Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

Some of the information presented in this Annual Report on Form 10-K, 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;

Albemarle Corporation and Subsidiaries

•	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 consolidated financial statements and related notes included in this Annual Report on Form 10-K.

The following is a discussion and analysis of results of operations for the years ended December 31, 2015, 2014 and 2013. A discussion of consolidated financial condition and sources of additional capital is included under a separate heading “Financial Condition and Liquidity” on page 48.

Overview

We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals that meets customer needs across a diverse range of end markets. The end markets we serve include 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 our recently completed 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.

2015 Highlights

•	In the first quarter, we increased our quarterly dividend for the 21st consecutive year, to $0.29 per share.

•	On January 12, 2015, we completed the acquisition of Rockwood for a purchase price of approximately $5.7 billion.

•	In connection with the acquisition of Rockwood, we realigned our organizational structure under three reportable segments: Performance Chemicals, Refining Solutions and Chemetall Surface Treatment.

•	On February 19, 2015, our Chemetall Surface Treatment segment completed the acquisition of all remaining shares of its Shanghai Chemetall joint venture for a purchase price of $57.6 million.

Albemarle Corporation and Subsidiaries

•	We repaid our $325.0 million senior notes which matured on February 1, 2015.

•	We announced a new leading-edge catalyst that will further strengthen our position in the hydrocracking pre-treat (“HC-PT”) market. Pilot plant testing of the new HC-PT catalyst is complete and commercial sales have begun.

•	On May 1, 2015, our Chemetall Surface Treatment segment completed the acquisition of the aluminum finishing business of Chemal GmbH & Co. KG (“Chemal GmbH”), based in Hamm, Germany. Cash paid in connection with this acquisition was approximately $2.2 million.

•	We announced the start of commissioning activities associated with our new, state-of-the-art lithium carbonate production plant located at our La Negra site in northern Chile. We believe the 20,000 MT plant will help enable the Company to meet the accelerating demand for lithium.

•	We announced our intent to transfer the production of n-Butyllithium from our facility in New Johnsonville, Tennessee, to existing plants in Germany and Taiwan. The transfer process is expected to be completed in the first quarter of 2016. The New Johnsonville facility will continue to manufacture some specialty lithium products and will support blending operations for customers in North America.

•

We announced that we will relocate our corporate headquarters and Performance Chemicals business from Baton Rouge, LA to Charlotte, NC. In addition, we will relocate Baton Rouge employees in our Refining Solutions business to our existing Clear Lake, TX office. Approximately 120 employees will be relocated to Charlotte or Clear Lake, with the majority of the relocations expected to take place in June 2016.

•

On October 15, 2015, we redeemed all of the outstanding 4.625% senior notes issued by our wholly-owned subsidiary, Rockwood Specialties Group, Inc., at a redemption price of 103.469% of the principal amount of $1.25 billion, plus accrued and unpaid interest to the redemption date. The 4.625% senior notes were repaid with proceeds from a new term loan credit facility, comprised of a 364-day term loan facility in an aggregate principal amount of $300 million and a five-year term loan facility in an aggregate principal amount of $950 million.

•

We announced our intention to add up to 50,000 MT of mineral conversion production capacity to significantly boost battery grade lithium production to meet the growing needs of the energy storage market, in particular for customers in the global transportation industry utilizing lithium ion battery technology. Albemarle has commenced feasibility studies and is evaluating potential sites. The plant is expected to be operational in 2020.

•	We announced the first commercial application of our AlkyStarTM catalyst technology in Shandong, China. Our zeolite-based AlkyStarTM catalyst successfully produced high-quality alkylate after start-up of the world’s first solid acid catalyst alkylation unit.

•

On November 5, 2015, we signed a definitive agreement to sell our Tribotecc metal sulfides business to Treibacher Industrie AG. On January 4, 2016, the Company closed the sale of this business. Included in the transaction were sites in Vienna and Arnoldstein, Austria, and Tribotecc’s proprietary sulfide syntheses process. We received net proceeds of approximately $137 million in the first quarter of 2016 from 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 and received net proceeds of approximately $187 million.

•	On December 23, 2015, we paid approximately $4.8 million in connection with the acquisition of the remaining noncontrolling interests’ share of Nanjing Chemetall Surface Technologies Co., Ltd.

•

We achieved earnings from continuing operations of $360.1 million during 2015 as compared to $230.4 million for 2014. Our operating results contributed $360.7 million to cash flows from operations in 2015. Earnings from continuing operations for 2015 includes pension and other postretirement benefit (“OPEB”) actuarial gains of $27.8 million after income taxes, compared to pension and OPEB actuarial losses of $83.3 million after income taxes in 2014.

Outlook

On October 26, 2015, we announced that effective January 1, 2016, Performance Chemicals will be split into two separate reportable segments: (1) Bromine Specialties, and (2) Lithium and Advanced Materials, which will include Performance Catalyst Solutions and Curatives. Each unit will have a dedicated team of sales, product management, research & development, process technology, manufacturing, sourcing, sales and operations planning and customer service groups and will have 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.

Albemarle Corporation and Subsidiaries

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 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 on track to exceed our original expectations regarding synergies from the acquisition of the Rockwood businesses earlier in the year.

Through 2015, our operations were managed and reported under three reportable segments: Performance Chemicals, Refining Solutions and Chemetall Surface Treatment. Financial results and discussion about our segments included in this Annual Report on Form 10-K are organized according to these categories except where noted.

Performance Chemicals: We expect 2016 to be a challenging year for Bromine sales and profitability growth due to an expected decline in demand of 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.

For Lithium and Advanced Materials, we expect continued strong growth in 2016 led by demand in battery grade applications and continued price improvement in Lithium. Performance Catalyst Solutions experienced strong growth in 2015 due market demand in general and due to certain competitor outages, and we expect to maintain a similar level of profitability in 2016.

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 long-term basis for Bromine, 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 still 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.

On a long-term basis for Lithium and Advanced Materials, 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 Performance Catalyst Solutions to come from growing global demand for plastics driven by rising standards of living and infrastructure spending, particularly in Asia and the Middle East.

Refining Solutions: 2015 net sales were down 14% and Adjusted EBITDA was down 23% due largely to declines in clean fuels technology sales volumes slightly offset by solid growth in heavy oil upgrading volumes. 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

Albemarle Corporation and Subsidiaries

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 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.

All Other: In 2015, we announced our intention to pursue strategic alternatives for several businesses: minerals-based flame retardants and specialty chemicals, fine chemistry services and metal sulfides, which together comprise the “All Other” category. We closed on the sale of the metal sulfides business on January 4, 2016 and we closed on the sale of the minerals-based flame retardants and specialty chemicals business on February 1, 2016.

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 23.0%; 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.

Actuarial gains and losses related to our defined benefit pension and OPEB plan obligations are reflected in Corporate as a component of non-operating pension and OPEB plan costs under mark-to-market accounting. Results for the year ended December 31, 2015 include an actuarial gain of $38.9 million ($27.8 million after income taxes), as compared to a loss of $130.8 million ($83.3 million after income taxes) for the year ended December 31, 2014.

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.

Albemarle Corporation and Subsidiaries

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.

Selected Financial Data	Year Ended December 31,												Percentage Change
	2015				2014				2013				2015 vs. 2014			2014 vs. 2013
	(In thousands, except percentages and per share amounts)
NET SALES	$	3,651,335			$	2,445,548			$	2,394,270			49	%		2	%
Cost of goods sold	2,454,463				1,674,700				1,543,799				47	%		8	%
GROSS PROFIT	1,196,872				770,848				850,471				55	%		(9	)%
GROSS PROFIT MARGIN	32.8		%		31.5		%		35.5		%
Selling, general and administrative expenses	512,274				355,135				158,189				44	%		125	%
Research and development expenses	102,871				88,310				82,246				16	%		7	%
Restructuring and other, net	(6,804		)		25,947				33,361				(126	)%		(22	)%
Acquisition and integration related costs	146,096				30,158				—				384	%		*
OPERATING PROFIT	442,435				271,298				576,675				63	%		(53	)%
OPERATING PROFIT MARGIN	12.1		%		11.1		%		24.1		%
Interest and financing expenses	(132,722		)		(41,358		)		(31,559		)		221	%		31	%
Other income (expenses), net	48,474				(16,761		)		(6,674		)		*			151	%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN NET INCOME OF UNCONSOLIDATED INVESTMENTS	358,187				213,179				538,442				68	%		(60	)%
Income tax expense	29,122				18,484				134,445				58	%		(86	)%
Effective tax rate	8.1		%		8.7		%		25.0		%
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY IN NET INCOME OF UNCONSOLIDATED INVESTMENTS	329,065				194,695				403,997				69	%		(52	)%
Equity in net income of unconsolidated investments (net of tax)	30,999				35,742				31,729				(13	)%		13	%
NET INCOME FROM CONTINUING OPERATIONS	360,064				230,437				435,726				56	%		(47	)%
(Loss) income from discontinued operations (net of tax)	—				(69,531		)		4,108				(100	)%		*
NET INCOME	360,064				160,906				439,834				124	%		(63	)%
Net income attributable to noncontrolling interests	(25,158		)		(27,590		)		(26,663		)		(9	)%		3	%
NET INCOME ATTRIBUTABLE TO ALBEMARLE CORPORATION	$	334,906			$	133,316			$	413,171			151	%		(68	)%
NET INCOME FROM CONTINUING OPERATIONS AS A PERCENTAGE OF NET SALES	9.9		%		9.4		%		18.2		%
Basic earnings (loss) per share:
Continuing operations	$	3.01			$	2.57			$	4.88			17	%		(47	)%
Discontinued operations	—				(0.88		)		0.05				(100	)%		*
	$	3.01			$	1.69			$	4.93			78	%		(66	)%
Diluted earnings (loss) per share:
Continuing operations	$	3.00			$	2.57			$	4.85			17	%		(47	)%
Discontinued operations	—				(0.88		)		0.05				(100	)%		*
	$	3.00			$	1.69			$	4.90			78	%		(66	)%

• Percentage calculation is not meaningful.

