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

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

Forward-looking Statements

Some of the information presented in this Quarterly Report on Form 10-Q 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,” “would,” “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. 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 from the outlook expressed or implied in any forward-looking statement include, without limitation, information related to:

  • changes in economic and business conditions;

  • product development;

  • future acquisition and divestiture transactions;

  • expected benefits from proposed transactions;

  • timing of active and proposed projects;

  • 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;

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

  • changes in our markets in general;

  • fluctuations in foreign currencies;

  • changes in laws and government regulation impacting our operations or our products;

  • the occurrence of regulatory actions, 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 through 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;

  • uncertainties as to the duration and impact of the novel coronavirus (“COVID-19”) pandemic; and

  • the other factors detailed from time to time in the reports we file with the U.S. Securities and Exchange Commission (“SEC”).

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

The following is a discussion and analysis of our results of operations for the three-month and nine-month periods ended September 30, 2021 and 2020. A discussion of our consolidated financial condition and sources of additional capital is included under a separate heading “Financial Condition and Liquidity.”

Overview

We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals that are designed to meet our customers’ needs across a diverse range of end markets. We believe our purpose is making the world safe and sustainable by powering the potential of people. The end markets we serve include energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals and crop protection. 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 of 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 to contribute to our sustainable revenue. For example, our Lithium business contributes to the growth of clean miles driven with electric miles and more efficient use of renewable energy through grid storage; Bromine Specialties enables the prevention of fires starting in electronic equipment, greater fuel efficiency from rubber tires and the reduction of emissions from coal fired power plants; and the Catalysts business creates efficiency of natural resources through more usable products from a single barrel of oil, enables safer, greener production of alkylates used to produce more environmentally-friendly fuels, and reduced emissions through cleaner transportation fuels. We believe our disciplined cost reduction efforts and ongoing productivity improvements, among other factors, 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.

Third Quarter 2021

During the third quarter of 2021:

  • Our board of directors declared a quarterly dividend of $0.39 per share on July 20, 2021, which was paid on October 1, 2021 to shareholders of record at the close of business as of September 17, 2021.

  • On September 30, 2021, we 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 with a designed annual conversion capacity of up to 25,000 metric tons of lithium carbonate equivalent (“LCE”) per year.

  • Our net sales for the quarter were $830.6 million, up 11% from net sales of $746.9 million in the third quarter of 2020.

  • Diluted loss per share was $(3.36), which included an after tax loss of $504.5 million following an arbitration ruling related to a legal matter from a legacy Rockwood Holdings, Inc. (“Rockwood”) business sold to Huntsman International LLC (“Huntsman”) prior to Albemarle’s acquisition of Rockwood.

  • Net cash provided by operations was $105.0 million in the third quarter of 2021

Outlook

The current global business environment presents a diverse set of opportunities and challenges in the markets we serve. In particular, the market for lithium battery and energy storage, particularly that for electric vehicles (“EVs”), remains strong, providing the opportunity to continue to develop high quality and innovative products while managing the high cost of expanding capacity. The other markets we serve continue to present various opportunities for value and growth as we have positioned ourselves to manage the impact on our business of changing global conditions, such as slow and uneven global growth, currency exchange volatility, crude oil price fluctuation, a dynamic pricing environment, an ever-changing landscape in electronics, the continuous need for cutting edge catalysts and technology by our refinery customers 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, optimizing and improving the value of our portfolio

primarily through pricing and product development, managing costs and delivering value to our customers and shareholders. We believe that our businesses remain well-positioned to capitalize on new business opportunities and long-term trends driving growth within our end markets and to respond quickly to changes in economic conditions in these markets.

While global economic conditions have been improving, the COVID-19 pandemic continues to have an impact globally. We have not seen a material impact to our operations to date, however, the ultimate impact on our business will depend on the length and severity of the outbreak throughout the world. All of our information technology systems are running as designed and all sites are operating at normal capacity while we continue to comply with all government and health agency recommendations and requirements, as well as protecting the safety of our employees and communities. We believe we have sufficient inventory to continue to produce at current levels, however, government mandated shutdowns could impact our ability to acquire additional materials and disrupt our customers’ purchases. At this time we cannot predict the expected overall financial impact of the COVID-19 pandemic on our business, but we are planning for various economic scenarios and continue to make efforts to protect the safety of our employees and the health of our business.

Lithium: We expect results to be higher year-over-year during 2021 in Lithium, due mainly to North American plant restarts, efficiency improvements and tolling, offset by higher unit costs from plant start-ups at La Negra, Chile and Kemerton, Western Australia. We will not be introducing any new capacity during 2021 to drive significant additional sales volume, although we expect our new plants in La Negra and Kemerton to begin producing sales in 2022. EV sales have started to rebound after a marked slowdown during the second quarter of 2020, with full year 2020 and year to date 2021 each showing a healthy increase in total EV sales over the prior year. While the pricing environment has strengthened throughout the year, we expect our average prices for the full year to be flat-to-slightly-up versus 2020.

On September 30, 2021, we signed a definitive agreement to acquire Tianyuan, which includes a lithium hydroxide conversion plant designed to produce up to 25,000 metric tons of LCE per year. We expect this transaction to close in early 2022, with commercial production from the lithium hydroxide conversion plant to begin in the first half of 2022. We also announced agreements for strategic investments in China with plans to build two lithium hydroxide conversion plants, each initially targeting 50,000 metric tons per year. In addition, our 60%-owned MARBL joint venture recently announced they intend to resume spodumene concentrate production at the Wodgina spodumene mine, with the production restart expected during the third quarter of 2022.

On a longer-term basis, we believe that demand for lithium will continue to grow as new lithium applications advance and the use of plug-in hybrid electric vehicles and full battery electric vehicles increases. This demand for lithium is supported by a favorable backdrop of steadily declining lithium ion battery costs, increasing battery performance, continuing significant investments in the battery and EV supply chain by cathode and battery producers, and automotive OEM’s, favorable global public policy toward e-mobility/renewable energy usage, and additional stimulus measures taken in Europe in light of the COVID-19 pandemic that we expect to strengthen EV demand. Our outlook is also bolstered by long-term supply agreements with key strategic customers, reflecting our standing as a preferred global lithium partner, highlighted by our scale, access to geographically diverse, low-cost resources and long-term track record of reliability of supply and operating execution.

Bromine Specialties: We expect both net sales and profitability to be modestly higher in 2021 as we recover from the lower demand due to shutdowns related to the COVID-19 pandemic and ongoing cost savings initiatives. While we have not experienced a material impact from the COVID-19 pandemic to date, sales in 2020 were adversely impacted. We have begun to see recovery of those sales in 2021, however, bromine volume has been, and is expected to continue to be, lower in the second half of 2021 compared to the first half due to a force majeure declaration for chlorine in the U.S.

On a longer-term basis, we continue to believe that improving global standards of living, widespread digitization, increasing demand for data management capacity and the potential for increasingly stringent fire safety regulations in developing markets are likely to drive continued demand for fire safety products. Our long-term drilling outlook is uncertain at this time and will follow a long-term trajectory in line with oil prices. We are focused on profitably growing our globally competitive bromine and derivatives production network to serve all major bromine consuming products and markets. The combination of our solid, long-term business fundamentals, strong cost position, product innovations and effective management of raw material costs 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.

