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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	2,310,596	$	2,091,805	$	7,261,038	$	4,699,126
Cost of goods sold	2,255,662		1,047,991		5,371,077		2,625,858
Gross profit	54,934		1,043,814		1,889,961		2,073,268
Selling, general and administrative expenses	173,866		134,479		725,242		375,989
Research and development expenses	21,082		18,358		62,972		51,827

Loss on sale of interest in properties	—		—		—		8,400

Operating (loss) profit	(140,014)		890,977		1,101,747		1,637,052
Interest and financing expenses	(29,332)		(29,691)		(81,686)		(98,934)
Other income, net	11,182		7,974		147,628		32,237
(Loss) income before income taxes and equity in net income of unconsolidated investments	(158,164)		869,260		1,167,689		1,570,355
Income tax (benefit) expense	(8,551)		196,938		311,399		366,486
(Loss) income before equity in net income of unconsolidated investments	(149,613)		672,322		856,290		1,203,869
Equity in net income of unconsolidated investments (net of tax)	470,306		258,884		1,417,545		449,476
Net income	320,693		931,206		2,273,835		1,653,345
Net income attributable to noncontrolling interests	(18,160)		(33,991)		(82,679)		(95,974)
Net income attributable to Albemarle Corporation	$	302,533	$	897,215	$	2,191,156	$	1,557,371
Basic earnings per share	$	2.58	$	7.66	$	18.68	$	13.30
Diluted earnings per share	$	2.57	$	7.61	$	18.60	$	13.23
Weighted-average common shares outstanding – basic	117,349		117,136		117,304		117,106
Weighted-average common shares outstanding – diluted	117,783		117,869		117,797		117,749

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	320,693	$	931,206	$	2,273,835	$	1,653,345
Other comprehensive (loss) income, net of tax:
Foreign currency translation and other	(143,957)		(200,520)		(103,376)		(324,230)


Cash flow hedge	(39,088)		(9,652)		(36,961)		(8,144)
Interest rate swap	—		—		—		7,399

Total other comprehensive loss, net of tax	(183,045)		(210,172)		(140,337)		(324,975)
Comprehensive income	137,648		721,034		2,133,498		1,328,370
Comprehensive income attributable to noncontrolling interests	(18,141)		(33,990)		(82,652)		(95,858)
Comprehensive income attributable to Albemarle Corporation	$	119,507	$	687,044	$	2,050,846	$	1,232,512

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	1,601,668	$	1,499,142
Trade accounts receivable, less allowance for doubtful accounts (2023 – $2,992; 2022 – $2,534)	1,179,012		1,190,970
Other accounts receivable	528,744		185,819
Inventories	3,404,212		2,076,031
Other current assets	411,926		234,955

Total current assets	7,125,562		5,186,917
Property, plant and equipment, at cost	10,929,150		9,354,330
Less accumulated depreciation and amortization	2,620,535		2,391,333
Net property, plant and equipment	8,308,615		6,962,997
Investments	1,254,041		1,150,553


Other assets	328,518		250,558
Goodwill	1,606,077		1,617,627
Other intangibles, net of amortization	260,541		287,870
Total assets	$	18,883,354	$	15,456,522
Liabilities And Equity
Current liabilities:
Accounts payable to third parties	$	1,812,168	$	1,533,624
Accounts payable to related parties	795,088		518,377
Accrued expenses	689,106		505,894

Current portion of long-term debt	162,351		2,128
Dividends payable	46,661		46,116


Income taxes payable	436,238		134,876
Total current liabilities	3,941,612		2,741,015
Long-term debt	3,495,971		3,214,972
Postretirement benefits	32,797		32,751
Pension benefits	153,955		159,571


Other noncurrent liabilities	807,051		636,596
Deferred income taxes	289,529		480,770
Commitments and contingencies (Note 9)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 117,352 in 2023 and 117,168 in 2022	1,174		1,172
Additional paid-in capital	2,945,975		2,940,840
Accumulated other comprehensive loss	(700,972)		(560,662)
Retained earnings	7,651,638		5,601,277
Total Albemarle Corporation shareholders’ equity	9,897,815		7,982,627
Noncontrolling interests	264,624		208,220
Total equity	10,162,439		8,190,847
Total liabilities and equity	$	18,883,354	$	15,456,522

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 June 30, 2023	117,339,879		$	1,174	$	2,936,036	$	(517,946)	$	7,396,045	$	9,815,309	$	272,731	$	10,088,040
Net income									302,533		302,533		18,160		320,693
Other comprehensive loss							(183,026)				(183,026)		(19)		(183,045)
Cash dividends declared, $0.40 per common share									(46,940)		(46,940)		(26,248)		(73,188)
Stock-based compensation					11,159						11,159				11,159

Exercise of stock options	592		—		36						36				36

Issuance of common stock, net	17,031		—		—						—				—
Withholding taxes paid on stock-based compensation award distributions	(5,785)		—		(1,256)						(1,256)				(1,256)
Balance at September 30, 2023	117,351,717		$	1,174	$	2,945,975	$	(700,972)	$	7,651,638	$	9,897,815	$	264,624	$	10,162,439

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
Net income									897,215		897,215		33,991		931,206
Other comprehensive loss							(210,171)				(210,171)		(1)		(210,172)
Cash dividends declared, $0.395 per common share									(46,272)		(46,272)		(17,683)		(63,955)
Stock-based compensation					7,405						7,405				7,405

