Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

 

FORM 10-Q

 

 

 

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

For Quarterly Period Ended March 31, 2013

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.)

451 FLORIDA STREET

BATON ROUGE, LOUISIANA

  70801
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code - (225) 388-8011

 

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Number of shares of common stock, $.01 par value, outstanding as of April 10, 2013: 87,844,521

 

 

 


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 Ended March 31, 2013 and 2012

     3   
  

Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2013 and 2012

     4   
  

Condensed Consolidated Balance Sheets – March 31, 2013 and December 31, 2012

     5   
  

Consolidated Statements of Changes in Equity – Three Months Ended March 31, 2013 and 2012

     6   
  

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2013 and 2012

     7   
  

Notes to the Condensed Consolidated Financial Statements

     8-19   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     20-31   

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

     31   

Item 4.

  

Controls and Procedures

     32   

PART II.

  

OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

     32   

Item 1A.

  

Risk Factors

     32   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     32   

Item 6.

  

Exhibits

     33   

SIGNATURES

     34   

EXHIBITS

  

 

2


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
March 31,
 
     2013     2012  

Net sales

   $ 641,625      $ 711,704   

Cost of goods sold

     442,035        460,724   
  

 

 

   

 

 

 

Gross profit

     199,590        250,980   

Selling, general and administrative expenses

     64,750        74,004   

Research and development expenses

     19,953        19,049   
  

 

 

   

 

 

 

Operating profit

     114,887        157,927   

Interest and financing expenses

     (5,231     (8,734

Other expenses, net

     (4,209     (118
  

 

 

   

 

 

 

Income before income taxes and equity in net income of unconsolidated investments

     105,447        149,075   

Income tax expense

     26,192        39,028   
  

 

 

   

 

 

 

Income before equity in net income of unconsolidated investments

     79,255        110,047   

Equity in net income of unconsolidated investments (net of tax)

     10,261        8,586   
  

 

 

   

 

 

 

Net income

     89,516        118,633   

Net income attributable to noncontrolling interests

     (5,529     (4,371
  

 

 

   

 

 

 

Net income attributable to Albemarle Corporation

   $ 83,987      $ 114,262   
  

 

 

   

 

 

 

Basic earnings per share

   $ 0.95      $ 1.28   
  

 

 

   

 

 

 

Diluted earnings per share

   $ 0.94      $ 1.27   
  

 

 

   

 

 

 

Weighted-average common shares outstanding – basic

     88,719        88,997   
  

 

 

   

 

 

 

Weighted-average common shares outstanding – diluted

     89,236        89,947   
  

 

 

   

 

 

 

Cash dividends declared per share of common stock

   $ 0.24      $ 0.20   
  

 

 

   

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

3


Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  

Net income

   $ 89,516      $ 118,633   
  

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

    

Foreign currency translation

     (33,909     29,012   

Pension and postretirement benefits

     (74     (180

Other

     32        35   
  

 

 

   

 

 

 

Total other comprehensive (loss) income, net of tax

     (33,951     28,867   
  

 

 

   

 

 

 

Comprehensive income

     55,565        147,500   

Comprehensive income attributable to non-controlling interests

     (5,833     (4,516
  

 

 

   

 

 

 

Comprehensive income attributable to Albemarle Corporation

   $ 49,732      $ 142,984   
  

 

 

   

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

4


Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

     March 31,
2013
     December 31,
2012
 

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 434,904       $ 477,696   

Trade accounts receivable, less allowance for doubtful accounts (2013 – $1,553; 2012 – $1,641)

     407,823         378,973   

Other accounts receivable

     47,133         43,844   

Inventories

     433,061         428,145   

Other current assets

     80,579         78,655   
  

 

 

    

 

 

 

Total current assets

     1,403,500         1,407,313   
  

 

 

    

 

 

 

Property, plant and equipment, at cost

     2,850,731         2,818,604   

Less accumulated depreciation and amortization

     1,532,972         1,522,033   
  

 

 

    

 

 

 

Net property, plant and equipment

     1,317,759         1,296,571   

Investments

     215,900         207,141   

Other assets

     151,742         154,836   

Goodwill

     269,714         276,966   

Other intangibles, net of amortization

     91,830         94,464   
  

 

 

    

 

 

 

Total assets

   $ 3,450,445       $ 3,437,291   
  

 

 

    

 

 

 

Liabilities And Equity

     

Current liabilities:

     

Accounts payable

   $ 207,496       $ 172,866   

Accrued expenses

     189,166         177,546   

Current portion of long-term debt

     9,228         12,700   

Dividends payable

     20,889         17,471   

Income taxes payable

     7,472         4,426   
  

 

 

    

 

 

 

Total current liabilities

     434,251         385,009   
  

 

 

    

 

 

 

Long-term debt

     686,592         686,588   

Postretirement benefits

     60,341         60,815   

Pension benefits

     194,485         195,481   

Other noncurrent liabilities

     106,276         114,022   

Deferred income taxes

     66,260         63,368   

Commitments and contingencies (Note 8)

     

Equity:

     

Albemarle Corporation shareholders’ equity:

     

Common stock, $.01 par value, issued and outstanding – 88,081 in 2013 and 88,899 in 2012

     881         889   

Additional paid-in capital

     2,007         2,761   

Accumulated other comprehensive income

     51,009         85,264   

Retained earnings

     1,744,100         1,744,684   
  

 

 

    

 

 

 

Total Albemarle Corporation shareholders’ equity

     1,797,997         1,833,598   
  

 

 

    

 

 

 

Noncontrolling interests

     104,243         98,410   
  

 

 

    

 

 

 

Total equity

     1,902,240         1,932,008   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 3,450,445       $ 3,437,291   
  

 

 

    

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

(In Thousands, Except Share Data)

  Common Stock    

Additional

Paid-in

   

Accumulated

Other
Comprehensive

    Retained
Earnings
    Total
Albemarle
Shareholders’
Equity
    Non-
controlling
Interests
    Total
Equity
 
  Shares     Amounts     Capital     Income          

Balance at January 1, 2013

    88,899,209      $ 889      $ 2,761      $ 85,264      $ 1,744,684      $ 1,833,598      $ 98,410      $ 1,932,008   

Net income

            83,987        83,987        5,529        89,516   

Other comprehensive (loss) income

          (34,255       (34,255     304        (33,951

Cash dividends declared

            (21,226     (21,226       (21,226

Stock-based compensation and other

        2,237            2,237          2,237   

Exercise of stock options

    64,368        1        1,719            1,720          1,720   

Shares repurchased

    (1,013,650     (10     (1,167       (63,345     (64,522       (64,522

Tax benefit related to stock plans

        1,901            1,901          1,901   

Issuance of common stock, net

    216,113        2        (2         —            —     

Shares withheld for withholding taxes associated with common stock issuances

    (85,488     (1     (5,442         (5,443       (5,443
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

    88,080,552      $ 881      $ 2,007      $ 51,009      $ 1,744,100      $ 1,797,997      $ 104,243      $ 1,902,240   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2012

    88,841,240      $ 888      $ 15,194      $ 60,329      $ 1,514,866      $ 1,591,277      $ 87,550      $ 1,678,827   

Net income

            114,262        114,262        4,371        118,633   

Other comprehensive income

          28,722          28,722        145        28,867   

Cash dividends declared

            (17,824     (17,824     (7,629     (25,453

Stock-based compensation and other

        6,114            6,114          6,114   

Exercise of stock options

    149,101        2        2,567            2,569          2,569   

Tax benefit related to stock plans

        4,544            4,544          4,544   

Issuance of common stock, net

    280,117        3        (3         —            —     

Shares withheld for withholding taxes associated with common stock issuances

    (101,957     (1     (6,726         (6,727       (6,727
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

    89,168,501      $ 892      $ 21,690      $ 89,051      $ 1,611,304      $ 1,722,937      $ 84,437      $ 1,807,374   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  

Cash and cash equivalents at beginning of year

   $ 477,696      $ 469,416   
  

 

 

   

 

 

 

Cash flows from operating activities:

    

Net income

     89,516        118,633   

Adjustments to reconcile net income to cash flows from operating activities:

    

Depreciation and amortization

     25,244        24,235   

Stock-based compensation

     2,513        6,926   

Excess tax benefits realized from stock-based compensation arrangements

     (1,901     (4,544

Equity in net income of unconsolidated investments (net of tax)

     (10,261     (8,586

Dividends received from unconsolidated investments and nonmarketable securities

     559        4,183   

Pension and postretirement expense

     1,582        243   

Pension and postretirement contributions

     (1,741     (2,527

Unrealized gain on investments in marketable securities

     (1,037     (1,262

Deferred income taxes

     6,506        10,800   

Working capital changes

     (12,641     (32,728

Other, net

     311        8,171   
  

 

 

   

 

 

 

Net cash provided by operating activities

     98,650        123,544   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures

     (55,335     (54,784

Cash payments related to acquisitions and other

     —          (134

Sales of (investments in) marketable securities, net

     821        (1,113
  

 

 

   

 

 

 

Net cash used in investing activities

     (54,514     (56,031
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of long-term debt

     (3,604     (7,149

Dividends paid to shareholders

     (17,808     (15,578

Repurchases of common stock

     (60,798     —     

Proceeds from exercise of stock options

     1,720        2,569   

Excess tax benefits realized from stock-based compensation arrangements

     1,901        4,544   

Withholding taxes paid on stock-based compensation award distributions

     (5,443     (6,516
  

 

 

   

 

 

 

Net cash used in financing activities

     (84,032     (22,130
  

 

 

   

 

 

 

Net effect of foreign exchange on cash and cash equivalents

     (2,896     4,560   
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (42,792     49,943   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 434,904      $ 519,359   
  

 

 

   

 

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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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 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   
  

 

 

   

 

 

   

 

 

 

 

8


Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

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   

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

NOTE 2—Foreign Exchange:

Our consolidated statements of income include foreign exchange transaction losses of $4.8 million and $1.8 million for the three-month periods ended March 31, 2013 and 2012, respectively.

