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, 2021

OR

☐ 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):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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, 2021: 116,949,867

ALBEMARLE CORPORATION

INDEX – FORM 10-Q

		Page Number(s)
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income - Three and Six Months Ended June 30, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income - Three Months and Six Months Ended June 30, 2021 and 2020	4
	Condensed Consolidated Balance Sheets - June 30, 2021 and December 31, 2020	5
	Consolidated Statements of Changes in Equity - Three Months and Six Months Ended June 30, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2021 and 2020	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 6.	Exhibits	49
SIGNATURES		50
EXHIBITS

2

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,
	2021		2020		2021		2020
Net sales	$	773,896	$	764,049	$	1,603,187	$	1,502,894
Cost of goods sold	525,479		530,690		1,091,083		1,027,517
Gross profit	248,417		233,359		512,104		475,377
Selling, general and administrative expenses	121,516		106,949		214,703		208,826
Research and development expenses	13,976		14,210		28,612		30,307
Gain on sale of business	(429,408)		—		(429,408)		—
Operating profit	542,333		112,200		698,197		236,244
Interest and financing expenses	(7,152)		(17,852)		(51,034)		(34,737)
Other income (expense), net	14		(6,273)		11,326		2,041
Income before income taxes and equity in net income of unconsolidated investments	535,195		88,075		658,489		203,548
Income tax expense	106,985		15,431		129,092		33,873
Income before equity in net income of unconsolidated investments	428,210		72,644		529,397		169,675
Equity in net income of unconsolidated investments (net of tax)	17,998		31,114		34,509		57,718
Net income	446,208		103,758		563,906		227,393
Net income attributable to noncontrolling interests	(21,608)		(18,134)		(43,629)		(34,565)
Net income attributable to Albemarle Corporation	$	424,600	$	85,624	$	520,277	$	192,828
Basic earnings per share	$	3.63	$	0.81	$	4.54	$	1.81
Diluted earnings per share	$	3.62	$	0.80	$	4.51	$	1.81
Weighted-average common shares outstanding – basic	116,809		106,329		114,700		106,278
Weighted-average common shares outstanding – diluted	117,436		106,535		115,383		106,524

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	446,208	$	103,758	$	563,906	$	227,393
Other comprehensive income (loss), net of tax:
Foreign currency translation and other	20,564		62,855		(7,578)		(19,122)
Net investment hedge	—		(5,756)		5,110		(3,675)
Cash flow hedge	823		37,645		(777)		(13,815)
Interest rate swap	650		648		1,300		1,296
Total other comprehensive income (loss), net of tax	22,037		95,392		(1,945)		(35,316)
Comprehensive income	468,245		199,150		561,961		192,077
Comprehensive income attributable to noncontrolling interests	(21,532)		(18,168)		(43,553)		(34,645)
Comprehensive income attributable to Albemarle Corporation	$	446,713	$	180,982	$	518,408	$	157,432

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

	June 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	823,572	$	746,724
Trade accounts receivable, less allowance for doubtful accounts (2021 – $2,623; 2020 – $2,083)	455,222		530,838
Other accounts receivable	58,256		61,958
Inventories	732,563		750,237
Other current assets	81,741		116,427
Total current assets	2,151,354		2,206,184
Property, plant and equipment, at cost	7,596,684		7,427,641
Less accumulated depreciation and amortization	2,086,085		2,073,016
Net property, plant and equipment	5,510,599		5,354,625
Investments	907,080		656,244
Other assets	256,081		219,268
Goodwill	1,640,720		1,665,520
Other intangibles, net of amortization	331,092		349,105
Total assets	$	10,796,926	$	10,450,946
Liabilities And Equity
Current liabilities:
Accounts payable	$	535,153	$	483,221
Accrued expenses	317,954		440,763
Current portion of long-term debt	623		804,677
Dividends payable	45,428		40,937
Income taxes payable	85,770		32,251
Total current liabilities	984,928		1,801,849
Long-term debt	2,043,794		2,767,381
Postretirement benefits	47,371		48,075
Pension benefits	309,712		340,818
Other noncurrent liabilities	616,912		629,377
Deferred income taxes	428,438		394,852
Commitments and contingencies (Note 9)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 116,945 in 2021 and 106,842 in 2020	1,169		1,069
Additional paid-in capital	2,907,981		1,438,038
Accumulated other comprehensive loss	(328,001)		(326,132)
Retained earnings	3,584,400		3,155,252
Total Albemarle Corporation shareholders’ equity	6,165,549		4,268,227
Noncontrolling interests	200,222		200,367
Total equity	6,365,771		4,468,594
Total liabilities and equity	$	10,796,926	$	10,450,946

