Albemarle Corporation

Fourth Quarter and Full Year

2013 Earnings
Conference Call/Webcast
Wednesday, January 29, 2014
9:00am ET
Forward-Looking Statements
Some of Lhe lnformaLlon presenLed ln Lhls presenLaLlon and dlscusslons LhaL follow, lncludlng, wlLhouL llmlLaLlon,
sLaLemenLs wlLh respecL Lo producL developmenL, changes ln producLlvlLy, markeL Lrends, prlce, volume and mlx
changes, expecLed growLh and earnlngs, lnpuL cosLs, surcharges, Lax raLes, sLock repurchases, dlvldends, economlc
Lrends, ouLlook and all oLher lnformaLlon relaLlng Lo maLLers LhaL are noL hlsLorlcal facLs may consLlLuLe forward-looklng
sLaLemenLs wlLhln Lhe meanlng of Lhe rlvaLe SecurlLles LlLlgaLlon 8eform AcL of 1993. 1here can be no assurance LhaL
acLual resulLs wlll noL dlffer maLerlally.
lacLors LhaL could cause acLual resulLs Lo dlffer maLerlally lnclude, wlLhouL llmlLaLlon: changes ln economlc and
buslness condlLlons, changes ln flnanclal and operaLlng performance of our ma[or cusLomers, lndusLrles and markeLs
served by us, Lhe Llmlng of orders recelved from cusLomers, Lhe galn or loss of slgnlflcanL cusLomers, compeLlLlon from
oLher manufacLurers, changes ln Lhe demand for our producLs, llmlLaLlons or prohlblLlons on Lhe manufacLure and sale
of our producLs, avallablllLy of raw maLerlals, changes ln Lhe cosL of raw maLerlals and energy, and our ablllLy Lo pass
Lhrough such lncreases, acqulslLlons and dlvesLlLures, and changes ln performance of acqulred companles, changes ln
our markeLs ln general, flucLuaLlons ln forelgn currencles, changes ln laws and governmenL regulaLlon lmpacLlng our
operaLlons or our producLs, Lhe occurrence of clalms or llLlgaLlon, Lhe occurrence of naLural dlsasLers, Lhe lnablllLy Lo
malnLaln currenL levels of producL or premlses llablllLy lnsurance or Lhe denlal of such coverage, pollLlcal unresL
affecLlng Lhe global economy, lncludlng adverse effecLs from Lerrorlsm or hosLlllLles, pollLlcal lnsLablllLy affecLlng our
manufacLurlng operaLlons or [olnL venLures, changes ln accounLlng sLandards, Lhe lnablllLy Lo achleve resulLs from our
global manufacLurlng cosL reducLlon lnlLlaLlves as well as our ongolng conLlnuous lmprovemenL and raLlonallzaLlon
programs, changes ln Lhe [urlsdlcLlonal mlx of our earnlngs and changes ln Lax laws and raLes, changes ln moneLary
pollcles, lnflaLlon or lnLeresL raLes LhaL may lmpacL our ablllLy Lo ralse caplLal or lncrease our cosL of funds, lmpacL Lhe
performance of our penslon fund lnvesLmenLs and lncrease our penslon expense and fundlng obllgaLlons, volaLlllLy and
subsLanLlal uncerLalnLles ln Lhe debL and equlLy markeLs, Lechnology or lnLellecLual properLy lnfrlngemenL, lncludlng
cyber securlLy breaches, and oLher lnnovaLlon rlsks, declslons we may make ln Lhe fuLure, and Lhe oLher facLors deLalled
from Llme Lo Llme ln Lhe reporLs we flle wlLh Lhe SLC, lncludlng Lhose descrlbed under 8lsk lacLors" ln our Annual
8eporL on lorm 10-k and CuarLerly 8eporLs on lorm 10-C.
