Item 8. Financial Statements and Supplementary Data.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with management’s and our directors’ authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria for effective internal control over financial reporting described in the Internal Control—Integrated Framework 2013 set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management concluded that, as of December 31, 2020, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. The concept of reasonable assurance is based on the recognition that there are inherent limitations in all systems of internal control. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
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/S/ J. KENT MASTERS
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J. Kent Masters
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Chairman, President and Chief Executive Officer
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(principal executive officer)
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February 19, 2021
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Albemarle Corporation and Subsidiaries
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Albemarle Corporation:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Albemarle Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues with contracts from customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
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Albemarle Corporation and Subsidiaries
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company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment – Refining Solutions Reporting Unit
As described in Notes 1 and 12 to the consolidated financial statements, the Company’s goodwill balance was $1,666 million as of December 31, 2020, and the goodwill associated with the Refining Solutions reporting unit was $190 million. Management conducts an impairment test as of October 31 of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. Fair value is estimated by management using present value techniques involving future cash flows. Management’s cash flow projections for the Refining Solutions reporting unit included significant judgment and assumptions relating to revenue growth rates, adjusted EBITDA margins and the discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Refining Solutions reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, adjusted EBITDA margins, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Refining Solutions reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Refining Solutions reporting unit; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to the revenue growth rates, adjusted EBITDA margins, and the discount rate. Evaluating management’s assumptions related to the revenue growth rates and adjusted EBITDA margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external economic and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and the discount rate assumption.
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/s/ PricewaterhouseCoopers LLP
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Charlotte, North Carolina
|
February 19, 2021
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We have served as the Company’s auditor since 1994.
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Albemarle Corporation and Subsidiaries
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands, Except Per Share Amounts)
|
Year Ended December 31
|
2020
|
|
2019
|
|
2018
|
Net sales
|
$
|
3,128,909
|
|
|
$
|
3,589,427
|
|
|
$
|
3,374,950
|
|
Cost of goods sold
|
2,134,056
|
|
|
2,331,649
|
|
|
2,157,694
|
|
Gross profit
|
994,853
|
|
|
1,257,778
|
|
|
1,217,256
|
|
Selling, general and administrative expenses
|
429,827
|
|
|
533,368
|
|
|
446,090
|
|
Research and development expenses
|
59,214
|
|
|
58,287
|
|
|
70,054
|
|
|
|
|
|
|
|
Gain on sale of business
|
—
|
|
|
—
|
|
|
(210,428)
|
|
|
|
|
|
|
|
Operating profit
|
505,812
|
|
|
666,123
|
|
|
911,540
|
|
Interest and financing expenses
|
(73,116)
|
|
|
(57,695)
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|
|
(52,405)
|
|
Other expenses, net
|
(59,177)
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|
|
(45,478)
|
|
|
(64,434)
|
|
Income before income taxes and equity in net income of unconsolidated investments
|
373,519
|
|
|
562,950
|
|
|
794,701
|
|
Income tax expense
|
54,425
|
|
|
88,161
|
|
|
144,826
|
|
Income before equity in net income of unconsolidated investments
|
319,094
|
|
|
474,789
|
|
|
649,875
|
|
Equity in net income of unconsolidated investments (net of tax)
|
127,521
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|
|
129,568
|
|
|
89,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
446,615
|
|
|
604,357
|
|
|
739,139
|
|
Net income attributable to noncontrolling interests
|
(70,851)
|
|
|
(71,129)
|
|
|
(45,577)
|
|
Net income attributable to Albemarle Corporation
|
$
|
375,764
|
|
|
$
|
533,228
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|
|
$
|
693,562
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
3.53
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|
|
$
|
5.03
|
|
|
$
|
6.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
$
|
3.52
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|
|
$
|
5.02
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|
|
$
|
6.34
|
|
Weighted-average common shares outstanding—basic
|
106,402
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|
|
105,949
|
|
|
108,427
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|
Weighted-average common shares outstanding—diluted
|
106,808
|
|
|
106,321
|
|
|
109,458
|
|
See accompanying notes to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Year Ended December 31
|
2020
|
|
2019
|
|
2018
|
Net income
|
$
|
446,615
|
|
|
$
|
604,357
|
|
|
$
|
739,139
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
Foreign currency translation
|
100,389
|
|
|
(62,031)
|
|
|
(150,258)
|
|
Pension and postretirement benefits
|
(557)
|
|
|
632
|
|
|
(138)
|
|
Net investment hedge
|
(34,185)
|
|
|
8,441
|
|
|
25,786
|
|
Cash flow hedge
|
1,602
|
|
|
4,847
|
|
|
—
|
|
Interest rate swap
|
2,601
|
|
|
2,591
|
|
|
(585)
|
|
Total other comprehensive income (loss), net of tax
|
69,850
|
|
|
(45,520)
|
|
|
(125,195)
|
|
Comprehensive income
|
516,465
|
|
|
558,837
|
|
|
613,944
|
|
Comprehensive income attributable to noncontrolling interests
|
(71,098)
|
|
|
(70,662)
|
|
|
(45,396)
|
|
Comprehensive income attributable to Albemarle Corporation
|
$
|
445,367
|
|
|
$
|
488,175
|
|
|
$
|
568,548
|
|
See accompanying notes to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
December 31
|
2020
|
|
2019
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
746,724
|
|
|
$
|
613,110
|
|
Trade accounts receivable, less allowance for doubtful accounts (2020—$2,083; 2019—$3,711)
|
530,838
|
|
|
612,651
|
|
Other accounts receivable
|
61,958
|
|
|
67,551
|
|
Inventories
|
750,237
|
|
|
768,984
|
|
Other current assets
|
116,427
|
|
|
162,813
|
|
|
|
|
|
Total current assets
|
2,206,184
|
|
|
2,225,109
|
|
Property, plant and equipment, at cost
|
7,427,641
|
|
|
6,817,843
|
|
Less accumulated depreciation and amortization
|
2,073,016
|
|
|
1,908,370
|
|
Net property, plant and equipment
|
5,354,625
|
|
|
4,909,473
|
|
Investments
|
656,244
|
|
|
579,813
|
|
|
|
|
|
Other assets
|
219,268
|
|
|
213,061
|
|
Goodwill
|
1,665,520
|
|
|
1,578,785
|
|
Other intangibles, net of amortization
|
349,105
|
|
|
354,622
|
|
Total assets
|
$
|
10,450,946
|
|
|
$
|
9,860,863
|
|
Liabilities and Equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
483,221
|
|
|
$
|
574,138
|
|
Accrued expenses
|
440,763
|
|
|
576,297
|
|
Current portion of long-term debt
|
804,677
|
|
|
187,336
|
|
Dividends payable
|
40,937
|
|
|
38,764
|
|
|
|
|
|
|
|
|
|
Income taxes payable
|
32,251
|
|
|
32,461
|
|
Total current liabilities
|
1,801,849
|
|
|
1,408,996
|
|
Long-term debt
|
2,767,381
|
|
|
2,862,921
|
|
Postretirement benefits
|
48,075
|
|
|
50,899
|
|
Pension benefits
|
340,818
|
|
|
292,073
|
|
|
|
|
|
Other noncurrent liabilities
|
629,377
|
|
|
754,536
|
|
Deferred income taxes
|
394,852
|
|
|
397,858
|
|
Commitments and contingencies (Note 17)
|
|
|
|
Equity:
|
|
|
|
Albemarle Corporation shareholders’ equity:
|
|
|
|
Common stock, $.01 par value (authorized 150,000 shares), issued and outstanding — 106,842 in 2020 and 106,040 in 2019
|
1,069
|
|
|
1,061
|
|
Additional paid-in capital
|
1,438,038
|
|
|
1,383,446
|
|
Accumulated other comprehensive loss
|
(326,132)
|
|
|
(395,735)
|
|
Retained earnings
|
3,155,252
|
|
|
2,943,478
|
|
Total Albemarle Corporation shareholders’ equity
|
4,268,227
|
|
|
3,932,250
|
|
Noncontrolling interests
|
200,367
|
|
|
161,330
|
|
Total equity
|
4,468,594
|
|
|
4,093,580
|
|
Total liabilities and equity
|
$
|
10,450,946
|
|
|
$
|
9,860,863
|
|
See accompanying notes to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands, Except Share Data)
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Retained Earnings
|
|
Total Albemarle
Shareholders’ Equity
|
|
Noncontrolling Interests
|
|
Total Equity
|
Shares
|
|
Amounts
|
|
Balance at January 1, 2018
|
|
110,546,674
|
|
|
$
|
1,105
|
|
|
$
|
1,863,949
|
|
|
$
|
(225,668)
|
|
|
$
|
2,035,163
|
|
|
$
|
3,674,549
|
|
|
$
|
143,147
|
|
|
$
|
3,817,696
|
|
Net income
|
|
|
|
|
|
|
|
|
|
693,562
|
|
|
693,562
|
|
|
45,577
|
|
|
739,139
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
(125,014)
|
|
|
|
|
(125,014)
|
|
|
(181)
|
|
|
(125,195)
|
|
Cash dividends declared, $1.34 per common share
|
|
|
|
|
|
|
|
|
|
(144,601)
|
|
|
(144,601)
|
|
|
(14,756)
|
|
|
(159,357)
|
|
Cumulative adjustments from adoption of income tax standard updates
|
|
|
|
|
|
|
|
|
|
(18,074)
|
|
|
(18,074)
|
|
|
|
|
(18,074)
|
|
Stock-based compensation
|
|
|
|
|
|
18,506
|
|
|
|
|
|
|
18,506
|
|
|
|
|
18,506
|
|
Exercise of stock options
|
|
94,031
|
|
|
1
|
|
|
3,632
|
|
|
|
|
|
|
3,633
|
|
|
|
|
3,633
|
|
Shares repurchased
|
|
(5,262,654)
|
|
|
(53)
|
|
|
(499,947)
|
|
|
|
|
|
|
(500,000)
|
|
|
|
|
(500,000)
|
|
Issuance of common stock, net
|
|
383,974
|
|
|
4
|
|
|
(4)
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Shares withheld for withholding taxes associated with common stock issuances
|
|
(145,997)
|
|
|
(1)
|
|
|
(17,239)
|
|
|
|
|
|
|
(17,240)
|
|
|
|
|
(17,240)
|
|
Balance at December 31, 2018
|
|
105,616,028
|
|
|
$
|
1,056
|
|
|
$
|
1,368,897
|
|
|
$
|
(350,682)
|
|
|
$
|
2,566,050
|
|
|
$
|
3,585,321
|
|
|
$
|
173,787
|
|
|
$
|
3,759,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
533,228
|
|
|
533,228
|
|
|
71,129
|
|
|
604,357
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
(45,053)
|
|
|
|
|
(45,053)
|
|
|
(467)
|
|
|
(45,520)
|
|
Cash dividends declared, $1.47 per common share
|
|
|
|
|
|
|
|
|
|
(155,800)
|
|
|
(155,800)
|
|
|
(83,187)
|
|
|
(238,987)
|
|
Stock-based compensation
|
|
|
|
|
|
21,284
|
|
|
|
|
|
|
21,284
|
|
|
|
|
21,284
|
|
Exercise of stock options
|
|
161,909
|
|
|
2
|
|
|
4,812
|
|
|
|
|
|
|
4,814
|
|
|
|
|
4,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock, net
|
|
396,269
|
|
|
4
|
|
|
(4)
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Increase in ownership interest of noncontrolling interest
|
|
|
|
|
|
(513)
|
|
|
|
|
|
|
(513)
|
|
|
68
|
|
|
(445)
|
|
Shares withheld for withholding taxes associated with common stock issuances
|
|
(133,991)
|
|
|
(1)
|
|
|
(11,030)
|
|
|
|
|
|
|
(11,031)
|
|
|
|
|
(11,031)
|
|
Balance at December 31, 2019
|
|
106,040,215
|
|
|
$
|
1,061
|
|
|
$
|
1,383,446
|
|
|
$
|
(395,735)
|
|
|
$
|
2,943,478
|
|
|
$
|
3,932,250
|
|
|
$
|
161,330
|
|
|
$
|
4,093,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
375,764
|
|
|
375,764
|
|
|
70,851
|
|
|
446,615
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
69,603
|
|
|
|
|
69,603
|
|
|
247
|
|
|
69,850
|
|
Cash dividends declared, $1.54 per common share
|
|
|
|
|
|
|
|
|
|
(163,990)
|
|
|
(163,990)
|
|
|
(32,061)
|
|
|
(196,051)
|
|
Stock-based compensation
|
|
|
|
|
|
19,306
|
|
|
|
|
|
|
19,306
|
|
|
|
|
19,306
|
|
Exercise of stock options
|
|
682,068
|
|
|
7
|
|
|
40,430
|
|
|
|
|
|
|
40,437
|
|
|
|
|
40,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock, net
|
|
185,918
|
|
|
2
|
|
|
(2)
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Shares withheld for withholding taxes associated with common stock issuances
|
|
(65,832)
|
|
|
(1)
|
|
|
(5,142)
|
|
|
|
|
|
|
(5,143)
|
|
|
|
|
(5,143)
|
|
Balance at December 31, 2020
|
|
106,842,369
|
|
|
$
|
1,069
|
|
|
$
|
1,438,038
|
|
|
$
|
(326,132)
|
|
|
$
|
3,155,252
|
|
|
$
|
4,268,227
|
|
|
$
|
200,367
|
|
|
$
|
4,468,594
|
|
See accompanying notes to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Year Ended December 31
|
2020
|
|
2019
|
|
2018
|
Cash and cash equivalents at beginning of year
|
$
|
613,110
|
|
|
$
|
555,320
|
|
|
$
|
1,137,303
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
446,615
|
|
|
604,357
|
|
|
739,139
|
|
Adjustments to reconcile net income to cash flows from operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
231,984
|
|
|
213,484
|
|
|
200,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business or joint venture
|
(7,168)
|
|
|
—
|
|
|
(210,428)
|
|
Gain on sale of property
|
—
|
|
|
(14,411)
|
|
|
—
|
|
Stock-based compensation and other
|
22,837
|
|
|
19,680
|
|
|
15,228
|
|
Equity in net income of unconsolidated investments (net of tax)
|
(127,521)
|
|
|
(129,568)
|
|
|
(89,264)
|
|
Dividends received from unconsolidated investments and nonmarketable securities
|
88,161
|
|
|
71,746
|
|
|
57,415
|
|
Pension and postretirement expense
|
45,658
|
|
|
31,515
|
|
|
10,410
|
|
Pension and postretirement contributions
|
(16,434)
|
|
|
(16,478)
|
|
|
(15,236)
|
|
Unrealized gain on investments in marketable securities
|
(4,635)
|
|
|
(2,809)
|
|
|
(527)
|
|
Loss on early extinguishment of debt
|
—
|
|
|
4,829
|
|
|
—
|
|
Deferred income taxes
|
(1,976)
|
|
|
14,394
|
|
|
49,164
|
|
Changes in current assets and liabilities, net of effects of acquisitions and divestitures:
|
|
|
|
|
|
Decrease (increase) in accounts receivable
|
100,118
|
|
|
(18,220)
|
|
|
(97,448)
|
|
Decrease (increase) in inventories
|
51,978
|
|
|
(46,304)
|
|
|
(124,067)
|
|
Decrease (increase) in other current assets
|
7,902
|
|
|
(32,941)
|
|
|
(2,181)
|
|
(Decrease) increase in accounts payable
|
(31,519)
|
|
|
(12,234)
|
|
|
73,730
|
|
(Decrease) in accrued expenses and income taxes payable
|
(215,011)
|
|
|
(4,640)
|
|
|
(1,999)
|
|
Other, net
|
207,925
|
|
|
36,974
|
|
|
(58,469)
|
|
Net cash provided by operating activities
|
798,914
|
|
|
719,374
|
|
|
546,165
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired
|
(22,572)
|
|
|
(820,000)
|
|
|
(11,403)
|
|
|
|
|
|
|
|
Capital expenditures
|
(850,477)
|
|
|
(851,796)
|
|
|
(699,991)
|
|
|
|
|
|
|
|
Cash proceeds from divestitures, net
|
—
|
|
|
—
|
|
|
413,569
|
|
Proceeds from sale of joint venture
|
11,000
|
|
|
—
|
|
|
—
|
|
Proceeds from sale of property and equipment
|
—
|
|
|
10,356
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of (investments in) marketable securities, net
|
903
|
|
|
384
|
|
|
(270)
|
|
|
|
|
|
|
|
Investments in equity and other corporate investments
|
(2,427)
|
|
|
(2,569)
|
|
|
(5,600)
|
|
Net cash used in investing activities
|
(863,573)
|
|
|
(1,663,625)
|
|
|
(303,695)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings of other long-term debt
|
452,163
|
|
|
1,597,807
|
|
|
—
|
|
Repayments of long-term debt
|
(250,000)
|
|
|
(175,215)
|
|
|
—
|
|
Other borrowings (repayments), net
|
137,635
|
|
|
(126,364)
|
|
|
(113,567)
|
|
Fees related to early extinguishment of debt
|
—
|
|
|
(4,419)
|
|
|
—
|
|
Dividends paid to shareholders
|
(161,818)
|
|
|
(152,204)
|
|
|
(144,596)
|
|
Dividends paid to noncontrolling interests
|
(32,061)
|
|
|
(83,187)
|
|
|
(14,756)
|
|
|
|
|
|
|
|
Repurchases of common stock
|
—
|
|
|
—
|
|
|
(500,000)
|
|
Proceeds from exercise of stock options
|
40,437
|
|
|
4,814
|
|
|
3,633
|
|
Withholding taxes paid on stock-based compensation award distributions
|
(5,143)
|
|
|
(11,031)
|
|
|
(17,240)
|
|
Debt financing costs
|
(3,952)
|
|
|
(7,514)
|
|
|
—
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
177,261
|
|
|
1,042,687
|
|
|
(786,526)
|
|
Net effect of foreign exchange on cash and cash equivalents
|
21,012
|
|
|
(40,646)
|
|
|
(37,927)
|
|
Increase (decrease) in cash and cash equivalents
|
133,614
|
|
|
57,790
|
|
|
(581,983)
|
|
Cash and cash equivalents at end of year
|
$
|
746,724
|
|
|
$
|
613,110
|
|
|
$
|
555,320
|
|
See accompanying notes to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 1—Summary of Significant Accounting Policies:
Basis of Consolidation
The consolidated financial statements include the accounts and operations of Albemarle Corporation and our wholly owned, majority owned and controlled subsidiaries. Unless the context otherwise indicates, the terms “Albemarle,” “we,” “us,” “our” or “the Company” mean Albemarle Corporation and its consolidated subsidiaries. For entities that we control and are the primary beneficiary, but own less than 100%, we record the minority ownership as noncontrolling interest, except as noted below. We apply the equity method of accounting for investments in which we have an ownership interest from 20% to 50% or where we exercise significant influence over the related investee’s operations. All significant intercompany accounts and transactions are eliminated in consolidation.
