filings.toolsItem 1. Financial Statements (Unaudited).
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Item 1. Financial Statements (Unaudited).
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net sales | $ | 830,566 | $ | 746,868 | $ | 2,433,753 | $ | 2,249,762 | |||||||||||||||
| Cost of goods sold | 581,293 | 492,812 | 1,672,376 | 1,520,329 | |||||||||||||||||||
| Gross profit | 249,273 | 254,056 | 761,377 | 729,433 | |||||||||||||||||||
| Selling, general and administrative expenses | 103,477 | 96,092 | 318,180 | 304,918 | |||||||||||||||||||
| Research and development expenses | 13,289 | 13,532 | 41,901 | 43,839 | |||||||||||||||||||
| Gain on sale of business | 984 | — | (428,424) | — | |||||||||||||||||||
| Operating profit | 131,523 | 144,432 | 829,720 | 380,676 | |||||||||||||||||||
| Interest and financing expenses | (5,136) | (19,227) | (56,170) | (53,964) | |||||||||||||||||||
| Other expense, net | (643,196) | (3,661) | (631,870) | (1,620) | |||||||||||||||||||
| (Loss) income before income taxes and equity in net income of unconsolidated investments | (516,809) | 121,544 | 141,680 | 325,092 | |||||||||||||||||||
| Income tax (benefit) expense | (114,670) | 30,653 | 14,422 | 64,526 | |||||||||||||||||||
| (Loss) income before equity in net income of unconsolidated investments | (402,139) | 90,891 | 127,258 | 260,566 | |||||||||||||||||||
| Equity in net income of unconsolidated investments (net of tax) | 27,706 | 26,154 | 62,215 | 83,872 | |||||||||||||||||||
| Net (loss) income | (374,433) | 117,045 | 189,473 | 344,438 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | (18,348) | (18,744) | (61,977) | (53,309) | |||||||||||||||||||
| Net (loss) income attributable to Albemarle Corporation | $ | (392,781) | $ | 98,301 | $ | 127,496 | $ | 291,129 | |||||||||||||||
| Basic (loss) earnings per share | $ | (3.36) | $ | 0.92 | $ | 1.10 | $ | 2.74 | |||||||||||||||
| Diluted (loss) earnings per share | $ | (3.36) | $ | 0.92 | $ | 1.10 | $ | 2.73 | |||||||||||||||
| Weighted-average common shares outstanding – basic | 116,965 | 106,386 | 115,455 | 106,314 | |||||||||||||||||||
| Weighted-average common shares outstanding – diluted | 116,965 | 106,873 | 116,140 | 106,640 |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Thousands)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net (loss) income | $ | (374,433) | $ | 117,045 | $ | 189,473 | $ | 344,438 | |||||||||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation and other | (39,274) | 37,499 | (46,852) | 18,377 | |||||||||||||||||||
| Net investment hedge | — | (12,408) | 5,110 | (16,083) | |||||||||||||||||||
| Cash flow hedge | 214 | 6,993 | (563) | (6,822) | |||||||||||||||||||
| Interest rate swap | 651 | 647 | 1,951 | 1,943 | |||||||||||||||||||
| Total other comprehensive (loss) income, net of tax | (38,409) | 32,731 | (40,354) | (2,585) | |||||||||||||||||||
| Comprehensive (loss) income | (412,842) | 149,776 | 149,119 | 341,853 | |||||||||||||||||||
| Comprehensive income attributable to noncontrolling interests | (18,374) | (18,811) | (61,927) | (53,456) | |||||||||||||||||||
| Comprehensive (loss) income attributable to Albemarle Corporation | $ | (431,216) | $ | 130,965 | $ | 87,192 | $ | 288,397 |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
| September 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 595,049 | $ | 746,724 | |||||||
| Trade accounts receivable, less allowance for doubtful accounts (2021 – $2,574; 2020 – $2,083) | 520,746 | 530,838 | |||||||||
| Other accounts receivable | 56,298 | 61,958 | |||||||||
| Inventories | 745,598 | 750,237 | |||||||||
| Other current assets | 160,415 | 116,427 | |||||||||
| Total current assets | 2,078,106 | 2,206,184 | |||||||||
| Property, plant and equipment, at cost | 7,783,962 | 7,427,641 | |||||||||
| Less accumulated depreciation and amortization | 2,128,485 | 2,073,016 | |||||||||
| Net property, plant and equipment | 5,655,477 | 5,354,625 | |||||||||
| Investments | 902,504 | 656,244 | |||||||||
| Other assets | 251,786 | 219,268 | |||||||||
| Goodwill | 1,623,471 | 1,665,520 | |||||||||
| Other intangibles, net of amortization | 320,981 | 349,105 | |||||||||
| Total assets | $ | 10,832,325 | $ | 10,450,946 | |||||||
| Liabilities And Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 545,922 | $ | 483,221 | |||||||
| Accrued expenses | 956,506 | 440,763 | |||||||||
| Current portion of long-term debt | 611 | 804,677 | |||||||||
| Dividends payable | 45,450 | 40,937 | |||||||||
| Income taxes payable | 42,553 | 32,251 | |||||||||
| Total current liabilities | 1,591,042 | 1,801,849 | |||||||||
| Long-term debt | 2,021,487 | 2,767,381 | |||||||||
| Postretirement benefits | 47,020 | 48,075 | |||||||||
| Pension benefits | 299,875 | 340,818 | |||||||||
| Other noncurrent liabilities | 617,488 | 629,377 | |||||||||
| Deferred income taxes | 360,181 | 394,852 | |||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Equity: | |||||||||||
| Albemarle Corporation shareholders’ equity: | |||||||||||
| Common stock, $.01 par value, issued and outstanding – 116,976 in 2021 and 106,842 in 2020 | 1,170 | 1,069 | |||||||||
| Additional paid-in capital | 2,913,383 | 1,438,038 | |||||||||
| Accumulated other comprehensive loss | (366,436) | (326,132) | |||||||||
| Retained earnings | 3,145,999 | 3,155,252 | |||||||||
| Total Albemarle Corporation shareholders’ equity | 5,694,116 | 4,268,227 | |||||||||
| Noncontrolling interests | 201,116 | 200,367 | |||||||||
| Total equity | 5,895,232 | 4,468,594 | |||||||||
| Total liabilities and equity | $ | 10,832,325 | $ | 10,450,946 |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| (In Thousands, Except Share Data) | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Albemarle Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amounts | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 1, 2021 | 116,944,511 | $ | 1,169 | $ | 2,907,981 | $ | (328,001) | $ | 3,584,400 | $ | 6,165,549 | $ | 200,222 | $ | 6,365,771 | ||||||||||||||||||||||||||||||||
| Net (loss) income | (392,781) | (392,781) | 18,348 | (374,433) | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income | (38,435) | (38,435) | 26 | (38,409) | |||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $0.39 per common share | (45,620) | (45,620) | (17,480) | (63,100) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 4,203 | 4,203 | 4,203 | ||||||||||||||||||||||||||||||||||||||||||||
| Fees related to public issuance of common stock | 23 | 23 | 23 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 22,226 | 1 | 1,884 | 1,885 | 1,885 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 12,688 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes paid on stock-based compensation award distributions | (3,107) | — | (708) | (708) | (708) | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 116,976,318 | $ | 1,170 | $ | 2,913,383 | $ | (366,436) | $ | 3,145,999 | $ | 5,694,116 | $ | 201,116 | $ | 5,895,232 | ||||||||||||||||||||||||||||||||
| Balance at July 1, 2020 | 106,336,982 | $ | 1,064 | $ | 1,400,105 | $ | (431,131) | $ | 3,054,434 | $ | 4,024,472 | $ | 181,689 | $ | 4,206,161 | ||||||||||||||||||||||||||||||||
| Net income | 98,301 | 98,301 | 18,744 | 117,045 | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | 32,664 | 32,664 | 67 | 32,731 | |||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $0.385 per common share | (40,986) | (40,986) | — | (40,986) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 5,098 | 5,098 | 5,098 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 96,356 | 1 | 6,115 | 6,116 | 6,116 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 33,798 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes paid on stock-based compensation award distributions | (10,088) | — | (784) | (784) | (784) | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | 106,457,048 | $ | 1,065 | $ | 1,410,534 | $ | (398,467) | $ | 3,111,749 | $ | 4,124,881 | $ | 200,500 | $ | 4,325,381 | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 | 106,842,369 | $ | 1,069 | $ | 1,438,038 | $ | (326,132) | $ | 3,155,252 | $ | 4,268,227 | $ | 200,367 | $ | 4,468,594 | ||||||||||||||||||||||||||||||||
| Net income | 127,496 | 127,496 | 61,977 | 189,473 | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | (40,304) | (40,304) | (50) | (40,354) | |||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $1.17 per common share | (136,749) | (136,749) | (61,178) | (197,927) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 13,981 | 13,981 | 13,981 | ||||||||||||||||||||||||||||||||||||||||||||