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In Thousands, Except Share Data)				Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Albemarle Shareholders’ Equity		Noncontrolling Interests		Total Equity
	Common Stock
	Shares	Amounts
Balance at April 1, 2021	116,718,175	$	1,167	$	2,889,923	$	(350,114)	$	3,205,408	$	5,746,384	$	196,169	$	5,942,553
Net income								424,600		424,600		21,608		446,208
Other comprehensive income (loss)						22,113				22,113		(76)		22,037
Cash dividends declared, $0.39 per common share								(45,608)		(45,608)		(17,479)		(63,087)
Stock-based compensation				5,104						5,104				5,104
Fees related to public issuance of common stock				(9)						(9)				(9)
Exercise of stock options	223,685	2		13,150						13,152				13,152
Issuance of common stock, net	3,783	—		—						—				—
Shares withheld for withholding taxes associated with common stock issuances	(1,132)	—		(187)						(187)				(187)
Balance at June 30, 2021	116,944,511	$	1,169	$	2,907,981	$	(328,001)	$	3,584,400	$	6,165,549	$	200,222	$	6,365,771
Balance at April 1, 2020	106,318,614	$	1,063	$	1,393,681	$	(526,489)	$	3,009,749	$	3,878,004	$	163,521	$	4,041,525
Net income								85,624		85,624		18,134		103,758
Other comprehensive income						95,358				95,358		34		95,392
Cash dividends declared, $0.385 per common share								(40,939)		(40,939)		—		(40,939)
Stock-based compensation				6,005						6,005				6,005
Exercise of stock options	10,940	—		614						614				614
Issuance of common stock, net	13,250	1		(1)						—				—
Shares withheld for withholding taxes associated with common stock issuances	(5,822)	—		(194)						(194)				(194)
Balance at June 30, 2020	106,336,982	$	1,064	$	1,400,105	$	(431,131)	$	3,054,434	$	4,024,472	$	181,689	$	4,206,161
Balance at January 1, 2021	106,842,369	$	1,069	$	1,438,038	$	(326,132)	$	3,155,252	$	4,268,227	$	200,367	$	4,468,594
Net income								520,277		520,277		43,629		563,906
Other comprehensive loss						(1,869)				(1,869)		(76)		(1,945)
Cash dividends declared, $0.78 per common share								(91,129)		(91,129)		(43,698)		(134,827)
Stock-based compensation				9,778						9,778				9,778
Fees related to public issuance of common stock				(911)						(911)				(911)
Exercise of stock options	241,649	2		14,333						14,335				14,335
Issuance of common stock, net	9,906,090	99		1,453,789						1,453,888				1,453,888
Shares withheld for withholding taxes associated with common stock issuances	(45,597)	(1)		(7,046)						(7,047)				(7,047)
Balance at June 30, 2021	116,944,511	$	1,169	$	2,907,981	$	(328,001)	$	3,584,400	$	6,165,549	$	200,222	$	6,365,771
Balance at January 1, 2020	106,040,215	$	1,061	$	1,383,446	$	(395,735)	$	2,943,478	$	3,932,250	$	161,330	$	4,093,580
Net income								192,828		192,828		34,565		227,393
Other comprehensive (loss) income						(35,396)				(35,396)		80		(35,316)
Cash dividends declared, $0.77 per common share								(81,872)		(81,872)		(14,286)		(96,158)
Stock-based compensation				9,872						9,872				9,872
Exercise of stock options	204,477	2		10,807						10,809				10,809
Issuance of common stock, net	145,570	2		(2)						—				—
Shares withheld for withholding taxes associated with common stock issuances	(53,280)	(1)		(4,018)						(4,019)				(4,019)
Balance at June 30, 2020	106,336,982	$	1,064	$	1,400,105	$	(431,131)	$	3,054,434	$	4,024,472	$	181,689	$	4,206,161

