Item 1. Financial Statements (Unaudited).

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Item 1. Financial Statements (Unaudited).

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	1,479,593	$	773,896	$	2,607,321	$	1,603,187
Cost of goods sold	899,169		525,479		1,577,867		1,091,083
Gross profit	580,424		248,417		1,029,454		512,104
Selling, general and administrative expenses	128,942		121,516		241,510		214,703
Research and development expenses	17,386		13,976		33,469		28,612

(Gain) loss on sale of business/interest in properties	—		(429,408)		8,400		(429,408)

Operating profit	434,096		542,333		746,075		698,197
Interest and financing expenses	(41,409)		(7,152)		(69,243)		(51,034)
Other income, net	8,767		14		24,263		11,326
Income before income taxes and equity in net income of unconsolidated investments	401,454		535,195		701,095		658,489
Income tax expense	89,018		106,985		169,548		129,092
Income before equity in net income of unconsolidated investments	312,436		428,210		531,547		529,397
Equity in net income of unconsolidated investments (net of tax)	128,156		17,998		190,592		34,509
Net income	440,592		446,208		722,139		563,906
Net income attributable to noncontrolling interests	(33,819)		(21,608)		(61,983)		(43,629)
Net income attributable to Albemarle Corporation	$	406,773	$	424,600	$	660,156	$	520,277
Basic earnings per share	$	3.47	$	3.63	$	5.64	$	4.54
Diluted earnings per share	$	3.46	$	3.62	$	5.61	$	4.51
Weighted-average common shares outstanding – basic	117,116		116,809		117,091		114,700
Weighted-average common shares outstanding – diluted	117,724		117,436		117,689		115,383

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	440,592	$	446,208	$	722,139	$	563,906
Other comprehensive (loss) income, net of tax:
Foreign currency translation and other	(117,821)		20,564		(123,710)		(7,578)

Net investment hedge	—		—		—		5,110
Cash flow hedge	(2,509)		823		1,508		(777)
Interest rate swap	6,749		650		7,399		1,300

Total other comprehensive (loss) income, net of tax	(113,581)		22,037		(114,803)		(1,945)
Comprehensive income	327,011		468,245		607,336		561,961
Comprehensive income attributable to noncontrolling interests	(33,757)		(21,532)		(61,868)		(43,553)
Comprehensive income attributable to Albemarle Corporation	$	293,254	$	446,713	$	545,468	$	518,408

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	930,596	$	439,272
Trade accounts receivable, less allowance for doubtful accounts (2022 – $2,532; 2021 – $2,559)	962,215		556,922
Other accounts receivable	124,409		66,184
Inventories	1,216,213		812,920
Other current assets	116,671		132,683

Total current assets	3,350,104		2,007,981
Property, plant and equipment, at cost	8,465,403		8,074,746
Less accumulated depreciation and amortization	2,257,379		2,165,130
Net property, plant and equipment	6,208,024		5,909,616
Investments	903,861		897,708


Other assets	230,346		252,239
Goodwill	1,542,767		1,597,627
Other intangibles, net of amortization	285,303		308,947
Total assets	$	12,520,405	$	10,974,118
Liabilities And Equity
Current liabilities:
Accounts payable	$	1,091,583	$	647,986
Accrued expenses	330,941		763,293

Current portion of long-term debt	251,304		389,920
Dividends payable	46,097		45,469


Income taxes payable	61,837		27,667
Total current liabilities	1,781,762		1,874,335
Long-term debt	3,205,730		2,004,319
Postretirement benefits	43,079		43,693
Pension benefits	205,890		229,187


Other noncurrent liabilities	591,021		663,698
Deferred income taxes	391,948		353,279
Commitments and contingencies (Note 10)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 117,122 in 2022 and 117,015 in 2021	1,171		1,170
Additional paid-in capital	2,927,086		2,920,007
Accumulated other comprehensive loss	(507,138)		(392,450)
Retained earnings	3,664,172		3,096,539
Total Albemarle Corporation shareholders’ equity	6,085,291		5,625,266
Noncontrolling interests	215,684		180,341
Total equity	6,300,975		5,805,607
Total liabilities and equity	$	12,520,405	$	10,974,118

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


(In Thousands, Except Share Data)					Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Albemarle Shareholders’ Equity		Noncontrolling Interests		Total Equity
Common Stock
Shares		Amounts
Balance at March 31, 2022	117,112,394		$	1,171	$	2,915,387	$	(393,619)	$	3,303,661	$	5,826,600	$	208,452	$	6,035,052
Net income									406,773		406,773		33,819		440,592
Other comprehensive loss							(113,519)				(113,519)		(62)		(113,581)
Cash dividends declared, $0.395 per common share									(46,262)		(46,262)		(26,525)		(72,787)
Stock-based compensation					11,424						11,424				11,424

Exercise of stock options	7,289		—		436						436				436

Issuance of common stock, net	3,066		—		—						—				—
Withholding taxes paid on stock-based compensation award distributions	(1,001)		—		(161)						(161)				(161)
Balance at June 30, 2022	117,121,748		$	1,171	$	2,927,086	$	(507,138)	$	3,664,172	$	6,085,291	$	215,684	$	6,300,975

Balance at March 31, 2021	116,718,175		$	1,167	$	2,889,923	$	(350,114)	$	3,205,408	$	5,746,384	$	196,169	$	5,942,553
Net income									424,600		424,600		21,608		446,208
Other comprehensive income (loss)							22,113				22,113		(76)		22,037
Cash dividends declared, $0.39 per common share									(45,608)		(45,608)		(17,479)		(63,087)
Stock-based compensation					5,104						5,104				5,104
Fees related to the public issuance of common stock					(9)						(9)				(9)
Exercise of stock options	223,685		2		13,150						13,152				13,152
Issuance of common stock, net	3,783		—		—						—				—
Withholding taxes paid on stock-based compensation award distributions	(1,132)		—		(187)						(187)				(187)
Balance at June 30, 2021	116,944,511		$	1,169	$	2,907,981	$	(328,001)	$	3,584,400	$	6,165,549	$	200,222	$	6,365,771

Balance at December 31, 2021	117,015,333		$	1,170	$	2,920,007	$	(392,450)	$	3,096,539	$	5,625,266	$	180,341	$	5,805,607
Net income									660,156		660,156		61,983		722,139
Other comprehensive loss							(114,688)				(114,688)		(115)		(114,803)
Cash dividends declared, $0.79 per common share									(92,523)		(92,523)		(26,525)		(119,048)
Stock-based compensation					16,808						16,808				16,808

