Attached files
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| 8-K - 8-K - ALBEMARLE CORP | a1214168-kdocument.htm |
EXHIBITS
Exhibit No. | Description | |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Statements | |
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Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet and statements of income are based upon the historical information of Albemarle Corporation (the “Company”), adjusted to reflect the sale of the Chemetall Surface Treatment business. The Chemetall Surface Treatment business was acquired on January 12, 2015 as part of the acquisition of Rockwood Holdings, Inc (“Rockwood”). As a result, the unaudited pro forma consolidated statements of income are presented only for the year ended December 31, 2015 and for the nine months ended September 30, 2016.
The unaudited pro forma condensed consolidated balance sheet reflects the sale of the Chemetall Surface Treatment business as if it occurred on September 30, 2016, while the unaudited pro forma consolidated statements of income give effect to the sale as if it occurred on January 1, 2015. The pro forma adjustments, described in the related notes, are based upon available information and certain assumptions that the Company’s management believe are reasonable. There are no pro forma adjustments for the period of January 1, 2015 to January 12, 2015 as the Chemetall Surface Treatment business was not owned by the Company and its results are already excluded from the historical financial statements for that period. As of the close of the second quarter of 2016, the Chemetall Surface Treatment business met the criteria, and was accounted, for as discontinued operations. Therefore, the historical consolidated statement of income for the nine months ended September 30, 2016 already reflected the Chemetall Surface Treatment business as discontinued operations.
The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and are not necessarily indicative of what the actual results of operations or financial position of the Company would have been if the sale had been completed on the dates indicated above, nor are they indicative of future financial results. The unaudited pro forma condensed consolidated financial statements and the related notes should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2016.
The unaudited pro forma information reflects the repayment of all borrowings, and accrued and unpaid interest, under the Company’s term loan facility and the 3.00% Senior notes due 2019, as well as partial repayments to the 1.875% Senior notes due 2021, the 4.15% Senior notes due 2024, the 4.50% Senior notes due 2020 and the commercial paper notes. The Company has elected to assume that the remaining cash proceeds will be used for general corporate purposes, which may include investing in growth of the remaining businesses and returning capital to shareholders. In accordance with Securities and Exchange Commission (“SEC”) guidance, we have assumed no interest income on the remaining cash proceeds.
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ALBEMARLE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
September 30, 2016 | |||||||||||
Albemarle Corporation Historical | Pro Forma Adjustments | Pro Forma | |||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 233,599 | $ | 969,314 | (a) | $ | 1,202,913 | ||||
Trade accounts receivable, less allowance for doubtful accounts ($14,078) | 441,266 | — | 441,266 | ||||||||
Other accounts receivable | 50,250 | — | 50,250 | ||||||||
Inventories | 504,984 | — | 504,984 | ||||||||
Other current assets | 72,027 | — | 72,027 | ||||||||
Assets held for sale | 255,577 | (255,577 | ) | (b) | — | ||||||
Total current assets | 1,557,703 | 713,737 | 2,271,440 | ||||||||
Property, plant and equipment, at cost | 3,890,254 | — | 3,890,254 | ||||||||
Less accumulated depreciation and amortization | 1,545,287 | — | 1,545,287 | ||||||||
Net property, plant and equipment | 2,344,967 | — | 2,344,967 | ||||||||
Investments | 468,765 | — | 468,765 | ||||||||
Noncurrent assets held for sale | 2,975,016 | (2,975,016 | ) | (b) | — | ||||||
Other assets | 185,943 | — | 185,943 | ||||||||
Goodwill | 1,484,182 | — | 1,484,182 | ||||||||
Other intangibles, net of amortization | 380,368 | — | 380,368 | ||||||||
Total assets | $ | 9,396,944 | $ | (2,261,279 | ) | $ | 7,135,665 | ||||
Liabilities And Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 241,511 | $ | — | $ | 241,511 | |||||
Accrued expenses | 240,652 | (2,683 | ) | (c) | 237,969 | ||||||
Current portion of long-term debt | 400,892 | (50,000 | ) | (d) | 350,892 | ||||||
Dividends payable | 34,077 | — | 34,077 | ||||||||
Liabilities held for sale | 135,735 | (135,735 | ) | (b) | — | ||||||
Income taxes payable | 23,967 | — | 23,967 | ||||||||
Total current liabilities | 1,076,834 | (188,418 | ) | 888,416 | |||||||
Long-term debt | 3,048,440 | (1,610,860 | ) | (d) | 1,437,580 | ||||||
Postretirement benefits | 49,157 | — | 49,157 | ||||||||
Pension benefits | 292,853 | — | 292,853 | ||||||||
Noncurrent liabilities held for sale | 466,687 | (466,687 | ) | (b) | — | ||||||
Other noncurrent liabilities | 228,270 | — | 228,270 | ||||||||
Deferred income taxes | 783,270 | (411,304 | ) | (e) | 371,966 | ||||||
Equity: | |||||||||||
Albemarle Corporation shareholders’ equity: | |||||||||||
Common stock, $.01 par value, issued and outstanding – 112,466 | 1,124 | — | 1,124 | ||||||||
Additional paid-in capital | 2,078,169 | — | 2,078,169 | ||||||||
Accumulated other comprehensive loss | (334,431 | ) | — | (334,431 | ) | ||||||
Retained earnings | 1,554,160 | 415,990 | (f) | 1,970,150 | |||||||
Total Albemarle Corporation shareholders’ equity | 3,299,022 | 415,990 | 3,715,012 | ||||||||
Noncontrolling interests | 152,411 | — | 152,411 | ||||||||
Total equity | 3,451,433 | 415,990 | 3,867,423 | ||||||||
Total liabilities and equity | $ | 9,396,944 | $ | (2,261,279 | ) | $ | 7,135,665 | ||||
See accompanying Notes to the Pro Forma Condensed Consolidated Financial Statements.