NOTE 3—Income Taxes:

The effective income tax rate for the first quarter of 2013 was 24.8% compared to 26.2% for the first quarter of 2012. The Company’s effective income tax rate fluctuates based on, among other factors, our level and location of income. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the 2013 and 2012 periods is mainly due to the impact of earnings from outside the U.S.

NOTE 4—Earnings Per Share:

Basic and diluted earnings per share for the three-month periods ended March 31, 2013 and 2012 are calculated as follows:

 

     Three Months Ended
March 31,
 
     2013      2012  
     (In thousands, except per share amounts)  

Basic earnings per share

     

Numerator:

     

Net income attributable to Albemarle Corporation

   $ 83,987       $ 114,262   
  

 

 

    

 

 

 

Denominator:

     

Weighted-average common shares for basic earnings per share

     88,719         88,997   
  

 

 

    

 

 

 

Basic earnings per share

   $ 0.95       $ 1.28   
  

 

 

    

 

 

 

Diluted earnings per share

     

Numerator:

     

Net income attributable to Albemarle Corporation

   $ 83,987       $ 114,262   
  

 

 

    

 

 

 

Denominator:

     

Weighted-average common shares for basic earnings per share

     88,719         88,997   

Incremental shares under stock compensation plans

     517         950   
  

 

 

    

 

 

 

Total shares

     89,236         89,947   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 0.94       $ 1.27   
  

 

 

    

 

 

 

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

On February 12, 2013, the Company increased the regular quarterly dividend by 20% to $0.24 per share and declared a cash dividend of said amount for the first quarter of 2013, which was paid on April 1, 2013 to shareholders of record at the close of business as of March 15, 2013.

On February 12, 2013, our Board of Directors authorized an increase in the number of shares the Company is permitted to repurchase under our share repurchase program, pursuant to which the Company is now permitted to repurchase up to a maximum of 15 million shares, including those shares previously authorized but not yet repurchased. During the three-month period ended March 31, 2013, we repurchased 1,013,650 shares of our common stock for $64.5 million pursuant to the terms of our share repurchase program. As of March 31, 2013, there were 13,986,350 shares available for repurchase under our authorized share repurchase program.

NOTE 5—Inventories:

The following table provides a breakdown of inventories at March 31, 2013 and December 31, 2012:

 

     March 31,
2013
     December 31,
2012
 
     (In thousands)  

Finished goods

   $ 331,885       $ 325,762   

Raw materials

     56,293         57,245   

Stores, supplies and other

     44,883         45,138   
  

 

 

    

 

 

 

Total inventories

   $ 433,061       $ 428,145   
  

 

 

    

 

 

 

NOTE 6—Investments:

The carrying value of our unconsolidated investment in Stannica LLC, a variable interest entity for which we are not the primary beneficiary, was $6.4 million and $6.6 million at March 31, 2013 and December 31, 2012, respectively. Our maximum exposure to loss in connection with our continuing involvement with Stannica LLC is limited to our investment carrying value.

NOTE 7—Long-Term Debt:

Long-term debt at March 31, 2013 and December 31, 2012 consisted of the following:

 

     March 31,
2013
     December 31,
2012
 
     (In thousands)  

5.10% Senior notes, net of unamortized discount of $61 at March 31, 2013 and $70 at December 31, 2012

   $ 324,939       $ 324,930   

4.50% Senior notes, net of unamortized discount of $2,421 at March 31, 2013 and $2,500 at December 31, 2012

     347,579         347,500   

Fixed rate foreign borrowings

     19,488         19,458   

Variable-rate foreign bank loans

     3,511         7,006   

Miscellaneous

     303         394   
  

 

 

    

 

 

 

Total long-term debt

     695,820         699,288   

Less amounts due within one year

     9,228         12,700   
  

 

 

    

 

 

 

Long-term debt, less current portion

   $ 686,592       $ 686,588   
  

 

 

    

 

 

 

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

NOTE 8—Commitments and Contingencies:

We had the following activity in our recorded environmental liabilities for the three months ended March 31, 2013, as follows (in thousands):

 

Beginning balance at December 31, 2012

   $ 20,322   

Expenditures

     (258

Changes in estimates recorded to earnings and other

     50   

Foreign currency translation

     (929
  

 

 

 

Ending balance at March 31, 2013

     19,185   

Less amounts reported in Accrued expenses

     9,715   
  

 

 

 

Amounts reported in Other noncurrent liabilities

   $ 9,470   
  

 

 

 

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, in excess of amounts already recorded, could be up to approximately $15 million before income taxes.

Approximately $7.5 million of our recorded liability is related to the closure and post-closure activities at a former landfill associated with our Bergheim, Germany site, which was recorded at the time of our acquisition of this site in 2001. This closure project has been approved under the authority of the governmental permit for this site and is scheduled for completion in 2017, with post-closure monitoring to occur for 30 years thereafter. The remainder of our recorded liability is associated with sites that are being evaluated under governmental authority but for which final remediation plans have not yet been approved. In connection with the remediation activities at our Bergheim, Germany site as required by the German environmental authorities, we have pledged certain of our land and housing facilities at this site which has an estimated fair value of $5.7 million.

During the second quarter of 2012, the Company recorded $8.7 million in estimated site remediation liabilities at our Avonmouth, United Kingdom site as part of the charges associated with our exit of the phosphorus flame retardant business. Included in these estimated charges are anticipated costs of site investigation, remediation and cleanup activities. We are in the process of reviewing our investigation and remediation plans with local government authorities. Based on current information about site conditions, we anticipate this investigation and remediation program will be substantially completed during 2014.

We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded should occur over a period of time and should 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.

On July 3, 2006, we received a Notice of Violation (the 2006 NOV) from the U.S. Environmental Protection Agency Region 4 (EPA) regarding the implementation of the Pharmaceutical Maximum Achievable Control Technology standards at our plant in Orangeburg, South Carolina. The alleged violations involve (i) the applicability of the specific regulations to certain intermediates manufactured at the plant, (ii) failure to comply with certain reporting requirements, (iii) improper evaluation and testing to properly implement the regulations and (iv) the sufficiency of the leak detection and repair program at the plant. In the second quarter of 2011, the Company was served with a complaint by the EPA in the U.S. District Court for the District of South Carolina, based on the alleged violations set out in the 2006 NOV seeking civil penalties and injunctive relief. The complaint was subsequently amended to add the State of South Carolina as a plaintiff. We intend to vigorously defend this action. Any settlement or finding adverse to us could result in the payment by us of fines, penalties, capital expenditures or some combination thereof. At this time, it is not possible to predict with any certainty the outcome of this litigation or the financial impact which may result therefrom. However, we do not expect any financial impact to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

In addition, 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 as estimated by our general counsel for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.

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 customer supply contracts that are executed through certain financial institutions. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.

NOTE 9—Operating Segments:

Segment income represents operating profit (adjusted for significant non-recurring items) and equity in net income of unconsolidated investments and is reduced by net income attributable to noncontrolling interests. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.

Summarized financial information concerning our reportable segments is shown in the following table. Corporate & other includes corporate-related items not allocated to the reportable segments.