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Cash and cash equivalents at beginning of year	$	746,724	$	613,110
Cash flows from operating activities:
Net income	563,906		227,393
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	123,683		111,535
Gain on sale of business	(429,408)		—
Stock-based compensation and other	8,425		9,765
Equity in net income of unconsolidated investments (net of tax)	(34,509)		(57,718)
Dividends received from unconsolidated investments and nonmarketable securities	27,420		12,984
Pension and postretirement benefit	(8,465)		(3,312)
Pension and postretirement contributions	(20,266)		(6,692)
Unrealized gain on investments in marketable securities	(2,384)		(1,278)
Loss on early extinguishment of debt	28,955		—
Deferred income taxes	27,708		8,990
Working capital changes	7,942		(156,579)
Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL	96,185		87,750
Other, net	(3,339)		(24,921)
Net cash provided by operating activities	385,853		207,917
Cash flows from investing activities:
Acquisitions, net of cash acquired	—		(22,572)
Capital expenditures	(396,915)		(418,991)
Cash proceeds from divestitures, net	290,467		—
Sales of marketable securities, net	4,553		1,496
Investments in equity and other corporate investments	(286)		(486)
Net cash used in investing activities	(102,181)		(440,553)
Cash flows from financing activities:
Proceeds from issuance of common stock	1,453,888		—
Repayments of long-term debt and credit agreements	(1,173,823)		—
Proceeds from borrowings of credit agreements	—		452,163
Other debt repayments, net	(325,316)		12,956
Fees related to early extinguishment of debt	(24,877)		—
Dividends paid to shareholders	(86,637)		(79,909)
Dividends paid to noncontrolling interests	(43,698)		(14,286)
Proceeds from exercise of stock options	14,335		10,809
Withholding taxes paid on stock-based compensation award distributions	(7,047)		(4,019)
Other	(1,359)		(2,669)
Net cash (used in) provided by financing activities	(194,534)		375,045
Net effect of foreign exchange on cash and cash equivalents	(12,290)		(18,823)
Increase in cash and cash equivalents	76,848		123,586
Cash and cash equivalents at end of period	$	823,572	$	736,696

See accompanying Notes to the Condensed Consolidated Financial Statements.

7

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, 2021 and December 31, 2020, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three- and six-month periods ended June 30, 2021 and 2020 and our condensed consolidated statements of cash flows for the six-month periods ended June 30, 2021 and 2020. Income tax expense for the six-month period ended June 30, 2021 includes expense of $7.9 million due to the correction of an out-of-period error regarding an overstated deferred tax liability for the three-month period ended December 31, 2017. The Company does not believe this adjustment is material to the consolidated financial statements for the six-month period ended June 30, 2021, or the three-month period or year ended December 31, 2017. 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, 2020, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on February 19, 2021. The December 31, 2020 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, 2021 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the accompanying condensed consolidated financial statements and the notes thereto to conform to the current presentation.

The current novel coronavirus (“COVID-19”) pandemic is having an impact on overall global economic conditions. While we have not seen a material impact to our operations to date, the ultimate impact on our business will depend on the length and severity of the outbreak throughout the world. The Company has taken, and plans to continue to take, certain measures to maintain financial flexibility while still protecting our employees and customers.