2
4 2013
($ ln mllllons, excepL LS)
ear-Cver-ear Sequent|a|
neL Sales $ 692 1 7
SegmenL lncome
1
$ 136 (10) 0
neL lncome ex Sl
1,2
$ 88 (16) (1)
L8l1uA ex Sl
1, 3
$ 147 (8) (4)
L8l1uA Marglns ex Sl
1, 3
21 (207bps) (237bps)
ulluLed LS ex Sl
1,2
$ 1.08 (8) (1)
Fourth Quarter 2013 Financial Results
3
1
non-CAA measure. See non-CAA reconclllaLlons ln Appendlx.
2
8eflecLs neL lncome aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal charges such as resLrucLurlng and non-operaLlng penslon and CL8 cosLs
3
8eflecLs L8l1uA aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal charges such as resLrucLurlng and non-operaLlng penslon and CL8 cosLs
Full Year 2013 Financial Results
4
2013
($ ln mllllons, excepL LS)
ear-Cver-ear
neL Sales $ 2,616 (3)
SegmenL lncome
1
$ 333 (19)
neL lncome ex Sl
1,2
$ 342 (22)
L8l1uA ex Sl
1, 3
$ 376 (18)
L8l1uA Marglns ex Sl
1, 3
22 (360bps)
ulluLed LS ex Sl
1,2
$ 4.06 (16)
1
non-CAA measure. See non-CAA reconclllaLlons ln Appendlx.
2
8eflecLs neL lncome aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal charges such as resLrucLurlng and non-operaLlng penslon and CL8 cosLs
3
8eflecLs L8l1uA aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal charges such as resLrucLurlng and non-operaLlng penslon and CL8 cosLs
Financial Highlights
3
4 2013 net |ncome
1
of 588M, 51.08 per share
4 2013 L8I1DA
2
of 5147M, L8I1DA marg|n of
21
Iu|| year free cash f|ow
3
of 5291M, up 27 y]y
Successfu||y comp|eted 5S82M buyback program,
reduc|ng share count by ~10 y]y
Cata|ysts 4 net sa|es up on strong vo|umes,
segment |ncome h|gher on better m|x, part|a||y
offset by h|gher f|xed costs
o|ymer So|ut|ons 4 segment |ncome down on
|ower pr|c|ng, |ower ut|||zat|on rates and
unfavorab|e f|ame retardant m|x, offsett|ng
h|gher vo|ume
I|ne Chem|stry 4 net sa|es and segment |ncome
down on caut|ous customer |nventory
management, |ower ut|||zat|on rates and h|gher
f|xed costs
1
8eflecLs neL lncome aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal
and non-operaLlng penslon and CL8 lLems
2
8eflecLs L8l1uA aLLrlbuLable Lo Albemarle CorporaLlon, excludlng speclal and
non-operaLlng penslon and CL8 lLems
3
See reconclllaLlon on llnanclal erformance sllde 10
$2,200
$2,300
$2,400
$2,300
$2,600
$2,700
$2,800
$2,900
$3,000
411 112 212 312 412 113 213 313 413
11M Sa|es
$0
$30
$100
$130
$200
$230
$300
$330
$400
$430
$300
411 112 212 312 412 113 213 313 413
11M Net Income (ex. Spec|a| Items)
($ in millions)
6
Strong HOU 4Q on double-digit volume and profit growth
driven by new customers and strong resid orders
CFT achieved high 4Q volume and profit expectations due
to favorable mix and strong execution to deliver several
sizeable orders
Full year sales decline despite HOU and CFT volume
growth, due to lower metals pass through, which drove 7%
of the total 10% y/y price decline
PCS full year profitability depressed by higher fixed costs,
softer plastics demand and pricing pressure
Catalysts
erformance Dr|vers n|stor|ca| 1rend
4
th
tr erformance 4
th
tr ] Sa|es Compar|son
--
Currency
(3) r|ce
7
4
Sa|es Growth
(6)
(10)
4
--
Iu|| ear
4
th
tr
Vo|ume ] M|x
4Q
2013
vs. 4Q
2012
FY
2013
vs. FY
2012
Net Sales $306 4% $1,002 (6%)
Segment Income $80 2% $246 (16%)
Segment Margin 26% (63bps) 25% (284bps)
0
3
10
13
20
23
30
33
$0
$30
$100
$130
$200
$230
$300
$330
$400
411 112 212 312 412 113 213 313 413
11M Segment Income 11M Segment Marg|n
($ in millions)
Sluggish electronics (excluding connectors) and