As described further in Note 2, “Acquisitions,” we completed the acquisition of a 60% ownership interest in Mineral Resources Limited’s (“MRL”) Wodgina hard rock lithium mine project (“Wodgina Project”) on October 31, 2019 creating a joint venture named MARBL Lithium Joint Venture (“MARBL”). The consolidated financial statements contained herein include our proportionate share of the results of operations of the Wodgina Project, commencing on November 1, 2019. We are entitled to a pro rata portion of 60% of all minerals (other than iron ore and tantalum) recovered from the tenements and produced by the joint venture. The 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.
Estimates, Assumptions and Reclassifications
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Revenue Recognition
Effective January 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” and all related amendments using the modified retrospective method. There was no material impact to our results of operations or financial position upon adoption, and no adjustment was made to Retained earnings in our consolidated balance sheets because such adjustment was determined to be immaterial. In addition, new presentation requirements, including separate disclosure of net sales from sources other than customers on our consolidated statements of income and separate disclosures of contract assets or liabilities on our consolidated balance sheets, generally did not have a material impact. However, business circumstances, including the nature of customer contracts, can change and as such, we have expanded processes and controls to recognize such changes, and as necessary, consider whether any of these currently immaterial items might differ in the future.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services, and is recognized when performance obligations are satisfied under the terms of contracts with our customers. A performance obligation is deemed to be satisfied when control of the product or service is transferred to our customer. The transaction price of a contract, or the amount we expect to receive upon satisfaction of all performance obligations, is determined by reference to the contract’s terms and includes adjustments, if applicable, for any variable consideration, such as customer rebates, noncash consideration or consideration payable to the customer, although these adjustments are generally not material. Where a contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation, although these situations do not occur frequently and are generally not built into our contracts. Any unsatisfied performance obligations are not material. Standalone selling prices are based on prices we charge to our customers, which in some cases is based on established market prices. Sales and other similar taxes collected from customers on behalf of third parties are excluded from revenue. Our payment terms are generally between 30 to 90 days, however, they vary by market factors, such as customer size, creditworthiness, geography and competitive environment.
All of our revenue is derived from contracts with customers, and almost all of our contracts with customers contain one performance obligation for the transfer of goods where such performance obligation is satisfied at a point in time. Control of a product is deemed to be transferred to the customer upon shipment or delivery. Significant portions of our sales are sold free on board shipping point or on an equivalent basis, while delivery terms of other transactions are based upon specific contractual arrangements. Our standard terms of delivery are generally included in our contracts of sale, order confirmation documents and invoices, while the timing between shipment and delivery generally ranges between 1 and 45 days. Costs for shipping and
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
handling activities, whether performed before or after the customer obtains control of the goods, are accounted for as fulfillment costs.
The Company currently utilizes the following practical expedients, as permitted by Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers:
•All sales and other pass-through taxes are excluded from contract value;
•In utilizing the modified retrospective transition method, no adjustment was necessary for contracts that did not cross over the reporting year;
•We will not consider the possibility of a contract having a significant financing component (which would effectively attribute a portion of the sales price to interest income) unless, if at contract inception, the expected payment terms (from time of delivery or other relevant criterion) are more than one year;
•If our right to customer payment is directly related to the value of our completed performance, we recognize revenue consistent with the invoicing right; and
•We expense as incurred all costs of obtaining a contract incremental to any costs/compensation attributable to individual product sales/shipments for contracts where the amortization period for such costs would otherwise be one year or less.
Certain products we produce are made to our customer’s specifications where such products have limited alternative use or would need significant rework costs in order to be sold to another customer. In management’s judgment, control of these arrangements is transferred to the customer at a point in time (upon shipment or delivery) and not over the time they are produced. Therefore revenue is recognized upon shipment or delivery of these products.
Costs incurred to obtain contracts with customers are not significant and are expensed immediately as the amortization period would be one year or less. When the Company incurs pre-production or other fulfillment costs in connection with an existing or specific anticipated contract and such costs are recoverable through margin or explicitly reimbursable, such costs are capitalized and amortized to Cost of goods sold on a systematic basis that is consistent with the pattern of transfer to the customer of the goods or services to which the asset relates, which is less than one year. We record bad debt expense in specific situations when we determine the customer is unable to meet its financial obligation.
Included in Trade accounts receivable at December 31, 2020 and 2019 is approximately $522.3 million and $602.1 million, respectively, arising from contracts with customers. The remaining balance of Trade accounts receivable at December 31, 2020 and 2019 primarily includes value-added taxes collected from customers on behalf of various taxing authorities.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market investments with insignificant interest rate risks and no limitations on access.
Inventories
Inventories are stated at lower of cost and net realizable value with cost determined primarily on the first-in, first-out basis. Cost is determined on the weighted-average basis for a small portion of our inventories at foreign plants and our stores, supplies and other inventory. A portion of our domestic produced finished goods and raw materials are determined on the last-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment include costs of assets constructed, purchased or leased under a finance lease, related delivery and installation costs and interest incurred on significant capital projects during their construction periods. Expenditures for renewals and betterments also are capitalized, but expenditures for normal repairs and maintenance are expensed as incurred. Costs associated with yearly planned major maintenance are generally deferred and amortized over 12 months or until the same major maintenance activities must be repeated, whichever is shorter. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts, and gains or losses thereon are included in income.
We assign the useful lives of our property, plant and equipment based upon our internal engineering estimates which are reviewed periodically. The estimated useful lives of our property, plant and equipment range from two to sixty years and
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
depreciation is recorded on the straight-line method, with the exception of our mineral rights and reserves, which are depleted on a units-of-production method.
We evaluate the recovery of our property, plant and equipment by comparing the net carrying value of the asset group to the undiscounted net cash flows expected to be generated from the use and eventual disposition of that asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset group is not recoverable, the fair value of the asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized.
Leases
Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” and all related amendments using the modified retrospective method. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $139.1 million as of January 1, 2019. Comparative periods have not been restated and are reported in accordance with our historical accounting. The standard did not have an impact on our consolidated Net income or cash flows. In addition, as a result of the adoption of this new standard, we have implemented internal controls and system changes to prepare the financial information.
As part of this adoption, we have elected the practical expedient relief package allowed by the new standard, which does not require the reassessment of (1) whether existing contracts contain a lease, (2) the lease classification or (3) unamortized initial direct costs for existing leases; and have elected to apply hindsight to the existing leases. Additionally, we have made accounting policy elections such as exclusion of short-term leases (leases with a term of 12 months or less and which do not include a purchase option that we are reasonably certain to exercise) from the balance sheet presentation, use of portfolio approach in determination of discount rate and accounting for non-lease components in a contract as part of a single lease component for all asset classes, except specific mining operation equipment.
We determine if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As an implicit rate for most of our leases is not determinable, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The lease payments for the initial measurement of lease ROU assets and lease liabilities include fixed and variable payments based on an index or a rate. Variable lease payments that are not index or rate based are recorded as expenses when incurred. Our variable lease payments typically include real estate taxes, insurance costs and common-area maintenance. The operating lease ROU asset also includes any lease payments made, net of lease incentives. The lease term is the non-cancelable period of the lease, including any options to extend, purchase or terminate the lease when it is reasonably certain that we will exercise that option. We amortize the operating lease ROU assets on a straight-line basis over the period of the lease and the finance lease ROU assets on a straight-line basis over the shorter of their estimated useful lives or the lease terms. 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.
Resource Development Expenses
We incur costs in resource exploration, evaluation and development during the different phases of our resource development projects. Exploration costs incurred before the declaration of proven and probable resources are generally expensed as incurred. After proven and probable resources are declared, exploration, evaluation and development costs necessary to bring the property to commercial capacity or increase the capacity or useful life are capitalized. Any costs to maintain the production capacity in a property under production are expensed as incurred.
Capitalized resource costs are depleted using the units-of-production method. Our resource development assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.
Investments
Investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, we record our investments in equity-method investees in the consolidated balance sheets as Investments and our share of investees’ earnings or losses together with other-
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
than-temporary impairments in value as Equity in net income of unconsolidated investments in the consolidated statements of income. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.
Certain mutual fund investments are accounted for as trading equities and are marked-to-market on a periodic basis through the consolidated statements of income. Investments in joint ventures and nonmarketable securities of immaterial entities are estimated based upon the overall performance of the entity where financial results are not available on a timely basis.
Environmental Compliance and Remediation
Environmental compliance costs include the cost of purchasing and/or constructing assets to prevent, limit and/or control pollution or to monitor the environmental status at various locations. These costs are capitalized and depreciated based on estimated useful lives. Environmental compliance costs also include maintenance and operating costs with respect to pollution prevention and control facilities and other administrative costs. Such operating costs are expensed as incurred. Environmental remediation costs of facilities used in current operations are generally immaterial and are expensed as incurred. We accrue for environmental remediation costs and post-remediation costs that relate to existing conditions caused by past operations at facilities or off-plant disposal sites in the accounting period in which responsibility is established and when the related costs are estimable. In developing these cost estimates, we evaluate currently available facts regarding each site, with consideration given to existing technology, presently enacted laws and regulations, prior experience in remediation of contaminated sites, the financial capability of other potentially responsible parties and other factors, subject to uncertainties inherent in the estimation process. If the amount and timing of the cash payments for a site are fixed or reliably determinable, the liability is discounted, if the calculated discount is material. Additionally, these estimates are reviewed periodically, with adjustments to the accruals recorded as necessary.
Research and Development Expenses
Our research and development expenses related to present and future products are expensed as incurred. These expenses consist primarily of personnel-related costs and other overheads, as well as outside service and consulting costs incurred for specific programs. Our U.S. facilities in Michigan, Pennsylvania, Texas and Louisiana and our global facilities in the Netherlands, Germany, Belgium and Korea form the capability base for our contract research and custom manufacturing businesses. These business areas provide research and scale-up services primarily to innovative life science companies.
Goodwill and Other Intangible Assets
We account for goodwill and other intangibles acquired in a business combination in conformity with current accounting guidance that requires that goodwill and indefinite-lived intangible assets not be amortized.
We test goodwill for impairment by comparing the estimated fair value of our reporting units to the related carrying value. Our reporting units are either our operating business segments or one level below our operating business segments for which discrete financial information is available and for which operating results are regularly reviewed by the business management. We estimate the fair value based on present value techniques involving future cash flows. Future cash flows for all reporting units include assumptions about revenue growth rates, adjusted EBITDA margins, discount rate as well as other economic or industry-related factors. For the Refining Solutions reporting unit, the revenue growth rates, adjusted EBITDA margins and the discount rate were deemed to be significant assumptions. Significant management judgment is involved in estimating these variables and they include inherent uncertainties since they are forecasting future events. We perform a sensitivity analysis by using a range of inputs to confirm the reasonableness of these estimates being used in the goodwill impairment analysis. We use a Weighted Average Cost of Capital (“WACC”) approach to determine our discount rate for goodwill recoverability testing. Our WACC calculation incorporates industry-weighted average returns on debt and equity from a market perspective. The factors in this calculation are largely external to the Company and, therefore, are beyond our control. We test our recorded goodwill for impairment in the fourth quarter of each year or upon the occurrence of events or changes in circumstances that would more likely than not reduce the fair value of our reporting units below their carrying amounts. The Company performed its annual goodwill impairment test as of October 31, 2020 and did not note any impairment indicators. As a result, the Company concluded there was no impairment as of that date.
We assess our indefinite-lived intangible assets, which include trade names and trademarks, for impairment annually and between annual tests if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The indefinite-lived intangible asset impairment standard allows us to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if we determine, based on the qualitative assessment, that it is
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
more likely than not that the indefinite-lived intangible asset’s fair value is less than its carrying amount. If we determine based on the qualitative assessment that it is more likely than not that the asset is impaired, an impairment test is performed by comparing the fair value of the indefinite-lived intangible asset to its carrying amount.
Definite-lived intangible assets, such as purchased technology, patents and customer lists, are amortized over their estimated useful lives generally for periods ranging from five to twenty-five years. Except for customer lists and relationships associated with the majority of our Lithium business, which are amortized using the pattern of economic benefit method, definite-lived intangible assets are amortized using the straight-line method. We evaluate the recovery of our definite-lived intangible assets by comparing the net carrying value of the asset group to the undiscounted net cash flows expected to be generated from the use and eventual disposition of that asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset group is not recoverable, the fair value of the asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized. See Note 12, “Goodwill and Other Intangibles.”
Pension Plans and Other Postretirement Benefits
Under authoritative accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets. As required, we recognize a balance sheet asset or liability for each of our pension and other postretirement benefit (“OPEB”) plans equal to the plan’s funded status as of the measurement date. The primary assumptions are as follows:
•Discount Rate—The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future.
•Expected Return on Plan Assets—We project the future return on plan assets based on prior performance and future expectations for the types of investments held by the plans, as well as the expected long-term allocation of plan assets for these investments. These projected returns reduce the net benefit costs recorded currently.
•Rate of Compensation Increase—For salary-related plans, we project employees’ annual pay increases, which are used to project employees’ pension benefits at retirement.
•Mortality Assumptions—Assumptions about life expectancy of plan participants are used in the measurement of related plan obligations.
Actuarial gains and losses are recognized annually in our consolidated statements of income in the fourth quarter and whenever a plan is determined to qualify for a remeasurement during a fiscal year. The remaining components of pension and OPEB plan expense, primarily service cost, interest cost and expected return on assets, are recorded on a monthly basis. The market-related value of assets equals the actual market value as of the date of measurement.
During 2020, we made changes to assumptions related to discount rates and expected rates of return on plan assets. We consider available information that we deem relevant when selecting each of these assumptions.
In selecting the discount rates for the U.S. plans, we consider expected benefit payments on a plan-by-plan basis. As a result, the Company uses different discount rates for each plan depending on the demographics of participants and the expected timing of benefit payments. For 2020, the discount rates were calculated using the results from a bond matching technique developed by Milliman, which matched the future estimated annual benefit payments of each respective plan against a portfolio of bonds of high quality to determine the discount rate. We believe our selected discount rates are determined using preferred methodology under authoritative accounting guidance and accurately reflect market conditions as of the December 31, 2020 measurement date.
In selecting the discount rates for the foreign plans, we look at long-term yields on AA-rated corporate bonds when available. Our actuaries have developed yield curves based on the yields on the constituent bonds in the various indices as well as on other market indicators such as swap rates, particularly at the longer durations. For the Eurozone, we apply the Aon Hewitt yield curve to projected cash flows from the relevant plans to derive the discount rate. For the United Kingdom (“U.K.”), the discount rate is determined by applying the Aon Hewitt yield curve for typical schemes of similar duration to projected cash flows of Albemarle’s U.K. plan. In other countries where there is not a sufficiently deep market of high-quality corporate bonds, we set the discount rate by referencing the yield on government bonds of an appropriate duration.
In estimating the expected return on plan assets, we consider past performance and future expectations for the types of investments held by the plan as well as the expected long-term allocation of plan assets to these investments. In projecting the rate of compensation increase, we consider past experience in light of movements in inflation rates.
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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In October 2019, the SOA published the Pri-2012 Mortality Tables and an updated Improvement Scale, MP-2019. The Pri-2012 Mortality Tables are an update to the RP-2014 Adjusted to 2006 Total Dataset Mortality while the updated improvement scale incorporates an additional year of mortality data (2017). We revised both the base mortality tables and mortality improvement assumption by incorporating both the Pri-2012 Mortality Tables and MP-2019 Mortality Improvement Scale for purpose of measuring our U.S. pension and OPEB obligations at December 31, 2019. In October 2020, the SOA published an updated Improvement Scale, MP-2020, which was used for the purpose of measuring our U.S. pension and OPEB obligations at December 31, 2020.