Albemarle Corporation and Subsidiaries

Comparison of 2015 to 2014

Net Sales

For the year ended December 31, 2015, we recorded net sales of $3.65 billion, a 49% increase compared to net sales of $2.45 billion for the corresponding period of 2014. Approximately $1.4 billion of the increase was attributable to the impact of the Rockwood acquisition. Excluding the acquisition of Rockwood, net sales decreased by $210.1 million primarily due to $106.5 million of unfavorable sales volumes, $87.7 million of unfavorable impacts from currency translation and $15.8 million of unfavorable price impacts due to market conditions and portfolio mix. The unfavorable sales volumes were due to lower Clean Fuels Technologies, Fine Chemistry Services, and Bromine volumes partially offset by increased Heavy Oil Upgrading and PCS sales volumes. The unfavorable price impacts were primarily due to lower Refining Solutions, Fine Chemistry Services, and PCS prices partly offset by favorable price impacts for Bromine.

Gross Profit

For the year ended December 31, 2015, our gross profit increased $426.0 million, or 55%, from the corresponding 2014 period. Gross profit for 2015 includes $1.4 million of pension and OPEB benefits (including mark-to-market actuarial gains of $2.0 million) allocated to cost of good sold, as compared to $36.5 million of pension and OPEB costs (including mark-to-market actuarial losses of $36.4 million) allocated to cost of goods sold in 2014. Excluding the $37.9 million increase in gross profit related to pension and OPEB plans, gross profit increased by $388.1 million due to $470.9 million of gross profit attributable to the performance of the acquired Rockwood business, which includes a $75.9 million charge for the utilization of the inventory markup recorded as part of purchase accounting for the acquisition, partially offset by an $82.8 million decrease in gross profit due primarily to unfavorable impacts from currency translation, unfavorable price impacts due to market conditions and portfolio mix and lower overall sales volumes. Overall, these factors contributed to a higher gross profit margin for the year ended December 31, 2015 of 32.8%, up from 31.5% in the corresponding period of 2014. Excluding the impact of pension and OPEB mark-to-market actuarial losses and gains, our gross profit margin was 32.7% in 2015 and 33.0% in 2014.

The mark-to-market actuarial loss in 2014 is primarily attributable to: (a) a decrease in the weighted-average discount rate for our pension plans to 4.03% from 5.00% to reflect market conditions as of the December 31, 2014 measurement date, and (b) changes in mortality assumptions, and to a lesser extent, other demographic assumptions related to our pension plans. The mark-to-market actuarial loss in 2014 was partially offset by a higher return on pension plan assets in 2014 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. pension plan assets was 8.87% versus an expected return of 6.91%.

Selling, General and Administrative Expenses

For the year ended December 31, 2015, our selling, general and administrative (“SG&A”) expenses increased $157.1 million, or 44%, compared to the year ended December 31, 2014. SG&A expenses for 2015 includes approximately $37.4 million of pension and OPEB benefits (including mark-to-market actuarial gains of $36.9 million) allocated to SG&A, as compared to $97.1 million of pension and OPEB costs (including mark-to-market actuarial losses of $94.5 million) allocated to SG&A in 2014. Excluding the $134.5 million decrease in SG&A related to pension and OPEB plans, SG&A increased by $291.6 million, or 13.0%, due to the acquisition of Rockwood, net of realized synergies. As a percentage of net sales, SG&A expenses were 14.0% in 2015, compared to 14.5% in 2014. Excluding the impact of pension and OPEB mark-to-market actuarial losses and gains, SG&A expenses as a percentage of net sales were 15.0% in 2015 and 10.7% in 2014.

The mark-to-market actuarial gain in 2015 is primarily attributable to: (a) an increase in the weighted-average discount rate to 4.67% from 4.18% for our U.S. pension plans and to 2.89% from 2.34% for our foreign pension plans to reflect market conditions as of the December 31, 2015 measurement date, and (b) changes in mortality assumptions. The mark-to-market actuarial gain in 2015 was partially offset by a lower return on pension plan assets in 2015 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. and foreign pension plan assets was (2.74)% versus an expected return of 6.85%. The mark-to-market actuarial loss in 2014 resulted from the factors as discussed in Gross Profit above.

Research and Development Expenses

For the year ended December 31, 2015, our R&D expenses increased $14.6 million, or 16%, from the year ended December 31, 2014, primarily due to the acquisition of Rockwood. As a percentage of net sales, R&D expenses were 2.8% in 2015, compared to 3.6% in 2014.

Albemarle Corporation and Subsidiaries

Restructuring and Other, Net

Included in restructuring and other, net, for the year ended December 31, 2015 is a gain of $6.8 million ($5.4 million after income taxes) recognized upon the sale of land in Avonmouth, U.K., which was utilized by the phosphorus flame retardants business we exited in 2012. Restructuring and other, net, of $25.9 million for the year ended December 31, 2014 includes the following items:

(a)	Estimated costs of approximately $20.5 million ($13.6 million after income taxes) in connection with action we initiated to reduce the high cost supply capacity of certain aluminum alkyl products, primarily through the termination of a third party manufacturing contract.

(b)	An impairment charge of $3.0 million ($1.9 million after income taxes) for certain capital project costs also related to aluminum alkyls capacity which we do not expect to recover.

(c)	Other net charges of $2.4 million ($1.4 million after income taxes), mainly in connection with a write-off of certain multi-product facility project costs that we do not expect to recover in future periods.

Acquisition and Integration Related Costs

The year ended December 31, 2015 includes $137.7 million of acquisition and integration related costs directly related to the acquisition of Rockwood (mainly consisting of professional services and advisory fees, costs to achieve synergies, relocation costs, and other integration costs) and $8.4 million of costs in connection with other significant projects. The year ended December 31, 2014 includes $23.6 million of acquisition and integration related costs directly related to the acquisition of Rockwood and $6.6 million of costs in connection with other significant projects.

Interest and Financing Expenses

Interest and financing expenses for the year ended December 31, 2015 increased $91.4 million to $132.7 million from the corresponding 2014 period, due mainly to higher borrowing levels in connection with the acquisition of Rockwood. Included in 2015 is a charge of approximately $5.4 million related to the early extinguishment of the 4.625% senior notes we assumed from Rockwood.

Other Income (Expenses), Net

Other income (expenses), net, for the year ended December 31, 2015 was $48.5 million versus ($16.8) million for the corresponding 2014 period. The change was due mainly to $54.7 million of favorable foreign currency translation gains and a $12.3 million reduction in amortization of bridge facility fees and other financing fees related to the acquisition of Rockwood. The foreign currency gains are primarily related to cash denominated in U.S. Dollars held by foreign subsidiaries where the European Union Euro serves as the functional currency.

Income Tax Expense

The effective income tax rate for 2015 was 8.1% compared to 8.7% for 2014. Our effective income tax rate differs from the U.S. federal statutory income tax rates in the comparative periods mainly due to the impact of earnings from outside the U.S, including net impacts on the release of the liability from earnings that were not indefinitely invested and were repatriated from legacy Rockwood. Our effective tax rate for 2015 was affected by discrete net tax benefit items of $41.6 million related mainly to the release of prior year uncertain tax positions associated with lapses in statutes of limitations and audit closures, items associated with U.S. provision to return adjustments, and an OPEB plan termination gain recorded in the period. Our effective income tax rate in 2014 was affected by tax benefits of $74.2 million related to restructuring charges, a pension plan actuarial loss and the release of reserves related principally to the expiration of the U.S. federal statute of limitations. See Note 20, “Income Taxes” to our consolidated financial statements included in Part II, Item 8 of this report for a reconciliation of the U.S. federal statutory income tax rate to our effective rate for 2015 and 2014.

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $31.0 million for the year ended December 31, 2015 compared to $35.7 million in the same period last year. The current year equity in net income of unconsolidated investments includes a $27.1 million charge for utilization of fair value adjustments to inventories as well as a $2.0 million impairment charge related to our unconsolidated investment in Fábrica Carioca de Catalisadores SA. Excluding theses charges, equity in net income of unconsolidated investments increased by $24.4 million primarily due to equity income derived from unconsolidated investments we acquired from Rockwood (Performance Chemicals and Chemetall Surface Treatment segments), partially offset

Albemarle Corporation and Subsidiaries

by lower equity income reported by our Refining Solutions segment joint venture Nippon Ketjen Company Limited primarily due to lower sales volumes.

Loss from Discontinued Operations

Loss from discontinued operations, after income taxes, of $69.5 million for the year ended December 31, 2014 includes a pre-tax charge of $85.5 million ($65.7 million after income taxes) related to the sale of our antioxidant, ibuprofen and propofol businesses and assets to SI Group, Inc., which closed on September 1, 2014. This charge represented the difference between the carrying value of the related assets and their fair value as determined by the sales price less estimated costs to sell, and was primarily attributable to the write-off of goodwill, intangibles and long-lived assets, net of cumulative foreign currency translation gains of $17.8 million.

Net Income Attributable to Noncontrolling Interests

For the year ended December 31, 2015, net income attributable to noncontrolling interests was $25.2 million compared to $27.6 million in the same period last year. This decrease of $2.4 million was due primarily to changes in consolidated income related to our Jordanian joint venture.

Net Income Attributable to Albemarle Corporation

Net income attributable to Albemarle Corporation increased to $334.9 million for the year ended December 31, 2015, from $133.3 million for the corresponding period of 2014. The total estimated impact of the Rockwood acquisition is income of approximately $3.8 million before income taxes, including earnings of the acquiree (as included in Note 2, “Acquisitions” to our consolidated financial statements included in Part II, Item 8 of this report), acquisition and integration related costs, interest expense associated with additional borrowings, and other currency transaction gains related to the execution of the closing. Excluding the impact of the Rockwood acquisition, net income increased approximately $197.8 million primarily due to a $144.4 million decrease in pension and OPEB charges versus the prior year, the loss from discontinued operations and restructuring and other charges in the prior year of $69.5 million and $25.9 million, respectively, plus the gain on sale of land of $6.8 million in restructuring and other for the 2015 period, partly offset by unfavorable impacts in operating profit of approximately $48.8 million, including the unfavorable impacts of currency translation.

Other Comprehensive Loss, Net of Tax

Total other comprehensive loss, after income taxes, was $360.8 million in 2015 compared to $178.7 million in 2014. The majority of these amounts are the result of translating our foreign subsidiary financial statements from their local currencies to U.S. Dollars. In 2015, other comprehensive loss from foreign currency translation adjustments was $413.0 million, mainly as a result of unfavorable movements in the European Union Euro of approximately $279 million, the British Pound Sterling of approximately $49 million, the Brazilian Real of approximately $30 million, the Turkish Lira of approximately $10 million, the Korean Won of approximately $7 million, the Chinese Renminbi of approximately $8 million, the South African Rand of approximately $8 million and a net unfavorable variance in various other currencies totaling approximately $23 million (each approximately $5 million or less). Also included in total other comprehensive loss for 2015 is income of $50.9 million in connection with the revaluation of our €700.0 million senior notes which were designated as a hedge of our net investment in foreign operations. In 2014, other comprehensive loss from foreign currency translation adjustments was $168.8 million, mainly as a result of unfavorable movements in the European Union Euro of approximately $124 million, the Chinese Renminbi of approximately $18 million and the Brazilian Real of approximately $13 million. Also included in total other comprehensive loss for 2014 is a realized loss of $21.0 million related to an interest rate swap which settled in the fourth quarter of 2014, and income of $11.4 million in connection with the revaluation of our €700.0 million senior notes and settlement of related foreign currency forward contracts, both of which were designated as a hedge of our net investment in foreign operations.