construction trends continued in 4Q, impacting BFR
volumes and price
4Q MFR volume growth, due to improved European auto
wire and cable market, offset by pricing
Full year Flame Retardant volumes up, but segment
income down on pricing and higher costs
Stabilizers and Curatives sales and profit growth driven
by geographic expansion and lower raw material costs
erformance Dr|vers
Polymer Solutions
7
n|stor|ca| 1rend
4
th
tr erformance 4
th
tr ] Sa|es Compar|son
--
Currency
(S) r|ce
6
0
Sa|es Growth
(3)
(6)
7
--
Iu|| ear
4
th
tr
hosphorus 8us|ness (1) (4)
Vo|ume ] M|x
4Q
2013
vs. 4Q
2012
FY
2013
vs. FY
2012
Net Sales $201 0% $864 (3%)
Segment Income $27 (24%) $158 (22%)
Segment Margin 14% (447bps) 18% (445bps)
0
3
10
13
20
23
30
$0
$30
$100
$130
$200
$230
$300
411 112 212 312 412 113 213 313 413
11M Segment Income 11M Segment Marg|n
($ in millions)
4Q
2013
vs. 4Q
2012
FY
2013
vs. FY
2012
Net Sales $185 (4%) $750 (4%)
Segment Income $29 (20%) $132 (21%)
Segment Margin 15% (294bps) 18% (363bps)
Fine Chemistry
8
4
th
tr erformance 4
th
tr ] Sa|es Compar|son
erformance Dr|vers n|stor|ca| 1rend
--
Currency
1 r|ce
(S)
(4)
Sa|es Growth
(4)
(1)
(3)
--
Iu|| ear
4
th
tr
Vo|ume ] M|x
0
3
10
13
20
23
$0
$30
$100
$130
$200
411 112 212 312 412 113 213 313 413
11M Segment Income 11M Segment Marg|n
4Q sales and segment income softness driven by
inventory destocking and well completion delays at key
NA and ME clear completion fluid customers
4Q Fine Chemistry Services results continued to show
2H13 recovery, benefiting from pickup in ag and
electronics contracts
Full year results reflect lower prices and utilization rates
in bromine and HBr, increased fixed costs related to new
capacity and 1H13 Custom Services lull, offsetting
strong clear completion fluid results
($ in millions)
Sales Volume Variance By Major Product Groups
9
Vo|ume erformance
413 vs. 412 11M 413 vs. 11M 412
Peavy Cll upgradlng
++ ++
Clean luel 1echnology
- +
erformance CaLalysLs
SoluLlons
- -
8romlnaLed llame 8eLardanLs
~ +
Mlneral llame 8eLardanLs
++ +
8romlne uerlvaLlves (ex l8s)
1
- +
++ kepresents growth above 10, + represents growth between 3 and 10, ~ represents (2) to 2, - represents dec||ne
between (3) and (10), -- represents dec||ne of more than 10
1
lncludes elemenLal bromlne and all non-l8 bromlne derlvaLlves
Twelve Months Ended 12/31/13
2013 2012
Net Income
1
$413 $312
Restructuring and Pension Charges (60) 154
Depreciation & Amortization 107 99
Change in Working Capital (64) (98)
Other
2
37 22
Net Cash from Operations 433 489
Less: Capital Expenditures (155) (281)
Add Back: Pension Contributions 13 22
Free Cash Flow $291 $230
Iree Cash I|ow (ICI)
10
1
8eflecLs neL lncome aLLrlbuLable Lo Albemarle CorporaLlon
2
lncludes penslon conLrlbuLlons of $13 for 2013 and $22 for 2012
3
Lxcludes !v debL noL guaranLeed by Company
4
Lxcludlng speclal and non-operaLlng penslon and CL8 lLems
Financial Performance
D|v|dends a|d: 578
D|v|dend Growth (]): 13
Shares kepurchased: 5S82
Net Debt
3
: 5S88
Net Debt to L8I1DA
4
: 1.0x
keturned 5660M |n Cap|ta| to Shareho|ders and
Lstab||shed Net Debt-to-L8I1DA I|oor of 1.0x
53S6
5230
5291
$0
$30
$100
$130
$200
$230
$300
$330
$400
2011 2012 2013
ICI n|stor|ca| 1rend
Cther I|nanc|a| n|gh||ghts
as of 12]31]2013
($ in millions)
APPENDIX
Non-GAAP Reconciliations
11
12
Segment Operating Profit & Segment Income
*Lxcludes corporaLe nonconLrolllng lnLeresL ad[usLmenLs of $(20) for Lhe year ended uecember 31, 2012.