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  
     (In thousands)  

Net sales:

    

Polymer Solutions

   $ 214,774      $ 228,131   

Catalysts

     235,573        293,522   

Fine Chemistry

     191,278        190,051   
  

 

 

   

 

 

 

Total net sales

   $ 641,625      $ 711,704   
  

 

 

   

 

 

 

Segment operating profit:

    

Polymer Solutions

   $ 43,670      $ 54,547   

Catalysts

     49,045        76,641   

Fine Chemistry

     36,178        44,363   
  

 

 

   

 

 

 

Total segment operating profit

     128,893        175,551   
  

 

 

   

 

 

 

Equity in net income of unconsolidated investments:

    

Polymer Solutions

     2,308        1,845   

Catalysts

     7,953        6,741   

Fine Chemistry

     —          —     

Corporate & other

     —          —     
  

 

 

   

 

 

 

Total equity in net income of unconsolidated investments

     10,261        8,586   
  

 

 

   

 

 

 

Net (income) loss attributable to noncontrolling interests:

    

Polymer Solutions

     (708     (1,002

Catalysts

     —          —     

Fine Chemistry

     (4,821     (3,372

Corporate & other

     —          3   
  

 

 

   

 

 

 

Total net income attributable to noncontrolling interests

     (5,529     (4,371
  

 

 

   

 

 

 

Segment income:

    

Polymer Solutions

     45,270        55,390   

Catalysts

     56,998        83,382   

Fine Chemistry

     31,357        40,991   
  

 

 

   

 

 

 

Total segment income

     133,625        179,763   

Corporate & other

     (14,006     (17,621

Interest and financing expenses

     (5,231     (8,734

Other expenses, net

     (4,209     (118

Income tax expense

     (26,192     (39,028
  

 

 

   

 

 

 

Net income attributable to Albemarle Corporation

   $ 83,987      $ 114,262   
  

 

 

   

 

 

 

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

NOTE 10—Pension Plans and Other Postretirement Benefits:

The following information is provided for domestic and foreign pension and postretirement defined benefit plans:

 

     Three Months Ended
March 31,
 
     2013     2012  
     (In thousands)  

Net Periodic Pension Benefit Cost (Credit):

    

Service cost

   $ 3,642      $ 3,173   

Interest cost

     7,218        8,211   

Expected return on assets

     (9,872     (11,630

Amortization of prior service benefit

     (49     (261
  

 

 

   

 

 

 

Total net periodic pension benefit cost (credit)

   $ 939      $ (507
  

 

 

   

 

 

 

Net Periodic Postretirement Benefit Cost (Credit):

    

Service cost

   $ 83      $ 50   

Interest cost

     688        850   

Expected return on assets

     (103     (125

Amortization of prior service benefit

     (25     (25
  

 

 

   

 

 

 

Total net periodic postretirement benefit cost

   $ 643      $ 750   
  

 

 

   

 

 

 

Total net periodic pension and postretirement benefit cost

   $ 1,582      $ 243   
  

 

 

   

 

 

 

During the three-month periods ended March 31, 2013 and 2012, we made contributions of $0.6 million and $1.4 million, respectively, to our qualified and nonqualified pension plans.

We paid $1.1 million in premiums to the U.S. postretirement benefit plan during each of the three-month periods ended March 31, 2013 and 2012.

NOTE 11—Fair Value of Financial Instruments:

In assessing the fair value of financial instruments, we use methods and assumptions that are based on market conditions and other risk factors existing at the time of assessment. Fair value information for our financial instruments is as follows:

Long-Term Debt – The carrying value of long-term debt reported in the accompanying condensed consolidated balance sheets, with the exception of the 4.50% and 5.10% senior notes and the foreign currency denominated debt at Jordan Bromine Company Limited, approximates fair value as substantially all of the long-term debt bears interest based on prevailing variable market rates currently available in the countries in which we have borrowings. The fair values of the 4.50% and 5.10% senior notes are estimated using Level 1 inputs and account for the majority of the difference between the recorded amount and fair value of our long-term debt.

 

     March 31, 2013      December 31, 2012  
     Recorded
Amount
     Fair Value      Recorded
Amount
     Fair Value  
     (In thousands)  

Long-term debt

   $ 695,820       $ 754,802       $ 699,288       $ 764,784   

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

Foreign Currency Forward Contracts – we enter into foreign currency forward contracts in connection with our risk management strategies in an attempt to minimize the financial impact of changes in foreign currency exchange rates. These derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes. The fair values of our foreign currency forward contracts are estimated based on current settlement values. At March 31, 2013 and December 31, 2012, we had outstanding foreign currency forward contracts with notional values totaling $236.5 million and $274.0 million, respectively. At March 31, 2013, $0.3 million was included in Other accounts receivable associated with the fair value of our foreign currency forward contracts. At December 31, 2012, $0.3 million was included in Other accounts receivable and $0.8 million was included in Accrued expenses associated with the fair value of our foreign currency forward contracts.

Gains and losses on foreign currency forward contracts are recognized currently in Other income (expenses), net; further, fluctuations in the value of these contracts are generally offset by the changes in the value of the underlying exposures being hedged. For the three-month periods ended March 31, 2013 and 2012, we recognized (losses) gains of $(4.7) million and $1.3 million, respectively, in Other income (expenses), net in our consolidated statements of income related to the change in the fair value of our foreign currency forward contracts. These amounts are substantially offset by changes in the value of the underlying exposures being hedged which are also reported in Other income (expenses), net. Also, for the three-month periods ended March 31, 2013 and 2012, we recorded $4.7 million and $(1.3) million, respectively, related to the change in the fair value of our foreign currency forward contracts, and cash settlements of $(5.5) million and $0.4 million, respectively, in Other, net in our condensed consolidated statements of cash flows.

NOTE 12—Fair Value Measurement:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:

 

Level 1    Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2    Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3    Unobservable inputs for the asset or liability

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 (in thousands):

 

     March 31,
2013
     Quoted Prices in
Active Markets

for Identical
Items
(Level 1)
     Quoted Prices in
Active Markets

for Similar Items
(Level 2)
 

Assets:

        

Investments under executive deferred compensation plan (a)

   $ 20,483       $ 20,483       $ —     

Equity securities (b)

   $ 22       $ 22       $ —     

Foreign currency forward contracts (c)

   $ 251       $ —         $ 251   

Liabilities:

        

Obligations under executive deferred compensation plan (a)

   $ 20,483       $ 20,483       $ —     

Foreign currency forward contracts (c)

   $ 13       $ —         $ 13   

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

     December 31,
2012
     Quoted Prices in
Active Markets
for Identical
Items

(Level 1)
     Quoted Prices in
Active Markets
for Similar Items

(Level 2)
 

Assets:

        

Investments under executive deferred compensation plan (a)

   $ 20,265       $ 20,265       $ —     

Equity securities (b)

   $ 25       $ 25       $ —     

Foreign currency forward contracts (c)

   $ 262       $ —         $ 262   

Liabilities:

        

Obligations under executive deferred compensation plan (a)

   $ 20,265       $ 20,265       $ —     

Foreign currency forward contracts (c)

   $ 771       $ —         $ 771   

 

(a)

We maintain an Executive Deferred Compensation Plan (EDCP) that was adopted in 2001 and subsequently amended. The purpose of the EDCP is to provide current tax planning opportunities as well as supplemental funds upon the retirement or death of certain of our employees. The EDCP is intended to aid in attracting and retaining employees of exceptional ability by providing them with these benefits. We also maintain a Benefit Protection Trust (the Trust) that was created to provide a source of funds to assist in meeting the obligations of the EDCP, subject to the claims of our creditors in the event of our insolvency. Assets of the Trust are consolidated in accordance with authoritative guidance. The assets of the Trust consist primarily of mutual fund investments (which are accounted for as trading securities and are marked-to-market on a monthly basis through the consolidated statements of income) and cash and cash equivalents. As such, these assets and obligations are classified within Level 1.

(b)

Our investments in equity securities are classified as available-for-sale and are reported in Investments in the condensed consolidated balance sheets. The changes in fair value are reported in Other in our consolidated statements of comprehensive income. These securities are classified within Level 1.

(c) 

As a result of our global operating and financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from interest and foreign currency exchange rate fluctuations through the use of derivative financial instruments. The foreign currency forward contracts are valued using broker quotations or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within Level 2.

NOTE 13—Restructuring and Other

We had the following activity in our recorded workforce reduction liabilities for the three months ended March 31, 2013 (in thousands):

 

Beginning balance at December 31, 2012

   $ 15,898   

Workforce reduction charges

     —     

Payments

     (2,533

Amount reversed to income

     (362

Foreign currency translation

     (448
  

 

 

 

Ending balance at March 31, 2013

     12,555   

Less amounts reported in Accrued expenses

     11,348   
  

 

 

 

Amounts reported in Other noncurrent liabilities

   $ 1,207   
  

 

 

 

The quarter ended March 31, 2012 includes a gain of $8.1 million ($5.1 million after income taxes) resulting from proceeds received in connection with the settlement of certain commercial litigation (net of estimated reimbursement of related legal fees of approximately $0.9 million). The litigation involved claims and cross-claims relating to alleged breaches of a purchase and sale agreement. The settlement resolved all outstanding issues and claims between the parties and they agreed to dismiss all outstanding litigation and release all existing and potential claims against each other that were or could have been asserted in the litigation. The quarter ended March 31, 2012 also includes an $8 million ($5.1 million after income taxes) charitable contribution to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and operate. These items are included in our consolidated Selling, general and administrative expenses for the three months ended March 31, 2012.