Exercise of stock options	8,377		—		735						735				735
Issuance of common stock, net	21,597		—		—						—				—
Withholding taxes paid on stock-based compensation award distributions	(6,358)		—		(1,567)						(1,567)				(1,567)
Balance at September 30, 2022	117,145,364		$	1,171	$	2,933,659	$	(717,309)	$	4,515,115	$	6,732,636	$	231,991	$	6,964,627

Balance at December 31, 2022	117,168,366		$	1,172	$	2,940,840	$	(560,662)	$	5,601,277	$	7,982,627	$	208,220	$	8,190,847
Net income									2,191,156		2,191,156		82,679		2,273,835
Other comprehensive loss							(140,310)				(140,310)		(27)		(140,337)
Cash dividends declared, $1.20 per common share									(140,795)		(140,795)		(26,248)		(167,043)
Stock-based compensation					31,186						31,186				31,186

Exercise of stock options	1,812		—		117						117				117

Issuance of common stock, net	293,891		3		(3)						—				—

Withholding taxes paid on stock-based compensation award distributions	(112,352)		(1)		(26,165)						(26,166)				(26,166)
Balance at September 30, 2023	117,351,717		$	1,174	$	2,945,975	$	(700,972)	$	7,651,638	$	9,897,815	$	264,624	$	10,162,439

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									1,557,371		1,557,371		95,974		1,653,345
Other comprehensive loss							(324,859)				(324,859)		(116)		(324,975)
Cash dividends declared, $1.185 per common share									(138,795)		(138,795)		(44,208)		(183,003)
Stock-based compensation					24,213						24,213				24,213

Exercise of stock options	16,166		—		1,203						1,203				1,203

Issuance of common stock, net	176,293		2		385						387				387

Withholding taxes paid on stock-based compensation award distributions	(62,428)		(1)		(12,149)						(12,150)				(12,150)
Balance at September 30, 2022	117,145,364		$	1,171	$	2,933,659	$	(717,309)	$	4,515,115	$	6,732,636	$	231,991	$	6,964,627

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Cash and cash equivalents at beginning of year	$	1,499,142	$	439,272
Cash flows from operating activities:
Net income	2,273,835		1,653,345
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	285,801		215,280




Loss on sale of investment in properties	—		8,400

Stock-based compensation and other	29,465		24,649
Equity in net income of unconsolidated investments (net of tax)	(1,417,545)		(449,476)
Dividends received from unconsolidated investments and nonmarketable securities	1,939,225		350,895
Pension and postretirement benefit	5,925		(12,299)
Pension and postretirement contributions	(12,243)		(10,929)
Unrealized (gain) loss on investments in marketable securities	(36,740)		3,864
Loss on early extinguishment of debt	—		19,219
Deferred income taxes	(182,764)		77,968
Working capital changes	(1,332,042)		(1,004,236)
Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL	17,132		115,969
Other, net	(146,509)		(37,047)
Net cash provided by operating activities	1,423,540		955,602
Cash flows from investing activities:
Acquisitions, net of cash acquired	(43,207)		—

Capital expenditures	(1,465,193)		(815,934)




(Purchases) sales of marketable securities, net	(205,952)		3,132

Investments in equity investments and nonmarketable securities	(1,279)		(507)
Net cash used in investing activities	(1,715,631)		(813,309)
Cash flows from financing activities:

Repayments of long-term debt and credit agreements	—		(455,000)
Proceeds from borrowings of long-term debt and credit agreements	300,000		1,964,216
Other debt borrowings (repayments), net	172,791		(391,067)
Fees related to early extinguishment of debt	—		(9,767)
Dividends paid to shareholders	(140,251)		(138,165)
Dividends paid to noncontrolling interests	(79,393)		(44,208)

Proceeds from exercise of stock options	117		1,590
Withholding taxes paid on stock-based compensation award distributions	(26,166)		(12,150)

Other	(191)		(4,198)
Net cash provided by financing activities	226,907		911,251
Net effect of foreign exchange on cash and cash equivalents	167,710		(110,013)
Increase in cash and cash equivalents	102,526		943,531
Cash and cash equivalents at end of period	$	1,601,668	$	1,382,803

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1—Basis of Presentation:

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Albemarle Corporation and our wholly-owned, majority-owned and controlled subsidiaries (collectively, “Albemarle,” “we,” “us,” “our” or the “Company”) contain all adjustments necessary for a fair statement, in all material respects, of our consolidated balance sheets as of September 30, 2023 and December 31, 2022, our consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of changes in equity for the three- and nine- month periods ended September 30, 2023 and 2022 and our condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2023 and 2022. 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, 2022, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 15, 2023. The December 31, 2022 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 nine-month periods ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

NOTE 2—Acquisitions:

Guangxi Tianyuan New Energy Materials Acquisition

On October 25, 2022, the Company completed the acquisition of all of the outstanding equity of Guangxi Tianyuan New Energy Materials Co., Ltd. (“Qinzhou”) for approximately $200 million in cash, which included the deferral of approximately $29 million. The full amount of the deferral, net of working capital adjustments, was paid in installments ending in July 2023. Qinzhou's operations include a lithium processing plant strategically positioned near the Port of Qinzhou in Guangxi, which began commercial production in the first half of 2022. The plant has designed annual conversion capacity of up to 25,000 metric tons of lithium carbonate equivalent (“LCE”) and is capable of producing battery-grade lithium carbonate and lithium hydroxide.

The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the acquisition closing date, which were based, in part, upon third-party appraisals for certain assets. The fair value of the assets and liabilities was primarily related to Property, plant and equipment of $106.6 million, Other intangibles of $16.3 million, net current liabilities of $5.5 million, and long-term liabilities of $7.1 million. The excess of the purchase price over the fair value of the net assets acquired was $76.8 million and was recorded as Goodwill.

