SEC Document
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, 2016
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 May 3, 2016: 112,297,329


Table of Contents

ALBEMARLE CORPORATION
INDEX – FORM 10-Q
 
 
 
 
 
 
Page
Number(s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8-23
 
 
 
24-37
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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,
 
2016
 
2015
Net sales
$
865,398

 
$
884,404

Cost of goods sold
528,000

 
625,938

Gross profit
337,398

 
258,466

Selling, general and administrative expenses
139,157

 
135,765

Research and development expenses
23,401

 
26,492

Gain on sales of businesses, net
(121,324
)
 

Acquisition and integration related costs
21,356

 
59,523

Operating profit
274,808

 
36,686

Interest and financing expenses
(25,251
)
 
(35,746
)
Other income, net
410

 
49,957

Income before income taxes and equity in net income of unconsolidated investments
249,967

 
50,897

Income tax expense
30,985

 
14,140

Income before equity in net income of unconsolidated investments
218,982

 
36,757

Equity in net income of unconsolidated investments (net of tax)
16,566

 
10,392

Net income
235,548

 
47,149

Net income attributable to noncontrolling interests
(7,362
)
 
(4,034
)
Net income attributable to Albemarle Corporation
$
228,186

 
$
43,115

Basic earnings per share
$
2.03

 
$
0.40

Diluted earnings per share
$
2.02

 
$
0.40

Weighted-average common shares outstanding – basic
112,260

 
108,130

Weighted-average common shares outstanding – diluted
112,770

 
108,464

Cash dividends declared per share of common stock
$
0.305

 
$
0.29

See accompanying Notes to the Condensed Consolidated Financial Statements.

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Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
(Unaudited)

 
Three Months Ended 
 March 31,
 
2016
 
2015
Net income
$
235,548

 
$
47,149

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation
98,910

 
(354,571
)
Pension and postretirement benefits
1

 
2

Net investment hedge
(9,524
)
 
54,046

Interest rate swap
525

 
527

Other
(4
)
 
27

Total other comprehensive income (loss), net of tax
89,908

 
(299,969
)
Comprehensive income (loss)
325,456

 
(252,820
)
Comprehensive income attributable to noncontrolling interests
(7,645
)
 
(3,934
)
Comprehensive income (loss) attributable to Albemarle Corporation
$
317,811

 
$
(256,754
)
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,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
252,382

 
$
213,734

Trade accounts receivable, less allowance for doubtful accounts (2016 – $5,981; 2015 – $4,148)
565,724

 
552,828

Other accounts receivable
87,239

 
79,877

Inventories
531,230

 
508,728

Other current assets
68,519

 
71,351

Assets held for sale
110,297

 
404,485

Total current assets
1,615,391

 
1,831,003

Property, plant and equipment, at cost
3,929,319

 
3,881,162

Less accumulated depreciation and amortization
1,439,779

 
1,396,424

Net property, plant and equipment
2,489,540

 
2,484,738

Investments
476,701

 
455,417

Other assets
194,811

 
199,938

Goodwill
2,931,293

 
2,893,811

Other intangibles, net of amortization
1,731,232

 
1,733,047

Total assets
$
9,438,968

 
$
9,597,954

Liabilities And Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
303,805

 
$
306,517

Accrued expenses
315,649

 
402,379

Current portion of long-term debt
484,754

 
677,345

Dividends payable
34,016

 
32,306

Liabilities held for sale
28,618

 
128,706

Income taxes payable
58,256

 
69,432

Total current liabilities
1,225,098

 
1,616,685

Long-term debt
3,105,351

 
3,157,614

Postretirement benefits
49,427

 
49,647

Pension benefits
380,933

 
381,552

Other noncurrent liabilities
248,177

 
254,826

Deferred income taxes
735,111

 
736,317

Commitments and contingencies (Note 11)

 

Equity:
 
 
 
Albemarle Corporation shareholders’ equity:
 
 
 
Common stock, $.01 par value, issued and outstanding – 112,297 in 2016 and 112,219 in 2015
1,123

 
1,122

Additional paid-in capital
2,061,503

 
2,059,151

Accumulated other comprehensive loss
(331,663
)
 
(421,288
)
Retained earnings
1,809,342

 
1,615,407

Total Albemarle Corporation shareholders’ equity
3,540,305

 
3,254,392

Noncontrolling interests
154,566

 
146,921

Total equity
3,694,871

 
3,401,313

Total liabilities and equity
$
9,438,968

 
$
9,597,954

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)
 
 
 
 
 
Additional
Paid-in Capital
 
Accumulated Other
Comprehensive (Loss) Income
 
Retained Earnings
 
Total Albemarle
Shareholders’ Equity
 
Noncontrolling
Interests
 
Total Equity
Common Stock
 
 
Shares
 
Amounts
 
 
 
 
 
 
Balance at January 1, 2016
 
112,219,351

 
$
1,122

 
$
2,059,151

 
$
(421,288
)
 
$
1,615,407

 
$
3,254,392

 
$
146,921

 
$
3,401,313

Net income
 
 
 
 
 
 
 
 
 
228,186

 
228,186

 
7,362

 
235,548

Other comprehensive income
 
 
 
 
 
 
 
89,625

 
 
 
89,625

 
283

 
89,908

Cash dividends declared
 
 
 
 
 
 
 
 
 
(34,251
)
 
(34,251
)
 

 
(34,251
)
Stock-based compensation and other
 
 
 
 
 
4,517

 
 
 
 
 
4,517

 
 
 
4,517

Tax deficiency related to stock plans
 
 
 
 
 
(195
)
 
 
 
 
 
(195
)
 
 
 
(195
)
Issuance of common stock, net
 
112,624

 
1

 
(1
)
 
 
 
 
 

 
 
 

Shares withheld for withholding taxes associated with common stock issuances
 
(35,176
)
 

 
(1,969
)
 
 
 
 
 
(1,969
)
 
 
 
(1,969
)
Balance at March 31, 2016
 
112,296,799

 
$
1,123

 
$
2,061,503

 
$
(331,663
)
 
$
1,809,342

 
$
3,540,305

 
$
154,566

 
$
3,694,871

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2015
 
78,030,524

 
$
780

 
$
10,447

 
$
(62,413
)
 
$
1,410,651

 
$
1,359,465

 
$
129,170

 
$
1,488,635

Net income
 
 
 
 
 
 
 
 
 
43,115

 
43,115

 
4,034

 
47,149

Other comprehensive loss
 
 
 
 
 
 
 
(299,869
)
 
 
 
(299,869
)
 
(100
)
 
(299,969
)
Cash dividends declared
 
 
 
 
 
 
 
 
 
(32,532
)
 
(32,532
)
 

 
(32,532
)
Stock-based compensation and other
 
 
 
 
 
3,863

 
 
 
 
 
3,863

 
 
 
3,863

Exercise of stock options
 
4,000

 

 
90

 
 
 
 
 
90

 
 
 
90

Tax deficiency related to stock plans
 
 
 
 
 
(125
)
 
 
 
 
 
(125
)
 
 
 
(125
)
Issuance of common stock, net
 
58,064

 
1

 
(1
)
 
 
 
 
 

 
 
 

Acquisition of Rockwood
 
34,113,064

 
341

 
2,036,209

 

 

 
2,036,550

 

 
2,036,550

Noncontrolling interest assumed in acquisition of Shanghai Chemetall
 
 
 
 
 
 
 
 
 
 
 