Segment Information Overview. Summarized financial information concerning our reportable segments is shown in the following tables. Results for 2014 have been recast to reflect the change in segments previously noted and a change in our measure of segment profit or loss to adjusted EBITDA as discussed below. During the first quarter we announced our intention to pursue strategic alternatives for several businesses - mineral flame retardants, fine chemistry services and metal sulfides, which together comprise the “All Other” category. 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 segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating

Albemarle Corporation and Subsidiaries

pension and OPEB items”) are included in Corporate. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.

Beginning in 2015, 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.

		Year Ended December 31,														Percentage Change
		2015				%			2014				%			2015 vs. 2014
		(In thousands, except percentages)
Net sales:
Performance Chemicals		$	1,610,319			44.1	%		$	1,121,645			45.9	%		44	%
Refining Solutions		729,261				20.0	%		852,139				34.8	%		(14	)%
Chemetall Surface Treatment		824,906				22.6	%		—				—	%		*
All Other		471,434				12.9	%		471,764				19.3	%		—	%
Corporate		15,415				0.4	%		—				—	%		*
Total net sales		$	3,651,335			100.0	%		$	2,445,548			100.0	%		49	%
Adjusted EBITDA:
Performance Chemicals		$	535,520			55.8	%		$	306,572			54.5	%		75	%
Refining Solutions		197,595				20.6	%		256,485				45.6	%		(23	)%
Chemetall Surface Treatment		202,028				21.1	%		—				—	%		*
All Other		53,993				5.6	%		73,973				13.2	%		(27	)%
Corporate		(29,814		)		(3.1	)%		(74,875		)		(13.3	)%		(60	)%
Total adjusted EBITDA		$	959,322			100.0	%		$	562,155			100.0	%		71	%

• Percentage calculation is not meaningful.

Albemarle Corporation and Subsidiaries

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):

	Performance Chemicals				Refining Solutions				Chemetall Surface Treatment				Reportable Segments Total				All Other				Corporate				Consolidated Total
2015
Adjusted EBITDA	$	535,520			$	197,595			$	202,028			$	935,143			$	53,993			$	(29,814	)		$	959,322
Depreciation and amortization	(120,248		)		(34,039		)		(78,903		)		(233,190		)		(18,183		)		(8,703		)		(260,076		)
Utilization of inventory markup(a)	(79,977		)		—				(20,030		)		(100,007		)		(3,029		)		—				(103,036		)
Restructuring and other, net	—				—				—				—				—				6,804				6,804
Acquisition and integration related costs(b)	—				—				—				—				—				(146,096		)		(146,096		)
Interest and financing expenses	—				—				—				—				—				(132,722		)		(132,722		)
Income tax expense	—				—				—				—				—				(29,122		)		(29,122		)
Non-operating pension and OPEB items	—				—				—				—				—				46,244				46,244
Other(c)	—				(1,971		)		—				(1,971		)		—				(4,441		)		(6,412		)
Net income (loss) attributable to Albemarle Corporation	$	335,295			$	161,585			$	103,095			$	599,975			$	32,781			$	(297,850	)		$	334,906
2014
Adjusted EBITDA	$	306,572			$	256,485			$	—			$	563,057			$	73,973			$	(74,875	)		$	562,155
Depreciation and amortization(d)	(51,707		)		(32,670		)		—				(84,377		)		(13,478		)		(2,552		)		(100,407		)
Restructuring and other, net	—				—				—				—				—				(25,947		)		(25,947		)
Acquisition and integration related costs(b)	—				—				—				—				—				(30,158		)		(30,158		)
Interest and financing expenses	—				—				—				—				—				(41,358		)		(41,358		)
Income tax expense	—				—				—				—				—				(18,484		)		(18,484		)
Loss from discontinued operations (net of tax)	—				—				—				—				—				(69,531		)		(69,531		)
Non-operating pension and OPEB items	—				—				—				—				—				(125,462		)		(125,462		)
Other(e)	—				—				—				—				—				(17,492		)		(17,492		)
Net income (loss) attributable to Albemarle Corporation	$	254,865			$	223,815			$	—			$	478,680			$	60,495			$	(405,859	)		$	133,316

(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 year ended December 31, 2015, $75.9 million was included in Cost of goods sold, and Equity in net income of unconsolidated investments was reduced by $27.1 million, related to the utilization of the inventory markup.

(b)	See “Acquisition and Integration Related Costs” on page 36 for a description of these costs.

(c)	Refining Solutions includes an impairment charge of approximately $2.0 million related to our unconsolidated investment in Fábrica Carioca de Catalisadores SA. Corporate includes approximately $4.4 million of financing-related fees expensed in connection with the acquisition of Rockwood.

(d)	Excludes discontinued operations.

(e)	Financing-related fees expensed in connection with the acquisition of Rockwood.

Performance Chemicals

Performance Chemicals segment net sales for the year ended December 31, 2015 were $1.61 billion, up $488.7 million, or 44%, in comparison to the same period in 2014. The increase was driven mainly by the acquisition of Rockwood, $26.0 million of favorable PCS volumes due to higher demand, and $9.4 million of favorable Bromine price impacts on certain products, partly offset by $21.8 million of unfavorable Bromine volumes on weaker demand and $27.9 million of unfavorable impacts from currency translation, primarily due to the weaker European Union Euro. Adjusted EBITDA for Performance Chemicals was up 75%, or $228.9 million, to $535.5 million for the year ended December 31, 2015, compared to the same period in 2014, with approximately $213.5 million due to the acquisition of Rockwood, $24.6 million in higher PCS sales volumes due to strong demand, and $9.4 million in favorable Bromine pricing impacts due to market conditions, offset partly by $16.1 million of unfavorable impacts of currency translation, primarily due to the weaker European Union Euro.

Albemarle Corporation and Subsidiaries

Refining Solutions

Refining Solutions segment net sales for the year ended December 31, 2015 were $729.3 million, a decrease of $122.9 million, or 14%, compared to the year ended December 31, 2014. This decrease was predominantly due to $103.5 million of unfavorable Clean Fuels Technology volumes due to customer demand, $15.0 million unfavorable Clean Fuels Technology and Heavy Oil Upgrading pricing impacts due to product and customer mix, and $30.4 million of unfavorable impacts from currency translation, primarily due to the weaker European Union Euro, partially offset by $30.4 million of higher Heavy Oil Upgrading volumes. Refining Solutions adjusted EBITDA decreased 23%, or $58.9 million, to $197.6 million for the year ended December 31, 2015 in comparison to the corresponding period of 2014. This decrease was due primarily to lower overall sales volumes primarily in Clean Fuels Technology due to lower demand, unfavorable pricing and mix due to economic conditions and specific crude feeds, and unfavorable impacts of currency translation, primarily due to the weaker European Union Euro, partially offset by $21.7 million in favorable pricing on raw materials and natural gas.

Chemetall Surface Treatment

Arising from the acquisition of Rockwood, Chemetall Surface Treatment segment net sales and adjusted EBITDA for the year ended December 31, 2015 were $824.9 million, and $202.0 million, respectively.

All Other

All Other net sales for the year ended December 31, 2015 were $471.4 million, a decrease of $0.3 million compared to the year ended December 31, 2014. The decrease was driven mainly by $55.3 million of unfavorable Fine Chemistry Services volumes, and $29.4 million of unfavorable impacts from currency translation impacts, primarily due to the weaker European Union Euro, offset by the acquisition of Rockwood. All Other adjusted EBITDA was down 27%, or $20.0 million, for the year ended December 31, 2015 in comparison to the same period of 2014. This decrease was due primarily to lower overall sales and unfavorable impacts from currency translation, primarily due to the weaker European Union Euro, partially offset by the acquisition of Rockwood.

Corporate

Corporate adjusted EBITDA was a charge of $29.8 million for the year ended December 31, 2015, a decrease of $45.1 million, compared to the year ended December 31, 2014. The change was due mainly to $52.7 million of foreign currency translation gains and achieved synergies partially offset by the acquisition of Rockwood. The foreign translation gains are primarily related to cash denominated in U.S. Dollars held by foreign subsidiaries where the European Union Euro serves as the functional currency.

Comparison of 2014 to 2013

Net Sales

For the year ended December 31, 2014, we recorded net sales of $2.45 billion, a 2% increase compared to net sales of $2.39 billion for the corresponding period of 2013. This increase was due primarily to favorable volume impacts of approximately $60.1 million in Refining Solutions, $11.3 million in Minerals and $8.3 million in Performance Chemicals partially offset by unfavorable volume impacts of approximately $27.8 million in Fine Chemistry Services and unfavorable currency impacts of approximately $2.2 million due to a stronger U.S. Dollar as we closed out the year.

Gross Profit

For the year ended December 31, 2014, our gross profit decreased $79.6 million, or 9%, from the corresponding 2013 period. Our gross profit for 2014 was impacted by approximately $36.5 million of pension and OPEB costs (including mark-to-market actuarial losses of $36.4 million) allocated to cost of goods sold, as compared to $42.2 million of pension and OPEB benefits (including mark-to-market actuarial gains of $42.7 million) allocated to cost of goods sold in 2013. Overall, these factors contributed to our gross profit margin of 31.5% for 2014, down from 35.5% in 2013. Excluding the impact of pension and OPEB mark-to-market actuarial losses and gains, our gross profit margin was 33.0% in 2014 and 33.7% in 2013.

The mark-to-market actuarial loss in 2014 is primarily attributable to: (a) a decrease in the weighted-average discount rate for our pension plans to 4.03% from 5.00% to reflect market conditions as of the December 31, 2014 measurement date, and (b) changes in mortality assumptions, and to a lesser extent, other demographic assumptions related to our pension plans. The mark-to-market actuarial loss in 2014 was partially offset by a higher return on pension plan assets in 2014 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. pension plan assets was 8.87% versus an expected return of 6.91%.