| Fees related to public issuance of common stock | (888) | (888) | (888) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 263,875 | 3 | 16,217 | 16,220 | 16,220 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 9,918,778 | 99 | 1,453,789 | 1,453,888 | 1,453,888 | ||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes paid on stock-based compensation award distributions | (48,704) | (1) | (7,754) | (7,755) | (7,755) | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | 116,976,318 | $ | 1,170 | $ | 2,913,383 | $ | (366,436) | $ | 3,145,999 | $ | 5,694,116 | $ | 201,116 | $ | 5,895,232 | ||||||||||||||||||||||||||||||||
| Balance at January 1, 2020 | 106,040,215 | $ | 1,061 | $ | 1,383,446 | $ | (395,735) | $ | 2,943,478 | $ | 3,932,250 | $ | 161,330 | $ | 4,093,580 | ||||||||||||||||||||||||||||||||
| Net income | 291,129 | 291,129 | 53,309 | 344,438 | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income | (2,732) | (2,732) | 147 | (2,585) | |||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $1.155 per common share | (122,858) | (122,858) | (14,286) | (137,144) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 14,970 | 14,970 | 14,970 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 300,833 | 3 | 16,922 | 16,925 | 16,925 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 179,368 | 2 | (2) | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Withholding taxes paid on stock-based compensation award distributions | (63,368) | (1) | (4,802) | (4,803) | (4,803) | ||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | 106,457,048 | $ | 1,065 | $ | 1,410,534 | $ | (398,467) | $ | 3,111,749 | $ | 4,124,881 | $ | 200,500 | $ | 4,325,381 |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash and cash equivalents at beginning of year | $ | 746,724 | $ | 613,110 | |||||||
| Cash flows from operating activities: | |||||||||||
| Net income | 189,473 | 344,438 | |||||||||
| Adjustments to reconcile net income to cash flows from operating activities: | |||||||||||
| Depreciation and amortization | 185,765 | 170,214 | |||||||||
| Gain on sale of business | (428,424) | — | |||||||||
| Stock-based compensation and other | 14,668 | 15,864 | |||||||||
| Equity in net income of unconsolidated investments (net of tax) | (62,215) | (83,872) | |||||||||
| Dividends received from unconsolidated investments and nonmarketable securities | 43,374 | 61,309 | |||||||||
| Pension and postretirement benefit | (12,451) | (4,975) | |||||||||
| Pension and postretirement contributions | (24,145) | (10,323) | |||||||||
| Unrealized gain on investments in marketable securities | (3,912) | (3,377) | |||||||||
| Loss on early extinguishment of debt | 28,955 | — | |||||||||
| Deferred income taxes | (38,924) | 7,920 | |||||||||
| Working capital changes | 456,405 | (167,436) | |||||||||
| Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL | 135,928 | 131,929 | |||||||||
| Other, net | 6,089 | 23 | |||||||||
| Net cash provided by operating activities | 490,586 | 461,714 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions, net of cash acquired | — | (22,572) | |||||||||
| Capital expenditures | (652,739) | (621,371) | |||||||||
| Cash proceeds from divestitures, net | 289,791 | — | |||||||||
| Sales of marketable securities, net | 4,407 | 1,208 | |||||||||
| Investments in equity and other corporate investments | (286) | (786) | |||||||||
| Net cash used in investing activities | (358,827) | (643,521) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock | 1,453,888 | — | |||||||||
| Repayments of long-term debt and credit agreements | (1,173,823) | (250,000) | |||||||||
| Proceeds from borrowings of credit agreements | — | 452,163 | |||||||||
| Other debt (repayments) borrowings, net | (327,292) | 202,786 | |||||||||
| Fees related to early extinguishment of debt | (24,877) | — | |||||||||
| Dividends paid to shareholders | (132,236) | (120,836) | |||||||||
| Dividends paid to noncontrolling interests | (61,178) | (14,286) | |||||||||
| Proceeds from exercise of stock options | 16,220 | 16,925 | |||||||||
| Withholding taxes paid on stock-based compensation award distributions | (7,755) | (4,803) | |||||||||
| Other | (1,384) | (2,751) | |||||||||
| Net cash (used in) provided by financing activities | (258,437) | 279,198 | |||||||||
| Net effect of foreign exchange on cash and cash equivalents | (24,997) | (8,428) | |||||||||
| (Decrease) increase in cash and cash equivalents | (151,675) | 88,963 | |||||||||
| Cash and cash equivalents at end of period | $ | 595,049 | $ | 702,073 |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1—Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Albemarle Corporation and our wholly-owned, majority-owned and controlled subsidiaries (collectively, “Albemarle,” “we,” “us,” “our” or “the Company”) contain all adjustments necessary for a fair statement, in all material respects, of our consolidated balance sheets as of September 30, 2021 and December 31, 2020, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three- and nine-month periods ended September 30, 2021 and 2020 and our condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2021 and 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on February 19, 2021. The December 31, 2020 consolidated balance sheet data herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). The results of operations for the three-month and nine-month periods ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the accompanying condensed consolidated financial statements and the notes thereto to conform to the current presentation.
Cost of goods sold for the three-month period ended September 30, 2021 includes expense of $13.5 million for the correction of out-of-period errors regarding misstated inventory foreign exchange values relating to prior periods. These misstatements in prior periods (understated) overstated Cost of goods sold by ($18.3) million and $9.6 million for the years ended December 31, 2020 and 2019, respectively, and ($4.8) million for the six months ended June 30, 2021. In addition, Income tax expense for the nine-month period ended September 30, 2021 includes expense of $7.9 million due to the correction of an out-of-period error regarding an overstated deferred tax liability for the three-month period ended December 31, 2017. The Company does not believe these are material to the consolidated financial statements for any of the prior periods presented or to the three-month period ended September 30, 2021.
The current novel coronavirus (“COVID-19”) pandemic is having an impact on overall global economic conditions. While we have not seen a material impact to our operations to date, the ultimate impact on our business will depend on the length and severity of the outbreak throughout the world. The Company has taken, and plans to continue to take, certain measures to maintain financial flexibility while still protecting our employees and customers.
NOTE 2—Acquisitions:
On September 30, 2021, the Company signed a definitive agreement to acquire all of the outstanding equity of Guangxi Tianyuan New Energy Materials Co., Ltd. (“Tianyuan”), for approximately $200 million in cash. Tianyuan's operations include a recently constructed lithium processing plant strategically positioned near the Port of Qinzhou in Guangxi. The plant has designed annual conversion capacity of up to 25,000 metric tons of LCE and is capable of producing battery-grade lithium carbonate and lithium hydroxide. The plant is currently in the commissioning stage and is expected to begin commercial production in the first half of 2022. The Company expects the transaction, which is subject to customary closing conditions, to close in early 2022.
NOTE 3—Divestitures:
On June 1, 2021, the Company completed the sale of its fine chemistry services (“FCS”) business to W. R. Grace & Co. (“Grace”) for proceeds of approximately $570 million, consisting of $300 million in cash and the issuance to Albemarle of preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue payment-in-kind (“PIK”) dividends at an annual rate of 12% beginning two years after issuance.
As part of the transaction, Grace acquired our manufacturing facilities located in South Haven, Michigan and Tyrone, Pennsylvania. The sale of the FCS business reflects the Company’s commitment to investing in its core, growth-oriented business segments. During the nine-month period ended September 30, 2021 we recorded a gain of $428.4 million ($330.9 million after taxes) related to the sale of this business.