NOTE 2—Divestitures:

On June 1, 2021, the Company completed the sale of its fine chemistry services (“FCS”) business to W. R. Grace & Co. (“Grace”) for proceeds of approximately $570 million, consisting of $300 million in cash and the issuance to Albemarle of preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue payment-in-kind (“PIK”) dividends at an annual rate of 12% beginning two years after issuance.

As part of the transaction, Grace acquired our manufacturing facilities located in South Haven, Michigan and Tyrone, Pennsylvania. The sale of the FCS business reflects the Company’s commitment to investing in its core, growth-oriented business segments. During the three-month period ended June 30, 2021 we recorded a gain of $429.4 million ($331.6 million after taxes) related to the sale of this business.

We determined that this business met the assets held for sale criteria in accordance with ASC 360, Property, Plant and Equipment during the first quarter of 2021. The results of operations of the business classified as held for sale, through June 1, 2021, are included in the consolidated statements of income. This business did not qualify for discontinued operations treatment because the Company’s management does not consider the sale as representing a strategic shift that had or will have a major effect on the Company’s operations and financial results.

NOTE 3—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the six months ended June 30, 2021 (in thousands):

	Lithium		Bromine Specialties		Catalysts		All Other		Total
Balance at December 31, 2020	$	1,441,781	$	20,319	$	196,834	$	6,586	$	1,665,520
Divestitures(a)	—		—		—		(6,586)		(6,586)
Foreign currency translation adjustments	(14,297)		—		(3,917)		—		(18,214)
Balance at June 30, 2021	$	1,427,484	$	20,319	$	192,917	$	—	$	1,640,720

8

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(a)    Represents goodwill of the FCS business. See Note 2, “Divestitures,” for additional information.

The following table summarizes the changes in other intangibles and related accumulated amortization for the six months ended June 30, 2021 (in thousands):

	Customer Lists and Relationships		Trade Names and Trademarks(a)		Patents and Technology		Other		Total
Gross Asset Value
Balance at December 31, 2020	$	448,748	$	18,710	$	58,096	$	39,864	$	565,418
Divestitures(b)	—		—		—		(1,473)		(1,473)
Foreign currency translation adjustments and other	(7,465)		(227)		(154)		(240)		(8,086)
Balance at June 30, 2021	$	441,283	$	18,483	$	57,942	$	38,151	$	555,859
Accumulated Amortization
Balance at December 31, 2020	$	(147,286)	$	(8,176)	$	(39,500)	$	(21,351)	$	(216,313)
Amortization	(11,615)		—		(731)		(454)		(12,800)
Divestitures(b)	—		—		—		1,457		1,457
Foreign currency translation adjustments and other	2,400		60		345		84		2,889
Balance at June 30, 2021	$	(156,501)	$	(8,116)	$	(39,886)	$	(20,264)	$	(224,767)
Net Book Value at December 31, 2020	$	301,462	$	10,534	$	18,596	$	18,513	$	349,105
Net Book Value at June 30, 2021	$	284,782	$	10,367	$	18,056	$	17,887	$	331,092

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

(b)    Represents other intangibles of the FCS business. See Note 2, “Divestitures,” for additional information.

NOTE 4—Income Taxes:

The effective income tax rate for the three-month and six-month periods ended June 30, 2021 was 20.0% and 19.6% compared to 17.5% and 16.6% for the three-month and six-month periods ended June 30, 2020, respectively. The six-month period ended June 30, 2021 includes discrete tax benefits related to the release of a foreign valuation allowance, excess tax benefits realized from stock-based compensation arrangements, and the revaluation of deferred taxes due to tax rate changes, offset by tax expense due to an out-of-period adjustment regarding an overstated deferred tax liability recorded during the three-month period ended December 31, 2017. 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, 2021 and June 30, 2020 was impacted by a variety of factors, primarily stemming from the location in which income was earned. In addition, 2021 includes a $97.8 million tax expense recorded for the gain on the sale of the FCS business, partially offset by a benefit from foreign rate differences primarily 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.

