Acquisitions:

On July 15, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire all the outstanding shares of Rockwood (the “Merger”). On January 12, 2015 (the “Acquisition Closing Date”), we completed the acquisition of Rockwood for a purchase price of approximately $5.7 billion. As a result, Rockwood became a wholly-owned subsidiary of Albemarle. The cash consideration was funded with proceeds from our 2014 Senior Notes, August 2014 Term Loan Agreement, Cash Bridge Facility and February 2014 Credit Agreement, each of which is described further in Note 14, “Long-Term Debt.” The fair value of the equity consideration was based on the closing price of Albemarle’s common stock on the Acquisition Closing Date of $59.70 per share, as reported on the New York Stock Exchange.

Pursuant to the Merger Agreement, at the Acquisition Closing Date each issued and outstanding share of Rockwood common stock, par value $0.01 per share, (other than shares owned directly or indirectly by Albemarle, Rockwood or the Merger Sub, as defined in the Merger Agreement, and Appraisal Shares as defined in the Merger Agreement) was canceled and extinguished and converted into the right to receive (i) $50.65 in cash, without interest, and (ii) 0.4803 of a share of Albemarle common stock, par value $0.01 per share, (the “Merger Consideration”). Pursuant to the Merger Agreement, equity awards relating to shares of Rockwood’s common stock were canceled and converted into the right to receive the cash value of the Merger Consideration. On the Acquisition Closing Date, we issued approximately 34.1 million shares of Albemarle common stock.

Subsequent to the acquisition of Rockwood, Albemarle continues to be a leading global developer, manufacturer and marketer of technologically advanced and high value-added specialty chemicals. We are a leading integrated and low-cost global producer of lithium and lithium compounds used in lithium ion batteries for electronic devices, alternative transportation vehicles and energy storage technologies, meeting the significant growth in global demand for these products. We are also one of the largest global producers of surface treatments and coatings for metal processing, servicing the automotive, aerospace and general industrial markets.

Included in Net sales and Net income attributable to Albemarle Corporation for the year ended December 31, 2015 is approximately $1.4 billion and $176.2 million, respectively, attributable to the businesses acquired from Rockwood. Included in Acquisition and integration related costs on our consolidated statement of income for the year ended December 31, 2015 is $137.7 million of costs directly related to the acquisition of Rockwood (mainly consisting of professional services and advisory fees, costs to achieve synergies, relocation costs, and other integration costs), and $8.4 million of costs in connection with other significant projects. Acquisition and integration related costs for the year ended December 31, 2014 includes $23.6 million of costs directly related to the acquisition of Rockwood and $6.6 million of costs in connection with other significant projects. Acquisition-related costs incurred during the year ended December 31, 2013 are included in Selling, general and administrative (“SG&A”) expenses and were not significant.

Preliminary Purchase Price Allocation

The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the Acquisition Closing Date, which were based, in part, upon third-party appraisals for certain assets, including specifically-identified intangible assets. The excess of the purchase price over the preliminary estimated fair value of the net assets acquired was approximately $2.8 billion and was recorded as goodwill.

The following table summarizes the consideration paid for Rockwood and the amounts of the assets acquired and liabilities assumed as of the acquisition date, which have been allocated on a preliminary basis (in thousands):



Total purchase price	$	5,725,321

Net assets acquired:
Cash and cash equivalents	$	1,555,139
Trade and other accounts receivable	262,947
Inventories	290,326
Other current assets	86,267
Property, plant and equipment	1,377,249
Investments	529,453
Other assets	25,538
Definite-lived intangible assets:
Patents and technology	227,840
Trade names and trademarks	258,740
Customer lists and relationships	1,264,227
Indefinite-lived intangible assets:
Trade names and trademarks	104,380
Other	26,410
Current liabilities	(406,513		)
Long-term debt	(1,319,132		)
Pension benefits	(316,086		)
Other noncurrent liabilities	(195,052		)
Deferred income taxes	(845,965		)
Noncontrolling interests	(17,582		)
Total identifiable net assets	2,908,186
Goodwill	2,817,135
Total net assets acquired	$	5,725,321

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the acquisition date) as additional information concerning final asset and liability valuations is obtained. Significant changes to the purchase price allocation since our initial preliminary estimates reported in the first quarter of 2015 were primarily related to decreases in the estimated fair values of certain current assets, property, plant and equipment, investments and intangible assets and increases in certain other noncurrent liabilities and noncontrolling interests, which resulted in an increase to recognized goodwill of approximately $192.3 million. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of specific property, plant and equipment and intangible assets, and related deferred income taxes. The fair values of the assets acquired and liabilities assumed are based on management’s preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, it will evaluate any necessary information prior to finalization of the amounts. During the measurement-period, the Company will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date. The effect of measurement-period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement-period adjustments will be included in current period earnings. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets or goodwill, or require acceleration of the amortization of intangible assets in subsequent periods.

