Segment Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Reportable Segments

Segment Information:

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. This 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. 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, 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,
	2019			2018			2019			2018
	(In thousands)
Net sales:
Lithium	$	330,386		$	270,928		$	947,030		$	886,523
Bromine Specialties	256,267			232,616			760,752			678,769
Catalysts	261,346			251,139			779,295			796,822
All Other	31,748			23,065			109,786			90,978
Corporate	—			—			—			159
Total net sales	$	879,747		$	777,748		$	2,596,863		$	2,453,251
Adjusted EBITDA:
Lithium	$	127,459		$	113,629		$	384,854		$	386,260
Bromine Specialties	88,814			78,585			248,743			217,921
Catalysts	66,944			62,602			193,890			205,534
All Other	10,448			3,968			28,931			7,729
Corporate	(39,314		)	(23,702		)	(114,300		)	(75,082		)
Total adjusted EBITDA	$	254,351		$	235,082		$	742,118		$	742,362

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, 2019
Net income (loss) attributable to Albemarle Corporation	$	102,136		$	75,224	$	54,345		$	231,705		$	8,305	$	(84,940	)	$	155,070
Depreciation and amortization	25,212			12,448		12,599			50,259			2,143		2,085			54,487
Acquisition and integration related costs(a)	—			—		—			—			—		4,114			4,114
Interest and financing expenses	—			—		—			—			—		11,108			11,108
Income tax expense	—			—		—			—			—		25,341			25,341
Non-operating pension and OPEB items	—			—		—			—			—		(551		)	(551		)
Other(b)	111			1,142		—			1,253			—		3,529			4,782
Adjusted EBITDA	$	127,459		$	88,814	$	66,944		$	283,217		$	10,448	$	(39,314	)	$	254,351
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(c)	—			—		—			—			—		3,724			3,724
Acquisition and integration related costs(a)	—			—		—			—			—		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(d)	—			—		—			—			—		(1,017		)	(1,017		)
Other(e)	(54		)	—		—			(54		)	—		4,712			4,658
Adjusted EBITDA	$	113,629		$	78,585	$	62,602		$	254,816		$	3,968	$	(23,702	)	$	235,082
Nine months ended September 30, 2019
Net income (loss) attributable to Albemarle Corporation	$	312,609		$	212,320	$	156,328		$	681,257		$	22,629	$	(261,049	)	$	442,837
Depreciation and amortization	71,669			35,281		37,562			144,512			6,302		5,904			156,718
Acquisition and integration related costs(a)	—			—		—			—			—		14,388			14,388
Gain on sale of property(f)	—			—		—			—			—		(11,079		)	(11,079		)
Interest and financing expenses	—			—		—			—			—		35,295			35,295
Income tax expense	—			—		—			—			—		93,266			93,266
Non-operating pension and OPEB items	—			—		—			—			—		(1,810		)	(1,810		)
Other(b)	576			1,142		—			1,718			—		10,785			12,503
Adjusted EBITDA	$	384,854		$	248,743	$	193,890		$	827,487		$	28,931	$	(114,300	)	$	742,118
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(c)	—			—		—			—			—		3,724			3,724
Gain on sale of business(g)	—			—		(218,705		)	(218,705		)	—		—			(218,705		)
Acquisition and integration related costs(a)	—			—		—			—			—		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(d)	—			—		—			—			—		27,027			27,027
Environmental accrual(h)	—			—		—			—			—		15,597			15,597
Albemarle Foundation contribution(i)	—			—		—			—			—		15,000			15,000
Other(e)	(1,439		)	—		—			(1,439		)	—		6,797			5,358
Adjusted EBITDA	$	386,260		$	217,921	$	205,534		$	809,715		$	7,729	$	(75,082	)	$	742,362

(a) Included acquisition and integration related costs relating to various significant projects. For the three-month and nine-month periods ended September 30, 2019, $4.1 million and $14.4 million was recorded in Selling, general and administrative expenses. For the three-month and nine-month periods ended September 30, 2018, $0.9 million and $2.9 million was recorded in Cost of goods sold, respectively, and $3.4 million and $10.2 million was recorded in Selling, general and administrative expenses, respectively.

(b) Included amounts for the three months ended September 30, 2019 recorded in:

▪ Cost of goods sold - $0.1 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.

▪ Selling, general and administrative expenses - $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialties segment.

▪ Other (expenses) income, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, as well as a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting.

Included amounts for the nine months ended September 30, 2019 recorded in:

▪ Cost of goods sold - $0.6 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.

▪ Selling, general and administrative expenses - Expected severance payments to be made in 2019 as part of a business reorganization plan of $5.3 million, with the unpaid balance recorded in Accrued expenses as of September 30, 2019, $1.0 million of shortfall contributions for our multiemployer plan financial improvement plan, and $1.1 million of a write-off of uncollectable accounts receivable from a terminated distributor in the Bromine Specialties segment.

▪ Other (expenses) income, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, a net loss of $0.4 million primarily resulting from the settlement of legal matters related to previously disposed businesses or recorded in purchase accounting, and $0.9 million of a net loss primarily resulting from the revision of indemnifications and other liabilities related to previously disposed businesses.

(c) Severance payments as part of a business reorganization plan, recorded in Selling, general and administrative expenses.

(d) Included in Other (expenses) income, net for the three-month and nine-month periods ended September 30, 2018 is a gain of $1.4 million and an expense of $16.2 million, respectively, resulting from a jury rendered verdict against Albemarle related to certain business concluded under a 2014 sales agreement for products that Albemarle no longer manufactures and expenses of $0.4 million and $10.8 million, respectively, resulting from a settlement of a legal matter related to guarantees from a previously disposed business.

(e) 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 (expenses) income, 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 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 (expenses) income, net - $0.8 million related to the revision of previously recorded expenses of disposed businesses.

(f) Gain recorded in Other (expenses) income, net related to the sale of land in Pasadena, Texas not used as part of our operations.

(g) Gain related to the sale of the Polyolefin Catalysts Divestiture, which closed in the second quarter of 2018.

(h) Increase in environmental reserve to indemnify the buyer of a formerly owned site recorded in Other (expenses) income, net. As defined in the agreement of sale, this indemnification has a set cutoff date in 2024, at which point we will no longer be required to provide financial coverage.

(i)

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 ordinary 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.