Exercise of stock options	7,789		—		468						468				468

Issuance of common stock, net	154,696		2		385						387				387

Withholding taxes paid on stock-based compensation award distributions	(56,070)		(1)		(10,582)						(10,583)				(10,583)
Balance at June 30, 2022	117,121,748		$	1,171	$	2,927,086	$	(507,138)	$	3,664,172	$	6,085,291	$	215,684	$	6,300,975

Balance at December 31, 2020	106,842,369		$	1,069	$	1,438,038	$	(326,132)	$	3,155,252	$	4,268,227	$	200,367	$	4,468,594
Net income									520,277		520,277		43,629		563,906
Other comprehensive loss							(1,869)				(1,869)		(76)		(1,945)
Cash dividends declared, $0.78 per common share									(91,129)		(91,129)		(43,698)		(134,827)
Stock-based compensation					9,778						9,778				9,778
Fees related to public issuance of common stock					(911)						(911)				(911)
Exercise of stock options	241,649		2		14,333						14,335				14,335

Issuance of common stock, net	9,906,090		99		1,453,789						1,453,888				1,453,888

Withholding taxes paid on stock-based compensation award distributions	(45,597)		(1)		(7,046)						(7,047)				(7,047)
Balance at June 30, 2021	116,944,511		$	1,169	$	2,907,981	$	(328,001)	$	3,584,400	$	6,165,549	$	200,222	$	6,365,771

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	Six Months Ended June 30,
	2022		2021
Cash and cash equivalents at beginning of year	$	439,272	$	746,724
Cash flows from operating activities:
Net income	722,139		563,906
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	137,567		123,683




Loss (gain) on sale of business/investment in properties	8,400		(429,408)

Stock-based compensation and other	15,232		8,425
Equity in net income of unconsolidated investments (net of tax)	(190,592)		(34,509)
Dividends received from unconsolidated investments and nonmarketable securities	156,964		27,420
Pension and postretirement benefit	(8,273)		(8,465)
Pension and postretirement contributions	(7,685)		(20,266)
Unrealized gain on investments in marketable securities	3,061		(2,384)
Loss on early extinguishment of debt	19,219		28,955
Deferred income taxes	39,476		27,708
Working capital changes	(888,036)		7,942
Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL	96,314		96,185
Other, net	(43,475)		(3,339)
Net cash provided by operating activities	60,311		385,853
Cash flows from investing activities:


Capital expenditures	(502,607)		(396,915)

Cash proceeds from divestitures, net	—		290,467


Sales of marketable securities, net	3,402		4,553

Investments in equity and other corporate investments	(767)		(286)
Net cash used in investing activities	(499,972)		(102,181)
Cash flows from financing activities:
Proceeds from issuance of common stock	—		1,453,888
Repayments of long-term debt and credit agreements	(455,000)		(1,173,823)
Proceeds from borrowings of long-term debt and credit agreements	1,964,216		—
Other debt repayments, net	(390,601)		(325,316)
Fees related to early extinguishment of debt	(9,767)		(24,877)
Dividends paid to shareholders	(91,894)		(86,637)
Dividends paid to noncontrolling interests	(26,525)		(43,698)

Proceeds from exercise of stock options	855		14,335
Withholding taxes paid on stock-based compensation award distributions	(10,583)		(7,047)

Other	(4,172)		(1,359)
Net cash provided by (used in) financing activities	976,529		(194,534)
Net effect of foreign exchange on cash and cash equivalents	(45,544)		(12,290)
Increase in cash and cash equivalents	491,324		76,848
Cash and cash equivalents at end of period	$	930,596	$	823,572

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1—Basis of Presentation:

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Albemarle Corporation and our wholly-owned, majority-owned and controlled subsidiaries (collectively, “Albemarle,” “we,” “us,” “our” or “the Company”) contain all adjustments necessary for a fair statement, in all material respects, of our consolidated balance sheets as of June 30, 2022 and December 31, 2021, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three- and six-month periods ended June 30, 2022 and 2021 and our condensed consolidated statements of cash flows for the six-month periods ended June 30, 2022 and 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2022. The December 31, 2021 consolidated balance sheet data herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). The results of operations for the three-and six-month periods ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

Interest and financing expenses for the six-month period ended June 30, 2022 includes an expense of $17.5 million for the correction of out of period errors regarding overstated capitalized interest values in prior periods. For the years ended December 31, 2021, 2020 and 2019, Interest expense was understated by $11.4 million, $5.5 million and $0.6 million, respectively. The Company does not believe these adjustments are material to the consolidated financial statements for any of the prior periods presented or to the six-month period ended June 30, 2022, in which they were corrected.

NOTE 2—Acquisitions:

On September 30, 2021, the Company signed a definitive agreement to acquire all of the outstanding equity of Guangxi Tianyuan New Energy Materials Co., Ltd. (“Tianyuan”), for approximately $200 million in cash. Tianyuan's operations include a recently constructed lithium processing plant strategically positioned near the Port of Qinzhou in Guangxi. The plant has designed annual conversion capacity of up to 25,000 metric tons of LCE and is capable of producing battery-grade lithium carbonate and lithium hydroxide. The plant began commercial production in the first half of 2022. The Company expects the transaction, which is subject to customary closing conditions, to close in the second half of 2022.

NOTE 3—Divestitures:

On June 1, 2021, the Company completed the sale of its fine chemistry services (“FCS”) business to W. R. Grace & Co. (“Grace”) for proceeds of approximately $570 million, consisting of $300 million in cash and the issuance to Albemarle of preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue payment-in-kind (“PIK”) dividends at an annual rate of 12% beginning two years after issuance.

As part of the transaction, Grace acquired our manufacturing facilities located in South Haven, Michigan and Tyrone, Pennsylvania. The sale of the FCS business reflects the Company’s commitment to investing in its core, growth-oriented business segments. During the three- and six-month periods ended June 30, 2021 we recorded a gain of $429.4 million ($331.6 million after income taxes) related to the sale of this business. Historical financial statements include results from this business until divested on June 1, 2021.