Albemarle Corporation and Subsidiaries

The mark-to-market actuarial gain in 2013 is primarily attributable to: (a) an increase in the weighted-average discount rate for our pension plans to 5.00% from 4.04% to reflect market conditions as of the December 31, 2013 measurement date; (b) the weighted-average actual return on U.S. pension plan assets of 15.07% was higher than the expected return of 7.25% as a result of overall market and investment portfolio performance; and (c) changes in demographic assumptions related to our pension plans, such as mortality rates, rates of compensation and other factors.

Selling, General and Administrative Expenses

For the year ended December 31, 2014, our SG&A expenses increased $196.9 million, or 125%, compared to the year ended December 31, 2013. This increase was primarily due to unfavorable pension and OPEB items and incentive compensation costs. SG&A expenses for 2014 includes approximately $97.1 million of pension and OPEB costs (including mark-to-market actuarial losses of $94.5 million), as compared to $90.5 million of pension and OPEB benefits (including mark-to-market actuarial gains of $96.3 million) in 2013. The mark-to-market actuarial losses and gains in 2014 and 2013, respectively, resulted from the factors as discussed in Gross Profit above.

As a percentage of net sales, SG&A expenses were 14.5% for the year ended December 31, 2014, compared to 6.6% for the corresponding period in 2013. Excluding the impact of pension and OPEB mark-to-market actuarial losses and gains, SG&A expenses as a percentage of net sales were 10.7% in 2014 and 10.6% in 2013.

Research and Development Expenses

For the year ended December 31, 2014, our R&D expenses increased $6.1 million, or 7%, from the year ended December 31, 2013, mainly as a result of higher personnel costs and higher spending for outside services. As a percentage of net sales, R&D expenses were 3.6% in 2014, compared to 3.4% in 2013.

Restructuring and Other, Net

Restructuring and other, net, of $25.9 million for the year ended December 31, 2014 includes the following items:

(a)	Estimated costs of approximately $20.5 million ($13.6 million after income taxes) in connection with action we initiated to reduce the high cost supply capacity of certain aluminum alkyl products, primarily through the termination of a third party manufacturing contract.

(b)	An impairment charge of $3.0 million ($1.9 million after income taxes) for certain capital project costs also related to aluminum alkyls capacity which we do not expect to recover.

(c)	Other net charges of $2.4 million ($1.4 million after income taxes), mainly in connection with a write-off of certain multi-product facility project costs that we do not expect to recover in future periods.

In connection with a realignment of our operating segments effective January 1, 2014, in the fourth quarter of 2013, we initiated a workforce reduction plan which resulted in a reduction of approximately 230 employees worldwide. We recorded charges of $33.4 million ($21.9 million after income taxes) during the year ended December 31, 2013 for termination benefits and other costs related to this workforce reduction plan.

Acquisition and Integration Related Costs

The year ended December 31, 2014 includes $23.6 million of acquisition and integration related costs directly related to the acquisition of Rockwood and $6.6 million of costs in connection with other significant projects. Acquisition-related costs incurred during the year ended December 31, 2013 are included in SG&A expenses and were not significant.

Interest and Financing Expenses

Interest and financing expenses for the year ended December 31, 2014 increased $9.8 million to $41.4 million from the corresponding 2013 period, due mainly to higher borrowing levels in connection with the acquisition of Rockwood and decreases in interest capitalized on lower average construction work in progress balances in the 2014 period.

Other Expenses, Net

Other expenses, net, for the year ended December 31, 2014 was $16.8 million versus $6.7 million for the corresponding 2013 period. This increase was due to $16.7 million of amortized bridge facility fees and $1.0 million of other financing fees in the 2014 period related to the acquisition of Rockwood, partially offset by net favorable items of $7.6 million primarily related to favorable currency impacts compared to the corresponding period in 2013 due to more effective management of currency risks.

Albemarle Corporation and Subsidiaries

Income Tax Expense

The effective income tax rate for 2014 was 8.7% compared to 25.0% for 2013. Our effective income tax rate differs from the U.S. federal statutory income tax rates in the comparative periods mainly due to the impact of earnings from outside the U.S. Our effective income tax rate in 2014 was affected by tax benefits of $74.2 million related to restructuring charges, a pension plan actuarial loss and the release of reserves related principally to the expiration of the U.S. federal statute of limitations. See Note 20, “Income Taxes” to our consolidated financial statements included in Part II, Item 8 of this report for a reconciliation of the U.S. federal statutory income tax rate to our effective rate for 2014 and 2013.

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $35.7 million for the year ended December 31, 2014 compared to $31.7 million in the same period last year. This increase was due primarily to higher equity income reported by our Refining Solutions segment joint ventures Nippon Ketjen Company Limited and Fábrica Carioca de Catalisadores SA, our Performance Chemicals segment joint venture Stannica, and our Magnifin joint venture (included in All Other), partly offset by lower equity income amounts reported by our Refining Solutions segment joint venture Eurecat.

(Loss) Income from Discontinued Operations

(Loss) income from discontinued operations, after income taxes, was ($69.5) million for the year ended December 31, 2014, compared to $4.1 million for the year ended December 31, 2013. Included in 2014 is a pre-tax charge of ($85.5) million ($65.7 million after income taxes), which represented the difference between the carrying value of the related assets and their fair value as determined by the sales price less estimated costs to sell. This charge was primarily attributable to the write-off of goodwill, intangibles and long-lived assets, net of cumulative foreign currency translation gains of $17.8 million.

Net Income Attributable to Noncontrolling Interests

For the year ended December 31, 2014, net income attributable to noncontrolling interests was $27.6 million compared to $26.7 million in the same period last year. This increase of $0.9 million was due primarily to higher profits of our consolidated joint venture JBC in the 2014 period.

Net Income Attributable to Albemarle Corporation

Net income attributable to Albemarle Corporation decreased to $133.3 million for the year ended December 31, 2014, from $413.2 million for the corresponding period of 2013 primarily due to an unfavorable impact of $73.6 million (after income taxes) related to discontinued operations, unfavorable impacts of $266.4 million related to pension and OPEB items mainly resulting from an actuarial loss in 2014 compared to an actuarial gain in 2013, charges of $30.2 million in 2014 for certain significant acquisition-related costs (of which $23.6 million relates to the acquisition of Rockwood), higher manufacturing and SG&A costs of approximately $33.0 million, higher interest and financing expenses of $9.8 million, and higher other expenses, net, of $10.1 million, partly offset by lower income tax expense of $116.0 million, lower restructuring and other, net, of $7.4 million, favorable volume impacts of approximately $12.2 million on market demand, and lower variable input costs of approximately $9.3 million.

Other Comprehensive (Loss) Income, Net of Tax

Total other comprehensive (loss) income, after income taxes, was ($178.7) million in 2014 compared to $31.3 million in 2013. The majority of these amounts are the result of translating our foreign subsidiary financial statements from their local currencies to U.S. Dollars. In 2014, other comprehensive (loss) from foreign currency translation adjustments was ($168.8) million, mainly as a result of unfavorable movements of approximately $(124) million in the European Union Euro, $(18) million in the Chinese Renminbi and ($13) million in the Brazilian Real. Also included in total other comprehensive (loss) income, for 2014 is ($21.0) million related to a realized loss on an interest rate swap which settled in the fourth quarter, and $11.4 million in connection with the revaluation of our €700.0 million senior notes and settlement of related foreign currency forward contracts, both of which were designated as a hedge of our net investment in foreign operations. In 2013, other comprehensive income from foreign currency translation adjustments was $31.7 million, mainly as a result of favorable movements in the European Union Euro of approximately $42 million, partially offset by unfavorable movements in the Brazilian Real of approximately $14 million.

Albemarle Corporation and Subsidiaries

		Year Ended December 31,														Percentage Change
		2014				%			2013				%			2014 vs. 2013
		(In thousands, except percentages)
Net sales:
Performance Chemicals		$	1,121,645			45.9	%		$	1,141,890			47.7	%		(2	)%
Refining Solutions		852,139				34.8	%		775,207				32.4	%		10	%
All Other		471,764				19.3	%		477,173				19.9	%		(1	)%
Total net sales		$	2,445,548			100.0	%		$	2,394,270			100.0	%		2	%
Adjusted EBITDA:
Performance Chemicals		$	306,572			54.5	%		$	364,712			65.4	%		(16	)%
Refining Solutions		256,485				45.6	%		190,388				34.1	%		35	%
All Other		73,973				13.2	%		71,691				12.9	%		3	%
Corporate		(74,875		)		(13.3	)%		(69,240		)		(12.4	)%		8	%
Total adjusted EBITDA		$	562,155			100.0	%		$	557,551			100.0	%		1	%

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 GAAP, (in thousands):

	Performance Chemicals				Refining Solutions				Reportable Segments Total				All Other				Corporate				Consolidated Total
2014
Adjusted EBITDA	$	306,572			$	256,485			$	563,057			$	73,973			$	(74,875	)		$	562,155
Depreciation and amortization(a)	(51,707		)		(32,670		)		(84,377		)		(13,478		)		(2,552		)		(100,407		)
Restructuring and other, net	—				—				—				—				(25,947		)		(25,947		)
Acquisition and integration related costs(b)	—				—				—				—				(30,158		)		(30,158		)
Interest and financing expenses	—				—				—				—				(41,358		)		(41,358		)
Income tax expense	—				—				—				—				(18,484		)		(18,484		)
Loss from discontinued operations (net of tax)	—				—				—				—				(69,531		)		(69,531		)
Non-operating pension and OPEB items	—				—				—				—				(125,462		)		(125,462		)
Other(c)	—				—				—				—				(17,492		)		(17,492		)
Net income (loss) attributable to Albemarle Corporation	$	254,865			$	223,815			$	478,680			$	60,495			$	(405,859	)		$	133,316
2013
Adjusted EBITDA	$	364,712			$	190,388			$	555,100			$	71,691			$	(69,240	)		$	557,551
Depreciation and amortization(a)	(46,225		)		(33,580		)		(79,805		)		(13,323		)		(2,188		)		(95,316		)
Restructuring and other, net	—				—				—				—				(33,361		)		(33,361		)
Interest and financing expenses	—				—				—				—				(31,559		)		(31,559		)
Income tax expense	—				—				—				—				(134,445		)		(134,445		)
Income from discontinued operations (net of tax)	—				—				—				—				4,108				4,108
Non-operating pension and OPEB items	—				—				—				—				146,193				146,193
Net income (loss) attributable to Albemarle Corporation	$	318,487			$	156,808			$	475,295			$	58,368			$	(120,492	)		$	413,171

(a)	Excludes discontinued operations.

