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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 June 30, 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.)
 
 
4350 CONGRESS STREET, SUITE 700
CHARLOTTE, NORTH CAROLINA
 
28209
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code - (980) 299-5700
_________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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 July 29, 2016: 112,403,118


Table of Contents

ALBEMARLE CORPORATION
INDEX – FORM 10-Q
 
 
 
 
 
 
Page
Number(s)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8-26
 
 
 
27-46
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBITS
 
 

2

Table of Contents

PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements (Unaudited).
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

Cost of goods sold
421,223

 
506,259

 
835,900

 
1,007,188

Gross profit
248,104

 
212,031

 
490,638

 
403,415

Selling, general and administrative expenses
86,055

 
88,010

 
168,686

 
171,660

Research and development expenses
20,500

 
21,925

 
40,372

 
45,421

Gain on sales of businesses, net
(974
)
 

 
(122,298
)
 

Acquisition and integration related costs
19,030

 
22,832

 
37,588

 
80,657

Operating profit
123,493

 
79,264

 
366,290

 
105,677

Interest and financing expenses
(15,800
)
 
(20,599
)
 
(30,914
)
 
(42,899
)
Other (expenses) income, net
(2,297
)
 
286

 
(2,250
)
 
50,110

Income from continuing operations before income taxes and equity in net income of unconsolidated investments
105,396

 
58,951

 
333,126

 
112,888

Income tax expense
23,656

 
14,851

 
49,141

 
28,636

Income from continuing operations before equity in net income of unconsolidated investments
81,740

 
44,100

 
283,985

 
84,252

Equity in net income of unconsolidated investments (net of tax)
13,846

 
5,118

 
29,837

 
14,219

Net income from continuing operations
95,586

 
49,218

 
313,822

 
98,471

(Loss) income from discontinued operations (net of tax)
(398,340
)
 
10,122

 
(381,028
)
 
8,024

Net (loss) income
(302,754
)
 
59,340

 
(67,206
)
 
106,495

Net income attributable to noncontrolling interests
(12,067
)
 
(7,193
)
 
(19,429
)
 
(11,233
)
Net (loss) income attributable to Albemarle Corporation
$
(314,821
)
 
$
52,147

 
$
(86,635
)
 
$
95,262

Basic earnings (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.74

 
$
0.37

 
$
2.62

 
$
0.79

Discontinued operations
(3.54
)
 
0.09

 
(3.39
)
 
0.07

 
$
(2.80
)
 
$
0.46

 
$
(0.77
)
 
$
0.86

Diluted earnings (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.74

 
$
0.37

 
$
2.61

 
$
0.79

Discontinued operations
(3.52
)
 
0.09

 
(3.38
)
 
0.07

 
$
(2.78
)
 
$
0.46

 
$
(0.77
)
 
$
0.86

Weighted-average common shares outstanding – basic
112,339

 
112,189

 
112,300

 
110,160

Weighted-average common shares outstanding – diluted
113,175

 
112,607

 
112,973

 
110,536

Cash dividends declared per share of common stock
$
0.305

 
$
0.29

 
$
0.61

 
$
0.58

See accompanying Notes to the Condensed Consolidated Financial Statements.

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Table of Contents

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

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Net (loss) income
$
(302,754
)
 
$
59,340

 
$
(67,206
)
 
$
106,495

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation
(51,193
)
 
56,227

 
47,713

 
(298,317
)
Pension and postretirement benefits
419

 
2

 
420

 
4

Net investment hedge
6,607

 
(10,930
)
 
(2,917
)
 
43,116

Interest rate swap
526

 
526

 
1,051

 
1,053

Total other comprehensive (loss) income, net of tax
(43,641
)
 
45,825

 
46,267

 
(254,144
)
Comprehensive (loss) income
(346,395
)
 
105,165

 
(20,939
)
 
(147,649
)
Comprehensive income attributable to noncontrolling interests
(12,219
)
 
(7,168
)
 
(19,864
)
 
(11,082
)
Comprehensive (loss) income attributable to Albemarle Corporation
$
(358,614
)
 
$
97,997

 
$
(40,803
)
 
$
(158,731
)
See accompanying Notes to the Condensed Consolidated Financial Statements.