 
4,843

 
4,843

Shares withheld for withholding taxes associated with common stock issuances
 
(20,707
)
 

 
(1,174
)
 
 
 
 
 
(1,174
)
 
 
 
(1,174
)
Balance at March 31, 2015
 
112,184,945

 
$
1,122

 
$
2,049,309

 
$
(362,282
)
 
$
1,421,234

 
$
3,109,383

 
$
137,947

 
$
3,247,330

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,
 
2016
 
2015
Cash and cash equivalents at beginning of year
$
213,734

 
$
2,489,768

Cash flows from operating activities:
 
 
 
Net income
235,548

 
47,149

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
Depreciation and amortization
60,552

 
63,986

Gain on sales of businesses, net
(121,324
)
 

Stock-based compensation
4,007

 
4,912

Excess tax benefits realized from stock-based compensation arrangements

 
(23
)
Equity in net income of unconsolidated investments (net of tax)
(16,566
)
 
(10,392
)
Dividends received from unconsolidated investments and nonmarketable securities
200

 
3,048

Pension and postretirement expense (benefit)
1,389

 
(1,458
)
Pension and postretirement contributions
(4,224
)
 
(5,986
)
Unrealized loss (gain) on investments in marketable securities
1,044

 
(462
)
Deferred income taxes
816

 
(32,845
)
Working capital changes
10,467

 
28,881

Other, net
799

 
(51,019
)
Net cash provided by operating activities
172,708

 
45,791

Cash flows from investing activities:
 
 
 
Acquisition of Rockwood, net of cash acquired

 
(2,051,645
)
Other acquisitions, net of cash acquired

 
(45,550
)
Cash payments related to acquisitions and other
(81,988
)
 

Capital expenditures
(58,120
)
 
(56,741
)
Decrease in restricted cash

 
57,550

Cash proceeds from divestitures, net
307,165

 

Sales of marketable securities, net
1,191

 
1,557

Repayments from joint ventures

 
2,156

Net cash provided by (used in) investing activities
168,248

 
(2,092,673
)
Cash flows from financing activities:
 
 
 
Repayments of long-term debt
(331,595
)
 
(1,326,263
)
Proceeds from borrowings of long-term debt

 
1,000,000

Other borrowings, net
68,829

 
167,571

Dividends paid to shareholders
(32,541
)
 
(21,730
)
Proceeds from exercise of stock options

 
90

Excess tax benefits realized from stock-based compensation arrangements

 
23

Withholding taxes paid on stock-based compensation award distributions
(1,969
)
 
(1,174
)
Debt financing costs

 
(1,164
)
Net cash used in financing activities
(297,276
)
 
(182,647
)
Net effect of foreign exchange on cash and cash equivalents
(5,032
)
 
1,182

Increase (decrease) in cash and cash equivalents
38,648

 
(2,228,347
)
Cash and cash equivalents at end of period
$
252,382

 
$
261,421

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, 2016 and December 31, 2015, our consolidated statements of income, consolidated statements of comprehensive income (loss), consolidated statements of changes in equity and condensed consolidated statements of cash flows for the three-month periods ended March 31, 2016 and 2015. 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, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on February 29, 2016. The December 31, 2015 condensed consolidated balance sheet data herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). The results of operations for the three-month period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the accompanying condensed consolidated financial statements and the notes thereto to conform to the current presentation.
As described further in Note 2, “Acquisitions,” we completed our acquisition of Rockwood Holdings, Inc. (“Rockwood”) on January 12, 2015. The unaudited condensed consolidated financial statements contained herein include the results of operations of Rockwood, commencing on January 13, 2015.
NOTE 2—Acquisitions:
On January 12, 2015 (the “Acquisition Closing Date”), we completed the acquisition of all the outstanding shares of Rockwood (the “Merger”) for a purchase price of approximately $5.7 billion. As a result, Rockwood became a wholly-owned subsidiary of Albemarle.
Purchase Price Allocation
The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the Acquisition Closing Date, which were based, in part, upon third-party appraisals for certain assets, including specifically-identified intangible assets. The excess of the purchase price over the estimated fair value of the net assets acquired was approximately $2.8 billion and was recorded as goodwill.
The allocation of the purchase price was finalized during the the three-month period ended March 31, 2016. The following table summarizes the allocation of the purchase price paid and the amounts of assets acquired and liabilities assumed for the Rockwood acquisition based upon estimated fair values at the date of acquisition (in thousands):

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Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Total purchase price
$
5,725,321

 
 
Net assets acquired:
 
Cash and cash equivalents
$
1,555,139

Trade and other accounts receivable
262,947

Inventories
290,496

Other current assets
86,267

Property, plant and equipment
1,383,480

Investments
529,453

Other assets
25,538

Definite-lived intangible assets:
 
Patents and technology
227,840

Trade names and trademarks
234,610

Customer lists and relationships
1,280,142

Indefinite-lived intangible assets:
 
Trade names and trademarks
104,380

Other
26,670

Current liabilities
(406,532
)
Long-term debt
(1,319,132
)
Pension benefits
(316,086
)
Other noncurrent liabilities
(195,052
)
Deferred income taxes
(845,884
)
Noncontrolling interests
(17,582
)
Total identifiable net assets
2,906,694

Goodwill
2,818,627

Total net assets acquired
$
5,725,321

Significant changes to the purchase price allocation since our initial preliminary estimates reported in the first quarter of 2015 were primarily related to decreases in the estimated fair values of certain current assets, property, plant and equipment, investments and intangible assets and increases in certain other noncurrent liabilities and noncontrolling interests, which resulted in an increase to recognized goodwill of approximately $193.8 million. This increase to recognized goodwill includes approximately $1.5 million that was recognized during the three-month period ended March 31, 2016 based on changes to intangible assets, property, plant and equipment and deferred taxes.
Goodwill arising from the acquisition consists largely of the anticipated synergies and economies of scale from the combined companies and the overall strategic importance of the acquired businesses to Albemarle. The goodwill attributable to the acquisition will not be amortizable or deductible for tax purposes.
Included in Acquisition and integration related costs on our consolidated statements of income for the three-month periods ended March 31, 2016 and 2015 is $19.7 million and $57.4 million, respectively, of integration costs resulting from the acquisition of Rockwood (mainly consisting of professional services and advisory fees, costs to achieve synergies, relocation costs, and other integration costs) and $1.7 million and $2.1 million, respectively, of costs in connection with other significant projects.
The weighted-average amortization periods for the intangible assets acquired are 20 years for patents and technology, 20 years for trade names and trademarks and 24 years for customer lists and relationships. The weighted-average amortization period for all definite-lived intangible assets acquired is 23 years.
For the three-month period ended March 31, 2016, Depreciation and amortization expense included in Cost of goods sold was reduced by approximately $4.3 million as a result of measurement-period adjustments related to previous reporting periods.

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Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

In addition, Cost of goods sold was reduced by $0.2 million in the three-month period ended March 31, 2016 as a result of a measurement-period adjustment related to the utilization of the inventory markup, as further described in Note 12, “Segment Information.”
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations of the Company for the three-month period ended March 31, 2015 assume that the Merger occurred on January 1, 2015. The pro forma amounts include certain adjustments, including interest expense, depreciation, amortization expense and income taxes. The pro forma amounts were also adjusted to exclude approximately $57.4 million of nonrecurring acquisition and integration related costs, and approximately $48.2 million of charges related to the utilization of the inventory markup as further described in Note 12, “Segment Information.” The pro forma results do not include adjustments related to cost savings or other synergies that are anticipated as a result of the Merger. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred as of January 1, 2015, nor are they indicative of future results of operations.
 