(b)	See “Acquisition and Integration Related Costs” on page 41 for a description of these costs.

(c)	Financing-related fees expensed in connection with the acquisition of Rockwood.

Albemarle Corporation and Subsidiaries

Performance Chemicals

Performance Chemicals segment net sales for the year ended December 31, 2014 were $1.12 billion, down $20.2 million, or 2%, in comparison to the same period in 2013. The decrease was due to lower Bromine sales volumes of $28.5 million, unfavorable Bromine pricing of $16.6 million, unfavorable PCS pricing of $8.7 million and $3.3 million of unfavorable currency exchange impacts partially offset by $36.7 million of increased PCS sales volumes. Adjusted EBITDA for Performance Chemicals was down 16%, or $58.1 million, to $306.6 million for the year ended 2014 compared to 2013, as a result of lower pricing due to market conditions, higher manufacturing and SG&A costs of approximately $22.0 million, and unfavorable currency impacts of approximately $2.3 million mainly due to the weaker Japanese yen.

Refining Solutions

Refining Solutions segment net sales for the year ended December 31, 2014 were $852.1 million, an increase of $76.9 million, or 10%, compared to the year ended December 31, 2013. This increase was primarily due $35.1 million of increased Clean Fuels Technology sales volumes, $23.7 million of increase Heavy Oil Upgrading sales volumes, $1.4 million of increased Chemical Catalysts sales volumes, and $16.6 million of favorable price impacts in both Heavy Oil Upgrading and Clean Fuels Technology. Refining Solutions adjusted EBITDA increased 35%, or $66.1 million, to $256.5 million for the year ended December 31, 2014 in comparison to the corresponding period of 2013. This increase was due primarily to higher overall sales volumes, improved pricing, and a $3.1 million increase in equity income reported by our Nippon Ketjen Company Limited joint venture primarily due to higher sales volumes

All Other

All Other net sales for the year ended December 31, 2014 were $471.8 million, a decrease of $5.4 million, or 1% compared to the year ended December 31, 2013. The decrease was driven mainly by $27.8 million of unfavorable Fine Chemistry Services volumes partially offset by $11.3 million of increased Minerals sales volumes, $9.3 million of improved price impacts and $1.9 million of favorable currency exchange impacts. All Other adjusted EBITDA was up 3%, or $2.3 million, for the year ended December 31, 2014 in comparison to the same period in 2014. This increase was due primarily to a favorable mix of sales volumes, $9.3 million of favorable price impacts, and lower SG&A costs.

Corporate

Corporate adjusted EBITDA was a charge of $74.9 million for the year ended December 31, 2014, an increase of $5.6 million, compared to the year ended December 31, 2013. The change was due mainly to unfavorable incentive compensation costs.

Summary of Critical Accounting Policies and Estimates

Estimates, Assumptions and Reclassifications

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Listed below are the estimates and assumptions that we consider to be critical in the preparation of our financial statements.

Certain amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to the current presentation.

Property, Plant and Equipment. We assign the useful lives of our property, plant and equipment based upon our internal engineering estimates which are reviewed periodically. The estimated useful lives of our property, plant and equipment range from 2 to 60 years and depreciation is recorded on the straight-line method, with the exception of our long-term mineral rights, which are depleted on a units-of-production method. We evaluate the recovery of our property, plant and equipment by comparing the net carrying value of the asset group to the undiscounted net cash flows expected to be generated from the use and eventual disposition of that asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset group is not recoverable, the fair value of the asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized.

Acquisition Method of Accounting. We recognize the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their estimated fair values on the date of acquisition for acquired businesses. Determining the fair value of these items requires management’s judgment, the utilization of independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and

Albemarle Corporation and Subsidiaries

outflows, discount rates, customer attrition rates, royalty rates, market prices and tax rates, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense. For more information on our acquisitions and application of the acquisition method, see Note 2, “Acquisitions” to our consolidated financial statements included in Part II, Item 8 of this report.

Income Taxes. We assume the deductibility of certain costs in our income tax filings, and we estimate the future recovery of deferred tax assets, uncertain tax positions, and indefinite investment assertions.

Environmental Remediation Liabilities. We estimate and accrue the costs required to remediate a specific site depending on site-specific facts and circumstances. Cost estimates to remediate each specific site are developed by assessing (i) the scope of our contribution to the environmental matter, (ii) the scope of the anticipated remediation and monitoring plan and (iii) the extent of other parties’ share of responsibility.

Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

Revenue Recognition

We recognize sales when the revenue is realized or realizable, and has been earned, in accordance with authoritative accounting guidance. We recognize net sales as risk and title to the product transfer to the customer, which usually occurs at the time shipment is made. Significant portions of our sales are sold free on board shipping point or on an equivalent basis, and other transactions are based upon specific contractual arrangements. Our standard terms of delivery are generally included in our contracts of sale, order confirmation documents and invoices. We recognize revenue from services when performance of the services has been completed. Where the Company incurs pre-production design and development costs under long-term supply contracts, these costs are expensed where they relate to the products sold unless contractual guarantees for reimbursement exist. Conversely, these costs are capitalized if they pertain to equipment that we will own and use in producing the products to be supplied and expect to utilize for future revenue generating activities.

Goodwill and Other Intangible Assets

We account for goodwill and other intangibles acquired in a business combination in conformity with current accounting guidance which requires goodwill and indefinite-lived intangible assets to not be amortized.

We test goodwill for impairment by comparing the estimated fair value of our reporting units to the related carrying value. We estimate the fair value based on present value techniques involving future cash flows. Future cash flows include assumptions about sales volumes, selling prices, raw material prices, labor and other employee benefit costs, capital additions, income taxes, working capital, and other economic or market-related factors. Significant management judgment is involved in estimating these variables and they include inherent uncertainties since they are forecasting future events. We perform a sensitivity analysis by using a range of inputs to confirm the reasonableness of these estimates being used in the goodwill impairment analysis. We use a Weighted Average Cost of Capital (“WACC”) approach to determine our discount rate for goodwill recoverability testing. Our WACC calculation incorporates industry-weighted average returns on debt and equity from a market perspective. The factors in this calculation are largely external to the Company and, therefore, are beyond our control. We test our recorded goodwill for impairment in the fourth quarter of each year or upon the occurrence of events or changes in circumstances that would more likely than not reduce the fair value of our reporting units below their carrying amounts. The Company performed its annual goodwill impairment test as of October 31, 2015 and concluded there was no impairment as of that date. In addition, no indications of impairment in any of our reporting units were indicated by the sensitivity analysis.

We assess our indefinite-lived intangible assets, which include trade names and in-progress research and development, for impairment annually and between annual tests if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The indefinite-lived intangible asset impairment standard allows us to first to assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if we determine, based on the qualitative assessment, that it is more likely than not that the indefinite-lived intangible asset’s fair value is less than its carrying amount. If we determine based on the qualitative assessment that it is more likely than not that the asset is impaired, an impairment test is performed by comparing the fair value of the indefinite-lived intangible asset to its carrying amount.

Definite-lived intangible assets, such as purchased technology, patents, customer lists and trade names, are amortized over their estimated useful lives generally for periods ranging from five to twenty-five years. Except for customer lists and relationships associated with our Lithium business and Chemetall Surface Treatment segment which are amortized using the

Albemarle Corporation and Subsidiaries

pattern of economic benefit method, definite-lived intangible assets are amortized using the straight-line method. We evaluate the recovery of our definite-lived intangible assets by comparing the net carrying value of the asset group to the undiscounted net cash flows expected to be generated from the use and eventual disposition of that asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset group is not recoverable, the fair value of the asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized. See Note 12, “Goodwill and Other Intangibles” to our consolidated financial statements included in Part II, Item 8 of this report.

Pension Plans and Other Postretirement Benefits

Under authoritative accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets. As required, we recognize a balance sheet asset or liability for each of our pension and OPEB plans equal to the plan’s funded status as of the measurement date. The primary assumptions are as follows:

•	Discount Rate—The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future.

•	Expected Return on Plan Assets—We project the future return on plan assets based on prior performance and future expectations for the types of investments held by the plans as well as the expected long-term allocation of plan assets for these investments. These projected returns reduce the net benefit costs recorded currently.

•	Rate of Compensation Increase—For salary-related plans, we project employees’ annual pay increases, which are used to project employees’ pension benefits at retirement.

•	Mortality Assumptions—Assumptions about life expectancy of plan participants are used in the measurement of related plan obligations.

Actuarial gains and losses are recognized annually in our consolidated statements of income in the fourth quarter and whenever a plan is determined to qualify for a remeasurement during a fiscal year. The remaining components of pension and OPEB plan expense, primarily service cost, interest cost and expected return on assets, are recorded on a quarterly basis. The market-related value of assets equals the actual market value as of the date of measurement.

During 2015, we made changes to assumptions related to discount rates and expected rates of return on plan assets. We consider available information that we deem relevant when selecting each of these assumptions.

Our U.S. defined benefit plans for non-represented employees are closed to new participants, with no additional benefits accruing under these plans as participants’ accrued benefits have been frozen. In selecting the discount rates for the U.S. plans, we consider expected benefit payments on a plan-by-plan basis. As a result, the Company uses different discount rates for each plan depending on the demographics of participants and the expected timing of benefit payments. For 2015, the discount rates were calculated using the results from a bond matching technique developed by Milliman, which matched the future estimated annual benefit payments of each respective plan against a portfolio of bonds of high quality to determine the discount rate. We believe our selected discount rates are determined using preferred methodology under authoritative accounting guidance and accurately reflect market conditions as of the December 31, 2015 measurement date.

In selecting the discount rates for the foreign plans, we look at long-term yields on AA-rated corporate bonds when available. Our actuaries have developed yield curves based on the yields of constituent bonds in the various indices as well as on other market indicators such as swap rates, particularly at the longer durations. For the Eurozone, we apply the Aon Hewitt yield curve to projected cash flows from the relevant plans to derive the discount rate. For the U.K., the discount rate is determined by applying the Aon Hewitt yield curve for typical schemes of similar duration to projected cash flows of Albemarle’s U.K. plan. In other countries where there is not a sufficiently deep market of high-quality corporate bonds, we set the discount rate by referencing the yield on government bonds of an appropriate duration.