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Table of Contents

ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

 
June 30,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
193,661

 
$
213,734

Trade accounts receivable, less allowance for doubtful accounts (2016 – $13,545; 2015 – $3,390)
446,352

 
397,912

Other accounts receivable
44,437

 
74,989

Inventories
517,052

 
439,513

Other current assets
70,317

 
62,922

Assets held for sale
255,941

 
641,932

Total current assets
1,527,760

 
1,831,002

Property, plant and equipment, at cost
3,846,686

 
3,700,472

Less accumulated depreciation and amortization
1,500,554

 
1,379,377

Net property, plant and equipment
2,346,132

 
2,321,095

Investments
458,650

 
435,584

Noncurrent assets held for sale
2,944,071

 
2,971,455

Other assets
182,231

 
194,398

Goodwill
1,472,553

 
1,460,552

Other intangibles, net of amortization
380,984

 
383,868

Total assets
$
9,312,381

 
$
9,597,954

Liabilities And Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
253,067

 
$
239,572

Accrued expenses
211,444

 
313,259

Current portion of long-term debt
493,705

 
674,994

Dividends payable
34,045

 
32,306

Liabilities held for sale
145,269

 
329,598

Income taxes payable
21,528

 
26,956

Total current liabilities
1,159,058

 
1,616,685

Long-term debt
3,019,478

 
3,142,163

Postretirement benefits
49,265

 
49,647

Pension benefits
293,426

 
299,983

Noncurrent liabilities held for sale
455,452

 
464,207

Other noncurrent liabilities
230,347

 
239,104

Deferred income taxes
799,009

 
384,852

Commitments and contingencies (Note 11)

 

Equity:
 
 
 
Albemarle Corporation shareholders’ equity:
 
 
 
Common stock, $.01 par value, issued and outstanding – 112,391 in 2016 and 112,219 in 2015
1,124

 
1,122

Additional paid-in capital
2,070,705

 
2,059,151

Accumulated other comprehensive loss
(375,456
)
 
(421,288
)
Retained earnings
1,460,242

 
1,615,407

Total Albemarle Corporation shareholders’ equity
3,156,615

 
3,254,392

Noncontrolling interests
149,731

 
146,921

Total equity
3,306,346

 
3,401,313

Total liabilities and equity
$
9,312,381

 
$
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 (loss) income
 
 
 
 
 
 
 
 
 
(86,635
)
 
(86,635
)
 
19,429

 
(67,206
)
Other comprehensive income
 
 
 
 
 
 
 
45,832

 
 
 
45,832

 
435

 
46,267

Cash dividends declared
 
 
 
 
 
 
 
 
 
(68,530
)
 
(68,530
)
 
(17,054
)
 
(85,584
)
Stock-based compensation and other
 
 
 
 
 
8,560

 
 
 
 
 
8,560

 
 
 
8,560

Exercise of stock options
 
93,719

 
1

 
4,939

 
 
 
 
 
4,940

 
 
 
4,940

Tax benefit related to stock plans
 
 
 
 
 
38

 
 
 
 
 
38

 
 
 
38

Issuance of common stock, net
 
113,235

 
1

 
(1
)
 
 
 
 
 

 
 
 

Shares withheld for withholding taxes associated with common stock issuances
 
(35,367
)
 

 
(1,982
)
 
 
 
 
 
(1,982
)
 
 
 
(1,982
)
Balance at June 30, 2016
 
112,390,938

 
$
1,124

 
$
2,070,705

 
$
(375,456
)
 
$
1,460,242

 
$
3,156,615

 
$
149,731

 
$
3,306,346

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 
95,262

 
95,262

 
11,233

 
106,495

Other comprehensive loss
 
 
 
 
 
 
 
(253,993
)
 
 
 
(253,993
)
 
(151
)
 
(254,144
)
Cash dividends declared
 
 
 
 
 
 
 
 
 
(65,068
)
 
(65,068
)
 
(8,282
)
 
(73,350
)
Stock-based compensation and other
 
 
 
 
 
7,868

 
 
 
 
 
7,868

 
 
 
7,868

Exercise of stock options
 
10,500

 

 
342

 
 
 
 
 
342

 
 
 
342

Tax deficiency related to stock plans
 
 
 
 
 
(131
)
 
 
 
 
 
(131
)
 
 
 
(131
)
Issuance of common stock, net
 
59,764

 
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
 
(21,254
)
 

 
(1,218
)
 
 
 
 
 
(1,218
)
 
 
 
(1,218
)
Balance at June 30, 2015
 
112,192,598

 
$
1,122

 
$
2,053,516

 
$
(316,406
)
 
$
1,440,845

 
$
3,179,077

 
$
136,813

 
$
3,315,890

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)
 
Six Months Ended 
 June 30,
 
2016
 
2015
Cash and cash equivalents at beginning of year
$
213,734

 
$
2,489,768

Cash flows from operating activities:
 
 
 
Net (loss) income
(67,206
)
 
106,495

Adjustments to reconcile net (loss) income to cash flows from operating activities:
 
 
 
Depreciation and amortization
128,505

 
131,469

Gain on sales of businesses, net
(122,298
)
 