Catalysts: Total Catalysts results in 2021 are expected to be down year-over-year. In the first half of 2021, both the refining catalyst and performance catalyst solutions (“PCS”) businesses were negatively impacted by the U.S. Gulf Coast winter storm. While we expect PCS volumes to improve slightly over lower 2020 levels, we expect 2021 results to be flat to slightly down year-over-year due to the impact of the storms. In addition, we expect 2021 refining catalyst volumes to be lower year-over-year resulting from a recent change in customer order patterns in North America and the impact of the U.S. Gulf Coast winter storm. The fluidized catalytic cracking (“FCC”) market is expected to gradually recover from the COVID-19 pandemic in line with increased travel and depletion of global gasoline inventories, however, demand may not return to normal

levels until late 2022 or 2023 at the earliest. Hydroprocessing catalysts (“HPC”) demand tends to be lumpier than FCC demand and is also expected to continue to be negatively impacted as refiners defer spending into 2021 and 2022.

On a longer-term basis, we believe increased global demand for transportation fuels, new refinery start-ups and ongoing adoption of cleaner fuels will be the primary drivers of growth in our Catalysts business. We believe delivering superior end-use performance continues to be the most effective way to create sustainable value in the refinery catalysts industry. We also believe our technologies continue to provide significant performance and financial benefits to refiners challenged to meet tighter regulations around the world, including those managing new contaminants present in North America tight oil, and those in the Middle East and Asia seeking to use heavier feedstock while pushing for higher propylene yields. Longer-term, we believe that the global crude supply will get heavier and more sour, a trend that bodes well for our catalysts portfolio. With superior technology and production capacities, and expected growth in end market demand, we believe that Catalysts remains well-positioned for the future. In PCS, we expect growth on a longer-term basis in our organometallics business due to growing global demand for plastics driven by rising standards of living and infrastructure spending.

Corporate: In the first quarter of 2021, we increased our quarterly dividend rate to $0.39 per share. We continue to focus on cash generation, working capital management and process efficiencies. In addition, we expect our global effective tax rate for 2021 to continue to vary based on the locations in which income is actually earned and remains subject to potential volatility from changing legislation in the U.S. and other tax jurisdictions.

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

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.

Third Quarter 2021 Compared to Third Quarter 2020

Selected Financial Data (Unaudited)

Net Sales

In thousandsQ3 2021Q3 2020$ Change% Change
Net sales$830,566$746,868$83,69811%
▪$46.1 million decrease in net sales following the sale of the FCS business on June 1, 2021 ▪$77.0 million of higher sales volume, primarily in Lithium ▪$44.7 million of increased pricing, driven by Bromine Specialties and Lithium ▪$8.1 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies

Gross Profit

In thousandsQ3 2021Q3 2020$ Change% Change
Gross profit$249,273$254,056$(4,783)(2)%
Gross profit margin30.0%34.0%
▪Higher sales volume in Lithium, as well as favorable pricing driven by Bromine Specialties and Lithium ▪2021 included $13.5 million of out-of-period adjustment expense in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior periods. See Note 1, “Basis of Presentation” for further details ▪Increased commission expenses in Chile resulting from the higher pricing in Lithium ▪Decrease in net sales resulting from the disposal of the FCS business on June 1, 2021 ▪Increased freight costs in Bromine Specialties ▪Favorable currency exchange impacts resulting from the weaker U.S. Dollar against various currencies

Selling, General and Administrative Expenses

In thousandsQ3 2021Q3 2020$ Change% Change
Selling, general and administrative expenses$103,477$96,092$7,3858%
Percentage of Net sales12.5%12.9%
▪Higher compensation, including incentive-based, expenses across all businesses and Corporate ▪Partially offset by productivity improvements and a reduction in professional fees and other administrative costs ▪$5.9 million decrease in restructuring and other expenses and acquisition and integration related costs for various significant projects

Research and Development Expenses

In thousandsQ3 2021Q3 2020$ Change% Change
Research and development expenses$13,289$13,532$(243)(2)%
Percentage of Net sales1.6%1.8%

Gain on Sale of Business

In thousandsQ3 2021Q3 2020$ Change% Change
Gain on sale of business$984$—$984
▪Adjustment to gain resulting from sale of FCS business on June 1, 2021, primarily due to working capital adjustments

Interest and Financing Expenses

In thousandsQ3 2021Q3 2020$ Change% Change
Interest and financing expenses$(5,136)$(19,227)$14,091(73)%
▪Decreased debt balance as certain debt instruments were repaid in the first quarter of 2021 ▪Higher capitalized interest from continued capital expenditures in 2021

Other Expense, Net

In thousandsQ3 2021Q3 2020$ Change% Change
Other expense, net$(643,196)$(3,661)$(639,535)17,469%
•$657.4 million of additional accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details •$7.1 million of favorable foreign exchange impacts •$4.2 million of income in 2021 from accretion of discount in preferred equity of W. R. Grace & Co. (“Grace”) subsidiary acquired as a portion of the proceeds of the FCS sale •$2.5 million increase in non-operating pension and OPEB benefits

Income Tax (Benefit) Expense

In thousandsQ3 2021Q3 2020$ Change% Change
Income tax (benefit) expense$(114,670)$30,653$(145,323)(474)%
Effective income tax rate22.2%25.2%
•2021 includes $152.9 million tax benefit resulting from an accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details •Change in geographic mix of earnings

Equity in Net Income of Unconsolidated Investments

In thousandsQ3 2021Q3 2020$ Change% Change
Equity in net income of unconsolidated investments$27,706$26,154$1,5526%
▪Increased earnings from strong operating results and other income from our Catalysts segment joint ventures ▪$10.2 million of unfavorable foreign exchange impacts from the Windfield Holdings Pty Ltd (“Talison”) joint venture

Net Income Attributable to Noncontrolling Interests

In thousandsQ3 2021Q3 2020$ Change% Change
Net income attributable to noncontrolling interests$(18,348)$(18,744)$396(2)%
▪Decrease in consolidated income related to our JBC joint venture

Net (Loss) Income Attributable to Albemarle Corporation

In thousandsQ3 2021Q3 2020$ Change% Change
Net (loss) income attributable to Albemarle Corporation$(392,781)$98,301$(491,082)(500)%
Percentage of Net sales(47.3)%13.2%
Basic (loss) earnings per share$(3.36)$0.92$(4.28)(465)%
Diluted (loss) earnings per share$(3.36)$0.92$(4.28)(465)%
▪$504.5 million, net of income taxes, of additional accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details ▪Increased sales volume and favorable pricing from Lithium, as well as favorable pricing in Bromine Specialties ▪Decreased interest and financing expenses due to lower debt balances ▪Productivity improvements and a reduction in professional fees and other administrative costs ▪Loss of sales from FCS business following the disposition on June 1, 2021 ▪2021 included $13.5 million of additional expense in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior periods ▪Increased SG&A expenses, primarily related to increased compensation expense ▪Earnings per share also impacted by the underwritten public offering of our common stock in February 2021, increasing share count by 9.8 million shares

Other Comprehensive Income (loss), Net of Tax

In thousandsQ3 2021Q3 2020$ Change% Change
Other comprehensive income (loss), net of tax$(38,409)$32,731$(71,140)(217)%
▪Foreign currency translation and other$(39,274)$37,499$(76,773)(205)%
▪2021 included unfavorable movements in the Euro of approximately $29 million, the Brazilian Real of approximately $7 million and a net unfavorable variance in various other currencies of $4 million ▪2020 included favorable movements in the Euro of approximately $26 million, the Chinese Renminbi of approximately $11 million and a net favorable variance in various other currencies totaling approximately $3 million, partially offset by unfavorable movements in the Brazilian Real of approximately $2 million
▪Cash flow hedge$214$6,993$(6,779)
▪Net investment hedge$—$(12,408)$12,408(100)%

Segment Information Overview. We have identified three reportable segments according to the nature and economic characteristics of our products as well as the manner in which the information is used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions. Our reportable business segments consist of: (1) Lithium, (2) Bromine Specialties and (3) Catalysts.

