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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 September 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 October 31, 2019: 106,033,033

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 Nine Months Ended September 30, 2019 and 2018	3

	Consolidated Statements of Comprehensive Income - Three Months and Nine Months Ended September 30, 2019 and 2018	4

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

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

	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2019 and 2018	7

	Notes to the Condensed Consolidated Financial Statements	8-25

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25-42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net sales	$	879,747		$	777,748		$	2,596,863		$	2,453,251
Cost of goods sold	569,880			497,211			1,677,596			1,556,379
Gross profit	309,867			280,537			919,267			896,872
Selling, general and administrative expenses	108,135			100,167			348,205			325,174
Research and development expenses	15,585			16,610			44,024			53,670
Gain on sale of business	—			—			—			(218,705		)
Operating profit	186,147			163,760			527,038			736,733
Interest and financing expenses	(11,108		)	(12,988		)	(35,295		)	(39,834		)
Other (expenses) income, net	(11,316		)	3,793			(7,090		)	(31,906		)
Income before income taxes and equity in net income of unconsolidated investments	163,723			154,565			484,653			664,993
Income tax expense	25,341			33,167			93,266			133,630
Income before equity in net income of unconsolidated investments	138,382			121,398			391,387			531,363
Equity in net income of unconsolidated investments (net of tax)	33,236			22,081			106,727			61,727
Net income	171,618			143,479			498,114			593,090
Net income attributable to noncontrolling interests	(16,548		)	(13,734		)	(55,277		)	(29,124		)
Net income attributable to Albemarle Corporation	$	155,070		$	129,745		$	442,837		$	563,966
Basic earnings per share	$	1.46		$	1.21		$	4.18		$	5.16
Diluted earnings per share	$	1.46		$	1.20		$	4.16		$	5.11
Weighted-average common shares outstanding – basic	105,999			107,315			105,920			109,223
Weighted-average common shares outstanding – diluted	106,299			108,302			106,324			110,276

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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income	$	171,618		$	143,479		$	498,114		$	593,090
Other comprehensive (loss) income, net of tax:
Foreign currency translation	(100,069		)	(9,549		)	(100,380		)	(95,515		)
Pension and postretirement benefits	(5		)	11			8			37
Net investment hedge	12,745			(3,621		)	13,012			4,947
Interest rate swap	641			642			1,923			1,926
Total other comprehensive loss, net of tax	(86,688		)	(12,517		)	(85,437		)	(88,605		)
Comprehensive income	84,930			130,962			412,677			504,485
Comprehensive income attributable to noncontrolling interests	(16,426		)	(13,729		)	(55,135		)	(29,042		)
Comprehensive income attributable to Albemarle Corporation	$	68,504		$	117,233		$	357,542		$	475,443

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)



	September 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	317,823		$	555,320
Trade accounts receivable, less allowance for doubtful accounts (2019 – $4,391; 2018 – $4,460)	637,037			605,712
Other accounts receivable	86,556			52,059
Inventories	802,434			700,540
Other current assets	125,902			84,790
Total current assets	1,969,752			1,998,421
Property, plant and equipment, at cost	5,406,123			4,799,063
Less accumulated depreciation and amortization	1,882,086			1,777,979
Net property, plant and equipment	3,524,037			3,021,084
Investments	551,657			528,722
Other assets	200,858			80,135
Goodwill	1,534,241			1,567,169
Other intangibles, net of amortization	361,058			386,143
Total assets	$	8,141,603		$	7,581,674
Liabilities And Equity
Current liabilities:
Accounts payable	$	527,052		$	522,516
Accrued expenses	273,709			257,323
Current portion of long-term debt	539,960			307,294
Dividends payable	38,678			35,169
Current operating lease liability	24,606			—
Income taxes payable	17,238			60,871
Total current liabilities	1,421,243			1,183,173
Long-term debt	1,381,984			1,397,916
Postretirement benefits	45,752			46,157
Pension benefits	272,345			285,396
Other noncurrent liabilities	618,822			526,942
Deferred income taxes	393,120			382,982
Commitments and contingencies (Note 9)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 106,031 in 2019 and 105,616 in 2018	1,060			1,056
Additional paid-in capital	1,379,419			1,368,897
Accumulated other comprehensive loss	(435,977		)	(350,682		)
Retained earnings	2,892,057			2,566,050
Total Albemarle Corporation shareholders’ equity	3,836,559			3,585,321
Noncontrolling interests	171,778			173,787
Total equity	4,008,337			3,759,108
Total liabilities and equity	$	8,141,603		$	7,581,674