Stock-based compensation
8,733

 
9,193

Excess tax benefits realized from stock-based compensation arrangements
(348
)
 
(59
)
Equity in net income of unconsolidated investments (net of tax)
(30,861
)
 
(16,186
)
Dividends received from unconsolidated investments and nonmarketable securities
31,522

 
45,526

Pension and postretirement expense (benefit)
3,390

 
(1,071
)
Pension and postretirement contributions
(9,524
)
 
(10,973
)
Unrealized gain on investments in marketable securities
(10
)
 
(571
)
Deferred income taxes
414,736

 
(41,207
)
Working capital changes
(108,016
)
 
(44,932
)
Other, net
3,878

 
(44,501
)
Net cash provided by operating activities
252,501

 
133,183

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

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

 
(48,845
)
Cash payments related to acquisitions and other
(81,988
)
 

Capital expenditures
(99,509
)
 
(111,723
)
Decrease in restricted cash

 
57,550

Cash proceeds from divestitures, net
310,599

 

Sales of marketable securities, net
969

 
1,433

Repayments from joint ventures

 
2,156

Net cash provided by (used in) investing activities
130,071

 
(2,151,074
)
Cash flows from financing activities:
 
 
 
Repayments of long-term debt
(382,162
)
 
(1,331,648
)
Proceeds from borrowings of long-term debt

 
1,000,000

Other borrowings, net
67,865

 
133,699

Dividends paid to shareholders
(66,791
)
 
(54,238
)
Dividends paid to noncontrolling interests
(17,052
)
 
(8,282
)
Proceeds from exercise of stock options
4,939

 
342

Excess tax benefits realized from stock-based compensation arrangements
348

 
59

Withholding taxes paid on stock-based compensation award distributions
(1,982
)
 
(1,218
)
Debt financing costs

 
(1,164
)
Other

 
(3,882
)
Net cash used in financing activities
(394,835
)
 
(266,332
)
Net effect of foreign exchange on cash and cash equivalents
(7,810
)
 
1,693

Decrease in cash and cash equivalents
(20,073
)
 
(2,282,530
)
Cash and cash equivalents at end of period
$
193,661

 
$
207,238

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 June 30, 2016 and December 31, 2015, our consolidated statements of (loss) income and consolidated statements of comprehensive (loss) income for the three-month and six-month periods ended June 30, 2016 and 2015 and our consolidated statements of changes in equity and condensed consolidated statements of cash flows for the six-month periods ended June 30, 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 and six-month periods ended June 30, 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.
On June 17, 2016, the Company signed a definitive agreement to sell its Chemetall® Surface Treatment business to BASF SE. In the second quarter of 2016, the Company began accounting for this business as discontinued operations in the consolidated statements of (loss) income and excluded the business from segment results for all periods presented. Related assets and liabilities are classified as held for sale for all periods presented in accordance with accounting standards for reporting discontinued operations. See Note 3, “Divestitures,” for additional information.
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.

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

The allocation of the purchase price was finalized in the first quarter of 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):
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(a)
$
5,725,321

(a)
Total net assets acquired includes amounts for the Chemetall Surface Treatment business, which is reported as discontinued operations. See Note 3, “Divestitures,” for additional information.
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 six-month period ended June 30, 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 (loss) income for the three-month and six-month periods ended June 30, 2016 is $18.4 million and $36.1 million, respectively, of integration costs resulting from the acquisition of Rockwood (mainly consisting of professional services fees, costs to achieve synergies, relocation costs, and other integration costs) and $0.6 million and $1.5 million, respectively, of costs in connection with other significant projects. The consolidated statements of (loss) income for the three-month and six-month periods ended June 30, 2015 include $19.9

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

million and $75.7 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 $2.9 million and $5.0 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 six-month period ended June 30, 2016, Depreciation and amortization expense included in Cost of goods sold was reduced by approximately $0.2 million as a result of measurement-period adjustments related to previous reporting periods. In addition, (Loss) income from discontinued operations (net of tax) was reduced by approximately $4.1 million for the six-month period ended June 30, 2016 as a result of measurement-period adjustments related to previous reporting periods.
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations of the Company for the three-month and six-month periods ended June 30, 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 are also adjusted to exclude approximately $21.3 million and $78.7 million, respectively, of nonrecurring acquisition and integration related costs, and approximately $37.3 million and $85.5 million, respectively, 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 anticipated as a result of the Merger. In addition, the pro forma amounts are not adjusted to reflect the Chemetall Surface Treatment business as discontinued operations. 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 necessarily indicative of future results of operations.
 