Summarized financial information concerning our reportable segments is shown in the following tables. The “All Other” category includes only the FCS business, the sale of which was completed on June 1, 2021, that does not fit into any of our core businesses.

The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the operating segments. Pension and OPEB service cost (which represents the benefits earned by active employees during the period) and amortization of prior service cost or benefit are allocated to the reportable segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating pension and OPEB items”) are included in Corporate. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.

Our 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. We define adjusted EBITDA as earnings before interest and financing

expenses, income tax expense, 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 planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. We 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, the generally accepted accounting principles in the United States (“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,Percentage Change
2021%2020%2021 vs 2020
(In thousands, except percentages)
Net sales:
Lithium$359,22943.3%$265,64635.6%35%
Bromine Specialties277,78333.4%237,19331.8%17%
Catalysts193,55423.3%197,91926.4%(2)%
All Other——%46,1106.2%(100)%
Total net sales$830,566100.0%$746,868100.0%11%
Adjusted EBITDA:
Lithium$125,41657.7%$97,78945.3%28%
Bromine Specialties86,01239.5%79,44836.8%8%
Catalysts33,10315.2%37,83417.5%(13)%
All Other——%24,98511.5%(100)%
Corporate(26,962)(12.4)%(24,001)(11.1)%(12)%
Total adjusted EBITDA$217,569100.0%$216,055100.0%1%

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):

LithiumBromine SpecialtiesCatalystsReportable Segments TotalAll OtherCorporateConsolidated 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 amortization34,25612,60313,06459,923—2,15962,082
Restructuring and other(a)—————754754
Gain on sale of business(b)—————984984
Acquisition and integration related costs(c)—————1,5531,553
Interest and financing expenses—————5,1365,136
Income tax expense—————(114,670)(114,670)
Non-operating pension and OPEB items—————(5,471)(5,471)
Legal accrual(d)—————657,412657,412
Other(e)(1,289)——(1,289)—3,8592,570
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 amortization28,68712,90012,65854,2452,1872,24758,679
Restructuring and other(a)—————2,2512,251
Acquisition and integration related costs(c)—————5,9285,928
Interest and financing expenses—————19,22719,227
Income tax expense—————30,65330,653
Non-operating pension and OPEB items—————(2,901)(2,901)
Other(f)—————3,9173,917
Adjusted EBITDA$97,789$79,448$37,834$215,071$24,985$(24,001)$216,055

(a)In 2021, we recorded facility closure costs related to offices in Germany, and severance expenses in Germany and Belgium, in Selling, general and administrative expenses (“SG&A”) related to offices in Germany. 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. The balance of unpaid severance is recorded in Accrued expenses and is expected to primarily be paid through 2021.

(b)Adjustments to the gain resulting from the sale of the FCS business completed on June 1, 2021.

(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 following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. 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 gain resulting from the adjustment of indemnifications related to previously disposed businesses.

(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.

Lithium

In thousandsQ3 2021Q3 2020$ Change% Change
Net sales$359,229$265,646$93,58335%
▪$79.0 million of higher sales volume, driven by strength in both carbonate and hydroxide ▪$9.1 million of favorable pricing impacts, primarily in battery- and tech-grade carbonate and hydroxide due to higher prices under certain contracts and mix ▪$5.4 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$125,416$97,789$27,62728%
▪Higher sales volume and favorable pricing impacts ▪Increased SG&A expenses from higher compensation, professional fees and other administrative costs ▪$7.8 million out-of-period adjustment expense recorded in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior periods ▪Increased costs related to tolled volume ▪$2.6 million of favorable currency translation resulting from a weaker Chilean Peso

Bromine Specialties

In thousandsQ3 2021Q3 2020$ Change% Change
Net sales$277,783$237,193$40,59017%
•$38.7 million of favorable pricing impacts, primarily in the flame retardants division •Sales volume was flat resulting from decreased production in 2021 due to force majeure declaration for chlorine in the U.S. •$2.0 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$86,012$79,448$6,5648%
▪Favorable pricing impacts as demand continues to be strong ▪Increased raw material prices, primarily due to the higher cost of BPA and the shortage of available chlorine ▪Increased freight costs ▪$1.8 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies

Catalysts

In thousandsQ3 2021Q3 2020$ Change% Change
Net sales$193,554$197,919$(4,365)(2)%
▪$3.2 million of unfavorable pricing impacts, primarily in FCC, partially offset by PCS ▪$1.8 million of lower sales volume, primarily from clean fuel technologies and PCS due to timing of shipments, partially offset by higher FCC sales volume as oil refineries improve utilization rates ▪$0.7 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$33,103$37,834$(4,731)(13)%
▪Unfavorable pricing impacts and lower sales volume, primarily driven by clean fuel technologies ▪Increased raw material and freight costs ▪$4.2 million out-of-period adjustment expense recorded in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior periods ▪Partially offset by productivity improvements and a reduction in professional fees and other administrative costs ▪$10 million of increased earnings from strong operating results and other income from our Catalysts segment joint ventures

All Other

In thousandsQ3 2021Q3 2020$ Change% Change
Net sales$—$46,110$(46,110)(100)%
▪Decreased volume resulting from the sale of the FCS business in the second quarter of 2021
Adjusted EBITDA$—$24,985$(24,985)(100)%
▪Decreased volume resulting from the sale of the FCS business in the second quarter of 2021

Corporate

In thousandsQ3 2021Q3 2020$ Change% Change
Adjusted EBITDA$(26,962)$(24,001)$(2,961)(12)%
▪$3.1 million of unfavorable currency exchange impacts, including a $10.2 million decrease in foreign exchange impacts from our Talison joint venture ▪Increase in incentive compensation costs

First Nine Months 2021 Compared to First Nine Months 2020

Selected Financial Data (Unaudited)

Net Sales

In thousandsYTD 2021YTD 2020$ Change% Change
Net sales$2,433,753$2,249,762$183,9918%
▪$84.7 million decrease in net sales from the FCS business, which was sold on June 1, 2021 ▪$212.9 million of higher sales volume from reportable segments, primarily in Lithium and Bromine Specialties, partially offset by Catalysts ▪$17.6 million of favorable pricing from reportable segments, driven by Bromine Specialties, partially offset by Lithium and Catalysts ▪$38.1 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies

Gross Profit

In thousandsYTD 2021YTD 2020$ Change% Change
Gross profit$761,377$729,433$31,9444%
Gross profit margin31.3%32.4%
▪Higher sales volume in Lithium and Bromine Specialties, partially offset by unfavorable pricing in Lithium ▪Lower commission expenses in Chile resulting from the lower pricing in Lithium ▪Decrease in net sales resulting from the disposal of the FCS business on June 1, 2021 ▪Increased production and utility costs of approximately $23 million in Bromine Specialties and Catalysts resulting from the U.S. Gulf Coast winter storm ▪2021 included $8.7 million of out-of-period adjustment expense in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior periods. See Note 1, “Basis of Presentation,” for further details ▪Increased freight costs in Bromine Specialties and Catalysts ▪Favorable currency exchange impacts resulting from the weaker U.S. Dollar against various currencies

Selling, General and Administrative Expenses

In thousandsYTD 2021YTD 2020$ Change% Change
Selling, general and administrative expenses$318,180$304,918$13,2624%
Percentage of Net sales13.1%13.6%
▪$20.0 million charitable contribution, using a portion of the proceeds received from the FCS divestiture, to the Albemarle Foundation, in addition to the normal annual contributions in 2021 ▪Higher compensation, including incentive-based, expenses across all businesses and Corporate ▪$8.6 million of expenses in 2021 primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements ▪$4.0 million loss resulting from the sale of property, plant and equipment in 2021 ▪Partially offset by productivity improvements and a reduction in professional fees and other administrative costs ▪$16.8 million decrease in restructuring and other expenses, and acquisition and integration related costs for various significant projects

Research and Development Expenses

In thousandsYTD 2021YTD 2020$ Change% Change
Research and development expenses$41,901$43,839$(1,938)(4)%
Percentage of Net sales1.7%1.9%
▪Decreased research and development spend in each of the reportable segments

Gain on Sale of Business

In thousandsYTD 2021YTD 2020$ Change% Change
Gain on sale of business$(428,424)$—$(428,424)
▪Gain resulting from sale of FCS business on June 1, 2021

Interest and Financing Expenses

In thousandsYTD 2021YTD 2020$ Change% Change
Interest and financing expenses$(56,170)$(53,964)$(2,206)4%
▪$29.0 million loss on early extinguishment of debt, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of debt during the first quarter of 2021 ▪Partially offset by decreased debt balance as certain debt instruments were repaid in the first quarter of 2021 ▪Higher capitalized interest from continued capital expenditures in 2021

Other Expense, Net

In thousandsYTD 2021YTD 2020$ Change% Change
Other expense, net$(631,870)$(1,620)$(630,250)38,904%
•$657.4 million of additional accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details •$16.9 million decrease in foreign exchange losses •$7.6 million increase in non-operating pension and OPEB benefits •$4.2 million of income in 2021 from accretion of discount in preferred equity of Grace subsidiary acquired as a portion of the proceeds of the FCS sale •$3.8 million expense related to asset retirement obligation charges in 2021 •$2.7 million gain resulting from the settlement of legal matters in 2020

Income Tax Expense

In thousandsYTD 2021YTD 2020$ Change% Change
Income tax expense$14,422$64,526$(50,104)(78)%
Effective income tax rate10.2%19.8%
•2021 includes $152.9 million tax benefit resulting from an accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details •$97.5 million one-time tax expense recorded for the gain on the sale of the FCS business in 2021 •Change in geographic mix of earnings •2021 includes a discrete tax expense due to an out-of-period adjustment for an overstated deferred tax liability recorded during the three-month period ended December 31, 2017

Equity in Net Income of Unconsolidated Investments

In thousandsYTD 2021YTD 2020$ Change% Change
Equity in net income of unconsolidated investments$62,215$83,872$(21,657)(26)%
▪Primarily lower earnings from our Lithium segment joint venture, Talison, primarily driven by lower pricing and unfavorable foreign exchange impacts, partially offset by higher volumes ▪Increased earnings from strong operating results and other income from our Catalysts segment joint ventures

Net Income Attributable to Noncontrolling Interests

In thousandsYTD 2021YTD 2020$ Change% Change
Net income attributable to noncontrolling interests$(61,977)$(53,309)$(8,668)16%
▪Increase in consolidated income related to our JBC joint venture from higher sales volume

Net Income Attributable to Albemarle Corporation

In thousandsYTD 2021YTD 2020$ Change% Change
Net income attributable to Albemarle Corporation$127,496$291,129$(163,633)(56)%
Percentage of Net sales5.2%12.9%
Basic earnings per share$1.10$2.74$(1.64)(60)%
Diluted earnings per share$1.10$2.73$(1.63)(60)%
▪$504.5 million, net of income taxes, of additional accrual recorded following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details ▪Gain on sale of FCS business of $330.9 million, net of tax ▪Increased sales volume from Lithium and Bromine Specialties, as well as favorable pricing in Bromine Specialties ▪Lower commission expenses in Chile resulting from the lower pricing in Lithium ▪Decreased interest and financing expenses due to lower debt balances ▪Productivity improvements and a reduction in professional fees and other administrative costs ▪Loss of four months of sales from FCS business following the disposition on June 1, 2021 ▪Increased production and utility costs in Bromine Specialties and Catalysts resulting from the winter storms in the southern U.S. ▪2021 included $8.7 million of additional expense in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior year periods ▪Increased SG&A expenses, primarily related to additional charitable contribution using proceeds from the sale of the FCS business ▪Lower equity in net income of unconsolidated investments from the Talison joint venture ▪Earnings per share also impacted by the underwritten public offering of our common stock in February 2021, increasing share count by 9.8 million shares

Other Comprehensive Income (loss), Net of Tax

In thousandsYTD 2021YTD 2020$ Change% Change
Other comprehensive income (loss), net of tax$(40,354)$(2,585)$(37,769)1,461%
▪Foreign currency translation and other$(46,852)$18,377$(65,229)(355)%
▪2021 included unfavorable movements in the Euro of approximately $40 million, the Japanese Yen of approximately $5 million, the South Korean Won of approximately $4 million and the net unfavorable variance in other currencies totaling approximately $2 million, partially offset by favorable movements in the Chinese Renminbi of approximately $4 million ▪2020 included favorable movements in the Euro of approximately $30 million, the Chinese Renminbi of approximately $8 million and the Japanese Yen and Taiwanese Dollar of approximately $3 million each, partially offset by unfavorable movements in the Brazilian Real of approximately $23 million
▪Cash flow hedge$(563)$(6,822)$6,259
▪Net investment hedge$5,110$(16,083)$21,193(132)%

Segment Information Overview. 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.