The allocation of the purchase price was finalized in the third quarter of 2023. The fair value of the assets acquired and liabilities assumed was based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The discount rate is a significant assumption used in the valuation model. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to possible impairment.

Goodwill arising from the acquisition was recorded within the Energy Storage segment and consists largely of anticipated synergies and economies of scale from the combined companies and overall strategic importance of the acquired businesses to Albemarle. The goodwill attributable to the acquisition will not be amortizable or deductible for tax purposes.

NOTE 3—Income Taxes:

The effective income tax rate for the three-month and nine-month period ended September 30, 2023 was 5.4% and 26.7%, respectively, compared to 22.7% and 23.3% for the three-month and nine-month periods ended September 30, 2022, respectively. The three-month period ended September 30, 2023 included tax expense related to an uncertain tax position in Chile offset by the geographic mix of earnings. 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 nine-month periods ended September 30, 2023 was impacted by a variety of factors, primarily the location in which income was earned, foreign-derived intangible income and an uncertain tax position recorded in Chile. During the nine-month period ended September 30, 2023, the effective tax rate was also impacted by a non-deductible accrual for the agreements in principle to resolve a previously disclosed legal matter with the U.S. Department of Justice (“DOJ”), the SEC, and the Dutch Public Prosecutor (“DPP”) (see Note 9, “Commitments and Contingencies,” for further information). The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the three-

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

month and nine-month periods ended September 30, 2022 was impacted by a variety of factors, primarily global intangible low-taxed income and the location in which income was earned.

NOTE 4—Earnings Per Share:

Basic and diluted earnings per share for the three-month and nine-month periods ended September 30, 2023 and 2022 are calculated as follows (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Basic earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	302,533	$	897,215	$	2,191,156	$	1,557,371
Denominator:
Weighted-average common shares for basic earnings per share	117,349		117,136		117,304		117,106
Basic earnings per share	$	2.58	$	7.66	$	18.68	$	13.30

Diluted earnings per share
Numerator:
Net income attributable to Albemarle Corporation	$	302,533	$	897,215	$	2,191,156	$	1,557,371
Denominator:
Weighted-average common shares for basic earnings per share	117,349		117,136		117,304		117,106
Incremental shares under stock compensation plans	434		733		493		643
Weighted-average common shares for diluted earnings per share	117,783		117,869		117,797		117,749
Diluted earnings per share	$	2.57	$	7.61	$	18.60	$	13.23

At September 30, 2023 there were 103,916 common stock equivalents not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

On July 18, 2023, the Company declared a cash dividend of $0.40, an increase from the prior year regular quarterly dividend. This dividend was paid on October 2, 2023 to shareholders of record at the close of business as of September 15, 2023. On October 23, 2023, the Company declared a cash dividend of $0.40 per share, which is payable on January 2, 2024 to shareholders of record at the close of business as of December 15, 2023.

NOTE 5—Inventories:

The following table provides a breakdown of inventories at September 30, 2023 and December 31, 2022 (in thousands):


	September 30,		December 31,
	2023		2022
Finished goods	$	2,916,284	$	1,679,473
Raw materials and work in process(a)	359,887		296,998
Stores, supplies and other	128,041		99,560
Total	$	3,404,212	$	2,076,031

(a)Includes $194.4 million and $133.2 million at September 30, 2023 and December 31, 2022, respectively, of work in process in our Energy Storage segment.

The Company eliminates the balance of intra-entity profits from its equity method investments to the Company to Inventories, specifically finished goods. The balance of intra-entity profits on inventory purchased from equity method investments in Inventories totaled $729.4 million and $332.3 million at September 30, 2023 and December 31, 2022, respectively.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 6—Investments:

MARBL Joint Venture Agreement Restructuring

On October 18, 2023, the Company closed on the restructuring of the MARBL lithium joint venture in Australia (“MARBL”) with Mineral Resources Limited (“MRL”). This updated structure is intended to significantly simplify the commercial operation agreements previously entered into, retain full control of downstream conversion assets and to provide greater strategic opportunities for each company based on their global operations and the evolving lithium market.

Under the amended agreements, Albemarle acquired the remaining 40% ownership of the Kemerton lithium hydroxide processing facility in Australia that was jointly owned with Mineral Resources through the MARBL joint venture. Following this restructuring, Albemarle and MRL each own 50% of the Wodgina Lithium Mine Project (“Wodgina”), and MRL operates the Wodgina mine on behalf of the joint venture. Albemarle expects to pay MRL between an estimated $380 million to $400 million in cash, which includes the $180 million of consideration for the remaining ownership of Kemerton as well as a payment for the economic effective date of the transaction being retroactive to April 1, 2022.

As a result of this transaction, the Company expects to record a gain on the consolidated statement of income during the fourth quarter of 2023.

Variable Interest Entities

The Company holds a 49% equity interest in Windfield Holdings Pty. Ltd. (“Talison”), where the ownership parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Talison 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 the Company’s 49% equity interest in Windfield, which is the Company’s most significant VIE, was $524.9 million and $694.5 million at September 30, 2023 and December 31, 2022, respectively. The Company’s unconsolidated VIEs are reported in Investments on the consolidated balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.