We determined that the FCS business met the assets held for sale criteria in accordance with ASC 360, Property, Plant and Equipment during the first quarter of 2021. The results of operations of the business classified as held for sale are included in the consolidated statements of income through June 1, 2021. This business did not qualify for discontinued operations treatment because the Company’s management does not consider the sale as representing a strategic shift that had or will have a major effect on the Company’s operations and financial results.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 4—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the six months ended June 30, 2022 (in thousands):


	Lithium		Bromine		Catalysts		Total
Balance at December 31, 2021	$	1,394,182	$	20,319	$	183,126	$	1,597,627


Foreign currency translation adjustments	(44,093)		—		(10,767)		(54,860)
Balance at June 30, 2022	$	1,350,089	$	20,319	$	172,359	$	1,542,767

The following table summarizes the changes in other intangibles and related accumulated amortization for the six months ended June 30, 2022 (in thousands):


	Customer Lists and Relationships		Trade Names and Trademarks(a)		Patents and Technology		Other		Total
Gross Asset Value
Balance at December 31, 2021	$	428,379	$	17,883	$	57,313	$	36,705	$	540,280

Foreign currency translation adjustments and other	(21,646)		(567)		(2,087)		2,149		(22,151)
Balance at June 30, 2022	$	406,733	$	17,316	$	55,226	$	38,854	$	518,129
Accumulated Amortization
Balance at December 31, 2021	$	(163,283)	$	(7,983)	$	(39,796)	$	(20,271)	$	(231,333)
Amortization	(10,687)		—		(698)		(455)		(11,840)

Foreign currency translation adjustments and other	8,140		155		1,326		726		10,347
Balance at June 30, 2022	$	(165,830)	$	(7,828)	$	(39,168)	$	(20,000)	$	(232,826)
Net Book Value at December 31, 2021	$	265,096	$	9,900	$	17,517	$	16,434	$	308,947
Net Book Value at June 30, 2022	$	240,903	$	9,488	$	16,058	$	18,854	$	285,303

(a) Net Book Value includes only indefinite-lived intangible assets.

NOTE 5—Income Taxes:

The effective income tax rate for the three-month and six-month periods ended June 30, 2022 was 22.2% and 24.2%, respectively, compared to 20.0% and 19.6% for the three-month and six-month periods ended June 30, 2021, respectively. The three-month period ended June 30, 2022 included a tax benefit related to global intangible low-taxed income and net discrete tax expenses related to withholding taxes and foreign return to provisions. The Company’s effective income tax rate fluctuates based on, among other factors, the amount and location of income. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the three-month and six-month periods ended June 30, 2022 and June 30, 2021 was impacted by a variety of factors, primarily global intangible low-taxed income and the location in which income was earned. In addition, the three- and six-month periods ended June 30, 2021 includes a $97.8 million tax expense recorded for the gain on the sale of the FCS business.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 6—Earnings Per Share:

Basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2022 and 2021 are calculated as follows (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Basic earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	406,773	$	424,600	$	660,156	$	520,277
Denominator:
Weighted-average common shares for basic earnings per share	117,116		116,809		117,091		114,700
Basic earnings per share	$	3.47	$	3.63	$	5.64	$	4.54

Diluted earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	406,773	$	424,600	$	660,156	$	520,277
Denominator:
Weighted-average common shares for basic earnings per share	117,116		116,809		117,091		114,700
Incremental shares under stock compensation plans	608		627		598		683
Weighted-average common shares for diluted earnings per share	117,724		117,436		117,689		115,383
Diluted earnings per share	$	3.46	$	3.62	$	5.61	$	4.51

On February 8, 2021, we completed an underwritten public offering of 8,496,773 shares of our common stock, par value $0.01 per share, at a price to the public of $153.00 per share. The Company also granted to the underwriters an option to purchase up to an additional 1,274,509 shares, which was exercised. The total gross proceeds from this offering were approximately $1.5 billion, before deducting expenses, underwriting discounts and commissions. The net proceeds were used for debt repayments and general corporate purposes.

On May 3, 2022, the Company declared a cash dividend of $0.395, an increase from the prior year regular quarterly dividend. This dividend was paid on July 1, 2022 to shareholders of record at the close of business as of June 10, 2022. On July 18, 2022, the Company declared a cash dividend of $0.395 per share, which is payable on October 3, 2022 to shareholders of record at the close of business as of September 16, 2022.

NOTE 7—Inventories:

The following table provides a breakdown of inventories at June 30, 2022 and December 31, 2021 (in thousands):


	June 30,		December 31,
	2022		2021
Finished goods	$	853,838	$	473,836
Raw materials and work in process(a)	272,051		259,221
Stores, supplies and other	90,324		79,863
Total	$	1,216,213	$	812,920

(a)Included $129.8 million and $149.4 million at June 30, 2022 and December 31, 2021, respectively, of work in process in our Lithium segment.

NOTE 8—Investments:

The Company holds a 49% equity interest in Windfield Holdings Pty. Ltd. (“Windfield”), where the ownership parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Windfield to be a variable interest entity (“VIE”), however this investment is not consolidated as the Company is not the primary beneficiary. The carrying amount of our 49% equity interest in Windfield, which is our most significant VIE, was $463.0 million and $462.3 million at June 30, 2022 and December 31, 2021, respectively. The Company’s aggregate net investment in all other entities which it considers to be VIEs for which the Company is not the primary beneficiary was $7.7 million at June 30, 2022 and $8.0 million at December 31, 2021. The Company’s unconsolidated VIEs are reported in Investments on the consolidated balance

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

sheets. The Company does not guarantee debt for, or have other financial support obligations to, these entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.

As part of the proceeds from the sale of the FCS business on June 1, 2021, Grace issued Albemarle preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and will accrue PIK dividends at an annual rate of 12% beginning two years after issuance. This preferred equity had a fair value of $248.4 million and $246.5 million at June 30, 2022 and December 31, 2021, respectively, which is reported in Investments in the consolidated balance sheets.

NOTE 9—Long-Term Debt:

Long-term debt at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):


	June 30,		December 31,
	2022		2021
1.125% notes due 2025	$	399,153	$	426,571
1.625% notes due 2028	529,200		565,550

3.45% Senior notes due 2029	171,612		171,612
4.15% Senior notes due 2024	—		425,000
4.65% Senior notes due 2027	650,000		—
5.05% Senior notes due 2032	600,000		—
5.45% Senior notes due 2044	350,000		350,000
5.65% Senior notes due 2052	450,000		—

Credit facilities	250,000		—
Commercial paper notes	—		388,500

Variable-rate foreign bank loans	2,953		5,226

Finance lease obligations	73,537		75,431
Other	11,087		—
Unamortized discount and debt issuance costs	(30,508)		(13,651)
Total long-term debt	3,457,034		2,394,239
Less amounts due within one year	251,304		389,920
Long-term debt, less current portion	$	3,205,730	$	2,004,319

On May 13, 2022, the Company issued a series of notes (collectively, the “2022 Notes”) as follows:

$650.0 million aggregate principal amount of senior notes, bearing interest at a rate of 4.65% payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2022. The effective interest rate on these senior notes is approximately 4.84%. These senior notes mature on June 1, 2027.
$600.0 million aggregate principal amount of senior notes, bearing interest at a rate of 5.05% payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2022. The effective interest rate on these senior notes is approximately 5.18%. These senior notes mature on June 1, 2032.
$450.0 million aggregate principal amount of senior notes, bearing interest at a rate of 5.65% payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2022. The effective interest rate on these senior notes is approximately 5.71%. These senior notes mature on June 1, 2052.