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

NOTE 14—Accumulated Other Comprehensive Income:

The components and activity in Accumulated other comprehensive income (net of deferred income taxes) consisted of the following during the three months ended March 31, 2013 (in thousands):

 

     Foreign
Currency
Translation
    Pension
and Post-
Retirement
Benefits(a)
    Other     Total  

Balance at December 31, 2012

   $ 85,117      $ 989      $ (842   $ 85,264   

Other comprehensive (loss) income before reclassifications

     (33,909     —          (2     (33,911

Amounts reclassified from accumulated other comprehensive income

     —          (74     34        (40
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

     (33,909     (74     32        (33,951
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income attributable to noncontrolling interests

     (304     —          —          (304
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2013

   $ 50,904      $ 915      $ (810   $ 51,009   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Amounts reclassified from accumulated other comprehensive income consist of amortization of prior service benefit. See Note 10, “Pension Plans and Other Postretirement Benefits.”

The amount of income tax (expense) benefit allocated to each component of Other comprehensive (loss) income for the three-month periods ended March 31, 2013 and 2012 is provided in the following (in thousands):

 

     Three Months Ended March 31,  
     2013     2012  
     Foreign
Currency
Translation
    Pension
and Post-
retirement
Benefits
    Other     Foreign
Currency
Translation
     Pension
and Post-
retirement
Benefits
    Other  

Other comprehensive (loss) income, before tax

   $ (34,252   $ (74   $ 52      $ 28,920       $ (286   $ 55   

Income tax benefit (expense)

     343        —          (20     92         106        (20
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

   $ (33,909   $ (74   $ 32      $ 29,012       $ (180   $ 35   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

NOTE 15—Recently Issued Accounting Pronouncements:

In December 2011, the Financial Accounting Standards Board (FASB) issued accounting guidance that requires entities to disclose information about financial instruments (including derivatives) and transactions eligible for offset in the statement of financial position or subject to an agreement similar to a master netting arrangement. In January 2013, the FASB issued additional guidance that limits the scope of these new requirements to certain derivatives, repurchase agreements and reverse repurchase agreements and securities borrowing and lending transactions. These amendments became effective on January 1, 2013 and had no impact on our consolidated financial statements.

In February 2013, the FASB issued accounting guidance that requires companies to present either in a single note or on the face of the financial statements the effect of significant amounts reclassified from each component of accumulated other comprehensive income, and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, companies instead cross reference to the related footnote for additional information. These amendments became effective for us on January 1, 2013 and did not have a material impact on our consolidated financial statements.

In February 2013, the FASB issued accounting guidance that requires entities that have obligations resulting from joint and several liability arrangements and for which the total amount is fixed at the reporting date to measure such obligations as the sum of (a) the amount the entity agreed to pay on the basis of its arrangement among its co-obligors, and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Entities are also required to disclose the nature, amount and any other relevant information about such obligations. This accounting guidance will

 

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ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements – (Continued)

(Unaudited)

 

become effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and should be applied retrospectively to all prior periods presented for obligations that exist at the beginning of an entity’s fiscal year of adoption. We are assessing the impact of these new requirements on our financial statements.

In March 2013, the FASB issued accounting guidance that clarifies a parent company’s accounting for the cumulative foreign currency translation adjustment when the parent sells a part or all of its investment in a foreign entity. The guidance clarifies that the sale of an investment in a foreign entity includes both (a) events that result in the loss of a controlling financial interest in a foreign entity, and (b) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative foreign currency translation adjustment should be released into net income upon the occurrence of those events. This accounting guidance will become effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and should be applied prospectively to derecognition events occurring after the effective date. We are assessing the impact of these new requirements on our financial statements.

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is a discussion and analysis of our financial condition and results of operations since December 31, 2012. A discussion of consolidated financial condition and sources of additional capital is included under a separate heading “Financial Condition and Liquidity” on page 28.

Forward-looking Statements

Some of the information presented in this Quarterly Report on Form 10-Q, including the documents incorporated by reference, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on our current expectations, which are in turn based on assumptions that we believe are reasonable based on our current knowledge of our business and operations. We have used words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and variations of such words and similar expressions to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, there can be no assurance that our actual results will not differ materially from the results and expectations expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, without limitation:

 

   

changes in economic and business conditions;

 

   

changes in financial and operating performance of our major customers, industries and markets served by us;

 

   

the timing of orders received from customers;

 

   

the gain or loss of significant customers;

 

   

competition from other manufacturers;

 

   

changes in the demand for our products;

 

   

limitations or prohibitions on the manufacture and sale of our products;

 

   

availability of raw materials;

 

   

changes in the cost of raw materials and energy, and our ability to pass through such increases;

 

   

acquisitions and divestitures, and changes in performance of acquired companies;

 

   

changes in our markets in general;

 

   

fluctuations in foreign currencies;

 

   

changes in laws and government regulation of our operations or our products;

 

   

the occurrence of claims or litigation;

 

   

the occurrence of natural disasters;

 

   

the inability to maintain current levels of product or premises liability insurance or the denial of such coverage;

 

   

political unrest affecting the global economy, including adverse effects from terrorism or hostilities;

 

   

political instability affecting our manufacturing operations or joint ventures;

 

   

changes in accounting standards;

 

   

the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs;

 

   

changes in jurisdictional mix of our earnings and changes in tax laws and rates;

 

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changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations;

 

   

volatility and substantial uncertainties in the debt and equity markets;

 

   

technology or intellectual property infringement; and

 

   

the other factors detailed from time to time in the reports we file with the SEC.

We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. The following discussion should be read together with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Overview

We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals that meet customer needs across an exceptionally diverse range of end markets including the petroleum refining, consumer electronics, plastics/packaging, construction, automotive, lubricants, pharmaceuticals, crop protection, food safety and custom chemistry services markets. We are committed to global sustainability and are advancing responsible eco-practices and solutions in our three business segments. We believe that our commercial and geographic diversity, technical expertise, innovative capability, flexible, low cost global manufacturing base, experienced management team and strategic focus on our core base technologies will enable us to maintain leading market positions in those areas of the specialty chemicals industry in which we operate.

Secular trends favorably impacting demand within the end markets that we serve combined with our diverse product portfolio, broad geographic presence and customer-focused solutions will continue to be key drivers to our future earnings growth. We continue to build upon our existing green solutions portfolio and our ongoing mission to provide innovative, yet commercially viable, clean energy products and services to the marketplace. We believe our disciplined cost reduction efforts, ongoing productivity improvements and strong balance sheet will position us well to take advantage of strengthening economic conditions as they occur while softening the negative impact of the current challenging economic environment.

First Quarter 2013

During the first quarter of 2013:

 

   

We achieved quarterly earnings of $0.94 per share (on a diluted basis), down 26% from first quarter 2012 results.

 

   

Our net sales for the quarter were $641.6 million, down 10% from net sales of $711.7 million in the first quarter of 2012.

 

   

Our quarterly dividend was increased to $0.24 per share of common stock ($0.96 annually).

 

   

Our Board of Directors authorized an increase in the number of shares the Company is permitted to repurchase under our share repurchase program, pursuant to which the Company is now permitted to repurchase up to a maximum of 15 million shares, including those shares previously authorized but not yet repurchased. We repurchased approximately 1.0 million shares of our common stock pursuant to the terms of our share repurchase program.

 

   

Jordan Bromine Company Limited (JBC), our consolidated joint venture with operations in Safi, Jordan, completed its first phase of expansion which doubles the site’s bromine production capacity. The second phase of the expansion will double the current capacity of key bromine derivatives, hydrobromic acid, calcium bromide and sodium bromide, and is scheduled for commissioning in May 2013.

 

   

We approved and began a $30 million expansion project at our Tyrone, Pennsylvania manufacturing site to add new capacity for custom manufacturing projects. The first increment of new capacity is expected to be operational in the second half of 2014.

 

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Outlook

As we expected, current dynamics in both the global economy and in select businesses have resulted in continued headwinds as we entered 2013, and could potentially continue to impact our results beyond the first quarter. Despite the current trends, our business fundamentals are sound and we are strategically well-positioned as we remain focused on increasing sales volumes, managing costs and delivering value to our customers. We believe that when the end markets we serve begin to stabilize and resume growth, our businesses will respond quickly to the improved market conditions and new business opportunities.

Polymer Solutions: Sales volumes in many of our core products were favorable in the first quarter of 2013 compared to the prior year quarter, offset by lower prices in our Flame Retardants and Additives businesses. In spite of this, year-over-year revenue was still down, driven mainly by our exit of the phosphorus flame retardants business in the second quarter of 2012. We closely monitor customer order patterns and other key indicators in our business, some of which show trends that indicate the current pace of business could continue beyond the first quarter of 2013. These trends, should they continue, will likely have adverse impacts on our net sales and profitability, including impacts from operating our production assets below optimum levels.

Despite these current trends and concerns, we believe that the combination of solid, long-term business fundamentals with our competitive position, product innovations and effective management of raw material inflation will enable our business to manage through periods of end market challenges and to capitalize on opportunities that will come with a sustained economic recovery. Further, we believe our position has been strengthened by our recent exit from the phosphorus flame retardants business, which should yield improvements in our future profitability.