The following table summarizes the unaudited results of operations for the Talison joint venture, which met the significant subsidiary test for subsidiaries not consolidated or 50% or less owned persons under Rule 10-01 of Regulation S-X, for the three-month and nine-month periods ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	1,478,430	$	1,295,161	$	5,756,748	$	2,314,686
Gross profit	1,410,698		1,245,340		5,556,634		2,167,442
Income before income taxes	1,353,249		1,169,655		5,289,278		1,915,577
Net income	947,275		818,758		3,702,503		1,340,908

Other

As part of the proceeds from the sale of the fine chemistry services (“FCS”) business on June 1, 2021, W.R. Grace & Co. (“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 began accruing PIK dividends at an annual rate of 12% on June 1, 2023. In addition, the preferred equity can be redeemed by Albemarle when the accumulated balance reaches 200% of the original value. This preferred equity had a fair value of $280.9 million and $260.1 million at September 30, 2023 and December 31, 2022, respectively, which is reported in Investments in the consolidated balance sheets.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 7—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the nine-month period ended September 30, 2023 (in thousands):


	Energy Storage		Specialties		Ketjen		Total
Balance at December 31, 2022	$	1,424,275	$	20,319	$	173,033	$	1,617,627
Acquisitions(a)	742		—		—		742

Segment realignment(b)	(12,316)		12,316		—		—
Foreign currency translation adjustments and other	(11,358)		—		(934)		(12,292)
Balance at September 30, 2023	$	1,401,343	$	32,635	$	172,099	$	1,606,077

(a) Represents final purchase price adjustments for the Qinzhou acquisition. See Note 2, “Acquisitions,” for additional information.

(b) Effective January 1, 2023, the Company realigned its Lithium and Bromine reportable segments into the Energy Storage and Specialties reportable segments. See Note 11, “Segment Information,” for additional details. As a result, the Company transferred goodwill from its legacy Lithium segment to the new Specialties reportable segment during the nine-month period ended September 30, 2023.

The following table summarizes the changes in other intangibles and related accumulated amortization for the nine-month period ended September 30, 2023 (in thousands):


	Customer Lists and Relationships		Trade Names and Trademarks(a)		Patents and Technology		Other		Total
Gross Asset Value
Balance at December 31, 2022	$	412,670	$	13,161	$	46,399	$	35,186	$	507,416


Foreign currency translation adjustments and other	(6,467)		(88)		(1,417)		(1,201)		(9,173)
Balance at September 30, 2023	$	406,203	$	13,073	$	44,982	$	33,985	$	498,243
Accumulated Amortization
Balance at December 31, 2022	$	(177,627)	$	(3,587)	$	(23,790)	$	(14,542)	$	(219,546)
Amortization	(19,529)		—		(1,937)		(725)		(22,191)

Foreign currency translation adjustments and other	3,084		14		469		468		4,035
Balance at September 30, 2023	$	(194,072)	$	(3,573)	$	(25,258)	$	(14,799)	$	(237,702)
Net Book Value at December 31, 2022	$	235,043	$	9,574	$	22,609	$	20,644	$	287,870
Net Book Value at September 30, 2023	$	212,131	$	9,500	$	19,724	$	19,186	$	260,541

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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 8—Long-Term Debt:

Long-term debt at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
1.125% notes due 2025	$	398,701	$	401,265
1.625% notes due 2028	528,600		532,000

3.45% Senior notes due 2029	171,612		171,612

4.65% Senior notes due 2027	650,000		650,000
5.05% Senior notes due 2032	600,000		600,000
5.45% Senior notes due 2044	350,000		350,000
5.65% Senior notes due 2052	450,000		450,000


Commercial paper notes	156,500		—

Interest-free loan	300,000		—
Variable-rate foreign bank loans	20,125		2,997

Finance lease obligations	120,844		76,537
Other	11,773		11,378
Unamortized discount and debt issuance costs	(99,833)		(28,689)
Total long-term debt	3,658,322		3,217,100
Less amounts due within one year	162,351		2,128
Long-term debt, less current portion	$	3,495,971	$	3,214,972

Current portion of long-term debt at September 30, 2023 consisted primarily of commercial paper notes with a weighted-average interest rate of approximately 5.52% and a weighted-average maturity of 3 days.

In the second quarter of 2023 the Company received a loan of $300.0 million to be repaid in five equal annual installments beginning on December 31, 2026. This interest-free loan was discounted using an imputed interest rate of 5.53% and the Company will amortize that discount through Interest and financing expenses over the term of the loan.

NOTE 9—Commitments and Contingencies:

Environmental

The following activity was recorded in environmental liabilities for the nine months ended September 30, 2023 (in thousands):


Beginning balance at December 31, 2022	$	38,245
Expenditures	(3,006)

Accretion of discount	865
Additions and changes in estimates	1,869
Foreign currency translation adjustments and other	(137)
Ending balance at September 30, 2023	37,836
Less amounts reported in Accrued expenses	10,946
Amounts reported in Other noncurrent liabilities	$	26,890

Environmental remediation liabilities included discounted liabilities of $30.5 million and $30.1 million at September 30, 2023 and December 31, 2022, respectively, discounted at rates with a weighted-average of 3.6% and 3.4%, respectively, and with the undiscounted amount totaling $58.4 million and $57.5 million at September 30, 2023 and December 31, 2022, 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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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 represent an additional $16 million before income taxes, in excess of amounts already recorded.

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

Litigation

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

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 what is now the Ketjen segment, we investigated and voluntarily self-reported potential violations of the U.S. Foreign Corrupt Practices Act to the DOJ and SEC, and also reported this conduct to the DPP. Since reporting these matters to the DOJ, SEC, and DPP, Albemarle has cooperated with these agencies in their investigations of this historical conduct. We have implemented appropriate remedial measures and strengthened our compliance program and related internal controls.