Three Months Ended March 31, 2015
 
(in thousands, except per share amounts)
Pro forma Net sales
$
917,734

Pro forma Net income
$
122,145

Pro forma Net income per share:
 
Basic
$
1.13

Diluted
$
1.13

See Item 8 Financial Statements and Supplementary Data—Note 2, “Acquisitions,” in our Annual Report on Form 10-K for the year ended December 31, 2015 for further details about the Rockwood acquisition.
NOTE 3—Divestitures:
In 2015, we announced our intention to pursue strategic alternatives, including divestitures, related to certain businesses which include minerals-based flame retardants and specialty chemicals, fine chemistry services and metal sulfides. In the fourth quarter of 2015, we determined that the assets held for sale criteria were met for these businesses as well as a small group of assets at an idled site.
On November 5, 2015, the Company signed a definitive agreement to sell its Tribotecc metal sulfides business to Treibacher Industrie AG. Included in the transaction were sites in Vienna and Arnoldstein, Austria, and Tribotecc’s proprietary sulfide synthesis process. On January 4, 2016, the Company closed the sale of this business, effective for the first day of business in 2016. We received net proceeds of approximately $137 million and have recorded a gain of $11.5 million before income taxes in the first quarter of 2016 related to the sale of this business.
On December 16, 2015, the Company signed a definitive agreement to sell its minerals-based flame retardants and specialty chemicals businesses to Huber Engineered Materials, a division of J.M. Huber Corporation. The transaction includes Albemarle’s Martinswerk GmbH subsidiary and manufacturing facility located in Bergheim, Germany, and Albemarle’s 50% ownership interest in Magnifin Magnesiaprodukte GmbH, a joint-venture with Radex Heraklith Industriebeteiligung AG at Breitenau, Austria. On February 1, 2016, the Company closed the sale of these businesses. We received net proceeds of approximately $187 million and have recorded a gain of $111.3 million before income taxes in the first quarter of 2016 related to the sale of these businesses.

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Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

The carrying amounts of the major classes of assets and liabilities that were classified as held for sale at March 31, 2016 and December 31, 2015, are as follows (in thousands):
 
March 31,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets
$
57,127

 
$
156,421

Net property, plant and equipment
46,452

 
115,865

Goodwill
6,586

 
46,794

Other intangibles, net of amortization
132

 
66,324

All other noncurrent assets

 
19,081

Assets held for sale
$
110,297

 
$
404,485

Liabilities
 
 
 
Current liabilities
$
28,618

 
$
72,756

Deferred income taxes

 
24,947

All other noncurrent liabilities

 
31,003

Liabilities held for sale
$
28,618

 
$
128,706

As of March 31, 2016, Assets held for sale and Liabilities held for sale include the assets and liabilities, respectively, of the fine chemistry services business. We have determined that as of March 31, 2016, the expected cash flows of the fine chemistry services business were sufficient to establish recoverability of the asset carrying values, and therefore no impairment charge has been recorded in the accompanying financial statements under the held-for-sale model. In April 2016, the Company concluded that it would discontinue efforts to sell its fine chemistry services business, and as a result, this business will be accounted for as held and used in the second quarter of 2016.
As of December 31, 2015, Assets held for sale and Liabilities held for sale included the assets and liabilities, respectively, of the minerals-based flame retardants and specialty chemicals and metal sulfides businesses divested in the first quarter of 2016, the fine chemistry services business, and a small group of assets at an idled site.
As of the March 31, 2016 and December 31, 2015 balance sheet dates, the Company expected to complete the sales of the businesses included in assets and liabilities held for sale and therefore such amounts were classified as current. These businesses did not qualify for discontinued operations treatment because the Company’s management does not consider their sale or potential sale as representing a strategic shift that had or will have a major effect on the Company’s operations and financial results.
Also included in Gain on sales of businesses, net, for the first quarter of 2016 is a loss of $1.5 million on the sale of our wafer reclaim business.

NOTE 4—Goodwill and Other Intangibles:
The following table summarizes the changes in goodwill by reportable segment for the three months ended March 31, 2016 (in thousands):
 
Lithium and Advanced Materials
 
Bromine Specialties
 
Refining Solutions
 
Chemetall Surface Treatment
 
Total
Balance at December 31, 2015(a)
$
1,267,505

 
$
20,319

 
$
172,728

 
$
1,433,259

 
$
2,893,811

Acquisition of Rockwood(b)
(1,706
)
 

 

 
3,198

 
1,492

Other acquisitions(c)

 

 

 
1,668

 
1,668

Foreign currency translation adjustments
13,301

 

 
3,732

 
17,289

 
34,322

Balance at March 31, 2016
$
1,279,100

 
$
20,319

 
$
176,460

 
$
1,455,414

 
$
2,931,293



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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

(a)
The December 31, 2015 balances have been recast to reflect a change in segments. See Note 12, "Segment Information," for further details.
(b)
Represents final purchase price adjustments for the Rockwood acquisition recorded in the three-month period ended March 31, 2016.
(c)
Represents final purchase price adjustments for the Chemetall Shanghai acquisition recorded in the three-month period ended March 31, 2016.
The following table summarizes the changes in other intangibles and related accumulated amortization for the three months ended March 31, 2016 (in thousands):
 
Customer Lists and Relationships
 
Trade Names and Trademarks (a)
 
Patents and Technology
 
Other (b)
 
Total
Gross Asset Value
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
1,284,057

 
$
355,207

 
$
200,101

 
$
42,353

 
$
1,881,718

Acquisition of Rockwood(c)
15,915

 
(24,130
)
 

 
260

 
(7,955
)
Other acquisitions(d)
(2,306
)
 

 

 

 
(2,306
)
Foreign currency translation adjustments and other
15,425

 
7,763

 
3,314

 
563

 
27,065

Balance at March 31, 2016
$
1,313,091

 
$
338,840

 
$
203,415

 
$
43,176

 
$
1,898,522

Accumulated Amortization
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
(71,958
)
 
$
(19,759
)
 
$
(39,777
)
 
$
(17,177
)
 
$
(148,671
)
Amortization
(12,789
)
 
(1,637
)
 
(2,162
)
 
(195
)
 
(16,783
)
Foreign currency translation adjustments and other
(970
)
 
(304
)
 
(469
)
 
(93
)
 
(1,836
)
Balance at March 31, 2016
$
(85,717
)
 
$
(21,700
)
 
$
(42,408
)
 
$
(17,465
)
 
$
(167,290
)
Net Book Value at December 31, 2015
$
1,212,099

 
$
335,448

 
$
160,324

 
$
25,176

 
$
1,733,047

Net Book Value at March 31, 2016
$
1,227,374

 
$
317,140

 
$
161,007

 
$
25,711

 
$
1,731,232


(a)
Included in Trade Names and Trademarks are indefinite-lived intangible assets with a gross carrying amount of $113.2 million and $113.1 million at March 31, 2016 and December 31, 2015, respectively.
(b)
Included in Other is an indefinite-lived intangible asset with a gross carrying amount of $22.1 million and $21.9 million at March 31, 2016 and December 31, 2015, respectively.
(c)
Represents final purchase price adjustments for the Rockwood acquisition recorded in the three-month period ended March 31, 2016.
(d)
Represents final purchase price adjustments for the Chemetall Shanghai acquisition recorded in the three-month period ended March 31, 2016.

