Item 1. Financial Statements (Unaudited).

131K characters. Original on sec.gov · Markdown

Item 1. Financial Statements (Unaudited).

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net sales$1,430,385$2,370,190$2,791,121$4,950,442
Cost of goods sold(a)1,440,9631,811,7032,762,7613,115,415
Gross (loss) profit(10,578)558,48728,3601,835,027
Selling, general and administrative expenses168,948397,070346,660551,376
Capital project assets write-off292,315—309,515—
Research and development expenses20,77021,41944,30241,890
Operating (loss) profit(492,611)139,998(672,117)1,241,761
Interest and financing expenses(35,187)(25,577)(73,156)(52,354)
Other income, net33,66653,95483,567136,446
(Loss) income before income taxes and equity in net income of unconsolidated investments(494,132)168,375(661,706)1,325,853
Income tax (benefit) expense(30,660)42,987(34,381)319,950
(Loss) income before equity in net income of unconsolidated investments(463,472)125,388(627,325)1,005,903
Equity in net income of unconsolidated investments (net of tax)286,878551,051467,378947,239
Net (loss) income(176,594)676,439(159,947)1,953,142
Net income attributable to noncontrolling interests(11,604)(26,396)(25,803)(64,519)
Net (loss) income attributable to Albemarle Corporation(188,198)650,043(185,750)1,888,623
Mandatory convertible preferred stock dividends(41,688)—(53,272)—
Net (loss) income attributable to Albemarle Corporation common shareholders$(229,886)$650,043$(239,022)$1,888,623
Basic (loss) earnings per share attributable to common shareholders$(1.96)$5.54$(2.03)$16.10
Diluted (loss) earnings per share attributable to common shareholders$(1.96)$5.52$(2.03)$16.03
Weighted-average common shares outstanding – basic117,528117,332117,489117,282
Weighted-average common shares outstanding – diluted117,528117,769117,489117,805

(a)Included purchases from related unconsolidated affiliates of $582.2 million and $421.0 million for the three-month periods ended June 30, 2024 and 2023, respectively, and $1.1 billion and $774.2 million for the six-month periods ended June 30, 2024 and 2023, respectively.

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In Thousands)

(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net (loss) income$(176,594)$676,439$(159,947)$1,953,142
Other comprehensive (loss) income, net of tax:
Foreign currency translation and other(46,751)(5,635)(96,971)40,581
Cash flow hedge6,6171,026(12,043)2,127
Total other comprehensive (loss) income, net of tax(40,134)(4,609)(109,014)42,708
Comprehensive (loss) income(216,728)671,830(268,961)1,995,850
Comprehensive income attributable to noncontrolling interests(11,816)(26,396)(25,814)(64,511)
Comprehensive (loss) income attributable to Albemarle Corporation$(228,544)$645,434$(294,775)$1,931,339

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Amounts)

(Unaudited)

June 30,December 31,
20242023
Assets
Current assets:
Cash and cash equivalents$1,830,227$889,900
Trade accounts receivable, less allowance for doubtful accounts (2024 – $2,762; 2023 – $2,808)785,5531,213,160
Other accounts receivable412,181509,097
Inventories1,800,1142,161,287
Other current assets397,630443,475
Total current assets5,225,7055,216,919
Property, plant and equipment, at cost12,788,64612,233,757
Less accumulated depreciation and amortization2,951,6142,738,553
Net property, plant and equipment9,837,0329,495,204
Investments1,160,6741,369,855
Other assets320,598297,087
Goodwill1,600,9381,629,729
Other intangibles, net of amortization243,335261,858
Total assets$18,388,282$18,270,652
Liabilities And Equity
Current liabilities:
Accounts payable to third parties$1,138,975$1,537,859
Accounts payable to related parties184,198550,186
Accrued expenses508,334544,835
Current portion of long-term debt3,213625,761
Dividends payable60,66846,666
Income taxes payable63,070255,155
Total current liabilities1,958,4583,560,462
Long-term debt3,519,5043,541,002
Postretirement benefits25,92526,247
Pension benefits141,627150,312
Other noncurrent liabilities758,283769,100
Deferred income taxes501,330558,430
Commitments and contingencies (Note 6)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, authorized – 275,000, issued and outstanding – 117,528 in 2024 and 117,356 in 20231,1751,174
Mandatory convertible preferred stock, Series A, no par value, $1,000 stated value, authorized – 15,000, issued and outstanding – 2,300 in 2024 and 0 in 20232,235,105—
Additional paid-in capital2,969,8512,952,517
Accumulated other comprehensive loss(637,551)(528,526)
Retained earnings6,653,9796,987,015
Total Albemarle Corporation shareholders’ equity11,222,5599,412,180
Noncontrolling interests260,596252,919
Total equity11,483,1559,665,099
Total liabilities and equity$18,388,282$18,270,652

See accompanying Notes to the Condensed Consolidated Financial Statements.

ALBEMARLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands, Except Per Share Amounts)

(Unaudited)