On a long-term basis, we continue to believe that improving global standards of living and the potential for increasingly stringent fire safety regulations in developing markets are likely to drive continued demand for fire safety products. Further, we continue to focus on globalization in this segment, with our antioxidants facilities in China positioning us well for growth in the Asia region. We remain well-positioned to meet future demand as global economic growth and global bromine supply/demand dynamics improve.

Catalysts: Lower metals surcharges and unfavorable volume impacts from product and customer mix in Refinery Catalyst Solutions, and lower sales volumes in Performance Catalyst Solutions, have resulted in overall lower year-over-year net sales for our Catalysts segment during the first quarter of 2013. On a longer term basis, we believe increased global demand for transportation fuels and implementation of more stringent fuel quality requirements will drive growth in our Refinery Catalyst Solutions business. In addition, we expect growth in our PCS division to come from growing global demand for plastics driven by rising standards of living and infrastructure spending, particularly in Asia and the Middle East, as well as from the LED market, driven by energy efficiency demands.

New market penetration and introduction of innovative cost-effective products for the refining and polyolefins industries continue to provide benefits. We believe our focus on advanced product development in Catalysts positions us well for commercial success, and we have introduced new value-added refining solutions and technologies that enable refiners to increase yields, a critical advantage for refiners, as well as offering advanced Ziegler-Natta catalysts to our polyolefin customers. Our marketing and research groups are tightly aligned, enabling us to continue to bring innovative technologies to the market.

We expect to leverage our existing positions in the Middle East and Asia to capitalize on growth opportunities and further develop our leading position in those emerging markets. Our joint venture in Saudi Arabia with SABIC, which is now operational, positions us to lead in the fast-growing Middle East polyolefins catalysts market. Construction at our Yeosu, South Korea site is progressing well, where lab and commercial development assets have allowed us to rapidly develop research and small-scale production facilities, adding immediate value to the metallocene polyolefin markets. The commercial facility is expected to be operational in the first half of 2013 to meet regional growth in metallocene polyolefins markets.

Fine Chemistry: In our Fine Chemistry segment, during the first quarter of 2013 we saw favorable year-over-year sales volumes in our bromine portfolio and agricultural businesses, partly offset by lower pricing in some regions. Fine Chemistry Services continues to benefit from the rapid pace of innovation and the introduction of new products, coupled with the movement by companies to outsource certain research, product development and manufacturing functions. We believe we can sustain healthy margins with continued focus on the two strategic areas in our Fine Chemistry segment – maximizing our bromine franchise value in the Performance Chemicals sector and continued growth of our Fine Chemistry Services business.

 

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On a longer term basis, we are focused on profitably growing our globally competitive bromine and derivatives production network to serve all major bromine consuming products and markets. We believe the global supply/demand gap will continue to tighten as demand for existing and new uses of bromine expand.

Our Fine Chemistry Services businesses continue to deliver strong net sales and profitability, and opportunities are expanding in the renewables, life sciences and electronic materials markets. Our pharmaceutical and crop protection businesses continue to deliver solid results. We expect product development opportunities to continue, such as partnering with ExxonMobil Corporation to make a specialty lubricant and with pharmaceutical developers like SIGA Technologies in their manufacture of the ST-246 smallpox drug.

Our technical expertise, manufacturing capabilities and speed to market allow us to develop a preferred outsourcing position serving leading chemical, renewable and life science innovators in diverse industries. We believe we will continue to generate growth in profitable niche products leveraged from this service business.

Corporate and Other: We continue to focus on cash generation, working capital management and process efficiencies. We expect our global effective tax rate for 2013 to be approximately 24.8%; however, our rate will vary based on the locales in which income is actually earned and remains subject to potential volatility from changing legislation in the U.S. and other tax jurisdictions.

In the first quarter of 2013, we increased our quarterly dividend payout to $0.24 per share. Also during the first quarter of 2013, we repurchased approximately 1.0 million shares of our common stock for approximately $65 million under our existing share repurchase program, and we may periodically repurchase shares in the future on an opportunistic basis.

We remain committed to evaluating the merits of any opportunities that may arise for acquisitions or other business development activities that will complement our business footprint. Additional information regarding our products, markets and financial performance is provided at our web site, www.albemarle.com. Our web site is not a part of this document nor is it incorporated herein by reference.

 

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Results of Operations

The following data and discussion provides an analysis of certain significant factors affecting our results of operations during the periods included in the accompanying consolidated statements of income. Results for 2012 have been retrospectively adjusted to reflect our election to change our method of accounting for actuarial gains and losses relating to our global pension and OPEB plans in 2012.

First Quarter 2013 Compared to First Quarter 2012

Selected Financial Data (Unaudited)

 

     Three Months Ended     Percentage  
     March 31,     Change  
     2013     2012     2013 vs. 2012  
     (In thousands, except percentages and per share amounts)  

NET SALES

   $ 641,625      $ 711,704        (10 )% 

Cost of goods sold

     442,035        460,724        (4 )% 
  

 

 

   

 

 

   

GROSS PROFIT

     199,590        250,980        (20 )% 

GROSS PROFIT MARGIN

     31.1     35.3  

Selling, general and administrative expenses

     64,750        74,004        (13 )% 

Research and development expenses

     19,953        19,049        5
  

 

 

   

 

 

   

OPERATING PROFIT

     114,887        157,927        (27 )% 

OPERATING PROFIT MARGIN

     17.9     22.2  

Interest and financing expenses

     (5,231     (8,734     (40 )% 

Other expenses, net

     (4,209     (118     *   
  

 

 

   

 

 

   

INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF UNCONSOLIDATED INVESTMENTS

     105,447        149,075        (29 )% 

Income tax expense

     26,192        39,028        (33 )% 

Effective tax rate

     24.8     26.2  
  

 

 

   

 

 

   

INCOME BEFORE EQUITY IN NET INCOME OF UNCONSOLIDATED INVESTMENTS

     79,255        110,047        (28 )% 

Equity in net income of unconsolidated investments (net of tax)

     10,261        8,586        20
  

 

 

   

 

 

   

NET INCOME

     89,516        118,633        (25 )% 

Net income attributable to noncontrolling interests

     (5,529     (4,371     26
  

 

 

   

 

 

   

NET INCOME ATTRIBUTABLE TO ALBEMARLE CORPORATION

   $ 83,987      $ 114,262        (26 )% 
  

 

 

   

 

 

   

PERCENTAGE OF NET SALES

     13.1     16.1  
  

 

 

   

 

 

   

Basic earnings per share

   $ 0.95      $ 1.28        (26 )% 
  

 

 

   

 

 

   

Diluted earnings per share

   $ 0.94      $ 1.27        (26 )% 
  

 

 

   

 

 

   

 

* Percentage calculation is not meaningful.

Net Sales

For the three-month period ended March 31, 2013, we recorded net sales of $641.6 million, a decrease of 10% compared to net sales of $711.7 million for the three-month period ended March 31, 2012. This decrease was due primarily to unfavorable pricing impacts of 7% (mainly lower metals surcharges in Refinery Catalyst Solutions, lower regional pricing on bromine, and lower flame retardant pricing), lower volume impacts of 2% (mainly due to our exit of the phosphorus flame retardants business in the second quarter of 2012) and unfavorable foreign currency impacts of 1% (mainly the weaker Japanese yen).

Gross Profit

For the three-month period ended March 31, 2013, our gross profit decreased $51.4 million, or 20%, from the corresponding 2012 period due mainly to overall unfavorable pricing impacts, lower volume impacts primarily in our Performance Catalyst Solutions and hydroprocessing catalysts (HPC) businesses, unfavorable currency impacts mainly from a weaker Japanese yen, and higher manufacturing costs. These were partly offset by favorable impacts from lower variable input costs. Overall, these factors contributed to a lower gross profit margin for the three-month period ended March 31, 2013 of 31.1%, down from 35.3% for the corresponding period in 2012.

 

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Selling, General and Administrative Expenses

For the three-month period ended March 31, 2013, our selling, general and administrative (SG&A) expenses decreased $9.3 million, or 13%, from the three-month period ended March 31, 2012. This decrease was primarily due to lower personnel-related costs, lower sales commissions and other spending. Additionally, SG&A for the three months ended March 31, 2012 included (a) a gain of $8.1 million resulting from proceeds received in connection with the settlement of litigation (net of legal fees), and (b) an $8 million charitable contribution to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and operate.

As a percentage of net sales, SG&A expenses were 10.1% for the three-month period ended March 31, 2013, compared to 10.4% for the corresponding period in 2012.

Research and Development Expenses

For the three-month period ended March 31, 2013, our research and development (R&D) expenses increased $0.9 million, or 5%, from the three-month period ended March 31, 2012, as a result of higher spending. As a percentage of net sales, R&D expenses were 3.1% for the three-month period ended March 31, 2013, compared to 2.7% for the corresponding period in 2012.

Interest and Financing Expenses

Interest and financing expenses for the three-month period ended March 31, 2013 decreased $3.5 million to $5.2 million from the corresponding 2012 period, due mainly to increases in interest capitalized on higher average construction work in progress balances and lower variable-rate borrowings year-over-year.