NOTE 5—Foreign Exchange:
Foreign exchange transaction (losses) gains were ($0.1) million and $52.4 million for the three-month periods ended March 31, 2016 and 2015, respectively, and are included in Other income, net, in our consolidated statements of income, with the unrealized portion included in Other, net, in our condensed consolidated statements of cash flows. The gains in the three-month period ended March 31, 2015 are primarily related to cash denominated in U.S. Dollars that was held by foreign subsidiaries where the European Union Euro serves as the functional currency, which was repatriated using the applicable transaction rates during the first quarter of 2015.
NOTE 6—Income Taxes:
The effective income tax rate for the three-month period ended March 31, 2016 was 12.4%, compared to 27.8% for the three-month period ended March 31, 2015. The Company’s effective income tax rate fluctuates based on, among other factors, its level and location of income. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the 2016 and 2015 periods is primarily due to the impact of earnings from outside the U.S. The decrease in the effective tax rate for the three-month period ended March 31, 2016 compared to the same period in 2015 is primarily driven by income from the sales of businesses and associated tax expense of $6.3 million. Our effective income tax rate for the three-month period ended March 31, 2015 was affected by $3.2 million related mainly to U.S. tax provision to return adjustments, and the OPEB plan termination gain described in Note 13, “Pension Plans and Other Postretirement Benefits.”

12

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)


NOTE 7—Earnings Per Share:
Basic and diluted earnings per share for the three-month periods ended March 31, 2016 and 2015 are calculated as follows (in thousands, except per share amounts):
 
Three Months Ended 
 March 31,
 
2016
 
2015
Basic earnings per share
 
 
 
Numerator:
 
 
 
Net income attributable to Albemarle Corporation
$
228,186

 
$
43,115

Denominator:
 
 
 
Weighted-average common shares for basic earnings per share
112,260

 
108,130

Basic earnings per share
$
2.03

 
$
0.40

 
 
 
 
Diluted earnings per share
 
 
 
Numerator:
 
 
 
Net income attributable to Albemarle Corporation
$
228,186

 
$
43,115

Denominator:
 
 
 
Weighted-average common shares for basic earnings per share
112,260

 
108,130

Incremental shares under stock compensation plans
510

 
334

Weighted-average common shares for diluted earnings per share
112,770

 
108,464

Diluted earnings per share
$
2.02

 
$
0.40

On February 26, 2016, the Company increased the regular quarterly dividend by 5% to $0.305 per share and declared a cash dividend of said amount for the first quarter of 2016, which was paid on April 1, 2016 to shareholders of record at the close of business as of March 16, 2016. On May 10, 2016, the Company declared a cash dividend of $0.305 per share, which is payable on July 1, 2016 to shareholders of record at the close of business as of June 15, 2016.
NOTE 8—Inventories:
The following table provides a breakdown of inventories at March 31, 2016 and December 31, 2015 (in thousands):
 
March 31,
 
December 31,
 
2016
 
2015
Finished goods
$
345,779

 
$
308,462

Raw materials and work in process(a)
135,480

 
144,886

Stores, supplies and other
49,971

 
55,380

Total inventories
$
531,230

 
$
508,728

(a)
Includes $41.0 million and $39.1 million at March 31, 2016 and December 31, 2015, respectively, of work in process related to the Lithium product category.

NOTE 9—Investments:
The Company holds a 49% equity interest in Windfield Holdings Pty Ltd (“Windfield”). With regard to the Company’s ownership in Windfield, the parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Windfield to be a variable interest entity (“VIE”). However, the Company does not consolidate Windfield as it is not the primary beneficiary. The carrying amount of our 49% equity interest in Windfield, which is our most significant VIE, was $292.6 million and $280.2 million at March 31, 2016 and December 31, 2015, respectively. The Company’s aggregate net investment in all other entities which it considers to be VIE’s for which the Company is not the primary beneficiary was $28.4 million and $27.6 million at March 31, 2016 and December 31, 2015, respectively. Our unconsolidated VIE’s are reported in Investments in the condensed consolidated balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.


13

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 10—Long-Term Debt:
Long-term debt at March 31, 2016 and December 31, 2015 consisted of the following (in thousands):
 
March 31,
 
December 31,
 
2016
 
2015
Term loan facilities, net of unamortized debt issuance costs of $2,343 at March 31, 2016 and $2,833 at December 31, 2015
$
916,657

 
$
1,247,167

1.875% Senior notes, net of unamortized discount and debt issuance costs of $9,662 at March 31, 2016 and $9,904 at December 31, 2015
774,688

 
759,151

3.00% Senior notes, net of unamortized discount and debt issuance costs of $1,616 at March 31, 2016 and $1,726 at December 31, 2015
248,385

 
248,274

4.15% Senior notes, net of unamortized discount and debt issuance costs of $4,225 at March 31, 2016 and $4,346 at December 31, 2015
420,775

 
420,654

4.50% Senior notes, net of unamortized discount and debt issuance costs of $2,832 at March 31, 2016 and $2,982 at December 31, 2015
347,168

 
347,018

5.45% Senior notes, net of unamortized discount and debt issuance costs of $4,429 at March 31, 2016 and $4,468 at December 31, 2015
345,571

 
345,532

Commercial paper notes
478,140

 
351,349

Fixed-rate foreign borrowings
1,010

 
995

Variable-rate foreign bank loans
41,114

 
77,452

Variable-rate domestic bank loans

 
20,479

Capital lease obligations
16,583

 
16,807

Miscellaneous
14

 
81

Total long-term debt
3,590,105

 
3,834,959

Less amounts due within one year
484,754

 
677,345

Long-term debt, less current portion
$
3,105,351

 
$
3,157,614

As a result of the adoption of new accounting guidance effective January 1, 2016, on a retrospective basis, unamortized debt issuance costs are now deducted from the carrying amount of the associated debt liability on the balance sheet. The reclassification of these unamortized debt issuance costs resulted in reductions of $17.1 million in Long-term debt and Other assets on the condensed consolidated balance sheets as of December 31, 2015. See Note 18, “Recently Issued Accounting Pronouncements,” for additional information.
Initial borrowings under our September 2015 Term Loan Agreement, which occurred on October 15, 2015, consisted of a 364-day term loan facility in an aggregate principal amount of $300 million (the “364-Day Facility”) and a five-year term loan facility in an aggregate principal amount of $950 million (the “Five-Year Facility”), or collectively, the “Term Loan Facilities.” In the three-month period ended March 31, 2016, we repaid the 364-Day Facility in full and repaid approximately $31 million of borrowings under the Five-Year Facility, each primarily with proceeds from the sales of the metal sulfides business and the minerals-based flame retardants and specialty chemicals businesses, both of which closed in the first quarter of 2016.
Current portion of long-term debt at March 31, 2016 consists primarily of commercial paper notes with a weighted-average interest rate of approximately 1.31% and a weighted-average maturity of 21 days.
The carrying value of our 1.875% Euro-denominated senior notes has been designated as an effective hedge of our net investment in foreign subsidiaries where the Euro serves as the functional currency, and gains or losses on the revaluation of these senior notes to our reporting currency are recorded in accumulated other comprehensive loss. During the three-month periods ended March 31, 2016 and 2015, (losses) gains of ($9.5) million and $54.0 million (net of income taxes), respectively, were recorded in accumulated other comprehensive loss in connection with the revaluation of these senior notes to our reporting currency.