The net proceeds from the issuance of the 2022 Notes were used to repay the balance of the commercial paper notes, the remaining balance of $425.0 million of the 4.15% Senior Notes due 2024 (the “2024 Notes”) and for general corporate purposes. The 2024 Notes were originally due to mature on December 15, 2024 and bore interest at a rate of 4.15%. During the three and six months ended June 30, 2022, the Company recorded a loss on early extinguishment of debt of $19.2 million in Interest and financing expenses, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of the 2024 Notes. In addition, the loss on early extinguishment of debt includes the accelerated amortization of the interest rate swap associated with the 2024 Notes from Accumulated other comprehensive income.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

In addition, during 2022 the Company drew $250 million under its 2019 Credit Facility for general corporate purposes. The applicable margin on the 2019 Credit Facility was 1.125% at June 30, 2022.

In the first quarter of 2021, the Company made certain debt principal payments using proceeds from the February 2021 underwritten public offering of common stock. As a result, included in Interest and financing expenses for the three-month and six-month periods ended June 30, 2021 is a loss on early extinguishment of debt of $1.2 million and $29.0 million, respectively, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of this debt.

Prior to repayment in the first quarter of 2021, the carrying value of the 1.875% Euro-denominated senior notes was designated as an effective hedge of the net investment in certain foreign subsidiaries where the Euro serves as the functional currency, and gains or losses on the revaluation of these senior notes to our reporting currency were recorded in accumulated other comprehensive loss. Upon repayment of these notes, this net investment hedge was discontinued. The balance of foreign exchange revaluation gains and losses associated with this discontinued net investment hedge will remain within accumulated other comprehensive loss until the hedged net investment is sold or liquidated. Prior to the net investment hedge being discontinued, we recorded a gain of $5.1 million (net of income taxes) during the three-month and six-month periods ended June 30, 2021 in accumulated other comprehensive loss.

NOTE 10—Commitments and Contingencies:

Environmental

The following activity was recorded in environmental liabilities for the six months ended June 30, 2022 (in thousands):


Beginning balance at December 31, 2021	$	46,617
Expenditures	(1,991)

Accretion of discount	521
Additions and changes in estimates	2,811
Foreign currency translation adjustments and other	(1,634)
Ending balance at June 30, 2022	46,324
Less amounts reported in Accrued expenses	9,728
Amounts reported in Other noncurrent liabilities	$	36,596

Environmental remediation liabilities included discounted liabilities of $38.5 million and $39.7 million at June 30, 2022 and December 31, 2021, respectively, discounted at rates with a weighted-average of 3.5%, and with the undiscounted amount totaling $67.6 million and $70.0 million at June 30, 2022 and December 31, 2021, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.

The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, could be an additional $10 million to $24 million before income taxes in excess of amounts already recorded. The variability of this range is primarily driven by possible environmental remediation activity at a formerly owned site where we indemnify the buyer through a set cutoff date in 2024.

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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Litigation

We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.

On February 6, 2017, Huntsman, a subsidiary of Huntsman Corporation, filed a lawsuit in New York state court against 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. Following the arbitration panel decision, Albemarle reached a settlement with Huntsman to pay $665 million in two equal installments, with the first payment made in December 2021. The second and final payment of $332.5 million was made in May 2022.

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 and DOJ about a potential resolution of these matters.

At this time, we are unable to predict the duration, scope, result, or related costs associated with the investigations. We also are unable to predict what action may be taken by the DOJ, the SEC, or the DPP, or what penalties or remedial actions they may ultimately seek. Any determination that our operations or activities are not, or were not, in compliance with existing laws or regulations could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses. We do not believe, however, that any such fines, penalties, disgorgement, equitable relief, or other losses would have a material adverse effect on our financial condition or liquidity. However, an adverse resolution could have a material adverse effect on our results of operations in a particular period.

Indemnities

We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.

The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $62.6 million and $66.8 million at June 30, 2022 and December 31, 2021, respectively, recorded in Other noncurrent liabilities, primarily related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold in 2017.

Other

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

NOTE 11—Leases:

We lease certain office space, buildings, transportation and equipment in various countries. The initial lease terms generally range from 1 to 30 years for real estate leases, and from 2 to 15 years for non-real estate leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.

Many leases include options to terminate or renew, with renewal terms that can extend the lease term from 1 to 50 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table provides details of our lease contracts for the three-month and six-month periods ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	10,590	$	9,735	$	21,201	$	19,147
Finance lease cost:
Amortization of right of use assets	972		156		1,402		313
Interest on lease liabilities	840		752		1,693		1,507
Total finance lease cost	1,812		908		3,095		1,820

Short-term lease cost	3,271		2,176		5,970		4,780
Variable lease cost	1,914		1,813		2,631		4,178


Total lease cost	$	17,587	$	14,632	$	32,897	$	29,925

Supplemental cash flow information related to our lease contracts for the six-month periods ended June 30, 2022 and 2021 is as follows (in thousands):


	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17,539	$	14,980
Operating cash flows from finance leases	1,185		876
Financing cash flows from finance leases	661		316
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	1,560		50,856

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Supplemental balance sheet information related to our lease contracts, including the location on balance sheet, at June 30, 2022 and December 31, 2021 is as follows (in thousands, except as noted):


	June 30, 2022			December 31, 2021
Operating leases:
Other assets	$	135,143		$	154,741

Accrued expenses	30,669			31,603
Other noncurrent liabilities	106,947			126,997
Total operating lease liabilities	137,616			158,600
Finance leases:
Net property, plant and equipment	72,983			75,302

Current portion of long-term debt(a)	4,199			3,768
Long-term debt	72,194			74,011
Total finance lease liabilities	76,393			77,779
Weighted average remaining lease term (in years):
Operating leases	13.5			12.9
Finance leases	24.5			24.5
Weighted average discount rate (%):
Operating leases	3.58		%	3.44		%
Finance leases	4.46		%	4.47		%

(a) Balance includes accrued interest of finance lease recorded in Accrued liabilities.

Maturities of lease liabilities at June 30, 2022 were as follows (in thousands):


	Operating Leases		Finance Leases
Remainder of 2022	$	17,928	$	3,038
2023	31,878		6,077
2024	19,464		6,077
2025	11,921		6,077
2026	9,783		5,442
Thereafter	122,295		97,215
Total lease payments	213,269		123,926
Less imputed interest	75,653		47,533
Total	$	137,616	$	76,393

NOTE 12—Segment Information:

Our three reportable segments include: (1) Lithium; (2) Bromine; and (3) Catalysts. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. This business structure aligns with the markets and customers we serve through each of the segments. This structure also facilitates the continued standardization of business processes across the organization, and is consistent with the manner in which information is presently used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Summarized financial information concerning our reportable segments is shown in the following tables. The “All Other” category included only the FCS business that did not fit into any of our core businesses. On June 1, 2021, we completed the sale of the FCS business. See Note 3, “Divestitures,” for additional information. Amounts in the “All Other” category represent activity in this business until divested on June 1, 2021.

