Company Quick10K Filing
Quick10K
Albemarle
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$72.61 106 $7,690
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-02-20 Earnings, Exhibits
8-K 2018-12-14 Enter Agreement
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-08-09 Regulation FD
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-06-21 Enter Agreement, Leave Agreement, Off-BS Arrangement
8-K 2018-05-14 Regulation FD
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-03-12
8-K 2018-02-27 Earnings, Exhibits
8-K 2018-02-23 Officers
8-K 2018-01-17 Officers, Exhibits
TGE Tallgrass Energy 6,560
LTHM Livent 1,230
HFWA Heritage Financial 1,130
HMY Harmony Gold Mining 905
VPG Vishay Precision Group 539
ELOX Eloxx Pharmaceuticals 426
WNEB Western New England Bancorp 257
ATEC Alphatec Holdings 178
AAME Atlantic American 47
EWST E-Waste 0
ALB 2019-03-31
Part I. Financial Information
Item 1. Financial Statements (Unaudited).
Note 1-Basis of Presentation:
Note 2-Leases:
Note 3-Goodwill and Other Intangibles:
Note 4-Income Taxes:
Note 5-Earnings per Share:
Note 6-Inventories:
Note 7-Investments:
Note 8-Long-Term Debt:
Note 9-Commitments and Contingencies:
Note 10-Segment Information:
Note 11-Pension Plans and Other Postretirement Benefits:
Note 12-Fair Value of Financial Instruments:
Note 13-Fair Value Measurement:
Note 14-Accumulated Other Comprehensive (Loss) Income:
Note 15-Related Party Transactions:
Note 16-Supplemental Cash Flow Information:
Note 17-Recently Issued Accounting Pronouncements:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-10.1 exhibit1010331201910q.htm
EX-10.2 exhibit1020331201910q.htm
EX-10.3 exhibit1030331201910q.htm
EX-10.4 exhibit1040331201910q.htm
EX-10.5 exhibit1050331201910q.htm
EX-31.1 exhibit3110331201910q.htm
EX-31.2 exhibit3120331201910q.htm
EX-32.1 exhibit3210331201910q.htm
EX-32.2 exhibit3220331201910q.htm

Albemarle Earnings 2019-03-31

ALB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

UNITED STATES
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, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the 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
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
4250 Congress Street, Suite 900
Charlotte, North Carolina 28209
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code - (980) 299-5700
_________________________________________________ 
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  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
 
Accelerated filer
 
¨
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
COMMON STOCK, $.01 Par Value
 
ALB
 
NEW YORK STOCK EXCHANGE
Number of shares of common stock, $.01 par value, outstanding as of April 30, 2019: 105,956,723


Table of Contents

ALBEMARLE CORPORATION
INDEX – FORM 10-Q
 
 
 
 
 
 
Page
Number(s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8-22
 
 
 
22-33
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBITS
 
 

2

Table of Contents

PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements (Unaudited).
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

 
Three Months Ended 
 March 31,
 
2019
 
2018
Net sales
$
832,064

 
$
821,629

Cost of goods sold
548,578

 
516,650

Gross profit
283,486

 
304,979

Selling, general and administrative expenses
113,355

 
101,370

Research and development expenses
14,977

 
20,986

Operating profit
155,154

 
182,623

Interest and financing expenses
(12,586
)
 
(13,538
)
Other income (expenses), net
11,291

 
(30,476
)
Income before income taxes and equity in net income of unconsolidated investments
153,859

 
138,609

Income tax expense
37,514

 
20,361

Income before equity in net income of unconsolidated investments
116,345

 
118,248

Equity in net income of unconsolidated investments (net of tax)
35,181

 
20,677

Net income
151,526

 
138,925

Net income attributable to noncontrolling interests
(17,957
)
 
(7,165
)
Net income attributable to Albemarle Corporation
$
133,569

 
$
131,760

Basic earnings per share
$
1.26

 
$
1.19

Diluted earnings per share
$
1.26

 
$
1.18

Weighted-average common shares outstanding – basic
105,799

 
110,681

Weighted-average common shares outstanding – diluted
106,356

 
111,867

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)

 
Three Months Ended 
 March 31,
 
2019
 
2018
Net income
$
151,526

 
$
138,925

Other comprehensive (loss) income, net of tax:
 
 
 
Foreign currency translation
(10,855
)
 
