,408 |  |  | — |  |  | — |  |  | 1,408 |  |  | — |  |  | — |  |  | 1,408 |
Acquisition and integration related costs(b) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,635 |  |  | 5,635 |
Interest and financing expenses | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15,792 |  |  | 15,792 |
Income tax expense | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18,495 |  |  | 18,495 |
Non-operating pension and OPEB items | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,028 | ) |  | (1,028 | )
Multiemployer plan shortfall contributions(g) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,646 |  |  | 1,646 |
Other(h) | (1,093 | ) |  | — |  |  | (1,250 | ) |  | (2,343 | ) |  | — |  |  | 645 |  |  | (1,698 | )
Adjusted EBITDA | $ | 112,944 |  |  | $ | 63,936 |  |  | $ | 60,394 |  |  | $ | 237,274 |  |  | $ | 306 |  |  | $ | (28,197 | ) |  | $ | 209,383 |
Nine months ended September 30, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Albemarle Corporation | $ | 315,939 |  |  | $ | 187,176 |  |  | $ | 387,038 |  |  | $ | 890,153 |  |  | $ | 1,659 |  |  | $ | (327,846 | ) |  | $ | 563,966 |
Depreciation and amortization | 71,760 |  |  | 30,745 |  |  | 37,201 |  |  | 139,706 |  |  | 6,070 |  |  | 4,735 |  |  | 150,511 |
Restructuring and other(a) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,724 |  |  | 3,724 |
Gain on sale of business(i) | — |  |  | — |  |  | (218,705 | ) |  | (218,705 | ) |  | — |  |  | — |  |  | (218,705 | )
Acquisition and integration related costs(b) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,016 |  |  | 13,016 |
Interest and financing expenses | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 39,834 |  |  | 39,834 |
Income tax expense | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 133,630 |  |  | 133,630 |
Non-operating pension and OPEB items | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,596 | ) |  | (6,596 | )
Legal accrual(c) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 27,027 |  |  | 27,027 |
Albemarle Foundation contribution(j) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15,000 |  |  | 15,000 |
Other(d) | (1,439 | ) |  | — |  |  | — |  |  | (1,439 | ) |  | — |  |  | 22,394 |  |  | 20,955 |
Adjusted EBITDA | $ | 386,260 |  |  | $ | 217,921 |  |  | $ | 205,534 |  |  | $ | 809,715 |  |  | $ | 7,729 |  |  | $ | (75,082 | ) |  | $ | 742,362 |
Nine months ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Albemarle Corporation | $ | 249,178 |  |  | $ | 164,193 |  |  | $ | 158,806 |  |  | $ | 572,177 |  |  | $ | 1,622 |  |  | $ | (300,583 | ) |  | $ | 273,216 |
Depreciation and amortization | 62,841 |  |  | 30,306 |  |  | 40,014 |  |  | 133,161 |  |  | 6,284 |  |  | 4,642 |  |  | 144,087 |
Utilization of inventory markup(e) | 23,095 |  |  | — |  |  | — |  |  | 23,095 |  |  | — |  |  | — |  |  | 23,095 |
Restructuring and other(k) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 17,141 |  |  | 17,141 |
Gain on acquisition(f) | (6,025 | ) |  | — |  |  | — |  |  | (6,025 | ) |  | — |  |  | — |  |  | (6,025 | )
Acquisition and integration related costs(b) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 26,395 |  |  | 26,395 |
Interest and financing expenses(l) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 98,895 |  |  | 98,895 |
Income tax expense | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 53,596 |  |  | 53,596 |
Non-operating pension and OPEB items | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,144 | ) |  | (3,144 | )
Multiemployer plan shortfall contributions(g) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,586 |  |  | 6,586 |
Other(h) | (1,093 | ) |  | — |  |  | (1,250 | ) |  | (2,343 | ) |  | — |  |  | 8,201 |  |  | 5,858 |
Adjusted EBITDA | $ | 327,996 |  |  | $ | 194,499 |  |  | $ | 197,570 |  |  | $ | 720,065 |  |  | $ | 7,906 |  |  | $ | (88,271 | ) |  | $ | 639,700 |
(a) | Expected severance payments as part of a business reorganization plan, recorded in Selling, general and administrative expenses. The unpaid balance is recorded in Accrued expenses at September 30, 2018, and is expected to be paid out by the end of 2018.