We determined that this business met the assets held for sale criteria in accordance with ASC 360, Property, Plant and Equipment during the first quarter of 2021. The results of operations of the business classified as held for sale are included in the consolidated statements of income through June 1, 2021. This business did not qualify for discontinued operations treatment
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
because the Company’s management does not consider the sale as representing a strategic shift that had or will have a major effect on the Company’s operations and financial results.
NOTE 4—Goodwill and Other Intangibles:
The following table summarizes the changes in goodwill by reportable segment for the nine months ended September 30, 2021 (in thousands):
| Lithium | Bromine Specialties | Catalysts | All Other | Total | |||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 1,441,781 | $ | 20,319 | $ | 196,834 | $ | 6,586 | $ | 1,665,520 | |||||||||||||||||||
| Divestitures(a) | — | — | — | (6,586) | (6,586) | ||||||||||||||||||||||||
| Foreign currency translation adjustments | (27,623) | — | (7,840) | — | (35,463) | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | 1,414,158 | $ | 20,319 | $ | 188,994 | $ | — | $ | 1,623,471 |
(a) Represents goodwill of the FCS business. See Note 3, “Divestitures,” for additional information.
The following table summarizes the changes in other intangibles and related accumulated amortization for the nine months ended September 30, 2021 (in thousands):
| Customer Lists and Relationships | Trade Names and Trademarks**(a)** | Patents and Technology | Other | Total | |||||||||||||||||||||||||
| Gross Asset Value | |||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 448,748 | $ | 18,710 | $ | 58,096 | $ | 39,864 | $ | 565,418 | |||||||||||||||||||
| Divestitures(b) | — | — | — | (1,473) | (1,473) | ||||||||||||||||||||||||
| Foreign currency translation adjustments and other | (12,075) | (484) | (507) | (1,070) | (14,136) | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | 436,673 | $ | 18,226 | $ | 57,589 | $ | 37,321 | $ | 549,809 | |||||||||||||||||||
| Accumulated Amortization | |||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | (147,286) | $ | (8,176) | $ | (39,500) | $ | (21,351) | $ | (216,313) | |||||||||||||||||||
| Amortization | (17,342) | — | (1,095) | (674) | (19,111) | ||||||||||||||||||||||||
| Divestitures(b) | — | — | — | 1,457 | 1,457 | ||||||||||||||||||||||||
| Foreign currency translation adjustments and other | 4,023 | 111 | 685 | 320 | 5,139 | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | (160,605) | $ | (8,065) | $ | (39,910) | $ | (20,248) | $ | (228,828) | |||||||||||||||||||
| Net Book Value at December 31, 2020 | $ | 301,462 | $ | 10,534 | $ | 18,596 | $ | 18,513 | $ | 349,105 | |||||||||||||||||||
| Net Book Value at September 30, 2021 | $ | 276,068 | $ | 10,161 | $ | 17,679 | $ | 17,073 | $ | 320,981 |
(a) Net Book Value includes only indefinite-lived intangible assets.
(b) Represents other intangibles of the FCS business. See Note 3, “Divestitures,” for additional information.
NOTE 5—Income Taxes:
The effective income tax rate for the three-month and nine-month periods ended September 30, 2021 was 22.2% and 10.2% compared to 25.2% and 19.8% for the three-month and nine-month periods ended September 30, 2020, respectively. The three- and nine-month periods ended September 30, 2021 include a tax benefit of $152.9 million related to an accrual recorded as a subsequent event for a legal arbitration ruling in October 2021. See Note 10, “Commitments and Contingencies,” for further details of this legal matter. The nine-month period ended September 30, 2021 also includes discrete tax expenses related to global intangible low-taxed income, tax expense due to an out-of-period adjustment regarding an overstated deferred tax liability recorded during the three-month period ended December 31, 2017 and foreign uncertain tax positions, partially offset by tax benefits related to the release of a foreign valuation allowance, excess tax benefits realized from stock-based compensation arrangements, and the revaluation of deferred taxes due to tax rate changes. The Company’s effective income tax rate fluctuates based on, among other factors, the amount and location of income. The difference between the U.S. federal
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
statutory income tax rate and our effective income tax rate for the three-month and nine-month periods ended September 30, 2021 and September 30, 2020 was impacted by a variety of factors, primarily stemming from the location in which income was earned. In addition, the nine-month period ended September 30, 2021 includes $97.5 million in tax expense recorded for the gain on the sale of the FCS business, offset by the tax benefit for the legal arbitration ruling noted above and a benefit from foreign rate differences.
NOTE 6—Earnings Per Share:
Basic and diluted earnings per share for the three-month and nine-month periods ended September 30, 2021 and 2020 are calculated as follows (in thousands, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Basic earnings per share | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net (loss) income attributable to Albemarle Corporation | $ | (392,781) | $ | 98,301 | $ | 127,496 | $ | 291,129 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares for basic earnings per share | 116,965 | 106,386 | 115,455 | 106,314 | |||||||||||||||||||
| Basic (loss) earnings per share | $ | (3.36) | $ | 0.92 | $ | 1.10 | $ | 2.74 | |||||||||||||||
| Diluted earnings per share | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net (loss) income attributable to Albemarle Corporation | $ | (392,781) | $ | 98,301 | $ | 127,496 | $ | 291,129 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares for basic earnings per share | 116,965 | 106,386 | 115,455 | 106,314 | |||||||||||||||||||
| Incremental shares under stock compensation plans | — | 487 | 685 | 326 | |||||||||||||||||||
| Weighted-average common shares for diluted earnings per share | 116,965 | 106,873 | 116,140 | 106,640 | |||||||||||||||||||
| Diluted (loss) earnings per share | $ | (3.36) | $ | 0.92 | $ | 1.10 | $ | 2.73 |
On February 8, 2021, we completed an underwritten public offering of 8,496,773 shares of our common stock, par value $0.01 per share, at a price to the public of $153.00 per share. The Company also granted to the underwriters an option to purchase up to an additional 1,274,509 shares, which was exercised. The total gross proceeds from this offering were approximately $1.5 billion, before deducting expenses, underwriting discounts and commissions. The net proceeds were used for debt repayments and general corporate purposes. See Note 9, “Long-Term Debt,” for further details.
On July 20, 2021, the Company declared a cash dividend of $0.39, an increase from the prior year regular quarterly dividend. This dividend was paid on October 1, 2021 to shareholders of record at the close of business as of September 17, 2021. On October 25, 2021, the Company declared a cash dividend of $0.39 per share, which is payable on January 3, 2022 to shareholders of record at the close of business as of December 17, 2021.
NOTE 7—Inventories:
The following table provides a breakdown of inventories at September 30, 2021 and December 31, 2020 (in thousands):
| September 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Finished goods | $ | 426,616 | $ | 454,162 | |||||||
| Raw materials and work in process(a) | 240,881 | 219,896 | |||||||||
| Stores, supplies and other | 78,101 | 76,179 | |||||||||
| Total | $ | 745,598 | $ | 750,237 |
(a)Included $145.0 million and $129.6 million at September 30, 2021 and December 31, 2020, respectively, of work in process in our Lithium segment.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 8—Investments:
The Company holds a 49% equity interest in Windfield Holdings Pty. Ltd. (“Windfield”), where the ownership parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Windfield to be a variable interest entity (“VIE”), however this investment is not consolidated as the Company is not the primary beneficiary. The carrying amount of our 49% equity interest in Windfield, which is our most significant VIE, was $469.4 million and $479.6 million at September 30, 2021 and December 31, 2020, respectively. The Company’s aggregate net investment in all other entities which it considers to be VIEs for which the Company is not the primary beneficiary was $8.2 million and $8.0 million at September 30, 2021 and December 31, 2020, respectively. Our unconsolidated VIEs are reported in Investments on the consolidated balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.
As part of the proceeds from the sale of the FCS business on June 1, 2021, Grace issued Albemarle preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue PIK dividends at an annual rate of 12% beginning two years after issuance. This preferred equity has a fair value of $248.8 million at September 30, 2021, which is reported in Investments in the consolidated balance sheets.