64,891

Pension and postretirement benefits
7

 
3

Net investment hedge
3,304

 
(14,421
)
Interest rate swap
641

 
642

Total other comprehensive (loss) income, net of tax
(6,903
)
 
51,115

Comprehensive income
144,623

 
190,040

Comprehensive income attributable to noncontrolling interests
(17,910
)
 
(7,351
)
Comprehensive income attributable to Albemarle Corporation
$
126,713

 
$
182,689

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 
March 31,
 
December 31,
 
2019
 
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
465,274

 
$
555,320

Trade accounts receivable, less allowance for doubtful accounts (2019 – $4,486; 2018 – $4,460)
603,542

 
605,712

Other accounts receivable
57,019

 
52,059

Inventories
756,193

 
700,540

Other current assets
105,148

 
84,790

Total current assets
1,987,176

 
1,998,421

Property, plant and equipment, at cost
4,983,385

 
4,799,063

Less accumulated depreciation and amortization
1,813,195

 
1,777,979

Net property, plant and equipment
3,170,190

 
3,021,084

Investments
563,030

 
528,722

Other assets
211,073

 
80,135

Goodwill
1,561,092

 
1,567,169

Other intangibles, net of amortization
378,501

 
386,143

Total assets
$
7,871,062

 
$
7,581,674

Liabilities And Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
482,433

 
$
522,516

Accrued expenses
263,868

 
257,323

Current portion of long-term debt
425,684

 
307,294

Dividends payable
38,716

 
35,169

Current operating lease liability
21,299

 

Income taxes payable
46,191

 
60,871

Total current liabilities
1,278,191

 
1,183,173

Long-term debt
1,393,904

 
1,397,916

Postretirement benefits
45,862

 
46,157

Pension benefits
282,082

 
285,396

Other noncurrent liabilities
616,007

 
526,942

Deferred income taxes
390,977

 
382,982

Commitments and contingencies (Note 9)

 

Equity:
 
 
 
Albemarle Corporation shareholders’ equity:
 
 
 
Common stock, $.01 par value, issued and outstanding – 105,950 in 2019 and 105,616 in 2018
1,059

 
1,056

Additional paid-in capital
1,368,069

 
1,368,897

Accumulated other comprehensive loss
(357,538
)
 
(350,682
)
Retained earnings
2,660,684

 
2,566,050

Total Albemarle Corporation shareholders’ equity
3,672,274

 
3,585,321

Noncontrolling interests
191,765

 
173,787

Total equity
3,864,039

 
3,759,108

Total liabilities and equity
$
7,871,062

 
$
7,581,674

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

(In Thousands, Except Share Data)
 
 
 
 
 
Additional
Paid-in Capital
 
Accumulated Other
Comprehensive (Loss) Income
 
Retained Earnings
 
Total Albemarle
Shareholders’ Equity
 
Noncontrolling
Interests
 
Total Equity
Common Stock
 
 
Shares
 
Amounts
 
 
 
 
 
 
Balance at January 1, 2019
 
105,616,028

 
$
1,056

 
$
1,368,897

 
$
(350,682
)
 
$
2,566,050

 
$
3,585,321

 
$
173,787

 
$
3,759,108

Net income
 
 
 
 
 
 
 
 
 
133,569

 
133,569

 
17,957

 
151,526

Other comprehensive loss
 
 
 
 
 
 
 
(6,856
)
 
 
 
(6,856
)
 
(47
)
 
(6,903
)
Cash dividends declared, $0.3675 per common share
 
 
 
 
 
 
 
 
 
(38,935
)
 
(38,935
)
 

 
(38,935
)
Stock-based compensation and other
 
 
 
 
 
7,277

 
 
 
 
 
7,277

 
 
 
7,277

Exercise of stock options
 
114,128

 
1

 
2,675

 
 
 
 
 
2,676

 
 
 
2,676

Issuance of common stock, net
 
340,111

 
3

 
(3
)
 
 
 
 
 

 
 
 

Increase in ownership interest of noncontrolling interest
 
 
 
 
 
(523
)
 
 
 
 
 
(523
)
 
68

 
(455
)
Shares withheld for withholding taxes associated with common stock issuances
 
(120,256
)
 
(1
)
 
(10,254
)
 
 
 
 
 
(10,255
)
 
 
 
(10,255
)
Balance at March 31, 2019
 
105,950,011

 
$
1,059

 
$
1,368,069

 
$
(357,538
)
 
