Divestitures:

Discontinued Operations

On June 17, 2016, we entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion in cash, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale of the Chemetall Surface Treatment business reflects the Company’s commitment to investing in the future growth of its high priority businesses, reducing leverage and returning capital to shareholders. The sale is expected to close in the fourth quarter of 2016, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities. At closing, any difference between the sales price and the proportionate carrying value of the interests being sold would be recognized.

The sale of the Chemetall Surface Treatment business, a separate reportable segment, qualifies for discontinued operations treatment because it represents a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, in the second quarter of 2016, the Company began accounting for this business as discontinued operations in the consolidated statements of (loss) income and excluded the business from segment results for all periods presented. Related assets and liabilities are classified as held for sale for all periods presented.

The major components of (Loss) income from discontinued operations (net of tax) for the three-month and six-month periods ended June 30, 2016 and 2015 were as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net sales	$	218,355		$	213,195		$	426,542		$	405,286
Cost of goods sold	120,448			124,660			233,771			249,669
Operating expenses, net	69,595			64,448			132,448			121,256
Interest and financing expenses^(a)	9,911			12,583			20,048			26,029
Other income, net	(832		)	(906		)	(1,770		)	(2,335		)
Income before income taxes	19,233			12,410			42,045			10,667
Income tax expense^(b)	417,573			2,288			423,073			2,643
(Loss) income from discontinued operations (net of tax)	$	(398,340	)	$	10,122		$	(381,028	)	$	8,024


(a)	Interest and financing expenses includes the allocation of interest expense not directly attributable to other operations as well as interest expense related to debt to be assumed by the buyer. The allocation of interest expense to discontinued operations was based on the ratio of net assets held for sale to the sum of total net assets plus consolidated debt.

(b)

Income tax expense for the three-month and six-month periods ended June 30, 2016 includes a discrete non-cash charge of $381.5 million due to a change in the Company’s assertion over book and tax basis differences related to a U.S. entity being sold, as well as a discrete non-cash charge of $35.2 million related to a change in the Company’s assertion over reinvestment of foreign undistributed earnings. The associated liability of $416.7 million has been recorded in Deferred tax liabilities on the condensed consolidated balance sheets as of June 30, 2016. Upon completion of the sale, the buyer will not assume these outside basis differences, thus the liability is ultimately the responsibility of the Company, and as such, this amount is not recorded as a Liability held for sale. The sale is expected to close in the fourth quarter of 2016, at which time, any difference between the sales price and the proportionate carrying value of the interests being sold would be recognized.

The carrying amounts of the major classes of assets and liabilities for the Chemetall Surface Treatment business classified as held for sale at June 30, 2016 and December 31, 2015, were as follows (in thousands):



	June 30,		December 31,
	2016		2015
Assets
Current assets	$	252,941	$	237,447
Net property, plant and equipment	161,846		163,643
Goodwill	1,441,460		1,433,259
Other intangibles, net of amortization	1,315,990		1,349,179
All other noncurrent assets	24,775		25,374
Assets held for sale^(a)	$	3,197,012	$	3,208,902
Liabilities
Current liabilities	$	145,269	$	200,892
Deferred income taxes	346,989		351,465
All other noncurrent liabilities	108,463		112,742
Liabilities held for sale	$	600,721	$	665,099


(a)	Excludes approximately $3.0 million of Assets held for sale as of June 30, 2016 related to a small group of assets at an idled site.

Depreciation and amortization and capital expenditures from discontinued operations for the six-month periods ended June 30, 2016 and 2015 were as follows (in thousands):



	Six Months Ended June 30,
	2016		2015
Depreciation and amortization	$	35,194	$	37,307
Capital expenditures	$	10,371	$	7,790

Other Assets Held for Sale

In 2015, we announced our intention to pursue strategic alternatives, including divestitures, related to certain businesses which include minerals-based flame retardants and specialty chemicals, fine chemistry services and metal sulfides. In the fourth quarter of 2015, we determined that the assets held for sale criteria were met for these businesses as well as a small group of assets at an idled site. As of the December 31, 2015 balance sheet date, the Company expected to complete the sales of the businesses included in assets and liabilities held for sale and therefore such amounts were classified as current. These businesses did not qualify for discontinued operations treatment because the Company’s management did not consider their sale or potential sale as representing a strategic shift that had or will have a major effect on the Company’s operations and financial results.

On November 5, 2015, the Company signed a definitive agreement to sell its Tribotecc metal sulfides business to Treibacher Industrie AG. Included in the transaction were sites in Vienna and Arnoldstein, Austria, and Tribotecc’s proprietary sulfide synthesis process. On January 4, 2016, the Company closed the sale of this business, effective for the first day of business in 2016. We received net proceeds of approximately $137 million and recorded a gain of $11.5 million before income taxes in 2016 related to the sale of this business.

On December 16, 2015, the Company signed a definitive agreement to sell its minerals-based flame retardants and specialty chemicals business to Huber Engineered Materials, a division of J.M. Huber Corporation. The transaction included Albemarle’s Martinswerk GmbH subsidiary and manufacturing facility located in Bergheim, Germany, and Albemarle’s 50% ownership interest in Magnifin Magnesiaprodukte GmbH, a joint-venture with Radex Heraklith Industriebeteiligung AG at Breitenau, Austria. On February 1, 2016, the Company closed the sale of these businesses. We received net proceeds of approximately $187 million and recorded a gain of $112.3 million before income taxes in 2016 related to the sale of these businesses.

In April 2016, the Company concluded that it would discontinue efforts to sell its fine chemistry services business, and as a result, this business is accounted for as held and used beginning in the second quarter of 2016.

The carrying amounts of the major classes of assets and liabilities of these businesses classified as held for sale at December 31, 2015, were as follows (in thousands):



	December 31,
	2015
Assets
Current assets	$	156,421
Net property, plant and equipment	115,865
Goodwill	46,794
Other intangibles, net of amortization	66,324
All other noncurrent assets	19,081
Assets held for sale	$	404,485
Liabilities
Current liabilities	$	72,756
Deferred income taxes	24,947
All other noncurrent liabilities	31,003
Liabilities held for sale	$	128,706

Also included in Gain on sales of businesses, net, for the six-month period ended June 30, 2016 is a loss of $1.5 million on the sale of our wafer reclaim business.