Three Months Ended
June 30, 2015
 
Six Months Ended June 30, 2015
 
(in thousands, except per share amounts)
Pro forma Net sales
$
931,485

 
$
1,849,219

Pro forma Net income
$
102,246

 
$
224,391

Pro forma Net income per share:
 
 
 
Basic
$
0.91

 
$
2.04

Diluted
$
0.91

 
$
2.03

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:
Discontinued Operations
On June 17, 2016, we entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately $3.2 billion in cash, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale of the Chemetall Surface Treatment business reflects the Company’s commitment to investing in the future growth of its high priority businesses, reducing leverage and returning capital to shareholders. The sale is expected to close in the fourth quarter of 2016, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities. At closing, any difference between the sales price and the proportionate carrying value of the interests being sold would be recognized.
The sale of the Chemetall Surface Treatment business, a separate reportable segment, qualifies for discontinued operations treatment because it represents a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, in the second quarter of 2016, the Company began accounting for this business as discontinued operations in the consolidated statements of (loss) income and excluded the business from segment results for all periods presented. Related assets and liabilities are classified as held for sale for all periods presented.

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

The major components of (Loss) income from discontinued operations (net of tax) for the three-month and six-month periods ended June 30, 2016 and 2015 were as follows (in thousands):
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Net sales
$
218,355

 
$
213,195

 
$
426,542

 
$
405,286

Cost of goods sold
120,448

 
124,660

 
233,771

 
249,669

Operating expenses, net
69,595

 
64,448

 
132,448

 
121,256

Interest and financing expenses(a)
9,911

 
12,583

 
20,048

 
26,029

Other income, net
(832
)
 
(906
)
 
(1,770
)
 
(2,335
)
Income before income taxes
19,233

 
12,410

 
42,045

 
10,667

Income tax expense(b)
417,573

 
2,288

 
423,073

 
2,643

(Loss) income from discontinued operations (net of tax)
$
(398,340
)
 
$
10,122

 
$
(381,028
)
 
$
8,024


(a)
Interest and financing expenses includes the allocation of interest expense not directly attributable to other operations as well as interest expense related to debt to be assumed by the buyer. The allocation of interest expense to discontinued operations was based on the ratio of net assets held for sale to the sum of total net assets plus consolidated debt.
(b)
Income tax expense for the three-month and six-month periods ended June 30, 2016 includes a discrete non-cash charge of $381.5 million due to a change in the Company’s assertion over book and tax basis differences related to a U.S. entity being sold, as well as a discrete non-cash charge of $35.2 million related to a change in the Company’s assertion over reinvestment of foreign undistributed earnings. The associated liability of $416.7 million has been recorded in Deferred tax liabilities on the condensed consolidated balance sheets as of June 30, 2016. Upon completion of the sale, the buyer will not assume these outside basis differences, thus the liability is ultimately the responsibility of the Company, and as such, this amount is not recorded as a Liability held for sale. The sale is expected to close in the fourth quarter of 2016, at which time, any difference between the sales price and the proportionate carrying value of the interests being sold would be recognized.
The carrying amounts of the major classes of assets and liabilities for the Chemetall Surface Treatment business classified as held for sale at June 30, 2016 and December 31, 2015, were as follows (in thousands):
 
June 30,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets
$
252,941

 
$
237,447

Net property, plant and equipment
161,846

 
163,643

Goodwill
1,441,460

 
1,433,259

Other intangibles, net of amortization
1,315,990

 
1,349,179

All other noncurrent assets
24,775

 
25,374

Assets held for sale(a)
$
3,197,012

 
$
3,208,902

Liabilities
 
 
 
Current liabilities
$
145,269

 
$
200,892

Deferred income taxes
346,989

 
351,465

All other noncurrent liabilities
108,463

 
112,742

Liabilities held for sale
$
600,721

 
$
665,099


(a)
Excludes approximately $3.0 million of Assets held for sale as of June 30, 2016 related to a small group of assets at an idled site.


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

Depreciation and amortization and capital expenditures from discontinued operations for the six-month periods ended June 30, 2016 and 2015 were as follows (in thousands):
 
Six Months Ended 
 June 30,
 
2016
 
2015
Depreciation and amortization
$
35,194

 
$
37,307

Capital expenditures
$
10,371

 
$
7,790

Other Assets Held for Sale
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. As of the December 31, 2015 balance sheet date, 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 did 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.
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 recorded a gain of $11.5 million before income taxes in 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 business to Huber Engineered Materials, a division of J.M. Huber Corporation. The transaction included 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 recorded a gain of $112.3 million before income taxes in 2016 related to the sale of these businesses.
In April 2016, the Company concluded that it would discontinue efforts to sell its fine chemistry services business, and as a result, this business is accounted for as held and used beginning in the second quarter of 2016.
The carrying amounts of the major classes of assets and liabilities of these businesses classified as held for sale at December 31, 2015, were as follows (in thousands):
 