NOTE 9—Long-Term Debt:
Long-term debt at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):
| September 30, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| 1.125% notes due 2025 | $ | 441,090 | $ | 610,800 | |||||||
| 1.625% notes due 2028 | 584,800 | 610,800 | |||||||||
| 1.875% Senior notes due 2021 | — | 480,007 | |||||||||
| 3.45% Senior notes due 2029 | 171,612 | 300,000 | |||||||||
| 4.15% Senior notes due 2024 | 425,000 | 425,000 | |||||||||
| 5.45% Senior notes due 2044 | 350,000 | 350,000 | |||||||||
| Floating rate notes | — | 200,000 | |||||||||
| Credit facilities | — | 223,900 | |||||||||
| Commercial paper notes | — | 325,000 | |||||||||
| Variable-rate foreign bank loans | 5,404 | 7,702 | |||||||||
| Finance lease obligations | 58,579 | 59,181 | |||||||||
| Unamortized discount and debt issuance costs | (14,387) | (20,332) | |||||||||
| Total long-term debt | 2,022,098 | 3,572,058 | |||||||||
| Less amounts due within one year | 611 | 804,677 | |||||||||
| Long-term debt, less current portion | $ | 2,021,487 | $ | 2,767,381 |
In the first quarter of 2021, the Company made the following debt principal payments using proceeds from the February 2021 underwritten public offering of common stock:
-
€123.8 million of the 1.125% notes due in November 2025
-
€393.0 million, the remaining balance, of the 1.875% Senior notes originally due in December 2021
-
$128.4 million of the 3.45% Senior notes due in November 2029
-
$200.0 million, the remaining balance, of the floating rate notes originally due in November 2022
-
€183.3 million, the outstanding balance, of the unsecured credit facility originally entered into on August 14, 2019, as amended and restated on December 15, 2020
-
$325.0 million, the outstanding balance, of the commercial paper notes
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
As a result, included in Interest and financing expenses for the nine-month period ended September 30, 2021 is a loss on early extinguishment of debt of $29.0 million representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of this debt.
Prior to repayment in the first quarter of 2021, the carrying value of our 1.875% Euro-denominated senior notes was designated as an effective hedge of our net investment in certain foreign subsidiaries where the Euro serves as the functional currency, and gains or losses on the revaluation of these senior notes to our reporting currency were recorded in accumulated other comprehensive loss. Upon repayment of these notes, this net investment hedge was discontinued. The balance of foreign exchange revaluation gains and losses associated with this discontinued net investment hedge will remain within accumulated other comprehensive loss until the hedged net investment is sold or liquidated. Prior to the net investment hedge being discontinued, we recorded a gain of $5.1 million (net of income taxes) in 2021, and during the three-month and nine-month periods ended September 30, 2020 we recorded losses of $12.4 million and $16.1 million (net of income taxes), respectively in accumulated other comprehensive loss.
NOTE 10—Commitments and Contingencies:
Environmental
We had the following activity in our recorded environmental liabilities for the nine months ended September 30, 2021 (in thousands):
| Beginning balance at December 31, 2020 | $ | 45,771 | |||
| Expenditures | (1,529) | ||||
| Accretion of discount | 723 | ||||
| Additions and changes in estimates | 1,576 | ||||
| Foreign currency translation adjustments and other | (814) | ||||
| Ending balance at September 30, 2021 | 45,727 | ||||
| Less amounts reported in Accrued expenses | 9,850 | ||||
| Amounts reported in Other noncurrent liabilities | $ | 35,877 |
Environmental remediation liabilities included discounted liabilities of $38.2 million and $39.2 million at September 30, 2021 and December 31, 2020, respectively, discounted at rates with a weighted-average of 3.5%, and with the undiscounted amount totaling $71.2 million and $73.6 million at September 30, 2021 and December 31, 2020, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.
The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, could be an additional $10 million to $37 million before income taxes in excess of amounts already recorded. The variability of this range is primarily driven by possible environmental remediation activity at a formerly owned site where we indemnify the buyer through a set cutoff date in 2024.
We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.
Litigation
We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability,
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.
On February 6, 2017, Huntsman International LLC (“Huntsman”), a subsidiary of Huntsman Corporation, filed a lawsuit in New York state court against Rockwood Holdings, Inc. (“Rockwood”), Rockwood Specialties, Inc., certain former executives of Rockwood and its subsidiaries—Seifollah Ghasemi, Thomas Riordan, Andrew Ross, and Michael Valente, and Albemarle. The lawsuit arises out of Huntsman’s acquisition of certain Rockwood subsidiaries in connection with a stock purchase agreement (the “SPA”), dated September 17, 2013. Before that transaction closed on October 1, 2014, Albemarle began discussions with Rockwood to purchase all outstanding equity of Rockwood and did so in a transaction that closed on January 12, 2015. Huntsman’s complaint asserted that certain technology that Rockwood had developed for a production facility in Augusta, Georgia, and which was among the assets that Huntsman acquired pursuant to the SPA, did not work, and that Rockwood and the defendant executives had intentionally misled Huntsman about that technology in connection with the Huntsman-Rockwood transaction. The complaint asserted claims for, among other things, fraud, negligent misrepresentation, and breach of the SPA, and sought certain costs for completing construction of the production facility.
On March 10, 2017, Albemarle moved in New York state court to compel arbitration, which was granted on January 8, 2018 (although Huntsman unsuccessfully appealed that decision). Huntsman’s arbitration demand asserted claims substantially similar to those asserted in its state court complaint, and sought various forms of legal remedies, including cost overruns, compensatory damages, expectation damages, punitive damages, and restitution. After a trial, the arbitration panel issued an award on October 28, 2021, awarding approximately $600 million (including interest) to be paid by Albemarle to Huntsman, in addition to the possibility of attorney’s fees, costs and expenses. Albemarle continues to assess its legal rights and options. Albemarle and Huntsman have initiated discussions regarding a resolution of the matter.
Based on our review of the decision by the AAA arbitration panel, Albemarle has decided to view the decision as representing the best estimate available of the outcome of this arbitration. As a result, the consolidated statements of income for the three and nine months ended September 30, 2021, includes a loss of $657.4 million ($504.5 million net of income tax), inclusive of estimated possible legal fees incurred by Huntsman and other related obligations, to reflect the increase in liabilities for this legal matter.
In addition, as first reported in 2018, following receipt of information regarding potential improper payments being made by third-party sales representatives of our Refining Solutions business, within our Catalysts segment, we promptly retained outside counsel and forensic accountants to investigate potential violations of the Company’s Code of Conduct, the Foreign Corrupt Practices Act, and other potentially applicable laws. Based on this internal investigation, we have voluntarily self-reported potential issues relating to the use of third-party sales representatives in our Refining Solutions business, within our Catalysts segment, to the U.S. Department of Justice (“DOJ”), the SEC, and the Dutch Public Prosecutor (“DPP”), and are cooperating with the DOJ, the SEC, and the DPP in their review of these matters. In connection with our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures. We have commenced discussions with the SEC about a potential resolution.
At this time, we are unable to predict the duration, scope, result, or related costs associated with the investigations. We also are unable to predict what action may be taken by the DOJ, the SEC, or the DPP, or what penalties or remedial actions they may ultimately seek. Any determination that our operations or activities are not, or were not, in compliance with existing laws or regulations could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses. We do not believe, however, that any such fines, penalties, disgorgement, equitable relief, or other losses would have a material adverse effect on our financial condition or liquidity. However, an adverse resolution could have a material adverse effect on our results of operations in a particular period.
Indemnities
We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.
The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management,
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $27.9 million and $30.5 million at September 30, 2021 and December 31, 2020, respectively, recorded in Other noncurrent liabilities, primarily related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold.
Other
We have contracts with certain of our customers which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis, as well as blanket coverage of multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value.
NOTE 11—Leases:
We lease certain office space, buildings, transportation and equipment in various countries. The initial lease terms generally range from 1 to 30 years for real estate leases, and from 2 to 15 years for non-real estate leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.