At December 31, 2015, the weighted-average discount rate for the U.S. and foreign pension plans was increased to 4.67% and 2.89%, respectively, from 4.18% and 2.34%, respectively, at December 31, 2014 to reflect market conditions as of the December 31, 2015 measurement date. The discount rate for the OPEB plans at December 31, 2015 and 2014 was 4.59% and 4.15%, respectively.

In estimating the expected return on plan assets, we consider past performance and future expectations for the types of investments held by the plan as well as the expected long-term allocations of plan assets to these investments. For the years 2015 and 2014, the weighted-average expected rate of return on U.S. pension plan assets was 6.85% and 6.91%, respectively, and the weighted-average expected rate of return on foreign pension plan assets was 5.63% and 4.00%, respectively. Effective January 1, 2016, the weighted-average expected rate of return on U.S. and foreign pension plan assets is 6.90% and 5.65%,

Albemarle Corporation and Subsidiaries

respectively. The weighted-average expected rate of return on plan assets for our OPEB plans was 7.00% during 2015 and 2014. There has been no change to the assumed rate of return on OPEB plan assets effective January 1, 2016.

In projecting the rate of compensation increase, we consider past experience in light of movements in inflation rates. At December 31, 2015, the assumed weighted-average rate of compensation increase changed to 3.17% from 3.40% for our foreign pension plans.

In October 2014, the Society of Actuaries (“SOA”) published updated mortality tables which reflect increased life expectancy. We revised our mortality assumptions to incorporate the new set of mortality tables issued by the SOA for purposes of measuring our U.S. pension and OPEB obligations at December 31, 2014. Further, the SOA released an updated Mortality Improvement Scale, MP-2015, on October 8, 2015. The updated improvement scale incorporates two additional years of mortality data and reflects a trend toward somewhat smaller improvements in longevity. In addition, the SOA released a set of factors to adjust the RP-2014 Mortality Tables to base year 2006. We revised our mortality assumption to incorporate these updated mortality improvements for purposes of measuring our U.S. pension and OPEB obligations at December 31, 2015.

At December 31, 2015, the assumed rate of increase in the pre-65 and post-65 per capita cost of covered health care benefits for U.S. retirees was zero as the employer-paid premium caps (pre-65 and post-65) were met starting January 1, 2013.

A variance in the assumptions discussed above would have an impact on the projected benefit obligations, the accrued OPEB liabilities, and the annual net periodic pension and OPEB cost. The following table reflects the sensitivities associated with a hypothetical change in certain assumptions, primarily in the U.S. (in thousands):

	(Favorable) Unfavorable
	1% Increase								1% Decrease
	Increase (Decrease) in Benefit Obligation				Increase (Decrease) in Benefit Cost				Increase (Decrease) in Benefit Obligation				Increase (Decrease) in Benefit Cost
Actuarial Assumptions
Discount Rate:
Pension	$	(130,542	)		$	3,680			$	157,588			$	(5,268	)
Other postretirement benefits	$	(5,160	)		$	254			$	6,192			$	(320	)
Expected return on plan assets:
Pension	*				$	(6,712	)		*				$	6,712
Other postretirement benefits	*				$	(27	)		*				$	27

• Not applicable.

Of the $694.1 million total pension and postretirement assets at December 31, 2015, $83.1 million, or approximately 12%, are measured using significant unobservable inputs (Level 3). Gains or losses attributable to these assets are recognized in the consolidated balance sheets as either an increase or decrease in plan assets. See Note 15, “Pension Plans and Other Postretirement Benefits” to our consolidated financial statements included in Part II, Item 8 of this report.

Income Taxes

We use the liability method for determining our income taxes, under which current and deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this method, the amounts of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. In order to record deferred tax assets and liabilities, we are following guidance under ASU 2015-17, which requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet, along with any related valuation allowance.

Deferred income taxes are provided for the estimated income tax effect of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred tax assets are also provided for operating losses, capital losses and certain tax credit carryovers. A valuation allowance, reducing deferred tax assets, is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of such deferred tax assets is dependent upon the generation of sufficient future taxable income of the appropriate character. Although realization is not assured, we do not establish a valuation allowance when we believe it is more likely than not that a net deferred tax asset will be realized.

We only recognize a tax benefit after concluding that it is more likely than not that the benefit will be sustained upon audit by the respective taxing authority based solely on the technical merits of the associated tax position. Once the recognition

Albemarle Corporation and Subsidiaries

threshold is met, we recognize a tax benefit measured as the largest amount of the tax benefit that, in our judgment, is greater than 50% likely to be realized. Interest and penalties related to income tax liabilities are included in Income tax expense on the consolidated statements of income.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Due to the statute of limitations, we are no longer subject to U.S. federal income tax audits by the Internal Revenue Service (“IRS”) for years prior to 2011. In 2015, the IRS continued its audit of legacy Albemarle’s U.S. consolidated group for 2011 and 2012. Additionally, in 2015 the IRS finalized its audit of legacy Rockwood’s U.S. consolidated group for 2010 and 2011. Due to the statute of limitations, we also are no longer subject to U.S. state income tax audits prior to 2010.

With respect to jurisdictions outside the U.S., several audits are in process. During 2015, the German tax authorities continued and announced audits on multiple German subsidiaries for various years from 2006 through 2013, the Belgium tax authorities continued the audit of our Belgium subsidiary for 2012 and 2013, and audits of two of our Korean entities for 2011 through 2013 were closed. We also have various audits ongoing for the years 2007 through 2014 related to Russia, the Philippines, India, Italy, and France.

While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than our accrued position. Accordingly, additional provisions on federal and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Since the timing of resolutions and/or closure of tax audits are uncertain, it is difficult to predict with certainty the range of reasonably possible significant increases or decreases in the liability related to uncertain tax positions that may occur within the next twelve months. Our current view is that it is reasonably possible that we could record a decrease in the liability related to uncertain tax positions, relating to a number of issues, up to approximately $3.3 million as a result of closure of tax statutes.

We have designated the undistributed earnings of substantially all of our foreign operations as indefinitely invested and as a result we do not provide for deferred income taxes on the unremitted earnings of these subsidiaries. If it is determined that cash can be repatriated with little to no tax consequences, we may choose to repatriate cash at that time. Our foreign earnings are computed under U.S. federal tax earnings and profits (“E&P”) principles. In general, to the extent our financial reporting book basis over tax basis of a foreign subsidiary exceeds these E&P amounts, deferred taxes have not been provided, as they are essentially permanent in duration. The determination of the amount of such unrecognized deferred tax liability is not practicable. We provide for deferred income taxes on our undistributed earnings of foreign operations that are not deemed to be indefinitely invested.

Stock-based Compensation Expense

The fair value of restricted stock awards, restricted stock unit awards and performance unit awards with a service condition are determined based on the number of shares or units granted and the quoted price of our common stock on the date of grant, and the fair value of stock options is determined using the Black-Scholes valuation model. The fair value of performance unit awards with a service and a market condition are estimated on the date of grant using a Monte Carlo simulation model. The fair value of these awards is determined after giving effect to estimated forfeitures. Such value is recognized as expense over the service period, which is generally the vesting period of the equity grant. To the extent restricted stock awards, restricted stock unit awards, performance unit awards and stock options are forfeited prior to vesting in excess of the estimated forfeiture rate, the corresponding previously recognized expense is reversed as an offset to operating expenses.

Financial Condition and Liquidity

Overview

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

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

Albemarle Corporation and Subsidiaries

Cash Flow

Our cash and cash equivalents were $213.7 million at December 31, 2015 as compared to $2.5 billion at December 31, 2014. Cash provided by operating activities was $360.7 million, $492.6 million and $432.9 million during the years ended December 31, 2015, 2014 and 2013, respectively.

The decrease in cash provided by operating activities in 2015 versus 2014 was primarily due to higher acquisition and integration related costs in connection with the Rockwood acquisition, higher payments for interest and higher payments for income taxes in 2015, as compared to 2014. The increase in cash provided by operating activities in 2014 versus 2013 was primarily due to a decrease in accounts receivable and higher dividends received from unconsolidated investments in 2014, partially offset by a decrease in accrued expenses.

During 2015, cash on hand, cash provided by operations, a return of capital from an unconsolidated investment and proceeds from borrowings funded $2.1 billion for acquisitions, $227.6 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $119.3 million, and pension and postretirement contributions of $21.6 million. Also during 2015, our consolidated joint venture, JBC, paid dividends of approximately $70 million, which resulted in dividends to noncontrolling interests of $23.3 million. During 2014, cash on hand, cash provided by operations and proceeds from divestitures funded payments of $150.0 million for repurchases of our common stock, $110.6 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $84.1 million, $33.4 million for the settlement of a forward starting interest rate swap, debt financing costs of $17.6 million and pension and postretirement contributions of $13.9 million. Also during 2014, our consolidated joint venture, JBC, paid dividends of approximately $51 million, which resulted in dividends to noncontrolling interests of $15.5 million. Additionally, in 2014 we issued a series of new senior notes totaling approximately $1.9 billion. During 2013, proceeds from borrowings net of repayments, cash on hand and cash provided by operations funded payments of $582.3 million for repurchases of our common stock, $155.3 million of capital expenditures for plant, machinery and equipment, dividends to shareholders of $78.1 million and pension and postretirement contributions of $13.3 million. Also during 2013, our consolidated joint venture, JBC, paid dividends of approximately $38 million, which resulted in dividends to noncontrolling interests of $10.0 million.

Net current assets decreased to approximately $214.3 million at December 31, 2015 from $2.21 billion at December 31, 2014, with the decrease being largely due to lower cash and cash equivalents in connection with acquisitions in 2015. Included in net current assets at December 31, 2015 is $275.8 million of assets held for sale, net of related liabilities. Other changes in the components of net current assets are due to the timing of the sale of goods and other normal transactions leading up to the balance sheet dates and are not the result of any policy changes by the Company, nor do they reflect any change in either the quality of our net current assets or our expectation of success in converting net working capital to cash in the normal course of business.

Capital expenditures were $227.6 million, $110.6 million and $155.3 million for the years ended December 31, 2015, 2014 and 2013, respectively, and were incurred mainly for plant, machinery and equipment. We expect our capital expenditures to approximate $230 million in 2016 for capacity increases, cost reduction and continuity of operations projects.

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 syntheses process. On January 4, 2016, the Company closed the sale of this business. We received net proceeds of approximately $137 million, and we currently expect to record a gain 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 mineral-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, subject to post-closing adjustments. We currently expect to record a gain in the first quarter of 2016 related to the sale of these businesses.