14

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 11—Commitments and Contingencies:
Environmental
We had the following activity in our recorded environmental liabilities for the three months ended March 31, 2016, as follows (in thousands):
Beginning balance at December 31, 2015
$
35,298

Expenditures
(387
)
Accretion of discount
217

Foreign currency translation adjustments and other
1,555

Ending balance at March 31, 2016
36,683

Less amounts reported in Accrued expenses
1,904

Amounts reported in Other noncurrent liabilities
$
34,779

Environmental remediation liabilities include discounted liabilities of $25.0 million and $24.5 million at March 31, 2016 and December 31, 2015, respectively, discounted at rates ranging from 2.8% to 4.3%, with the undiscounted amount totaling $65.1 million and $64.5 million at March 31, 2016 and December 31, 2015, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.
The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, in excess of amounts already recorded, could be up to approximately $15 million before income taxes.
We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.
Litigation
We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.
Indemnities
We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.
The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses that Rockwood divested prior to the Acquisition Closing Date. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows.


15

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Other
We have contracts with certain of our customers, which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis as well as blanket coverage of multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.
NOTE 12—Segment Information:

Effective January 1, 2016, our former Performance Chemicals reportable segment was split into two separate reportable segments: (1) Lithium and Advanced Materials and (2) Bromine Specialties. As a result, our four reportable segments include Lithium and Advanced Materials, Bromine Specialties, Refining Solutions and Chemetall® Surface Treatment. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. The new business structure aligns with the markets and customers we serve through each of the segments. The new structure also facilitates the continued standardization of business processes across the organization, and is consistent with the manner in which information is presently used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions.
Summarized financial information concerning our reportable segments is shown in the following tables. Results for 2015 have been recast to reflect the change in segments noted above.
The “All Other” category is comprised of three operating segments that do not fit into any of our core businesses subsequent to the acquisition of Rockwood: minerals-based flame retardants and specialty chemicals, fine chemistry services and metal sulfides. During the first quarter of 2016, we completed the sales of the metal sulfides business and the minerals-based flame retardants and specialty chemicals business. For additional information about these businesses, see Note 3, “Divestitures.”
The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the reportable segments. Pension and OPEB service cost (which represents the benefits earned by active employees during the period) and amortization of prior service cost or benefit are allocated to the reportable segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating pension and OPEB items”) are included in Corporate. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.
The Company uses earnings before interest, taxes, depreciation and amortization, as adjusted for certain non-recurring or unusual items such as restructuring charges, facility divestiture charges, non-operating pension and OPEB items and other significant non-recurring items (“adjusted EBITDA”), on a segment basis to assess the ongoing performance of the Company’s business segments. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. The Company has reported adjusted EBITDA because management believes it provides transparency to investors and enables period-to-period comparability of financial performance. Adjusted EBITDA should not be considered as an alternative to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP.

16

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

 
Three Months Ended 
 March 31,
 
2016
 
2015
 
(In thousands)
Net sales:
 
 
 
Lithium and Advanced Materials
$
216,173

 
$
198,774

Bromine Specialties
196,553

 
189,592

Refining Solutions
170,579

 
179,166

Chemetall Surface Treatment
208,187

 
192,091

All Other
72,089

 
122,369

Corporate
1,817

 
2,412

Total net sales
$
865,398

 
$
884,404

 
 
 
 
Adjusted EBITDA:
 
 
 
Lithium and Advanced Materials
$
86,474

 
$
77,595

Bromine Specialties
61,608

 
52,933

Refining Solutions
55,074

 
42,193

Chemetall Surface Treatment
52,522

 
46,004

All Other
8,464

 
13,564

Corporate
(19,166
)
 
33,339

Total adjusted EBITDA
$
244,976

 
$
265,628


See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, to Net income (loss) attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, (in thousands):
 
Lithium and Advanced Materials
 
Bromine Specialties
 
Refining Solutions
 
Chemetall Surface Treatment
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
Three months ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
86,474

 
$
61,608

 
$
55,074

 
$
52,522

 
$
255,678

 
$
8,464

 
$
(19,166
)
 
$
244,976

Depreciation and amortization
(23,147
)
 
(9,755
)
 
(8,760
)
 
(16,942
)
 
(58,604
)
 
(612
)
 
(1,336
)
 
(60,552
)
Utilization of inventory markup(a)

 

 

 
(154
)
 
(154
)
 

 

 
(154
)
Gain (loss) on sales of businesses, net(b)

 

 

 

 

 
122,857

 
(1,533
)
 
121,324

Acquisition and integration related costs(c)

 

 

 

 

 

 
(21,356
)
 
(21,356
)
Interest and financing expenses

 

 

 

 

 

 
(25,251
)
 
(25,251
)
Income tax expense

 

 

 

 

 

 
(30,985
)
 
(30,985
)
Non-operating pension and OPEB items

 

 

 

 

 

 
184

 
184

Net income (loss) attributable to Albemarle Corporation
$
63,327

 
$
51,853

 
$
46,314

 
$
35,426

 
$
196,920

 
$
130,709

 
$
(99,443
)
 
$
228,186

Three months ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
77,595

 
$
52,933

 
$
42,193

 
$
46,004

 
$
218,725

 
$
13,564

 
$
33,339

 
$
265,628

Depreciation and amortization
(21,822
)
 
(8,461
)
 
(8,110
)
 
(18,196
)
 
(56,589
)
 
(5,498
)
 
(1,899
)
 
(63,986
)
Utilization of inventory markup(a)
(28,582
)
 

 

 
(16,953
)
 
(45,535
)
 
(2,651
)
 

 
(48,186
)
Acquisition and integration related costs(c)

 

 

 

 

 

 
(59,523
)
 
(59,523
)
Interest and financing expenses

 

 

 

 

 

 
(35,746
)
 
(35,746
)
Income tax expense

 

 

 

 

 

 
(14,140
)
 
(14,140
)
Non-operating pension and OPEB items

 

 

 

 

 

 
3,509

 
3,509

Other(d)

 

 

 

 

 

 
(4,441
)
 
(4,441
)
Net income (loss) attributable to Albemarle Corporation
$
27,191

 
$
44,472

 
$
34,083

 
$
10,855

 
$
116,601

 
$
5,415

 
$
(78,901
)
 
$
43,115



17

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

(a)
In connection with the acquisition of Rockwood, the Company valued Rockwood’s existing inventory at fair value as of the Acquisition Closing Date, which resulted in a markup of the underlying net book value of the inventory totaling approximately $103 million. The inventory markup was expensed over the estimated remaining selling period. For the three-month period ended March 31, 2016, $0.2 million was included in Cost of goods sold related to the utilization of the inventory markup as a result of a measurement-period adjustment. For the three-month period ended March 31, 2015, $40.3 million was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $7.9 million, respectively, related to the utilization of the inventory markup.
(b)
See Note 3, “Divestitures.”
(c)
See Note 2, “Acquisitions.”
(d)
Financing-related fees expensed in connection with the acquisition of Rockwood.