Many leases include options to terminate or renew, with renewal terms that can extend the lease term from 1 to 50 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table provides details of our lease contracts for the three-month and nine-month periods ended September 30, 2021 and 2020 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Operating lease cost | $ | 13,807 | $ | 8,085 | $ | 32,954 | $ | 25,298 | |||||||||||||||
| Finance lease cost: | |||||||||||||||||||||||
| Amortization of right of use assets | 153 | 126 | 466 | 433 | |||||||||||||||||||
| Interest on lease liabilities | 722 | 697 | 2,229 | 1,977 | |||||||||||||||||||
| Total finance lease cost | 875 | 823 | 2,695 | 2,410 | |||||||||||||||||||
| Short-term lease cost | 2,949 | 3,427 | 7,729 | 9,824 | |||||||||||||||||||
| Variable lease cost | 2,441 | 2,312 | 6,619 | 6,344 | |||||||||||||||||||
| Total lease cost | $ | 20,072 | $ | 14,647 | $ | 49,997 | $ | 43,876 |
Supplemental cash flow information related to our lease contracts for the nine-month periods ended September 30, 2021 and 2020 is as follows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | 24,462 | $ | 28,074 | |||||||
| Operating cash flows from finance leases | 1,295 | 1,156 | |||||||||
| Financing cash flows from finance leases | 471 | 513 | |||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | 57,136 | 17,197 | |||||||||
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Supplemental balance sheet information related to our lease contracts, including the location on balance sheet, at September 30, 2021 and December 31, 2020 is as follows (in thousands, except as noted):
| September 30, 2021 | December 31, 2020 | ||||||||||
| Operating leases: | |||||||||||
| Other assets | $ | 165,970 | $ | 136,292 | |||||||
| Accrued expenses | 33,862 | 22,297 | |||||||||
| Other noncurrent liabilities | 136,552 | 116,765 | |||||||||
| Total operating lease liabilities | 170,414 | 139,062 | |||||||||
| Finance leases: | |||||||||||
| Net property, plant and equipment | 58,375 | 58,963 | |||||||||
| Current portion of long-term debt(a) | 2,658 | 1,752 | |||||||||
| Long-term debt | 57,968 | 58,543 | |||||||||
| Total finance lease liabilities | 60,626 | 60,295 | |||||||||
| Weighted average remaining lease term (in years): | |||||||||||
| Operating leases | 12.6 | 15.3 | |||||||||
| Finance leases | 27.0 | 27.5 | |||||||||
| Weighted average discount rate (%): | |||||||||||
| Operating leases | 3.46 | % | 3.94 | % | |||||||
| Finance leases | 4.57 | % | 4.56 | % |
(a) Balance includes accrued interest of finance lease recorded in Accrued liabilities.
Maturities of lease liabilities at September 30, 2021 were as follows (in thousands):
| Operating Leases | Finance Leases | ||||||||||
| Remainder of 2021 | $ | 10,126 | $ | 542 | |||||||
| 2022 | 38,503 | 4,448 | |||||||||
| 2023 | 34,453 | 4,448 | |||||||||
| 2024 | 20,984 | 4,448 | |||||||||
| 2025 | 14,714 | 4,448 | |||||||||
| Thereafter | 131,456 | 89,916 | |||||||||
| Total lease payments | 250,236 | 108,250 | |||||||||
| Less imputed interest | 79,822 | 47,624 | |||||||||
| Total | $ | 170,414 | $ | 60,626 |
NOTE 12—Segment Information:
Our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. This business structure aligns with the markets and customers we serve through each of the segments. This structure also facilitates the continued standardization of business processes across the organization, and is consistent with the manner in which information is presently used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Summarized financial information concerning our reportable segments is shown in the following tables. The “All Other” category includes only the FCS business that does not fit into any of our core businesses. On June 1, 2021, we completed the sale of the FCS business. See Note 3, “Divestitures,” for additional information. Amounts in the “All Other” category represent activity in this business until divested on June 1, 2021.
The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the operating segments. Pension and other post-employment benefit (“OPEB”) service cost (which represents the benefits earned by active employees during the period) and amortization of prior service cost or benefit are allocated to the reportable segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating pension and OPEB items”) are included in Corporate. Segment data includes inter-segment transfers of raw materials at cost and allocations for certain corporate costs.
The Company’s chief operating decision maker uses adjusted EBITDA (as defined below) to assess the ongoing performance of the Company’s business segments and to allocate resources. The Company defines adjusted EBITDA as earnings before interest and financing expenses, income tax expenses, depreciation and amortization, as adjusted on a consistent basis for certain non-operating, non-recurring or unusual items in a balanced manner and on a segment basis. These non-operating, non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business and enterprise planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides transparency to investors and enables period-to-period comparability of financial performance. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, or any other financial measure reported in accordance with U.S. GAAP.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Lithium | $ | 359,229 | $ | 265,646 | $ | 958,539 | $ | 786,186 | |||||||||||||||
| Bromine Specialties | 277,783 | 237,193 | 837,978 | 701,564 | |||||||||||||||||||
| Catalysts | 193,554 | 197,919 | 562,141 | 602,179 | |||||||||||||||||||
| All Other | — | 46,110 | 75,095 | 159,833 | |||||||||||||||||||
| Total net sales | $ | 830,566 | $ | 746,868 | $ | 2,433,753 | $ | 2,249,762 | |||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| Lithium | $ | 125,416 | $ | 97,789 | $ | 341,293 | $ | 270,962 | |||||||||||||||
| Bromine Specialties | 86,012 | 79,448 | 273,298 | 235,751 | |||||||||||||||||||
| Catalysts | 33,103 | 37,834 | 79,694 | 108,081 | |||||||||||||||||||
| All Other | — | 24,985 | 29,858 | 66,407 | |||||||||||||||||||
| Corporate | (26,962) | (24,001) | (81,892) | (83,588) | |||||||||||||||||||
| Total adjusted EBITDA | $ | 217,569 | $ | 216,055 | $ | 642,251 | $ | 597,613 |
See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, from Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP (in thousands):
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
| Lithium | Bromine Specialties | Catalysts | Reportable Segments Total | All Other | Corporate | Consolidated Total | |||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Albemarle Corporation | $ | 92,449 | $ | 73,409 | $ | 20,039 | $ | 185,897 | $ | — | $ | (578,678) | $ | (392,781) | |||||||||||||||||||||||||||
| Depreciation and amortization | 34,256 | 12,603 | 13,064 | 59,923 | — | 2,159 | 62,082 | ||||||||||||||||||||||||||||||||||
| Restructuring and other(a) | — | — | — | — | — | 754 | 754 | ||||||||||||||||||||||||||||||||||
| Gain on sale of business(b) | — | — | — | — | — | 984 | 984 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration related costs(c) | — | — | — | — | — | 1,553 | 1,553 | ||||||||||||||||||||||||||||||||||
| Interest and financing expenses | — | — | — | — | — | 5,136 | 5,136 | ||||||||||||||||||||||||||||||||||
| Income tax expense | — | — | — | — | — | (114,670) | (114,670) | ||||||||||||||||||||||||||||||||||
| Non-operating pension and OPEB items | — | — | — | — | — | (5,471) | (5,471) | ||||||||||||||||||||||||||||||||||
| Legal accrual(d) | — | — | — | — | — | 657,412 | 657,412 | ||||||||||||||||||||||||||||||||||
| Other(e) | (1,289) | — | — | (1,289) | — | 3,859 | 2,570 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 125,416 | $ | 86,012 | $ | 33,103 | $ | 244,531 | $ | — | $ | (26,962) | $ | 217,569 | |||||||||||||||||||||||||||
| Three months ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Albemarle Corporation | $ | 69,102 | $ | 66,548 | $ | 25,176 | $ | 160,826 | $ | 22,798 | $ | (85,323) | $ | 98,301 | |||||||||||||||||||||||||||
| Depreciation and amortization | 28,687 | 12,900 | 12,658 | 54,245 | 2,187 | 2,247 | 58,679 | ||||||||||||||||||||||||||||||||||
| Restructuring and other(a) | — | — | — | — | — | 2,251 | 2,251 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration related costs(c) | — | — | — | — | — | 5,928 | 5,928 | ||||||||||||||||||||||||||||||||||