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

The Company’s chief operating decision maker uses adjusted EBITDA (as defined below) to assess the ongoing performance of the Company’s business segments and to allocate resources. The Company defines adjusted EBITDA as earnings before interest and financing expenses, income tax expenses, depreciation and amortization, as adjusted on a consistent basis for certain non-operating, non-recurring or unusual items in a balanced manner and on a segment basis. These non-operating, non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business and enterprise planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides transparency to investors and enables period-to-period comparability of financial performance. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, or any other financial measure reported in accordance with U.S. GAAP.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Net sales:
Lithium	$	891,516	$	320,334	$	1,441,788	$	599,310
Bromine	377,752		279,748		737,331		560,195
Catalysts	210,325		148,344		428,202		368,587
All Other	—		25,470		—		75,095

Total net sales	$	1,479,593	$	773,896	$	2,607,321	$	1,603,187

Adjusted EBITDA:
Lithium	$	495,208	$	109,441	$	803,823	$	215,877
Bromine	135,683		92,646		264,917		187,286
Catalysts	9,792		21,164		26,702		46,591
All Other	—		8,379		—		29,858
Corporate	(30,474)		(37,002)		(53,303)		(54,930)
Total adjusted EBITDA	$	610,209	$	194,628	$	1,042,139	$	424,682

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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):


	Lithium		Bromine		Catalysts		Reportable Segments Total		All Other		Corporate		Consolidated Total
Three months ended June 30, 2022
Net income (loss) attributable to Albemarle Corporation	$	452,099	$	122,461	$	(3,383)	$	571,177	$	—	$	(164,404)	$	406,773
Depreciation and amortization	42,502		13,222		13,175		68,899		—		2,094		70,993



Acquisition and integration related costs(a)	—		—		—		—		—		5,375		5,375
Interest and financing expenses(b)	—		—		—		—		—		41,409		41,409
Income tax expense	—		—		—		—		—		89,018		89,018
Non-operating pension and OPEB items	—		—		—		—		—		(5,038)		(5,038)



Other(c)	607		—		—		607		—		1,072		1,679
Adjusted EBITDA	$	495,208	$	135,683	$	9,792	$	640,683	$	—	$	(30,474)	$	610,209
Three months ended June 30, 2021
Net income (loss) attributable to Albemarle Corporation	$	74,593	$	80,148	$	8,446	$	163,187	$	7,972	$	253,441	$	424,600
Depreciation and amortization	33,497		12,498		12,718		58,713		407		2,303		61,423
Restructuring and other(d)	—		—		—		—		—		766		766
Gain on sale of business(e)	—		—		—		—		—		(429,408)		(429,408)
Acquisition and integration related costs(a)	—		—		—		—		—		1,915		1,915

Interest and financing expenses(b)	—		—		—		—		—		7,152		7,152
Income tax expense	—		—		—		—		—		106,985		106,985
Non-operating pension and OPEB items	—		—		—		—		—		(5,471)		(5,471)

Albemarle Foundation contribution(f)	—		—		—		—		—		20,000		20,000
Other(g)	1,351		—		—		1,351		—		5,315		6,666
Adjusted EBITDA	$	109,441	$	92,646	$	21,164	$	223,251	$	8,379	$	(37,002)	$	194,628
Six months ended June 30, 2022
Net income (loss) attributable to Albemarle Corporation	$	713,788	$	239,022	$	606	$	953,416	$	—	$	(293,260)	$	660,156
Depreciation and amortization	81,028		25,895		26,096		133,019		—		4,548		137,567

Loss on sale of interest in properties(h)	8,400		—		—		8,400		—		—		8,400
Acquisition and integration related costs(a)	—		—		—		—		—		7,099		7,099
Interest and financing expenses(b)	—		—		—		—		—		69,243		69,243
Income tax expense	—		—		—		—		—		169,548		169,548
Non-operating pension and OPEB items	—		—		—		—		—		(10,318)		(10,318)


Other(c)	607		—		—		607		—		(163)		444
Adjusted EBITDA	$	803,823	$	264,917	$	26,702	$	1,095,442	$	—	$	(53,303)	$	1,042,139
Six months ended June 30, 2021
Net income (loss) attributable to Albemarle Corporation	$	144,965	$	162,261	$	21,362	$	328,588	$	27,988	$	163,701	$	520,277
Depreciation and amortization	65,303		25,025		25,229		115,557		1,870		6,256		123,683
Restructuring and other(d)	—		—		—		—		—		1,540		1,540
Gain on sale of business(e)	—		—		—		—		—		(429,408)		(429,408)
Acquisition and integration related costs(a)	—		—		—		—		—		4,076		4,076

Interest and financing expenses(b)	—		—		—		—		—		51,034		51,034
Income tax expense	—		—		—		—		—		129,092		129,092
Non-operating pension and OPEB items	—		—		—		—		—		(10,936)		(10,936)
Albemarle Foundation contribution(f)	—		—		—		—		—		20,000		20,000
Other(g)	5,609		—		—		5,609		—		9,715		15,324
Adjusted EBITDA	$	215,877	$	187,286	$	46,591	$	449,754	$	29,858	$	(54,930)	$	424,682

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(a)Costs related to the acquisition, integration and potential divestitures for various significant projects, recorded in Selling, general and administrative expenses (“SG&A”).

(b)Included in Interest and financing expenses is a loss on early extinguishment of debt of $19.2 million for the three and six months ended June 30, 2022, and $1.2 million and $29.0 million for the three and six months ended June 30, 2021, respectively. See Note 9, “Long-term Debt,” for additional information. In addition, Interest and financing expenses for the six months ended June 30, 2022 includes the correction of an out of period error of $17.5 million related to the overstatement of capitalized interest in prior periods. See Note 1, “Basis of Presentation,” for further details.

(c)Included amounts for the three months ended June 30, 2022 recorded in:

Cost of goods sold - $0.5 million of expense related to the settlement of a legal matter resulting from a prior acquisition.
SG&A - $1.1 million primarily related to facility closure expenses of offices in Germany.