Stock-based Compensation Expense
The fair value of restricted stock awards, restricted stock unit awards and performance unit awards with a service condition are determined based on the number of shares or units granted and the quoted price of our common stock on the date of grant, and the fair value of stock options is determined using the Black-Scholes valuation model. The fair value of performance unit awards with a service condition and a market condition are estimated on the date of grant using a Monte Carlo simulation model. The fair value of these awards is determined after giving effect to estimated forfeitures. Such value is recognized as expense over the service period, which is generally the vesting period of the equity grant. To the extent restricted stock awards, restricted stock unit awards, performance unit awards and stock options are forfeited prior to vesting in excess of the estimated forfeiture rate, the corresponding previously recognized expense is reversed as an offset to operating expenses.
Income Taxes
We use the liability method for determining our income taxes, under which current and deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this method, the amounts of deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. In order to record deferred tax assets and liabilities, we are following guidance under Financial Accounting Standards Board (“FASB”) ASU 2015-17, which requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet, along with any related valuation allowance. Tax effects are released from Accumulated Other Comprehensive Income using either the specific identification approach or the portfolio approach based on the nature of the underlying item.
Deferred income taxes are provided for the estimated income tax effect of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred tax assets are also provided for operating losses, capital losses and certain tax credit carryovers. A valuation allowance, reducing deferred tax assets, is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of such deferred tax assets is dependent upon the generation of sufficient future taxable income of the appropriate character. Although realization is not assured, we do not establish a valuation allowance when we believe it is more likely than not that a net deferred tax asset will be realized.
We only recognize a tax benefit after concluding that it is more likely than not that the benefit will be sustained upon audit by the respective taxing authority based solely on the technical merits of the associated tax position. Once the recognition threshold is met, we recognize a tax benefit measured as the largest amount of the tax benefit that, in our judgment, is greater than 50% likely to be realized. Under current accounting guidance for uncertain tax positions, interest and penalties related to income tax liabilities are included in Income tax expense on the consolidated statements of income.
We have designated the undistributed earnings of a portion of our foreign operations as indefinitely reinvested and as a result we do not provide for deferred income taxes on the unremitted earnings of these subsidiaries. Our foreign earnings are computed under U.S. federal tax earnings and profits, or E&P, principles. In general, to the extent our financial reporting book basis over tax basis of a foreign subsidiary exceeds these E&P amounts, deferred taxes have not been provided as they are essentially permanent in duration. The determination of the amount of such unrecognized deferred tax liability is not practicable. We provide for deferred income taxes on our undistributed earnings of foreign operations that are not deemed to be indefinitely invested. We will continue to evaluate our permanent investment assertion taking into consideration all relevant and current tax laws.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss comprises principally foreign currency translation adjustments, amounts related to the revaluation of our euro-denominated senior notes which were designated as a hedge of our net investment in foreign operations in 2014, a realized loss on a forward starting interest rate swap entered into in 2014 which was designated as a cash flow hedge, gains or losses on foreign currency cash flow hedges designated as effective hedging instruments, and deferred income taxes related to the aforementioned items.
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Albemarle Corporation and Subsidiaries
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Foreign Currency Translation
The assets and liabilities of all foreign subsidiaries were prepared in their respective functional currencies and translated into U.S. Dollars based on the current exchange rate in effect at the balance sheet dates, while income and expenses were translated at average exchange rates for the periods presented. Translation adjustments are reflected as a separate component of equity.
Foreign exchange transaction and revaluation losses were $28.8 million, $27.4 million and $10.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, and are included in Other expenses, net, in our consolidated statements of income, with the unrealized portion included in Other, net, in our consolidated statements of cash flows.
Derivative Financial Instruments
We manage our foreign currency exposures by balancing certain assets and liabilities denominated in foreign currencies and through the use of foreign currency forward contracts from time to time, which generally expire within one year. The principal objective of such contracts is to minimize the financial impact of changes in foreign currency exchange rates. While these contracts are subject to fluctuations in value, such fluctuations are generally expected to be offset by changes in the value of the underlying foreign currency exposures being hedged. Gains or losses under foreign currency forward contracts that have been designated as an effective hedging instrument under ASC 815, Derivatives and Hedging will be recorded in Accumulated other comprehensive loss beginning on the date of designation. All other gains and losses on foreign currency forward contracts not designated as an effective hedging instrument are recognized currently in Other expenses, net, and generally do not have a significant impact on results of operations.
We may also enter into interest rate swaps, collars or similar instruments from time to time, with the objective of reducing interest rate volatility relating to our borrowing costs.
The counterparties to these contractual agreements 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. We do not utilize financial instruments for trading or other speculative purposes. In 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 and designated it as an effective hedging instrument under ASC 815, Derivatives and Hedging. All other foreign currency forward contracts outstanding at December 31, 2020 and 2019 have not been designated as hedging instruments under ASC 815, Derivatives and Hedging.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued accounting guidance that, among other things, changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial asset. Additional disclosures are required regarding an entity’s assumptions, models and methods for estimating the expected credit loss. This guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is to be applied using a modified retrospective approach. We adopted this guidance on January 1, 2020 and it did not have a significant impact on our consolidated financial statements.
In January 2017, the FASB issued accounting guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a reporting unit to calculate the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit has been acquired in a business combination. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. This guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is to be applied on a prospective basis. We adopted this guidance on January 1, 2020 and it did not have a significant impact on our consolidated financial statements.
In December 2019, the FASB issued accounting guidance that simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We currently do not expect this guidance to have a significant impact on our consolidated financial statements.
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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In March 2020, the FASB issued accounting guidance that provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued additional accounting guidance which clarifies that certain optional expedients and exceptions apply to derivatives that are affected by the discounting transition. The guidance under both FASB issuances is effective March 12, 2020 through December 31, 2022. We currently do not expect this guidance to have a significant impact on our consolidated financial statements.
NOTE 2—Acquisitions:
On October 31, 2019 (the “Acquisition Closing Date”), we completed the previously announced acquisition of a 60% interest in MRL’s Wodgina Project for a total purchase price of approximately $1.3 billion. The purchase price is comprised of $820 million in cash and the transfer of 40% interest in certain lithium hydroxide conversion assets being built by Albemarle in Kemerton, Western Australia, valued at $480 million. The cash consideration was initially funded by the 2019 Credit Facility entered into on August 14, 2019; see Note 14, “Long-Term Debt,” for further details. In addition, during the year ended December 31, 2020, we paid $22.6 million of agreed upon purchase price adjustments. The stamp duty levied on the assets purchased of $61.5 million, originally recorded as an expense based on an estimated calculation during the year ended December 31, 2019, was paid during the year ended December 31, 2020 and is included in Change in working capital on the consolidated statement of cash flows.
In addition, we have formed an unincorporated joint venture with MRL, MARBL, for the exploration, development, mining, processing and production of lithium and other minerals from the Wodgina Project and for the operation of the Kemerton assets. We are entitled to a pro rata portion of 60% of all minerals (other than iron ore and tantalum) recovered from the tenements and produced by the joint venture. The 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. As part of this acquisition, MARBL Lithium Operations Pty. Ltd. (the “Manager”), an incorporated joint venture, has been formed to manage the Wodgina Project. We will consolidate our 60% ownership interest in the Manager in our consolidated financial statements.
This acquisition provides access to a high-quality hard rock lithium source, further diversifying our global lithium resource base, and strengthens our position by increasing capacity to support future market demand. In connection with the acquisition, we idled production of the Wodgina spodumene mine until demand supports bringing the mine back to production.
The results of our 60% ownership interest in MARBL are reported within the Lithium segment. Included in Net income attributable to Albemarle Corporation for the year ended December 31, 2020 and the period November 1 through December 31, 2019 were losses of approximately $20.1 million and $73.0 million, respectively, attributable to the joint venture. Included in the loss recorded in 2019 was an estimated loss of $64.8 million related to the stamp duties levied on the assets purchased. The adjustment to the final amount of stamp duties levied was recorded, and the full amount was paid, during the year ended December 31, 2020 as noted above. There were no net sales attributable to the joint venture during these periods. Pro forma financial information of the combined entities for periods prior to the acquisition is not presented due to the immaterial impact of the Net Sales and Net Income of the Wodgina Project on our consolidated statements of income.
Purchase Price Allocation
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 excess of the purchase price over the preliminary estimated fair value of the net assets acquired was approximately $36.3 million and was recorded as Goodwill.
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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The following table summarizes the consideration paid for the joint venture and the amounts of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
|
|
|
|
|
|
Total purchase price:
|
|
Cash paid
|
$
|
820,000
|
|
Fair value of 40% interest in Kemerton assets
|
480,000
|
|
Purchase agreement completion adjustment and other adjustments
|
22,566
|
|
Total purchase price
|
$
|
1,322,566
|
|
|
|
Net assets acquired:
|
|
|
|
|
|
Inventories
|
$
|
33,900
|
|
Other current assets
|
11,280
|
|
Property, plant and equipment:
|
|
Land improvements
|
2,912
|
|
Buildings and improvements
|
19,268
|
|
Machinery and equipment
|
163,662
|
|
Mineral rights and reserves
|
1,046,390
|
|
Construction in progress
|
103,700
|
|
|
|
Current liabilities
|
(10,695)
|
|
Long-term debt(a)
|
(55,806)
|
|
Other noncurrent liabilities
|
(28,392)
|
|
|
|
Total identifiable net assets
|
1,286,219
|
|
Goodwill
|
36,347
|
|
Total net assets acquired
|
$
|
1,322,566
|
|
(a) Represents finance lease acquired. See Note 18, “Leases,” for further information on the Company’s leases.
The allocation of the purchase price was finalized in the fourth quarter of 2020. There were no significant changes in our purchase price allocation since our initial preliminary estimates reported in the fourth quarter of 2019. The fair value of the assets acquired and liabilities assumed are 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 fair value of the mineral reserves of $1,046.4 million is determined using an excess earnings approach, which requires management to estimate future cash flows, net of capital investments in the specific operation. Management’s cash flow projections involved the use of significant estimates and assumptions with respect to the expected production of the mine over the estimated time period, sales prices, shipment volumes, and expected profit margins. The present value of the projected net cash flows represents the fair value assigned to mineral reserves. The discount rate is a significant assumption used in the valuation model.
The effect of measurement-period adjustments to the estimated fair values are recognized in the reporting period in which they are determined. The impact of all changes that do not qualify as measurement-period adjustments are included in current period earnings. 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 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.
Acquisition and integration related costs
Acquisition and integration related costs relate to the acquisition, integration and potential divestitures for various significant projects, including professional services and advisory fees related the acquisition of the Wodgina Project. These costs for the years ended December 31, 2019 and 2018 of $1.0 million and $3.7 million, respectively, were included in Cost of goods sold. Acquisition and integration related costs for the years ended December 31, 2020, 2019 and 2018 of $17.3 million, $19.7 million and $15.7 million were included in Selling, general and administrative expenses, respectively, on our consolidated statements of income.
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 3—Divestitures:
Polyolefin Catalysts and Components Business
On December 14, 2017, the Company signed a definitive agreement to sell the polyolefin catalysts and components portion of its Performance Catalyst Solutions (“PCS”) business (“Polyolefin Catalysts Divestiture”) to W.R. Grace & Co., with the sale closing on April 3, 2018. We received net cash proceeds of approximately $413.6 million and recorded a gain of $210.4 million before income taxes in 2018 related to the sale of this business. The transaction included Albemarle’s Product Development Center located in Baton Rouge, Louisiana, and operations at its Yeosu, South Korea site. The sale did not include the Company’s organometallics or curatives portion of its PCS business. The Polyolefin Catalysts Divestiture reflects the Company’s commitment to investing in the future growth of its high priority businesses and returning capital to shareholders.
NOTE 4—Supplemental Cash Flow Information:
Supplemental information related to the consolidated statements of cash flows is as follows (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Cash paid during the year for:
|
|
|
|
|
|
Income taxes (net of refunds of $25,991, $7,438 and $21,459 in 2020, 2019 and 2018, respectively)(a)
|
$
|
52,103
|
|
|
$
|
170,450
|
|
|
$
|
157,758
|
|
Interest (net of capitalization)
|
$
|
66,379
|
|
|
$
|
45,532
|
|
|
$
|
49,762
|
|
|
|
|
|
|
|
Supplemental non-cash disclosures related to investing activities:
|
|
|
|
|
|
Capital expenditures included in Accounts payable
|
$
|
139,120
|
|
|
$
|
199,451
|
|
|
$
|
134,784
|
|
(a)Includes approximately $41 million of income taxes paid in 2018 from the gain on sale of the Polyolefin Catalysts Divestiture.
As part of the purchase price paid for the acquisition of a 60% interest in MRL’s Wodgina Project, the Company transferred $179.4 million and $164.7 million of its construction in progress of the designated Kemerton assets during the years ended December 31, 2020 and 2019, respectively, representing MRL’s 40% interest in the assets. The cash outflow for these assets is recorded in Capital expenditures within Cash flows from investing activities on the consolidated statements of cash flows. The non-cash transfer of these assets is recorded in Other, net within Cash flows from operating activities on the consolidated statements of cash flows. The Company expects to transfer a total of approximately $480 million over the construction of these assets, as defined in the purchase agreement. See Note 2, “Acquisitions,” for further details.
Other, net within Cash flows from operating activities on the consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018 included $30.4 million, $14.3 million and $28.4 million, respectively, representing the reclassification of the current portion of the one-time transition tax resulting from the enactment of the Tax Cuts and Jobs Act (“TCJA”) in 2017, from Other noncurrent liabilities to Income taxes payable within current liabilities. For additional information, see Note 21, “Income Taxes.” In addition, included in Other, net for the years ended December 31, 2020, 2019 and 2018 is $28.8 million, $27.4 million and $10.5 million, respectively, related to losses on fluctuations in foreign currency exchange rates.
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Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 5—Earnings Per Share:
Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Basic earnings per share
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Albemarle Corporation
|
$
|
375,764
|
|
|
$
|
533,228
|
|
|
$
|
693,562
|
|
Denominator:
|
|
|
|
|
|
Weighted-average common shares for basic earnings per share
|
106,402
|
|
|
105,949
|
|
|
108,427
|
|
Basic earnings per share
|
$
|
3.53
|
|
|
$
|
5.03
|
|
|
$
|
6.40
|
|
Diluted earnings per share
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Albemarle Corporation
|
$
|
375,764
|
|
|
$
|
533,228
|
|
|
$
|
693,562
|
|
Denominator:
|
|
|
|
|
|
Weighted-average common shares for basic earnings per share
|
106,402
|
|
|
105,949
|
|
|
108,427
|
|
Incremental shares under stock compensation plans
|
406
|
|
|
372
|
|
|
1,031
|
|
Weighted-average common shares for diluted earnings per share
|
106,808
|
|
|
106,321
|
|
|
109,458
|
|
Diluted earnings per share
|
$
|
3.52
|
|
|
$
|
5.02
|
|
|
$
|
6.34
|
|
Included in the calculation of basic earnings per share are unvested restricted stock awards that contain nonforfeitable rights to dividends. At December 31, 2020, there were 10,350 unvested shares of restricted stock awards outstanding.
We have the authority to issue 15 million shares of preferred stock in one or more classes or series. As of December 31, 2020, no shares of preferred stock have been issued.
On February 8, 2021, we completed an underwritten public offering of 8,496,773 shares of our common stock, par value $0.01 per share, at a price to the public of $153.00 per share. The Company also granted to the Underwriters an option to purchase up to an additional 1,274,509 shares for a period of 30 days, which was exercised. The total gross proceeds from this offering were approximately $1.5 billion, before deducting expenses, underwriting discounts and commissions.
In November 2016, our Board of Directors authorized an increase in the number of shares the Company is permitted to repurchase under our share repurchase program, pursuant to which the Company is now permitted to repurchase up to a maximum of 15 million shares, including those previously authorized but not yet repurchased.
Under our existing Board authorized share repurchase program, during 2018, the Company entered into two separate accelerated share repurchase (“ASR”) agreements with financial institutions. Under each ASR agreement, the Company paid $250 million from available cash on hand. Under the terms of the first ASR agreement, which was completed on September 28, 2018, the Company received and retired a total of 2,680,704 shares, calculated based on the daily Rule 10b-18 volume-weighted average prices of the Company’s common stock over the term of the ASR agreement, less an agreed discount. Under the terms of the second ASR agreement, which was completed on December 7, 2018, the company received and retired a total of 2,581,950 shares, calculated based on the daily Rule 10b-18 weighted average prices of the Company’s common stock over the terms of the ASR agreement, less an agreed discount. The Company determined that each ASR agreement met the criteria to be accounted for as a forward contract indexed to its stock and was therefore treated as an equity instrument. In total, we received and retired 5,262,654 shares under these agreements, which reduced the Company’s weighted average shares outstanding for purposes of calculating basic and diluted earnings per share for the year ended December 31, 2018.