December 31,
 
2015
Assets
 
Current assets
$
156,421

Net property, plant and equipment
115,865

Goodwill
46,794

Other intangibles, net of amortization
66,324

All other noncurrent assets
19,081

Assets held for sale
$
404,485

Liabilities
 
Current liabilities
$
72,756

Deferred income taxes
24,947

All other noncurrent liabilities
31,003

Liabilities held for sale
$
128,706


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


Also included in Gain on sales of businesses, net, for the six-month period ended June 30, 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 six months ended June 30, 2016 (in thousands):
 
Lithium and Advanced Materials
 
Bromine Specialties
 
Refining Solutions
 
All Other
 
Total
Balance at December 31, 2015(a)(b)
$
1,267,505

 
$
20,319

 
$
172,728

 
$

 
$
1,460,552

Acquisition of Rockwood(c)
(1,706
)
 

 

 

 
(1,706
)
Reclass from assets held for sale(d)

 

 

 
6,586

 
6,586

Foreign currency translation adjustments
4,984

 

 
2,137

 

 
7,121

Balance at June 30, 2016(b)
$
1,270,783

 
$
20,319

 
$
174,865

 
$
6,586

 
$
1,472,553


(a)
The December 31, 2015 balances have been recast to reflect a change in segments. See Note 12, Segment Information, for further details.
(b)
As of June 30, 2016 and December 31, 2015, $1.4 billion and $1.5 billion, respectively, of Goodwill was classified as Assets held for sale in the condensed consolidated balance sheets. See Note 3, “Divestitures,” for additional information.
(c)
Represents final purchase price adjustments for the Rockwood acquisition recorded in the six-month period ended June 30, 2016. Excludes $3.2 million of final purchase price adjustments for businesses reported as discontinued operations.
(d)
Represents Goodwill of the fine chemistry services business, which was reported in Assets held for sale on the condensed consolidated balance sheets as of December 31, 2015. See Note 3, “Divestitures,” for additional information.
The following table summarizes the changes in other intangibles and related accumulated amortization for the six months ended June 30, 2016 (in thousands):
 
Customer Lists and Relationships
 
Trade Names and Trademarks (a)
 
Patents and Technology
 
Other
 
Total
Gross Asset Value
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
398,725

 
$
16,923

 
$
40,144

 
$
17,779

 
$
473,571

Reclass from assets held for sale(b)

 

 

 
1,454

 
1,454

Foreign currency translation adjustments and other
7,064

 
44

 
(388
)
 
(23
)
 
6,697

Balance at June 30, 2016
$
405,789

 
$
16,967

 
$
39,756

 
$
19,210

 
$
481,722

Accumulated Amortization
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
(32,656
)
 
$
(8,086
)
 
$
(32,008
)
 
$
(16,953
)
 
$
(89,703
)
Amortization
(8,898
)
 

 
(292
)
 
(223
)
 
(9,413
)
Reclass from assets held for sale(b)

 

 

 
(1,322
)
 
(1,322
)
Foreign currency translation adjustments and other
(276
)
 
(13
)
 
(32
)
 
21

 
(300
)
Balance at June 30, 2016
$
(41,830
)
 
$
(8,099
)
 
$
(32,332
)
 
$
(18,477
)
 
$
(100,738
)
Net Book Value at December 31, 2015(c)
$
366,069

 
$
8,837

 
$
8,136

 
$
826

 
$
383,868

Net Book Value at June 30, 2016(c)
$
363,959

 
$
8,868

 
$
7,424

 
$
733

 
$
380,984


(a)
Included in Trade Names and Trademarks are indefinite-lived intangible assets with a gross carrying amount of $8.7 million at June 30, 2016 and December 31, 2015.
(b)
Represents Other intangibles and related amortization of the fine chemistry services business, which was reported in Assets held for sale on the condensed consolidated balance sheets as of December 31, 2015. See Note 3 “Divestitures,” for additional information.
(c)
As of June 30, 2016 and December 31, 2015, $1.3 billion and $1.4 billion, respectively, of Other intangibles, net of amortization were classified as Assets held for sale in the condensed consolidated balance sheets. See Note 3 “Divestitures,” for additional information.

