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 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. As of the date this business qualified for discontinued operations treatment, the Company stopped recording depreciation and amortization expense on assets of the Chemetall Surface Treatment business.

The major components of Income (loss) from discontinued operations (net of tax) for the three-month and nine-month periods ended September 30, 2016 and 2015 were as follows (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net sales	$	211,347	$	211,877		$	637,889		$	617,163
Cost of goods sold	100,061		118,712			333,832			368,381
Operating expenses, net	70,604		66,280			203,052			187,536
Interest and financing expenses^(a)	9,864		12,763			29,912			38,792
Other expenses (income), net	134		(656		)	(1,636		)	(3,011		)
Income before income taxes	30,684		14,778			72,729			25,465
Income tax expense^(b)	7,499		3,748			430,572			6,391
Income (loss) from discontinued operations (net of tax)	$	23,185	$	11,030		$	(357,843	)	$	19,074


(a)	Interest and financing expenses included 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 nine-month period ended September 30, 2016 included 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. In addition, Income tax expense for the three-month and nine-month periods ended September 30, 2016 included discrete non-cash benefits (charges) of $5.4 million and ($29.8) million, respectively, related to a change in the Company’s assertion over reinvestment of foreign undistributed earnings. The associated liability of $411.3 million has been recorded in Deferred income taxes on the condensed consolidated balance sheets as of September 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 September 30, 2016 and December 31, 2015, were as follows (in thousands):



	September 30,		December 31,
	2016		2015
Assets
Current assets	$	255,577	$	237,447
Net property, plant and equipment	164,860		163,643
Goodwill	1,456,214		1,433,259
Other intangibles, net of amortization	1,328,799		1,349,179
All other noncurrent assets	25,143		25,374
Assets held for sale	$	3,230,593	$	3,208,902
Liabilities
Current liabilities	$	135,735	$	200,892
Deferred income taxes	355,368		351,465
All other noncurrent liabilities	111,319		112,742
Liabilities held for sale	$	602,422	$	665,099

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



	Nine Months Ended September 30,
	2016		2015
Depreciation and amortization	$	35,194	$	57,567
Capital expenditures	$	15,525	$	11,521

Other Assets Held for Sale

In 2015, we announced our intention to pursue strategic alternatives, including divestitures, related to certain businesses, including the minerals-based flame retardants and specialty chemicals, fine chemistry services and metal sulfides businesses. 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 nine-month period ended September 30, 2016 was a loss of $1.5 million on the sale of our wafer reclaim business.