Included amounts for the six months ended June 30, 2022 recorded in:

Cost of goods sold - $0.5 million of expense related to the settlement of a legal matter resulting from a prior acquisition.
SG&A - $4.3 million of gains from the sale of legacy properties not part of our operations, partially offset by $2.8 million of charges for environmental reserves at sites not part of our operations and $1.1 million primarily related to facility closure expenses of offices in Germany.
Other income, net - $0.6 million gain related to a settlement received from a legal matter in a prior period.

(d)In 2021, the Company recorded facility closure related to offices in Germany, and severance expenses in Germany and Belgium, in SG&A.

(e)See Note 3, “Divestitures,” for additional information.

(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 the Company’s employees live and the Company operates. This contribution is in addition to the normal annual contribution made to the Albemarle Foundation by the Company, and is significant in size and nature in that it is intended to provide more long-term benefits in these communities.

(g)Included amounts for the three months ended June 30, 2021 recorded in:

SG&A - $4.0 million of a loss resulting from the sale of property, plant and equipment, $1.6 million of charges for an environmental reserve at a site not part of our operations and $1.4 million of expenses primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements.
Other income, net - $0.3 million of a gain resulting from the adjustment of indemnifications related to previously disposed businesses.

Included amounts for the six months ended June 30, 2021 recorded in:

SG&A - $6.0 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 income, net - $3.6 million of expenses primarily related to asset retirement obligation charges to update of an estimate at a site formerly owned by Albemarle.

(h)Expense recorded as a result of revised estimates of the obligation to construct certain lithium hydroxide conversion assets in Kemerton, Western Australia, due to cost overruns from supply chain, labor and COVID-19 pandemic related issues. The corresponding obligation was recorded in Accrued liabilities to be transferred to Mineral Resources Limited (“MRL”), which maintains a 40% ownership interest in these Kemerton assets.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 13—Pension Plans and Other Postretirement Benefits:

The components of pension and postretirement benefits cost (credit) for the three-month and six-month periods ended June 30, 2022 and 2021 were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Pension Benefits Cost (Credit):
Service cost	$	970	$	1,172	$	1,955	$	2,351
Interest cost	5,568		5,120		11,173		10,239
Expected return on assets	(10,932)		(10,901)		(22,144)		(21,794)

Amortization of prior service benefit	23		29		47		58
Total net pension benefits credit	$	(4,371)	$	(4,580)	$	(8,969)	$	(9,146)
Postretirement Benefits Cost:
Service cost	$	22	$	31	$	43	$	62
Interest cost	326		310		653		619




Total net postretirement benefits cost	$	348	$	341	$	696	$	681
Total net pension and postretirement benefits credit	$	(4,023)	$	(4,239)	$	(8,273)	$	(8,465)

All components of net benefit cost (credit), other than service cost, are included in Other income, net on the consolidated statements of income.

During the three-month and six-month periods ended June 30, 2022, the Company made contributions of $3.1 million and $6.4 million, respectively, to its qualified and nonqualified pension plans. During the three-month and six-month periods ended June 30, 2021, the Company made contributions of $4.2 million and $18.9 million, respectively, to its qualified and nonqualified pension plans.

The Company paid $0.7 million and $1.3 million in premiums to the U.S. postretirement benefit plan during the three-month and six-month periods ended June 30, 2022 and 2021, respectively. During the three-month and six-month periods ended June 30, 2021, the Company paid $0.8 million and $1.4 million, respectively, in premiums to the U.S. postretirement benefit plan.

NOTE 14—Fair Value of Financial Instruments:

In assessing the fair value of financial instruments, we use methods and assumptions that are based on market conditions and other risk factors existing at the time of assessment. Fair value information for our financial instruments is as follows:

Long-Term Debt—the fair values of our notes are estimated using Level 1 inputs and account for the difference between the recorded amount and fair value of our long-term debt. The carrying value of our remaining long-term debt reported in the accompanying consolidated balance sheets approximates fair value as substantially all of such debt bears interest based on prevailing variable market rates currently available in the countries in which we have borrowings.


	June 30, 2022				December 31, 2021
	Recorded Amount		Fair Value		Recorded Amount		Fair Value
	(In thousands)
Long-term debt	$	3,481,309	$	3,319,347	$	2,405,021	$	2,593,590

Foreign Currency Forward Contracts—During the fourth quarter of 2019, we entered into a foreign currency forward contract to hedge the cash flow exposure of non-functional currency purchases during the construction of the Kemerton plant in Australia. This derivative financial instrument is used to manage risk and is not used for trading or other speculative purposes. This foreign currency forward contract has been designated as a hedging instrument under ASC 815, Derivatives and Hedging. There were no outstanding designated foreign currency forward contracts at June 30, 2022. At December 31, 2021, we had outstanding designated foreign currency forward contracts with notional values totaling the equivalent of $36.5 million.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

We also enter into foreign currency forward contracts in connection with our risk management strategies that have not been designated as hedging instruments under ASC 815, Derivatives and Hedging, in an attempt to minimize the financial impact of changes in foreign currency exchange rates. These derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes. The fair values of our non-designated foreign currency forward contracts are estimated based on current settlement values. At June 30, 2022 and December 31, 2021, we had outstanding non-designated foreign currency forward contracts with notional values totaling $452.9 million and $618.1 million, respectively, hedging our exposure to various currencies including the Chilean peso, Euro, Chinese Renminbi, Japanese Yen, Australian Dollar and Singapore Dollar.

The following table summarizes the fair value of our foreign currency forward contracts included in the consolidated balance sheets as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022				December 31, 2021
	Assets		Liabilities		Assets		Liabilities
Designated as hedging instruments
Other current assets	$	—	$	—	$	237	$	—
Accrued expenses	—		—		—		57
Total designated as hedging instruments	—		—		237		57
Not designated as hedging instruments
Other current assets	49		—		2,901		—
Accrued expenses	—		4,928		—		248
Total not designated as hedging instruments	49		4,928		2,901		248
Total	$	49	$	4,928	$	3,138	$	305

The following table summarizes the net gains (losses) recognized for our foreign currency forward contracts during the three-month and six-month periods ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Designated as hedging instruments
(Loss) income recognized in Other comprehensive loss	$	(2,508)	$	823	$	1,509	$	(777)
Not designated as hedging instruments
(Loss) income recognized in Other income, net(a)	$	(23,298)	$	2,048	$	(27,270)	$	1,857

(a) Fluctuations in the value of our foreign currency forward contracts not designated as hedging instruments are generally expected to be offset by changes in the value of the underlying exposures being hedged, which are also reported in Other income, net.

In addition, for the six-month periods ended June 30, 2022 and 2021, we recorded net cash settlements of $19.8 million and $0.4 million, respectively, in Other, net, in our condensed consolidated statements of cash flows.