(In Thousands, Except Share Data)Mandatory Convertible Preferred StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Albemarle Shareholders’ EquityNoncontrolling InterestsTotal Equity
Common Stock
SharesAmountsSharesAmounts
Balance at March 31, 2024117,527,167$1,1752,300,000$2,235,379$2,962,585$(597,205)$6,930,868$11,532,802$266,917$11,799,719
Net (loss) income(188,198)(188,198)11,604(176,594)
Other comprehensive (loss) income(40,346)(40,346)212(40,134)
Cash dividends declared, $0.40 per common share(47,003)(47,003)(18,137)(65,140)
Mandatory convertible preferred stock cumulative dividends(41,688)(41,688)(41,688)
Stock-based compensation7,3257,3257,325
Issuance of common stock, net1,463————
Issuance of mandatory convertible preferred stock, net—(274)(274)(274)
Withholding taxes paid on stock-based compensation award distributions(456)—(59)(59)(59)
Balance at June 30, 2024117,528,174$1,1752,300,000$2,235,105$2,969,851$(637,551)$6,653,979$11,222,559$260,596$11,483,155
Balance at March 31, 2023117,299,392$1,173—$—$2,931,961$(513,337)$6,792,938$9,212,735$246,335$9,459,070
Net income650,043650,04326,396676,439
Other comprehensive loss(4,609)(4,609)—(4,609)
Cash dividends declared, $0.40 per common share(46,936)(46,936)—(46,936)
Stock-based compensation10,36910,36910,369
Issuance of common stock, net71,6881(1)——
Withholding taxes paid on stock-based compensation award distributions(31,201)—(6,293)(6,293)(6,293)
Balance at June 30, 2023117,339,879$1,174—$—$2,936,036$(517,946)$7,396,045$9,815,309$272,731$10,088,040
(In Thousands, Except Share Data)Mandatory Convertible Preferred StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Albemarle Shareholders’ EquityNoncontrolling InterestsTotal Equity
Common Stock
SharesAmountsSharesAmounts
Balance at December 31, 2023117,356,270$1,174—$—$2,952,517$(528,526)$6,987,015$9,412,180$252,919$9,665,099
Net (loss) income(185,750)(185,750)25,803(159,947)
Other comprehensive (loss) income(109,025)(109,025)11(109,014)
Common stock dividends declared, $0.80 per common share(94,014)(94,014)(18,137)(112,151)
Mandatory convertible preferred stock cumulative dividends(53,272)(53,272)(53,272)
Stock-based compensation16,38216,38216,382
Exercise of stock options1,420—868686
Issuance of common stock, net262,213211,54311,54511,545
Issuance of mandatory convertible preferred stock, net2,300,0002,235,1052,235,1052,235,105
Withholding taxes paid on stock-based compensation award distributions(91,729)(1)(10,677)(10,678)(10,678)
Balance at June 30, 2024117,528,174$1,1752,300,000$2,235,105$2,969,851$(637,551)$6,653,979$11,222,559$260,596$11,483,155
Balance at December 31, 2022117,168,366$1,172—$—$2,940,840$(560,662)$5,601,277$7,982,627$208,220$8,190,847
Net income1,888,6231,888,62364,5191,953,142
Other comprehensive income (loss)42,71642,716(8)42,708
Common stock dividends declared, $0.80 per common share(93,855)(93,855)—(93,855)
Stock-based compensation20,02720,02720,027
Exercise of stock options1,220—818181
Issuance of common stock, net276,8603(3)——
Withholding taxes paid on stock-based compensation award distributions(106,567)(1)(24,909)(24,910)(24,910)
Balance at June 30, 2023117,339,879$1,174—$—$2,936,036$(517,946)$7,396,045$9,815,309$272,731$10,088,040

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,
20242023
Cash and cash equivalents at beginning of year$889,900$1,499,142
Cash flows from operating activities:
Net (loss) income(159,947)1,953,142
Adjustments to reconcile net (loss) income to cash flows from operating activities:
Depreciation and amortization262,030180,356
Non-cash capital project assets write-off276,013—
Stock-based compensation and other15,43920,017
Equity in net income of unconsolidated investments (net of tax)(467,378)(947,239)
Dividends received from unconsolidated investments and nonmarketable securities270,9261,079,439
Pension and postretirement expense2,5293,933
Pension and postretirement contributions(9,428)(8,632)
Realized loss on investments in marketable securities33,746—
Unrealized loss (gain) on investments in marketable securities23,777(61,434)
Deferred income taxes(129,087)(144,720)
Working capital changes460,937(1,155,408)
Other, net(118,711)(124,767)
Net cash provided by operating activities460,846794,687
Cash flows from investing activities:
Acquisitions, net of cash acquired—(8,240)
Capital expenditures(1,026,936)(919,295)
Sales (purchases) of marketable securities, net82,578(123,979)
Investments in equity investments and nonmarketable securities(148)(1,192)
Net cash used in investing activities(944,506)(1,052,706)
Cash flows from financing activities:
Proceeds from issuance of mandatory convertible preferred stock, net of issuance costs2,236,750—
Repayments of long-term debt and credit agreements(56,453)—
Proceeds from borrowings of long-term debt and credit agreements56,453300,000
Other debt repayments, net(627,390)(1,500)
Dividends paid to common shareholders(93,916)(93,317)
Dividends paid to mandatory convertible preferred shareholders(39,376)—
Dividends paid to noncontrolling interests(18,137)(53,145)
Proceeds from exercise of stock options8681
Withholding taxes paid on stock-based compensation award distributions(10,677)(24,910)
Other(2,758)—
Net cash provided by financing activities1,444,582127,209
Net effect of foreign exchange on cash and cash equivalents(20,595)231,406
Increase in cash and cash equivalents940,327100,596
Cash and cash equivalents at end of period$1,830,227$1,599,738

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, 2024 and December 31, 2023, our consolidated statements of (loss) income, consolidated statements of comprehensive (loss) income and consolidated statements of changes in equity for the three- and six-month periods ended June 30, 2024 and 2023 and our condensed consolidated statements of cash flows for the six-month periods ended June 30, 2024 and 2023. 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, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 15, 2024. The December 31, 2023 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, 2024 are not necessarily indicative of the results to be expected for the full year.

NOTE 2—Inventories:

The following table provides a breakdown of inventories at June 30, 2024 and December 31, 2023 (in thousands):

June 30,December 31,
20242023
Finished goods$1,203,222$1,624,893
Raw materials and work in process(a)448,372401,050
Stores, supplies and other148,520135,344
Total(b)$1,800,114$2,161,287

(a)Includes $274.3 million and $213.4 million at June 30, 2024 and December 31, 2023, respectively, of work in process in our Energy Storage segment.

(b)During the year ended December 31, 2023, the Company recorded a $604.1 million charge in Cost of goods sold to reduce the value of certain spodumene and finished goods to their net realizable value following the decline in lithium market pricing at the end of the year.

