Document

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

_________________________________________________

FORM 10-Q

_________________________________________________



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended June 30, 2019



☐	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 ☒ 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 ☒ 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):

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 ☒

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 July 31, 2019: 105,986,264

Table of Contents

ALBEMARLE CORPORATION

INDEX – FORM 10-Q




		Page Number(s)
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Income - Three Months and Six Months Ended June 30, 2019 and 2018	3

	Consolidated Statements of Comprehensive Income - Three Months and Six Months Ended June 30, 2019 and 2018	4

	Condensed Consolidated Balance Sheets - June 30, 2019 and December 31, 2018	5

	Consolidated Statements of Changes in Equity - Three Months and Six Months Ended June 30, 2019 and 2018	6

	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2019 and 2018	7

	Notes to the Condensed Consolidated Financial Statements	8-24

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24-41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	42

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 6.	Exhibits	43

SIGNATURES		44

EXHIBITS

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 June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net sales	$	885,052		$	853,874		$	1,717,116		$	1,675,503
Cost of goods sold	559,138			542,518			1,107,716			1,059,168
Gross profit	325,914			311,356			609,400			616,335
Selling, general and administrative expenses	126,715			123,637			240,070			225,007
Research and development expenses	13,462			16,074			28,439			37,060
Gain on sale of business	—			(218,705		)	—			(218,705		)
Operating profit	185,737			390,350			340,891			572,973
Interest and financing expenses	(11,601		)	(13,308		)	(24,187		)	(26,846		)
Other (expenses) income, net	(7,065		)	(5,223		)	4,226			(35,699		)
Income before income taxes and equity in net income of unconsolidated investments	167,071			371,819			320,930			510,428
Income tax expense	30,411			80,102			67,925			100,463
Income before equity in net income of unconsolidated investments	136,660			291,717			253,005			409,965
Equity in net income of unconsolidated investments (net of tax)	38,310			18,969			73,491			39,646
Net income	174,970			310,686			326,496			449,611
Net income attributable to noncontrolling interests	(20,772		)	(8,225		)	(38,729		)	(15,390		)
Net income attributable to Albemarle Corporation	$	154,198		$	302,461		$	287,767		$	434,221
Basic earnings per share	$	1.46		$	2.76		$	2.72		$	3.94
Diluted earnings per share	$	1.45		$	2.73		$	2.71		$	3.90
Weighted-average common shares outstanding – basic	105,961			109,671			105,880			110,176
Weighted-average common shares outstanding – diluted	106,316			110,659			106,336			111,263

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	174,970		$	310,686		$	326,496		$	449,611
Other comprehensive income (loss), net of tax:
Foreign currency translation	10,544			(150,857		)	(311		)	(85,966		)
Pension and postretirement benefits	6			23			13			26
Net investment hedge	(3,037		)	22,989			267			8,568
Interest rate swap	641			642			1,282			1,284
Total other comprehensive income (loss), net of tax	8,154			(127,203		)	1,251			(76,088		)
Comprehensive income	183,124			183,483			327,747			373,523
Comprehensive income attributable to noncontrolling interests	(20,799		)	(7,962		)	(38,709		)	(15,313		)
Comprehensive income attributable to Albemarle Corporation	$	162,325		$	175,521		$	289,038		$	358,210

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)



	June 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	398,183		$	555,320
Trade accounts receivable, less allowance for doubtful accounts (2019 – $4,513; 2018 – $4,460)	624,808			605,712
Other accounts receivable	105,207			52,059
Inventories	814,022			700,540
Other current assets	94,417			84,790
Total current assets	2,036,637			1,998,421
Property, plant and equipment, at cost	5,248,994			4,799,063
Less accumulated depreciation and amortization	1,858,369			1,777,979
Net property, plant and equipment	3,390,625			3,021,084
Investments	541,014			528,722
Other assets	186,592			80,135
Goodwill	1,566,464			1,567,169
Other intangibles, net of amortization	373,082			386,143
Total assets	$	8,094,414		$	7,581,674
Liabilities And Equity
Current liabilities:
Accounts payable	$	558,839		$	522,516
Accrued expenses	268,666			257,323
Current portion of long-term debt	490,691			307,294
Dividends payable	38,733			35,169
Current operating lease liability	19,441			—
Income taxes payable	23,611			60,871
Total current liabilities	1,399,981			1,183,173
Long-term debt	1,398,419			1,397,916
Postretirement benefits	46,025			46,157
Pension benefits	279,342			285,396
Other noncurrent liabilities	609,209			526,942
Deferred income taxes	387,035			382,982
Commitments and contingencies (Note 9)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 105,971 in 2019 and 105,616 in 2018	1,059			1,056
Additional paid-in capital	1,373,213			1,368,897
Accumulated other comprehensive loss	(349,411		)	(350,682		)
Retained earnings	2,775,940			2,566,050
Total Albemarle Corporation shareholders’ equity	3,800,801			3,585,321
Noncontrolling interests	173,602			173,787
Total equity	3,974,403			3,759,108
Total liabilities and equity	$	8,094,414		$	7,581,674