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ALBEMARLE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Nine Months Ended September 30, 2016 | |||||||||||
Albemarle Corporation Historical | Pro Forma Adjustments | Pro Forma | |||||||||
Net sales | $ | 1,980,548 | $ | — | $ | 1,980,548 | |||||
Cost of goods sold | 1,250,938 | — | 1,250,938 | ||||||||
Gross profit | 729,610 | — | 729,610 | ||||||||
Selling, general and administrative expenses | 254,988 | — | 254,988 | ||||||||
Research and development expenses | 61,384 | — | 61,384 | ||||||||
Gain on sales of businesses, net | (122,298 | ) | — | (122,298 | ) | ||||||
Acquisition and integration related costs | 44,337 | — | 44,337 | ||||||||
Operating profit | 491,199 | — | 491,199 | ||||||||
Interest and financing expenses | (46,860 | ) | 3,442 | (g)(i) | (43,418 | ) | |||||
Other income, net | 740 | — | 740 | ||||||||
Income from continuing operations before income taxes and equity in net income of unconsolidated investments | 445,079 | 3,442 | 448,521 | ||||||||
Income tax expense | 61,535 | 1,205 | (h)(i) | 62,740 | |||||||
Income from continuing operations before equity in net income of unconsolidated investments | 383,544 | 2,237 | 385,781 | ||||||||
Equity in net income of unconsolidated investments (net of tax) | 44,790 | — | 44,790 | ||||||||
Net income from continuing operations | 428,334 | 2,237 | 430,571 | ||||||||
Net income from continuing operations attributable to noncontrolling interests | (28,906 | ) | — | (28,906 | ) | ||||||
Net income from continuing operations attributable to Albemarle Corporation | $ | 399,428 | $ | 2,237 | $ | 401,665 | |||||
Basic earnings per share | $ | 3.56 | $ | 3.58 | |||||||
Diluted earnings per share | $ | 3.53 | $ | 3.55 | |||||||
Weighted-average common shares outstanding – basic | 112,343 | 112,343 | |||||||||
Weighted-average common shares outstanding – diluted | 113,131 | 113,131 | |||||||||
See accompanying Notes to the Pro Forma Condensed Consolidated Financial Statements.
