-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I4WJaCJw5BGfTmgfHsgxS2AugSw8Z2woCUwFpJrRNbjeUVRNjr7AfdJFABIm88YM 64JRUaLTbx/m0vzvBOp0GQ== 0000915913-98-000007.txt : 19980506 0000915913-98-000007.hdr.sgml : 19980506 ACCESSION NUMBER: 0000915913-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980505 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBEMARLE CORP CENTRAL INDEX KEY: 0000915913 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 541692118 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12658 FILM NUMBER: 98610638 BUSINESS ADDRESS: STREET 1: 451 FLORIDA STREET STREET 2: P O BOX 1335 CITY: BATON ROUGE STATE: LA ZIP: 70801 BUSINESS PHONE: 504-388-74 MAIL ADDRESS: STREET 1: 451 FLORIDA STREET CITY: BATON ROUGE STATE: LA ZIP: 70801 FORMER COMPANY: FORMER CONFORMED NAME: ECHEM INC DATE OF NAME CHANGE: 19931208 10-Q 1 1 Page 1 of 15 Pages SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Transition Period from _____________to________________ Commission File Number 1-12658 ALBEMARLE CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) VIRGINIA 54-1692118 ----------------- ------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 330 SOUTH FOURTH STREET P. O. BOX 1335 RICHMOND, VIRGINIA 23210 - ----------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code - (804) 788-6000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Number of shares of common stock, $.01 par value, outstanding as of April 30, 1998: 53,120,366 2 ALBEMARLE CORPORATION I N D E X Page Number ------ PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 3-4 Consolidated Statements of Income - Three Months Ended March 31, 1998 and 1997 5 Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 1998 and 1997 6 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 7 Notes to the Consolidated Financial Statements 8-9 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition and Additional Information 10-13 PART II. OTHER INFORMATION ITEM 3. Legal Proceedings 13 ITEM 4. Submission of Matters to a Vote of Security Holders 14 ITEM 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 3 PART I - FINANCIAL INFORMATION - ------------------------------ ITEM 1. Financial Statements -------------------- ALBEMARLE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars In Thousands) ----------------------
March 31, December 31, 1998 1997 ------------- --------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 42,244 $ 34,322 Accounts receivable, less allowance for doubtful accounts (1998 - $2,528; 1997 - $2,449) 146,762 154,421 Inventories: Finished goods 69,810 65,998 Raw materials 11,901 7,424 Stores, supplies and other 16,869 16,861 ------------- --------------- 98,580 90,283 Deferred income taxes and prepaid expenses 19,276 17,710 -------------- --------------- Total current assets 306,862 296,736 -------------- --------------- Property, plant and equipment, at cost 1,200,596 1,188,252 Less accumulated depreciation and amortization (704,160) (691,612) -------------- --------------- Net property, plant and equipment 496,436 496,640 Other assets and deferred charges 81,720 77,204 Goodwill and other intangibles - net of amortization 16,810 17,601 -------------- --------------- Total assets $ 901,828 $ 888,181 -------------- --------------- -------------- --------------- See accompanying notes to the consolidated financial statements.
4 ALBEMARLE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (Dollars In Thousands) ----------------------
March 31, December 31, 1998 1997 -------------- -------------- (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 55,789 $ 50,668 Long-term debt, current portion 375 379 Accrued expenses 48,981 47,578 Dividends payable 4,781 4,952 Income taxes payable 19,141 8,983 ------------- -------------- Total current liabilities 129,067 112,560 ------------- -------------- Long-term debt 88,968 91,414 Other noncurrent liabilities 72,500 69,704 Deferred income taxes 96,938 97,167 Shareholders' equity: Common stock, $.01 par value, issued - 53,128,551 in 1998 and 53,886,802 in 1997, respectively 531 539 Additional paid-in capital 199,987 218,841 Accumulated other comprehensive income (3,421) (1,445) Retained earnings 317,258 299,401 ------------- -------------- Total shareholders' equity 514,355 517,336 ------------- -------------- Total liabilities and shareholders' equity $ 901,828 $ 888,181 ------------- -------------- ------------- -------------- See accompanying notes to the consolidated financial statements.