$
2,660,684

 
$
3,672,274

 
$
191,765

 
$
3,864,039

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 
110,546,674

 
$
1,105

 
$
1,863,949

 
$
(225,668
)
 
$
2,035,163

 
$
3,674,549

 
$
143,147

 
$
3,817,696

Net income
 
 
 
 
 
 
 
 
 
131,760

 
131,760

 
7,165

 
138,925

Other comprehensive income
 
 
 
 
 
 
 
50,929

 
 
 
50,929

 
186

 
51,115

Cash dividends declared, $0.335 per common share
 
 
 
 
 
 
 
 
 
(37,103
)
 
(37,103
)
 
(7,378
)
 
(44,481
)
Cumulative adjustment from adoption of income tax standard update (Note 1)
 
 
 
 
 
 
 
 
 
(11,199
)
 
(11,199
)
 
 
 
(11,199
)
Stock-based compensation and other
 
 
 
 
 
5,737

 
 
 
 
 
5,737

 
 
 
5,737

Exercise of stock options
 
12,740

 

 
646

 
 
 
 
 
646

 
 
 
646

Issuance of common stock, net
 
319,440

 
3

 
(3
)
 
 
 
 
 

 
 
 

Shares withheld for withholding taxes associated with common stock issuances
 
(122,740
)
 
(1
)
 
(15,008
)
 
 
 
 
 
(15,009
)
 
 
 
(15,009
)
Balance at March 31, 2018
 
110,756,114

 
$
1,107

 
$
1,855,321

 
$
(174,739
)
 
$
2,118,621

 
$
3,800,310

 
$
143,120

 
$
3,943,430

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
Three Months Ended 
 March 31,
 
2019
 
2018
Cash and cash equivalents at beginning of year
$
555,320

 
$
1,137,303

Cash flows from operating activities:
 
 
 
Net income
151,526

 
138,925

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
Depreciation and amortization
49,283

 
50,330

Gain on sale of property
(11,079
)
 

Stock-based compensation
5,556

 
2,869

Equity in net income of unconsolidated investments (net of tax)
(35,181
)
 
(20,677
)
Dividends received from unconsolidated investments and nonmarketable securities
3,034

 
25,462

Pension and postretirement expense (benefit)
578

 
(890
)
Pension and postretirement contributions
(3,555
)
 
(3,548
)
Unrealized gain on investments in marketable securities
(476
)
 
(393
)
Deferred income taxes
7,580

 
29,067

Working capital changes
(122,939
)
 
(95,050
)
Other, net
10,589

 
(4,541
)
Net cash provided by operating activities
54,916

 
121,554

Cash flows from investing activities:
 
 
 
Capital expenditures
(216,132
)
 
(131,815
)
Proceeds from sale of property and equipment
10,356

 

Sales of marketable securities, net
1,090

 
10

Investments in equity and other corporate investments
(2,509
)
 
(735
)
Net cash used in investing activities
(207,195
)
 
(132,540
)
Cash flows from financing activities:
 
 
 
Other borrowings (repayments), net
118,223

 
(381,159
)
Dividends paid to shareholders
(35,387
)
 
(35,382
)
Dividends paid to noncontrolling interests

 
(7,378
)
Proceeds from exercise of stock options
2,676

 
646

Withholding taxes paid on stock-based compensation award distributions
(10,255
)
 
(15,009
)
Net cash provided by (used in) financing activities
75,257

 
(438,282
)
Net effect of foreign exchange on cash and cash equivalents
(13,024
)
 
4,153

Decrease in cash and cash equivalents
(90,046
)
 
(445,115
)
Cash and cash equivalents at end of period
$
465,274

 
$
692,188

See accompanying Notes to the Condensed Consolidated Financial Statements.