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


NOTE 5—Foreign Exchange:
Foreign exchange transaction (losses) gains were ($3.3) million and ($3.4) million for the three-month and six-month periods ended June 30, 2016, respectively, and $0.6 million and $53.0 million for the three-month and six-month periods ended June 30, 2015, respectively, and are included in Other (expenses) income, net, in our consolidated statements of (loss) income, with the unrealized portion included in Other, net, in our condensed consolidated statements of cash flows. The gains in 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 and six-month periods ended June 30, 2016 was 22.4% and 14.8%, respectively, compared to 25.2% and 25.4% for the three-month and six-month periods ended June 30, 2015, respectively. The Company’s effective income tax rate fluctuates based on, among other factors, its level and location of income. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the 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 six-month period ended June 30, 2016 compared to the same period in 2015 is primarily driven by income of $122.3 million from the sales of businesses with associated tax expense of $6.7 million. Our effective income tax rate for the three-month and six-month periods ended June 30, 2015 was affected by a discrete tax benefit of $1.0 million related mainly to prior year uncertain tax position adjustments associated with lapses in statutes of limitations. Additionally, our effective income tax rate for the six-month period ended June 30, 2015 was affected by $3.4 million related mainly to U.S. tax provision to return adjustments.
NOTE 7—Earnings Per Share:
Basic and diluted earnings per share from continuing operations for the three-month and six-month periods ended June 30, 2016 and 2015 are calculated as follows (in thousands, except per share amounts):
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Basic earnings per share from continuing operations
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income from continuing operations
$
95,586

 
$
49,218

 
$
313,822

 
$
98,471

Net income from continuing operations attributable to noncontrolling interests
(12,067
)
 
(7,193
)
 
(19,429
)
 
(11,233
)
Net income from continuing operations attributable to Albemarle Corporation
$
83,519

 
$
42,025

 
$
294,393

 
$
87,238

Denominator:
 
 
 
 
 
 
 
Weighted-average common shares for basic earnings per share
112,339

 
112,189

 
112,300

 
110,160

Basic earnings per share from continuing operations
$
0.74

 
$
0.37

 
$
2.62

 
$
0.79

 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income from continuing operations
$
95,586

 
$
49,218

 
$
313,822

 
$
98,471

Net income from continuing operations attributable to noncontrolling interests
(12,067
)
 
(7,193
)
 
(19,429
)
 
(11,233
)
Net income from continuing operations attributable to Albemarle Corporation
$
83,519

 
$
42,025

 
$
294,393

 
$
87,238

Denominator:
 
 
 
 
 
 
 
Weighted-average common shares for basic earnings per share
112,339

 
112,189

 
112,300

 
110,160

Incremental shares under stock compensation plans
836

 
418

 
673

 
376

Weighted-average common shares for diluted earnings per share
113,175

 
112,607

 
112,973

 
110,536

Diluted earnings per share from continuing operations
$
0.74

 
$
0.37

 
$
2.61

 
$
0.79

On February 26, 2016, the Company increased the regular quarterly dividend by 5% to $0.305 per share. On May 10, 2016, the Company declared a cash dividend of $0.305 per share, which was paid on July 1, 2016 to shareholders of record at

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

the close of business as of June 15, 2016. On July 11, 2016, the Company declared a cash dividend of $0.305 per share, which is payable on October 3, 2016 to shareholders of record at the close of business as of September 15, 2016.
NOTE 8—Inventories:
The following table provides a breakdown of inventories at June 30, 2016 and December 31, 2015 (in thousands):
 
June 30,
 
December 31,
 
2016
 
2015
Finished goods
$
352,583

 
$
264,025

Raw materials and work in process(a)
114,978

 
122,038

Stores, supplies and other
49,491

 
53,450

Total inventories(b)
$
517,052

 
$
439,513


(a)
Includes $44.0 million and $39.1 million at June 30, 2016 and December 31, 2015, respectively, of work in process related to the Lithium product category.
(b)
As of June 30, 2016 and December 31, 2015, $69.9 million and $162.8 million, respectively, of inventories were classified as Assets held for sale in the condensed consolidated balance sheets. See Note 3, “Divestitures,” for additional information.

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 $291.6 million and $280.2 million at June 30, 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 $7.7 million and $7.8 million at June 30, 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.
NOTE 10—Long-Term Debt:
Long-term debt at June 30, 2016 and December 31, 2015 consisted of the following (in thousands):
 
June 30,
 
December 31,
 
2016
 
2015
Term loan facilities, net of unamortized debt issuance costs of $2,212 at June 30, 2016 and $2,833 at December 31, 2015
$
866,788

 
$
1,247,167

1.875% Senior notes, net of unamortized discount and debt issuance costs of $9,122 at June 30, 2016 and $9,904 at December 31, 2015
764,623

 
759,151

3.00% Senior notes, net of unamortized discount and debt issuance costs of $1,506 at June 30, 2016 and $1,726 at December 31, 2015
248,494

 
248,274

4.15% Senior notes, net of unamortized discount and debt issuance costs of $4,103 at June 30, 2016 and $4,346 at December 31, 2015
420,897