See accompanying Notes to the Condensed Consolidated Financial Statements.

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 March 31, 2019	105,950,011		$	1,059		$	1,368,069		$	(357,538	)	$	2,660,684		$	3,672,274		$	191,765		$	3,864,039
Net income												154,198			154,198			20,772			174,970
Other comprehensive income									8,127						8,127			27			8,154
Cash dividends declared, $0.3675 per common share												(38,942		)	(38,942		)	(38,962		)	(77,904		)
Stock-based compensation						4,930									4,930						4,930
Exercise of stock options	11,781		—			529									529						529
Issuance of common stock, net	16,713		—			—									—						—
Shares withheld for withholding taxes associated with common stock issuances	(7,041	)	—			(315		)							(315		)				(315		)
Balance at June 30, 2019	105,971,464		$	1,059		$	1,373,213		$	(349,411	)	$	2,775,940		$	3,800,801		$	173,602		$	3,974,403

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
Net income												302,461			302,461			8,225			310,686
Other comprehensive loss									(126,940		)				(126,940		)	(263		)	(127,203		)
Cash dividends declared, $0.335 per common share												(36,437		)	(36,437		)	(7,378		)	(43,815		)
Stock-based compensation						4,991									4,991						4,991
Exercise of stock options	16,226		—			642									642						642
Shares repurchased	(2,354,133	)	(24		)	(249,976		)							(250,000		)				(250,000		)
Issuance of common stock, net	38,487		1			(1		)							—						—
Shares withheld for withholding taxes associated with common stock issuances	(15,331	)	—			(1,451		)							(1,451		)				(1,451		)
Balance at June 30, 2018	108,441,363		$	1,084		$	1,609,526		$	(301,679	)	$	2,384,645		$	3,693,576		$	143,704		$	3,837,280

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												287,767			287,767			38,729			326,496
Other comprehensive income (loss)									1,271						1,271			(20		)	1,251
Cash dividends declared, $0.735 per common share												(77,877		)	(77,877		)	(38,962		)	(116,839		)
Stock-based compensation						12,197									12,197						12,197
Exercise of stock options	125,909		1			3,204									3,205						3,205
Issuance of common stock, net	356,824		3			(3		)							—						—
Increase in ownership interest of noncontrolling interest						(513		)							(513		)	68			(445		)
Shares withheld for withholding taxes associated with common stock issuances	(127,297	)	(1		)	(10,569		)							(10,570		)				(10,570		)
Balance at June 30, 2019	105,971,464		$	1,059		$	1,373,213		$	(349,411	)	$	2,775,940		$	3,800,801		$	173,602		$	3,974,403

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												434,221			434,221			15,390			449,611
Other comprehensive loss									(76,011		)				(76,011		)	(77		)	(76,088		)
Cash dividends declared, $0.67 per common share												(73,540		)	(73,540		)	(14,756		)	(88,296		)
Cumulative adjustment from adoption of income tax standard update (Note 1)												(11,199		)	(11,199		)				(11,199		)
Stock-based compensation						10,728									10,728						10,728
Exercise of stock options	28,966		—			1,288									1,288						1,288
Shares repurchased	(2,354,133	)	(24		)	(249,976		)							(250,000		)				(250,000		)
Issuance of common stock, net	357,927		4			(4		)							—						—
Shares withheld for withholding taxes associated with common stock issuances	(138,071	)	(1		)	(16,459		)							(16,460		)				(16,460		)
Balance at June 30, 2018	108,441,363		$	1,084		$	1,609,526		$	(301,679	)	$	2,384,645		$	3,693,576		$	143,704		$	3,837,280