Other Expenses, Net

Other expenses, net for the three-month period ended March 31, 2013 was $4.2 million versus $0.1 million for the corresponding 2012 period. This change was due primarily to unfavorable currency impacts from the corresponding period in 2012.

Income Tax Expense

The effective income tax rate for the first quarter of 2013 was 24.8% compared to 26.2% for the first quarter of 2012. Our effective income tax rate differs from the U.S. federal statutory income tax rates in the comparative periods mainly due to the impact of earnings from outside the U.S.

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $10.3 million for the three-month period ended March 31, 2013 compared to $8.6 million in the same period last year. This increase was due primarily to higher equity income amounts reported from our Catalysts segment joint venture Nippon Ketjen Company Limited, as well as our Polymer Solutions joint venture Magnifin.

Net Income Attributable to Noncontrolling Interests

For the three-month period ended March 31, 2013, net income attributable to noncontrolling interests was $5.5 million compared to $4.4 million in the same period last year. This increase of $1.1 million was due primarily to higher year-over-year profitability from our consolidated joint venture JBC based mainly on higher demand for clear brine fluids.

Net Income Attributable to Albemarle Corporation

Net income attributable to Albemarle Corporation decreased to $84.0 million in the three-month period ended March 31, 2013, from $114.3 million in the three-month period ended March 31, 2012 primarily due to lower pricing, including impacts from both volatility in metals surcharges and related cost impacts in Refinery Catalyst Solutions (particularly rare earths) and in certain products in our overall bromine portfolio, unfavorable overall volume impacts and unfavorable foreign currency impacts. These impacts were partly offset by favorable overall variable input costs, lower overall expenses, lower interest and financing expenses and lower income tax expense.

 

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Segment Information Overview. We have identified three reportable segments according to the nature and economic characteristics of our products as well as the manner in which the information is used internally by the Company’s key decision maker, our Chief Executive Officer, in accordance with current accounting guidance. Our Polymer Solutions segment is comprised of the flame retardants and stabilizers and curatives product areas. Our Catalysts segment is comprised of the Refinery Catalyst Solutions and Performance Catalyst Solutions product areas. Our Fine Chemistry segment is comprised of the Performance Chemicals and Fine Chemistry Services product areas. Segment income represents operating profit (adjusted for significant non-recurring items) and equity in net income of unconsolidated investments and is reduced by net income attributable to noncontrolling interests. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.

 

     Three Months Ended March 31,     Percentage
Change
 
     2013     % of
net sales
    2012     % of
net sales
    2013 vs. 2012  
     (In thousands, except percentages)  

Net sales:

          

Polymer Solutions

   $ 214,774        33.5   $ 228,131        32.1     (6 )% 

Catalysts

     235,573        36.7     293,522        41.2     (20 )% 

Fine Chemistry

     191,278        29.8     190,051        26.7     1
  

 

 

   

 

 

   

 

 

   

 

 

   

Total net sales

   $ 641,625        100.0   $ 711,704        100.0     (10 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

Segment operating profit:

          

Polymer Solutions

   $ 43,670        20.3   $ 54,547        23.9     (20 )% 

Catalysts

     49,045        20.8     76,641        26.1     (36 )% 

Fine Chemistry

     36,178        18.9     44,363        23.3     (18 )% 
  

 

 

     

 

 

     

Total segment operating profit

     128,893          175,551          (27 )% 
  

 

 

     

 

 

     

Equity in net income of unconsolidated investments:

          

Polymer Solutions

     2,308          1,845          25

Catalysts

     7,953          6,741          18

Fine Chemistry

     —            —            —  

Corporate & other

     —            —            —  
  

 

 

     

 

 

     

Total equity in net income of unconsolidated investments

     10,261          8,586          20
  

 

 

     

 

 

     

Net (income) loss attributable to noncontrolling interests:

          

Polymer Solutions

     (708       (1,002       (29 )% 

Catalysts

     —            —            —  

Fine Chemistry

     (4,821       (3,372       43

Corporate & other

     —            3          (100 )% 
  

 

 

     

 

 

     

Total net income attributable to noncontrolling interests

     (5,529       (4,371       26
  

 

 

     

 

 

     

Segment income:

          

Polymer Solutions

     45,270        21.1     55,390        24.3     (18 )% 

Catalysts

     56,998        24.2     83,382        28.4     (32 )% 

Fine Chemistry

     31,357        16.4     40,991        21.6     (24 )% 
  

 

 

     

 

 

     

Total segment income

     133,625          179,763          (26 )% 
  

 

 

     

 

 

     

Corporate & other

     (14,006       (17,621       (21 )% 

Interest and financing expenses

     (5,231       (8,734       (40 )% 

Other expenses, net

     (4,209       (118       *   

Income tax expense

     (26,192       (39,028       (33 )% 
  

 

 

     

 

 

     

Net income attributable to Albemarle Corporation

   $ 83,987        $ 114,262          (26 )% 
  

 

 

     

 

 

     

 

* Percentage calculation is not meaningful.

Our segment information includes measures we refer to as “Segment operating profit” and “Segment income” which are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (GAAP). The Company has reported Segment operating profit and Segment income because management believes that these financial measures provide transparency to investors and enable period-to-period comparability of financial performance. Segment operating profit and Segment income should not be considered as an alternative to Operating profit or Net income attributable to Albemarle Corporation, respectively, as determined in accordance with GAAP.

 

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See below for a reconciliation of Segment operating profit and Segment income, the non-GAAP financial measures, to Operating profit and Net income attributable to Albemarle Corporation, respectively, the most directly comparable financial measures calculated and reported in accordance with GAAP.

 

     Three Months Ended
March 31,
 
     2013     2012  
     (In thousands)  

Total segment operating profit

   $ 128,893      $ 175,551   

Add (less):

    

Corporate & other(a)

     (14,006     (17,624
  

 

 

   

 

 

 

GAAP Operating profit

   $ 114,887      $ 157,927   
  

 

 

   

 

 

 

Total segment income

   $ 133,625      $ 179,763   

Add (less):

    

Corporate & other

     (14,006     (17,621

Interest and financing expenses

     (5,231     (8,734

Other expenses, net

     (4,209     (118

Income tax expense

     (26,192     (39,028
  

 

 

   

 

 

 

GAAP Net income attributable to Albemarle Corporation

   $ 83,987      $ 114,262   
  

 

 

   

 

 

 

 

(a) 

Excludes corporate equity income and noncontrolling interest adjustments of $3 for the three-month period ended March 31, 2012.

Polymer Solutions

Polymer Solutions segment net sales for the three-month period ended March 31, 2013 were $214.8 million, down $13.3 million, or 6%, in comparison to the same period in 2012. The decrease was driven mainly by our mid-year 2012 exit of the phosphorus flame retardants business. Other unfavorable impacts from lower pricing in Flame Retardants and Additives were mostly offset by favorable volumes in Brominated Flame Retardants and Additives. Segment income for Polymer Solutions was down 18%, or $10.1 million, to $45.3 million for the three-month period ended March 31, 2013, compared to the same period in 2012, as a result of lower pricing mainly in Flame Retardants and Additives, lower fixed costs absorption, higher variable input costs, higher manufacturing spending, and unfavorable currency impacts mainly due to the weaker Japanese yen. These were partly offset by favorable impacts from Brominated Flame Retardants and Additives volumes and favorable equity in net income of our unconsolidated joint venture Magnifin.

Catalysts

Catalysts segment net sales for the three-month period ended March 31, 2013 were $235.5 million, a decrease of $58.0 million, or 20%, compared to the three-month period ended March 31, 2012. This decrease was due mainly to unfavorable pricing on lower metals surcharges in Refinery Catalyst Solutions, unfavorable product mix in our Clean Fuels Technology business, and lower volumes in Polymer Catalysts. Catalysts segment income decreased 32%, or $26.4 million, to $57.0 million for the three-month period ended March 31, 2013 in comparison to the corresponding period of 2012. This decrease was due primarily to net unfavorable pricing impacts from volatility in metals surcharges and related cost impacts in Refinery Catalyst Solutions, and unfavorable sales and production volume impacts in Polymer Catalysts and Clean Fuels Technology.

Fine Chemistry

Fine Chemistry segment net sales for the three-month period ended March 31, 2013 were $191.3 million, an increase of $1.2 million, or 1%, versus the three-month period ended March 31, 2012. This increase was primarily attributable to favorable volume impacts of 5%, partly offset by unfavorable price impacts of 4%. Segment income for the three-month period ended March 31, 2013 was $31.4 million, down 24% from the corresponding period in 2012. The decrease was due to lower pricing mainly in Performance Chemicals, delays in product launches in our Fine Chemistry Services businesses and higher net income attributable to noncontrolling interests associated with higher profit results from our JBC joint venture. These were partly offset by favorable variable input costs.

 

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Corporate and other

For the three-month period ended March 31, 2013, our Corporate and other expense was $14.0 million compared to $17.6 million for the corresponding period in 2012. This decrease was primarily due to lower employee-related costs, including performance-based incentive compensation (reflected mainly in SG&A expenses) and other spending.