| Interest and financing expenses | — | — | — | — | — | 19,227 | 19,227 | ||||||||||||||||||||||||||||||||||
| Income tax expense | — | — | — | — | — | 30,653 | 30,653 | ||||||||||||||||||||||||||||||||||
| Non-operating pension and OPEB items | — | — | — | — | — | (2,901) | (2,901) | ||||||||||||||||||||||||||||||||||
| Other(f) | — | — | — | — | — | 3,917 | 3,917 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 97,789 | $ | 79,448 | $ | 37,834 | $ | 215,071 | $ | 24,985 | $ | (24,001) | $ | 216,055 | |||||||||||||||||||||||||||
| Nine months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Albemarle Corporation | $ | 237,293 | $ | 235,670 | $ | 41,401 | $ | 514,364 | $ | 27,988 | $ | (414,856) | $ | 127,496 | |||||||||||||||||||||||||||
| Depreciation and amortization | 99,559 | 37,628 | 38,293 | 175,480 | 1,870 | 8,415 | 185,765 | ||||||||||||||||||||||||||||||||||
| Restructuring and other(a) | — | — | — | — | — | 2,294 | 2,294 | ||||||||||||||||||||||||||||||||||
| Gain on sale of business(b) | — | — | — | — | — | (428,424) | (428,424) | ||||||||||||||||||||||||||||||||||
| Acquisition and integration related costs(c) | — | — | — | — | — | 5,629 | 5,629 | ||||||||||||||||||||||||||||||||||
| Interest and financing expenses(g) | — | — | — | — | — | 56,170 | 56,170 | ||||||||||||||||||||||||||||||||||
| Income tax expense | — | — | — | — | — | 14,422 | 14,422 | ||||||||||||||||||||||||||||||||||
| Non-operating pension and OPEB items | — | — | — | — | — | (16,407) | (16,407) | ||||||||||||||||||||||||||||||||||
| Legal accrual(d) | — | — | — | — | — | 657,412 | 657,412 | ||||||||||||||||||||||||||||||||||
| Albemarle Foundation contribution(h) | — | — | — | — | — | 20,000 | 20,000 | ||||||||||||||||||||||||||||||||||
| Other(e) | 4,441 | — | — | 4,441 | — | 13,453 | 17,894 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 341,293 | $ | 273,298 | $ | 79,694 | $ | 694,285 | $ | 29,858 | $ | (81,892) | $ | 642,251 | |||||||||||||||||||||||||||
| Nine months ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Albemarle Corporation | $ | 188,380 | $ | 198,905 | $ | 70,770 | $ | 458,055 | $ | 60,069 | $ | (226,995) | $ | 291,129 | |||||||||||||||||||||||||||
| Depreciation and amortization | 82,582 | 36,846 | 37,311 | 156,739 | 6,338 | 7,137 | 170,214 | ||||||||||||||||||||||||||||||||||
| Restructuring and other(a) | — | — | — | — | — | 10,831 | 10,831 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration related costs(c) | — | — | — | — | — | 14,349 | 14,349 | ||||||||||||||||||||||||||||||||||
| Interest and financing expenses | — | — | — | — | — | 53,964 | 53,964 | ||||||||||||||||||||||||||||||||||
| Income tax expense | — | — | — | — | — | 64,526 | 64,526 | ||||||||||||||||||||||||||||||||||
| Non-operating pension and OPEB items | — | — | — | — | — | (8,704) | (8,704) | ||||||||||||||||||||||||||||||||||
| Other(f) | — | — | — | — | — | 1,304 | 1,304 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 270,962 | $ | 235,751 | $ | 108,081 | $ | 614,794 | $ | 66,407 | $ | (83,588) | $ | 597,613 |
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(a)In 2021, we recorded facility closure related to offices in Germany, and severance expenses in Germany and Belgium, in Selling, general and administrative expenses (“SG&A”). In 2020, we recorded severance expenses as part of business reorganization plans, impacting each of our businesses and Corporate, primarily in the U.S., Germany and with our Jordanian joint venture partner. During the three months ended September 30, 2020, we recorded expenses of $2.3 million in SG&A. During the nine months ended September 30, 2020, we recorded expenses of $0.7 million in Cost of goods sold, $10.4 million in SG&A and a $0.3 million gain in Net income attributable to noncontrolling interests for the portion of severance expense allocated to our Jordanian joint venture partner. The balance of unpaid severance is recorded in Accrued expenses and is expected to primarily be paid through 2021.
(b)See Note 3, “Divestitures,” for additional information.
(c)Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in SG&A.
(d)Loss recorded in Other expense, net in the three months ended September 30, 2021 related to an arbitration ruling for the Huntsman legal matter. See Note 10, “Commitments and Contingencies,” for further details.
(e)Included amounts for the three months ended September 30, 2021 recorded in:
-
SG&A - $2.5 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements.
-
Other expense, net - $0.1 million of a loss resulting from the adjustment of indemnifications related to previously disposed businesses.
Included amounts for the nine months ended September 30, 2021 recorded in:
-
SG&A - $8.6 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements, a $4.0 million loss resulting from the sale of property, plant and equipment and $1.6 million of charges for an environmental reserve at a site not part of our operations.
-
Other expense, net - $3.7 million of expenses primarily related to asset retirement obligation charges to update of an estimate at a site formerly owned by Albemarle.
(f)Included amounts for the three months ended September 30, 2020 recorded in:
-
SG&A - $3.8 million of a net expense primarily related to the increase of environmental reserves at non-operating businesses we had previously divested.
-
Other expense, net - $0.2 million loss resulting from the settlement of a historical legal matter of an acquired company.
Included amounts for the nine months ended September 30, 2020 recorded in:
▪SG&A - $3.8 million of a net expense primarily related to the increase of environmental reserves at non-operating businesses we had previously divested.
▪Other expense, net - $2.5 million net gain resulting from the settlement of legal matters related to a business sold and $0.8 million net gain primarily related to the sale of idle properties in Germany, partially offset by a $0.8 million loss resulting from the adjustment of indemnifications related to previously disposed businesses.
(g)Included in Interest and financing expenses is a loss on early extinguishment of debt of $29.0 million for the nine months ended September 30, 2021, respectively. See Note 9, “Long-Term Debt,” for additional information.
(h)Included in SG&A is a charitable contribution, using a portion of the proceeds received from the FCS divestiture, to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and the Company operates. This contribution is in addition to the normal annual contribution made to the Albemarle Foundation by the Company, and is significant in size and nature in that it is intended to provide more long-term benefits in these communities.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 13—Pension Plans and Other Postretirement Benefits:
The components of pension and postretirement benefits cost (credit) for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Pension Benefits Cost (Credit): | |||||||||||||||||||||||
| Service cost | $ | 1,425 | $ | 1,202 | $ | 3,776 | $ | 3,623 | |||||||||||||||
| Interest cost | 5,113 | 6,696 | 15,352 | 20,049 | |||||||||||||||||||
| Expected return on assets | (10,893) | (10,065) | (32,687) | (30,156) | |||||||||||||||||||
| Amortization of prior service benefit | 29 | 9 | 87 | 27 | |||||||||||||||||||
| Total net pension benefits credit | $ | (4,326) | $ | (2,158) | $ | (13,472) | $ | (6,457) | |||||||||||||||
| Postretirement Benefits Cost: | |||||||||||||||||||||||
| Service cost | $ | 31 | $ | 27 | $ | 93 | $ | 79 | |||||||||||||||
| Interest cost | 309 | 468 | 928 | 1,403 | |||||||||||||||||||
| Total net postretirement benefits cost | $ | 340 | $ | 495 | $ | 1,021 | $ | 1,482 | |||||||||||||||
| Total net pension and postretirement benefits credit | $ | (3,986) | $ | (1,663) | $ | (12,451) | $ | (4,975) |
All components of net benefit cost (credit), other than service cost, are included in Other expense, net on the consolidated statements of income.
During the three-month and nine-month periods ended September 30, 2021, we made contributions of $3.2 million and $22.1 million, respectively, to our qualified and nonqualified pension plans. During the three-month and nine-month periods ended September 30, 2020, we made contributions of $2.7 million and $7.9 million, respectively, to our qualified and nonqualified pension plans.