There were no shares of the Company’s common stock repurchased during the year ended December 31, 2020 or 2019. As of December 31, 2020, there were 7,396,263 remaining shares available for repurchase under the Company’s authorized share repurchase program.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 6—Other Accounts Receivable:
Other accounts receivable consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Value added tax/consumption tax
|
$
|
45,309
|
|
|
$
|
52,059
|
|
Other
|
16,649
|
|
|
15,492
|
|
Total
|
$
|
61,958
|
|
|
$
|
67,551
|
|
NOTE 7—Inventories:
The following table provides a breakdown of inventories at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Finished goods
|
$
|
454,162
|
|
|
$
|
495,639
|
|
Raw materials and work in process(a)
|
219,896
|
|
|
205,781
|
|
Stores, supplies and other
|
76,179
|
|
|
67,564
|
|
Total
|
$
|
750,237
|
|
|
$
|
768,984
|
|
(a)Included $129.6 million and $109.3 million at December 31, 2020 and 2019, respectively, of work in process in our Lithium segment.
Approximately 8% and 10% of our inventories are valued using the last-in, first-out (“LIFO”) method at December 31, 2020 and 2019, respectively. The portion of our domestic inventories stated on the LIFO basis amounted to $62.2 million and $78.7 million at December 31, 2020 and 2019, respectively, which are below replacement cost by approximately $29.7 million and $30.8 million, respectively.
NOTE 8—Other Current Assets:
Other current assets consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
|
|
|
Income tax receivables
|
$
|
45,031
|
|
|
$
|
72,246
|
|
Prepaid expenses
|
57,531
|
|
|
83,637
|
|
Other
|
13,865
|
|
|
6,930
|
|
Total
|
$
|
116,427
|
|
|
$
|
162,813
|
|
NOTE 9—Property, Plant and Equipment:
Property, plant and equipment, at cost, consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
Lives
(Years)
|
|
December 31,
|
2020
|
|
2019
|
Land
|
|
—
|
|
$
|
121,330
|
|
|
$
|
116,728
|
|
Land improvements
|
|
10 – 30
|
|
115,693
|
|
|
83,256
|
|
Buildings and improvements
|
|
10 – 50
|
|
354,679
|
|
|
337,728
|
|
Machinery and equipment(a)
|
|
2 – 45
|
|
3,564,389
|
|
|
3,355,519
|
|
Mineral rights and reserves
|
|
7 – 60
|
|
1,780,236
|
|
|
1,764,067
|
|
|
|
|
|
|
|
|
Construction in progress
|
|
—
|
|
1,491,314
|
|
|
1,160,545
|
|
Total
|
|
|
|
$
|
7,427,641
|
|
|
$
|
6,817,843
|
|
(a)Consists primarily of (1) short-lived production equipment components, office and building equipment and other equipment with estimated lives ranging 2 – 7 years, (2) production process equipment (intermediate components) with estimated lives ranging 8 – 19 years, (3) production process equipment (major unit components) with estimated lives ranging 20 – 29 years, and (4) production process equipment (infrastructure and other) with estimated lives ranging 30 – 45 years.
The cost of property, plant and equipment is depreciated generally by the straight-line method. Depletion of mineral rights is based on the units-of-production method. Depreciation expense, including depletion, amounted to $203.6 million,
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
$183.3 million and $170.0 million during the years ended December 31, 2020, 2019 and 2018, respectively. Interest capitalized on significant capital projects in 2020, 2019 and 2018 was $30.4 million, $30.2 million and $19.3 million, respectively.
NOTE 10—Investments:
Investments include our share of unconsolidated joint ventures, nonmarketable securities and marketable equity securities. The following table details our investment balances at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
Joint ventures
|
|
$
|
604,964
|
|
|
$
|
534,430
|
|
Nonmarketable securities
|
|
14,171
|
|
|
11,746
|
|
Marketable equity securities
|
|
37,109
|
|
|
33,637
|
|
Total
|
|
$
|
656,244
|
|
|
$
|
579,813
|
|
Our ownership positions in significant unconsolidated investments are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
*
|
|
Windfield Holdings Pty. Ltd. - a joint venture with Sichuan Tianqi Lithium Industries, Inc., that mines lithium ore and produces lithium concentrate
|
49
|
%
|
|
49
|
%
|
|
49
|
%
|
*
|
|
Nippon Aluminum Alkyls - a joint venture with Mitsui Chemicals, Inc. that produces aluminum alkyls
|
50
|
%
|
|
50
|
%
|
|
50
|
%
|
|
|
|
|
|
|
|
|
*
|
|
Nippon Ketjen Company Limited - a joint venture with Sumitomo Metal Mining Company Limited that produces refinery catalysts
|
50
|
%
|
|
50
|
%
|
|
50
|
%
|
*
|
|
Eurecat S.A. - a joint venture with Axens Group for refinery catalysts regeneration services
|
50
|
%
|
|
50
|
%
|
|
50
|
%
|
*
|
|
Fábrica Carioca de Catalisadores S.A. - a joint venture with Petrobras Quimica S.A. - PETROQUISA that produces catalysts and includes catalysts research and product development activities
|
50
|
%
|
|
50
|
%
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment in the significant unconsolidated joint ventures above amounted to $587.6 million and $513.8 million as of December 31, 2020 and 2019, respectively, and the amount included in Equity in net income of unconsolidated investments (net of tax) in the consolidated statements of income totaled $126.0 million, $128.0 million and $88.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Undistributed earnings attributable to our significant unconsolidated investments represented approximately $255.4 million and $216.9 million of our consolidated retained earnings at December 31, 2020 and 2019, respectively. All of the unconsolidated joint ventures in which we have investments are private companies and accordingly do not have a quoted market price available.
The following summary lists the assets, liabilities and results of operations for our significant unconsolidated joint ventures presented herein (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
Summary of Balance Sheet Information:
|
|
|
|
|
Current assets
|
|
$
|
449,441
|
|
|
$
|
473,426
|
|
Noncurrent assets
|
|
1,590,204
|
|
|
1,404,765
|
|
Total assets
|
|
$
|
2,039,645
|
|
|
$
|
1,878,191
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
116,136
|
|
|
$
|
201,792
|
|
Noncurrent liabilities
|
|
769,114
|
|
|
583,839
|
|
Total liabilities
|
|
$
|
885,250
|
|
|
$
|
785,631
|
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Summary of Statements of Income Information:
|
|
|
|
|
|
|
Net sales
|
|
$
|
597,082
|
|
|
$
|
910,891
|
|
|
$
|
829,590
|
|
Gross profit
|
|
$
|
266,026
|
|
|
$
|
496,150
|
|
|
$
|
456,518
|
|
Income before income taxes
|
|
$
|
225,436
|
|
|
$
|
384,690
|
|
|
$
|
332,632
|
|
Net income
|
|
$
|
157,628
|
|
|
$
|
229,733
|
|
|
$
|
225,791
|
|
We have evaluated each of the unconsolidated investments pursuant to current accounting guidance and none qualify for consolidation. Dividends received from our significant unconsolidated investments were $87.4 million, $71.0 million and $56.4 million in 2020, 2019 and 2018, respectively.
At December 31, 2020 and 2019, the carrying amount of our investments in unconsolidated joint ventures differed from the amount of underlying equity in net assets by approximately $32.1 million and $15.3 million, respectively. These amounts represent the differences between the value of certain assets of the joint ventures and our related valuation on a U.S. GAAP basis.
The Company holds a 49% equity interest in Windfield Holdings Pty. Ltd. (“Windfield”), which we acquired in the Rockwood acquisition. With regards to the Company’s ownership in Windfield, the 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, the Company does not consolidate Windfield as it is not the primary beneficiary. The carrying amount of our 49% equity interest in Windfield, which is our most significant VIE, was $479.6 million and $397.2 million at December 31, 2020 and December 31, 2019, respectively. The Company’s aggregate net investment in all other entities which it considers to be VIE’s for which the Company is not the primary beneficiary was $8.0 million and $7.6 million at December 31, 2020 and December 31, 2019, respectively. Our unconsolidated VIEs are reported in Investments in 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.
In the fourth quarter of 2020, the Company divested its ownership interest in the Saudi Organometallic Chemicals Company LLC (“SOCC”) joint venture for cash proceeds of $11.0 million. As a result of this divestiture, the Company recorded a gain of $7.2 million in Other expenses, net during the year ended December 31, 2020.
The Company holds a 50% equity interest in Jordan Bromine Company Limited (“JBC”), reported in the Bromine Specialties segment. The Company consolidates this venture as it is considered the primary beneficiary due to its operational and financial control.
On October 31, 2019, the Company completed the acquisition of 60% interest in MRL’s Wodgina Project and formed an unincorporated joint venture with MRL. The 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. See Note 2, “Acquisitions,” for additional information.
We maintain a Benefit Protection Trust (the “Trust”) that was created to provide a source of funds to assist in meeting the obligations of our Executive Deferred Compensation Plan (“EDCP”), subject to the claims of our creditors in the event of our insolvency. Assets of the Trust, in conjunction with our EDCP, are accounted for as trading securities in accordance with authoritative accounting guidance. The assets of the Trust consist primarily of mutual fund investments and are marked-to-market on a monthly basis through the consolidated statements of income. As of December 31, 2020 and 2019, these marketable securities amounted to $32.4 million and $28.7 million, respectively.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 11—Other Assets:
Other assets consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Deferred income taxes(a)
|
$
|
20,317
|
|
|
$
|
15,275
|
|
Assets related to unrecognized tax benefits(a)
|
24,112
|
|
|
26,127
|
|
|
|
|
|
|
|
|
|
Operating leases(b)
|
136,292
|
|
|
133,864
|
|
Other(c)
|
38,547
|
|
|
37,795
|
|
Total
|
$
|
219,268
|
|
|
$
|
213,061
|
|
(a)See Note 1, “Summary of Significant Accounting Policies” and Note 21, “Income Taxes.”
(b)See Note 18, “Leases.”
(c)As of December 31, 2019, a $28.7 million reserve was recorded against a note receivable on one of our European entities no longer deemed probable of collection. This reserve and related receivable were written off as a result of the divestiture of our ownership interest in the SOCC joint venture. See Note 10, “Investments,” for additional information.
NOTE 12—Goodwill and Other Intangibles:
The following table summarizes the changes in goodwill by reportable segment for the years ended December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lithium
|
|
Bromine Specialties
|
|
Catalysts(b)
|
|
All Other
|
|
Total
|
Balance at December 31, 2018
|
$
|
1,354,779
|
|
|
$
|
20,319
|
|
|
$
|
185,485
|
|
|
$
|
6,586
|
|
|
$
|
1,567,169
|
|
Acquisitions(a)
|
31,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,762
|
|
Foreign currency translation adjustments and other
|
(15,695)
|
|
|
—
|
|
|
(4,451)
|
|
|
—
|
|
|
(20,146)
|
|
Balance at December 31, 2019
|
1,370,846
|
|
|
20,319
|
|
|
181,034
|
|
|
6,586
|
|
|
1,578,785
|
|
Acquisitions(a)
|
4,585
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,585
|
|
Foreign currency translation adjustments and other
|
66,350
|
|
|
—
|
|
|
15,800
|
|
|
—
|
|
|
82,150
|
|
Balance at December 31, 2020
|
$
|
1,441,781
|
|
|
$
|
20,319
|
|
|
$
|
196,834
|
|
|
$
|
6,586
|
|
|
$
|
1,665,520
|
|
(a) Represents purchase price adjustments for the Wodgina Project acquisition. Amount recorded during the year ended December 31, 2020 represents the finalization of the purchase price during the one-year measurement period. See Note 2, “Acquisitions,” for additional information.
(b) Balance at December 31, 2020 consists of goodwill related to Refining Solutions (composed of our clean fuels technologies (“CFT”) and fluidized catalytic cracking (“FCC”) catalysts and additives businesses) of $189.8 million and performance catalyst solutions (“PCS”) of $7.0 million.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Other intangibles consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Lists and Relationships
|
|
Trade Names and Trademarks(a)
|
|
Patents and Technology
|
|
Other
|
|
Total
|
Gross Asset Value
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
428,372
|
|
|
$
|
18,453
|
|
|
$
|
55,801
|
|
|
$
|
43,708
|
|
|
$
|
546,334
|
|
Foreign currency translation adjustments and other
|
(5,910)
|
|
|
(366)
|
|
|
(781)
|
|
|
(2,426)
|
|
|
(9,483)
|
|
Balance at December 31, 2019
|
422,462
|
|
|
18,087
|
|
|
55,020
|
|
|
41,282
|
|
|
536,851
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments and other
|
26,286
|
|
|
623
|
|
|
3,076
|
|
|
(1,418)
|
|
|
28,567
|
|
Balance at December 31, 2020
|
$
|
448,748
|
|
|
$
|
18,710
|
|
|
$
|
58,096
|
|
|
$
|
39,864
|
|
|
$
|
565,418
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
(95,797)
|
|
|
$
|
(8,176)
|
|
|
$
|
(35,248)
|
|
|
$
|
(20,970)
|
|
|
$
|
(160,191)
|
|
Amortization
|
(23,020)
|
|
|
—
|
|
|
(1,388)
|
|
|
(2,714)
|
|
|
(27,122)
|
|
Foreign currency translation adjustments and other
|
2,068
|
|
|
238
|
|
|
439
|
|
|
2,339
|
|
|
5,084
|
|
Balance at December 31, 2019
|
(116,749)
|
|
|
(7,938)
|
|
|
(36,197)
|
|
|
(21,345)
|
|
|
(182,229)
|
|
Amortization
|
(22,575)
|
|
|
—
|
|
|
(1,377)
|
|
|
(970)
|
|
|
(24,922)
|
|
Foreign currency translation adjustments and other
|
(7,962)
|
|
|
(238)
|
|
|
(1,926)
|
|
|
964
|
|
|
(9,162)
|
|
Balance at December 31, 2020
|
$
|
(147,286)
|
|
|
$
|
(8,176)
|
|
|
$
|
(39,500)
|
|
|
$
|
(21,351)
|
|
|
$
|
(216,313)
|
|
Net Book Value at December 31, 2019
|
$
|
305,713
|
|
|
$
|
10,149
|
|
|
$
|
18,823
|
|
|
$
|
19,937
|
|
|
$
|
354,622
|
|
Net Book Value at December 31, 2020
|
$
|
301,462
|
|
|
$
|
10,534
|
|
|
$
|
18,596
|
|
|
$
|
18,513
|
|
|
$
|
349,105
|
|
(a)Net Book Value includes only indefinite-lived intangible assets.
Useful lives range from 13 – 25 years for customer lists and relationships; 8 – 20 years for patents and technology; and primarily 5 – 25 years for other.
Amortization of other intangibles amounted to $24.9 million, $27.1 million and $28.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Included in amortization for the years ended December 31, 2020, 2019 and 2018 is $19.1 million, $19.5 million and $19.7 million, respectively, of amortization using the pattern of economic benefit method.
Total estimated amortization expense of other intangibles for the next five fiscal years is as follows (in thousands):
|
|
|
|
|
|
|
Estimated Amortization Expense
|
2021
|
$
|
24,989
|
|
2022
|
$
|
24,396
|
|
2023
|
$
|
23,782
|
|
2024
|
$
|
23,039
|
|
2025
|
$
|
22,500
|
|
NOTE 13—Accrued Expenses:
Accrued expenses consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Employee benefits, payroll and related taxes
|
$
|
102,711
|
|
|
$
|
82,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wodgina Project acquisition consideration obligation(a)
|
137,092
|
|
|
260,686
|
|
Other(b)
|
200,960
|
|
|
233,583
|
|
Total
|
$
|
440,763
|
|
|
$
|
576,297
|
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(a)Represents the 40% interest in the Kemerton assets, which are under construction, expected to be transferred to MRL in the next twelve months as part of the consideration paid for the Wodgina Project acquisition. The balance as of December 31, 2019 also included $64.8 million of estimated stamp duties levied on the assets purchased. See Note 2, “Acquisitions,” for further details.
(b)No individual component exceeds 5% of total current liabilities.
NOTE 14—Long-Term Debt:
Long-term debt consisted of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
1.125% Notes
|
$
|
610,800
|
|
|
$
|
554,900
|
|
1.625% Notes
|
610,800
|
|
|
554,900
|
|
1.875% Senior notes
|
480,007
|
|
|
436,073
|
|
3.45% Senior notes
|
300,000
|
|
|
300,000
|
|
4.15% Senior notes
|
425,000
|
|
|
425,000
|
|
|
|
|
|
5.45% Senior notes
|
350,000
|
|
|
350,000
|
|
Floating rate notes
|
200,000
|
|
|
200,000
|
|
Credit facilities
|
223,900
|
|
|
—
|
|
Commercial paper notes
|
325,000
|
|
|
186,700
|
|
|
|
|
|
Variable-rate foreign bank loans
|
7,702
|
|
|
7,296
|
|
|
|
|
|
Finance lease obligations
|
59,181
|
|
|
59,524
|
|
|
|
|
|
Unamortized discount and debt issuance costs
|
(20,332)
|
|
|
(24,136)
|
|
Total long-term debt
|
3,572,058
|
|
|
3,050,257
|
|
Less amounts due within one year
|
804,677
|
|
|
187,336
|
|
Long-term debt, less current portion
|
$
|
2,767,381
|
|
|
$
|
2,862,921
|
|
Aggregate annual maturities of long-term debt as of December 31, 2020 are as follows (in millions): 2021—$804.7; 2022—$200.0; 2023—$223.9; 2024—$425.0; 2025—$610.8; thereafter—$1,328.0.