NOTE 13—Pension Plans and Other Postretirement Benefits:
The components of pension and postretirement benefits cost (credit) for the three-month periods ended March 31, 2016 and 2015 are as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2016
 
2015
Pension Benefits Cost (Credit):
 
 
 
Service cost
$
1,540

 
$
1,979

Interest cost
10,601

 
9,564

Expected return on assets
(11,309
)
 
(11,082
)
Actuarial gain
(50
)
 

Amortization of prior service benefit
28

 
30

Total net pension benefits cost
$
810

 
$
491

Postretirement Benefits Cost (Credit):
 
 
 
Service cost
$
29

 
$
66

Interest cost
621

 
668

Expected return on assets
(47
)
 
(65
)
Amortization of prior service benefit
(24
)
 
(24
)
Settlements/curtailments(a)

 
(2,594
)
Total net postretirement benefits cost (credit)
$
579

 
$
(1,949
)
Total net pension and postretirement benefits cost (credit)
$
1,389

 
$
(1,458
)
(a)
We assumed responsibility for one domestic OPEB plan in connection with the acquisition of Rockwood which covered a small number of active employees and retirees. This plan was terminated in the first quarter of 2015 and provisions were made for the affected employees and retirees to receive benefits under an existing plan. A gain of $2.6 million was recognized in the first quarter of 2015 related to the termination of this plan.
During the three-month periods ended March 31, 2016 and 2015, we made contributions of $3.4 million and $4.5 million, respectively, to our qualified and nonqualified pension plans.
We paid $0.8 million and $1.5 million in premiums to the U.S. postretirement benefit plan during the three-month periods ended March 31, 2016 and 2015, respectively.
Multiemployer Plan
Our contributions to the Pensionskasse Dynamit Nobel Versicherungsverein auf Gegenseitigkeit, Troisdorf (“DN Pensionskasse”) multiemployer plan were €0.4 million and €0.3 million (approximately $0.5 million and $0.4 million) during the three months ended March 31, 2016 and 2015, respectively.


18

Table of Contents
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 14—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 fair values of our senior notes and other fixed rate foreign borrowings 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. The carrying value of our remaining long-term debt reported in the accompanying condensed consolidated balance sheets approximates fair value as substantially all of such debt bears interest based on prevailing variable market rates currently available in the countries in which we have borrowings.
 
March 31, 2016
 
December 31, 2015
 
Recorded
Amount
 
Fair Value
 
Recorded
Amount
 
Fair Value
 
(In thousands)
Long-term debt
$
3,606,269

 
$
3,583,568

 
$
3,852,019

 
$
3,810,981

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, 2016 and December 31, 2015, we had outstanding foreign currency forward contracts with notional values totaling $284.0 million and $217.7 million, respectively. Our foreign currency forward contracts outstanding at March 31, 2016 and December 31, 2015 have not been designated as hedging instruments under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. At March 31, 2016, $0.4 million was included in Other accounts receivable associated with the fair value of our foreign currency forward contracts, and at December 31, 2015, $0.3 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, net; further, fluctuations in the value of these contracts are generally expected to be offset by changes in the value of the underlying exposures being hedged. For the three-month periods ended March 31, 2016 and 2015, we recognized gains (losses) of $5.8 million and ($20.4) million, respectively, in Other income, net, in our consolidated statements of income related to the change in the fair value of our foreign currency forward contracts. These amounts are generally expected to be offset by changes in the value of the underlying exposures being hedged which are also reported in Other income, net. Also, for the three-month periods ended March 31, 2016 and 2015, we recorded ($5.8) million and $20.4 million, respectively, related to the change in the fair value of our foreign currency forward contracts, and net cash receipts (settlements) of $5.1 million and ($19.7) million, respectively, in Other, net, in our condensed consolidated statements of cash flows.
The counterparties to our foreign currency forward contracts are major financial institutions with which we generally have other financial relationships. We are exposed to credit loss in the event of nonperformance by these counterparties. However, we do not anticipate nonperformance by the counterparties.

NOTE 15—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. Transfers between levels of the fair value hierarchy are deemed to have occurred on the date of the event or change in circumstance that caused the transfer.

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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

There were no transfers between Levels 1 and 2 during the three-month period ended March 31, 2016. 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, 2016 and December 31, 2015 (in thousands):
 
March 31, 2016
 
Quoted Prices in Active Markets for Identical Items (Level 1)
 
Quoted Prices in Active Markets for Similar Items (Level 2)
 
Unobservable Inputs (Level 3)
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investments under executive deferred compensation plan(a)
$
19,400

 
$
19,400

 
$

 
$

Private equity securities(b)
$
2,615

 
$
27

 
$

 
$
2,588

Foreign currency forward contracts(c)
$
437

 
$

 
$
437

 
$

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Obligations under executive deferred compensation plan(a)
$
19,400

 
$
19,400

 
$

 
$

 
December 31, 2015
 
Quoted Prices in Active Markets for Identical Items (Level 1)
 
Quoted Prices in Active Markets for Similar Items (Level 2)
 
Unobservable Inputs (Level 3)
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investments under executive deferred compensation plan(a)
$
21,631

 
$
21,631

 
$

 
$

Private equity securities(b)
$
2,626

 
$
31

 
$

 
$
2,595

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Obligations under executive deferred compensation plan(a)
$
21,631

 
$
21,631

 
$

 
$

Foreign currency forward contracts(c)
$
250

 
$

 
$
250

 
$

(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)
Primarily consists of private equity securities 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 income, net, in our consolidated statements of income. Holdings in private equity securities are typically valued using the net asset valuations provided by the underlying private investment companies and as such are classified within Level 3.
(c)
As a result of our global operating and financing activities, we are exposed to market risks from changes in foreign currency exchange rates, which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from foreign currency exchange rate fluctuations through the use of foreign currency forward contracts. Unless otherwise noted, these derivative financial instruments are not designated as hedging instruments under ASC 815, Derivatives and Hedging. 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.

The following table presents the fair value reconciliation of Level 3 assets measured at fair value on a recurring basis for the periods indicated (in thousands):
 
Three Months Ended 
 March 31,
 
2016
 
2015
Beginning balance
$
2,595

 
$
1,785

Total unrealized losses included in earnings relating to assets still held at the reporting date
(7
)
 

Ending balance
$
2,588

 
$
1,785


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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 16—Accumulated Other Comprehensive (Loss) Income:
The components and activity in Accumulated other comprehensive (loss) income (net of deferred income taxes) consisted of the following during the periods indicated below (in thousands):
 
Foreign Currency Translation
 
Pension and Postretirement Benefits(a)
 
Net Investment Hedge
 
Interest Rate Swap(b)
 
Other
 
Total
Three months ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
(463,372
)
 
$
(758
)
 
$
62,245

 
$
(18,861
)
 
$
(542
)
 
$
(421,288
)
Other comprehensive income (loss) before reclassifications
98,910

 

 
(9,524
)
 

 
(4
)
 
89,382

Amounts reclassified from accumulated other comprehensive loss

 
1

 

 
525

 

 
526

Other comprehensive income (loss), net of tax
98,910

 
1

 
(9,524
)
 
525

 
(4
)
 
89,908

Other comprehensive income attributable to noncontrolling interests
(283
)
 

 

 

 

 
(283
)
Balance at March 31, 2016
$
(364,745
)
 
$
(757
)
 
$
52,721

 
$
(18,336
)
 
$
(546
)
 
$
(331,663
)
Three months ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
(52,264
)
 
$

 
$
11,384

 
$
(20,962
)
 
$
(571
)
 
$
(62,413
)
Other comprehensive (loss) income before reclassifications
(354,571
)
 

 
54,046

 

 

 
(300,525
)
Amounts reclassified from accumulated other comprehensive loss

 
2

 