9

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, 2021 and 2020 are calculated as follows (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	424,600	$	85,624	$	520,277	$	192,828
Denominator:
Weighted-average common shares for basic earnings per share	116,809		106,329		114,700		106,278
Basic earnings per share	$	3.63	$	0.81	$	4.54	$	1.81
Diluted earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	424,600	$	85,624	$	520,277	$	192,828
Denominator:
Weighted-average common shares for basic earnings per share	116,809		106,329		114,700		106,278
Incremental shares under stock compensation plans	627		206		683		246
Weighted-average common shares for diluted earnings per share	117,436		106,535		115,383		106,524
Diluted earnings per share	$	3.62	$	0.80	$	4.51	$	1.81

On February 8, 2021, we completed an underwritten public offering of 8,496,773 shares of our common stock, par value $0.01 per share, at a price to the public of $153.00 per share. The Company also granted to the underwriters an option to purchase up to an additional 1,274,509 shares, which was exercised. The total gross proceeds from this offering were approximately $1.5 billion, before deducting expenses, underwriting discounts and commissions. The net proceeds were used for debt repayments and general corporate purposes. See Note 8, “Long-Term Debt,” for further details.

On May 4, 2021, the Company declared a cash dividend of $0.39, an increase from the prior year regular quarterly dividend. This dividend was paid on July 1, 2021 to shareholders of record at the close of business as of June 11, 2021. On July 20, 2021, the Company declared a cash dividend of $0.39 per share, which is payable on October 1, 2021 to shareholders of record at the close of business as of September 17, 2021.

NOTE 6—Inventories:

The following table provides a breakdown of inventories at June 30, 2021 and December 31, 2020 (in thousands):

	June 30,		December 31,
	2021		2020
Finished goods	$	432,084	$	454,162
Raw materials and work in process(a)	224,560		219,896
Stores, supplies and other	75,919		76,179
Total	$	732,563	$	750,237

(a)Included $142.6 million and $129.6 million at June 30, 2021 and December 31, 2020, respectively, of work in process in our Lithium segment.

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 $485.9 million and $479.6 million at June 30, 2021 and December 31, 2020, respectively. The Company’s aggregate net investment in all other entities

10

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

which it considers to be VIEs for which the Company is not the primary beneficiary was $8.1 million and $8.0 million at June 30, 2021 and December 31, 2020, respectively. Our unconsolidated VIEs are reported in Investments on the condensed consolidated 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.

As part of the proceeds from the sale of the FCS business on June 1, 2021, Grace issued Albemarle preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue PIK dividends at an annual rate of 12% beginning two years after issuance. This preferred equity has a fair value of $244.5 million at June 30, 2021, which is reported in Investments in the condensed consolidated balance sheets.

NOTE 8—Long-Term Debt:

Long-term debt at June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

	June 30,		December 31,
	2021		2020
1.125% notes due 2025	$	450,103	$	610,800
1.625% notes due 2028	596,750		610,800
1.875% Senior notes due 2021	—		480,007
3.45% Senior notes due 2029	171,612		300,000
4.15% Senior notes due 2024	425,000		425,000
5.45% Senior notes due 2044	350,000		350,000
Floating rate notes	—		200,000
Credit facilities	—		223,900
Commercial paper notes	—		325,000
Variable-rate foreign bank loans	7,222		7,702
Finance lease obligations	58,792		59,181
Unamortized discount and debt issuance costs	(15,062)		(20,332)
Total long-term debt	2,044,417		3,572,058
Less amounts due within one year	623		804,677
Long-term debt, less current portion	$	2,043,794	$	2,767,381

In the first quarter of 2021, the Company made the following debt principal payments using proceeds from the February 2021 underwritten public offering of common stock:

•€123.8 million of the 1.125% notes due in November 2025

•€393.0 million, the remaining balance, of the 1.875% Senior notes originally due in December 2021

•$128.4 million of the 3.45% Senior notes due in November 2029

•$200.0 million, the remaining balance, of the floating rate notes originally due in November 2022

•€183.3 million, the outstanding balance, of the unsecured credit facility originally entered into on August 14, 2019, as amended and restated on December 15, 2020

•$325.0 million, the outstanding balance, of the commercial paper notes

As a result, included in Interest and financing expenses for the three-month and six-month period ended June 30, 2021 is a loss on early extinguishment of debt of $1.2 million and $29.0 million, respectively, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of this debt.