($ in thousands)
Three Months Ended Year Ended
December 31, December 31,
2013 2012 2013 2012
Total segment operating profit $ 135,071 $ 147,505 $ 530,125 $ 641,660
Corporate & other * 124,473
(98,740)
86,145
(123,811)
Restructuring and other charges, net
(33,361) (16,982) (33,361) (111,685)
GAAP Operating profit $ 226,183 $ 31,783 $ 582,909 $ 406,164
Total segment income $ 136,079 $ 150,600 $ 535,191 $ 661,156
Corporate & other 124,473
(98,740)
86,145
(123,831)
Restructuring and other charges, net
(33,361) (16,982) (33,361) (111,685)
Interest and financing expenses
(9,224) (7,666) (31,559) (32,800)
Other (expenses) income, net (628) (335) (6,923) 1,229
Income tax expense (benefit)
(61,406)
10,849
(136,322) (82,533)
GAAP Net income attributable to Albemarle Corporation $ 155,933 $ 37,726 $ 413,171 $ 311,536
13
Net Income and EBITDA
($ in thousands)
Three Months Ended Year Ended
December 31, December 31,
2013 2012 2013 2012
Net income attributable to Albemarle Corporation $ 155,933 $ 37,726 $ 413,171 $ 311,536
Add back:
Non-operating pension and OPEB items (net of tax) (89,464) 53,657 (92,829) 41,706
Special items (net of tax) 21,945 13,837 21,945 82,937
Net income attributable to Albemarle Corporation excluding special
and non-operating pension and OPEB items $ 88,414 $ 105,220 $ 342,287 $ 436,179
Net income attributable to Albemarle Corporation $ 155,933 $ 37,726 $ 413,171 $ 311,536
Add back:
Interest and financing expenses 9,224 7,666 31,559 32,800
Income tax expense (benefit) 61,406 (10,849) 136,322 82,533
Depreciation and amortization 27,893 24,592 107,370 99,020
EBITDA 254,456 59,135 688,422 525,889
Non-operating pension and OPEB items (140,818) 84,189 (146,193) 65,279
Special items 33,361 16,982 33,361 111,685
EBITDA excluding special and non-operating pension and
OPEB items $ 146,999 $ 160,306 $ 575,590 $ 702,853
Net sales $ 691,956 $ 687,596 $ 2,616,416 $ 2,745,420
EBITDA Margin
36.8% 8.6% 26.3% 19.2%
EBITDA Margin excluding special and non-operating pension and
OPEB items 21.2% 23.3% 22.0% 25.6%
14
Net Debt
($ in thousands) December 31,
2013 2012
Total-Long term debt $ 1,078,864 $ 699,288
JV debt not guaranteed by Company
(consolidated but guaranteed by others) (13,207) (16,232)
Less Cash and cash equivalents (477,239) (477,696)
Net Debt $ 588,418 $ 205,360
13
Diluted EPS
Three Months Ended
December 31,
2013 2012
Diluted earnings per share $ 1.91 $ 0.42
Non-operating pension and OPEB items (1.09) 0.60
Special items 0.27 0.15
Diluted earnings per share excluding special and non-
operating pension and OPEB items $ 1.08 $ 1.17
1
1oLals may noL add due Lo roundlng
1
www.a|bemar|e.com
16