 
527

 
27

 
556

Other comprehensive (loss) income, net of tax
(354,571
)
 
2

 
54,046

 
527

 
27

 
(299,969
)
Other comprehensive loss attributable to noncontrolling interests
100

 

 

 

 

 
100

Balance at March 31, 2015
$
(406,735
)
 
$
2

 
$
65,430

 
$
(20,435
)
 
$
(544
)
 
$
(362,282
)

(a)
The pre-tax portion of amounts reclassified from accumulated other comprehensive (loss) income consists of amortization of prior service benefit, which is a component of pension and postretirement benefits cost (credit). See Note 13, “Pension Plans and Other Postretirement Benefits.”
(b)
The pre-tax portion of amounts reclassified from accumulated other comprehensive (loss) income is included in interest expense.
The amount of income tax (expense) benefit allocated to each component of Other comprehensive income (loss) for the three-month periods ended March 31, 2016 and 2015 is provided in the following tables (in thousands):
 
Three Months Ended March 31,
 
2016
 
2015
 
Foreign Currency Translation
 
Pension and Postretirement Benefits
 
Net Investment Hedge
 
Interest Rate Swap
 
Other
 
Foreign Currency Translation
 
Pension and Postretirement Benefits
 
Net Investment Hedge
 
Interest Rate Swap
 
Other
Other comprehensive income (loss), before tax
$
99,281

 
$
4

 
$
(15,121
)
 
$
834

 
$
(4
)
 
$
(387,812
)
 
$
6

 
$
85,577

 
$
834

 
$
18

Income tax (expense) benefit
(371
)
 
(3
)
 
5,597

 
(309
)
 

 
33,241

 
(4
)
 
(31,531
)
 
(307
)
 
9

Other comprehensive income (loss), net of tax
$
98,910

 
$
1

 
$
(9,524
)
 
$
525

 
$
(4
)
 
$
(354,571
)
 
$
2

 
$
54,046

 
$
527

 
$
27



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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 17—Related Party Transactions:
Our condensed consolidated financial statements include sales to and purchases from unconsolidated affiliates in the ordinary course of business as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2016
 
2015
Sales to unconsolidated affiliates
$
6,389

 
$
7,105

Purchases from unconsolidated affiliates
35,621

 
26,776


NOTE 18—Recently Issued Accounting Pronouncements:
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance designed to enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of the guidance is that revenue recognized from a transaction or event that arises from a contract with a customer should reflect the consideration to which an entity expects to be entitled in exchange for goods or services provided. To achieve that core principle the new guidance sets forth a five-step revenue recognition model that will need to be applied consistently to all contracts with customers, except those that are within the scope of other topics in the ASC. Also required are new disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The new disclosures include qualitative and quantitative information about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized related to the costs to obtain or fulfill a contract. In March 2016 and April 2016, the FASB issued amendments to this new guidance that provides clarification about principal versus agent considerations, identification of performance obligations and accounting for the licensing of intellectual property. In addition, in May 2016, the FASB issued an amendment to the guidance that provides clarification about collectibility, noncash consideration, presentation of sales tax, and transition. These new requirements become effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. We are assessing the impact of these new requirements on our financial statements.
In February 2015, the FASB issued accounting guidance that changes the analysis that reporting entities must perform to determine whether certain types of legal entities should be consolidated. Specifically, the amendments affect (a) limited partnerships and similar legal entities; (b) the consolidation analysis of reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships; and (c) certain investment funds. These amendments became effective on January 1, 2016 and did not have a material effect on our condensed consolidated financial statements.
In April and August 2015, the FASB issued accounting guidance that changes the balance sheet presentation of debt issuance costs (except for debt issuance costs related to line-of-credit arrangements). The guidance requires debt issuance costs relating to a recognized debt liability to be presented as a direct deduction from the carrying amount of the associated debt liability in the balance sheet. This new requirement became effective on January 1, 2016. See Note 10, “Long-Term Debt” for additional information.
In April 2015, the FASB issued accounting guidance that, among other things, provides for a practical expedient related to interim period remeasurements of defined benefit plan assets and obligations. The practical expedient permits entities to remeasure plan assets and obligations using the month-end that is closest to the date of the actual event. Disclosure of such election and related month-end remeasurement date is required. This guidance became effective on January 1, 2016 and did not have a material effect on our condensed consolidated financial statements.
In April 2015, the FASB issued accounting guidance which clarifies the proper method of accounting for fees paid in a cloud computing arrangement. The guidance requires software licenses included in a cloud computing arrangement to be accounted for consistently with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. This guidance became effective on January 1, 2016 and did not have a material effect on our condensed consolidated financial statements.
In May 2015, the FASB issued accounting guidance for which investments measured at net asset value per share (or its equivalent) using the practical expedient should no longer be categorized within the fair value hierarchy. Although removed from the fair value hierarchy, disclosure of the nature, risks and amount of investments for which fair value is measured using

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ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

the practical expedient is still required. This guidance became effective on January 1, 2016 and did not have a material effect on our condensed consolidated financial statements.
In July 2015, the FASB issued accounting guidance that requires inventory to be measured at the lower of cost and net realizable value. The scope of this guidance excludes inventory measured using the last-in first-out method or the retail inventory method. This new requirement will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and is to be applied prospectively. Early adoption is permitted. We are assessing the impact of this new requirement on our financial statements.
In February 2016, the FASB issued accounting guidance that requires assets and liabilities arising from leases to be recorded on the balance sheet. Additional disclosures are required regarding the amount, timing, and uncertainty of cash flows from leases. This new guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied using a modified retrospective approach. Early adoption is permitted. We are assessing the impact of this new requirement on our financial statements.
In March 2016, the FASB issued accounting guidance that simplifies several aspects of the accounting for share-based payment awards. Among other things, this guidance requires all tax effects related to share-based payment awards to be recognized as income tax expense or benefit on the income statement, thus eliminating all additional paid-in capital pools. An entity should recognize excess tax benefits regardless of whether the benefit reduces income taxes payable in the current period. For interim reporting purposes, excess tax benefits and tax deficiencies should be accounted for as discrete items in the reporting period in which they occur. Additionally, this new guidance requires all tax related cash flows resulting from share-based payments to be presented as an operating activity on the statement of cash flows rather than as a financing activity. This guidance will be effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. We are assessing the impact of this new requirement on our financial statements.