In September 2023, the Company finalized agreements to resolve these matters with the DOJ and SEC. The DPP has confirmed it will not pursue action in this matter. In connection with this resolution, which relates to conduct prior to 2018, we entered into a non-prosecution agreement with the DOJ and an administrative resolution with the SEC, pursuant to which we paid a total of $218.5 million in aggregate fines, disgorgement, and prejudgment interest to the DOJ and SEC. The resolution does not include a compliance monitorship, although the Company has agreed to certain ongoing compliance reporting obligations.

During the second quarter of 2023, the Company recorded a charge of $218.5 million in Selling, General and Administrative Expenses in its consolidated statement of operations and accrued a corresponding liability on its consolidated balance sheet for these agreements. The agreed upon amounts were paid to the DOJ and SEC in October 2023, with this matter considered finalized and no future financial obligations expected.

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 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 $28.6 million and $66.1 million at September 30, 2023 and December 31, 2022, 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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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 10—Leases:

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

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

The following table provides details of our lease contracts for the three-month and nine-month periods ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	11,307	$	11,456	$	37,369	$	32,657
Finance lease cost:
Amortization of right of use assets	1,686		952		4,466		2,354
Interest on lease liabilities	1,616		826		4,310		2,519
Total finance lease cost	3,302		1,778		8,776		4,873

Short-term lease cost	4,826		4,171		14,746		10,141
Variable lease cost	7,560		3,179		15,835		5,810


Total lease cost	$	26,995	$	20,584	$	76,726	$	53,481

Supplemental cash flow information related to our lease contracts for the nine-month periods ended September 30, 2023 and 2022 is as follows (in thousands):


	Nine Months Ended September 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	35,364	$	27,201
Operating cash flows from finance leases	3,593		2,360
Financing cash flows from finance leases	1,627		999
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	43,907		8,378
Finance leases	46,773		—

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Supplemental balance sheet information related to our lease contracts, including the location on balance sheet, at September 30, 2023 and December 31, 2022 is as follows (in thousands, except as noted):


	September 30, 2023			December 31, 2022
Operating leases:
Other assets	$	140,691		$	128,173

Accrued expenses	34,159			35,515
Other noncurrent liabilities	115,619			99,269
Total operating lease liabilities	149,778			134,784
Finance leases:
Net property, plant and equipment	123,146			81,356

Current portion of long-term debt(a)	9,450			4,995
Long-term debt	114,993			74,409
Total finance lease liabilities	124,443			79,404
Weighted average remaining lease term (in years):
Operating leases	12.2			13.3
Finance leases	21.4			22.8
Weighted average discount rate (%):
Operating leases	4.58		%	3.60		%
Finance leases	4.65		%	4.41		%

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

Maturities of lease liabilities at September 30, 2023 were as follows (in thousands):


	Operating Leases		Finance Leases
Remainder of 2023	$	13,143	$	4,997
2024	32,787		12,879
2025	27,622		9,795
2026	19,039		9,160
2027	14,726		9,160
Thereafter	112,850		148,497
Total lease payments	220,167		194,488
Less imputed interest	70,389		70,045
Total	$	149,778	$	124,443

NOTE 11—Segment Information:

Effective January 1, 2023, the Company realigned its Lithium and Bromine global business units into a new corporate structure designed to better meet customer needs and foster talent required to deliver in a competitive global environment. In addition, the Company announced its decision to retain its Catalysts business under a separate, wholly-owned subsidiary renamed Ketjen. As a result, the Company’s three reportable segments include: (1) Energy Storage; (2) Specialties; and (3) Ketjen. 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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

to evaluate performance and make resource allocation decisions. The segment information for the prior year period been recast to conform to the current year presentation.

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 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 additional useful measurements to review the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Total adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Total 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.

Segment information for the three-month and nine-month periods ended September 30, 2023 and 2022 were as follows (in thousands). Prior period amounts have been recast to reflect the current segment structure.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales:
Energy Storage	$	1,697,163	$	1,414,053	$	5,403,910	$	2,680,150
Specialties	352,722		441,928		1,142,802		1,354,950
Ketjen	260,711		235,824		714,326		664,026


Total net sales	$	2,310,596	$	2,091,805	$	7,261,038	$	4,699,126









Adjusted EBITDA:
Energy Storage	$	407,476	$	1,084,643	$	2,745,680	$	1,853,407
Specialties	46,307		133,558		268,665		433,534
Ketjen	15,159		4,635		72,584		31,337
Total segment adjusted EBITDA	468,942		1,222,836		3,086,929		2,318,278

Corporate	(15,655)		(32,870)		(5,657)		(86,173)
Total adjusted EBITDA	$	453,287	$	1,189,966	$	3,081,272	$	2,232,105

Depreciation and amortization:
Energy Storage	$	67,323	$	44,591	$	176,025	$	118,451
Specialties	22,699		16,939		63,890		50,002
Ketjen	13,259		12,689		39,486		38,785

Corporate	2,164		3,494		6,400		8,042
Total depreciation and amortization	$	105,445	$	77,713	$	285,801	$	215,280

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total segment adjusted EBITDA	$	468,942	$	1,222,836	$	3,086,929	$	2,318,278
Corporate expenses, net	(15,655)		(32,870)		(5,657)		(86,173)
Depreciation and amortization	(105,445)		(77,713)		(285,801)		(215,280)
Interest and financing expenses(a)	(29,332)		(29,691)		(81,686)		(98,934)
Income tax expense	8,551		(196,938)		(311,399)		(366,486)