The Company purchases certain of its inventory from its equity method investments (primarily the Windfield Holdings Pty. Ltd. (“Windfield”) joint venture) and eliminates the balance of intra-entity profits on purchases of such inventory that remains unsold at the balance sheet in Inventories, specifically finished goods and equally reduces Equity in net income of unconsolidated investments (net of tax) on the consolidated statements of (loss) income. The balance of intra-entity profits on inventory purchased from equity method investments in Inventories totaled $237.7 million and $559.6 million at June 30, 2024 and December 31, 2023, respectively. The intra-entity profit is recognized in Equity in net income of unconsolidated investments (net of tax) in the period that converted inventory is sold to a third-party customer. In the same period, the intra-entity profit is also recognized as higher Cost of goods sold on the consolidated statements of (loss) income.

NOTE 3—Investments:

Proportionately Consolidated Joint Ventures

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 simplify the commercial operation agreements previously entered into, allowed us to retain full control of downstream conversion assets and 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 MRL 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. During the fourth quarter of 2023, Albemarle paid MRL approximately $380 million in cash, which included $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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

This joint venture is unincorporated with each investor holding an undivided interest in each asset and proportionately liable for each liability; therefore our proportionate share of assets, liabilities, revenue and expenses are included in the appropriate classifications in the consolidated financial statements.

Unconsolidated Joint Ventures

The following table details the Company’s equity in net income of unconsolidated investments (net of tax) for the three-month and six-month periods ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Windfield$278,995$545,943$451,674$933,242
Other joint ventures7,8835,10815,70413,997
Total$286,878$551,051$467,378$947,239

The Company holds a 49% equity interest in 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 the Company’s 49% equity interest in Windfield, which is the Company’s most significant VIE, was $626.7 million and $712.0 million at June 30, 2024 and December 31, 2023, 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 Windfield 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 six-month periods ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net sales$541,982$2,319,020$731,991$4,278,318
Gross profit391,6102,244,236541,5924,145,936
Income before income taxes326,3222,151,879420,9523,936,029
Net income226,6891,506,326293,1002,755,228

Public Equity Securities

Included in the Company’s investments balance are holdings in equity securities of public companies. 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 (loss) income. During the six-month period ended June 30, 2023, the Company purchased approximately $121.9 million of shares in publicly-traded companies. In addition, during the three-month and six-month periods ended June 30, 2024, the Company recorded unrealized mark-to-market losses of $17.8 million and $27.2 million, respectively, in Other income, net for all public equity securities held at the end of the balance sheet date. During the three-month and six-month periods ended June 30, 2023, the Company recorded unrealized mark-to-market gains of $15.0 million and $60.8 million, respectively, in Other income, net for all public equity securities held at the end of the balance sheet date.

In January 2024, the Company sold equity securities of a public company for proceeds of approximately $81.5 million. As a result of the sale, the Company realized a loss of $33.7 million in the six months ended June 30, 2024.

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 payment-in-kind (“PIK”) dividends at an annual rate of 12% on June 1, 2023. In addition, the preferred equity can be redeemed by Albemarle when the

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

accumulated balance reaches 200% of the original value. This preferred equity had a fair value of $297.8 million and $289.3 million at June 30, 2024 and December 31, 2023, respectively, which is reported in Investments in the consolidated balance sheets.

NOTE 4—Goodwill and Other Intangibles:

The following table summarizes the changes in goodwill by reportable segment for the six-month period ended June 30, 2024 (in thousands):

Energy StorageSpecialtiesKetjenTotal
Balance at December 31, 2023(a)$1,424,484$32,639$172,606$1,629,729
Foreign currency translation adjustments(22,719)(51)(6,021)(28,791)
Balance at June 30, 2024(a)$1,401,765$32,588$166,585$1,600,938

(a) Balance at June 30, 2024 and December 31, 2023 includes an accumulated impairment loss of $6.8 million in Ketjen. As a result, the balance of Ketjen at June 30, 2024 and December 31, 2023 fully consists of goodwill related to the Refining Solutions reporting unit.

The following table summarizes the changes in other intangibles and related accumulated amortization for the six-month period ended June 30, 2024 (in thousands):

Customer Lists and RelationshipsTrade Names and Trademarks**(a)**Patents and TechnologyOtherTotal
Gross Asset Value
Balance at December 31, 2023$417,803$13,405$46,287$34,649$512,144
Retirements—(2,309)(14,506)(4,409)(21,224)
Foreign currency translation adjustments and other(11,338)(264)(745)(769)(13,116)
Balance at June 30, 2024$406,465$10,832$31,036$29,471$477,804
Accumulated Amortization
Balance at December 31, 2023$(204,481)$(3,673)$(26,758)$(15,374)$(250,286)
Amortization(9,877)—(1,276)(452)(11,605)
Retirements—2,30914,5064,40921,224
Foreign currency translation adjustments and other5,409404532966,198
Balance at June 30, 2024$(208,949)$(1,324)$(13,075)$(11,121)$(234,469)
Net Book Value at December 31, 2023$213,322$9,732$19,529$19,275$261,858
Net Book Value at June 30, 2024$197,516$9,508$17,961$18,350$243,335

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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 5—Long-Term Debt:

Long-term debt at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30,December 31,
20242023
1.125% notes due 2025$402,661$416,501
1.625% notes due 2028533,850552,200
3.45% Senior notes due 2029171,612171,612
4.65% Senior notes due 2027650,000650,000
5.05% Senior notes due 2032600,000600,000
5.45% Senior notes due 2044350,000350,000
5.65% Senior notes due 2052450,000450,000
Commercial paper notes—620,000
Interest-free loan300,000300,000
Variable-rate foreign bank loans26,83230,197
Finance lease obligations113,100110,245
Other22,00022,000
Unamortized discount and debt issuance costs(97,338)(105,992)
Total long-term debt3,522,7174,166,763
Less amounts due within one year3,213625,761
Long-term debt, less current portion$3,519,504$3,541,002

During the six months ended June 30, 2024, we repaid a net amount of $620.0 million of commercial paper notes using the net proceeds received from the issuance of mandatory convertible preferred stock. See Note 7, “Equity,” for additional information.