 
420,654

4.50% Senior notes, net of unamortized discount and debt issuance costs of $2,681 at June 30, 2016 and $2,982 at December 31, 2015
347,319

 
347,018

5.45% Senior notes, net of unamortized discount and debt issuance costs of $4,390 at June 30, 2016 and $4,468 at December 31, 2015
345,610

 
345,532

Commercial paper notes
477,164

 
351,349

Variable-rate foreign bank loans
42,260

 
77,452

Variable-rate domestic bank loans

 
20,479

Miscellaneous
28

 
81

Total long-term debt(a)
3,513,183

 
3,817,157

Less amounts due within one year
493,705

 
674,994

Long-term debt, less current portion
$
3,019,478

 
$
3,142,163



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

(a)
As of June 30, 2016 and December 31, 2015, $16.8 million and $20.3 million, respectively, of long-term debt was classified as Liabilities held for sale in the condensed consolidated balance sheets. See Note 3, “Divestitures,” for additional information.
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 six-month period ended June 30, 2016, we repaid the 364-Day Facility in full and repaid approximately $81 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 business, both of which closed in the first quarter of 2016.
Current portion of long-term debt at June 30, 2016 consists primarily of commercial paper notes with a weighted-average interest rate of approximately 1.34% 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 certain 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 and six-month periods ended June 30, 2016, gains (losses) of $6.6 million and ($2.9) million (net of income taxes), respectively, and during the three-month and six-month periods ended June 30, 2015, (losses) gains of ($10.9) million and $43.1 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.

NOTE 11—Commitments and Contingencies:
Environmental
We had the following activity in our recorded environmental liabilities for the six months ended June 30, 2016, as follows (in thousands):
Beginning balance at December 31, 2015(a)
$
31,436

Expenditures
(1,194
)
Accretion of discount
397

Revisions of estimates
250

Foreign currency translation adjustments and other
1,900

Ending balance at June 30, 2016(a)
32,789

Less amounts reported in Accrued expenses
1,145

Amounts reported in Other noncurrent liabilities
$
31,644


(a)
As of June 30, 2016 and December 31, 2015, $3.9 million of environmental liabilities were classified as Assets held for sale in the condensed consolidated balance sheets. See Note 3, “Divestitures,” for additional information.
Environmental remediation liabilities include discounted liabilities of $23.2 million and $22.0 million at June 30, 2016 and December 31, 2015, respectively, discounted at rates with a weighted-average of 3.8%, with the undiscounted amount totaling $62.4 million and $59.5 million at June 30, 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

16

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

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 $17 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.
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 reportable segments: (1) Lithium and Advanced Materials and (2) Bromine Specialties. In addition, on June 17, 2016, the Company signed a definitive agreement to sell its Chemetall Surface Treatment business to BASF SE. This business, a separate reportable segment, is classified as discontinued operations and its results are excluded from segment results for all periods presented. As a result, our three reportable segments include Lithium and Advanced Materials, Bromine Specialties and Refining Solutions. 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.”

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

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’s chief operating decision maker uses earnings before interest, taxes, depreciation and amortization, as adjusted on a consistent basis for certain non-recurring or unusual items such as acquisition and integration related costs, utilization of inventory markup, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, non-operating pension and OPEB items and other significant non-recurring items (“adjusted EBITDA”), in a balanced manner and on a segment basis to assess the ongoing performance of the Company’s business segments and to allocate resources. In addition, management uses adjusted EBITDA for business planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. 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 is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. 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, or any other financial measure reported in accordance with U.S. GAAP.
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Net sales:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
233,353

 
$
213,003

 
$
449,526

 
$
411,777

Bromine Specialties
206,863

 
223,959

 
403,416

 
413,551

Refining Solutions
178,012

 
164,573

 
348,591

 
343,739

All Other
50,626

 
113,404

 
122,715

 
235,773

Corporate
473

 
3,351

 
2,290

 
5,763

Total net sales
$
669,327

 
$
718,290

 
$
1,326,538

 
$
1,410,603

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Lithium and Advanced Materials
$
82,668

 
$
79,985

 
$
169,142

 
$
157,580

Bromine Specialties
66,562

 
68,697

 
128,170

 
121,630

Refining Solutions
61,586

 
48,200

 
116,660

 
90,393

All Other
876

 
9,714

 
9,340

 
23,278

Corporate
(21,221
)
 
(25,238
)
 
(40,808
)
 
7,977

Total adjusted EBITDA
$
190,471

 
$
181,358

 
$
382,504

 
$
400,858


See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, to Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, (in thousands):

18

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

 
Lithium and Advanced Materials
 
Bromine Specialties
 
Refining Solutions
 
Reportable Segments Total
 
All Other
 
Corporate
 
Consolidated Total
Three months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
82,668

