Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation

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 March 31, 2013 and December 31, 2012, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three-month periods ended March 31, 2013 and 2012 and our condensed consolidated statements of cash flows for the three-month periods ended March 31, 2013 and 2012. 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, 2012, which was filed with the Securities and Exchange Commission (SEC) on February 15, 2013. The December 31, 2012 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 period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the accompanying consolidated financial statements and the notes thereto to conform to the current presentation.

Change in accounting principle regarding pension and other postretirement benefits

During 2012, we elected to change our method of accounting for actuarial gains and losses relating to our global pension and other postretirement benefit (OPEB) plans. Previously, we recognized actuarial gains and losses from our pension and OPEB plans in our consolidated balance sheets as Accumulated other comprehensive income (loss) within shareholders’ equity, with amortization of these gains and losses that exceed 10 percent of the greater of plan assets or projected benefit obligations recognized each quarter in our consolidated statements of income over the average future service period of active employees. Under the new method of accounting, referred to as mark-to-market accounting, these gains and losses will be recognized annually in our consolidated statements of income in the fourth quarter and whenever a plan is determined to qualify for a remeasurement during a fiscal year. The remaining components of pension and OPEB plan expense, primarily service cost, interest cost and expected return on assets, will be recorded on a quarterly basis. The gain/loss subject to amortization and expected return on assets components of our pension expense has historically been calculated using a five-year smoothing of asset gains and losses referred to as the market-related value. Under mark-to-market accounting, the market-related value of assets will equal the actual market value as of the date of measurement. While our historical policy of recognizing pension and OPEB plan expense is considered acceptable under U.S. GAAP, we believe that the new policy is preferable as it eliminates the delay in recognizing gains and losses within operating results. This change will also improve transparency within our operating results by immediately recognizing the effects of economic and interest rate trends on plan investments and assumptions in the year these gains and losses are actually incurred. This change in accounting principle has been applied retrospectively, adjusting all prior periods presented.

The impact of this accounting policy change on Albemarle’s consolidated financial statements for the three-month period ended March 31, 2012 is summarized below:

Consolidated Statements of Income

Three Months Ended March 31, 2012 (In Thousands, Except Per Share Amounts)	As Previously Reported			Effect of Accounting Change			As Adjusted
Net sales	$	711,704		$	—		$	711,704
Cost of goods sold		463,817			(3,093	)		460,724
Gross profit		247,887			3,093			250,980
Selling, general and administrative expenses		80,692			(6,688	)		74,004
Research and development expenses		19,049			—			19,049
Operating profit		148,146			9,781			157,927
Interest and financing expenses		(8,734	)		—			(8,734	)
Other expenses, net		(118	)		—			(118	)
Income before income taxes and equity in net income of unconsolidated investments		139,294			9,781			149,075
Income tax expense		35,466			3,562			39,028
Income before equity in net income of unconsolidated investments		103,828			6,219			110,047
Equity in net income of unconsolidated investments (net of tax)		8,586			—			8,586
Net income	$	112,414		$	6,219		$	118,633
Net income attributable to noncontrolling interests		(4,371	)		—			(4,371	)
Net income attributable to Albemarle Corporation	$	108,043		$	6,219		$	114,262
Basic earnings per share	$	1.21		$	0.07		$	1.28
Diluted earnings per share	$	1.20		$	0.07		$	1.27
Weighted-average common shares outstanding – basic		88,997			—			88,997
Weighted-average common shares outstanding – diluted		89,947			—			89,947
Cash dividends declared per share of common stock	$	0.20		$	—		$	0.20

Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2012 (In Thousands)	As Previously Reported			Effect of Accounting Change			As Adjusted
Net income	$	112,414		$	6,219		$	118,633
Other comprehensive income (loss), net of tax:
Foreign currency translation		29,012			—			29,012
Pension and postretirement benefits		6,039			(6,219	)		(180	)
Other		35			—			35
Total other comprehensive income, net of tax		35,086			(6,219	)		28,867
Comprehensive income		147,500			—			147,500
Comprehensive income attributable to non-controlling interests		(4,516	)		—			(4,516	)
Comprehensive income attributable to Albemarle Corporation	$	142,984		$	—		$	142,984

Consolidated Statements of Changes In Equity

Three Months Ended March 31, 2012 (In Thousands)	As Previously Reported			Effect of Accounting Change			As Adjusted
Accumulated other comprehensive (loss) income:
Balance at January 1, 2012	$	(222,922	)	$	283,251		$	60,329
Other comprehensive income		34,941			(6,219	)		28,722
Balance at March 31, 2012	$	(187,981	)	$	277,032		$	89,051
Retained earnings:
Balance at January 1, 2012	$	1,798,117		$	(283,251	)	$	1,514,866
Net income		108,043			6,219			114,262
Cash dividends declared		(17,824	)		—			(17,824	)
Balance at March 31, 2012	$	1,888,336		$	(277,032	)	$	1,611,304

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2012 (In Thousands)	As Previously Reported		Effect of Accounting Change			As Adjusted
Cash flows from operating activities:
Net income	$	112,414	$	6,219		$	118,633
Pension and postretirement expense		10,024		(9,781	)		243
Deferred income taxes		7,238		3,562			10,800