7

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


NOTE 1—Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Albemarle Corporation and our wholly-owned, majority-owned and controlled subsidiaries (collectively, “Albemarle,” “we,” “us,” “our” or “the Company”) contain all adjustments necessary for a fair statement, in all material respects, of our condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, our consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and condensed consolidated statements of cash flows for the three-month periods ended March 31, 2019 and 2018. All adjustments are of a normal and recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission (“SEC”) on February 27, 2019. The December 31, 2018 condensed consolidated balance sheet data herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). The results of operations for the three-month period ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year. The three-month period ended March 31, 2018 includes an $11.2 million cumulative adjustment to decrease Retained earnings due to the adoption of accounting guidance that eliminated the deferral of tax effects of intra-entity asset transfers other than inventory.
Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” and all related amendments using the modified retrospective method. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $139.1 million as of January 1, 2019. Comparative periods have not been restated and are reported in accordance with our historical accounting. The standard did not have an impact on our consolidated Net income or cash flows. In addition, as a result of the adoption of this new standard, we have implemented internal controls and system changes to prepare the financial information.
As part of this adoption, we have elected the practical expedient relief package allowed by the new standard, which does not require the reassessment of (1) whether existing contracts contain a lease, (2) the lease classification or (3) unamortized initial direct costs for existing leases; and have elected to apply hindsight to the existing leases. Additionally, we have made accounting policy elections such as exclusion of short-term leases (leases with a term of 12 months or less and which do not include a purchase option that we are reasonably certain to exercise) from the balance sheet presentation, use of portfolio approach in determination of discount rate and accounting for non-lease components in a contract as part of a single lease component for all asset classes.
See Note 2, “Leases” and Note 17, “Recently Issued Accounting Pronouncements,” for additional information. In addition, see below for a description of our updated lease accounting policy.
Leases
We determine if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As an implicit rate for most of our leases is not determinable, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The lease payments for the initial measurement of lease ROU assets and lease liabilities include fixed and variable payments based on an index or a rate. Variable lease payments that are not index or rate based are recorded as expenses when incurred. Our variable lease payments typically include real estate taxes, insurance costs and common-area maintenance. The operating lease ROU asset also includes any lease payments made, net of lease incentives. The lease term is the non-cancelable period of the lease, including any options to extend, purchase or terminate the lease when it is reasonably certain that we will exercise that option. We amortize the operating lease ROU assets on a straight-line basis over the period of the lease and the finance lease ROU assets on a straight-line basis over the shorter of their estimated useful lives or the lease terms. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.


8

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 2—Leases:
We lease certain office space, buildings, transportation and equipment in various countries. The initial lease terms generally range from 1 to 30 years for real estate leases, and from 2 to 15 years for non-real estate leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.
Many leases include options to terminate or renew, with renewal terms that can extend the lease term from 1 to 50 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table provides details of our lease contracts for the three months ended March 31, 2019 (in thousands):
 
Three Months Ended
 
March 31, 2019
Operating lease cost
$
9,421

Finance lease cost:
 
Amortization of right of use assets
178

Interest on lease liabilities
33

Total finance lease cost
211

 
 
Short-term lease cost
1,966

Variable lease cost
1,086

Total lease cost
$
12,684

Supplemental cash flow information related to our lease contracts for the three months ended March 31, 2019 is as follows (in thousands):
 
Three Months Ended
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
8,930

Operating cash flows from finance leases
33

Financing cash flows from finance leases
171



9

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Supplemental balance sheet information related to our lease contracts, including the location on balance sheet, at March 31, 2019 is as follows (in thousands, except as noted):
 
March 31, 2019
Operating leases:
 
Other assets
$
130,628

 
 
Current operating lease liability
21,299

Other noncurrent liabilities
110,058

Total operating lease liabilities
131,357

Finance leases:
 
Net property, plant and equipment
4,105

 
 
Current portion of long-term debt
684

Long-term debt
3,601

Total finance lease liabilities
4,285

Weighted average remaining lease term (in years):
 
Operating leases
11.9

Finance leases
6.5

Weighted average discount rate (%):
 
Operating leases
3.88
%
Finance leases
2.90
%

Maturities of lease liabilities as of March 31, 2019 were as follows (in thousands):
 
Operating Leases
 
Finance Leases
Remainder of 2019
$
18,801

 
$
607

2020
21,096

 
765

2021
12,435

 
676

2022
10,546

 
676

2023
10,198

 
676

Thereafter
93,911

 
1,352

Total lease payments
166,987

 
4,752

Less imputed interest
35,630

 
467

Total
$
131,357

 
$
4,285


As of December 31, 2018, future non-cancelable minimum lease payments were $25.6 million in 2019; $17.9 million in 2020; $12.5 million in 2021; $10.8 million in 2022; $10.1 million in 2023; and $87.1 million thereafter.