We paid $0.7 million and $2.1 million, respectively, in premiums to the U.S. postretirement benefit plan during the three-month and nine-month periods ended September 30, 2021, respectively. During the three-month and nine-month periods ended September 30, 2020, we paid $0.9 million and $2.5 million, respectively, in premiums to the U.S. postretirement benefit plan.
NOTE 14—Fair Value of Financial Instruments:
In assessing the fair value of financial instruments, we use methods and assumptions that are based on market conditions and other risk factors existing at the time of assessment. Fair value information for our financial instruments is as follows:
Long-Term Debt—the fair values of our notes are estimated using Level 1 inputs and account for the difference between the recorded amount and fair value of our long-term debt. The carrying value of our remaining long-term debt reported in the accompanying consolidated balance sheets approximates fair value as substantially all of such debt bears interest based on prevailing variable market rates currently available in the countries in which we have borrowings.
| September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
| Recorded Amount | Fair Value | Recorded Amount | Fair Value | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Long-term debt | $ | 2,033,469 | $ | 2,235,877 | $ | 3,588,157 | $ | 3,783,225 |
Foreign Currency Forward Contracts—During the fourth quarter of 2019, we entered into a foreign currency forward contract to hedge the cash flow exposure of non-functional currency purchases during the construction of the Kemerton plant in Australia. This derivative financial instrument is used to manage risk and is not used for trading or other speculative purposes. This foreign currency forward contract has been designated as a hedging instrument under ASC 815, Derivatives and Hedging. At September 30, 2021 and December 31, 2020, we had outstanding designated foreign currency forward contracts with notional values totaling the equivalent of $127.1 million and $75.4 million, respectively.
We also enter into foreign currency forward contracts in connection with our risk management strategies that have not been designated as hedging instruments under ASC 815, Derivatives and Hedging, in an attempt to minimize the financial
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
impact of changes in foreign currency exchange rates. These derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes. The fair values of our non-designated foreign currency forward contracts are estimated based on current settlement values. At September 30, 2021 and December 31, 2020, we had outstanding non-designated foreign currency forward contracts with notional values totaling $593.1 million and $611.1 million, respectively, hedging our exposure to various currencies including the Euro, Australian Dollar, Taiwanese Dollar, Chinese Renminbi and Chilean Peso.
The following table summarizes the fair value of our foreign currency forward contracts included in the consolidated balance sheets as of September 30, 2021 and December 31, 2020 (in thousands):
| September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| Designated as hedging instruments(a) | $ | 1,961 | $ | 93 | $ | 7,043 | $ | — | |||||||||||||||
| Not Designated as hedging instruments(b) | 2,675 | 4,101 | 6,563 | 4,803 | |||||||||||||||||||
| Total | $ | 4,636 | $ | 4,194 | $ | 13,606 | $ | 4,803 |
(a) Included $2.0 million in Other current assets and $0.1 million in Accrued expenses at September 30, 2021, and $6.2 million in Other current assets and $0.9 million in Other assets at December 31, 2020.
(b) Included $2.7 million in Other current assets and $4.1 million in Accrued expenses at September 30, 2021 and $6.6 million in Other current assets and $4.8 million in Accrued expenses at December 31, 2020.
The following table summarizes the net gains (losses) recognized for our foreign currency forward contracts during the three-month and nine-month periods ended September 30, 2021 and 2020 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Designated as hedging instruments | |||||||||||||||||||||||
| Income (loss) recognized in Other comprehensive (loss) income | $ | 214 | $ | 6,993 | $ | (563) | $ | (6,822) | |||||||||||||||
| Not designated as hedging instruments | |||||||||||||||||||||||
| (Loss) income recognized in Other expense, net(a) | $ | (1,199) | $ | 3,102 | $ | 658 | $ | (5,201) |
(a) Fluctuations in the value of our foreign currency forward contracts not designated as hedging instruments are generally expected to be offset by changes in the value of the underlying exposures being hedged, which are also reported in Other expense, net.
In addition, for the nine-month periods ended September 30, 2021 and 2020, we recorded net cash receipts (settlements) of $0.8 million and ($25.5) million, respectively, in Other, net, in our condensed consolidated statements of cash flows.
As of September 30, 2021, there are no unrealized gains or losses related to the cash flow hedges expected to be reclassified to earnings in the next twelve months.
The counterparties to our foreign currency forward contracts are major financial institutions with which we generally have other financial relationships. We are exposed to credit loss in the event of nonperformance by these counterparties. However, we do not anticipate nonperformance by the counterparties.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 15—Fair Value Measurement:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:
| Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities | ||||
| Level 2 | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability | ||||
| Level 3 | Unobservable inputs for the asset or liability |
We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (in thousands):
| September 30, 2021 | Quoted Prices in Active Markets for Identical Items (Level 1) | Quoted Prices in Active Markets for Similar Items (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Available for sale debt securities(a) | $ | 248,775 | $ | — | $ | — | $ | 248,775 | |||||||||||||||
| Investments under executive deferred compensation plan(b) | $ | 31,952 | $ | 31,952 | $ | — | $ | — | |||||||||||||||
| Private equity securities measured at net asset value(c)(d) | $ | 4,695 | $ | — | $ | — | $ | — | |||||||||||||||
| Foreign currency forward contracts(e) | $ | 4,636 | $ | — | $ | 4,636 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Obligations under executive deferred compensation plan(b) | $ | 31,952 | $ | 31,952 | $ | — | $ | — | |||||||||||||||
| Foreign currency forward contracts(e) | $ | 4,194 | $ | — | $ | 4,194 | $ | — |
| December 31, 2020 | Quoted Prices in Active Markets for Identical Items (Level 1) | Quoted Prices in Active Markets for Similar Items (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investments under executive deferred compensation plan(b) | $ | 32,447 | $ | 32,447 | $ | — | $ | — | |||||||||||||||
| Private equity securities measured at net asset value(c)(d) | $ | 4,661 | $ | — | $ | — | $ | — | |||||||||||||||
| Foreign currency forward contracts(e) | $ | 13,606 | $ | — | $ | 13,606 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Obligations under executive deferred compensation plan(b) | $ | 32,447 | $ | 32,447 | $ | — | $ | — | |||||||||||||||
| Foreign currency forward contracts(e) | $ | 4,803 | $ | — | $ | 4,803 | $ | — |
(a)Preferred equity of a Grace subsidiary acquired as a portion of the proceeds of the FCS sale on June 1, 2021. See Note 2, “Divestitures,” for further details on the material terms and conditions. A third-party estimate of the fair value was prepared using expected future cash flows over the period up to when the asset is likely to be redeemed, applying a discount rate that appropriately captures a market participant's view of the risk associated with the investment. These are considered to be Level 3 inputs.
(b)We maintain an Executive Deferred Compensation Plan (“EDCP”) that was adopted in 2001 and subsequently amended. The purpose of the EDCP is to provide current tax planning opportunities as well as supplemental funds upon the retirement or death of certain of our employees. The EDCP is intended to aid in attracting and retaining employees of exceptional ability by providing them with these benefits. We also maintain a Benefit Protection Trust (the “Trust”) that was created to provide a source of funds to assist in meeting the obligations of the EDCP, subject to the claims of our creditors in the event of our insolvency. Assets of the Trust are consolidated in accordance with authoritative guidance. The assets of the Trust consist primarily of mutual fund investments (which are accounted for as trading securities and are marked-to-market on a monthly basis through the consolidated statements of income) and cash and cash equivalents. As such, these assets and obligations are classified within Level 1.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(c)Primarily consists of private equity securities reported in Investments in the consolidated balance sheets. The changes in fair value are reported in Other expense, net, in our consolidated statements of income.
(d)Holdings in certain private equity securities are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy.
(e)As a result of our global operating and financing activities, we are exposed to market risks from changes in foreign currency exchange rates which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from foreign currency exchange rate fluctuations through the use of foreign currency forward contracts. The foreign currency forward contracts are valued using broker quotations or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within Level 2. See Note 14, “Fair Value of Financial Instruments,” for further details about our foreign currency forward contracts.