Prior to repayment in the first quarter of 2021, the carrying value of our 1.875% Euro-denominated senior notes was designated as an effective hedge of our net investment in certain foreign subsidiaries where the Euro serves as the functional

11

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

currency, and gains or losses on the revaluation of these senior notes to our reporting currency were recorded in accumulated other comprehensive loss. Upon repayment of these notes, this net investment hedge was discontinued. The balance of foreign exchange revaluation gains and losses associated with this discontinued net investment hedge will remain within accumulated other comprehensive loss until the hedged net investment is sold or liquidated. Prior to the net investment hedge being discontinued, we recorded a gain of $5.1 million (net of income taxes) in 2021, and during the three-month and six-month periods ended June 30, 2020 we recorded losses of $5.8 million and $3.7 million (net of income taxes), respectively in accumulated other comprehensive loss.

NOTE 9—Commitments and Contingencies:

Environmental

We had the following activity in our recorded environmental liabilities for the six months ended June 30, 2021 (in thousands):

Beginning balance at December 31, 2020	$	45,771
Expenditures	(879)
Accretion of discount	483
Additions and changes in estimates	1,576
Foreign currency translation adjustments and other	(408)
Ending balance at June 30, 2021	46,543
Less amounts reported in Accrued expenses	9,582
Amounts reported in Other noncurrent liabilities	$	36,961

Environmental remediation liabilities included discounted liabilities of $38.7 million and $39.2 million at June 30, 2021 and December 31, 2020, respectively, discounted at rates with a weighted-average of 3.5%, and with the undiscounted amount totaling $72.3 million and $73.6 million at June 30, 2021 and December 31, 2020, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.

The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, could be an additional $10 million to $37 million before income taxes in excess of amounts already recorded. The variability of this range is primarily driven by possible environmental remediation activity at a formerly owned site where we indemnify the buyer through a set cutoff date in 2024.

We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.

Litigation

We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.

As previously reported in 2018, following receipt of information regarding potential improper payments being made by third party sales representatives of our Refining Solutions business, within our Catalysts segment, we promptly retained outside counsel and forensic accountants to investigate potential violations of the Company’s Code of Conduct, the Foreign Corrupt

12

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Practices Act and other potentially applicable laws. Based on this internal investigation, we have voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business, within our Catalysts segment, to the U.S. Department of Justice (“DOJ”), SEC, and the Dutch Public Prosecutor (“DPP”), and are cooperating with the DOJ, SEC, and DPP in their review of these matters. In connection with our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures.

At this time, we are unable to predict the duration, scope, result or related costs associated with any investigations by the DOJ, SEC, or DPP. We are unable to predict what, if any, action may be taken by the DOJ, SEC, or DPP, or what penalties or remedial actions they may seek to impose. Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses. We do not believe, however, that any fines, penalties, disgorgement, equitable relief or other losses would have a material adverse effect on our financial condition or liquidity.

Indemnities

We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.

The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $28.3 million and $30.5 million at June 30, 2021 and December 31, 2020, respectively, recorded in Other noncurrent liabilities, primarily related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold.

Other

We have contracts with certain of our customers which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis, as well as blanket coverage of multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.

NOTE 10—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.

13

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

The following table provides details of our lease contracts for the three-month and six-month periods ended June 30, 2021 and 2020 (in thousands):

Three Months Ended
June 30,