See accompanying Notes to the Condensed Consolidated Financial Statements.

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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 June 30, 2019	105,971,464		$	1,059		$	1,373,213		$	(349,411	)	$	2,775,940		$	3,800,801		$	173,602		$	3,974,403
Net income												155,070			155,070			16,548			171,618
Other comprehensive loss									(86,566		)				(86,566		)	(122		)	(86,688		)
Cash dividends declared, $0.3675 per common share												(38,953		)	(38,953		)	(18,250		)	(57,203		)
Stock-based compensation						4,802									4,802						4,802
Exercise of stock options	36,000		1			1,608									1,609						1,609
Issuance of common stock, net	26,489		—			—									—						—
Shares withheld for withholding taxes associated with common stock issuances	(2,865	)	—			(204		)							(204		)				(204		)
Balance at September 30, 2019	106,031,088		$	1,060		$	1,379,419		$	(435,977	)	$	2,892,057		$	3,836,559		$	171,778		$	4,008,337

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
Net income												129,745			129,745			13,734			143,479
Other comprehensive loss									(12,512		)				(12,512		)	(5		)	(12,517		)
Cash dividends declared, $0.335 per common share												(35,679		)	(35,679		)				(35,679		)
Stock-based compensation						3,287									3,287						3,287
Exercise of stock options	42,683		1			1,013									1,014						1,014
Shares repurchased	(2,311,485	)	(23		)	(249,977		)							(250,000		)				(250,000		)
Issuance of common stock, net	20,079		—			—									—						—
Shares withheld for withholding taxes associated with common stock issuances	(6,137	)	—			(587		)							(587		)				(587		)
Balance at September 30, 2018	106,186,503		$	1,062		$	1,363,262		$	(314,191	)	$	2,478,711		$	3,528,844		$	157,433		$	3,686,277

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												442,837			442,837			55,277			498,114
Other comprehensive loss									(85,295		)				(85,295		)	(142		)	(85,437		)
Cash dividends declared, $1.1025 per common share												(116,830		)	(116,830		)	(57,212		)	(174,042		)
Stock-based compensation						16,999									16,999						16,999
Exercise of stock options	161,909		2			4,812									4,814						4,814
Issuance of common stock, net	383,313		3			(3		)							—						—
Increase in ownership interest of noncontrolling interest						(513		)							(513		)	68			(445		)
Shares withheld for withholding taxes associated with common stock issuances	(130,162	)	(1		)	(10,773		)							(10,774		)				(10,774		)
Balance at September 30, 2019	106,031,088		$	1,060		$	1,379,419		$	(435,977	)	$	2,892,057		$	3,836,559		$	171,778		$	4,008,337

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												563,966			563,966			29,124			593,090
Other comprehensive loss									(88,523		)				(88,523		)	(82		)	(88,605		)
Cash dividends declared, $1.005 per common share												(109,219		)	(109,219		)	(14,756		)	(123,975		)
Cumulative adjustment from adoption of income tax standard update (Note 1)												(11,199		)	(11,199		)				(11,199		)
Stock-based compensation						14,015									14,015						14,015
Exercise of stock options	71,649		1			2,301									2,302						2,302
Shares repurchased	(4,665,618	)	(47		)	(499,953		)							(500,000		)				(500,000		)
Issuance of common stock, net	378,006		4			(4		)							—						—
Shares withheld for withholding taxes associated with common stock issuances	(144,208	)	(1		)	(17,046		)							(17,047		)				(17,047		)
Balance at September 30, 2018	106,186,503		$	1,062		$	1,363,262		$	(314,191	)	$	2,478,711		$	3,528,844		$	157,433		$	3,686,277