The following tables set forth the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements (in thousands):
| Available for Sale Debt Securities | |||||
| Beginning balance at December 31, 2020 | $ | — | |||
| Additions | 244,530 | ||||
| Accretion of discount | 4,245 | ||||
| Ending balance at September 30, 2021 | $ | 248,775 |
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 16—Accumulated Other Comprehensive (Loss) Income:
The components and activity in Accumulated other comprehensive (loss) income (net of deferred income taxes) consisted of the following during the periods indicated below (in thousands):
| Foreign Currency Translation and Other | Net Investment Hedge**(a)** | Cash Flow Hedge**(b)** | Interest Rate Swap**(c)** | Total | |||||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | (324,951) | $ | — | $ | 5,672 | $ | (8,722) | $ | (328,001) | |||||||||||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (39,295) | — | 214 | — | (39,081) | ||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 21 | — | — | 651 | 672 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | (39,274) | — | 214 | 651 | (38,409) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income attributable to noncontrolling interests | (26) | — | — | — | (26) | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | (364,251) | $ | — | $ | 5,886 | $ | (8,071) | $ | (366,436) | |||||||||||||||||||||||||||||||
| Three months ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | (487,939) | $ | 77,103 | $ | (8,968) | $ | (11,327) | $ | (431,131) | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 37,489 | (12,408) | 6,993 | — | 32,074 | ||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 10 | — | — | 647 | 657 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | 37,499 | (12,408) | 6,993 | 647 | 32,731 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss attributable to noncontrolling interests | (67) | — | — | — | (67) | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | (450,507) | $ | 64,695 | $ | (1,975) | $ | (10,680) | $ | (398,467) | |||||||||||||||||||||||||||||||
| Nine months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | (369,152) | $ | 46,593 | $ | 6,449 | $ | (10,022) | $ | (326,132) | |||||||||||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (46,923) | 5,110 | (563) | — | (42,376) | ||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 71 | — | — | 1,951 | 2,022 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | (46,852) | 5,110 | (563) | 1,951 | (40,354) | ||||||||||||||||||||||||||||||||||||
| Amounts reclassified within accumulated other comprehensive loss | 51,703 | (51,703) | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income attributable to noncontrolling interests | 50 | — | — | — | 50 | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | (364,251) | $ | — | $ | 5,886 | $ | (8,071) | $ | (366,436) | |||||||||||||||||||||||||||||||
| Nine months ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | (468,737) | $ | 80,778 | $ | 4,847 | $ | (12,623) | $ | (395,735) | |||||||||||||||||||||||||||||||
| Other comprehensive loss before reclassifications | 18,350 | (16,083) | (6,822) | — | (4,555) | ||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | 27 | — | — | 1,943 | 1,970 | ||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | 18,377 | (16,083) | (6,822) | 1,943 | (2,585) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss attributable to noncontrolling interests | (147) | — | — | — | (147) | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | (450,507) | $ | 64,695 | $ | (1,975) | $ | (10,680) | $ | (398,467) |
(a)During the first quarter of 2021 the net investment hedge was discontinued following the repayment of the 1.875% Euro-denominated senior notes. The balance of foreign exchange revaluation gains and losses associated with this discontinued net investment hedge have been reclassified to Foreign currency translation and other, and will remain within accumulated other comprehensive loss until the hedged net investment is sold or liquidated.
(b)We entered into a foreign currency forward contract, which was designated and accounted for as a cash flow hedge under ASC 815, Derivatives and Hedging. See Note 14, “Fair Value of Financial Instruments,” for additional information.
(c)The pre-tax portion of amounts reclassified from accumulated other comprehensive loss is included in interest expense.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The amount of income tax (expense) benefit allocated to each component of Other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2021 and 2020 is provided in the following tables (in thousands):
| Foreign Currency Translation and Other | Net Investment Hedge | Cash Flow Hedge | Interest Rate Swap | ||||||||||||||||||||||||||
| Three months ended September 30, 2021 | |||||||||||||||||||||||||||||
| Other comprehensive (loss) income, before tax | $ | (39,266) | $ | — | $ | 214 | $ | 834 | |||||||||||||||||||||
| Income tax expense | (8) | — | — | (183) | |||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | $ | (39,274) | $ | — | $ | 214 | $ | 651 | |||||||||||||||||||||
| Three months ended September 30, 2020 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss), before tax | $ | 37,504 | $ | (16,029) | $ | 6,993 | $ | 834 | |||||||||||||||||||||
| Income tax (expense) benefit | (5) | 3,621 | — | (187) | |||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | $ | 37,499 | $ | (12,408) | $ | 6,993 | $ | 647 | |||||||||||||||||||||
| Nine months ended September 30, 2021 | |||||||||||||||||||||||||||||
| Other comprehensive (loss) income, before tax | $ | (46,836) | $ | 6,552 | $ | (563) | $ | 2,502 | |||||||||||||||||||||
| Income tax expense | (16) | (1,442) | — | (551) | |||||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | $ | (46,852) | $ | 5,110 | $ | (563) | $ | 1,951 | |||||||||||||||||||||
| Nine months ended September 30, 2020 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss), before tax | $ | 18,380 | $ | (20,755) | $ | (6,822) | $ | 2,502 | |||||||||||||||||||||
| Income tax (expense) benefit | (3) | 4,672 | — | (559) | |||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | $ | 18,377 | $ | (16,083) | $ | (6,822) | $ | 1,943 |
NOTE 17—Related Party Transactions:
Our consolidated statements of income include sales to and purchases from unconsolidated affiliates in the ordinary course of business as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Sales to unconsolidated affiliates | $ | 5,629 | $ | 4,863 | $ | 16,357 | $ | 17,361 | |||||||||||||||
| Purchases from unconsolidated affiliates(a) | $ | 55,540 | $ | 10,742 | $ | 144,461 | $ | 142,366 |
(a)Purchases from unconsolidated affiliates primarily relate to purchases from our Windfield joint venture.
Our consolidated balance sheets include accounts receivable due from and payable to unconsolidated affiliates in the ordinary course of business as follows (in thousands):
| September 30, 2021 | December 31, 2020 | ||||||||||
| Receivables from unconsolidated affiliates | $ | 1,782 | $ | 4,098 | |||||||
| Payables to unconsolidated affiliates | $ | 36,744 | $ | 30,123 |
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 18—Supplemental Cash Flow Information:
Supplemental information related to the condensed consolidated statements of cash flows is as follows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Supplemental non-cash disclosure related to investing activities: | |||||||||||
| Capital expenditures included in Accounts payable | $ | 157,743 | $ | 167,393 | |||||||
| Non-cash proceeds from divestitures(a) | $ | 244,530 | $ | — |
(a)Fair value of preferred equity of a Grace subsidiary received as part of proceeds for the sale of our FCS business. See Note 3, “Divestitures,” for further details.
As part of the purchase price paid for the acquisition of a 60% interest in the Mineral Resources Ltd. (“MRL”) Wodgina Project, the Company transferred $135.9 million and $131.9 million of its construction in progress of the designated Kemerton assets during the nine months ended September 30, 2021 and 2020, respectively, representing MRL’s 40% interest in the assets. Since the acquisition, we have transferred the full $480.0 million of construction in progress to MRL, as defined in the purchase agreement. The cash outflow for these assets is recorded in Capital expenditures within Cash flows from investing activities on the condensed consolidated statements of cash flows. The non-cash transfer of these assets is recorded in Non-cash transfer of 40% value of construction in progress of the Kemerton plant to MRL within Cash flows from operating activities on the consolidated statements of cash flows.
Other, net within Cash flows from operating activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 included $28.7 million and $30.4 million, respectively, representing the reclassification of the current portion of the one-time transition tax resulting from the enactment of the U.S. Tax Cuts and Jobs Act, from Other noncurrent liabilities to Income taxes payable within current liabilities.
NOTE 19—Recently Issued Accounting Pronouncements:
In December 2019, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance became effective on January 1, 2020 and did not have a significant impact on our consolidated financial statements.
In March 2020, the FASB issued accounting guidance that provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued additional accounting guidance which clarifies that certain optional expedients and exceptions apply to derivatives that are affected by the discounting transition. The guidance under both FASB issuances is effective March 12, 2020 through December 31, 2022. We currently do not expect this guidance to have a significant impact on our consolidated financial statements.
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