Loss on sale of interest in properties, net(b)	—		—		—		(8,400)
Acquisition and integration related costs(c)	(10,043)		(2,145)		(21,653)		(9,244)

Non-operating pension and OPEB items	(620)		5,027		(1,833)		15,345

Mark-to-market gain on public equity securities(d)	(26,445)		10,626		34,401		10,626
Legal accrual(e)	—		—		(218,510)		—


Other(f)	12,580		(1,917)		(3,635)		(2,361)
Net income attributable to Albemarle Corporation	$	302,533	$	897,215	$	2,191,156	$	1,557,371

(a)Included in Interest and financing expenses for the nine-month period ended September 30, 2022 was a loss on early extinguishment of debt of $19.2 million following the May 2022 repayment of Senior Notes due in 2024. In addition, included in Interest and financing expenses for the nine-month period ended September 30, 2022 is the correction of an out of period error of $17.5 million related to the overstatement of capitalized interest in prior periods.

(b)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 MRL, which maintains a 40% ownership interest in these Kemerton assets.

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

(d)(Loss) gain recorded in Other income, net for the three-month and nine-month periods ended September 30, 2023, resulting from the change in fair value of investments in public equity securities.

(e)Accrual recorded in SG&A for the agreements in principle to resolve a previously disclosed legal matter with the DOJ, SEC and DPP. See Note 9, “Commitments and Contingencies,” for further details.

(f)Included amounts for the three-month period ended September 30, 2023 recorded in:

SG&A - $1.8 million of separation and other severance costs to employees in Corporate and the Ketjen business which are primarily expected to be paid out during 2023, $0.7 million of facility closure expenses related to offices in Germany and $0.3 million of a loss from the sale of legacy properties not part of Albemarle’s operations.
Other income, net - $8.2 million gain from PIK dividends of preferred equity in a Grace subsidiary and a $7.2 million gain resulting from insurance proceeds of a prior legal matter.

Included amounts for the three-month period ended September 30, 2022 recorded in:

Cost of goods sold - $2.7 million of expense related to one-time retention payments for certain employees during the Ketjen strategic review and business unit realignment.
SG&A - $1.9 million of expense primarily related to one-time retention payments for certain employees during the Catalysts strategic review and business unit realignment and $1.4 million primarily related to facility closure expenses of offices in Germany.
Other income, net - $3.0 million gain from the reversal of a liability related to a previous divestiture and a $1.1 million gain resulting from the adjustment of indemnification related to previously disposed businesses.

Included amounts for the nine-month period ended September 30, 2023 recorded in:

SG&A - $9.2 million of separation and other severance costs to employees in Corporate and the Ketjen business which are primarily expected to be paid out during 2023, $2.1 million of facility closure expenses related to offices in Germany, $1.9 million of charges primarily for environmental reserves at sites not part of our operations and $1.0 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.
Other income, net - $10.9 million gain from PIK dividends of preferred equity in a Grace subsidiary and a $7.2 million gain resulting from insurance proceeds of a prior legal matter, partially offset by $3.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses and $3.6 million of charges for asset retirement obligations at a site not part of our operations.

Included amounts for the nine-month period ended September 30, 2022 recorded in:

Cost of goods sold - $2.7 million of expense related to one-time retention payments for certain employees during the Ketjen strategic review and business unit realignment and $0.5 million of expense related to the settlement of a legal matter resulting from a prior acquisition.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

SG&A - $3.4 million primarily related to facility closure expenses related to offices in Germany, $2.8 million of charges for environmental reserves at sites not part of our operations and $1.9 million of expense related to one-time retention payments for certain employees during the Catalysts strategic review and business unit realignment, partially offset by $4.3 million of gains from the sale of legacy properties not part of our operations.
Other income, net - $3.0 million gain from the reversal of a liability related to a previous divestiture, a $1.1 million gain resulting from the adjustment of indemnification related to previously disposed businesses and a $0.6 million gain related to a settlement received from a legal matter in a prior period.

NOTE 12—Pension Plans and Other Postretirement Benefits:

The components of pension and postretirement benefits cost (credit) for the three-month and nine-month periods ended September 30, 2023 and 2022 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Pension Benefits Cost (Credit):
Service cost	$	1,340	$	959	$	3,995	$	2,914
Interest cost	8,587		5,530		25,687		16,703
Expected return on assets	(8,434)		(10,884)		(25,258)		(33,028)

Amortization of prior service benefit	20		21		61		68
Total net pension benefits cost (credit)	$	1,513	$	(4,374)	$	4,485	$	(13,343)
Postretirement Benefits Cost:
Service cost	$	12	$	21	$	36	$	64
Interest cost	467		327		1,404		980




Total net postretirement benefits cost	$	479	$	348	$	1,440	$	1,044
Total net pension and postretirement benefits cost (credit)	$	1,992	$	(4,026)	$	5,925	$	(12,299)

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 nine-month periods ended September 30, 2023, the Company made contributions of $3.6 million and $12.2 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan. During the three-month and nine-month periods ended September 30, 2022 the Company made contributions of $3.2 million and $10.9 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan.

NOTE 13—Fair Value of Financial Instruments:

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

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


	September 30, 2023				December 31, 2022
	Recorded Amount		Fair Value		Recorded Amount		Fair Value
	(In thousands)
Long-term debt	$	3,678,744	$	3,348,090	$	3,239,853	$	2,993,027

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 Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. We had outstanding designated foreign currency forward contracts with notional values totaling the equivalent of $1.1 billion and $64.5 million at September 30, 2023 and December 31, 2022, respectively.