Nine Months Ended September 30,Percentage Change
2021%2020%2021 vs 2020
(In thousands, except percentages)
Net sales:
Lithium$958,53939.4%$786,18634.9%22%
Bromine Specialties837,97834.4%701,56431.2%19%
Catalysts562,14123.1%602,17926.8%(7)%
All Other75,0953.1%159,8337.1%(53)%
Total net sales$2,433,753100.0%$2,249,762100.0%8%
Adjusted EBITDA:
Lithium$341,29353.1%$270,96245.3%26%
Bromine Specialties273,29842.6%235,75139.5%16%
Catalysts79,69412.4%108,08118.1%(26)%
All Other29,8584.6%66,40711.1%(55)%
Corporate(81,892)(12.7)%(83,588)(14.0)%2%
Total adjusted EBITDA$642,251100.0%$597,613100.0%7%

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):

LithiumBromine SpecialtiesCatalystsReportable Segments TotalAll OtherCorporateConsolidated Total
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 amortization99,55937,62838,293175,4801,8708,415185,765
Restructuring and other(a)—————2,2942,294
Gain on sale of business(b)—————(428,424)(428,424)
Acquisition and integration related costs(c)—————5,6295,629
Interest and financing expenses(d)—————56,17056,170
Income tax expense—————14,42214,422
Non-operating pension and OPEB items—————(16,407)(16,407)
Legal accrual(e)—————657,412657,412
Albemarle Foundation contribution(f)—————20,00020,000
Other(g)4,441——4,441—13,45317,894
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 amortization82,58236,84637,311156,7396,3387,137170,214
Restructuring and other(a)—————10,83110,831
Acquisition and integration related costs(b)—————14,34914,349
Interest and financing expenses—————53,96453,964
Income tax expense—————64,52664,526
Non-operating pension and OPEB items—————(8,704)(8,704)
Other(h)—————1,3041,304
Adjusted EBITDA$270,962$235,751$108,081$614,794$66,407$(83,588)$597,613

(a)In 2021, we recorded facility closure costs related to offices in Germany, and severance expenses in Germany and Belgium, in 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 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)Gain resulting from the sale of the FCS business completed on June 1, 2021.

(c)Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in SG&A.

(d)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. See Note 9, “Long-Term Debt,” for additional information.

(e)Loss recorded in Other expense, net in the three months ended September 30, 2021 following an arbitration ruling related to a legal matter from a legacy Rockwood business sold to Huntsman prior to Albemarle’s acquisition of Rockwood. See Note 10, “Commitments and Contingencies,” for further details.

(f)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 operate. 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.

(g)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.

(h)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.

Lithium

In thousandsYTD 2021YTD 2020$ Change% Change
Net sales$958,539$786,186$172,35322%
▪$193.2 million of higher sales volume, driven by both carbonate and hydroxide ▪$41.4 million of unfavorable pricing impacts, primarily in battery-grade carbonate due to lower contract pricing in the first half of 2021 ▪$20.6 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$341,293$270,962$70,33126%
▪Higher sales volume, partially offset by unfavorable pricing impacts ▪Lower commission expenses in Chile resulting from the lower pricing in Lithium ▪Productivity improvements, offsetting the impact of inflation ▪Lower equity in net income of unconsolidated investments from the Talison joint venture ▪$4.4 million out-of-period adjustment expense recorded in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior year periods ▪$4.3 million of unfavorable currency translation resulting from a stronger Chilean Peso

Bromine Specialties

In thousandsYTD 2021YTD 2020$ Change% Change
Net sales$837,978$701,564$136,41419%
▪$66.9 million of favorable pricing impacts, primarily in the flame retardants division and as a result of a favorable 2021 customer mix ▪$59.9 million of higher sales volume related to increased demand across all products ▪$9.6 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$273,298$235,751$37,54716%
▪Higher sales volume and favorable pricing impacts as a result of a favorable 2021 customer mix ▪Productivity improvements and a reduction in professional fees and other administrative costs ▪Increased raw material prices, primarily due to shortage of available chlorine ▪Increased production and utility costs of approximately $6 million resulting from the U.S. Gulf Coast winter storm ▪Increased freight costs ▪$8.7 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies

Catalysts

In thousandsYTD 2021YTD 2020$ Change% Change
Net sales$562,141$602,179$(40,038)(7)%
▪$40.0 million of lower sales volume, primarily from lower demand in clean fuel technologies ▪$8.0 million of unfavorable pricing impacts, primarily in FCC, partially offset by PCS ▪$7.9 million of favorable currency translation resulting from the weaker U.S. Dollar against various currencies
Adjusted EBITDA$79,694$108,081$(28,387)(26)%
▪Lower sales volume, primarily from lower demand in clean fuel technologies, as well as unfavorable pricing impacts, primarily in FCC ▪Increased production and utility costs of approximately $17 million resulting from the U.S. Gulf Coast winter storm ▪$3.1 million out-of-period adjustment expense recorded in Cost of goods sold to correct misstated inventory foreign exchange values relating to prior year periods ▪Increased raw material and freight costs ▪Partially offset by productivity improvements and a reduction in professional fees and other administrative costs

All Other

In thousandsYTD 2021YTD 2020$ Change% Change
Net sales$75,095$159,833$(84,738)(53)%
▪Primarily decreased volume resulting from the sale of the FCS business in the second quarter of 2021
Adjusted EBITDA$29,858$66,407$(36,549)(55)%
▪Primarily decreased volume resulting from the sale of the FCS business in the second quarter of 2021

Corporate

In thousandsYTD 2021YTD 2020$ Change% Change
Adjusted EBITDA$(81,892)$(83,588)$1,6962%
▪$4.1 million of favorable currency exchange impacts, including a $12.8 million decrease in foreign currency impacts from our Talison joint venture ▪Productivity improvements and a reduction in professional fees and other administrative costs ▪Increase in incentive compensation costs

Financial Condition and Liquidity

Overview

The principal uses of cash in our business generally have been capital investments and resource development costs, funding working capital, and service 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, payables and inventory. We anticipate that cash on hand, cash provided by operating activities, proceeds from divestitures and borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund capital expenditures and other investing activities, fund pension contributions and pay dividends for the foreseeable future.

Cash Flow

During the first nine months of 2021, cash on hand, cash provided by operations, net cash proceeds of $289.8 million from the sale of the FCS business and the $1.5 billion net proceeds from our underwritten public offering of common stock funded $652.7 million of capital expenditures for plant, machinery and equipment, debt principal payments of approximately $1.5 billion, early extinguishment of debt fees of $24.9 million and dividends to shareholders of $132.2 million. Our operations provided $490.6 million of cash flows during the first nine months of 2021, as compared to $461.7 million for the first nine months of 2020. The change compared to prior year was primarily due to lower working capital outflows of $39.3 million, excluding the non-cash impact to Accrued expenses from the legal accrual of the legacy Rockwood business matter arbitration ruling, and increased sales in each of our Lithium and Bromine Specialties segments, partially offset by lower earnings from the FCS business sold on June 1, 2021 and lower dividends received from unconsolidated investments. The inflow from working capital in 2021 was primarily driven by the legal accrual noted above, partially offset by higher tax payments, including on the proceeds from the sale of the FCS business, and increased inventory balances. Overall, our cash and cash equivalents decreased by $151.7 million to $595.0 million at September 30, 2021 from $746.7 million at December 31, 2020.

On June 1, 2021, we completed the sale of our FCS business to 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, guaranteed by Grace, can be redeemed by Grace at any time and will accrue payment-in-kind dividends at an annual rate of 12% beginning on June 1, 2023, two years after issuance.

On February 8, 2021, we completed an underwritten public offering of 8,496,773 shares of our common stock at a price to the public of $153.00 per share. We 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. In the first quarter of 2021, we made the following debt principal payments using the net proceeds from this underwritten public offering:

  • €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 (the “2019 Credit Facility”)

  • $325.0 million, the outstanding balance, of the commercial paper notes

Capital expenditures for the nine-month period ended September 30, 2021 of $652.7 million were primarily associated with plant, machinery and equipment. We expect our capital expenditures to be between $925 million and $975 million in 2021, primarily for Lithium growth and capacity increases, primarily in Australia, Chile and Silver Peak, Nevada, as well as productivity and continuity of operations projects in all segments. Our La Negra, Chile plant is in the commissioning and qualification stage. We currently expect to complete construction of Train I of our Kermerton, Australia plant by the end of 2021. Due to the ongoing labor shortages and COVID-19 pandemic travel restrictions in Western Australia, Train II construction is now expected to be completed in the second half of 2022. Commercial sales volume from Train I will begin in 2022 and Train II in 2023.