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)



	Nine Months Ended September 30,
	2019			2018
Cash and cash equivalents at beginning of year	$	555,320		$	1,137,303
Cash flows from operating activities:
Net income	498,114			593,090
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	156,718			150,511
Gain on sale of business	—			(218,705		)
Gain on sale of property	(11,079		)	—
Stock-based compensation and other	15,169			11,785
Equity in net income of unconsolidated investments (net of tax)	(106,727		)	(61,727		)
Dividends received from unconsolidated investments and nonmarketable securities	62,982			32,794
Pension and postretirement expense (benefit)	1,641			(2,708		)
Pension and postretirement contributions	(10,728		)	(11,068		)
Unrealized gain on investments in marketable securities	(1,701		)	(1,615		)
Deferred income taxes	7,726			43,400
Working capital changes	(289,587		)	(131,813		)
Other, net	23,110			(27,003		)
Net cash provided by operating activities	345,638			376,941
Cash flows from investing activities:
Acquisitions, net of cash acquired	—			(11,403		)
Capital expenditures	(608,456		)	(471,675		)
Cash proceeds from divestitures, net	—			413,479
Proceeds from sale of property and equipment	10,356			—
Sales of (investments in) marketable securities, net	1,177			(761		)
Investments in equity and other corporate investments	(2,569		)	(5,346		)
Net cash used in investing activities	(599,492		)	(75,706		)
Cash flows from financing activities:
Other borrowings (repayments), net	232,183			(134,505		)
Dividends paid to shareholders	(113,321		)	(108,922		)
Dividends paid to noncontrolling interests	(57,212		)	(14,756		)
Repurchases of common stock	—			(500,000		)
Proceeds from exercise of stock options	4,814			2,302
Withholding taxes paid on stock-based compensation award distributions	(10,774		)	(17,047		)
Other	(445		)	—
Net cash provided by (used in) financing activities	55,245			(772,928		)
Net effect of foreign exchange on cash and cash equivalents	(38,888		)	(24,384		)
Decrease in cash and cash equivalents	(237,497		)	(496,077		)
Cash and cash equivalents at end of period	$	317,823		$	641,226

See accompanying Notes to the Condensed Consolidated Financial Statements.

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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 September 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 nine-month periods ended September 30, 2019 and 2018 and our condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2019 and 2018. Cost of goods sold for the three-month period ended September 30, 2019 includes expense of $7.0 million due to the correction of an out-of-period error regarding carbonate inventory values related to the three-month period ended June 30, 2019. The Company does not believe this adjustment is material to the consolidated financial statements for the three- or nine-month periods ended September 30, 2019, or the three- or six-month periods ended June 30, 2019. All other 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 nine-month periods ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year. The nine-month period ended September 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.

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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-month and nine-month periods ended September 30, 2019 (in thousands):



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	7,939	$	25,741
Finance lease cost:
Amortization of right of use assets	157		471
Interest on lease liabilities	31		96
Total finance lease cost	188		567

Short-term lease cost	2,587		6,422
Variable lease cost	1,541		4,059
Total lease cost	$	12,255	$	36,789

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



	Nine Months Ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	22,486
Operating cash flows from finance leases	96
Financing cash flows from finance leases	509
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	21,578

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



	September 30, 2019
Operating leases:
Other assets	$	138,222

Current operating lease liability	24,606
Other noncurrent liabilities	116,590
Total operating lease liabilities	141,196
Finance leases:
Net property, plant and equipment	3,793

Current portion of long-term debt	660
Long-term debt	3,174
Total finance lease liabilities	3,834
Weighted average remaining lease term (in years):
Operating leases	11.4
Finance leases	6.0
Weighted average discount rate (%):
Operating leases	3.85		%
Finance leases	2.88		%