2019 Notes
On November 25, 2019, we issued a series of notes (collectively, the “2019 Notes”) as follows:
•$200.0 million aggregate principal amount of notes, bearing interest at a floating rate payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning in 2020 (“Floating Rate Notes”), with the interest rate reset on each interest payment date. Borrowings under these notes bear interest at a floating rate based on the 3-month London inter-bank offered rate (“LIBOR”) plus 105 basis points. The applicable floating interest rate for the current interest period is 1.271%. These notes mature on November 15, 2022.
•€500.0 million aggregate principal amount of notes, bearing interest at a rate of 1.125% payable annually on November 25 of each year, beginning in 2020. The effective interest rate on these notes is approximately 1.30%. These notes mature on November 25, 2025.
•€500.0 million aggregate principal amount of notes, bearing interest at a rate of 1.625% payable annually on November 25 of each year, beginning in 2020. The effective interest rate on these notes is approximately 1.74%. These notes mature on November 25, 2028.
•$300.0 million aggregate principal amount of senior notes, bearing interest at a rate of 3.45% payable semi-annually on May 15 and November 15 of each year, beginning in 2020. The effective interest rate on these senior notes is approximately 3.58%. These senior notes mature on November 15, 2029.
The net proceeds from the issuance of the 2019 Notes were used to repay the $1.0 billion balance of the 2019 Credit Facility (see below for further details), a large portion of approximately $370 million of commercial paper notes, the remaining balance of $175.2 million of the senior notes issued on December 10, 2010 (“2010 Senior Notes”), and for general corporate purposes. The 2010 Senior Notes were originally due to mature on December 15, 2020 and bore interest at a rate of 4.50%. During the year ended December 31, 2019, we recorded a loss on early extinguishment of debt of $4.8 million in Interest and financing expenses, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of the 2010 Senior Notes.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
2014 Senior Notes
We currently have the following senior notes outstanding, initially issued in the fourth quarter of 2014:
•€393.0 million aggregate principal amount of senior notes, issued on December 8, 2014, bearing interest at a rate of 1.875% payable annually on December 8 of each year, beginning in 2015. The effective interest rate on these senior notes is approximately 2.10%. These senior notes mature on December 8, 2021.
•$425.0 million aggregate principal amount of senior notes, issued on November 24, 2014, bearing interest at a rate of 4.15% payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2015. The effective interest rate on these senior notes is approximately 5.06%. These senior notes mature on December 1, 2024.
•$350.0 million aggregate principal amount of senior notes, issued on November 24, 2014, bearing interest at a rate of 5.45% payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2015. The effective interest rate on these senior notes is approximately 5.50%. These senior notes mature on December 1, 2044.
On January 22, 2014, we entered into a pay fixed, receive variable rate forward starting interest rate swap, with a notional amount of $325.0 million, with J.P. Morgan Chase Bank, N.A., to be effective October 15, 2014. Our risk management objective and strategy for undertaking this hedge was to eliminate the variability in the interest rate and partial credit spread on the 20 future semi-annual coupon payments that we will pay in connection with our 4.15% senior notes. On October 15, 2014, the swap was settled, resulting in a payment to the counterparty of $33.4 million. This amount was recorded in Accumulated other comprehensive loss and is being amortized to interest expense over the life of the 4.15% senior notes. The amount to be reclassified to interest expense from Accumulated other comprehensive loss during the next twelve months is approximately $3.3 million.
On December 18, 2014, the carrying value of the 1.875% Euro-denominated senior notes was designated as an effective hedge of our net investment in foreign subsidiaries where the Euro serves as the functional currency, and beginning on the date of designation, gains or losses on the revaluation of these senior notes to our reporting currency have been and will be recorded in Accumulated other comprehensive loss. During the years ended December 31, 2020, 2019 and 2018, (losses) gains of ($34.2) million, $8.4 million and $25.8 million (net of income taxes), respectively, were recorded in Accumulated other comprehensive loss in connection with the revaluation of these senior notes to our reporting currency.
Credit Agreements
Our revolving, unsecured credit agreement dated as of June 21, 2018, as amended on August 14, 2019 (the “2018 Credit Agreement”), currently provides for borrowings of up to $1.0 billion and matures on August 9, 2024. Borrowings under the 2018 Credit Agreement bear interest at variable rates based on an average LIBOR for deposits in the relevant currency plus an applicable margin which ranges from 0.910% to 1.500%, depending on the Company’s credit rating from Standard & Poor’s Ratings Services LLC (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”). The applicable margin on the facility was 1.325% as of December 31, 2020. There were no borrowings outstanding under the 2018 Credit Agreement as of December 31, 2020.
On August 14, 2019, the Company entered into a $1.2 billion unsecured credit facility (the “2019 Credit Facility”) with several banks and other financial institutions, which was amended and restated on December 15, 2020. The lenders’ commitment to provide loans under the 2019 Credit Facility terminates on December 10, 2021, with each such loan maturing one year after the funding of such loan. The Company can request that the maturity date of loans be extended for a period of up to four additional years, but any such extension is subject to the approval of the lenders. Borrowings under the amended 2019 Credit Facility bear interest at variable rates based on an average LIBOR for deposits in the relevant currency plus an applicable margin which ranges from 1.125% to 1.750%, depending on the Company’s credit rating from S&P, Moody’s and Fitch. The applicable margin on the credit facility was 1.500% as of December 31, 2020. In October 2019, we borrowed $1.0 billion under this credit facility to fund the cash portion of the October 31, 2019 acquisition of a 60% interest in MRL’s Wodgina Project and for general corporate purposes and as noted above, such amount was repaid in full in November 2019. In April 2020, the Company borrowed the remaining $200 million under the 2019 Credit Facility, which remained outstanding as of December 31, 2020 and matures in April 2023, to be used for general corporate purposes. As part of the December 2020 amendment, the Company is permitted up to two additional borrowings in an aggregate amount equal to $500 million for general corporate purposes.
Borrowings under the 2019 Credit Facility and 2018 Credit Agreement (together “the Credit Agreements”) are conditioned upon satisfaction of certain conditions precedent, including the absence of defaults. The Company is subject to one financial covenant, as well as customary affirmative and negative covenants. The financial covenant initially required that the Company’s consolidated funded debt to consolidated EBITDA ratio (as such terms are defined in the Credit Agreements) to be less than or equal to 3.50:1, subject to adjustments in accordance with the terms of the Credit Agreements relating to a
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
consummation of an acquisition where the consideration includes cash proceeds from issuance of funded debt in excess of $500 million. As a result of the uncertainty of the overall financial impact of the COVID-19 pandemic, the Company amended the Credit Agreements on May 11, 2020 to modify its financial covenant based on the Company’s current expectations. The amendment effects changes to certain provisions of the Credit Agreements, including: (a) conversion of the consolidated funded debt to consolidated EBITDA ratio to a consolidated net funded debt to consolidated EBITDA ratio; (b) carving-out third party sales of accounts receivables from the Securitization Transaction definition; (c) setting the consolidated net funded debt to consolidated EBITDA ratio to 4.00:1 for the fiscal quarter ending June 30, 2020, 4.50:1 for the fiscal quarters through September 30, 2021, 4.00:1 for the fiscal quarter ending December 31, 2021, and 3.50:1 for fiscal quarters thereafter; and (d) reducing the priority debt basket to 24% of Consolidated Net Tangible Assets, as defined in the Credit Agreements, through and including December 31, 2021. As part of this amendment, the Company agreed to pay a 10 basis point fee on the consenting lenders commitments under the Credit Agreements. If conditions caused by the COVID-19 pandemic worsen and the Company’s earnings and cash flow from operations do not start to recover as contemplated in the Company's current plans, the Company may not be able to maintain compliance with its amended financial covenants and it will require the Company to seek additional amendments to the Credit Agreements. If the Company is not able to obtain such necessary additional amendments, this would 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. The Credit Agreements also contain customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness.
Commercial Paper Notes
On May 29, 2013, we entered into agreements to initiate a commercial paper program on a private placement basis under which we may issue unsecured commercial paper notes (the “Commercial Paper Notes”) from time-to-time up to a maximum aggregate principal amount outstanding at any time of $750.0 million. The proceeds from the issuance of the Commercial Paper Notes are expected to be used for general corporate purposes, including the repayment of other debt of the Company. The Credit Agreements are available to repay the Commercial Paper Notes, if necessary. Aggregate borrowings outstanding under the Credit Agreements and the Commercial Paper Notes will not exceed the $1.2 billion current maximum amount available under the Credit Agreements. The Commercial Paper Notes will be sold at a discount from par, or alternatively, will be sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The maturities of the Commercial Paper Notes will vary but may not exceed 397 days from the date of issue. The definitive documents relating to the commercial paper program contain customary representations, warranties, default and indemnification provisions. At December 31, 2020, we had $325.0 million of Commercial Paper Notes outstanding bearing a weighted-average interest rate of approximately 0.51% and a weighted-average maturity of 16 days.
Other
We have additional uncommitted credit lines with various U.S. and foreign financial institutions that provide for borrowings of up to approximately $220 million at December 31, 2020. Outstanding borrowings under these agreements were $7.7 million and $7.3 million at December 31, 2020 and 2019, respectively. The average interest rate on borrowings under these agreements during 2020, 2019 and 2018 was approximately 0.36%, 0.36% and 0.69%, respectively.
At December 31, 2020 and 2019, we had the ability and intent to refinance our borrowings under our other existing credit lines with borrowings under the Credit Agreements. Therefore, the amounts outstanding under those credit lines, if any, are classified as long-term debt at December 31, 2020 and 2019. At December 31, 2020, we had the ability to borrow $1.18 billion under our commercial paper program and the Credit Agreements.
We believe that as of December 31, 2020, we were, and currently are, in compliance with all of our debt covenants.
NOTE 15—Pension Plans and Other Postretirement Benefits:
We maintain various noncontributory defined benefit pension plans covering certain employees, primarily in the U.S., the U.K., Germany and Japan. We also have a contributory defined benefit plan covering certain Belgian employees. The benefits for these plans are based primarily on compensation and/or years of service. Our U.S. and U.K. defined benefit plans for non-represented employees are closed to new participants, with no additional benefits accruing under these plans as participants’ accrued benefits have been frozen. The funding policy for each plan complies with the requirements of relevant governmental laws and regulations. The pension information for all periods presented includes amounts related to salaried and hourly plans.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The following provides a reconciliation of benefit obligations, plan assets and funded status, as well as a summary of significant assumptions, for our defined benefit pension plans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
Change in benefit obligations:
|
|
|
|
|
|
|
|
Benefit obligation at January 1
|
$
|
678,720
|
|
|
$
|
258,374
|
|
|
$
|
635,866
|
|
|
$
|
240,303
|
|
Service cost
|
849
|
|
|
4,000
|
|
|
730
|
|
|
3,680
|
|
Interest cost
|
23,402
|
|
|
3,357
|
|
|
28,199
|
|
|
4,998
|
|
Plan amendments
|
—
|
|
|
593
|
|
|
—
|
|
|
—
|
|
Actuarial loss
|
79,780
|
|
|
19,571
|
|
|
56,108
|
|
|
21,588
|
|
Benefits paid
|
(41,800)
|
|
|
(9,905)
|
|
|
(42,183)
|
|
|
(10,088)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee contributions
|
—
|
|
|
101
|
|
|
—
|
|
|
133
|
|
Foreign exchange loss (gain)
|
—
|
|
|
19,858
|
|
|
—
|
|
|
(1,772)
|
|
Settlements/curtailments
|
—
|
|
|
(5,866)
|
|
|
—
|
|
|
(398)
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
302
|
|
|
—
|
|
|
(70)
|
|
Benefit obligation at December 31
|
$
|
740,951
|
|
|
$
|
290,385
|
|
|
$
|
678,720
|
|
|
$
|
258,374
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
$
|
556,683
|
|
|
$
|
81,466
|
|
|
$
|
513,075
|
|
|
$
|
70,584
|
|
Actual return on plan assets
|
75,715
|
|
|
8,173
|
|
|
82,926
|
|
|
9,417
|
|
Employer contributions
|
3,630
|
|
|
9,653
|
|
|
2,865
|
|
|
10,572
|
|
Benefits paid
|
(41,800)
|
|
|
(9,905)
|
|
|
(42,183)
|
|
|
(10,088)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee contributions
|
—
|
|
|
101
|
|
|
—
|
|
|
133
|
|
Foreign exchange gain
|
—
|
|
|
4,110
|
|
|
—
|
|
|
1,316
|
|
Settlements/curtailments
|
—
|
|
|
(4,279)
|
|
|
—
|
|
|
(398)
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
(78)
|
|
|
—
|
|
|
(70)
|
|
Fair value of plan assets at December 31
|
$
|
594,228
|
|
|
$
|
89,241
|
|
|
$
|
556,683
|
|
|
$
|
81,466
|
|
|
|
|
|
|
|
|
|
Funded status at December 31
|
$
|
(146,723)
|
|
|
$
|
(201,144)
|
|
|
$
|
(122,037)
|
|
|
$
|
(176,908)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
Amounts recognized in consolidated balance sheets:
|
|
|
|
|
|
|
|
Current liabilities (accrued expenses)
|
$
|
(1,217)
|
|
|
$
|
(5,832)
|
|
|
$
|
(1,224)
|
|
|
$
|
(5,648)
|
|
Noncurrent liabilities (pension benefits)
|
(145,506)
|
|
|
(195,312)
|
|
|
(120,813)
|
|
|
(171,260)
|
|
Net pension liability
|
$
|
(146,723)
|
|
|
$
|
(201,144)
|
|
|
$
|
(122,037)
|
|
|
$
|
(176,908)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive (loss) income:
|
|
|
|
|
|
|
|
Prior service benefit
|
$
|
—
|
|
|
$
|
(433)
|
|
|
$
|
—
|
|
|
$
|
224
|
|
Net amount recognized
|
$
|
—
|
|
|
$
|
(433)
|
|
|
$
|
—
|
|
|
$
|
224
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit obligations at December 31:
|
|
|
|
|
|
|
|
Discount rate
|
2.50
|
%
|
|
0.86
|
%
|
|
3.56
|
%
|
|
1.33
|
%
|
Rate of compensation increase
|
—
|
%
|
|
3.82
|
%
|
|
—
|
%
|
|
3.72
|
%
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The accumulated benefit obligation for all defined benefit pension plans was $1.02 billion and $927.6 million at December 31, 2020 and 2019, respectively.
Postretirement medical benefits and life insurance is provided for certain groups of U.S. retired employees. Medical and life insurance benefit costs have been funded principally on a pay-as-you-go basis. Although the availability of medical coverage after retirement varies for different groups of employees, the majority of employees who retire before becoming eligible for Medicare can continue group coverage by paying a portion of the cost of a monthly premium designed to cover the claims incurred by retired employees subject to a cap on payments allowed. The availability of group coverage for Medicare-eligible retirees also varies by employee group with coverage designed either to supplement or coordinate with Medicare. Retirees generally pay a portion of the cost of the coverage. Plan assets for retiree life insurance are held under an insurance contract and are reserved for retiree life insurance benefits. In 2005, the postretirement medical benefit available to U.S. employees was changed to provide that employees who are under age 50 as of December 31, 2005 would no longer be eligible for a company-paid retiree medical premium subsidy. Employees who are of age 50 and above as of December 31, 2005 and who retire after January 1, 2006 will have their retiree medical premium subsidy capped. Effective January 1, 2008, our medical insurance for certain groups of U.S. retired employees is now insured through a medical carrier.