Given the economic conditions, specifically around the market pricing of lithium, and the related anticipated impact on the Company’s future earnings, on February 9, 2024 we amended our revolving, unsecured amended and restated credit agreement dated October 28, 2022 (the “2022 Credit Agreement”), which provides for borrowings of up to $1.5 billion and matures on October 28, 2027. Borrowings under the 2022 Credit Agreement bear interest at variable rates based on a benchmark rate depending on the currency in which the loans are denominated, plus an applicable margin which ranges from 0.910% to 1.375%, depending on the Company’s credit rating from Standard & Poor’s Rating Services LLC, Moody’s Investors Services, Inc. and Fitch Ratings, Inc. With respect to loans denominated in U.S. dollars, interest is calculated using the term Secured Overnight Financing Rate (“SOFR”) plus a term SOFR adjustment of 0.10%, plus the applicable margin. The applicable margin on the facility was 1.125% as of June 30, 2024. There were no borrowings outstanding under the 2022 Credit Agreement as of June 30, 2024.

Borrowings under the 2022 Credit Agreement are conditioned upon satisfaction of certain customary conditions precedent, including the absence of defaults. The February 2024 amendment was entered into to modify the financial covenants under the 2022 Credit Agreement to avoid a potential covenant violation over the following 18 months given the market pricing of lithium. Following the February 2024 amendment, the 2022 Credit Agreement subjects the Company to two financial covenants, as well as customary affirmative and negative covenants. The first financial covenant requires that the ratio of (a) the Company’s consolidated net funded debt plus a proportionate amount of Windfield’s net funded debt to (b) consolidated Windfield-Adjusted EBITDA (as such terms are defined in the 2022 Credit Agreement) be less than or equal to (i) 3.50:1 prior to the second quarter of 2024, (ii) 5.00:1 for the second quarter of 2024, (iii) 5.50:1 for the third quarter of 2024, (iv) 4.00:1 for the fourth quarter of 2024, (v) 3.75:1 for the first and second quarters of 2025 and (vi) 3.50:1 after the second quarter of 2025. The maximum permitted leverage ratios described above are subject to adjustment in accordance with the terms of the 2022 Credit Agreement upon the consummation of an acquisition after June 30, 2025 if the consideration includes cash proceeds from issuance of funded debt in excess of $500 million.

The second financial covenant requires that, beginning in the fourth quarter of 2024, the ratio of the Company’s consolidated EBITDA to consolidated interest charges (as such terms are defined in the 2022 Credit Agreement) be no less than 2.00:1 for fiscal quarters through June 30, 2025, and no less than 3.00:1 for all fiscal quarters thereafter. The 2022 Credit

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Agreement also contains customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness. The occurrence of an event of default under the 2022 Credit Agreement could result in all loans and other obligations becoming immediately due and payable and the commitments under the 2022 Credit Agreement being terminated. Following the $2.2 billion issuance of mandatory convertible preferred stock in March 2024 and the amendments to the financial covenants, the Company expects to maintain compliance with the amended financial covenants in the near future. However, a significant and extended downturn in lithium market prices or demand could impact the Company’s ability to maintain compliance with its amended financial covenants and it could require the Company to seek additional amendments to the 2022 Credit Agreement and/or issue debt or equity securities to fund its activities and maintain financial flexibility. If the Company were unable to obtain such necessary additional amendments, this could lead to an event of default and its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

NOTE 6—Commitments and Contingencies:

Environmental

The following activity was recorded in environmental liabilities for the six months ended June 30, 2024 (in thousands):

Beginning balance at December 31, 2023$34,149
Expenditures(1,060)
Accretion of discount576
Liability releases(2,570)
Foreign currency translation adjustments and other54
Ending balance at June 30, 202431,149
Less amounts reported in Accrued expenses6,694
Amounts reported in Other noncurrent liabilities$24,455

Environmental remediation liabilities included discounted liabilities of $25.2 million and $27.4 million at June 30, 2024 and December 31, 2023, respectively, discounted at rates with a weighted-average of 3.6% and 3.7%, respectively, and with the undiscounted amount totaling $52.0 million and $55.4 million at June 30, 2024 and December 31, 2023, 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 represent an additional $48 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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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 $12.0 million and $14.5 million at June 30, 2024 and December 31, 2023, 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

The Company has contracts with certain of its 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. The Company is unable to estimate the maximum amount of the potential future liability under performance guarantees. However, the Company accrues for any potential loss for which we believe a future payment is probable and a range of loss can be reasonably estimated. At June 30, 2024, the Company believes its liability under such obligations is immaterial.

NOTE 7—Equity:

Common Stock

On May 9, 2024, the Company filed to amend the Company’s Amended and Restated Articles of Incorporation (the “Charter”) to increase the number of authorized shares of common stock, $0.01 par value per share, from 150,000,000 to 275,000,000 (the “Charter Amendment”). The Charter Amendment became effective May 10, 2024.

On May 7, 2024, the Company’s board of directors declared a cash dividend of $0.40 per share. This dividend was paid on July 1, 2024 to shareholders of record at the close of business as of June 14, 2024. On July 16, 2024, the Company’s board of directors declared a cash dividend of $0.405 per share, which is payable on October 1, 2024 to shareholders of record at the close of business as of September 13, 2024.

Mandatory Convertible Preferred Stock

On March 8, 2024, the Company issued 46,000,000 depositary shares (“Depositary Shares”), each representing a 1/20th interest in a share of Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”). The 2,300,000 shares of Mandatory Convertible Preferred Stock issued had a $1,000 per share liquidation preference. As a result of this transaction, the Company received cash proceeds of approximately $2.2 billion, net of underwriting fees and offering costs. The Company intends to use the proceeds for general corporate purposes, which may include, among other uses, funding growth capital expenditures, such as the construction and expansion of lithium operations in Australia and China that are significantly progressed or near completion, following the repayment of commercial paper with a portion of the proceeds in the first quarter of 2024.