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



	Operating Leases		Finance Leases
Remainder of 2019	$	7,318	$	197
2020	25,982		745
2021	14,843		657
2022	12,870		657
2023	12,349		657
Thereafter	105,536		1,313
Total lease payments	178,898		4,226
Less imputed interest	37,702		392
Total	$	141,196	$	3,834

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 nine months ended September 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	(25,992		)	—		(6,936		)	—		(32,928		)
Balance at September 30, 2019	$	1,328,787		$	20,319	$	178,549		$	6,586	$	1,534,241

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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 nine months ended September 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	(8,094		)	(304		)	(1,217		)	1,807			(7,808		)
Balance at September 30, 2019	$	420,278		$	18,149		$	54,584		$	45,515		$	538,526
Accumulated Amortization
Balance at December 31, 2018	$	(95,797	)	$	(8,176	)	$	(35,248	)	$	(20,970	)	$	(160,191	)
Amortization	(17,453		)	—			(1,091		)	(1,965		)	(20,509		)
Foreign currency translation adjustments and other	1,994			104			686			448			3,232
Balance at September 30, 2019	$	(111,256	)	$	(8,072	)	$	(35,653	)	$	(22,487	)	$	(177,468	)
Net Book Value at December 31, 2018	$	332,575		$	10,277		$	20,553		$	22,738		$	386,143
Net Book Value at September 30, 2019	$	309,022		$	10,077		$	18,931		$	23,028		$	361,058


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

NOTE 4—Income Taxes:

The effective income tax rate for the three-month and nine-month periods ended September 30, 2019 was 15.5% and 19.2%, respectively, compared to 21.5% and 20.1% for the three-month and nine-month periods ended September 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 nine-month periods ended September 30, 2019 and 2018 was impacted by a variety of factors, primarily stemming from the location in which income was earned. For the three-month and nine-month periods ended September 30, 2019, this was mainly attributable to our share of the income of our Jordan Bromine Company Limited (“JBC”) joint venture, a Free Zones company under the laws of the Hashemite Kingdom of Jordan. Income tax expense for the three-month period ended September 30, 2018 included discrete tax expenses of $1.9 million from stock-based compensation arrangements and $1.7 million related to the accounting for the U.S. Tax Cuts and Jobs Act (“TCJA”), partially offset by discrete tax benefits of $2.0 million from foreign accrual to return adjustments and $1.2 million from the release of foreign valuation allowances. Income tax expense for the nine-month period ended September 30, 2018 included discrete tax expenses 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 $7.3 million for adjustments to foreign valuation allowances, partially offset by discrete tax benefits of $8.0 million for tax accounting method changes, $4.8 million for adjustments related to accounting for the TCJA, $5.4 million from stock-based compensation arrangements and $2.0 million from foreign accrual to return adjustments.

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Basic earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	155,070	$	129,745	$	442,837	$	563,966
Denominator:
Weighted-average common shares for basic earnings per share	105,999		107,315		105,920		109,223
Basic earnings per share	$	1.46	$	1.21	$	4.18	$	5.16

Diluted earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	155,070	$	129,745	$	442,837	$	563,966
Denominator:
Weighted-average common shares for basic earnings per share	105,999		107,315		105,920		109,223
Incremental shares under stock compensation plans	300		987		404		1,053
Weighted-average common shares for diluted earnings per share	106,299		108,302		106,324		110,276
Diluted earnings per share	$	1.46	$	1.20	$	4.16	$	5.11

At September 30, 2019, there were 226,872 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 July 24, 2019, the Company declared a cash dividend of $0.3675 per share, which was paid on October 1, 2019 to shareholders of record at the close of business as of September 13, 2019. On October 29, 2019, the Company declared a cash dividend of $0.3675 per share, which is payable on January 2, 2020 to shareholders of record at the close of business as of December 13, 2019.

NOTE 6—Inventories:

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



	September 30,		December 31,
	2019		2018
Finished goods^(a)(b)	$	561,981	$	482,355
Raw materials and work in process^(c)	173,973