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 September 30, 2023 and December 31, 2022, we had outstanding non-designated foreign currency forward contracts with notional values totaling $7.6 billion and $2.8 billion, respectively, hedging our exposure to various currencies including the Chinese Renminbi, Euro, Australian Dollar, Chilean Peso and Japanese Yen.

The following table summarizes the fair value of our foreign currency forward contracts included in the consolidated balance sheets as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023				December 31, 2022
	Assets		Liabilities		Assets		Liabilities
Designated as hedging instruments


Accrued expenses	$	—	$	9,694	$	—	$	3,159
Other noncurrent liabilities	—		25,660		—		—
Total designated as hedging instruments	—		35,354		—		3,159
Not designated as hedging instruments
Other current assets	785		—		6,016		—
Accrued expenses	—		6,830		—		85
Total not designated as hedging instruments	785		6,830		6,016		85
Total	$	785	$	42,184	$	6,016	$	3,244

The following table summarizes the net gains (losses) recognized for our foreign currency forward contracts during the three-month and nine-month periods ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Designated as hedging instruments
Loss recognized in Other comprehensive income	$	(39,020)	$	(9,653)	$	(36,893)	$	(8,144)
Not designated as hedging instruments
(Loss) income recognized in Other income, net(a)	$	(59,241)	$	(9,056)	$	184,166	$	(36,326)

(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 nine-month periods ended September 30, 2023 and 2022, we recorded net cash receipts (settlements) of $192.8 million and ($38.6) 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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 14—Fair Value Measurement:

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


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

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

Level 3			Unobservable inputs for the asset or liability

We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		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)	$	280,881	$	—	$	—	$	280,881
Investments under executive deferred compensation plan(b)	$	32,126	$	32,126	$	—	$	—
Public equity securities(c)	$	243,149	$	243,149	$	—	$	—
Private equity securities measured at net asset value(d)(e)	$	6,377	$	—	$	—	$	—
Foreign currency forward contracts(f)	$	785	$	—	$	785	$	—

Liabilities:
Obligations under executive deferred compensation plan(b)	$	32,126	$	32,126	$	—	$	—
Foreign currency forward contracts(f)	$	42,184	$	—	$	42,184	$	—


	December 31, 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)	$	260,139	$	—	$	—	$	260,139
Investments under executive deferred compensation plan(b)	$	27,270	$	27,270	$	—	$	—
Public equity securities(c)	$	5,890	$	5,890	$	—	$	—
Private equity securities measured at net asset value(d)(e)	$	6,375	$	—	$	—	$	—
Foreign currency forward contracts(f)	$	6,016	$	—	$	6,016	$	—

Liabilities:
Obligations under executive deferred compensation plan(b)	$	27,270	$	27,270	$	—	$	—
Foreign currency forward contracts(f)	$	3,244	$	—	$	3,244	$	—

(a)Preferred equity of a Grace subsidiary acquired as a portion of the proceeds of the FCS sale on June 1, 2021. 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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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)Holdings in equity securities of public companies reported in Investments in the consolidated balance sheets. The fair value is measured using publicly available share prices of the investments, with any changes reported in Other income, net in our consolidated statements of income. During the nine-month period ended September 30, 2023, the Company purchased approximately $203.4 million of shares in publicly-traded companies. In addition, the Company recorded a mark-to-market (loss) gain of ($26.4) million and $34.4 million on all public equity securities during the three- and nine-month periods ended September 30, 2023 in Other income, net.

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

(e)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.

(f)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 13, “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, 2022	$	260,139
Fair value adjustment	15,436
Accretion of discount	5,306
Ending balance at September 30, 2023	$	280,881

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 15—Accumulated Other Comprehensive (Loss) Income:

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


	Foreign Currency Translation and Other		Cash Flow Hedge(a)		Interest Rate Swap(b)		Total
Three months ended September 30, 2023
Balance at June 30, 2023	$	(522,297)	$	4,351	$	—	$	(517,946)
Other comprehensive loss before reclassifications	(143,974)		(39,021)		—		(182,995)
Amounts reclassified from accumulated other comprehensive loss	17		(67)		—		(50)
Other comprehensive loss, net of tax	(143,957)		(39,088)		—		(183,045)
Other comprehensive income attributable to noncontrolling interests	19		—		—		19
Balance at September 30, 2023	$	(666,235)	$	(34,737)	$	—	$	(700,972)
Three months ended September 30, 2022
Balance at June 30, 2022	$	(515,269)	$	8,131	$	—	$	(507,138)
Other comprehensive loss before reclassifications	(200,538)		(9,652)		—		(210,190)
Amounts reclassified from accumulated other comprehensive loss	18		—		—		18
Other comprehensive loss, net of tax	(200,520)		(9,652)		—		(210,172)
Other comprehensive loss attributable to noncontrolling interests	1		—		—		1
Balance at September 30, 2022	$	(715,788)	$	(1,521)	$	—	$	(717,309)
Nine months ended September 30, 2023
Balance at December 31, 2022	$	(562,886)	$	2,224	$	—	$	(560,662)
Other comprehensive loss before reclassifications	(103,426)		(36,894)		—		(140,320)
Amounts reclassified from accumulated other comprehensive loss	50		(67)		—		(17)
Other comprehensive loss, net of tax	(103,376)		(36,961)		—		(140,337)

Other comprehensive income attributable to noncontrolling interests	27		—		—		27
Balance at September 30, 2023	$	(666,235)	$	(34,737)	$	—	$	(700,972)
Nine months ended September 30, 2022
Balance at December 31, 2021	$	(391,674)	$	6,623	$	(7,399)	$	(392,450)
Other comprehensive loss before reclassifications	(324,287)		(8,144)		—		(332,431)
Amounts reclassified from accumulated other comprehensive loss	57		—		7,399		7,456
Other comprehensive (loss) income, net of tax	(324,230)		(8,144)		7,399		(324,975)

Other comprehensive income attributable to noncontrolling interests	116		—		—		116
Balance at September 30, 2022	$	(715,788)	$	(1,521)	$	—	$	(717,309)

(a)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.