10

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 3—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the three months ended March 31, 2019 (in thousands):
 
Lithium
 
Bromine Specialties
 
Catalysts
 
All Other
 
Total
Balance at December 31, 2018
$
1,354,779

 
$
20,319

 
$
185,485

 
$
6,586

 
$
1,567,169

   Foreign currency translation adjustments
(4,369
)
 

 
(1,708
)
 

 
(6,077
)
Balance at March 31, 2019
$
1,350,410

 
$
20,319

 
$
183,777

 
$
6,586

 
$
1,561,092



The following table summarizes the changes in other intangibles and related accumulated amortization for the three months ended March 31, 2019 (in thousands):
 
Customer Lists and Relationships
 
Trade Names and Trademarks(a)
 
Patents and Technology
 
Other
 
Total
Gross Asset Value
 
 
 
 
 
 
 
 
 
  Balance at December 31, 2018
$
428,372

 
$
18,453

 
$
55,801

 
$
43,708

 
$
546,334

Foreign currency translation adjustments
(1,662
)
 
(76
)
 
217

 
166

 
(1,355
)
  Balance at March 31, 2019
$
426,710

 
$
18,377

 
$
56,018

 
$
43,874

 
$
544,979

Accumulated Amortization
 
 
 
 
 
 
 
 
 
  Balance at December 31, 2018
$
(95,797
)
 
$
(8,176
)
 
$
(35,248
)
 
$
(20,970
)
 
$
(160,191
)
    Amortization
(5,808
)
 

 
(355
)
 
(664
)
 
(6,827
)
Foreign currency translation adjustments
412

 
25

 
113

 
(10
)
 
540

  Balance at March 31, 2019
$
(101,193
)
 
$
(8,151
)
 
$
(35,490
)
 
$
(21,644
)
 
$
(166,478
)
Net Book Value at December 31, 2018
$
332,575

 
$
10,277

 
$
20,553

 
$
22,738

 
$
386,143

Net Book Value at March 31, 2019
$
325,517

 
$
10,226

 
$
20,528

 
$
22,230

 
$
378,501


(a)
Includes only indefinite-lived intangible assets.

NOTE 4—Income Taxes:
The effective income tax rate for the three-month period ended March 31, 2019 was 24.4%, compared to 14.7% for the three-month period ended March 31, 2018. The Company’s effective income tax rate fluctuates based on, among other factors, its level and location of income. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the three-months ended March 31, 2019 was impacted by a variety of factors, primarily stemming from the location in which income was earned and discrete net tax expenses primarily related to uncertain tax positions. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the three-months ended March 31, 2018 was impacted by a variety of factors, primarily stemming from discrete tax benefits related to adjustments recorded for the U.S. Tax Cuts and Jobs Act (“TCJA”) and excess tax benefits realized from stock-based compensation arrangements.


11

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 5—Earnings Per Share:
Basic and diluted earnings per share for the three-month periods ended March 31, 2019 and 2018 are calculated as follows (in thousands, except per share amounts):
 
Three Months Ended 
 March 31,
 
2019
 
2018
Basic earnings per share
 
 
 
Numerator:
 
 
 
Net income attributable to Albemarle Corporation
$
133,569

 
$
131,760

Denominator:
 
 
 
Weighted-average common shares for basic earnings per share
105,799

 
110,681

Basic earnings per share
$
1.26

 
$
1.19

 
 
 
 
Diluted earnings per share
 
 
 
Numerator:
 
 
 
Net income attributable to Albemarle Corporation
$
133,569

 
$
131,760

Denominator:
 
 
 
Weighted-average common shares for basic earnings per share
105,799

 
110,681

Incremental shares under stock compensation plans
557

 
1,186

Weighted-average common shares for diluted earnings per share
106,356

 
111,867

Diluted earnings per share
$
1.26

 
$
1.18


At March 31, 2019, there were 119,265 common stock equivalents not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.
On February 26, 2019, the Company increased the regular quarterly dividend by 10% to $0.3675 per share and declared a cash dividend of said amount for the first quarter of 2019, which was paid on April 1, 2019 to shareholders of record at the close of business as of March 15, 2019. On May 8, 2019, the Company declared a cash dividend of $0.3675 per share, which is payable on July 1, 2019 to shareholders of record at the close of business as of June 14, 2019.
NOTE 6—Inventories:
The following table provides a breakdown of inventories at March 31, 2019 and December 31, 2018 (in thousands):
 
March 31,
 
December 31,
 
2019
 
2018
Finished goods(a)
$
535,201

 
$
482,355

Raw materials and work in process(b)
159,429

 
158,290

Stores, supplies and other
61,563

 
59,895

Total
$
756,193

 
$
700,540



(a)
Increase primarily due to the build-up of inventory in our Lithium and Catalysts segments for a forecasted increase in sales in 2019.
(b)
Included $76.4 million and $71.4 million at March 31, 2019 and December 31, 2018, respectively, of work in process related to lithium brine.