On September 30, 2021, the Company signed a definitive agreement to acquire all of the outstanding equity of 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. It currently is 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.

Net current assets were $487.1 million and $404.3 million at September 30, 2021 and December 31, 2020, respectively. The increase is primarily due to the repayment of the current portion of long-term debt using proceeds from our underwritten public offering of our common stock, partially offset by the accrual recorded following an arbitration ruling resulting from a legacy legal matter of the Rockwood business acquired in 2015, and the use of cash for capital expenditures. Additional changes in the components of net current assets are primarily due to the timing of the sale of goods and other ordinary transactions leading up to the balance sheet dates. The additional changes are not the result of any policy changes by the Company, and do not 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 ordinary course of business.

On February 25, 2021, we increased our quarterly dividend rate to $0.39 per share, an increase from the quarterly rate of $0.385 per share paid in 2020. On July 20, 2021, we declared a cash dividend of $0.39, which was paid on October 1, 2021 to shareholders of record at the close of business as of September 17, 2021.

At September 30, 2021 and December 31, 2020, our cash and cash equivalents included $376.8 million and $492.8 million, respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are indefinitely reinvested and which we plan to use to support our continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash 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 reinvested or whose earnings qualify as “previously taxed income” as defined by the Internal Revenue Code. During the first nine months of 2021 and 2020, we repatriated $0.9 million and $1.8 million, respectively, of cash as part of these foreign earnings cash repatriation activities.

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

We currently have the following notes outstanding:

Issue Month/YearPrincipal (in millions)Interest RateInterest Payment DatesMaturity Date
November 2019€371.71.125%November 25November 25, 2025
November 2019€500.01.625%November 25November 25, 2028
November 2019(a)$171.63.45%May 15 and November 15November 15, 2029
November 2014(a)$425.04.15%June 1 and December 1December 1, 2024
November 2014(a)$350.05.45%June 1 and December 1December 1, 2044

(a) Denotes senior notes.

Our senior notes are senior unsecured obligations and rank equally with all our other senior unsecured indebtedness from time to time outstanding. The notes are effectively subordinated to all 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 series of notes outstanding has terms that allow us to redeem the notes before 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 these 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 these notes) plus between 25 and 40 basis points, depending on the series of notes, 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. These notes are 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.

Our Euro notes issued in 2019 are unsecured and unsubordinated obligations and rank equally in right of payment to all our other unsecured senior obligations. The Euro notes are effectively subordinated to all 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 series of notes 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 notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal thereof and interest thereon (exclusive of interest accrued to, but excluding, the date of redemption) discounted to the redemption date on an annual basis using the bond rate (as defined in the indentures governing these notes) plus between 25 and 35 basis points, depending on the series of notes, plus, in each case, accrued and unpaid interest on the principal amount being redeemed to, but excluding, 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. These notes are subject to typical events of default, including bankruptcy and insolvency events, nonpayment and the acceleration of certain subsidiary indebtedness exceeding $100 million caused by a nonpayment default.

Our revolving, unsecured credit agreement dated as of June 21, 2018, as amended on August 14, 2019 and further amended on May 11, 2020 (the “2018 Credit Agreement”) currently provides for borrowings of up to $1.0 billion and matures on August 9, 2024. Borrowings under the 2018 Credit Agreement bear interest at variable rates based on an average LIBOR for deposits in the relevant currency plus an applicable margin which ranges from 0.910% to 1.500%, depending on the Company’s credit rating from Standard & Poor’s Ratings Services LLC (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”). The applicable margin on the facility was 1.125% as of September 30, 2021. As of September 30, 2021 there were no borrowings outstanding under the 2018 Credit Agreement.

On August 14, 2019, the Company entered into the $1.2 billion 2019 Credit Facility with several banks and other financial institutions, which was amended and restated on December 15, 2020. The lenders’ commitment to provide new loans under the amended 2019 Credit Facility terminates on December 10, 2021, with each such loan maturing one year after the funding of such loan. The Company can request that the maturity date of loans be extended for a period of up to four additional years, but any such extension is subject to the approval of the lenders. Borrowings under the amended 2019 Credit Facility bear

interest at variable rates based on an average LIBOR for deposits in the relevant currency plus an applicable margin which ranges from 1.125% to 1.750%, depending on the Company’s credit rating from S&P, Moody’s and Fitch. The applicable margin on the 2019 Credit Facility was 1.375% as of September 30, 2021. In March 2021, the Company repaid the outstanding balance of €183.3 million under the 2019 Credit Facility. Following the completion of the sale of the FCS business, the Company is permitted to make up to two additional borrowings in an aggregate amount equal to $270 million for general corporate purposes under the 2019 Credit Facility.

Borrowings under the under the 2019 Credit Facility and 2018 Credit Agreement (together the “Credit Agreements”) are conditioned upon satisfaction of certain conditions precedent, including the absence of defaults. The Company is subject to one financial covenant, as well as customary affirmative and negative covenants. The financial covenant requires that the Company’s consolidated net funded debt to consolidated EBITDA ratio (as such terms are defined in the Credit Agreements) be less than or equal to 4.50:1 for the fiscal quarters through September 30, 2021, 4.00:1 for the fiscal quarter ending December 31, 2021, and 3:50:1 for fiscal quarters thereafter, subject to adjustments in accordance with the terms of the Credit Agreements relating to a consummation of an acquisition where the consideration includes cash proceeds from issuance of funded debt in excess of $500 million. The Credit Agreements also contain customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness. The occurrence of an event of default under the Credit Agreements could result in all loans and other obligations becoming immediately due and payable and each such Credit Agreement being terminated. Certain representations, warranties and covenants under the 2018 Credit Agreement were conformed to those under the 2019 Credit Facility following the amendments to those agreements.

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. The Credit Agreements are available to repay the Commercial Paper Notes, if necessary. Aggregate borrowings outstanding under the Credit Agreements and the Commercial Paper Notes will not exceed the $1.0 billion current maximum amount available under the Credit Agreements. 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. In March 2021 we repaid all outstanding Commercial Paper Notes and had none outstanding at September 30, 2021.

The non-current portion of our long-term debt amounted to $2.02 billion at September 30, 2021, compared to $2.77 billion at December 31, 2020. In addition, at September 30, 2021, we had availability to borrow $1.27 billion under our commercial paper program and the Credit Agreements, and $131.5 million under other existing lines of credit, subject to various financial covenants under our Credit Agreements. We have the ability and intent to refinance our borrowings under our other existing lines of credit with borrowings under the Credit Agreements, as applicable. Therefore, the amounts outstanding under those line of credit, if any, are classified as long-term debt. We believe that at September 30, 2021, we were, and currently are, in compliance with all of our long-term debt covenants.