Dividends on the Mandatory Convertible Preferred Stock are payable on a cumulative basis when, as and if declared by the Albemarle board of directors, or an authorized committee thereof, at an annual rate of 7.25% on the liquidation preference of $1,000 per share, and may be paid in cash or, subject to certain limitations, in shares of common stock or, subject to certain limitations, any combination of cash and shares of common stock. Dividends that are declared on the Mandatory Convertible Preferred Stock will be payable quarterly to the holders of record on the February 15, May 15, August 15 and November 15 of each year, immediately preceding the relevant dividend payment date, whether or not such holders convert their Depositary Shares, or such Depositary Shares are automatically converted, after a record date and on or prior to the immediately succeeding dividend payment date. The first dividend was paid in June 2024 at $17.12 per share of Mandatory Convertible

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Preferred Stock. Subsequent quarterly cash dividends are expected to be $18.125 per share of Mandatory Convertible Preferred Stock. Dividends are expected to be paid on March 1, June 1, September 1 and December 1 of each year ending on, and including, March 1, 2027.

The Company may not redeem the shares of the Mandatory Convertible Preferred Stock. However, at its option, the Company may purchase the Mandatory Convertible Preferred Stock from time to time on the open market, by tender offer, exchange offer or otherwise.

Unless converted earlier in accordance with its terms, each share of Mandatory Convertible Preferred Stock will automatically convert on the mandatory conversion date, which is expected to be March 1, 2027, into between 7.618 shares and 9.140 shares of common stock, in each case, subject to customary anti-dilution adjustments described in the certificate of designations related to the Mandatory Convertible Preferred Stock (the “Certificate of Designations”). The number of shares of common stock issuable upon conversion will be determined based on the average volume weighted average price per share of common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately prior to March 1, 2027.

Holders of shares of Mandatory Convertible Preferred Stock have the option to convert all or any portion of their shares of the Mandatory Convertible Preferred Stock at any time. The conversion rate applicable to any early conversion may in certain circumstances be increased to compensate holders of the Mandatory Convertible Preferred Stock for certain unpaid accumulated dividends as described in the Certificate of Designations.

If a Fundamental Change, as defined in the Certificate of Designations, occurs on or prior to March 1, 2027, then holders of the Mandatory Convertible Preferred Stock will be entitled to convert all or any portion of their Mandatory Convertible Preferred Stock at the fundamental change conversion rate, as defined in the Certificate of Designations, as for a specified period of time and to also receive an amount to compensate them for certain unpaid accumulated dividends and any remaining future scheduled dividend payments.

There were 2,300,000 shares of Mandatory Convertible Preferred Stock issued and outstanding at June 30, 2024.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Accumulated Other Comprehensive Loss

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

Three Months Ended June 30, 2024Three Months Ended June 30, 2023
Foreign Currency Translation and OtherCash Flow Hedge**(a)**TotalForeign Currency Translation and OtherCash Flow Hedge(a)Total
Balance, beginning of period$(586,620)$(10,585)$(597,205)$(516,662)$3,325$(513,337)
Other comprehensive (loss) income before reclassifications(46,767)4,060(42,707)(5,652)1,026(4,626)
Amounts reclassified from accumulated other comprehensive loss162,5572,57317—17
Other comprehensive (loss) income, net of tax(46,751)6,617(40,134)(5,635)1,026(4,609)
Other comprehensive income attributable to noncontrolling interests(212)—(212)———
Balance, end of period$(633,583)$(3,968)$(637,551)$(522,297)$4,351$(517,946)
Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Foreign Currency Translation and OtherCash Flow Hedge**(a)**TotalForeign Currency Translation and OtherCash Flow Hedge**(a)**Total
Balance, beginning of period$(536,601)$8,075$(528,526)$(562,886)$2,224$(560,662)
Other comprehensive (loss) income before reclassifications(97,004)(17,282)(114,286)40,5482,12742,675
Amounts reclassified from accumulated other comprehensive loss335,2395,27233—33
Other comprehensive (loss) income, net of tax(96,971)(12,043)(109,014)40,5812,12742,708
Other comprehensive (income) loss attributable to noncontrolling interests(11)—(11)8—8
Balance, end of period$(633,583)$(3,968)$(637,551)$(522,297)$4,351$(517,946)

(a)We previously 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.

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, 2024 and 2023 is provided in the following tables (in thousands):

Three Months Ended June 30, 2024Three Months Ended June 30, 2023
Foreign Currency Translation and OtherCash Flow HedgeTotalForeign Currency Translation and OtherCash Flow HedgeTotal
Other comprehensive (loss) income, before tax$(46,747)$9,453$(37,294)$(5,631)$1,026$(4,605)
Income tax expense(4)(2,836)(2,840)(4)—(4)
Other comprehensive (loss) income, net of tax$(46,751)$6,617$(40,134)$(5,635)$1,026$(4,609)
Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Foreign Currency Translation and OtherCash Flow HedgeTotalForeign Currency Translation and OtherCash Flow HedgeTotal
Other comprehensive (loss) income, before tax$(96,964)$(17,204)$(114,168)$40,347$2,127$42,474
Income tax (expense) benefit(7)5,1615,154234—234
Other comprehensive (loss) income, net of tax$(96,971)$(12,043)$(109,014)$40,581$2,127$42,708

NOTE 8—Restructuring and Capital Project Assets Write-off:

In January 2024, the Company announced measures to unlock near-term cash flow and generate long-term financial flexibility by re-phasing organic growth investments and optimizing its cost structure. During the second quarter of 2024, the Company indefinitely suspended construction of the fourth train at its Kemerton conversion plant in Western Australia, as well as deferred spending and investments with respect to certain other capital projects. The Company wrote-off the book value of assets related to these capital projects, which are no longer part of the Company’s modified capital plan, as it determined that these assets will not provide future value or will require significant re-engineering if the related projects are restarted, as well as recorded losses for associated contract cancellation costs. This resulted in charges of $292.3 million and $309.5 million recorded in Operating (loss) profit for the three-month and six-month periods ended June 30, 2024, respectively, and losses of $2.6 million and $5.4 million recorded in Other income, net for the three-month and six-month periods ended June 30, 2024, respectively.