 
$
66,562

 
$
61,586

 
$
210,816

 
$
876

 
$
(21,221
)
 
$
190,471

Depreciation and amortization
(25,788
)
 
(9,815
)
 
(9,114
)
 
(44,717
)
 
(3,353
)
 
(1,635
)
 
(49,705
)
Gain on sales of businesses(a)

 

 

 

 
974

 

 
974

Acquisition and integration related costs(b)

 

 

 

 

 
(19,030
)
 
(19,030
)
Interest and financing expenses

 

 

 

 

 
(15,800
)
 
(15,800
)
Income tax expense

 

 

 

 

 
(23,656
)
 
(23,656
)
Loss from discontinued operations (net of tax)

 

 

 

 

 
(398,340
)
 
(398,340
)
Non-operating pension and OPEB items

 

 

 

 

 
265

 
265

Net income (loss) attributable to Albemarle Corporation
$
56,880

 
$
56,747

 
$
52,472

 
$
166,099

 
$
(1,503
)
 
$
(479,417
)
 
$
(314,821
)
Three months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
79,985

 
$
68,697

 
$
48,200

 
$
196,882

 
$
9,714

 
$
(25,238
)
 
$
181,358

Depreciation and amortization
(23,632
)
 
(8,211
)
 
(8,483
)
 
(40,326
)
 
(5,724
)
 
(2,322
)
 
(48,372
)
Utilization of inventory markup(c)
(33,823
)
 

 

 
(33,823
)
 
(378
)
 

 
(34,201
)
Acquisition and integration related costs(b)

 

 

 

 

 
(22,832
)
 
(22,832
)
Interest and financing expenses

 

 

 

 

 
(20,599
)
 
(20,599
)
Income tax expense

 

 

 

 

 
(14,851
)
 
(14,851
)
Income from discontinued operations (net of tax)

 

 

 

 

 
10,122

 
10,122

Non-operating pension and OPEB items

 

 

 

 

 
1,522

 
1,522

Net income (loss) attributable to Albemarle Corporation
$
22,530

 
$
60,486

 
$
39,717

 
$
122,733

 
$
3,612

 
$
(74,198
)
 
$
52,147

Six months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
169,142

 
$
128,170

 
$
116,660

 
$
413,972

 
$
9,340

 
$
(40,808
)
 
$
382,504

Depreciation and amortization
(48,935
)
 
(19,570
)
 
(17,874
)
 
(86,379
)
 
(3,965
)
 
(2,970
)
 
(93,314
)
Gain (loss) on sales of businesses, net(a)

 

 

 

 
123,831

 
(1,533
)
 
122,298

Acquisition and integration related costs(b)

 

 

 

 

 
(37,588
)
 
(37,588
)
Interest and financing expenses

 

 

 

 

 
(30,914
)
 
(30,914
)
Income tax expense

 

 

 

 

 
(49,141
)
 
(49,141
)
Loss from discontinued operations (net of tax)

 

 

 

 

 
(381,028
)
 
(381,028
)
Non-operating pension and OPEB items

 

 

 

 

 
548

 
548

Net income (loss) attributable to Albemarle Corporation
$
120,207

 
$
108,600

 
$
98,786

 
$
327,593

 
$
129,206

 
$
(543,434
)
 
$
(86,635
)
Six months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
157,580

 
$
121,630

 
$
90,393

 
$
369,603

 
$
23,278

 
$
7,977

 
$
400,858

Depreciation and amortization
(45,454
)
 
(16,672
)
 
(16,593
)
 
(78,719
)
 
(11,222
)
 
(4,221
)
 
(94,162
)
Utilization of inventory markup(c)
(62,405
)
 

 

 
(62,405
)
 
(3,029
)
 

 
(65,434
)
Acquisition and integration related costs(b)

 

 

 

 

 
(80,657
)
 
(80,657
)
Interest and financing expenses

 

 

 

 

 
(42,899
)
 
(42,899
)
Income tax expense

 

 

 

 

 
(28,636
)
 
(28,636
)
Income from discontinued operations (net of tax)

 

 

 

 

 
8,024

 
8,024

Non-operating pension and OPEB items

 

 

 

 

 
2,609

 
2,609

Other(d)

 

 

 

 

 
(4,441
)
 
(4,441
)
Net income (loss) attributable to Albemarle Corporation
$
49,721

 
$
104,958

 
$
73,800

 
$
228,479

 
$
9,027

 
$
(142,244
)
 
$
95,262


(a)
See Note 3, “Divestitures,” for additional information.
(b)
See Note 2, “Acquisitions,” for additional information.

19

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