5 ALBEMARLE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (In Thousands Except Per-Share Amounts) --------------------------------------- (Unaudited)
Three Months Ended March 31, -------------------------- 1998 1997 ---------- ----------- Net sales $ 215,149 $ 198,394 Cost of goods sold 147,328 132,032 ---------- ----------- Gross profit 67,821 66,362 Selling, general and administrative expenses 26,575 26,599 Research and development expenses 7,054 7,397 ----------- ----------- Operating profit 34,192 32,366 Interest and financing expenses 952 197 Other income, net (666) (62) ----------- ----------- Income before income taxes 33,906 32,231 Income taxes 11,257 12,054 ----------- ----------- NET INCOME $ 22,649 $ 20,177 ----------- ----------- ----------- ----------- BASIC EARNINGS PER SHARE $ .42 $ .37 ----------- ----------- ----------- ----------- Shares used to compute basic earnings per share 53,469 55,046 ----------- ----------- ----------- ----------- DILUTED EARNINGS PER SHARE $ .42 $ .36 ----------- ----------- ----------- ----------- Shares used to compute diluted earnings per share 53,981 55,535 ----------- ----------- ----------- ----------- Cash dividends declared per share of common stock $ .09 $ .07 ----------- ----------- ----------- ----------- See accompanying notes to the consolidated financial statements.
6 ALBEMARLE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ----------------------------------------------- (Dollars in Thousands) ---------------------- (Unaudited)
Three Months Ended March 31, -------------------------- 1998 1997 ---------- ----------- Net income $ 22,649 $ 20,177 Other comprehensive income, net of tax: Foreign currency translation adjustments (1,976) (11,292) ----------- ----------- Comprehensive income $ 20,673 $ 8,885 ----------- ----------- See accompanying notes to the consolidated financial statements.
7 ALBEMARLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Dollars In Thousands) ---------------------- (Unaudited)
Three Months Ended March 31, -------------------------- 1998 1997 --------- ---------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 34,322 $ 14,242 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 22,649 20,177 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 17,607 16,097 Working capital decrease (increase) excluding cash and cash equivalents 15,206 (21,603) Other, net (2,680) 850 ---------- ------------ Net cash provided from operating activities 52,782 15,521 ---------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and acquisition cost (18,361) (27,424) Other, net (215) 8 ---------- ------------ Net cash used in investing activities (18,576) (27,416) ---------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of common stock (19,029) - Proceeds from borrowings 3,865 12,555 Repayments of long-term debt (6,324) (8,440) Dividends paid (4,963) (3,853) Proceeds from stock options exercised 167 6 ---------- ------------ Net cash (used in) provided from financing activities (26,284) 268 ---------- ------------ Increase (decrease) in cash and cash equivalents 7,922 (11,627) ---------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,244 $ 2,615 ---------- ------------ ---------- ------------ See accompanying notes to the consolidated financial statements.
8 ALBEMARLE CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per-Share Amounts) (Unaudited) 1. In the opinion of management, the accompanying consolidated financial statements of Albemarle Corporation and Subsidiaries ("Albemarle" or "the Company") contain all adjustments necessary to present fairly, in all material respects, the Company's consolidated financial position as of March 31, 1998 and December 31, 1997, the actual consolidated results of operations, comprehensive income and condensed consolidated cash flows for the three-month periods ended March 31, 1998 and 1997. All adjustments are of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1997 Annual Report & Form 10-K filed on March 20, 1998. The December 31, 1997 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The results of operations for the three-month period ended March 31, 1998, are not necessarily indicative of the results to be expected for the full year. Certain amounts in the accompanying consolidated financial statements and notes thereto for the period ended March 31, 1997, have been compiled and included herein in connection with the adoption of Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" effective January 1, 1998. 2. Long-term debt consists of the following:
March 31, December 31, 1998 1997 ------------ ------------- Variable-rate bank loans $ 70,700 $ 77,000 Foreign bank borrowings 17,519 13,645 Miscellaneous 1,124 1,148 ------------ ------------- Total 89,343 91,793 Less amounts due within one year 375 379 ----------- ------------- Long-term debt $ 88,968 $ 91,414 ----------- ------------- ----------- -------------
9 3. Basic and diluted earnings per share for the three-month periods ended March 31, 1998 and 1997, are calculated as follows: BASIC EARNINGS PER SHARE 1998 1997 ---------- ---------- Numerator: Income available to stockholders, as reported $ 22,649 $ 20,177 ---------- ---------- Denominator: Average number of shares of common stock outstanding 53,469 55,046 ---------- ---------- Basic earnings per share $ .42 $ .37 DILUTED EARNINGS PER SHARE Numerator: Income available to stockholders, as reported $ 22,649 $ 20,177 Denominator: Average number of shares of common stock outstanding 53,469 55,046 Shares issuable upon exercise of stock options 512 489 ---------- ---------- Total shares 53,981 55,535 ---------- ---------- Diluted earnings per share $ .42 $ .36 ---------- ---------- ---------- ----------