Goodwill arising from the acquisition consists largely of the anticipated synergies and economies of scale from the combined companies and the overall strategic importance of the acquired businesses to Albemarle. The goodwill attributable to the acquisition will not be amortizable or deductible for tax purposes.

The weighted-average amortization periods for the intangible assets acquired are 20 years for patents and technology, 20 years for trade names and trademarks and 24 years for customer lists and relationships. The weighted-average amortization period for all definite-lived intangible assets acquired is 23 years.

Long-term debt assumed primarily includes Rockwood’s 4.625% senior notes with an aggregate principal amount of $1.25 billion and a fair value adjustment of approximately $43.7 million related to the senior notes. The fair value adjustment was based primarily on reported market values using Level 1 inputs. See Note 14, “Long-Term Debt,” for additional information about these senior notes.

As discussed further in Note 1, “Summary of Significant Accounting Policies,” in the third quarter of 2015 the Company early-adopted new accounting guidance that changes the reporting requirements for measurement-period adjustments that occur in periods after a business combination is consummated. For the three months ended December 31, 2015, Depreciation and amortization expense included in Cost of goods sold was reduced by approximately $3.0 million as a result of measurement period adjustments related to previous reporting periods. There were no significant measurement-period adjustments recorded in the consolidated statement of income for the year ended December 31, 2015 that related to previous reporting periods.

Unaudited Pro Forma Financial Information

The following unaudited pro forma results of operations of the Company for the years ended December 31, 2015 and 2014 assume that the Merger occurred on January 1, 2014. The pro forma amounts include certain adjustments, including interest expense, depreciation, amortization expense and income taxes. The pro forma amounts for the years ended December 31, 2015 and 2014 were adjusted to exclude approximately $137.7 million and $23.6 million, respectively, of nonrecurring acquisition and integration related costs. Additionally, pro forma amounts for the year ended December 31, 2015 were adjusted to exclude approximately $103.0 million of charges related to the utilization of the inventory markup as further described in Note 25, “Segment and Geographic Area Information.” The 2014 pro forma results do not include adjustments related to cost savings or other synergies that are anticipated as a result of the Merger. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred as of January 1, 2014, nor are they indicative of future results of operations.



	Year Ended December 31,
	2015		2014
	(in thousands, except per share amounts)
Pro forma Net sales	$	3,684,665	$	3,870,428
Pro forma Net income from continuing operations	$	527,997	$	353,313
Pro forma Net income from continuing operations per share:
Basic	$	4.75	$	3.13
Diluted	$	4.73	$	3.12

Litigation Related to the Merger

On February 19, 2015, Verition Multi-Strategy Master Fund Ltd. and Verition Partners Master Fund Ltd., who collectively owned approximately 882,000 shares of Rockwood common stock immediately prior to the Merger, commenced an action in the Delaware Chancery Court seeking appraisal of their shares of Rockwood common stock pursuant to Delaware General Corporation Law § 262. These shareholders exercised their right not to receive the Merger Consideration for each share of Rockwood common stock owned by such shareholders. Following the Merger, these shareholders ceased to have any rights with respect to their Rockwood shares, except for their rights to seek an appraisal of the cash value of their Rockwood shares under Delaware law. On March 16, 2015, Albemarle, on behalf of Rockwood, filed an Answer and Verified List in response to the appraisal petition. On November 2, 2015, the court granted the parties’ jointly stipulated amended scheduling order, which set forth dates for fact and expert discovery, as well as trial. On December 21, 2015, the parties entered into a Settlement Agreement and Release to resolve the matter, and on January 11, 2016, the Court dismissed the matter with prejudice.

Acquisition of Remaining Interest in Shanghai Chemetall Chemicals Co., Ltd.

On January 29, 2015, we acquired the remaining 40% interest in Shanghai Chemetall Chemicals Co., Ltd., (“Shanghai Chemetall”) for approximately $57.6 million ($45.6 million net of cash acquired), the proceeds of which came from the release of restricted cash acquired from Rockwood at closing. As of the acquisition date, Shanghai Chemetall became a wholly-owned subsidiary of Albemarle and is being consolidated into the Chemetall^® Surface Treatment segment. The purchase price and the fair value of our equity interest immediately before the date of acquisition (approximately $60 million), as well as the fair value of the noncontrolling interest in Nanjing Chemetall Surface Technologies Co., Ltd., have been allocated to the net assets acquired at the acquisition date. On December 23, 2015, we paid approximately $4.8 million in connection with the acquisition of the remaining noncontrolling interests’ share of Nanjing Chemetall Surface Technologies Co., Ltd.