Unrealized gains and losses related to the cash flow hedges will be reclassified to earnings over the life of the related assets when settled and the related assets are placed into service.

The counterparties to our foreign currency forward contracts are major financial institutions with which we generally have other financial relationships. We are exposed to credit loss in the event of nonperformance by these counterparties. However, we do not anticipate nonperformance by the counterparties.

NOTE 15—Fair Value Measurement:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy:

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

Level 3			Unobservable inputs for the asset or liability

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022		Quoted Prices in Active Markets for Identical Items (Level 1)		Quoted Prices in Active Markets for Similar Items (Level 2)		Unobservable Inputs (Level 3)

Assets:
Available for sale debt securities(a)	$	248,364	$	—	$	—	$	248,364
Investments under executive deferred compensation plan(b)	$	26,027	$	26,027	$	—	$	—

Private equity securities measured at net asset value(c)(d)	$	4,719	$	—	$	—	$	—
Foreign currency forward contracts(e)	$	49	$	—	$	49	$	—

Liabilities:
Obligations under executive deferred compensation plan(b)	$	26,027	$	26,027	$	—	$	—
Foreign currency forward contracts(e)	$	4,928	$	—	$	4,928	$	—


	December 31, 2021		Quoted Prices in Active Markets for Identical Items (Level 1)		Quoted Prices in Active Markets for Similar Items (Level 2)		Unobservable Inputs (Level 3)

Assets:
Available for sale debt securities(a)	$	246,517	$	—	$	—	$	246,517
Investments under executive deferred compensation plan(b)	$	32,491	$	32,491	$	—	$	—

Private equity securities measured at net asset value(c)(d)	$	4,696	$	—	$	—	$	—
Foreign currency forward contracts(e)	$	3,138	$	—	$	3,138	$	—

Liabilities:
Obligations under executive deferred compensation plan(b)	$	32,491	$	32,491	$	—	$	—
Foreign currency forward contracts(e)	$	305	$	—	$	305	$	—

(a)Preferred equity of a Grace subsidiary acquired as a portion of the proceeds of the FCS sale on June 1, 2021. See Note 2, “Divestitures,” for further details on the material terms and conditions. A third-party estimate of the fair value was prepared using expected future cash flows over the period up to when the asset is likely to be redeemed, applying a discount rate that appropriately captures a market participant's view of the risk associated with the investment. These are considered to be Level 3 inputs.

(b)We maintain an Executive Deferred Compensation Plan (“EDCP”) that was adopted in 2001 and subsequently amended. The purpose of the EDCP is to provide current tax planning opportunities as well as supplemental funds upon the retirement or death of certain of our employees. The EDCP is intended to aid in attracting and retaining employees of exceptional ability by providing them with these benefits. We also maintain a Benefit Protection Trust (the “Trust”) that was created to provide a source of funds to assist in meeting the obligations of the EDCP, subject to the claims of our creditors in the event of our insolvency. Assets of the Trust are consolidated in accordance with authoritative guidance. The assets of the Trust consist primarily of mutual fund investments (which are accounted for as trading securities and are marked-to-market on a monthly basis through the consolidated statements of income) and cash and cash equivalents. As such, these assets and obligations are classified within Level 1.

(c)Primarily consists of private equity securities reported in Investments in the consolidated balance sheets. The changes in fair value are reported in Other expense, net, in our consolidated statements of income.

(d)Holdings in certain private equity securities are measured at fair value using the net asset value per share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(e)As a result of our global operating and financing activities, we are exposed to market risks from changes in foreign currency exchange rates which may adversely affect our operating results and financial position. When deemed appropriate, we minimize our risks from foreign currency exchange rate fluctuations through the use of foreign currency forward contracts. The foreign currency forward contracts are valued using broker quotations or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within Level 2. See Note 14, “Fair Value of Financial Instruments,” for further details about our foreign currency forward contracts.

The following tables set forth the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements (in thousands):


	Available for Sale Debt Securities
Beginning balance at December 31, 2021	$	246,517
Fair value adjustment	(4,521)
Accretion of discount	6,368
Ending balance at June 30, 2022	$	248,364

NOTE 16—Accumulated Other Comprehensive (Loss) Income:

The components and activity in Accumulated other comprehensive (loss) income (net of deferred income taxes) consisted of the following during the periods indicated below (in thousands):

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


	Foreign Currency Translation and Other		Net Investment Hedge(a)		Cash Flow Hedge(b)		Interest Rate Swap(c)		Total
Three months ended June 30, 2022
Balance at March 31, 2022	$	(397,510)	$	—	$	10,640	$	(6,749)	$	(393,619)
Other comprehensive loss before reclassifications	(117,840)		—		(2,509)		—		(120,349)
Amounts reclassified from accumulated other comprehensive loss	19		—		—		6,749		6,768
Other comprehensive loss, net of tax	(117,821)		—		(2,509)		6,749		(113,581)
Other comprehensive income attributable to noncontrolling interests	62		—		—		—		62
Balance at June 30, 2022	$	(515,269)	$	—	$	8,131	$	—	$	(507,138)
Three months ended June 30, 2021
Balance at March 31, 2021	$	(345,591)	$	—	$	4,849	$	(9,372)	$	(350,114)
Other comprehensive income before reclassifications	20,539		—		823		—		21,362
Amounts reclassified from accumulated other comprehensive loss	25		—		—		650		675
Other comprehensive income, net of tax	20,564		—		823		650		22,037
Other comprehensive income attributable to noncontrolling interests	76		—		—		—		76
Balance at June 30, 2021	$	(324,951)	$	—	$	5,672	$	(8,722)	$	(328,001)
Six months ended June 30, 2022
Balance at December 31, 2021	$	(391,674)	$	—	$	6,623	$	(7,399)	$	(392,450)
Other comprehensive (loss) income before reclassifications	(123,749)		—		1,508		—		(122,241)
Amounts reclassified from accumulated other comprehensive loss	39		—		—		7,399		7,438
Other comprehensive (loss) income, net of tax	(123,710)		—		1,508		7,399		(114,803)

Other comprehensive income attributable to noncontrolling interests	115		—		—		—		115
Balance at June 30, 2022	$	(515,269)	$	—	$	8,131	$	—	$	(507,138)
Six months ended June 30, 2021
Balance at December 31, 2020	$	(369,152)	$	46,593	$	6,449	$	(10,022)	$	(326,132)
Other comprehensive (loss) income before reclassifications	(7,628)		5,110		(777)		—		(3,295)
Amounts reclassified from accumulated other comprehensive loss	50		—		—		1,300		1,350
Other comprehensive (loss) income, net of tax	(7,578)		5,110		(777)		1,300		(1,945)
Amounts reclassified within accumulated other comprehensive loss	51,703		(51,703)		—		—		—
Other comprehensive income attributable to noncontrolling interests	76		—		—		—		76
Balance at June 30, 2021	$	(324,951)	$	—	$	5,672	$	(8,722)	$	(328,001)

(a)During the first quarter of 2021 the net investment hedge was discontinued following the repayment of the 1.875% Euro-denominated senior notes. The balance of foreign exchange revaluation gains and losses associated with this discontinued net investment hedge have been reclassified to Foreign currency translation and other, and will remain within accumulated other comprehensive loss until the hedged net investment is sold or liquidated.