Off-Balance Sheet Arrangements

In the ordinary 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 $81.8 million at September 30, 2021. 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

Our contractual obligations have not significantly changed based on our ordinary business activities and projected capital expenditures noted above from the information we provided in our Annual Report on Form 10-K for the year ended December 31, 2020, with the exception of the debt repayments made in the first quarter of 2021, as noted above. Following the debt repayments, our annual maturities of long-term debt at September 30, 2021 and our expected interest payments on those long-term debt obligations are as follows (in millions):

Maturities of Long-term DebtExpected Interest Payments
Remainder of 2021$0.6$36.8
2022—57.4
2023—57.4
2024425.055.9
2025441.139.3
Thereafter1,169.8413.7

For variable-rate debt obligations, projected interest payments are calculated using the September 30, 2021 weighted average interest rate of approximately 0.36%.

Total expected 2021 contributions to our domestic and foreign qualified and nonqualified pension plans, including the Albemarle Corporation Supplemental Executive Retirement Plan, should approximate $25 million, including contributions expected to be made in 2020 that were deferred to 2021. We may choose to make additional pension contributions in excess of this amount. We have made contributions of $22.1 million to our domestic and foreign pension plans (both qualified and nonqualified) during the nine-month period ended September 30, 2021.

The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled $16.7 million at September 30, 2021 and $14.7 million at December 31, 2020. Related assets for corresponding offsetting benefits recorded in Other assets totaled $22.4 million at September 30, 2021 and $24.1 million at December 31, 2020. We cannot estimate the amounts of any cash payments associated with these liabilities for the remainder of 2021 or the next twelve months, and we are unable to estimate the timing of any such cash payments in the future at this time.

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

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

Liquidity Outlook

We anticipate that cash on hand 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 acquisitions, make pension contributions and pay dividends for the foreseeable future. Our main focus during the uncertainty surrounding the COVID-19 pandemic is to continue to maintain financial flexibility by continuing our cost savings initiative, while still protecting our employees and customers, committing to shareholder returns and maintaining an investment grade rating. Over the next three years, in terms of uses of cash, we will continue to invest in growth of the businesses and return value to shareholders. 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 growth investments include the recently announced the signing of a definitive agreement to acquire all of the outstanding equity of Tianyuan for approximately $200 million in cash. Tianyuan's operations include a recently constructed lithium processing plant that 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. We expect the transaction, which is subject to customary closing conditions, to close in early 2022. In addition, we announced agreements for strategic investments in China with plans

to build two lithium hydroxide conversion plants, each initially targeting 50,000 metric tons per year. We expect construction of these conversion plants to begin in 2022 and be completed by the end of 2024.

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. The COVID-19 pandemic has not had a material impact on our liquidity to date; however, we cannot predict the overall impact in terms of cash flow generation as that will depend on the length and severity of the outbreak. As a result, we are planning for various economic scenarios and actively monitoring our balance sheet to maintain the financial flexibility needed.

Although we maintain business relationships with a diverse group of financial institutions as sources of financing, an adverse change in their credit standing could lead them to not honor their contractual credit commitments to us, decline funding under our existing but uncommitted lines of credit with them, not renew their extensions of credit or not provide new financing to us. While the global corporate bond and bank loan markets remain strong, periods of elevated uncertainty related to the COVID-19 pandemic or 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. If the U.S. Federal Reserve or similar national reserve banks in other countries decide to tighten the monetary supply in response, for example, to improving economic conditions, we may incur increased borrowing costs (as interest rates increase on our variable rate credit facilities, as our various credit facilities mature or as we refinance any maturing fixed rate debt obligations), although these cost increases would be partially offset by increased income rates on portions of our cash deposits.

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.

Overall, with generally strong cash-generative businesses and no significant long-term debt maturities before 2024, we believe we have, and will be able to maintain, a solid liquidity position.

We had cash and cash equivalents totaling $595.0 million at September 30, 2021, of which $376.8 million is held by our foreign subsidiaries. This cash represents an important source of our liquidity and is invested in bank accounts or money market investments with no limitations on access. The cash held by our foreign subsidiaries is 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.

Guarantor Financial Information

Albemarle Wodgina Pty Ltd Issued Notes

Albemarle Wodgina Pty Ltd (the “Issuer”), a wholly owned subsidiary of Albemarle Corporation, issued $300.0 million aggregate principal amount of 3.45% Senior Notes due 2029 (the “3.45% Senior Notes”) in November 2019. The 3.45% Senior Notes are fully and unconditionally guaranteed (the “Guarantee”) on a senior unsecured basis by Albemarle Corporation (the “Parent Guarantor”). No direct or indirect subsidiaries of the Parent Guarantor guarantee the 3.45% Senior Notes (such subsidiaries are referred to as the “Non-Guarantors”).

In 2019, we completed the acquisition of a 60% interest in Mineral Resources Limited’s (“MRL”) Wodgina hard rock lithium mine project (“Wodgina Project”) in Western Australia and formed an unincorporated joint venture with MRL, named MARBL Lithium Joint Venture, for the exploration, development, mining, processing and production of lithium and other minerals (other than iron ore and tantalum) from the Wodgina spodumene mine (“MARBL”) and for the operation of the Kemerton assets in Western Australia. We participate in the Wodgina Project through our ownership interest in the Issuer.

The Parent Guarantor conducts its U.S. Bromine Specialties and Catalysts operations directly, and conducts its other operations (other than operations conducted through the Issuer) through the Non-Guarantors.

The 3.45% Senior Notes are the Issuer’s senior unsecured obligations and rank equally in right of payment to the senior indebtedness of the Issuer, effectively subordinated to all of the secured indebtedness of the Issuer, to the extent of the value of the assets securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities of its subsidiaries. The Guarantee is the senior unsecured obligation of the Parent Guarantor and ranks equally in right of payment to the senior indebtedness of the Parent Guarantor, effectively subordinated to the secured debt of the Parent Guarantor to the extent of the value of the assets securing the indebtedness and structurally subordinated to all indebtedness and other liabilities of its subsidiaries.

For cash management purposes, the Parent Guarantor transfers cash among itself, the Issuer and the Non-Guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Issuer and/or the Parent Guarantor’s outstanding debt, common stock dividends and common stock repurchases. There are no significant restrictions on the ability of the Issuer or the Parent Guarantor to obtain funds from subsidiaries by dividend or loan.

The following tables present summarized financial information for the Parent Guarantor and the Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the Issuer and the Parent Guarantor and (ii) equity in earnings from and investments in any subsidiary that is a Non-Guarantor. Each entity in the combined financial information follows the same accounting policies as described herein and in our Annual Report on Form 10-K for the year ended December 31, 2020.

Summarized Statement of Operations

$ in thousandsNine Months Ended September 30, 2021Year Ended December 31, 2020
Net sales(a)$1,085,274$1,621,651
Gross profit204,861357,431
Income (loss) before income taxes and equity in net income of unconsolidated investments(b)(c)233,685(205,486)
Net income (loss) attributable to the Parent Guarantor and the Issuer171,322(222,097)

(a) Includes net sales to Non-Guarantors of $563.6 million and $893.5 million for the nine months ended September 30, 2021 and year ended December 31, 2020, respectively.

(b) Includes intergroup expenses to Non-Guarantors of $101.3 million and $132.7 million for the nine months ended September 30, 2021 and year ended December 31, 2020, respectively.

(c) The nine months ended September 30, 2021 includes the Parent Guarantor’s portion of gain on sale of the FCS business on June 1, 2021.