The Company evaluated the significance of the fourth train at its Kemerton conversion plant in relation to the overall asset group and deemed it to be insignificant. Despite the insignificance of the Kemerton conversion plant to the asset group, the Company elected to evaluate the recoverability of its property, plant and equipment within the corresponding asset group as of June 30, 2024 and concluded that the carrying amount of the associated asset group is recoverable as the undiscounted cash flows of the asset group significantly exceed its carrying value. Accordingly, no impairment loss was recognized during the second quarter of 2024.

In addition, as part of the Company’s continuing plan to optimize its cost structure, the Company recorded severance costs of $2.5 million and $18.9 million during the three-month and six-month periods ended June 30, 2024, respectively, for employees in Corporate and each of the businesses. These expenses were recorded in Selling, general and administrative expenses (“SG&A”) and have primarily been paid, with the remainder expected to be paid in 2024. During the three-month and six-month periods ended June 30, 2023, $7.4 million of severance costs in the Ketjen business were recorded in SG&A.

Subsequent Event

In July 2024, the Company announced a comprehensive review of its cost and operating structure to maintain a competitive position, further generate long-term financial flexibility and drive long-term value creation. As part of this review, the Company concluded to stop construction of the third train at its Kemerton conversion plant. The Company also announced that it will put the second train at the Kemerton conversion plant into care and maintenance. As a result, the Company expects

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

to record a charge in the third quarter of 2024 in the range of approximately $0.9 billion to $1.1 billion, of which approximately $725 million to $800 million consists of the expected write-off of the carrying value of the Kemerton Train 3 assets less any salvage value, with the remainder related to contract cancellation, severance, decommissioning, demolition and other associated restructuring costs for both Kemerton Trains 2 and 3. The Company’s estimated range of the charge takes into account initial estimates for these activities and the determination of salvage value of the fixed assets, among other variables. The restructuring actions associated with these charges are expected to be substantially complete in 2024. The first train of Kemerton will continue to operate and activity around it is currently focused on commercialization efforts.

As a result of the actions taken at Kemerton Train 3 and Train 2 in the third quarter of 2024, there is a reasonable possibility within the next 12 months the Company may reach a conclusion a valuation allowance will be needed.

NOTE 9—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, 2024 and 2023 were as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Pension Benefits Cost (Credit):
Service cost$1,563$1,334$3,129$2,655
Interest cost8,1408,55816,28517,100
Expected return on assets(8,838)(8,415)(17,668)(16,824)
Amortization of prior service benefit19213941
Total net pension benefits cost$884$1,498$1,785$2,972
Postretirement Benefits Cost:
Service cost$11$12$23$24
Interest cost361469721937
Total net postretirement benefits cost$372$481$744$961
Total net pension and postretirement benefits cost$1,256$1,979$2,529$3,933

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

During the three-month and six-month periods ended June 30, 2024, the Company made contributions of $4.6 million and $9.4 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan. During the three-month and six-month periods ended June 30, 2023, the Company made contributions of $5.8 million and $8.6 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan.

NOTE 10—Income Taxes:

The effective income tax rates for the three-month and six-month periods ended June 30, 2024 were 6.2% and 5.2%, respectively, compared to 25.5% and 24.1% for the three-month and six-month periods ended June 30, 2023, respectively. The three-month and six-month periods ended June 30, 2024 included the impact of the 15% global minimum tax under the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”) developed by the Organisation for Economic Co-operation and Development (“OECD”) as part of global tax framework. The Company’s effective income tax rate fluctuates based on, among other factors, the amount and location of income. The lower effective tax rate in the three-month and six-month periods ended June 30, 2024, compared to the three-month and six-month periods ended June 30, 2023, was due to lower 2024 earnings in various jurisdictions. The difference between the U.S. federal statutory income tax rate of 21% and the Company’s effective income tax rate for the three-month and six-month periods ended June 30, 2024 was impacted by a variety of factors, primarily the location in which income was earned, including the impact of the OECD Pillar Two minimum tax and the valuation allowance for losses in certain entities in China, and an uncertain tax position recorded in Chile. The difference between the U.S. federal statutory income tax rate of 21% and the Company’s effective income tax rate for the three-month and six-month periods ended June 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, and 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”).

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 11—Earnings Per Share:

Basic and diluted (loss) earnings per share for the three-month and six-month periods ended June 30, 2024 and 2023 are calculated as follows (in thousands, except per share amounts):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Basic (loss) earnings per share
Numerator:
Net (loss) income attributable to Albemarle Corporation$(188,198)$650,043$(185,750)$1,888,623
Mandatory convertible preferred stock dividends(41,688)—(53,272)—
Net (loss) income attributable to Albemarle Corporation common shareholders$(229,886)$650,043$(239,022)$1,888,623
Denominator:
Weighted-average common shares for basic (loss) earnings per share117,528117,332117,489117,282
Basic (loss) earnings per share$(1.96)$5.54$(2.03)$16.10
Diluted (loss) earnings per share
Numerator:
Net (loss) income attributable to Albemarle Corporation$(188,198)$650,043$(185,750)$1,888,623
Mandatory convertible preferred stock dividends(41,688)—(53,272)—
Net (loss) income attributable to Albemarle Corporation common shareholders$(229,886)$650,043$(239,022)$1,888,623
Denominator:
Weighted-average common shares for basic (loss) earnings per share117,528117,332117,489117,282
Incremental shares under stock compensation plans—437—523
Weighted-average common shares for diluted (loss) earnings per share117,528117,769117,489117,805
Diluted (loss) earnings per share$(1.96)$5.52$(2.03)$16.03

The following table summarizes the number of shares, calculated on a weighted average basis, not included in the computation of diluted earnings per share because their effect would have been anti-dilutive (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Shares assuming the conversion of the mandatory convertible preferred stock19,411—12,841—
Shares under the stock compensation plans1,140511,01836

NOTE 12—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.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

The following table provides details of our lease contracts for the three-month and six-month periods ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Operating lease cost$9,572$14,311$19,118$26,062
Finance lease cost:
Amortization of right of use assets2,3571,9353,6652,780
Interest on lease liabilities1,7421,6353,2012,694
Total finance lease cost4,0993,5706,8665,474
Short-term lease cost8,7864,86014,8049,920
Variable lease cost9,2154,76617,0128,275
Total lease cost$31,672$27,507$57,800$49,731