During 2014 and 2013 we repurchased approximately 2.2 million shares and 9.2 million shares of our common stock, respectively, pursuant to the terms of our Board authorized share repurchase program. All of the shares repurchased in 2014 and approximately 7.1 million of the shares repurchased in 2013 were also repurchased pursuant to the terms of accelerated share repurchase agreements with major financial institutions. As of December 31, 2015, there were 3,749,340 remaining shares available for repurchase under the Company’s authorized share repurchase program.

Albemarle Corporation and Subsidiaries

On February 26, 2016, we increased our quarterly dividend rate to $0.305 per share, a 5% increase from the quarterly rate of $0.29 per share paid in 2015.

During 2015, we incurred $137.7 million of acquisition and integration related costs directly related to the acquisition of Rockwood (mainly consisting of professional services and advisory fees, costs to achieve synergies, relocation costs, and other integration costs) and $8.4 million of costs in connection with other significant projects. In 2014, we incurred $23.6 million of acquisition and integration related costs directly related to the acquisition of Rockwood and $6.6 million of costs in connection with other significant projects. We currently anticipate incurring additional acquisition and integration related costs of approximately $60 million through 2016 in connection with the acquisition of Rockwood; actual results may differ from this estimate.

At December 31, 2015 and December 31, 2014, our cash and cash equivalents included $200.7 million and $558.7 million, respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are indefinitely invested and which we plan to use to support our continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash associated with earnings from our foreign subsidiaries to the U.S. for normal operating needs through intercompany dividends, but only from subsidiaries whose earnings we have not asserted to be indefinitely invested or whose earnings qualify as “previously taxed income” as defined by the Internal Revenue Code. For the years ended December 31, 2015, 2014 and 2013, we repatriated approximately $122.5 million, $10.0 million and $7.2 million of cash associated with earnings, respectively, as part of these foreign earnings cash repatriation activities. With regard to the access of internal cash from Albemarle, Rockwood and their respective subsidiaries to help fund the Merger, the structure implemented did not impact the indefinite investment assertion of Albemarle as no taxes were triggered in the movements of Albemarle’s cash. With regard to the acquisition of Rockwood, the Company’s purchase price accounting included tax liabilities related to the repatriation of cash that occurred in 2015. As of December 31, 2015, the deferred tax liability has been fully utilized as the repatriation planning has concluded. We have asserted that substantially all future earnings of former Rockwood entities have been elected to be indefinitely invested.

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

Long-Term Debt

Our $325.0 million aggregate principal amount of senior notes, issued on January 20, 2005 and bearing interest at a rate of 5.10%, matured and were repaid on February 1, 2015. We currently have the following senior notes outstanding:

Issue Month/Year		Principal (in millions)		Interest Rate		Interest Payment Dates			Maturity Date
December 2014		€700.0		1.875%		December 8			December 8, 2021
November 2014		$250.0		3.00%		June 1	December 1		December 1, 2019
November 2014		$425.0		4.15%		June 1	December 1		December 1, 2024
November 2014		$350.0		5.45%		June 1	December 1		December 1, 2044
December 2010		$350.0		4.50%		June 15	December 15		December 15, 2020

Our senior notes are senior unsecured obligations and rank equally with all of our other senior unsecured indebtedness from time to time outstanding. The senior notes are effectively subordinated to any of our existing or future secured indebtedness and to the existing and future indebtedness of our subsidiaries. As is customary for such long-term debt instruments, each senior note outstanding has terms that allow us to redeem the notes before their maturity, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the senior notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis using the comparable government rate (as defined in the indentures governing the senior notes) plus between 25 and 40 basis points, depending on the note, plus, in each case, accrued interest thereon to the date of redemption. Holders may require us to purchase such notes at 101% upon a change of control triggering event, as defined in the indentures. The senior notes are

Albemarle Corporation and Subsidiaries

subject to typical events of default, including bankruptcy and insolvency events, nonpayment and the acceleration of certain subsidiary indebtedness of $40 million or more caused by a nonpayment default.

Upon completion of the Rockwood acquisition, we assumed Rockwood’s senior notes with an aggregate principal amount of $1.25 billion. These senior notes bore interest at a rate of 4.625% payable semi-annually on April 15 and October 15 of each year, and had a scheduled maturity of October 15, 2020. Under the terms of the indenture governing the 4.625% senior notes, as amended and supplemented, on October 15, 2015, our wholly-owned subsidiary, Rockwood Specialties Group, Inc., redeemed all of the outstanding 4.625% senior notes at a redemption price equal to 103.469% of the principal amount of the notes, representing a premium of $43.3 million, plus accrued and unpaid interest to the redemption date. The guarantees of the 4.625% senior notes and the senior notes we issued in 2014 were released upon repayment of the 4.625% senior notes.

The 4.625% senior notes we assumed from Rockwood were repaid with proceeds from a new term loan agreement we entered into on September 14, 2015 (the “September 2015 Term Loan Agreement”) with JPMorgan Chase Bank, N.A. (the “Administrative Agent”) and certain other lenders. The September 2015 Term Loan Agreement provides for borrowings under a 364-day term loan facility (the “364-Day Facility”) and a five-year term loan facility (the “Five-Year Facility”), or collectively, the “Term loan facilities.” As of December 31, 2015, aggregate amounts outstanding under the 364-Day Facility and the Five-Year Facility were $300.0 million and $950.0 million, respectively. As of February 19, 2016, we repaid the 364-Day Facility in full and we repaid approximately $31 million of borrowings under the Five-Year Facility, each primarily with proceeds from the sale of the Company’s Tribotecc metal sulfides business and the sale of the Company’s minerals-based flame retardants and specialty chemicals businesses, both of which closed in the first quarter of 2016. Borrowings under the facilities bear interest equal to, at the option of the Company: (a) the London Inter-Bank Offered Rate (“LIBOR”) plus a margin ranging from 1.000% to 1.875% per annum depending upon the long-term, unsecured, senior, non-credit enhanced debt rating of the Company, or (b) a base rate (defined as the highest of (i) the Federal Funds Rate plus 0.50%; (ii) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate”; or (iii) one-month LIBOR plus 1.00%) plus a margin of 0.000% to 0.875% per annum depending upon the long-term, unsecured, senior, non-credit enhanced debt rating of the Company. As of December 31, 2015, the interest rate on both Term loan facilities was LIBOR plus 1.375%.

Borrowings under the 364-Day Facility were required to be repaid 364 days after initial funding. Borrowings under the Five-Year Facility are required to be repaid in equal quarterly installments on the last business day of each March, June, September and December, beginning with September 30, 2016, and ending with the last such day to occur prior to the fifth anniversary after initial funding (each a “Payment Date”), in an aggregate principal amount equal to (a) in the case of each Payment Date occurring on or after the first anniversary and prior to the second anniversary of initial funding, 1.25% of the aggregate principal amount of such loans, and (b) in the case of each Payment Date occurring on or after the second anniversary of initial funding, equal to 2.5% of the aggregate principal amount of such loans. On the fifth anniversary after initial funding, any remaining amounts outstanding under the Five-Year Facility become due and payable. Additionally, the agreement requires that proceeds from divestitures of the Company’s Tribotecc metal sulfides business and the Company’s minerals-based flame retardants and specialty chemicals businesses, and intended divestiture of its Fine Chemistry Services business, must be used to repay amounts outstanding under the September 2015 Term Loan Agreement. Borrowings under the September 2015 Term Loan Agreement are subject to customary affirmative and negative covenants, including a maximum leverage ratio requirement that is aligned with the maximum leverage ratio requirement of our February 2014 Credit Agreement.

Our revolving, unsecured credit agreement dated as of February 7, 2014, as amended, (the “February 2014 Credit Agreement”) currently provides for borrowings of up to $1.0 billion and matures on February 7, 2020. Borrowings bear interest at variable rates based on the LIBOR for deposits in the relevant currency plus an applicable margin which ranges from 1.000% to 1.700%, depending on the Company’s credit rating from Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Services (“Moody’s”) and Fitch Ratings (“Fitch”). The applicable margin on the facility was 1.300% as of December 31, 2015. There were no borrowings outstanding under the February 2014 Credit Agreement as of December 31, 2015.

Borrowings under the February 2014 Credit Agreement are conditioned upon compliance with the following covenants: (a) consolidated funded debt, as defined in the agreement, must be less than or equal to 3.50 times consolidated EBITDA, as defined in the agreement, which reflects adjustments for certain non-recurring or unusual items such as restructuring charges, facility divestiture charges and other significant non-recurring items (herein “consolidated adjusted EBITDA” or “adjusted EBITDA”), as of the end of any fiscal quarter; (b) with the exception of certain liens as specified in the agreement, liens may not attach to assets when the aggregate amount of all indebtedness secured by such liens plus unsecured subsidiary indebtedness, other than indebtedness incurred by our subsidiaries under the February 2014 Credit Agreement, would exceed 20% of consolidated net worth, as defined in the agreement; and (c) with the exception of certain indebtedness as specified in the agreement, subsidiary indebtedness may not exceed the difference between 20% of consolidated net worth, as defined in the agreement, and indebtedness secured by liens permitted under the agreement. On August 15, 2014, certain amendments were

Albemarle Corporation and Subsidiaries

made to the February 2014 Credit Agreement which includes, among other things, an increase in the maximum leverage ratio (as described above) from 3.50 to 4.50 for the first four quarters following the completion of the acquisition of Rockwood, stepping down by 0.25 on a quarterly basis thereafter until reaching 3.50.

On May 29, 2013, we entered into agreements to initiate a commercial paper program on a private placement basis under which we may issue unsecured commercial paper notes (the “Commercial Paper Notes”) from time-to-time up to a maximum aggregate principal amount outstanding at any time of $750.0 million. The proceeds from the issuance of the Commercial Paper Notes are expected to be used for general corporate purposes, including the repayment of other debt of the Company. Our February 2014 Credit Agreement is available to repay the Commercial Paper Notes, if necessary. Aggregate borrowings outstanding under the February 2014 Credit Agreement and the Commercial Paper Notes will not exceed the $1.0 billion current maximum amount available under the February 2014 Credit Agreement. The Commercial Paper Notes will be sold at a discount from par, or alternatively, will be sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The maturities of the Commercial Paper Notes will vary but may not exceed 397 days from the date of issue. The definitive documents relating to the commercial paper program contain customary representations, warranties, default and indemnification provisions. At December 31, 2015, we had $351.3 million of Commercial Paper Notes outstanding bearing a weighted-average interest rate of approximately 1.07% and a weighted-average maturity of 29 days. The Commercial Paper Notes are classified as Current portion of long-term debt in our consolidated balance sheets at December 31, 2015 and December 31, 2014.