Financial Condition and Liquidity

Overview

The principal uses of cash in our business generally have been capital investments, funding working capital and repayment of debt. We also make contributions to our U.S. defined benefit pension plans, pay dividends to our shareholders and repurchase shares on an opportunistic basis. Historically, cash to fund the needs of our business has been principally provided by cash from operations, debt financing and equity issuances.

We are continually focused on working capital efficiency particularly in the areas of accounts receivable and inventory. We anticipate that cash on hand, cash provided by operating activities and long-term borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund capital expenditures and other investing activities, fund pension contributions and pay dividends for the foreseeable future.

Cash Flow

Our cash and cash equivalents decreased by $42.8 million to $434.9 million at March 31, 2013, down from $477.7 million at December 31, 2012. For the three-month period ended March 31, 2013, our operations provided $98.7 million of cash flows as compared to $123.5 million for the three-month period ended March 31, 2012. This decrease was primarily due to lower profitability, lower benefits from deferred income taxes and a decrease in other operating cash flows, partly offset by favorable changes in working capital items.

Combined with cash on hand, our cash from operations for the first three months of 2013 funded capital expenditures for plant, machinery and equipment of $55.3 million, repayments of long-term debt of $3.6 million, payments of $60.8 million for repurchases of our common stock, dividends to shareholders of $17.8 million and $5.4 million in withholding taxes paid on stock-based compensation amounts distributed during the period.

At March 31, 2013 and December 31, 2012, our cash and cash equivalents included $315.7 million and $319.3 million, respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are permanently reinvested and which we plan to use to support our continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash from our foreign subsidiaries to the U.S. for normal operating needs through intercompany dividends, but only from subsidiaries whose earnings we have not asserted to be permanently reinvested or whose earnings qualify as “previously taxed income” as defined by the Internal Revenue Code. No such repatriations occurred during the three-month periods ended March 31, 2013 or 2012.

Net current assets decreased to $969.2 million at March 31, 2013 from $1.0 billion at December 31, 2012. This decrease was due primarily to decreases in cash and cash equivalents and increases in accounts payable, accrued expenses and income taxes payable, partly offset by increases in accounts receivable and inventories.

Capital expenditures for the three-month period ended March 31, 2013 of $55.3 million were associated with property, plant and equipment additions. We expect our capital expenditures to approximate $150-$175 million in 2013 for capacity increases, cost reduction and continuity of operations projects.

While we continue to closely monitor our cash generation, working capital management and capital spending in light of continuing uncertainties in the global economy, we are optimistic that in 2013 we will have the financial flexibility and capability to opportunistically fund future growth initiatives. Additionally, we anticipate that future capital spending including business acquisitions, share repurchases and other cash outlays should be financed primarily with cash flow provided from operations and cash on hand, with additional cash needed, if any, provided by borrowings, including borrowings under our September 2011 credit agreement. The amount and timing of any additional borrowings will depend on our specific cash requirements.

On February 12, 2013, we increased our quarterly dividend payout to $0.24 per share, a 20% increase from the quarterly rate of $0.20 per share paid in 2012. Additionally, on February 12, 2013, our Board of Directors authorized an increase in the number of shares the Company is permitted to repurchase under its existing share repurchase program to 15 million from 3.9 million shares that remained outstanding under the program as of December 31, 2012, and we announced our expectation to repurchase approximately 10% of our outstanding shares over the following 10 to 15 months. This is consistent with our current expectation, and related share repurchases will be funded through a combination of available cash on hand, cash from operations and possibly debt.

 

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Long-Term Debt

We currently have outstanding $325.0 million of 5.10% senior notes due in 2015 and $350.0 million of 4.50% senior notes due in 2020, or the senior notes. The senior notes are senior unsecured obligations and rank equally with all of our other senior unsecured indebtedness from time to time outstanding. The senior notes are effectively subordinated to any of our existing or future secured indebtedness and to the existing and future indebtedness of our subsidiaries. We may redeem the senior notes before their maturity, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the senior notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis using the Treasury Rate (as defined in the indentures governing the senior notes) plus 15 basis points for the senior notes maturing in 2015 and 25 basis points for the senior notes maturing in 2020, plus, in each case, accrued interest thereon to the date of redemption. However, the 2020 senior notes are redeemable in whole or in part, at our option, at any time on or after three months prior to the maturity date, at a redemption price equal to 100% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest on the senior notes to be redeemed to the date of redemption. Holders of the 2020 senior notes may require us to purchase such notes at 101% upon a Change of Control Triggering Event, as defined in the related indenture.

The principal amounts of the senior notes become immediately due and payable upon the occurrence of certain bankruptcy or insolvency events involving us or certain of our subsidiaries and may be declared immediately due and payable by the trustee or the holders of not less than 25% of the senior notes upon the occurrence of an event of default. Events of default include, among other things: failure to pay principal or interest at required times; failure to perform or remedy a breach of covenants within prescribed periods; an event of default on any of our other indebtedness or certain indebtedness of our subsidiaries of $40.0 million or more that is caused by a failure to make a payment when due or that results in the acceleration of that indebtedness before its maturity; and certain bankruptcy or insolvency events involving us or certain of our subsidiaries. We believe that as of March 31, 2013, we were, and currently are, in compliance with all of the covenants of the indentures governing the senior notes.

For additional funding and liquidity purposes, we currently maintain a $750.0 million five-year, revolving, unsecured credit facility, which we refer to as the September 2011 credit agreement. The September 2011 credit agreement matures on September 22, 2016, provides for an additional $250.0 million in credit, if needed, subject to the terms of the agreement and provides for the ability to extend the maturity date under certain conditions. Borrowings bear interest at variable rates based on the London Inter-Bank Offered Rate (LIBOR) for deposits in the relevant currency plus an applicable margin which ranges from 0.900% to 1.400%, depending on the Company’s credit rating applicable from time to time. The applicable margin on the facility was 0.975% as of March 31, 2013. There were no borrowings outstanding under the September 2011 credit agreement during the three-month period ended March 31, 2013.

Borrowings under the September 2011 credit agreement are conditioned upon compliance with the following covenants: (i) consolidated funded debt, as defined in the agreement, must be less than or equal to 3.50 times consolidated EBITDA, as defined in the agreement, (which reflects adjustments for certain non-recurring or unusual items such as restructuring charges, facility divestiture charges and other significant non-recurring items), or herein “consolidated adjusted EBITDA,” as of the end of any fiscal quarter; (ii) with the exception of liens specified in the September 2011 credit agreement, liens may not attach to assets when the aggregate amount of all indebtedness secured by such liens plus unsecured subsidiary indebtedness, other than indebtedness incurred by our subsidiaries under the September 2011 credit agreement, would exceed 20% of consolidated net worth, as defined in the agreement; and (iii) with the exception of indebtedness specified in the September 2011 credit agreement, subsidiary indebtedness may not exceed the difference between 20% of consolidated net worth, as defined in the agreement, and indebtedness secured by liens permitted under the agreement. We believe that as of March 31, 2013, we were, and currently are, in compliance with all of our debt covenants.

The non-current portion of our long-term debt amounted to $686.6 million at March 31, 2013 and December 31, 2012. In addition, at March 31, 2013, we had the ability to borrow $750.0 million under our September 2011 credit agreement and $268.6 million under other existing lines of credit, subject to various financial covenants under our September 2011 credit agreement. We have the ability to refinance our borrowings under our other existing credit lines with borrowings under the September 2011 credit agreement, as applicable. Therefore, the amounts outstanding under those credit lines, if any, are classified as long-term debt.

 

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Off-Balance Sheet Arrangements

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, including bank guarantees and letters of credit, which totaled approximately $47.1 million at March 31, 2013. None of these off-balance sheet arrangements has, or is likely to have, a material effect on our current or future financial condition, results of operations, liquidity or capital resources.

Other Obligations

Total expected 2013 contributions to our domestic and foreign qualified and nonqualified pension plans, including our SERP, should approximate $9 million. We may choose to make additional pension contributions in excess of this amount. We have made contributions of $0.6 million to our domestic and foreign pension plans (both qualified and nonqualified) during the three-month period ended March 31, 2013.

The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled $28.4 million at March 31, 2013 and $29.2 million at December 31, 2012. Related assets for corresponding offsetting benefits recorded in Other assets totaled $24.6 million at March 31, 2013 and $25.8 million at December 31, 2012. We cannot estimate the amounts of any cash payments associated with these liabilities for the remainder of 2013 or the next twelve months, and we are unable to estimate the timing of any such cash payments in the future at this time.

We are subject to federal, state, local and foreign requirements regulating the handling, manufacture and use of materials (some of which may be classified as hazardous or toxic by one or more regulatory agencies), the discharge of materials into the environment and the protection of the environment. To our knowledge, we are currently complying and expect to continue to comply in all material respects with applicable environmental laws, regulations, statutes and ordinances. Compliance with existing federal, state, local and foreign environmental protection laws is not expected to have a material effect on capital expenditures, earnings or our competitive position, but the costs associated with increased legal or regulatory requirements could have an adverse effect on our results.