Summarized Balance Sheet

$ in thousandsSeptember 30, 2021December 31, 2020
Current assets(a)$1,003,579$1,194,278
Net property, plant and equipment2,824,8812,621,012
Other noncurrent assets534,090305,544
Current liabilities(b)$1,297,043$2,236,233
Long-term debt995,6901,321,413
Other noncurrent liabilities(c)7,284,0197,317,103

(a) Includes receivables from Non-Guarantors of $398.4 million and $548.9 million at September 30, 2021 and December 31, 2020, respectively.

(b) Includes current payables to Non-Guarantors of $965.0 million and $975.0 million at September 30, 2021 and December 31, 2020, respectively.

(c) Includes noncurrent payables to Non-Guarantors of $6.6 billion at September 30, 2021 and December 31, 2020.

The 3.45% Senior Notes are structurally subordinated to the indebtedness and other liabilities of the Non-Guarantors. The Non-Guarantors are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the 3.45% Senior Notes or the Indenture under which the 3.45% Senior Notes were issued, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that the Parent Guarantor has to receive any assets of any of the Non-Guarantors upon the liquidation or reorganization of any Non-Guarantor, and the consequent rights of holders of the 3.45% Senior Notes to realize proceeds from the sale of any of a Non-Guarantor’s assets, would be effectively subordinated to the claims of such Non-Guarantor’s creditors, including trade creditors and holders of preferred equity interests, if any, of such Non-Guarantor. Accordingly, in the event of a bankruptcy, liquidation or reorganization of any of the Non-Guarantors, the Non-Guarantors will pay the holders of their debts, holders of preferred equity interests, if any, and their trade creditors before they will be able to distribute any of their assets to the Parent Guarantor.

The 3.45% Senior Notes are obligations of the Issuer. The Issuer’s cash flow and ability to make payments on the 3.45% Senior Notes could be dependent upon the earnings it derives from the production from MARBL for the Wodgina Project. Absent income received from sales of its share of production from MARBL, the Issuer’s ability to service the 3.45% Senior Notes could be dependent upon the earnings of the Parent Guarantor’s subsidiaries and other joint ventures and the payment of those earnings to the Issuer in the form of equity, loans or advances and through repayment of loans or advances from the Issuer.

The Issuer’s obligations in respect of MARBL are guaranteed by the Parent Guarantor. Further, under MARBL pursuant to a deed of cross security between the Issuer, the joint venture partner and the manager of the project (the “Manager”), each of the Issuer, and the joint venture partner have granted security to each other and the Manager for the obligations each of the Issuer and the joint venture partner have to each other and to the Manager. The claims of the joint venture partner, the Manager and other secured creditors of the Issuer will have priority as to the assets of the Issuer over the claims of holders of the 3.45% Senior Notes.

Albemarle Corporation Issued Notes

In March 2021, Albemarle New Holding GmbH (the “Subsidiary Guarantor”), a wholly owned subsidiary of Albemarle Corporation, added a full and unconditional guarantee (the “Upstream Guarantee”) to all securities issued and outstanding by Albemarle Corporation (the “Parent Issuer”) and issuable by the Parent Issuer pursuant to the Indenture, dated as of January 20, 2005, as amended and supplemented from time to time (the “Indenture”). No other direct or indirect subsidiaries of the Parent Issuer guarantee these securities (such subsidiaries are referred to as the “Upstream Non-Guarantors”). See Long-term debt section above for a description of the securities issued by the Parent Issuer.

The current securities outstanding under the Indenture are the Parent Issuer’s unsecured and unsubordinated obligations and rank equally in right of payment with all other unsecured and unsubordinated indebtedness. With respect to any series of securities issued under the Indenture, the Upstream Guarantee is, and will be, an unsecured and unsubordinated obligation of the Subsidiary Guarantor, ranking pari passu with all other existing and future unsubordinated and unsecured indebtedness of the Subsidiary Guarantor.

For cash management purposes, the Parent Issuer transfers cash among itself, the Subsidiary Guarantor and the Upstream Non-Guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Parent Issuer and/or the Subsidiary Guarantor’s outstanding debt, common stock dividends and common stock repurchases. There are no significant restrictions on the ability of the Parent Issuer or the Subsidiary Guarantor to obtain funds from subsidiaries by dividend or loan.

The following tables present summarized financial information for the Subsidiary Guarantor and the Parent Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Issuer and the Subsidiary Guarantor and (ii) equity in earnings from and investments in any subsidiary that is an Upstream Non-Guarantor. Each entity in the combined financial information follows the same accounting policies as described herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Summarized Statement of Operations

$ in thousandsNine Months Ended September 30, 2021Year Ended December 31, 2020
Net sales(a)$1,085,274$1,621,651
Gross profit218,231375,138
Income (loss) before income taxes and equity in net income of unconsolidated investments(b)267,804(124,464)
Net income (loss) attributable to the Subsidiary Guarantor and the Parent Issuer195,729(152,509)

(a) Includes net sales to Non-Guarantors of $563.6 million and $893.5 million for the nine months ended September 30, 2021 and year ended December 31, 2020, respectively.

(b) Includes intergroup expenses to Non-Guarantors of $74.2 million and $57.2 million for the nine months ended September 30, 2021 and year ended December 31, 2020, respectively.

(c) The nine months ended September 30, 2021 includes the Parent Issuer’s portion of gain on sale of the FCS business on June 1, 2021.

Summarized Balance Sheet

$ in thousandsSeptember 30, 2021December 31, 2020
Current assets(a)$998,631$1,315,110
Net property, plant and equipment728,384770,230
Other non-current assets(b)1,550,779970,268
Current liabilities(c)$1,300,100$2,133,548
Long-term debt1,788,1072,404,193
Other noncurrent liabilities(c)6,548,6456,468,644

(a) Includes receivables from Non-Guarantors of $426.9 million and $705.1 million at September 30, 2021 and December 31, 2020, respectively.

(b) Includes noncurrent receivables from Non-Guarantors of $1.0 billion and $673.0 million at September 30, 2021 and December 31, 2020, respectively.

(c) Includes current payables to Non-Guarantors of $950.3 million and $983.3 million at September 30, 2021 and December 31, 2020, respectively.

(d) Includes noncurrent payables to Non-Guarantors of $5.8 billion and $5.7 billion at September 30, 2021 and December 31, 2020, respectively.

These securities are structurally subordinated to the indebtedness and other liabilities of the Upstream Non-Guarantors. The Upstream Non-Guarantors are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to these securities or the Indenture under which these securities were issued, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that the Subsidiary Guarantor has to receive any assets of any of the Upstream Non-Guarantors upon the liquidation or reorganization of any Upstream Non-Guarantors, and the consequent rights of holders of these securities to realize proceeds from the sale of any of an Upstream Non-Guarantor’s assets, would be effectively subordinated to the claims of such Upstream Non-Guarantor’s creditors, including trade creditors and holders of preferred equity interests, if any, of such Upstream Non-Guarantor. Accordingly, in the event of a bankruptcy, liquidation or reorganization of any of the Upstream Non-Guarantors, the Upstream Non-Guarantors will pay the holders of their debts, holders of preferred equity interests, if any, and their trade creditors before they will be able to distribute any of their assets to the Subsidiary Guarantor.

Summary of Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates from the information we provided in our Annual Report on Form 10-K for the year ended December 31, 2020.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Item 1 Financial Statements – Note 19, “Recently Issued Accounting Pronouncements.”

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