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ALBEMARLE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Year Ended December 31, 2015 | |||||||||||
Albemarle Corporation Historical | Pro Forma Adjustments | Pro Forma | |||||||||
Net sales | $ | 3,651,335 | $ | (824,906 | ) | (i) | $ | 2,826,429 | |||
Cost of goods sold | 2,454,463 | (488,267 | ) | (i) | 1,966,196 | ||||||
Gross profit | 1,196,872 | (336,639 | ) | 860,233 | |||||||
Selling, general and administrative expenses | 512,274 | (211,834 | ) | (i) | 300,440 | ||||||
Research and development expenses | 102,871 | (13,684 | ) | (i) | 89,187 | ||||||
Restructuring and other, net | (6,804 | ) | — | (6,804 | ) | ||||||
Acquisition and integration related costs | 146,096 | (13,797 | ) | (i) | 132,299 | ||||||
Operating profit | 442,435 | (97,324 | ) | 345,111 | |||||||
Interest and financing expenses | (132,722 | ) | 30,685 | (g)(i) | (102,037 | ) | |||||
Other income, net | 48,474 | (1,190 | ) | (i) | 47,284 | ||||||
Income from continuing operations before income taxes and equity in net income of unconsolidated investments | 358,187 | (67,829 | ) | 290,358 | |||||||
Income tax expense | 29,122 | (23,740 | ) | (h)(i) | 5,382 | ||||||
Income from continuing operations before equity in net income of unconsolidated investments | 329,065 | (44,089 | ) | 284,976 | |||||||
Equity in net income of unconsolidated investments (net of tax) | 30,999 | (3,021 | ) | (i) | 27,978 | ||||||
Net income from continuing operations | 360,064 | (47,110 | ) | 312,954 | |||||||
Net income from continuing operations attributable to noncontrolling interests | (25,158 | ) | 94 | (i) | (25,064 | ) | |||||
Net income from continuing operations attributable to Albemarle Corporation | $ | 334,906 | $ | (47,016 | ) | $ | 287,890 | ||||
Basic earnings per share | $ | 3.01 | $ | 2.59 | |||||||
Diluted earnings per share | $ | 3.00 | $ | 2.58 | |||||||
Weighted-average common shares outstanding – basic | 111,182 | 111,182 | |||||||||
Weighted-average common shares outstanding – diluted | 111,556 | 111,556 | |||||||||
See accompanying Notes to the Pro Forma Condensed Consolidated Financial Statements.
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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1—Pro Forma Assumptions and Adjustments:
Adjustments to the Pro Forma Condensed Consolidated Balance Sheet
(a) | Cash and cash equivalents is adjusted as follows (in thousands): |
Gross proceeds | $ | 3,200,000 | |
Estimated purchase price adjustments | (156,883 | ) | |
Net proceeds | $ | 3,043,117 | |
Less: | |||
Repayment of debt principal | (1,669,000 | ) | |
Debt repayment fees | (54,000 | ) | |
Accrued interest on debt repayment | (2,683 | ) | |
Estimated tax payments | (303,120 | ) | |
Estimated fees and expenses associated with the sale | (45,000 | ) | |
$ | 969,314 | ||
The net proceeds represent proceeds of $3.2 billion reduced by certain purchase price adjustments as defined in the purchase agreement, such as the Chemetall Surface Treatment business net pension liability, indebtedness, working capital and other adjustments. The purchase price adjustments do not reflect an adjustment for the cash balances of the Chemetall Surface Treatment business that will be included in the sale, as there would be no net effect on the Albemarle pro forma cash and cash equivalents balance. The Company has elected to assume that the remaining cash proceeds will be used for general corporate purposes. In accordance with SEC guidance, we have assumed no interest income on the remaining cash proceeds.
(b) | Represents the elimination of the assets and liabilities of the Chemetall Surface Treatment business. |
(c) | Represents accrued interest paid in connection with the full repayment of the term loan facilities and 3.00% Senior notes. |
(d) | Long-term debt is reduced as follows (in thousands): |
Term loan facilities | $ | 869,000 | |
1.875% Senior notes | 200,000 | ||
3.00% Senior notes | 250,000 | ||
4.15% Senior notes | 150,000 | ||
4.50% Senior notes | 150,000 | ||
Commercial paper notes | 50,000 | ||
Unamortized discounts | (2,343 | ) | |
Unamortized debt issuance costs | (5,797 | ) | |
$ | 1,660,860 | ||
(e) | Represents a discrete tax liability of $381.5 million due to a change in the Company’s position with respect to book and tax basis differences related to a U.S. entity being sold, as well as a discrete tax liability of $29.8 million related to a change in the Company’s position with respect to reinvestment of foreign undistributed earnings. Upon completion of the sale of the Chemetall Surface Treatment business, this deferred tax liability with respect to the difference between book and tax basis will be released and the actual cash taxes on the gain on sale will be recorded. |
(f) | Represents the estimated after tax net gain on sale, as well as the reversal of the discrete tax liability noted above. The effects of the gain were not reflected in the pro forma statements of income as the adjustments are nonrecurring in nature. |
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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
Adjustments to the Pro Forma Consolidated Statements of Income
(g) | The pro forma interest expense assumes the pro forma debt repayments described above. The pro forma adjustment for nine months ended September 30, 2016 represents the difference in the interest expense of the pro forma debt repayments described above and the interest expense allocated to discontinued operations in the historical consolidated statements of income. |
(h) | The income tax impact has been calculated using the statutory rate of 35%. |
(i) | Represents the elimination of the revenue, cost of goods sold, income and expenses of the Chemetall Surface Treatment business. |
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