NOTE 7—Investments:
The Company holds a 49% equity interest in Windfield Holdings Pty. Ltd. (“Windfield”), where the ownership parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Windfield to be a variable interest entity (“VIE”), however this investment is not consolidated as the Company is not the primary beneficiary. The carrying amount of our 49% equity interest in Windfield, which is our most significant VIE, was $380.6 million and $349.6 million at March 31, 2019 and December 31, 2018, respectively. The Company’s aggregate net investment in all other entities which it considers to be VIEs for which the Company is not the primary beneficiary was $8.3 million and $8.1 million at March 31, 2019 and December 31, 2018, respectively. Our unconsolidated VIEs are reported in Investments on the condensed consolidated balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these

12

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.

NOTE 8—Long-Term Debt:
Long-term debt at March 31, 2019 and December 31, 2018 consisted of the following (in thousands):
 
March 31,
 
December 31,
 
2019
 
2018
1.875% Senior notes, net of unamortized discount and debt issuance costs of $2,576 at March 31, 2019 and $2,841 at December 31, 2018
$
440,098

 
$
444,155

4.15% Senior notes, net of unamortized discount and debt issuance costs of $2,762 at March 31, 2019 and $2,884 at December 31, 2018
422,238

 
422,116

4.50% Senior notes, net of unamortized discount and debt issuance costs of $514 at March 31, 2019 and $589 at December 31, 2018
174,701

 
174,626

5.45% Senior notes, net of unamortized discount and debt issuance costs of $3,966 at March 31, 2019 and $4,004 at December 31, 2018
346,034

 
345,996

Commercial paper notes
425,000

 
306,606

Variable-rate foreign bank loans
7,232

 
7,216

Finance lease obligations
4,285

 
4,495

Total long-term debt
1,819,588

 
1,705,210

Less amounts due within one year
425,684

 
307,294

Long-term debt, less current portion
$
1,393,904

 
$
1,397,916


Current portion of long-term debt at March 31, 2019 consisted primarily of commercial paper notes with a weighted-average interest rate of approximately 2.89% and a weighted-average maturity of 42 days.
The carrying value of our 1.875% Euro-denominated senior notes has been designated as an effective hedge of our net investment in certain foreign subsidiaries where the Euro serves as the functional currency, and gains or losses on the revaluation of these senior notes to our reporting currency are recorded in accumulated other comprehensive loss. During the three-month periods ended March 31, 2019 and 2018, gains (losses) of $3.3 million and ($14.4) million (net of income taxes), respectively, were recorded in accumulated other comprehensive loss in connection with the revaluation of these senior notes to our reporting currency.

NOTE 9—Commitments and Contingencies:
Environmental
We had the following activity in our recorded environmental liabilities for the three months ended March 31, 2019 (in thousands):
Beginning balance at December 31, 2018
$
49,569

Expenditures
(2,080
)
Accretion of discount
223

Additions and changes in estimates
1,070

Foreign currency translation adjustments and other
(506
)
Ending balance at March 31, 2019
48,276

Less amounts reported in Accrued expenses
9,826

Amounts reported in Other noncurrent liabilities
$
38,450


Environmental remediation liabilities included discounted liabilities of $39.1 million and $40.4 million at March 31, 2019 and December 31, 2018, respectively, discounted at rates with a weighted-average of 3.7%, with the undiscounted amount totaling $72.7 million and $74.5 million at March 31, 2019 and December 31, 2018, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.