4. The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", in June, 1997, which became effective for fiscal years beginning after December 31, 1997. SFAS No. 131 establishes standards for reporting information about operating segments, including related disclosures about products and services, geographic areas, and major customers. Interim reporting disclosures are not required in the first year of adoption and are therefore not provided. The Company has not determined the impact on its disclosures resulting from adoption of this standard; however, at the time of adoption of SFAS No. 131, this standard is not expected to have a material impact on the financial position or results of operations of the Company. 10 ITEM 2. Management's Discussion And Analysis Of Results Of Operations And Financial Condition The following is management's discussion and analysis of certain significant factors affecting the results of operations of Albemarle Corporation ("Albemarle" or "the Company") during the periods included in the accompanying consolidated statements of income and changes in the Company's financial condition since December 31, 1997. Some of the information presented in the following discussion constitutes forward-looking comments within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its businesses and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors which could cause actual results to differ from expectations include, without limitation, the timing of orders received from customers, the gain or loss of significant customers, competition from other manufacturers, changes in the demand for the Company's products, increases in the cost of the product, changes in the market in general, fluctuations in foreign currencies and significant changes in new product introduction resulting in an increase in capital project requests and approvals leading to additional capital spending. Results of Operations - --------------------- First Quarter 1998 Compared with First Quarter 1997 - --------------------------------------------------- NET SALES Net sales for the first quarter of 1998 amounted to $215.1 million, an increase of eight percent or $16.8 million from first quarter 1997. The higher net sales were primarily due to increased shipments of pharmachemicals, flame retardants, polymer additives and intermediates, organometallics and agrichemicals, partly offset by lower prices in polymer additives and intermediates. OPERATING COSTS AND EXPENSES Cost of goods sold increased 12% ($15.3 million) in the first quarter of 1998 from first quarter 1997 primarily reflecting the impact of higher shipments and lower foreign exchange gains in 1998 versus 1997. Excluding the effect of foreign exchange gains in first quarter 1998 and 1997, gross margin as a percent of net sales would have been 31.1% in both periods. 11 Selling, general and administrative expenses and research and development expenses declined slightly in 1998 versus the 1997 quarter. The decline in first quarter 1998 resulted primarily from the Company's cost reduction program which began in 1996 and lower outside consulting costs, offset in part by higher employee related costs in the 1998 period. As a percentage of net sales, selling, general and administrative expenses and research and development expenses were 15.6% in 1998 versus 17.1% in the 1997 quarter. OPERATING PROFIT Operating profit in the first quarter of 1998 increased approximately 6% from the corresponding period in 1997 primarily due to increased shipments in pharmachemicals, flame retardants and polymer additives and intermediates, and improved costs in bromine and derivatives and surface actives offset in part by higher production costs in organometallics and catalysts. INTEREST AND FINANCING EXPENSES AND OTHER INCOME Interest and financing expenses for first quarter 1998 increased to $1.0 million from $.2 million for first quarter 1997 due to higher average outstanding debt. Other income increased $.6 million primarily due to higher interest income in the 1998 period. INCOME TAXES Income taxes for first quarter 1998 decreased $.8 million compared to first quarter 1997 as the effective tax rate declined to 33.2% in the 1998 quarter from 37.4% in the 1997 quarter. The higher tax rate in first quarter 1997 versus first quarter 1998 does not reflect the benefit of tax planning strategies and improved earnings in certain foreign subsidiaries in the latter half of 1997 which resulted in a 1997 annual effective income tax rate of 33.8%. Financial Condition and Liquidity - ---------------------------------- Cash and cash equivalents at March 31, 1998, were $42.2 million, representing an increase of $7.9 million from $34.3 million at year-end 1997. Cash flows from operating activities for the first three months of 1998 together with borrowings of $3.9 million were used to cover purchases of common stock, capital expenditures, payment of dividends, repayment of debt and increase cash and cash equivalents. The Company anticipates that cash provided from operations in the future will be sufficient to pay its operating expenses, satisfy debt-service obligations and make dividend payments. 