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)



	Six Months Ended June 30,
	2019			2018
Cash and cash equivalents at beginning of year	$	555,320		$	1,137,303
Cash flows from operating activities:
Net income	326,496			449,611
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	102,231			100,804
Gain on sale of business	—			(218,705		)
Gain on sale of property	(11,079		)	—
Stock-based compensation and other	10,136			8,076
Equity in net income of unconsolidated investments (net of tax)	(73,491		)	(39,646		)
Dividends received from unconsolidated investments and nonmarketable securities	60,291			30,045
Pension and postretirement expense (benefit)	1,055			(1,793		)
Pension and postretirement contributions	(7,778		)	(7,089		)
Unrealized gain on investments in marketable securities	(577		)	(625		)
Deferred income taxes	3,570			30,708
Working capital changes	(223,238		)	(91,189		)
Other, net	11,672			(36,340		)
Net cash provided by operating activities	199,288			223,857
Cash flows from investing activities:
Acquisitions, net of cash acquired	—			(7,643		)
Capital expenditures	(415,626		)	(280,945		)
Cash proceeds from divestitures, net	—			416,711
Proceeds from sale of property and equipment	10,356			—
Sales of marketable securities, net	908			(439		)
Investments in equity and other corporate investments	(2,549		)	(1,979		)
Net cash (used in) provided by investing activities	(406,911		)	125,705
Cash flows from financing activities:
Other borrowings (repayments), net	183,052			(211,833		)
Dividends paid to shareholders	(74,313		)	(72,484		)
Dividends paid to noncontrolling interests	(38,962		)	(7,378		)
Repurchases of common stock	—			(250,000		)
Proceeds from exercise of stock options	3,205			1,288
Withholding taxes paid on stock-based compensation award distributions	(10,570		)	(16,460		)
Other	(445		)	—
Net cash provided by (used in) financing activities	61,967			(556,867		)
Net effect of foreign exchange on cash and cash equivalents	(11,481		)	(21,854		)
Decrease in cash and cash equivalents	(157,137		)	(229,159		)
Cash and cash equivalents at end of period	$	398,183		$	908,144

See accompanying Notes to the Condensed Consolidated Financial Statements.

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 June 30, 2019 and December 31, 2018, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three-month and six-month periods ended June 30, 2019 and 2018 and our condensed consolidated statements of cash flows for the six-month periods ended June 30, 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 and six-month periods ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. The six-month period ended June 30, 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.

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

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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-month and six-month periods ended June 30, 2019 (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	8,381	$	17,802
Finance lease cost:
Amortization of right of use assets	136		314
Interest on lease liabilities	32		65
Total finance lease cost	168		379

Short-term lease cost	1,869		3,835
Variable lease cost	1,432		2,518
Total lease cost	$	11,850	$	24,534

Supplemental cash flow information related to our lease contracts for the six months ended June 30, 2019 is as follows (in thousands):



	Six Months Ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15,775
Operating cash flows from finance leases	65
Financing cash flows from finance leases	341
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	526

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 June 30, 2019 is as follows (in thousands, except as noted):



	June 30, 2019
Operating leases:
Other assets	$	124,872

Current operating lease liability	19,441
Other noncurrent liabilities	106,788
Total operating lease liabilities	126,229
Finance leases:
Net property, plant and equipment	4,089

Current portion of long-term debt	691
Long-term debt	3,459
Total finance lease liabilities	4,150
Weighted average remaining lease term (in years):
Operating leases	11.7
Finance leases	6.2
Weighted average discount rate (%):
Operating leases	3.87		%
Finance leases	2.89		%

Maturities of lease liabilities as of June 30, 2019 were as follows (in thousands):



	Operating Leases		Finance Leases
Remainder of 2019	$	12,495	$	408
2020	21,003		771
2021	12,685		682
2022	10,649		682
2023	10,246		682
Thereafter	93,748		1,364
Total lease payments	160,826		4,589
Less imputed interest	34,597		439
Total	$	126,229	$	4,150

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.