(b)The pre-tax portion of amounts reclassified from accumulated other comprehensive loss is included in interest expense. 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. In the second quarter of 2022, the Company repaid these notes, and as a result, reclassified the remaining balance of this interest rate swap to interest expense during the same period as part of an early extinguishment of debt.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

The amount of income tax expense allocated to each component of Other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2023 and 2022 is provided in the following tables (in thousands):


	Foreign Currency Translation and Other		Cash Flow Hedge		Interest Rate Swap		Total
Three months ended September 30, 2023
Other comprehensive (loss) income, before tax	$	(143,954)	$	(39,088)	$	—	$	(183,042)
Income tax expense	(3)		—		—		(3)
Other comprehensive (loss) income, net of tax	$	(143,957)	$	(39,088)	$	—	$	(183,045)

Three months ended September 30, 2022
Other comprehensive (loss) income, before tax	$	(198,888)	$	(9,652)	$	—	$	(208,540)
Income tax expense	(1,632)		—		—		(1,632)
Other comprehensive (loss) income, net of tax	$	(200,520)	$	(9,652)	$	—	$	(210,172)

Nine months ended September 30, 2023
Other comprehensive income, before tax	$	(103,607)	$	(36,961)	$	—	$	(140,568)
Income tax benefit	231		—		—		231
Other comprehensive income, net of tax	$	(103,376)	$	(36,961)	$	—	$	(140,337)

Nine months ended September 30, 2022
Other comprehensive (loss) income, before tax	$	(323,777)	$	(8,144)	$	9,739	$	(322,182)
Income tax expense	(453)		—		(2,340)		(2,793)
Other comprehensive (loss) income, net of tax	$	(324,230)	$	(8,144)	$	7,399	$	(324,975)

NOTE 16—Related Party Transactions:

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Sales to unconsolidated affiliates	$	4,070	$	9,490	$	14,843	$	24,359
Purchases from unconsolidated affiliates(a)(b)	$	884,886	$	614,889	$	3,072,374	$	1,146,329

(a)Purchases from unconsolidated affiliates primarily relate to spodumene purchased from the Company’s Windfield joint venture.

(b)Cost of goods sold on the consolidated statements of income included purchases from related unconsolidated affiliates of $634.7 million and $214.0 million during the three-month periods ended September 30, 2023 and 2022, respectively, and $1.4 billion and $372.6 million for the nine-month periods ended September 30, 2023 and 2022, respectively.

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


	September 30, 2023		December 31, 2022
Receivables from unconsolidated affiliates	$	2,419	$	21,495
Payables to unconsolidated affiliates(a)	$	795,088	$	518,377

(a)Payables to unconsolidated affiliates primarily relate spodumene purchased from the Company’s Windfield joint venture under normal payment terms.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 17—Supplemental Cash Flow Information:

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


	Nine Months Ended September 30,
	2023		2022
Supplemental non-cash disclosure related to investing and financing activities:
Capital expenditures included in Accounts payable	$	434,882	$	253,183
Promissory note issued for capital expenditures(a)	$	—	$	10,876

(a)During 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.

As part of the purchase price paid for the acquisition of a 60% interest in the MRL Wodgina Project, the Company transferred $17.1 million and $116.0 million of its construction in progress of the designated Kemerton assets during the nine-month periods ended September 30, 2023 and 2022, 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 nine-month periods ended September 30, 2023 and 2022 included $64.4 million and $42.5 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 18—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 was originally effective March 12, 2020 through December 31, 2022. However, in December 2022, the FASB issued an update to defer the sunset date of this guidance to December 31, 2024. The Company currently does not expect this guidance to have a significant impact on its consolidated financial statements.

In October 2021, the FASB issued guidance on how to recognize and measure acquired contract assets and liabilities from revenue contracts in a business combination, which requires the acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers as if it had originated the contracts. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2022, including interim periods within those annual periods. This guidance does not currently, nor is it expected to, have a significant impact on its consolidated financial statements.

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. This guidance does not currently, nor is it expected to, have a significant impact on its consolidated financial statements.

In March 2023, the FASB issued guidance which requires the Company to amortize leasehold improvements associated with common control leases over the asset’s useful life to the common control group regardless of the lease term. This guidance

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

is effective for financial statements issued for annual periods beginning after December 15, 2023, 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.

In August 2023, the FASB issued guidance which will require a joint venture to recognize and initially measure its assets, including goodwill, and liabilities using a new basis of accounting upon formation. Initial measurement of a joint venture’s total net assets will be equal to the fair value of one hundred percent of the joint venture’s equity. In addition, a joint venture will be permitted to apply the measurement period guidance of ASC 805-10 if the initial accounting for the the joint venture formation is incomplete by the end of the reporting period in which the formation occurs. This guidance is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. The Company currently does not expect this guidance to have a significant impact on its consolidated financial statements.

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