The following provides a reconciliation of benefit obligations, plan assets and funded status, as well as a summary of significant assumptions, for our postretirement benefit plans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
Other Postretirement Benefits
|
|
Other Postretirement Benefits
|
Change in benefit obligations:
|
|
|
|
Benefit obligation at January 1
|
$
|
55,089
|
|
|
$
|
50,390
|
|
Service cost
|
105
|
|
|
98
|
|
Interest cost
|
1,871
|
|
|
2,197
|
|
Actuarial (gain) loss
|
(2,571)
|
|
|
5,445
|
|
Benefits paid
|
(3,151)
|
|
|
(3,041)
|
|
|
|
|
|
|
|
|
|
Benefit obligation at December 31
|
$
|
51,343
|
|
|
$
|
55,089
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
Fair value of plan assets at January 1
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Employer contributions
|
3,151
|
|
|
3,041
|
|
Benefits paid
|
(3,151)
|
|
|
(3,041)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at December 31
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Funded status at December 31
|
$
|
(51,343)
|
|
|
$
|
(55,089)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
Other Postretirement Benefits
|
|
Other Postretirement Benefits
|
Amounts recognized in consolidated balance sheets:
|
|
|
|
Current liabilities (accrued expenses)
|
$
|
(3,268)
|
|
|
$
|
(4,190)
|
|
Noncurrent liabilities (postretirement benefits)
|
(48,075)
|
|
|
(50,899)
|
|
Net postretirement liability
|
$
|
(51,343)
|
|
|
$
|
(55,089)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit obligations at December 31:
|
|
|
|
Discount rate
|
2.49
|
%
|
|
3.53
|
%
|
Rate of compensation increase
|
3.50
|
%
|
|
3.50
|
%
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The components of pension benefits cost (credit) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
December 31, 2020
|
|
December 31, 2019
|
|
December 31, 2018
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
Service cost
|
$
|
849
|
|
|
$
|
4,000
|
|
|
$
|
730
|
|
|
$
|
3,680
|
|
|
$
|
1,043
|
|
|
$
|
3,919
|
|
Interest cost
|
23,402
|
|
|
3,357
|
|
|
28,199
|
|
|
4,998
|
|
|
26,804
|
|
|
5,144
|
|
Expected return on assets
|
(36,957)
|
|
|
(3,274)
|
|
|
(33,926)
|
|
|
(3,837)
|
|
|
(38,621)
|
|
|
(4,204)
|
|
Actuarial loss (gain)
|
40,653
|
|
|
14,189
|
|
|
7,106
|
|
|
16,784
|
|
|
30,234
|
|
|
(10,833)
|
|
Amortization of prior service benefit
|
—
|
|
|
36
|
|
|
—
|
|
|
37
|
|
|
60
|
|
|
34
|
|
Total net pension benefits cost (credit)
|
$
|
27,947
|
|
|
$
|
18,308
|
|
|
$
|
2,109
|
|
|
$
|
21,662
|
|
|
$
|
19,520
|
|
|
$
|
(5,940)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumption percentages:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
3.56
|
%
|
|
1.33
|
%
|
|
4.59
|
%
|
|
2.15
|
%
|
|
4.03
|
%
|
|
1.94
|
%
|
Expected return on plan assets
|
6.88
|
%
|
|
4.07
|
%
|
|
6.89
|
%
|
|
5.51
|
%
|
|
6.89
|
%
|
|
5.52
|
%
|
Rate of compensation increase
|
—
|
%
|
|
3.72
|
%
|
|
—
|
%
|
|
3.63
|
%
|
|
—
|
%
|
|
3.18
|
%
|
Effective January 1, 2021, the weighted-average expected rate of return on plan assets for the U.S. and foreign defined benefit pension plans is 6.88% and 4.12%, respectively.
The components of postretirement benefits cost (credit) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
Other Postretirement Benefits
|
|
Other Postretirement Benefits
|
|
Other Postretirement Benefits
|
Service cost
|
$
|
105
|
|
|
$
|
98
|
|
|
$
|
117
|
|
Interest cost
|
1,871
|
|
|
2,197
|
|
|
2,168
|
|
Expected return on assets
|
—
|
|
|
—
|
|
|
(7)
|
|
Actuarial (gain) loss
|
(2,573)
|
|
|
5,449
|
|
|
(5,400)
|
|
Amortization of prior service benefit
|
—
|
|
|
—
|
|
|
(48)
|
|
|
|
|
|
|
|
Total net postretirement benefits (credit) cost
|
$
|
(597)
|
|
|
$
|
7,744
|
|
|
$
|
(3,170)
|
|
|
|
|
|
|
|
Weighted-average assumption percentages:
|
|
|
|
|
|
Discount rate
|
3.53
|
%
|
|
4.55
|
%
|
|
3.99
|
%
|
Expected return on plan assets
|
—
|
%
|
|
—
|
%
|
|
7.00
|
%
|
Rate of compensation increase
|
3.50
|
%
|
|
3.50
|
%
|
|
3.50
|
%
|
All components of net benefit cost (credit), other than service cost, are included in Other expenses, net on the consolidated statements of income.
The mark-to-market actuarial loss in 2020 is primarily attributable to a decrease in the weighted-average discount rate to 2.50% from 3.56% for our U.S. pension plans and to 0.86% from 1.33% for our foreign pension plans to reflect market conditions as of the December 31, 2020 measurement date. This was partially offset by a higher return on pension plan assets in 2020 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. and foreign pension plan assets was 13.15% versus an expected return of 6.52%.
The mark-to-market actuarial loss in 2019 is primarily attributable to a decrease in the weighted-average discount rate to 3.56% from 4.59% for our U.S. pension plans and to 1.33% from 2.15% for our foreign pension plans to reflect market conditions as of the December 31, 2019 measurement date. This was partially offset by a higher return on pension plan assets in 2019 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. and foreign pension plan assets was 15.82% versus an expected return of 6.72%.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The mark-to-market actuarial loss in 2018 is primarily attributable to a lower return on pension plan assets in 2018 than was expected, as a result of overall market and investment portfolio performance. The weighted-average actual return on our U.S. and foreign pension plan assets was (4.55)% versus an expected return of 6.73%. The mark-to-market actuarial loss in 2018 was partially offset by an increase in the weighted-average discount rate to 4.59% from 4.03% for our U.S. pension plans and to 2.15% from 1.94% for our foreign pension plans to reflect market conditions as of the December 31, 2018 measurement date.
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. Investments for which market quotations are readily available are valued at the closing price on the last business day of the year. Listed securities for which no sale was reported on such date are valued at the mean between the last reported bid and asked price. Securities traded in the over-the-counter market are valued at the closing price on the last business day of the year or at bid price. The net asset value of shares or units is based on the quoted market value of the underlying assets. The market value of corporate bonds is based on institutional trading lots and is most often reflective of bid price. Government securities are valued at the mean between bid and ask prices. Holdings in private equity securities are typically valued using the net asset valuations provided by the underlying private investment companies.
The following tables set forth the assets of our pension and postretirement plans that were accounted for at fair value on a recurring basis as of December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Quoted Prices in Active Markets for Identical Items (Level 1)
|
|
Quoted Prices in Active Markets for Similar Items (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Pension Assets:
|
|
|
|
|
|
|
|
Domestic Equity(a)
|
$
|
142,280
|
|
|
$
|
140,548
|
|
|
$
|
1,732
|
|
|
$
|
—
|
|
International Equity(b)
|
139,611
|
|
|
113,174
|
|
|
26,437
|
|
|
—
|
|
Fixed Income(c)
|
319,998
|
|
|
270,589
|
|
|
49,409
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Absolute Return Measured at Net Asset Value(d)
|
78,787
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash
|
2,793
|
|
|
2,793
|
|
|
—
|
|
|
—
|
|
Total Pension Assets
|
$
|
683,469
|
|
|
$
|
527,104
|
|
|
$
|
77,578
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Quoted Prices in Active Markets for Identical Items (Level 1)
|
|
Quoted Prices in Active Markets for Similar Items (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Pension Assets:
|
|
|
|
|
|
|
|
Domestic Equity(a)
|
$
|
119,842
|
|
|
$
|
118,255
|
|
|
$
|
1,587
|
|
|
$
|
—
|
|
International Equity(b)
|
126,828
|
|
|
95,246
|
|
|
31,582
|
|
|
—
|
|
Fixed Income(c)
|
317,667
|
|
|
279,731
|
|
|
37,936
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Absolute Return Measured at Net Asset Value(d)
|
73,777
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash
|
35
|
|
|
35
|
|
|
—
|
|
|
—
|
|
Total Pension Assets
|
$
|
638,149
|
|
|
$
|
493,267
|
|
|
$
|
71,105
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Consists primarily of U.S. stock funds that track or are actively managed and measured against the S&P 500 index.
(b)Consists primarily of international equity funds which invest in common stocks and other securities whose value is based on an international equity index or an underlying equity security or basket of equity securities.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(c)Consists primarily of debt obligations issued by governments, corporations, municipalities and other borrowers. Also includes insurance policies.
(d)Consists primarily of funds with holdings in private investment companies. See additional information about the Absolute Return investments below. Holdings in private investment companies are measured at fair value using the net asset value per share as a practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts of $78.8 million and $73.8 million as of December 31, 2020 and 2019, respectively, are included in this table to permit reconciliation to the reconciliation of plan assets table above.
The Company’s pension plan assets in the U.S. and U.K. represent approximately 97% of the total pension plan assets. The investment objective of these pension plan assets is to achieve solid returns while preserving capital to meet current plan cash flow requirements. Assets should participate in rising markets, with defensive action in declining markets expected to an even greater degree. Depending on market conditions, the broad asset class targets may range up or down by approximately 10%. These asset classes include but are not limited to hedge fund of funds, bonds and other fixed income vehicles, high yield fixed income securities, equities and distressed debt. At December 31, 2020 and 2019, equity securities held by our pension and OPEB plans did not include direct ownership of Albemarle common stock.
The weighted-average target allocations as of the measurement date are as follows:
|
|
|
|
|
|
|
Target Allocation
|
Equity securities
|
42
|
%
|
Fixed income
|
49
|
%
|
Absolute return
|
9
|
%
|
|
|
Our Absolute Return investments consist primarily of our investments in hedge fund of funds. These are holdings in private investment companies with fair values that are based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment. Investment managers or fund managers associated with these investments provide valuations of the investments on a monthly basis utilizing the net asset valuation approach for determining fair values. These valuations are reviewed by the Company for reasonableness based on applicable sector, benchmark and company performance to validate the appropriateness of the net asset values as a fair value measurement. Where available, audited financial statements are obtained and reviewed for the investments as support for the manager’s investment valuation. In general, the investment objective of these funds is high risk-adjusted returns with an emphasis on preservation of capital. The investment strategies of each of the funds vary; however, the objective of our Absolute Return investments is complementary to the overall investment objective of our U.S. pension plan assets.
We made contributions to our defined benefit pension and OPEB plans of $16.4 million, $16.5 million and $15.2 million during the years ended December 31, 2020, 2019 and 2018, respectively. We expect contributions to our domestic nonqualified and foreign qualified and nonqualified pension plans to approximate $27.1 million in 2021. Also, we expect to pay approximately $3.3 million in premiums to our U.S. postretirement benefit plan in 2021. However, we may choose to make additional voluntary pension contributions in excess of these amounts.
The current forecast of benefit payments, which reflects expected future service, amounts to (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plans
|
|
Foreign Pension Plans
|
|
Other Postretirement Benefits
|
2021
|
$
|
43.0
|
|
|
$
|
12.2
|
|
|
$
|
3.3
|
|
2022
|
$
|
43.4
|
|
|
$
|
11.5
|
|
|
$
|
3.2
|
|
2023
|
$
|
43.8
|
|
|
$
|
14.2
|
|
|
$
|
3.2
|
|
2024
|
$
|
44.1
|
|
|
$
|
12.5
|
|
|
$
|
3.2
|
|
2025
|
$
|
44.6
|
|
|
$
|
12.2
|
|
|
$
|
3.1
|
|
2026-2030
|
$
|
213.2
|
|
|
$
|
66.4
|
|
|
$
|
14.7
|
|
We have a supplemental executive retirement plan (“SERP”), which provides unfunded supplemental retirement benefits to certain management or highly compensated employees. The SERP provides for incremental pension benefits to offset the limitations imposed on qualified plan benefits by federal income tax regulations. Costs (credits) relating to our SERP were $3.8 million, $2.2 million and ($0.8) million for the years ended December 31, 2020, 2019 and 2018, respectively. The projected benefit obligation for the SERP recognized in the consolidated balance sheets at December 31, 2020 and 2019 was $23.1 million and $21.3 million, respectively. The benefit expenses and obligations of this SERP are included in the tables above. Benefits of $1.2 million are expected to be paid to SERP retirees in 2021. On October 1, 2012, our Board of Directors approved
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
amendments to the SERP, such that effective December 31, 2014, no additional benefits shall accrue under this plan and participants’ accrued benefits shall be frozen as of that date to reflect the same changes as were made under the U.S. qualified defined benefit plan.
At December 31, 2020, the assumed rate of increase in the pre-65 and post-65 per capita cost of covered health care benefits for U.S. retirees was zero as the employer-paid premium caps (pre-65 and post-65) were met starting January 1, 2013.
Defined Contribution Plans
On March 31, 2004, a new defined contribution pension plan benefit was adopted under the qualified defined contribution plan for U.S. non-represented employees hired after March 31, 2004. On October 1, 2012 our Board of Directors approved certain plan amendments, such that effective January 1, 2013, the defined contribution pension plan benefit is expanded to include non-represented employees hired prior to March 31, 2004, and revised the contribution for all participants to be based on 5% of eligible employee compensation. The employer portion of contributions to our U.S. defined contribution pension plan amounted to $6.9 million, $11.5 million, and $11.8 million in 2020, 2019 and 2018, respectively. In addition, as part of the Company’s plan to maintain financial flexibility during the COVID-19 pandemic, we have deferred $4.8 million of 2020 contributions for certain employees to the defined contribution plan to 2021.
Certain of our employees participate in our defined contribution 401(k) employee savings plan, which is generally available to all U.S. full-time salaried and non-union hourly employees and to employees who are covered by a collective bargaining agreement that provides for such participation. This U.S. defined contribution plan is funded with contributions made by the participants and us. Our contributions to the 401(k) plan amounted to $7.5 million, $12.6 million and $12.7 million in 2020, 2019 and 2018, respectively. In addition, as part of the Company’s plan to maintain financial flexibility during the COVID-19 pandemic, we have deferred $4.5 million of 2020 contributions for certain employees to the 401(k) plan to 2021.
In 2006, we formalized a new plan in the Netherlands similar to a collective defined contribution plan. The collective defined contribution plan is supported by annuity contracts through an insurance company. The insurance company unconditionally undertakes the legal obligation to provide specific benefits to specific individuals in return for a fixed amount of premiums. Our obligation under this plan is limited to a variable calculated employer match for each participant plus an additional fixed amount of contributions to assist in covering estimated cost of living and salary increases (indexing) and administrative costs for the overall plan. We paid approximately $9.9 million, $9.7 million and $10.2 million in 2020, 2019 and 2018, respectively, in annual premiums and related costs pertaining to this plan.
Multiemployer Plan
Certain current and former employees participate in a multiemployer plan in Germany, the Pensionskasse Dynamit Nobel Versicherungsverein auf Gegenseitigkeit, Troisdorf (“DN Pensionskasse”) that provides monthly payments in the case of disability, death or retirement. The risks of participating in a multiemployer plan are different from single-employer plans in the following ways: (a) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, and (b) if a participating employer stops contributing to the plan due to financial inability to provide funding, the unfunded obligation of the plan may be borne by remaining participating employers.
Some participants in the plan are subject to collective bargaining arrangements, which have no fixed expiration date. The contribution and benefit levels are not negotiated or significantly influenced by these collective bargaining arrangements. Also, the benefit levels generally are not subject to reduction. Under German insurance law, the DN Pensionskasse must be fully funded at all times. The DN Pensionskasse was fully funded as of December 31, 2019, the date of the most recently available information for the plan. This funding level would correspond to the highest funding zone status (at least 80% funded) under U.S. pension regulation. Since the plan liabilities need to be fully funded at all times according to local funding requirements, it is unlikely that the DN Pensionskasse plan will fail to fulfill its obligations, however, in such an event, the Company is liable for the benefits of its employees, and former employees of certain divested businesses, who participate in the plan. Additional information of the DN Pensionskasse is available in the public domain.
The majority of the Company’s contributions are tied to employees’ contributions, which are generally calculated as a percentage of base compensation, up to a certain statutory ceiling. Our normal contributions to this plan were approximately $1.5 million, $1.4 million and $1.5 million in 2020, 2019 and 2018, respectively. The Company’s contributions represented more than 5% of total contributions to the DN Pensionskasse in 2020.
Effective July 1, 2016, the DN Pensionskasse is subject to a financial improvement plan which expires on December 31, 2022, with the final contribution in the second quarter of 2023. This financial improvement plan calls for increased capital reserves to avoid future underfunding risk. During the years ended December 31, 2020, 2019 and 2018, we made contributions
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
for our employees covered under this plan of approximately $3.1 million, $1.8 million and $2.3 million, respectively, recorded in Selling, general and administrative expenses, as a result of this financial improvement plan. The value of the additional funding required under the financial improvement plan each year is determined upon the completion of the annual financial statements and are payable in the second quarter of the following year. A portion of the additional funding necessary for the year will be based on an estimate prepared on September 30 of each year and payable in the fourth quarter of that same year.
NOTE 16—Other Noncurrent Liabilities:
Other noncurrent liabilities consist of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Transition tax on foreign earnings(a)
|
$
|
273,048
|
|
|
$
|
303,490
|
|
Wodgina Project acquisition consideration obligation(b)
|
—
|
|
|
120,800
|
|
Operating leases(c)
|
116,765
|
|
|
114,686
|
|
Liabilities related to uncertain tax positions(d)
|
14,683
|
|
|
21,169
|
|
Executive deferred compensation plan obligation
|
32,447
|
|
|
28,715
|
|
|
|
|
|
Environmental liabilities(e)
|
36,298
|
|
|
33,058
|
|
Asset retirement obligations(e)
|
74,856
|
|
|
55,848
|
|
Tax indemnification liability(f)
|
30,488
|
|
|
30,993
|
|
Other(g)
|
50,792
|
|
|
45,777
|
|
Total
|
$
|
629,377
|
|
|
$
|
754,536
|
|
(a)Noncurrent portion of one-time transition tax on foreign earnings. See Note 21, “Income Taxes,” for additional information.