NOTE 3—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the six months ended June 30, 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	(626		)	—		(79		)	—		(705		)
Balance at June 30, 2019	$	1,354,153		$	20,319	$	185,406		$	6,586	$	1,566,464

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes the changes in other intangibles and related accumulated amortization for the six months ended June 30, 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 and other	940			(12		)	(46		)	(84		)	798
Balance at June 30, 2019	$	429,312		$	18,441		$	55,755		$	43,624		$	547,132
Accumulated Amortization
Balance at December 31, 2018	$	(95,797	)	$	(8,176	)	$	(35,248	)	$	(20,970	)	$	(160,191	)
Amortization	(11,695		)	—			(707		)	(1,319		)	(13,721		)
Foreign currency translation adjustments and other	(252		)	8			23			83			(138		)
Balance at June 30, 2019	$	(107,744	)	$	(8,168	)	$	(35,932	)	$	(22,206	)	$	(174,050	)
Net Book Value at December 31, 2018	$	332,575		$	10,277		$	20,553		$	22,738		$	386,143
Net Book Value at June 30, 2019	$	321,568		$	10,273		$	19,823		$	21,418		$	373,082


(a)	Net Book Value includes only indefinite-lived intangible assets.

NOTE 4—Income Taxes:

The effective income tax rate for the three-month and six-month periods ended June 30, 2019 was 18.2% and 21.2%, respectively, compared to 21.5% and 19.7% for the three-month and six-month periods ended June 30, 2018, respectively. 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-month and six-month periods ended June 30, 2019 and 2018 was impacted by a variety of factors, primarily stemming from the location in which income was earned. Income tax expense for the three-month and six-month periods ended June 30, 2018 included discrete tax adjustments of $42.0 million for the disposition of the polyolefin catalysts and components portion of our Performance Catalyst Solutions (“PCS”) business (“Polyolefin Catalysts Divestiture”) and $8.5 million for a valuation allowance recorded due to a foreign restructuring plan, partially offset by an $8.0 million benefit for tax accounting method changes. In addition, Income tax expense for the six-month period ended June 30, 2018 included 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.

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 and six-month periods ended June 30, 2019 and 2018 are calculated as follows (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Basic earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	154,198	$	302,461	$	287,767	$	434,221
Denominator:
Weighted-average common shares for basic earnings per share	105,961		109,671		105,880		110,176
Basic earnings per share	$	1.46	$	2.76	$	2.72	$	3.94

Diluted earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	154,198	$	302,461	$	287,767	$	434,221
Denominator:
Weighted-average common shares for basic earnings per share	105,961		109,671		105,880		110,176
Incremental shares under stock compensation plans	355		988		456		1,087
Weighted-average common shares for diluted earnings per share	106,316		110,659		106,336		111,263
Diluted earnings per share	$	1.45	$	2.73	$	2.71	$	3.90

At June 30, 2019, there were 214,904 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. On May 8, 2019, the Company declared a cash dividend of $0.3675 per share, which was paid on July 1, 2019 to shareholders of record at the close of business as of June 14, 2019. On July 24, 2019, the Company declared a cash dividend of $0.3675 per share, which is payable on October 1, 2019 to shareholders of record at the close of business as of September 13, 2019.

NOTE 6—Inventories:

The following table provides a breakdown of inventories at June 30, 2019 and December 31, 2018 (in thousands):



	June 30,		December 31,
	2019		2018
Finished goods^(a)	$	574,880	$	482,355
Raw materials and work in process^(b)	172,607		158,290
Stores, supplies and other	66,535		59,895
Total	$	814,022	$	700,540


(a)	Increase primarily due to the build-up of inventory in our Lithium and Catalysts segments to meet higher projected sales during the remainder of 2019.


(b)	Included $69.6 million and $71.4 million at June 30, 2019 and December 31, 2018, respectively, of work in process in our Lithium segment. Raw materials increased primarily in Lithium to meet higher projected sales during the remainder of 2019.

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 $358.7 million and $349.6 million at June 30, 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 $8.2 million and $8.1 million at June 30, 2019 and December 31, 2018, respectively. Our unconsolidated VIEs are reported in Investments on the condensed consolidated

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these 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—