12 The change in the Company's foreign currency translation adjustments, net of related deferred taxes, was primarily due to the strengthening of the U.S. dollar. The noncurrent portion of the Company's long-term debt amounted to $89.0 million at March 31, 1998, compared to $91.4 million at the end of 1997. The Company's long-term debt, including the current portion, as a percentage of total capitalization amounted to 14.8% at March 31, 1998. The Company's capital expenditures in the first quarter of 1998 were lower than in the first quarter of 1997. For the year, capital expenditures are forecasted to be above the 1997 level. Capital spending will be financed primarily with cash flow from operations with any additional cash provided from debt. The amount and timing of any additional borrowing will depend on the Company's specific cash requirements. The Company is subject to federal, state, local and foreign requirements regulating the handling, manufacture and use of materials (some of which may be classified as hazardous or toxic by one or more regulatory agencies), the discharge of materials into the environment and the protection of the environment. To the best of the Company's knowledge, it currently is complying with and expects to continue to comply in all material respects with existing environmental laws, regulations, statutes and ordinances. Such compliance with federal, state, local and foreign environmental protection laws has not in the past had, and is not expected to have in the future, a material effect on earnings or the competitive position of Albemarle. Among other environmental requirements, the Company is subject to the federal Superfund law, and similar state laws, under which the Company may be designated as a potentially responsible party and may be liable for a share of the costs associated with cleaning up various hazardous waste sites. Outlook - ------- First quarter 1998 saw the continued strengthening of the U.S. dollar against the Japanese yen and the Deutsche mark, which has had a negative impact on the Company's results during the period. The Company expects this trend to continue through the end of 1998. The Company continues to emphasize plant efficiencies and revenue growth in its continuing efforts to mitigate these currency effects. The Company used forward exchange contracts in the 1998 first quarter and likely will use this option from time to time where appropriate to lessen the effects of currency exchange rates. 13 The Company continues to sell Polymer Chemicals products into Asia Pacific, reflecting continued strong demand by European and U.S. consumers for the Asia Pacific's electronic products containing the Company's additives. While no significant reduction in sales volumes has occurred due to the Asia Pacific's current economic conditions, the Company continues to watch the situation closely. New product development is a primary focus for the Company in its growth strategy. Currently, customers are qualifying two new flame retardants, and sales of commercial quantities of these products should develop, assuming successful completion of the qualification process. As reported in the 1997 Form 10-K, Ethacure 300 curative, used in cast polyurethane elastomers and other applications, is scheduled for plant start up during mid-year 1998. Naproxen, a pharmaceutical bulk active, is being sold in the U.S. and to a limited extent outside the U.S., however, sales continue to lag expectations. Other new products are under development, including new pharmaceutical, agricultural, cleaning and polymer chemicals. The Company continues to seek alliances and pursue acquisitions in synergistic specialty chemicals. Identification of opportunities continues. PART II - OTHER INFORMATION - ---------------------------- Item 3. Legal Proceedings ----------------- The Company and its subsidiaries are involved from time to time in legal proceedings of types regarded as common in the Company's businesses, particularly products liability and toxic tort litigation and administrative or judicial proceedings seeking remediation under environmental laws, such as Superfund. While it is not possible to predict or determine the outcome of the proceedings presently pending, in the Company's opinion they should not result ultimately in liabilities that are likely to have a material adverse effect upon the results of operations or financial condition of the Company and its subsidiaries on a consolidated basis. 14 Item 4. Submission Of Matters To A Vote Of Security Holders ---------------------------------------------------- At the annual meeting of shareholders held on April 22, 1998, the shareholders elected the directors nominated in the Proxy with the following affirmative votes and votes withheld: Director Affirmative Votes Votes Withheld - -------- ----------------- -------------- Craig R. Andersson 48,520,610 84,915 Dirk Betlem 48,522,341 83,184 Floyd D. Gottwald, Jr. 48,510,498 95,027 John D. Gottwald 48,520,034 85,491 Andre' B. Lacy 48,519,070 86,455 Seymour S. Preston, III 48,522,097 83,428 Emmett J. Rice 48,508,492 97,033 Charles E. Stewart 48,519,458 86,067 Charles B. Walker 48,516,418 89,107 Anne M. Whittemore 48,520,281 85,244 Shareholders also approved the Albemarle Corporation 1998 Incentive Plan as described in the 1998 Proxy Statement. A copy of the Plan was filed with the Securities and Exchange Commission along with the Company's Proxy Statement. The Plan received 41,731,921 affirmative votes and 2,510,170 negative votes, with 352,740 abstentions and 4,010,695 broker non-votes. The shareholders also approved the selection of Coopers & Lybrand L.L.P. as the Company's auditors with 48,391,151 affirmative votes, 110,084 negative and 104,290 abstentions. ITEM 6. Exhibits and Reports on Form 8-K --------------------------------- (a) Exhibits 27. Financial Data Schedule (b) No report on Form 8-K was filed during the quarter for which this report is filed. 15 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALBEMARLE CORPORATION --------------------- (Registrant) Date: May 5, 1998 By: s/Thomas G. Avant ------------------ Thomas G. Avant Senior Vice President (Principal Accounting Officer) Date: May 5, 1998 By: s/Robert G. Kirchhoefer ------------------------ Robert G. Kirchhoefer Treasurer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 3-MOS DEC-31-1998 MAR-31-1998 $42,244 $0 $149,290 $2,528 $98,580 $306,862 $1,200,596 $704,160 $901,828 $129,067 $0 $0 $0 $531 $513,824 $901,828 $215,149 $215,149 $147,328 $180,957 $0 $0 $952 $33,906 $11,257 $22,649 $0 $0 $0 $22,649 $0.42 $0.42
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