Supplemental cash flow information related to our lease contracts for the six-month periods ended June 30, 2024 and 2023 is as follows (in thousands):

Six Months Ended June 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$18,022$24,816
Operating cash flows from finance leases6,3182,400
Financing cash flows from finance leases2,7221,081
Right-of-use assets obtained in exchange for lease obligations:
Operating leases9,44930,581
Finance leases6,20046,773

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 June 30, 2024 and December 31, 2023 is as follows (in thousands, except as noted):

June 30, 2024December 31, 2023
Operating leases:
Other assets$129,486$137,405
Accrued expenses28,36830,583
Other noncurrent liabilities108,404113,681
Total operating lease liabilities136,772144,264
Finance leases:
Net property, plant and equipment114,509112,438
Current portion of long-term debt(a)6,6979,702
Long-term debt109,887104,484
Total finance lease liabilities116,584114,186
Weighted average remaining lease term (in years):
Operating leases12.712.2
Finance leases20.620.7
Weighted average discount rate (%):
Operating leases4.66%4.74%
Finance leases5.61%4.71%

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

Maturities of lease liabilities at June 30, 2024 were as follows (in thousands):

Operating LeasesFinance Leases
Remainder of 2024$16,362$5,690
202530,76210,739
202622,35510,098
202717,01110,098
202812,38210,098
Thereafter108,091141,265
Total lease payments206,963187,988
Less imputed interest70,19171,404
Total$136,772$116,584

NOTE 13—Segment Information:

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 to evaluate performance and make resource allocation decisions.

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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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. Effective January 1, 2024, the Company changed its definition of adjusted EBITDA for financial accounting purposes. The updated definition includes Albemarle’s share of the pre-tax earnings of the Windfield joint venture, whereas the prior definition included Albemarle’s share of Windfield earnings net of tax. This calculation is consistent with the definition of adjusted EBITDA used in the leverage financial covenant calculation in the February 2024 amendment to the 2022 Credit Agreement, which is a material agreement for the Company and aligns the information presented to various stakeholders. This presentation more closely represents the materiality and financial contribution of the strategic investment in Windfield to the Company’s earnings, and more closely represents a measure of EBITDA. The Company’s updated definition of adjusted EBITDA is earnings before interest and financing expenses, income tax expenses, the proportionate share of Windfield income tax expense, depreciation and amortization, as adjusted on a consistent basis for certain non-operating, non-recurring or unusual items in a balanced manner and on a segment basis. These non-operating, non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business 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. Adjusted EBITDA for the prior period has been recast to conform to the current year presentation.

Segment information for the three-month and six-month periods ended June 30, 2024 and 2023 were as follows (in thousands).

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net sales:
Energy Storage$830,110$1,763,065$1,631,008$3,706,747
Specialties334,600371,302650,665790,080
Ketjen265,675235,823509,448453,615
Total net sales$1,430,385$2,370,190$2,791,121$4,950,442
Adjusted EBITDA:
Energy Storage$282,979$1,165,080$480,975$2,732,772
Specialties54,17560,20099,356222,358
Ketjen37,83642,88259,81557,425
Total segment adjusted EBITDA$374,990$1,268,162$640,146$3,012,555
Depreciation and amortization:
Energy Storage$100,433$56,540$187,707$108,702
Specialties23,17021,29945,60741,191
Ketjen12,93713,08425,29426,227
Total segment depreciation and amortization136,54090,923258,608176,120
Corporate1,7392,1623,4224,236
Total depreciation and amortization$138,279$93,085$262,030$180,356

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

See below for a reconciliation of total segment adjusted EBITDA to the Company’s consolidated Net (loss) 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 June 30,Six Months Ended June 30,
2024202320242023
Total segment adjusted EBITDA$374,990$1,268,162$640,146$3,012,555
Corporate expenses, net11,370(1,920)37,45015,391
Depreciation and amortization(138,279)(93,085)(262,030)(180,356)
Interest and financing expenses(35,187)(25,577)(73,156)(52,354)
Income tax benefit (expense)30,660(42,987)34,381(319,950)
Proportionate share of Windfield income tax expense(a)(119,780)(233,976)(193,469)(399,961)
Acquisition and integration related costs(b)(1,581)(6,502)(3,488)(11,610)
Restructuring and other charges(c)(2,525)(7,439)(18,861)(7,439)
Capital project assets write-off(c)(294,940)—(314,889)—
Non-operating pension and OPEB items337(612)662(1,213)
(Loss) gain in fair value of public equity securities(d)(17,780)15,020(60,939)60,846
Legal accrual(e)—(218,510)—(218,510)
Other(f)4,517(2,531)28,443(8,776)
Net (loss) income attributable to Albemarle Corporation$(188,198)$650,043$(185,750)$1,888,623

(a)Albemarle’s 49% ownership interest in the reported income tax expense of the Windfield joint venture.

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

(c)See Note 8, “Restructuring and Capital Project Assets Write-off,” for further details.

(d)Loss of $17.8 million and $27.2 million recorded in Other income, net for the three and six months ended June 30, 2024, respectively, resulting from the net change in fair value of investments in public equity securities and a loss of $33.7 million recorded in Other income, net for the six months ended June 30, 2024 resulting from the sale of investments in public equity securities. Gain of $15.0 million and $60.8 million recorded in Other income, net for the three and six months ended June 30, 2023, respectively, resulting from the net change in fair value of investments in public equity securities.

(e)Accrual recorded in SG&A representing for the agreements in principle to resolve a previously disclosed legal matter with the DOJ and SEC. This matter was settled in the third quarter of 2023.

(f)Included amounts for the three months ended June 30, 2024 recorded in:

  • SG&A - $5.1 million of expenses related to certain historical legal and environmental matters.

  • Other income, net - $8.9 million of income from PIK dividends of preferred equity in a Grace subsidiary and a $0.6 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations.

Included amounts for the three months ended June 30, 2023 recorded in:

  • SG&A - $0.7 million of facility closure expenses related to offices in Germany and $0.6 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.