The non-current portion of our long-term debt amounted to $3.2 billion at December 31, 2015, compared to $2.2 billion at December 31, 2014. The increase is attributable to debt associated with the acquisition of Rockwood. In addition, at December 31, 2015, we had the ability to borrow $648.7 million under our commercial paper program and the February 2014 Credit Agreement, and $154.1 million under other existing lines of credit, subject to various financial covenants under our February 2014 Credit Agreement. We have the ability and intent to refinance our borrowings under our other existing credit lines with borrowings under the February 2014 Credit Agreement, as applicable. Therefore, the amounts outstanding under those credit lines, if any, are classified as long-term debt. We believe that as of December 31, 2015 we were, and currently are, in compliance with all of our debt covenants. For additional information about our long-term debt obligations, see Note 14, “Long-Term Debt,” to our consolidated financial statements included in Part II, Item 8 of this report.

Off-Balance Sheet Arrangements

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, including bank guarantees and letters of credit, which totaled approximately $63.8 million at December 31, 2015. None of these off-balance sheet arrangements has, or is likely to have, a material effect on our current or future financial condition, results of operations, liquidity or capital resources.

Other Obligations

The following table summarizes our contractual obligations for capital projects, various take or pay and throughput agreements, long-term debt, operating leases and other commitments as of December 31, 2015 (in thousands):

	2016				2017				2018				2019				2020				Thereafter
Long-term debt obligations(a)	$	677,345			$	59,130			$	86,400			$	335,479			$	1,158,351			$	1,544,512
Expected interest payments on long-term debt obligations(b)	92,761				95,719				99,338				101,072				82,496				525,695
Operating lease obligations (rental)	14,643				10,664				9,217				7,436				6,665				21,124
Take or pay / throughput agreements(c)	43,654				11,762				6,363				6,063				5,923				11,484
Letters of credit and guarantees	24,789				11,248				3,190				14				210				24,356
Capital projects	36,599				1,580				—				—				—				—
Total	$	889,791			$	190,103			$	204,508			$	450,064			$	1,253,645			$	2,127,171

(a)	Amounts represent the expected principal payments of our long-term debt, including capital leases, and do not include any fair value adjustments or premiums or discounts.

(b)	Interest on our fixed rate borrowings was calculated based on the stated rates of such borrowings. A weighted average interest rate of approximately 1.53% was used for our remaining long-term debt obligations.

(c)	These amounts primarily relate to contracts entered into with certain third party vendors in the normal course of business to secure raw materials for our production processes. In order to secure materials, sometimes for long durations, these contracts mandate a minimum amount of product to be purchased at predetermined rates over a set timeframe.

Albemarle Corporation and Subsidiaries

Amounts in the table above exclude required employer pension contributions. Contributions to our domestic and foreign qualified and nonqualified pension plans, including our supplemental executive retirement plan (“SERP”), are expected to approximate $13 million in 2016. We may choose to make additional pension contributions in excess of this amount. We made contributions of approximately $18.0 million to our domestic and foreign pension plans (both qualified and nonqualified) during the year ended December 31, 2015.

The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled $101.7 million and $25.3 million at December 31, 2015 and 2014, respectively. Related assets for corresponding offsetting benefits recorded in Other assets totaled $50.9 million and $22.1 million at December 31, 2015 and 2014, respectively. We cannot estimate the amounts of any cash payments during the next twelve months associated with these liabilities and are unable to estimate the timing of any such cash payments in the future at this time.

Liquidity Outlook

We anticipate that cash on hand and cash provided by operating activities, divestitures and borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund any capital expenditures and share repurchases, make pension contributions and pay dividends for the foreseeable future. With the acquisition of Rockwood now closed, our main focus over the next three years, in terms of uses of cash, will be deleveraging to restore our borrowings to more normal levels and capturing synergies related to the integration of Rockwood. This may include refinancing certain of our existing outstanding debt if market conditions are favorable. Additionally, we will continue to evaluate the merits of any opportunities that may arise for acquisitions of businesses or assets, which may require additional liquidity.

Our cash flows from operations may be negatively affected by adverse consequences to our customers and the markets in which we compete as a result of moderating global economic conditions and reduced capital availability. Additionally, realization and timing of anticipated divestitures could have a significant impact on our cash flows in any given period.

While we maintain business relationships with a diverse group of financial institutions, an adverse change in their credit standing could lead them to not honor their contractual credit commitments, decline funding under existing but uncommitted lines of credit, not renew their extensions of credit or not provide new financing. While the global corporate bond and bank loan markets remain strong, periods of elevated uncertainty related to global economic and/or geopolitical concerns may limit efficient access to such markets for extended periods of time. If such concerns heighten, we may incur increased borrowing costs and reduced credit capacity as our various credit facilities mature. When the U.S. Federal Reserve or similar national reserve banks in other countries decide to tighten the monetary supply in response, for example, to improving economic conditions, we may incur increased borrowing costs as interest rates increase on our variable rate credit facilities, as our various credit facilities mature or as we refinance any maturing fixed rate debt obligations.

Overall, with generally strong cash-generative businesses and no significant long-term debt maturities before 2019, we believe we have and will maintain a solid liquidity position.

We had cash and cash equivalents totaling $213.7 million as of December 31, 2015, of which $200.7 million is held by our foreign subsidiaries. This cash represents an important source of our liquidity and is invested in short-term investments including time deposits and readily marketable securities with relatively short maturities. Substantially all of this cash is held, and intended for use, outside of the U.S. We anticipate that any needs for liquidity within the U.S. in excess of our cash held in the U.S. can be readily satisfied with borrowings under our existing U.S. credit facilities or our commercial paper program.

Safety and Environmental Matters

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

Among other environmental requirements, we are subject to the federal Superfund law, and similar state laws, under which we may be designated as a PRP, and may be liable for a share of the costs associated with cleaning up various hazardous waste sites. Management believes that in cases in which we may have liability as a PRP, our liability for our share of cleanup is de minimis. Further, almost all such sites represent environmental issues that are quite mature and have been investigated, studied and in many cases settled. In de minimis situations, our policy generally is to negotiate a consent decree and to pay any apportioned settlement, enabling us to be effectively relieved of any further liability as a PRP, except for remote contingencies.

Albemarle Corporation and Subsidiaries

In other than de minimis PRP matters, our records indicate that unresolved PRP exposures should be immaterial. We accrue and expense our proportionate share of PRP costs. Because management has been actively involved in evaluating environmental matters, we are able to conclude that the outstanding environmental liabilities for unresolved PRP sites should not have a material adverse effect upon our results of operations or financial condition.

Our environmental and safety operating costs charged to expense were $42.2 million, $35.7 million and $44.0 million in 2015, 2014 and 2013, respectively, excluding depreciation of previous capital expenditures, and are expected to be in the same range in the next few years. Costs for remediation have been accrued and payments related to sites are charged against accrued liabilities, which at December 31, 2015 totaled approximately $35.3 million, an increase of $26.1 million from $9.2 million at December 31, 2014. See Note 17, “Commitments and Contingencies” to our consolidated financial statements included in Part II, Item 8 of this report for a reconciliation of our environmental liabilities for the years ended December 31, 2015, 2014 and 2013.

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

Capital expenditures for pollution-abatement and safety projects, including such costs that are included in other projects, were approximately $25.0 million, $15.2 million and $14.1 million in 2015, 2014 and 2013, respectively. In the future, capital expenditures for these types of projects may increase due to more stringent environmental regulatory requirements and our efforts in reaching sustainability goals. Management’s estimates of the effects of compliance with governmental pollution-abatement and safety regulations are subject to (a) the possibility of changes in the applicable statutes and regulations or in judicial or administrative construction of such statutes and regulations and (b) uncertainty as to whether anticipated solutions to pollution problems will be successful, or whether additional expenditures may prove necessary.

Recently Issued Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that changed the criteria for reporting discontinued operations and modified related disclosure requirements to provide users of financial statements with more information about the assets, liabilities, revenues and expenses of discontinued operations. The guidance modified the definition of discontinued operations by limiting its scope to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Additionally, these new requirements require entities to disclose the pretax profit or loss related to disposals of significant components that do not qualify as discontinued operations. These new requirements became effective on January 1, 2015. For additional information, refer to Note 3, “Divestitures,” to our consolidated financial statements included in Part II, Item 8 of this report.

In May 2014, the 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 Accounting Standards Codification (“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. 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 June 2014, the FASB issued accounting guidance which clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The accounting guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. These new requirements become effective for annual and interim reporting periods

Albemarle Corporation and Subsidiaries

beginning after December 15, 2015, and early adoption is permitted. We do not expect this guidance to have a significant impact 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 are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We are assessing the impact of these amendments on our financial statements, however we do not expect this guidance to have a significant impact on our 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 will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and is to be applied on a retrospective basis. We do not expect this guidance to have a significant impact on our financial statements.

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 will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and is to be applied prospectively. Early application is permitted. We do not expect this guidance to have a significant impact on our 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 new requirement will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. We do not expect this guidance to have a significant impact on our 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 the practical expedient is still required. This guidance will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and is to be applied on a retrospective basis. Early adoption is permitted. We do not expect this guidance to have a significant impact on our 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 application is permitted. We are assessing the impact of this new requirement on our financial statements.

In September 2015, the FASB issued accounting guidance that eliminates the requirement to retrospectively adjust prior period financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. Measurement-period adjustments should continue to be calculated as if they were known at the acquisition date, but will now be recognized in the reporting period in which they are determined. The new guidance also requires that the acquirer present separately on the face of the income statement or disclose in the notes the amount recorded in current-period earnings, by line item, that would have been recorded in previous reporting periods if the adjustment to provisional amounts had been recognized as of the acquisition date. As allowed by the provisions of this new guidance, we early-adopted this new guidance in the third quarter of 2015. The adoption of this new guidance did not have a material impact on our consolidated financial statements.

In November 2015, the FASB issued accounting guidance that changes the balance sheet classification of deferred tax assets and liabilities. The guidance requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet, along with any related valuation allowance. As allowed by the provisions of this new guidance, we early-adopted this new

Albemarle Corporation and Subsidiaries

guidance in the fourth quarter of 2015 on a prospective basis. Accordingly, deferred tax asset and liability amounts as of December 31, 2014 were not retrospectively adjusted.

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 application is permitted. We have not evaluated the impact of the updated guidance on our consolidated financial statements.