Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Operating Segments

Segment Information:

As a result of the Rockwood acquisition, we have realigned our organizational structure under three reportable segments. Our new reportable business segments consist of the following: Performance Chemicals, Refining Solutions and Chemetall Surface Treatment. The Performance Chemicals segment includes the Lithium, PCS and Bromine product categories. The Refining Solutions segment consists of the Company’s Heavy Oil Upgrading and Clean Fuels Technologies product categories. The Chemetall Surface Treatment segment consists of the Surface Treatment product category.

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. The new business structure aligns with the markets and customers we serve through each of the segments. The new 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 2014 have been recast to reflect the change in segments noted above and a change in our measure of segment profit or loss to adjusted EBITDA as discussed below. Segment results for all periods presented exclude discontinued operations as further described in Note 17.

During the first quarter we announced our intention to pursue strategic alternatives for three operating segments - Minerals, Fine Chemistry Services and Metal Sulfides, which together comprise the “All Other” category. All three operating segments have been and are expected to continue to be profitable, but do not fit into any of our core businesses subsequent to the acquisition of Rockwood. We expect to use the cash generated from the sale of these businesses to reduce the debt incurred for the acquisition of Rockwood. We have considered the accounting guidance in Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment, and determined that the relevant asset groups did not meet the criteria to be accounted for as assets held for sale as of the balance sheet date.

The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the reportable 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.

Beginning in 2015, the Company uses earnings before interest, taxes, depreciation and amortization, as adjusted for certain non-recurring or unusual items such as restructuring charges, facility divestiture charges and other significant non-recurring items (“adjusted EBITDA”), on a segment basis to assess the ongoing performance of the Company’s business segments. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, GAAP. 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 should not be considered as an alternative to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP.

	Three Months Ended   March 31,
	2015		2014
	(In thousands)
Net sales:
Performance Chemicals	$	388,366	$	275,897
Refining Solutions	179,166		194,661
Chemetall Surface Treatment	192,091		—
All Other	122,369		129,285
Corporate	2,412		—
Total net sales	$	884,404	$	599,843
Adjusted EBITDA:
Performance Chemicals	$	130,528	$	73,385
Refining Solutions	42,193		61,034
Chemetall Surface Treatment	46,004		—
All Other	13,564		20,695
Corporate	33,339		(19,084		)
Total Adjusted EBITDA	$	265,628	$	136,030

See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP, (in thousands):

	Performance Chemicals			Refining Solutions			Chemetall Surface Treatment			Reportable Segments Total			All Other			Corporate			Consolidated Total
Three months ended March 31, 2015
Adjusted EBITDA	$	130,528		$	42,193		$	46,004		$	218,725		$	13,564		$	33,339		$	265,628
Depreciation and amortization	(30,283		)	(8,110		)	(18,196		)	(56,589		)	(5,498		)	(1,899		)	(63,986		)
Utilization of inventory markup(a)	(28,582		)	—			(16,953		)	(45,535		)	(2,651		)	—			(48,186		)
Acquisition and integration related costs(b)	—			—			—			—			—			(59,523		)	(59,523		)
Interest and financing expenses	—			—			—			—			—			(35,746		)	(35,746		)
Income tax expense	—			—			—			—			—			(14,140		)	(14,140		)
Non-operating pension and OPEB items	—			—			—			—			—			3,509			3,509
Other(c)	—			—			—			—			—			(4,441		)	(4,441		)
Net income (loss) attributable to Albemarle Corporation	$	71,663		$	34,083		$	10,855		$	116,601		$	5,415		$	(78,901	)	$	43,115
Three months ended March 31, 2014
Adjusted EBITDA	$	73,385		$	61,034		$	—		$	134,419		$	20,695		$	(19,084	)	$	136,030
Depreciation and amortization(d)	(12,056		)	(8,680		)	—			(20,736		)	(3,364		)	(544		)	(24,644		)
Restructuring and other charges, net(e)	—			—			—			—			—			(17,000		)	(17,000		)
Interest and financing expenses	—			—			—			—			—			(8,773		)	(8,773		)
Income tax expense	—			—			—			—			—			(13,190		)	(13,190		)
Loss from discontinued operations (net of tax)	—			—			—			—			—			(1,769		)	(1,769		)
Non-operating pension and OPEB items	—			—			—			—			—			(14,071		)	(14,071		)
Net income (loss) attributable to Albemarle Corporation	$	61,329		$	52,354		$	—		$	113,683		$	17,331		$	(74,431	)	$	56,583

(a) In connection with the acquisition of Rockwood, the Company valued Rockwood’s existing inventory at fair value as of the Acquisition Closing Date, which resulted in a markup of the underlying net book value of the inventory totaling approximately $103 million. The inventory markup is being expensed over the estimated remaining selling period. For the three-month period ended March 31, 2015, $40.3 million was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $7.9 million, related to the utilization of the inventory markup.

(b) See Note 2, “Acquisitions.”

(c) Financing-related fees expensed in the 2015 period in connection with the acquisition of Rockwood.

(d) Excludes discontinued operations.

(e) See Note 15, “Restructuring and Other.”