  • Other income, net - $3.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses, partially offset by a $2.7 million gain in the fair value of preferred equity of a Grace subsidiary.

Included amounts for the six months ended June 30, 2024 recorded in:

  • Cost of goods sold - $1.4 million of expenses related to non-routine labor and compensation related costs that are outside normal compensation arrangements.

  • SG&A - $5.2 million of expenses related to certain historical legal and environmental matters.

  • Other income, net - $17.6 million of income from PIK dividends of preferred equity in a Grace subsidiary, a $17.3 million gain primarily from the sale of assets at a site not part of our operations, a $2.4 million gain primarily resulting from the adjustment of indemnification related to a previously disposed business and a $0.6 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations, partially offset by $2.9 million of charges for asset retirement obligations at a site not part of our operations.

Included amounts for the six months ended June 30, 2023 recorded in:

  • SG&A - $1.9 million of charges primarily for environmental reserves at sites not part of our operations, $1.4 million of facility closure expenses related to offices in Germany and $0.6 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.

  • Other income, net - $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, partially offset by a $2.7 million gain in the fair value of preferred equity of a Grace subsidiary.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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, 2024December 31, 2023
Recorded AmountFair ValueRecorded AmountFair Value
(In thousands)
Long-term debt$3,540,851$3,342,861$4,186,532$4,021,693

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 $839.3 million and $994.5 million at June 30, 2024 and December 31, 2023, respectively.

We also enter into foreign currency forward contracts in connection with our risk management strategies that have not been designated as hedging instruments under ASC 815, Derivatives and Hedging, in an attempt to minimize the financial 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, 2024 and December 31, 2023, we had outstanding non-designated foreign currency forward contracts with notional values totaling $5.9 billion and $7.1 billion, respectively, hedging our exposure to various currencies including the Chinese Renminbi, Euro, Australian Dollar and Chilean Peso.

The following table summarizes the fair value of our foreign currency forward contracts included in the consolidated balance sheets as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024December 31, 2023
AssetsLiabilitiesAssetsLiabilities
Designated as hedging instruments
Other current assets$—$—$3,489$—
Other assets——11,704—
Accrued expenses—1,250—446
Other noncurrent liabilities—888——
Total designated as hedging instruments—2,13815,193446
Not designated as hedging instruments
Other current assets1,036—2,636—
Other assets12———
Accrued expenses—2,686—5,306
Other noncurrent liabilities—2,686——
Total not designated as hedging instruments1,0485,3722,6365,306
Total$1,048$7,510$17,829$5,752

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, 2024 and 2023 (in thousands):

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Designated as hedging instruments
Income (loss) recognized in Other comprehensive (loss) income$4,060$1,026$(17,282)$2,127
Loss recognized in Other income, net$(2,557)$—$(5,239)$—
Not designated as hedging instruments
(Loss) income recognized in Other income, net(a)$(1,847)$208,174$12,975$243,407

(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, 2024 and 2023, we recorded net cash receipts of $11.2 million and $224.2 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:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2Unadjusted 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 3Unobservable inputs for the asset or liability

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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, 2024 and December 31, 2023 (in thousands):

June 30, 2024Quoted 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)$297,761$—$—$297,761
Investments under executive deferred compensation plan(b)$34,663$34,663$—$—
Public equity securities(c)$27,730$27,730$—$—
Private equity securities measured at net asset value(d)(e)$4,534$—$—$—
Foreign currency forward contracts(f)$1,048$—$1,048$—
Liabilities:
Obligations under executive deferred compensation plan(b)$34,663$34,663$—$—
Foreign currency forward contracts(f)$7,510$—$7,510$—
December 31, 2023Quoted 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)$289,307$—$—$289,307
Investments under executive deferred compensation plan(b)$33,564$33,564$—$—
Public equity securities(c)$168,928$168,928$—$—
Private equity securities measured at net asset value(d)(e)$4,536$—$—$—
Foreign currency forward contracts(f)$17,829$—$17,829$—
Liabilities:
Obligations under executive deferred compensation plan(b)$33,564$33,564$—$—
Foreign currency forward contracts(f)$5,752$—$5,752$—

(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 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 (loss) 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, and as a result these balances are classified within Level 1. Any changes reported in Other income, net in our consolidated statements of (loss) income. See Note 3, “Investments,” for further details.

(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 (loss) 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

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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, 2023$289,307
PIK dividends17,619
Cash received for tax liability(9,165)
Ending balance at June 30, 2024$297,761

NOTE 16—Related Party Transactions:

Our consolidated statements of (loss) 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,
2024202320242023
Sales to unconsolidated affiliates$227$3,673$2,185$10,773
Purchases from unconsolidated affiliates(a)$181,256$1,114,944$318,453$2,187,488

(a)Purchases from unconsolidated affiliates primarily relate to spodumene purchased from the Company’s Windfield joint venture. The decrease from prior year primarily related to the lower lithium market prices in recent months.

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, 2024December 31, 2023
Receivables from unconsolidated affiliates$915$15,992
Payables to unconsolidated affiliates(a)$184,198$550,186

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

NOTE 17—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,
20242023
Supplemental non-cash disclosure related to investing and financing activities:
Capital expenditures included in Accounts payable$320,773$408,998
Common stock issued for annual incentive bonus plan(a)11,545—

(a)During the six-month period ended June 30, 2024, the Company issued 95,003 shares of common stock to certain employees in lieu of cash as payment of a portion of their 2023 annual incentive bonus plan.

Other, net within Cash flows from operating activities on the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2024 and 2023 included $82.7 million and $64.4 million, respectively, representing the reclassification of the current portion of the one-time transition tax resulting from the enactment of the U.S. Tax Cuts and Jobs Act from Other noncurrent liabilities to Income taxes payable within current liabilities.

ALBEMARLE CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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 material 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 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 material impact on its consolidated financial statements.

In November 2023, the FASB issued guidance to update qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. The Company currently does not expect this guidance to have a material impact on its consolidated financial statement disclosures.

In December 2023, the FASB issued guidance to require qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.

Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.