13

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, could be an additional $10 million to $35 million before income taxes, in excess of amounts already recorded. The variability of this range is primarily driven by possible environmental remediation activity at a formerly owned site where we indemnify the buyer through a set cutoff date in 2024.
We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.
Litigation
We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.
As previously reported in 2018, following receipt of information regarding potential improper payments being made by third party sales representatives of our Refining Solutions business, within our Catalysts segment, we promptly retained outside counsel and forensic accountants to investigate potential violations of the Company’s Code of Conduct, the Foreign Corrupt Practices Act and other potentially applicable laws. Based on this internal investigation, we have voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business, within our Catalysts segment, to the U.S. Department of Justice (“DOJ”), the SEC, and the Dutch Public Prosecutor (“DPP”), and are cooperating with the DOJ, the SEC, and DPP in their review of these matters. In connection with our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures.
At this time, we are unable to predict the duration, scope, result or related costs associated with any investigations by the DOJ, the SEC, or DPP. We are unable to predict what, if any, action may be taken by the DOJ, the SEC, or DPP, or what penalties or remedial actions they may seek to impose. Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses. We do not believe, however, that any fines, penalties, disgorgement, equitable relief or other losses would have a material adverse effect on our financial condition or liquidity.
Indemnities
We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.
The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $27.8 million and $45.3 million at March 31, 2019 and December 31, 2018, respectively, recorded in Other noncurrent liabilities, and $19.2 million recorded in Accrued expenses at March 31, 2019, related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold, as well as the proposed settlement of an ongoing audit of a previously disposed business in Germany.

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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Other
We have contracts with certain of our customers, which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis as well as blanket coverage of multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.

NOTE 10—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.

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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

 
Three Months Ended 
 March 31,
 
2019
 
2018
 
(In thousands)
Net sales:
 
 
 
Lithium
$
291,886

 
$
298,032

Bromine Specialties
249,052

 
225,639

Catalysts
251,648

 
260,717

All Other
39,478

 
37,165

Corporate

 
76

Total net sales
$
832,064

 
$
821,629

 
 
 
 
Adjusted EBITDA:
 
 
 
Lithium
$
115,616

 
$
131,014

Bromine Specialties
78,597

 
69,969

Catalysts
60,071

 
67,830

All Other
7,243

 
3,862

Corporate
(35,660
)
 
(23,957
)
Total adjusted EBITDA
$
225,867

 
$
248,718


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 March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
93,169

 
$
67,480

 
$
47,859

 
$
208,508

 
$
5,206

 
$
(80,145
)
 
$
133,569

Depreciation and amortization
22,092

 
11,117

 
12,212

 
45,421

 
2,037

 
1,825

 
49,283

Acquisition and integration related costs(a)

 

 

 

 

 
5,285

 
5,285

Gain on sale of property(b)

 

 

 

 

 
(11,079
)
 
(11,079
)
Interest and financing expenses

 

 

 

 

 
12,586

 
12,586

Income tax expense

 

 

 

 

 
37,514

 
37,514

Non-operating pension and OPEB items

 

 

 

 

 
(583
)
 
(583
)
Other(c)
355

 

 

 
355

 

 
(1,063
)
 
(708
)
Adjusted EBITDA
$
115,616

 
$
78,597

 
$
60,071

 
$
254,284

 
$
7,243

 
$
(35,660
)
 
$
225,867

Three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Albemarle Corporation
$
108,334

 
$
59,536

 
$
55,660

 
$
223,530

 
$
1,760

 
$
(93,530
)
 
$
131,760

Depreciation and amortization
24,065

 
10,433

 
12,170

 
46,668

 
2,102

 
1,560

 
50,330

Acquisition and integration related costs(a)

 

 

 

 

 
2,201

 
2,201

Interest and financing expenses

 

 

 

 

 
13,538

 
13,538

Income tax expense

 

 

 

 

 
20,361

 
20,361

Non-operating pension and OPEB items

 

 

 

 

 
(2,197
)
 
(2,197
)
Legal accrual(d)

 

 

 

 

 
17,628

 
17,628

Environmental accrual(e)

 

 

 

 

 
15,597

 
15,597

Other(f)
(1,385
)
 

 

 
(1,385
)
 

 
885

 
(500
)
Adjusted EBITDA
$
131,014

 
$
69,969

 
$
67,830

 
$
268,813

 
$
3,862

 
$
(23,957
)
 
$
248,718


(a)
Included acquisition and integration related costs relating to various significant projects. For the three-month period ended March 31, 2019, $5.3 million was recorded in Selling, general and administrative expenses. For the three-month period ended March 31, 2018, $1.0 million and $1.2 million was recorded in Cost of goods sold and Selling, general and administrative expenses, respectively.

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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

(b)
Gain recorded in Other income (expenses), net related to the sale of land in Pasadena, Texas not used as part of our operations.
(c)
Included amounts for the three months ended March 31, 2019 recorded in:
Cost of goods sold - $0.4 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 as part of a business reorganization plan of $0.5 million, with the unpaid balance reco