(b)Represents the 40% interest in the Kemerton assets, which are under construction, expected to be transferred to MRL as part of the consideration paid for the Wodgina Project acquisition. See Note 2, “Acquisitions,” for further details.
(c)See Note 18, “Leases.”
(d)See Note 21, “Income Taxes.”
(e)See Note 17, “Commitments and Contingencies.”
(f)Indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold in 2017.
(g)No individual component exceeds 5% of total liabilities.
NOTE 17—Commitments and Contingencies:
In the ordinary course of business, we have commitments in connection with various activities. We believe that amounts recorded are adequate for known items which might become due in the current year. The most significant commitments are as follows:
Environmental
We had the following activity in our recorded environmental liabilities for the years ended December 31, 2020, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Balance, beginning of year
|
$
|
42,592
|
|
|
$
|
49,569
|
|
|
$
|
39,808
|
|
Expenditures
|
(3,290)
|
|
|
(6,037)
|
|
|
(6,885)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discount
|
925
|
|
|
1,030
|
|
|
1,283
|
|
Additions and changes in estimates(a)
|
3,815
|
|
|
1,129
|
|
|
17,039
|
|
|
|
|
|
|
|
Foreign currency translation adjustments and other
|
1,729
|
|
|
(3,099)
|
|
|
(1,676)
|
|
Balance, end of year
|
45,771
|
|
|
42,592
|
|
|
49,569
|
|
Less amounts reported in Accrued expenses
|
9,473
|
|
|
9,534
|
|
|
9,193
|
|
Amounts reported in Other noncurrent liabilities
|
$
|
36,298
|
|
|
$
|
33,058
|
|
|
$
|
40,376
|
|
(a)Additions in 2018 primarily related to the indemnification of the buyer of a formerly owned site. As defined in the agreement of sale, this indemnification has a set cutoff date in 2024, at which point we will no longer be required to provide financial coverage.
Environmental remediation liabilities included discounted liabilities of $39.2 million and $35.6 million at December 31, 2020 and 2019, respectively, discounted at rates with a weighted-average of 3.5% and 3.7%, with the undiscounted amount totaling $73.6 million and $69.2 million at December 31, 2020 and 2019, respectively. For certain locations where the
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.
The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations, could be an additional $10 million to $30 million before income taxes, in excess of amounts already recorded. The variability of this range is primarily driven by possible environmental remediation activity at a formerly owned site where we indemnify the buyer through a set cutoff date in 2024.
We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.
Asset Retirement Obligations
The following is a reconciliation of our beginning and ending asset retirement obligation balances for 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Balance, beginning of year
|
$
|
60,246
|
|
|
$
|
41,489
|
|
Acquisitions(a)
|
1,222
|
|
|
4,650
|
|
Additions and changes in estimates(b)
|
15,750
|
|
|
14,734
|
|
Accretion of discount
|
2,531
|
|
|
2,035
|
|
Liabilities settled
|
(3,980)
|
|
|
(3,289)
|
|
|
|
|
|
Foreign currency translation adjustments and other
|
103
|
|
|
627
|
|
Balance, end of year
|
$
|
75,872
|
|
|
$
|
60,246
|
|
Less amounts reported in Accrued expenses
|
1,016
|
|
|
4,398
|
|
Amounts reported in Other noncurrent liabilities
|
$
|
74,856
|
|
|
$
|
55,848
|
|
(a) Represents purchase price adjustments for the Wodgina Project acquisition recorded during the year ended December 31, 2020 and 2019. See Note 2, “Acquisitions,” for additional information.
(b) Additions in 2020 and 2019 of $15.8 million and $11.1 million, respectively, related to new asset retirement obligations in Chile and Australia. The remaining $3.6 million of additions in 2019 related to the update of an estimate at a site formerly owned by Albemarle.
Asset retirement obligations primarily relate to post-closure reclamation of brine wells and sites involved in the surface mining and manufacturing of lithium. We are not aware of any conditional asset retirement obligations that would require recognition in our consolidated financial statements.
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 our Catalysts segment, we promptly retained outside counsel and forensic accountants to investigate potential violations of the Company’s Code of Conduct, the Foreign Corrupt Practices Act (“FCPA”), and other potentially applicable laws. Based on this internal investigation, we have voluntarily self-reported potential issues relating to the use of third party sales representatives in our Refining Solutions business, within our
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Catalysts segment, to the U.S. Department of Justice (“DOJ”), the Securities and Exchange Commission (“SEC”), and the Dutch Public Prosecutor (“DPP”), and are cooperating with the DOJ, the SEC, and DPP in their review of these matters. In connection with our internal investigation, we have implemented, and are continuing to implement, appropriate remedial measures.
At this time, we are unable to predict the duration, scope, result or related costs associated with the investigations by the DOJ, the SEC, or DPP. We are unable to predict what, if any, action may be taken by the DOJ, the SEC, or DPP, or what penalties or remedial actions they may seek to impose. Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, penalties, disgorgement, equitable relief, or other losses. We do not believe, however, that any such fines, penalties, disgorgement, equitable relief or other losses would have a material adverse effect on our financial condition or liquidity.
During the year ended December 31, 2018, we recorded a charge of $16.2 million in Other expenses, net resulting from a jury rendering a verdict against Albemarle in a legal matter related to certain business concluded under a 2014 sales agreement for products that Albemarle no longer manufactures. In addition, during the year ended December 31, 2018, we recorded a separate charge of $10.8 million in Other expenses, net due to a settlement of a legal matter related to guarantees from a previously disposed business. Both matters were resolved and paid during the year ended December 31, 2018.
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 $30.5 million and $31.0 million at December 31, 2020 and 2019, 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 standby letters of credit and guarantees with various financial institutions. The following table summarizes our letters of credit and guarantee agreements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
Letters of credit and other guarantees
|
$
|
79,282
|
|
|
$
|
4,476
|
|
|
$
|
1,501
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,872
|
|
The outstanding letters of credit are primarily related to insurance claim payment guarantees. The majority of the Company’s other guarantees have terms of one year and mainly consist of performance and environmental guarantees, as well as guarantees to customs and port authorities. The guarantees arose during the ordinary course of business.
We do not have recorded reserves for the letters of credit and guarantees as of December 31, 2020. We are unable to estimate the maximum amount of the potential future liability under guarantees and letters of credit. However, we accrue for any potential loss for which we believe a future payment is probable and a range of loss can be reasonably estimated. We believe our liability under such obligations is immaterial.
We currently, and are from time to time, subject to transactional audits in various taxing jurisdictions and to customs audits globally. We do not expect the financial impact of any of these audits to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
NOTE 18—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
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
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 years ended December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Operating lease cost
|
$
|
33,904
|
|
|
$
|
35,335
|
|
Finance lease cost:
|
|
|
|
Amortization of right of use assets
|
585
|
|
|
625
|
|
Interest on lease liabilities
|
2,681
|
|
|
117
|
|
Total finance lease cost
|
3,266
|
|
|
742
|
|
|
|
|
|
Short-term lease cost
|
11,663
|
|
|
6,655
|
|
Variable lease cost
|
8,691
|
|
|
6,198
|
|
|
|
|
|
|
|
|
|
Total lease cost
|
$
|
57,524
|
|
|
$
|
48,930
|
|
Rental expense was approximately $37.6 million for the year ended December 31, 2018.
Supplemental cash flow information related to our lease contracts for the years ended December 31, 2020 and 2019 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
$
|
36,245
|
|
|
$
|
29,946
|
|
Operating cash flows from finance leases
|
1,568
|
|
|
117
|
|
Financing cash flows from finance leases
|
663
|
|
|
678
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
Operating leases
|
29,581
|
|
|
24,687
|
|
Finance leases(a)
|
—
|
|
|
55,806
|
|
|
|
|
|
(a) Represents 60% ownership interest in finance lease acquired as part of the Wodgina Project acquisition. See Note 2, “Acquisitions,” for further details.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Supplemental balance sheet information related to our lease contracts, including the location on balance sheet, at December 31, 2020 and 2019 is as follows (in thousands, except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Operating leases:
|
|
|
|
Other assets
|
$
|
136,292
|
|
|
$
|
133,864
|
|
|
|
|
|
Accrued expenses
|
22,297
|
|
|
23,137
|
|
Other noncurrent liabilities
|
116,765
|
|
|
114,686
|
|
Total operating lease liabilities
|
139,062
|
|
|
137,823
|
|
Finance leases:
|
|
|
|
Net property, plant and equipment
|
58,963
|
|
|
59,494
|
|
|
|
|
|
Current portion of long-term debt(a)
|
1,752
|
|
|
636
|
|
Long-term debt
|
58,543
|
|
|
58,888
|
|
Total finance lease liabilities
|
60,295
|
|
|
59,524
|
|
Weighted average remaining lease term (in years):
|
|
|
|
Operating leases
|
15.3
|
|
11.4
|
Finance leases
|
27.5
|
|
28.3
|
Weighted average discount rate (%):
|
|
|
|
Operating leases
|
3.94
|
%
|
|
3.84
|
%
|
Finance leases
|
4.56
|
%
|
|
4.56
|
%
|
(a) Balance includes accrued interest of finance lease.
Maturities of lease liabilities as of December 31, 2020 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
2021
|
$
|
25,620
|
|
|
$
|
2,200
|
|
2022
|
20,428
|
|
|
4,479
|
|
2023
|
21,846
|
|
|
4,479
|
|
2024
|
10,794
|
|
|
4,479
|
|
2025
|
9,620
|
|
|
4,479
|
|
Thereafter
|
132,365
|
|
|
89,918
|
|
Total lease payments
|
220,673
|
|
|
110,034
|
|
Less imputed interest
|
81,611
|
|
|
49,739
|
|
Total
|
$
|
139,062
|
|
|
$
|
60,295
|
|
NOTE 19—Stock-based Compensation Expense:
Incentive Plans
We have various share-based compensation plans that authorize the granting of (i) qualified and non-qualified stock options to purchase shares of our common stock, (ii) restricted stock and restricted stock units, (iii) performance unit awards and (iv) stock appreciation rights (“SARs”) to employees and non-employee directors, at our option. Stock options granted to employees generally vest over three years and have a term of ten years. Restricted stock and restricted stock unit awards vest in periods ranging from one to five years from the date of grant. Performance unit awards are earned at a level ranging from 0% to 200% contingent upon the achievement of specific performance criteria over periods ranging from one to three years. Distribution of earned units occurs generally 50% upon completion of the applicable measurement period with the remaining 50% distributed one year thereafter.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
In May 2017, the Company adopted the Albemarle Corporation 2017 Incentive Plan (the “Incentive Plan”), which replaced the Albemarle Corporation 2008 Incentive Plan. The maximum number of shares available for issuance to participants under the Incentive Plan is 4,500,000 shares. The adoption of the Incentive Plan did not affect awards already granted under the Albemarle Corporation 2008 Incentive Plan. Under the Albemarle Corporation 2013 Stock Compensation and Deferral Election Plan for Non-Employee Directors (the “Non-Employee Directors Plan”), a maximum aggregate number of 500,000 shares of our common stock is authorized for issuance to the Company’s non-employee directors; any shares remaining available for issuance under the prior plans were canceled. The aggregate fair market value of shares that may be issued to a director during any compensation year (as defined in the agreement, generally July 1 to June 30) shall not exceed $150,000. At December 31, 2020, there were 3,754,334 shares available for grant under the Incentive Plan and 345,405 shares available for grant under the Non-Employee Directors Plan.
Total stock-based compensation expense associated with our incentive plans for the years ended December 31, 2020, 2019 and 2018 amounted to $19.3 million, $21.3 million and $15.2 million, respectively, and is included in Cost of goods sold and Selling, general and administrative expenses in the consolidated statements of income. Total related recognized tax benefits for the years ended December 31, 2020, 2019 and 2018 amounted to $2.4 million, $3.2 million and $2.6 million, respectively.
The following table summarizes information about the Company’s fixed-price stock options as of and for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value
(in thousands)
|
Outstanding at December 31, 2019
|
1,244,531
|
|
|
$
|
65.67
|
|
|
4.2
|
|
$
|
14,593
|
|
Granted
|
76,221
|
|
|
81.85
|
|
|
|
|
|
Exercised
|
(682,068)
|
|
|
59.28
|
|
|
|
|
|
Forfeited
|
(37,843)
|
|
|
94.03
|
|
|
|
|
|
Expired
|
(1,000)
|
|
|
41.94
|
|
|
|
|
|
Outstanding at December 31, 2020
|
599,841
|
|
|
$
|
73.24
|
|
|
5.6
|
|
$
|
44,554
|
|
Exercisable at December 31, 2020
|
416,289
|
|
|
$
|
64.06
|
|
|
4.4
|
|
$
|
34,742
|
|
We granted 76,221, 95,639 and 63,259 stock options during 2020, 2019 and 2018, respectively. There were no significant modifications made to any share-based grants during these periods.
The fair value of each option granted during the years ended December 31, 2020, 2019 and 2018 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Dividend yield
|
1.69
|
%
|
|
1.58
|
%
|
|
1.44
|
%
|
Volatility
|
32.65
|
%
|
|
32.50
|
%
|
|
32.48
|
%
|
Average expected life (years)
|
6
|
|
6
|
|
6
|
Risk-free interest rate
|
1.13
|
%
|
|
2.81
|
%
|
|
3.06
|
%
|
Fair value of options granted
|
$
|
22.14
|
|
|
$
|
27.71
|
|
|
$
|
37.35
|
|
Dividend yield is the average of historical yields and those estimated over the average expected life. The stock volatility is based on historical volatilities of our common stock. The average expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and our historical exercise patterns. The risk-free interest rate is based on the U.S. Treasury strip rate with stripped coupon interest for the period equal to the contractual term of the share option grant in effect at the time of grant.
The intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $31.3 million, $8.1 million and $6.2 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.
Total compensation cost not yet recognized for nonvested stock options outstanding as of December 31, 2020 is approximately $1.6 million and is expected to be recognized over a remaining weighted-average period of 1.8 years. Cash proceeds from stock options exercised and tax benefits related to stock options exercised were $40.4 million and $7.1 million
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
for the year ended December 31, 2020, respectively. The Company issues new shares of common stock upon exercise of stock options and vesting of restricted common stock awards.
The following table summarizes activity in performance unit awards as of and for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Grant Date Fair Value Per Share
|
Nonvested, beginning of period
|
259,733
|
|
|
$
|
115.69
|
|
Granted
|
87,124
|
|
|
99.44
|
|
Vested
|
(41,749)
|
|
|
78.03
|
|
Forfeited
|
(78,300)
|
|
|
115.23
|
|
Nonvested, end of period
|
226,808
|
|
|
116.54
|
|
The weighted average grant date fair value of performance unit awards granted in 2020, 2019 and 2018 was $8.7 million, $10.8 million and $10.9 million, respectively. During 2020 and 2019, half of the performance unit awards granted were based on the targeted return on invested capital (“ROIC Award”), while the other half were granted based on targeted market conditions (“TSR Award”). During 2018, all performance unit awards were TSR awards. The fair value of each TSR Award was estimated on the date of grant using the Monte Carlo simulation model as these equity awards are tied to a service and market condition. The calculation used the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Volatility
|
33.66
|
%
|
|
30.11
|
%
|
|
29.92
|
%
|
Risk-free interest rate
|
0.85
|
%
|
|
2.43
|
%
|
|
2.36
|
%
|
The weighted average fair value of performance unit awards that vested during 2020, 2019 and 2018 was $3.0 million, $11.7 million and $20.0 million, respectively, based on the closing prices of our common stock on the dates of vesting. Total compensation cost not yet recognized for nonvested performance unit awards outstanding as of December 31, 2020 is approximately $10.0 million, calculated based on current expectation of specific performance criteria, and is expected to be recognized over a remaining weighted-average period of approximately 1.5 years. Each performance unit represents one share of common stock.