(b) | Included amounts for the three-month and nine-month periods ended September 30, 2018 recorded in (1) Cost of goods sold of $0.9 million and $2.9 million, respectively; and (2) Selling, general and administrative expenses of $3.4 million and $10.2 million, respectively, relating to various significant projects. Included amounts for the three-month and nine-month periods ended September 30, 2017 recorded in (1) Cost of goods sold of $1.8 million and $12.5 million, respectively; and (2) Selling, general and administrative expenses of $3.8 million and $13.9 million, respectively, relating to various significant projects, including the Jiangxi Jiangli New Materials Science and Technology Co. Ltd. (“Jiangli New Materials”) acquisition, which contains unusual compensation related costs negotiated specifically as a result of this acquisition that are outside of the Company’s normal compensation arrangements.
(c) | Included in Other income (expenses), net. See Note 9, “Commitments and Contingencies,” for additional information.
(d) | Included amounts for the three months ended September 30, 2018 recorded in:
▪ | Cost of goods sold - $3.8 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
▪ | Selling, general and administrative expenses - $0.1 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
▪ | Other income (expenses), net - $0.2 million gain related to the revision of previously recorded expenses of disposed businesses.
Included amounts for the nine months ended September 30, 2018 recorded in:
▪ | Cost of goods sold - $4.9 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture.
▪ | Selling, general and administrative expenses - $1.5 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year, partially offset by a $1.2 million contribution, using a portion of the proceeds received from Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community.
▪ | Other income (expenses), net - $15.6 million of environmental charges related to a site formerly owned by Albemarle and $0.8 million related to the revision of previously recorded expenses of disposed businesses.
(e) | In connection with the acquisition of Jiangli New Materials, the Company valued inventory purchased from Jiangli New Materials at fair value, which resulted in a markup of the underlying net book value of the inventory totaling approximately $23.1 million. The inventory markup was expensed over the estimated remaining selling period. For the three-month and nine-month periods ended September 30, 2017, $0.6 million and $23.1 million, respectively, was included in Cost of goods sold related to the utilization of the inventory markup.
(f) | Gain recorded in Other income (expenses), net related to the acquisition of the remaining 50% interest in the Sales de Magnesio Ltda. joint venture in Chile.
(g) | Included shortfall contributions for our multiemployer plan financial improvement plan. See Note 11, “Pension Plans and Other Postretirement Benefits,” for additional information.
(h) | Included amounts for the three-month period ended September 30, 2017 recorded in:
▪ | Cost of goods sold - $1.3 million reversal of deferred income related to an abandoned project at an unconsolidated investment.
▪ | Other income (expenses), net - $1.1 million related to a reversal of a liability associated with the previous disposal of a property, partially offset by the revision of tax indemnification expenses of $0.7 million primarily related to the filing of tax returns for a previously disposed business.
Included amounts for the nine-month period ended September 30, 2017 recorded in:
▪ | Cost of goods sold - $1.3 million reversal of deferred income related to an abandoned project at an unconsolidated investment.
▪ | Selling, general and administrative expenses - $1.0 million related to a reversal of an accrual recorded as part of purchase accounting from a previous acquisition.
▪ | Other income (expenses), net - $3.2 million of asset retirement obligation charges related to the revision of an estimate at a site formerly owned by Albemarle, losses of $4.1 million associated with the previous disposal of businesses and the revision of tax indemnification expenses of $1.9 million primarily related to the filing of tax returns and a competent authority agreement for a previously disposed business. This is partially offset by $1.1 million related to a reversal of a liability associated with the previous disposal of a property.
(i) | See Note 2, “Divestitures,” for additional information.
(j) | Included in Selling, general and administrative expenses is a 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 normal 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.
(k) | During 2017, we initiated action to reduce costs in each of our reportable segments at several locations, primarily at our Lithium sites in Germany. Based on the restructuring plans, we have recorded expenses of $2.9 million in Cost of goods sold, $8.4 million in Selling, general and administrative expenses and $5.8 million in Research and development expenses for the nine-month period ended September 30, 2017, primarily related to expected severance payments. The unpaid balance is recorded in Accrued expenses at September 30, 2018, with the expectation that the majority of these plans will be completed by the end of 2018.
(l) | During the first quarter of 2017, we repaid the 3.00% Senior notes in full, €307.0 million of the 1.875% Senior notes and $174.7 million of the 4.50% Senior notes, as well as related tender premiums of $45.2 million. As a result, included in Interest and financing expenses is a loss on early extinguishment of debt of $52.8 million, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of these senior notes.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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