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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 and 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 or the end-user markets in which our products are sold;
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;
changes in our markets in general;
fluctuations in foreign currencies;
changes in laws and government regulation impacting our operations or our products;
the occurrence of regulatory proceedings, claims or litigation;
the occurrence of cyber-security breaches, terrorist attacks, industrial accidents, natural disasters or climate change;
hazards associated with chemicals manufacturing;
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 the jurisdictional mix of our earnings and changes in tax laws and rates;
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 uncertainties in the debt and equity markets;
technology or intellectual property infringement, including cyber-security breaches, and other innovation risks;
decisions we may make in the future;
the ability to successfully execute, operate and integrate acquisitions and divestitures, including the integration of Rockwood’s operations, and realize anticipated synergies and other benefits; 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 condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

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The following is a discussion and analysis of results of operations for the three-month periods ended March 31, 2016 and 2015. A discussion of consolidated financial condition and sources of additional capital is included under a separate heading “Financial Condition and Liquidity” on page 33.
Overview
We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals that meets customer needs across an exceptionally diverse range of end markets. The end markets we serve include the petroleum refining, consumer electronics, energy storage, construction, automotive, steel and aerospace, lubricants, pharmaceuticals, crop protection, household appliances, heating, ventilation, aluminum finishing, food safety and custom chemistry services. 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 the acquisition of Rockwood position us well to take advantage of strengthening economic conditions as they occur while softening the negative impact of the current challenging global economic environment.
First Quarter 2016
During the first quarter of 2016:
Effective January 1, 2016, our former Performance Chemicals reportable segment was split into two separate reportable segments: (1) Lithium and Advanced Materials and (2) Bromine Specialties. This split did not affect the existing Refining Solutions and Chemetall Surface Treatment reportable segments.
On January 4, 2016, we closed the sale of the metal sulfides business for net proceeds of approximately $137 million and recorded a gain of $11.5 million before income taxes in the first quarter of 2016 related to the sale.
On February 1, 2016, we closed the sale of the minerals-based flame retardants and specialty chemicals business for net proceeds of approximately $187 million and recorded a gain of $111.3 million before income taxes in the first quarter of 2016 related to the sale.
We repaid approximately $331 million of borrowings outstanding under the September 2015 Term Loan Agreement with proceeds from the divestitures closed in the first quarter of 2016.
Our board of directors declared a quarterly dividend of $0.305 per share on February 26, 2016, which was paid on April 1, 2016 to shareholders of record at the close of business as of March 16, 2016.
Our net sales for the quarter were $865.4 million, down 2% from net sales of $884.4 million in the first quarter of 2015.
Earnings per share were $2.02 (on a diluted basis), an increase from first quarter 2015 results of $0.40 per diluted share. The first quarter of 2016 includes a net gain on the sales of businesses of $121.3 million.
Cash provided by operating activities was $172.7 million in the first quarter, an increase from $45.8 million in the first quarter 2015.

Outlook
Effective January 1, 2016, the former Performance Chemicals segment was split into two separate reportable segments: (1) Lithium and Advanced Materials, which includes Performance Catalyst Solutions and Curatives (“PCS”), and (2) Bromine Specialties. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. We expect this change to provide further clarity into the performance of each business.
The current global business environment presents a diverse set of opportunities and challenges in the markets we serve, from slow and uneven global growth, currency exchange volatility, significantly lower crude oil prices, a dynamic pricing environment in bromine derivatives and an ever-changing landscape in electronics, to the continuous need for cutting edge catalysts and technology by our refinery customers, diverse energy storage needs including exciting opportunities in electric vehicles, and increasingly stringent environmental standards. Amidst these dynamics, we believe our business fundamentals are sound and that we are strategically well-positioned as we remain focused on increasing sales volumes, significant deleveraging following our acquisition of Rockwood, optimizing and improving the value of our portfolio through pricing and product

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Table of Contents

development, managing costs and delivering value to our customers. We believe that our businesses remain positioned to capitalize on new business opportunities and long-term trends driving growth within our end markets and to respond quickly to improved economic conditions. Additionally, we are well on track to exceed our expectations regarding synergies from the acquisition of the Rockwood businesses in 2015.
Lithium and Advanced Materials: We expect continued strong growth for the remainder of 2016, led by demand in battery-grade applications and continued price improvement in Lithium. PCS experienced strong growth in 2015 due to market demand in general and due to certain competitor outages. While we expect most of the PCS business to maintain a similar level of profitability in 2016, we may be challenged due to the bankruptcy filing of one of our customers, which could impact Income before income taxes and adjusted EBITDA by as much as $10 million this year.
On a longer term basis, we believe that demand for lithium will continue to grow as new applications for lithium power continue to be developed and the use of plug-in hybrid electric vehicles and battery electric vehicles escalates. In addition, we expect growth in PCS to come from growing global demand for plastics driven by rising standards of living and infrastructure spending, particularly in Asia and the Middle East.
Bromine Specialties: We expect the remainder of 2016 to be challenging for Bromine sales and profitability growth due to an expected decline in demand for clear brine fluids used in offshore drilling projects as well as the expiration of a methyl bromide supply agreement at the end of 2015 that was not replaced. Through working capital discipline and strong controls on costs, we expect to generate healthy cash flows in the Bromine business despite these challenges.
We believe that the combination of solid, long-term business fundamentals, with our strong cost position, product innovations and effective management of raw material inventory inflation will enable us to manage our business through end market challenges and to capitalize on opportunities that are expected with favorable market trends in select end markets and with a more evenly sustained economic recovery.
On a longer term basis, we continue to believe that improving global standards of living, widespread digitization, increasing demand for data management capacity and the potential for increasingly stringent fire safety regulations in developing markets are likely to drive continued demand for fire safety products. Demand for drilling completion fluids in 2015 held up better than expected, but is likely to be impacted negatively in the short term as a result of sustained lower oil prices impacting offshore drilling projects around the world. Longer term, absent an increase in regulatory pressure on offshore drilling, we would expect this business to resume a solid growth trajectory once oil prices recover from recent levels as we expect that deep water drilling will continue to increase around the world. 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 tighten as demand for existing and possible new uses of bromine expands over time.
Refining Solutions: In 2016, despite some near-term concerns about how the price of oil will impact the crude slate used by refineries and the resulting demand for catalysts, we expect to see continued, sustained high level performance from heavy oil upgrading as well as improvement in clean fuels technology results due to increased change outs by refiners and an improved product mix, although certain national oil companies, among others, are expected to look for ways to delay catalysts change outs due to the current oil economic environment.
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 Refining Solutions business. Delivering superior end-use performance continues to be the most effective way to create sustainable value in the refinery catalysts industry, and we believe our technologies continue to provide significant performance and financial benefits to refiners challenged to meet tighter regulations around the world, those managing new contaminants present in North America tight oil, and those in the Middle East and Asia seeking to use heavier feedstock while pushing for higher propylene yields. While lower oil prices may impact the overall crude slate for a period of time, longer term, we believe that the global crude supply will get heavier and more sour, trends that bode well for catalysts demand. Given this and based on our technology, current production capacities and expected growth in end market demand, we believe that we remain well-positioned for the future.
Chemetall Surface Treatment: Demand for surface treatment products generally follows the activity levels of metal processing manufacturers, including the automotive, steel and aerospace industries, as well as products sold to general industrial markets, including heavy equipment, household appliances, manufacturing, heating, ventilation and aluminum finishing. We believe that our strong customer relationships, service and our geographic and end market diversity coupled with the growth coming from recently completed acquisitions, will lead to continued growth for the remainder of 2016.
On a longer term basis, we expect to continue to generate growth from our focus on new product development, improving process technologies, expanding our customer base, and broadening our technology capabilities in existing and new markets through internal research and development and bolt-on acquisitions.

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All Other: During the first quarter of 2016, we closed the previously announced sales of the metal sulfides business and the minerals-based flame retardants and specialty chemicals businesses. The cash generated from the sale of these businesses was used to reduce borrowings outstanding under the September 2015 Term Loan Agreement.
In April 2016, we concluded that we would discontinue efforts to sell the fine chemistry services business. This business is expected to deliver improved results versus 2015 and will continue to be reported outside of the Company’s reportable segments.
Corporate: In the first quarter of 2016, we increased our quarterly dividend rate to $0.305 per share. We continue to focus on cash generation, working capital management and process efficiencies. We expect our global effective tax rate for 2016 to be approximately 20.2%; 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.
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.
First Quarter 2016 Compared to First Quarter