(b)We entered into a foreign currency forward contract, which was designated and accounted for as a cash flow hedge under ASC 815, Derivatives and Hedging. See Note 14, “Fair Value of Financial Instruments,” for additional information.

(c)The pre-tax portion of amounts reclassified from accumulated other comprehensive loss is included in Interest and financing expenses. The balance of this interest rate swap was being amortized to Interest and financing expenses over the life of the 4.15% senior notes originally due in 2024. As discussed in Note 9, “Long-term Debt,” the Company repaid these notes in the second quarter of 2022, and as a result, reclassified the remaining balance of this interest rate swap to interest expense during the same period as part of the early extinguishment of debt.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

The amount of income tax (expense) benefit allocated to each component of Other comprehensive (loss) income for the three-month and six-month periods ended June 30, 2022 and 2021 is provided in the following tables (in thousands):


	Foreign Currency Translation and Other		Net Investment Hedge		Cash Flow Hedge		Interest Rate Swap
Three months ended June 30, 2022
Other comprehensive (loss) income, before tax	$	(118,431)	$	—	$	(2,509)	$	8,905
Income tax benefit (expense)	610		—		—		(2,156)
Other comprehensive (loss) income, net of tax	$	(117,821)	$	—	$	(2,509)	$	6,749

Three months ended June 30, 2021
Other comprehensive income (loss), before tax	$	20,568	$	—	$	823	$	834
Income tax expense	(4)		—		—		(184)
Other comprehensive income (loss), net of tax	$	20,564	$	—	$	823	$	650

Six months ended June 30, 2022
Other comprehensive (loss) income, before tax	$	(124,889)	$	—	$	1,508	$	9,739
Income tax benefit (expense)	1,179		—		—		(2,340)
Other comprehensive (loss) income, net of tax	$	(123,710)	$	—	$	1,508	$	7,399

Six months ended June 30, 2021
Other comprehensive income (loss), before tax	$	(7,570)	$	6,552	$	(777)	$	1,668
Income tax expense	(8)		(1,442)		—		(368)
Other comprehensive income (loss), net of tax	$	(7,578)	$	5,110	$	(777)	$	1,300

NOTE 17—Related Party Transactions:

Our consolidated statements of income include sales to and purchases from unconsolidated affiliates in the ordinary course of business as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Sales to unconsolidated affiliates	$	7,214	$	4,998	$	14,869	$	10,728
Purchases from unconsolidated affiliates(a)	$	314,886	$	55,771	$	531,440	$	88,921

(a)Increases in purchases from unconsolidated affiliates primarily relate to increased pricing and volume of spodumene purchased from our Windfield joint venture.

Our consolidated balance sheets include accounts receivable due from and payable to unconsolidated affiliates in the ordinary course of business as follows (in thousands):


	June 30, 2022		December 31, 2021
Receivables from unconsolidated affiliates	$	3,091	$	2,139
Payables to unconsolidated affiliates(a)	$	204,209	$	47,499

(a)Increases in payables to unconsolidated affiliates primarily relate to increased purchases of spodumene purchased from our Windfield joint venture under normal payment terms.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 18—Supplemental Cash Flow Information:

Supplemental information related to the condensed consolidated statements of cash flows is as follows (in thousands):


	Six Months Ended June 30,
	2022		2021
Supplemental non-cash disclosure related to investing and financing activities:
Capital expenditures included in Accounts payable	$	222,533	$	169,532
Promissory note issued for capital expenditures(a)	$	10,876	$	—
Non-cash proceeds from divestitures(b)	$	—	$	244,530

(a)During the first quarter of 2022, the Company issued a promissory note with a present value of $10.9 million for land purchased in Kings Mountain, NC. The promissory note is payable in equal annual installments from the years 2027 to 2048.

(b)Fair value of preferred equity of a Grace subsidiary received as part of the proceeds for the sale of the FCS business. See Note 2, “Divestitures,” for further details.

As part of the purchase price paid for the acquisition of a 60% interest in the MRL Wodgina Project, the Company transferred $96.3 million and $96.2 million of its construction in progress of the designated Kemerton assets during the six months ended June 30, 2022 and 2021, respectively, representing MRL’s 40% interest in the assets. The cash outflow for these assets was recorded in Capital expenditures within Cash flows from investing activities on the condensed consolidated statements of cash flows. The non-cash transfer of these assets is recorded in Non-cash transfer of 40% value of construction in progress of the Kemerton plant to MRL within Cash flows from operating activities on the consolidated statements of cash flows.

Other, net within Cash flows from operating activities on the condensed consolidated statements of cash flows for the six

months ended June 30, 2022 and 2021 included $42.5 million and $28.7 million, respectively, representing the reclassification

of the current portion of the one-time transition tax resulting from the enactment of the U.S. Tax Cuts and Jobs Act, from Other

noncurrent liabilities to Income taxes payable within current liabilities.

NOTE 19—Recently Issued Accounting Pronouncements:

In March 2020, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued additional accounting guidance which clarifies that certain optional expedients and exceptions apply to derivatives that are affected by the discounting transition. The guidance under both FASB issuances is effective March 12, 2020 through December 31, 2022. The Company currently does not expect this guidance to have a significant impact on its consolidated financial statements.

In November 2021, the FASB issued accounting guidance that requires disclosures about government assistance in the notes to the financial statements. This guidance will require the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company currently does not expect this guidance to have a significant impact on its annual financial statement disclosures.

In March 2022, the FASB issued accounting guidance that expands the Company’s abilities to hedge the benchmark interest rate risk of portfolios of financial assets or beneficial interests in a fair value hedge. This guidance expands the use of the portfolio layer method to allow multiple hedges of a single closed portfolio of assets using spot starting, forward starting, and amortizing-notional swaps. This also permits both prepayable and non prepayable financial assets to be included in the closed portfolio of assets hedged in a portfolio layer hedge. In addition, this guidance requires that basis adjustments not be allocated to individual assets for active portfolio layer method hedges, but rather be maintained on the closed portfolio of assets as a whole. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2022, including interim periods within those annual periods. The Company currently does not expect this guidance to have a significant impact on its consolidated financial statements.

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