Among other environmental requirements, we are subject to the federal Superfund law, and similar state laws, under which we may be designated as a potentially responsible party (PRP) and may be liable for a share of the costs associated with cleaning up various hazardous waste sites. Management believes that in cases in which we may have liability as a PRP, our liability for our share of cleanup is de minimis. Further, almost all such sites represent environmental issues that are quite mature and have been investigated, studied and in many cases settled. In de minimis situations, our policy generally is to negotiate a consent decree and to pay any apportioned settlement, enabling us to be effectively relieved of any further liability as a PRP, except for remote contingencies. In other than de minimis PRP matters, our records indicate that unresolved PRP exposures should be immaterial. We accrue and expense our proportionate share of PRP costs. Because management has been actively involved in evaluating environmental matters, we are able to conclude that the outstanding environmental liabilities for unresolved PRP sites should not have a material adverse effect upon our results of operations or financial condition.

Liquidity Outlook

We anticipate that cash on hand, cash provided by operating activities and long-term borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund any capital expenditures and share repurchases, make pension contributions and pay dividends for the foreseeable future. In addition, as we have historically done, we will continue to evaluate the merits of any opportunities that may arise for acquisitions of businesses or assets, which may require additional liquidity.

While we maintain business relationships with a diverse group of financial institutions, an adverse change in their credit standing could lead them to not honor their contractual credit commitments, decline funding under existing but uncommitted lines of credit, not renew their extensions of credit or not provide new financing. While the corporate bond market remains strong, availability of bank debt is more limited than in prior years due to a variety of factors, including tighter bank regulations and more stringent bank capital requirements in the wake of the financial crisis, and continued unease regarding fallout from the European sovereign debt concerns, particularly relating to Cyprus, Greece and Spain. If bank debt remains relatively less prevalent, we may incur increased borrowing costs and reduced credit capacity as our various credit facilities mature. It is also possible that our ability to access the capital markets in future periods may be limited by market or counterparty factors at a time when we would need or desire to do so, which could have an impact on our ability to finance our businesses or react to changing economic and business conditions. In addition, our cash flows from operations may be negatively affected by adverse consequences to our customers and the markets in which we compete as a result of moderating global economic conditions and reduced capital availability. If the U.S. Federal Reserve or similar national reserve banks in other countries decide to tighten the monetary supply in response, for example, to improving economic conditions, we may incur increased borrowing costs as interest rates increase on our variable rate credit facilities, as our various credit facilities mature or as we refinance any maturing fixed rate debt obligations.

 

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At March 31, 2013, we had the ability to borrow in excess of $1.0 billion under our September 2011 credit agreement and other existing lines of credit, subject to various financial covenants under our September 2011 credit agreement. With generally strong cash-generative businesses and no significant debt maturities before 2015, we believe we have and will maintain a solid liquidity position.

We had cash and cash equivalents totaling $434.9 million as of March 31, 2013, which represent an important source of our liquidity. Our cash is invested in short-term investments including time deposits and readily marketable securities with relatively short maturities.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Item 1 Financial Statements – Note 15.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in our interest rate risk, foreign currency exchange rate exposure, marketable securities price risk or raw material price risk from the information we provided in our Annual Report on Form 10-K for the year ended December 31, 2012.

We had variable interest rate borrowings of $3.5 million outstanding at March 31, 2013, bearing a weighted average interest rate of 1.74% and representing approximately 1% of our total outstanding debt. A hypothetical 10% change (approximately 17 basis points) in the interest rate applicable to these borrowings would change our annualized interest expense by less than $0.1 million as of March 31, 2013. We may enter into interest rate swaps, collars or similar instruments with the objective of reducing interest rate volatility relating to our borrowing costs.

Our financial instruments, which are subject to foreign currency exchange risk, consist of foreign currency forward contracts with an aggregate notional value of $236.5 million and with a fair value representing a net asset position of $0.2 million at March 31, 2013. Fluctuations in the value of these contracts are generally offset by the value of the underlying exposures being hedged. We conducted a sensitivity analysis on the fair value of our foreign currency hedge portfolio assuming an instantaneous 10% change in select foreign currency exchange rates from their levels as of March 31, 2013, with all other variables held constant. A 10% appreciation of the U.S. Dollar against foreign currencies that we hedge would result in a decrease of approximately $10.4 million in the fair value of our foreign currency forward contracts. A 10% depreciation of the U.S. Dollar against these foreign currencies would result in an increase of approximately $4.8 million in the fair value of our foreign currency forward contracts. The sensitivity of the fair value of our foreign currency hedge portfolio represents changes in fair values estimated based on market conditions as of March 31, 2013, without reflecting the effects of underlying anticipated transactions. When those anticipated transactions are realized, actual effects of changing foreign currency exchange rates could have a material impact on our earnings and cash flows in future periods.

In addition, certain of our operations use natural gas as a source of energy which can expose our business to market risk when the price of natural gas changes suddenly. In an attempt to mitigate the impact and volatility of price swings in the natural gas market, from time to time we enter into natural gas hedge contracts with one or more major financial institutions for a portion of our 12-month rolling forecast for North American natural gas requirements. Such derivatives are held to secure natural gas at fixed prices and are not entered into for trading purposes. At March 31, 2013 and December 31, 2012, we had no natural gas hedge contracts outstanding.

 

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Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the fiscal quarter ended March 31, 2013 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

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 Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves as estimated by our general counsel for such proceedings. We also maintain insurance to mitigate certain of such risks. Additional information with respect to this Item 1 is contained in Note 8 to the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

 

Item 1A. Risk Factors.

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012 describes some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our results of operations and our financial condition. We do not believe that there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012.

 

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

The following table summarizes our repurchases of equity securities for the three-month period ended March 31, 2013:

 

Period

   Total
Number of
Shares
Repurchased
     Average
Price Paid
Per Share
     Total Number of
Shares
Repurchased as
Part of Publicly
Announced
Plans or
Programs*
     Maximum
Number of
Shares that May
Yet Be
Repurchased
Under the Plans
or Programs*
 

January 1, 2013 to January 31, 2013

     124,000       $ 62.89         124,000         14,876,000   

February 1, 2013 to February 28, 2013

     163,650         64.47         163,650         14,712,350   

March 1, 2013 to March 31, 2013

     726,000         63.60         726,000         13,986,350   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,013,650       $ 63.65         1,013,650         13,986,350   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Our stock repurchase plan, which was authorized by our Board of Directors, became effective on October 25, 2000 and included ten million shares. Since then, the Company has regularly repurchased shares under the stock repurchase plan, resulting in the Board of Directors periodically authorizing additional shares for repurchase under the plan. On February 12, 2013, our Board of Directors authorized another increase in the number of shares, pursuant to which the Company is now permitted to repurchase up to a maximum of fifteen million shares under the plan, including those shares previously authorized, but not yet repurchased. The stock repurchase plan will expire when we have repurchased all shares authorized for repurchase thereunder, unless the stock repurchase plan is earlier terminated by action of our Board of Directors or further shares are authorized for repurchase.

 

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Item 6. Exhibits.

(a) Exhibits

 

  31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
  31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
  32.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.
  32.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.
101    Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2013, furnished in XBRL (eXtensible Business Reporting Language)).

Attached as Exhibit 101 to this report are the following documents formatted in XBRL: (i) the Consolidated Statements of Income for the three months ended March 31, 2013 and 2012, (ii) the Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012, (iii) the Condensed Consolidated Balance Sheets at March 31, 2013 and December 31, 2012, (iv) the Consolidated Statements of Changes in Equity for the three months ended March 31, 2013 and 2012, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 and (vi) the Notes to the Condensed Consolidated Financial Statements.

 

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    ALBEMARLE CORPORATION
    (Registrant)
Date: April 19, 2013     By:  

/S/ SCOTT A. TOZIER

     

Scott A. Tozier

Senior Vice President, Chief Financial Officer and

Chief Accounting Officer

(principal financial and accounting officer)

 

34

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Luther C. Kissam IV, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Albemarle Corporation for the period ended March 31, 2013;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 19, 2013

/s/ LUTHER C. KISSAM IV

Luther C. Kissam IV

Chief Executive Officer and Director

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Scott A. Tozier, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Albemarle Corporation for the period ended March 31, 2013;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 19, 2013

/s/ SCOTT A. TOZIER

Scott A. Tozier

Senior Vice President, Chief Financial Officer and Chief Accounting Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Albemarle Corporation (the “Company”) for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Luther C. Kissam IV, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ LUTHER C. KISSAM IV

Luther C. Kissam IV

Chief Executive Officer and Director

April 19, 2013

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Albemarle Corporation (the “Company”) for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott A. Tozier, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ SCOTT A. TOZIER

Scott A. Tozier

Senior Vice President, Chief Financial Officer and Chief Accounting Officer

April 19, 2013