The following table summarizes activity in non-performance based restricted stock and restricted stock unit awards as of and for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Grant Date Fair Value Per Share
|
Nonvested, beginning of period
|
272,560
|
|
|
$
|
85.98
|
|
Granted
|
185,261
|
|
|
71.70
|
|
Vested
|
(107,215)
|
|
|
80.59
|
|
Forfeited
|
(23,862)
|
|
|
89.31
|
|
Nonvested, end of period
|
326,744
|
|
|
79.48
|
|
The weighted average grant date fair value of restricted stock and restricted stock unit awards granted in 2020, 2019 and 2018 was $13.3 million, $10.4 million and $10.9 million, respectively. The weighted average fair value of restricted stock and restricted stock unit awards that vested in 2020, 2019 and 2018 was $9.0 million, $7.5 million and $4.9 million, respectively, based on the closing prices of our common stock on the dates of vesting. Total compensation cost not yet recognized for nonvested, non-performance based restricted stock and restricted stock units as of December 31, 2020 is approximately $14.4 million and is expected to be recognized over a remaining weighted-average period of 2.0 years. The fair value of the non-performance based restricted stock and restricted stock units was estimated on the date of grant adjusted for a dividend factor, if necessary.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 20—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 years ended December 31, 2020, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation
|
|
Pension and Post-Retirement Benefits(a)
|
|
Net Investment Hedge
|
|
Cash Flow Hedge(b)
|
|
Interest Rate Swap(c)
|
|
|
|
Total
|
Balance at December 31, 2017
|
$
|
(257,569)
|
|
|
$
|
(21)
|
|
|
$
|
46,551
|
|
|
$
|
—
|
|
|
$
|
(14,629)
|
|
|
|
|
$
|
(225,668)
|
|
Other comprehensive (loss) income before reclassifications
|
(150,258)
|
|
|
—
|
|
|
15,695
|
|
|
—
|
|
|
—
|
|
|
|
|
(134,563)
|
|
Amounts reclassified from accumulated other comprehensive loss(d)
|
—
|
|
|
(138)
|
|
|
10,091
|
|
|
—
|
|
|
(585)
|
|
|
|
|
9,368
|
|
Other comprehensive income (loss), net of tax
|
(150,258)
|
|
|
(138)
|
|
|
25,786
|
|
|
—
|
|
|
(585)
|
|
|
|
|
(125,195)
|
|
Other comprehensive loss attributable to noncontrolling interests
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
181
|
|
Balance at December 31, 2018
|
$
|
(407,646)
|
|
|
$
|
(159)
|
|
|
$
|
72,337
|
|
|
$
|
—
|
|
|
$
|
(15,214)
|
|
|
|
|
$
|
(350,682)
|
|
Other comprehensive (loss) income before reclassifications
|
(62,031)
|
|
|
576
|
|
|
8,441
|
|
|
4,847
|
|
|
—
|
|
|
|
|
(48,167)
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
2,591
|
|
|
|
|
2,647
|
|
Other comprehensive (loss) income, net of tax
|
(62,031)
|
|
|
632
|
|
|
8,441
|
|
|
4,847
|
|
|
2,591
|
|
|
|
|
(45,520)
|
|
Other comprehensive loss attributable to noncontrolling interests
|
467
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
467
|
|
Balance at December 31, 2019
|
$
|
(469,210)
|
|
|
$
|
473
|
|
|
$
|
80,778
|
|
|
$
|
4,847
|
|
|
$
|
(12,623)
|
|
|
|
|
$
|
(395,735)
|
|
Other comprehensive income (loss) before reclassifications
|
100,389
|
|
|
(580)
|
|
|
(34,185)
|
|
|
1,602
|
|
|
—
|
|
|
|
|
67,226
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
2,601
|
|
|
|
|
2,624
|
|
Other comprehensive income (loss), net of tax
|
100,389
|
|
|
(557)
|
|
|
(34,185)
|
|
|
1,602
|
|
|
2,601
|
|
|
|
|
69,850
|
|
Other comprehensive income attributable to noncontrolling interests
|
(247)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(247)
|
|
Balance at December 31, 2020
|
$
|
(369,068)
|
|
|
$
|
(84)
|
|
|
$
|
46,593
|
|
|
$
|
6,449
|
|
|
$
|
(10,022)
|
|
|
|
|
$
|
(326,132)
|
|
(a)The pre-tax portion of amounts reclassified from accumulated other comprehensive loss consists of amortization of prior service benefit, which is a component of pension and postretirement benefits cost (credit). See Note 15, “Pension Plans and Other Postretirement Benefits,” for additional information.
(b)We entered into a foreign currency forward contract in the fourth quarter of 2019, which was designated and accounted for as a cash flow hedge under ASC 815, Derivatives and Hedging. See Note 22, “Fair Value of Financial Instruments,” for additional information.
(c)The pre-tax portion of amounts reclassified from accumulated other comprehensive loss is included in interest expense.
(d)Amounts reclassified from accumulated other comprehensive loss include a net benefit of $6.9 million, which was reclassified to Retained earnings for stranded tax effects caused by the TCJA.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The amount of income tax benefit (expense) allocated to each component of Other comprehensive income (loss) for the years ended December 31, 2020, 2019 and 2018 is provided in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Pension and Postretirement Benefits
|
|
Net Investment Hedge
|
|
Cash Flow Hedge
|
|
Interest Rate Swap
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), before tax
|
$
|
100,389
|
|
|
$
|
(679)
|
|
|
$
|
(43,826)
|
|
|
$
|
1,602
|
|
|
$
|
3,336
|
|
|
|
Income tax benefit (expense)
|
—
|
|
|
122
|
|
|
9,641
|
|
|
—
|
|
|
(735)
|
|
|
|
Other comprehensive income (loss), net of tax
|
$
|
100,389
|
|
|
$
|
(557)
|
|
|
$
|
(34,185)
|
|
|
$
|
1,602
|
|
|
$
|
2,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, before tax
|
$
|
(62,030)
|
|
|
$
|
633
|
|
|
$
|
10,867
|
|
|
$
|
4,847
|
|
|
$
|
3,336
|
|
|
|
Income tax expense
|
(1)
|
|
|
(1)
|
|
|
(2,426)
|
|
|
—
|
|
|
(745)
|
|
|
|
Other comprehensive (loss) income, net of tax
|
$
|
(62,031)
|
|
|
$
|
632
|
|
|
$
|
8,441
|
|
|
$
|
4,847
|
|
|
$
|
2,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, before tax
|
$
|
(150,262)
|
|
|
$
|
(128)
|
|
|
$
|
20,424
|
|
|
$
|
—
|
|
|
$
|
3,336
|
|
|
|
Income tax benefit (expense)
|
4
|
|
|
(10)
|
|
|
5,362
|
|
|
—
|
|
|
(3,921)
|
|
|
|
Other comprehensive (loss) income, net of tax
|
$
|
(150,258)
|
|
|
$
|
(138)
|
|
|
$
|
25,786
|
|
|
$
|
—
|
|
|
$
|
(585)
|
|
|
|
NOTE 21—Income Taxes:
Income before income taxes and equity in net income of unconsolidated investments, and current and deferred income tax expense (benefit) are composed of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Income before income taxes and equity in net income of unconsolidated investments:
|
|
|
|
|
|
Domestic
|
$
|
41,346
|
|
|
$
|
190,195
|
|
|
$
|
223,702
|
|
Foreign
|
332,173
|
|
|
372,755
|
|
|
570,999
|
|
Total
|
$
|
373,519
|
|
|
$
|
562,950
|
|
|
$
|
794,701
|
|
|
|
|
|
|
|
Current income tax expense (benefit):
|
|
|
|
|
|
Federal
|
$
|
(140)
|
|
|
$
|
21,258
|
|
|
$
|
(2,712)
|
|
State
|
(193)
|
|
|
5,453
|
|
|
6,793
|
|
Foreign
|
56,734
|
|
|
47,056
|
|
|
91,581
|
|
Total
|
$
|
56,401
|
|
|
$
|
73,767
|
|
|
$
|
95,662
|
|
|
|
|
|
|
|
Deferred income tax (benefit) expense:
|
|
|
|
|
|
Federal
|
$
|
4,564
|
|
|
$
|
13,255
|
|
|
$
|
15,573
|
|
State
|
(2,893)
|
|
|
(7,369)
|
|
|
1,614
|
|
Foreign
|
(3,647)
|
|
|
8,508
|
|
|
31,977
|
|
Total
|
$
|
(1,976)
|
|
|
$
|
14,394
|
|
|
$
|
49,164
|
|
|
|
|
|
|
|
Total income tax expense
|
$
|
54,425
|
|
|
$
|
88,161
|
|
|
$
|
144,826
|
|
As a result of the TCJA signed into law in 2017, the Company recorded net benefits of $29.3 million during the year ended December 31, 2018, including measurement period adjustments, primarily related to the one-time transition tax, the remeasurement of deferred tax assets and liabilities and other TCJA impacts.
As of January 1, 2018, the Company recorded a cumulative adjustment to decrease Retained earnings by $18.1 million as a result of the adoption of income tax standard updates.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The reconciliation of the U.S. federal statutory rate to the effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Income Before Income Taxes
|
|
2020
|
|
2019
|
|
2018
|
Federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
State taxes, net of federal tax benefit
|
0.3
|
|
|
(0.5)
|
|
|
0.9
|
|
Change in valuation allowance (a)
|
1.9
|
|
|
1.9
|
|
|
0.7
|
|
Impact of foreign earnings, net(b)
|
(8.4)
|
|
|
(3.7)
|
|
|
(0.3)
|
|
Global intangible low tax inclusion
|
1.9
|
|
|
1.8
|
|
|
0.8
|
|
Change in U.S. federal statutory rate
|
—
|
|
|
—
|
|
|
0.1
|
|
|
|
|
|
|
|
Transition tax on deferred foreign earnings(c)
|
—
|
|
|
—
|
|
|
(5.3)
|
|
Subpart F income
|
1.3
|
|
|
0.6
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
(1.0)
|
|
|
(0.6)
|
|
|
(0.7)
|
|
|
|
|
|
|
|
Depletion
|
(0.9)
|
|
|
(0.7)
|
|
|
(0.6)
|
|
Revaluation of unrecognized tax benefits/reserve requirements
|
(0.4)
|
|
|
(2.7)
|
|
|
—
|
|
|
|
|
|
|
|
Other items, net
|
(1.1)
|
|
|
(1.4)
|
|
|
0.7
|
|
Effective income tax rate
|
14.6
|
%
|
|
15.7
|
%
|
|
18.2
|
%
|
(a)The year ended December 31, 2019 includes a $2.1 million benefit due to the release of a foreign valuation allowance due to changes in expected profitability. 2018 includes an $8.2 million expense due to the establishment of a valuation allowance due to a foreign restructuring plan and a $1.5 million benefit due to the release of a foreign valuation allowance due to changes in expected profitability.
(b)Our statutory rate is decreased by of our share of the income of JBC, a Free Zones company under the laws of the Hashemite Kingdom of Jordan. The applicable provisions of the Jordanian law, and applicable regulations thereunder, do not have a termination provision and the exemption is indefinite. As a Free Zones company, JBC is not subject to income taxes on the profits of products exported from Jordan, and currently, substantially all of the profits are from exports. This resulted in a rate benefit of 11.9%, 8.0%, and 3.3% for 2020, 2019, and 2018, respectively.
(c)During the year ended December 31, 2018, we recorded an income tax benefit of $42.3 million to refine the impact of the one-time transition tax calculation resulting from the TCJA.
Deferred income tax assets and liabilities recorded on the consolidated balance sheets as of December 31, 2020 and 2019 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Accrued employee benefits
|
$
|
21,878
|
|
|
$
|
17,462
|
|
|
|
|
|
Operating loss carryovers(a)
|
1,321,942
|
|
|
1,134,410
|
|
Pensions
|
78,683
|
|
|
64,230
|
|
|
|
|
|
Tax credit carryovers
|
1,582
|
|
|
1,497
|
|
|
|
|
|
Other
|
57,370
|
|
|
64,955
|
|
Gross deferred tax assets
|
1,481,455
|
|
|
1,282,554
|
|
Valuation allowance(a)
|
(1,326,204)
|
|
|
(1,148,268)
|
|
Deferred tax assets
|
155,251
|
|
|
134,286
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Depreciation
|
(348,700)
|
|
|
(349,264)
|
|
Intangibles
|
(91,645)
|
|
|
(88,934)
|
|
|
|
|
|
|
|
|
|
Hedge of net investment of foreign subsidiary
|
(13,514)
|
|
|
(23,498)
|
|
Other
|
(75,927)
|
|
|
(55,173)
|
|
Deferred tax liabilities
|
(529,786)
|
|
|
(516,869)
|
|
|
|
|
|
Net deferred tax liabilities
|
$
|
(374,535)
|
|
|
$
|
(382,583)
|
|
Classification in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax assets
|
$
|
20,317
|
|
|
$
|
15,275
|
|
Noncurrent deferred tax liabilities
|
(394,852)
|
|
|
(397,858)
|
|
Net deferred tax liabilities
|
$
|
(374,535)
|
|
|
$
|
(382,583)
|
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(a)Increase in 2020 due to an increase in foreign net operating losses and an associated and equal valuation allowance.
Changes in the balance of our deferred tax asset valuation allowance are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Balance at January 1
|
$
|
(1,148,268)
|
|
|
$
|
(1,213,750)
|
|
|
$
|
(458,288)
|
|
Additions(a)
|
(182,325)
|
|
|
(24,986)
|
|
|
(766,012)
|
|
Deductions
|
4,389
|
|
|
90,468
|
|
|
10,550
|
|
Balance at December 31
|
$
|
(1,326,204)
|
|
|
$
|
(1,148,268)
|
|
|
$
|
(1,213,750)
|
|
(a)During 2018, the Company recognized intercompany losses at a foreign entity related to international restructuring resulting in an increase to the deferred tax asset for net operating losses and an associated and equal valuation allowance of $749.8 million.
At December 31, 2020, we had approximately $1.6 million of domestic credits available to offset future payments of income taxes, expiring in varying amounts between 2021 and 2039. We have established valuation allowances for $0.3 million of those domestic credits since we believe that it is more likely than not that the related deferred tax assets will not be realized. We believe that sufficient taxable income will be generated during the carryover period in order to utilize the other remaining credit carryovers.
At December 31, 2020, we have on a pre-tax basis, domestic state net operating losses of $206.8 million, expiring between 2021 and 2040, which have pre-tax valuation allowances of $51.7 million established. In addition, we have on a pre-tax basis $5.25 billion of foreign net operating losses, which have pre-tax valuation allowances for $5.20 billion established. $3.02 billion of these foreign net operating losses expire in 2035 and $1.97 billion have an indefinite life. We have established valuation allowances for these deferred tax assets since we believe that it is more likely than not that the related deferred tax assets will not be realized. For the same reason, we established pre-tax valuation allowances of $29.4 million and $67.9 million for other state and foreign deferred tax assets, respectively, unrelated to net operating losses. The realization of the deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, we believe it is more likely than not that the remaining deferred tax assets will be realized. However, the amount considered realizable could be reduced if estimates of future taxable income change.
As of December 31, 2020, we have not recorded taxes on approximately $4.9 billion of cumulative undistributed earnings of our non-U.S.subsidiaries and joint ventures. The TCJA imposed a mandatory transition tax on accumulated foreign earnings and generally eliminated U.S. taxes on foreign subsidiary distribution with the exception of foreign withholding taxes and other foreign local tax. We generally do not provide for taxes related to our undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. If in the foreseeable future, we can no longer demonstrate that these earnings are indefinitely reinvested, a deferred tax liability will be recognized. A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated.
Liabilities related to uncertain tax positions were $14.7 million and $21.2 million at December 31, 2020 and 2019, respectively, inclusive of interest and penalties of $3.1 million and $3.7 million at December 31, 2020 and 2019, respectively, and are reported in Other noncurrent liabilities as provided in Note 16, “Other Noncurrent Liabilities.” These liabilities at December 31, 2020 and 2019 were reduced by $24.1 million and $26.1 million, respectively, for offsetting benefits from the corresponding effects of potential transfer pricing adjustments, state income taxes and rate arbitrage related to foreign structure. These offsetting benefits are recorded in Other assets as provided in Note 11, “Other Assets.” The resulting net asset of $12.5 million as of December 31, 2020 would unfavorably affect earnings if recognized and released, while the net asset of $8.6 million at December 31, 2019 would unfavorably affect earnings if recognized and released.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
The liabilities related to uncertain tax positions, exclusive of interest, were $11.6 million and $17.5 million at December 31, 2020 and 2019, respectively. The following is a reconciliation of our total gross liability related to uncertain tax positions for 2020, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Balance at January 1
|
$
|
17,548
|
|
|
$
|
19,742
|
|
|
$
|
21,438
|
|
|
|
|
|
|
|
Additions for tax positions related to prior years
|
5,646
|
|
|
2,235
|
|
|
874
|
|
Reductions for tax positions related to prior years
|
(174)
|
|
|
—
|
|
|
—
|
|
Additions for tax positions related to current year
|
315
|
|
|
—
|
|
|
1,091
|
|
Lapses in statutes of limitations/settlements
|
(12,128)
|
|
|
(4,494)
|
|
|
(3,578)
|
|
Foreign currency translation adjustment
|
432
|
|
|
65
|
|
|
(83)
|
|
Balance at December 31
|
$
|
11,639
|
|
|
$
|
17,548
|
|
|
$
|
19,742
|
|
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Due to the statute of limitations, we are no longer subject to U.S. federal income tax audits by the Internal Revenue Service (“IRS”) for years prior to 2017. Due to the statute of limitations, we also are no longer subject to U.S. state income tax audits prior to 2011.
With respect to jurisdictions outside the U.S., several audits are in process. We have audits ongoing for the years 2011 through 2019 related to Germany, Italy, Belgium, and Chile, some of which are for entities that have since been divested.
While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than our accrued position. Accordingly, additional provisions on federal and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
Since the timing of resolutions and/or closure of tax audits is uncertain, it is difficult to predict with certainty the range of reasonably possible significant increases or decreases in the liability related to uncertain tax positions that may occur within the next twelve months. Our current view is that it is reasonably possible that we could record a decrease in the liability related to uncertain tax positions, relating to a number of issues, up to approximately $0.5 million as a result of closure of tax statutes.
NOTE 22—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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
Recorded Amount
|
|
Fair Value
|
|
Recorded Amount
|
|
Fair Value
|
|
(In thousands)
|
Long-term debt
|
$
|
3,588,157
|
|
|
$
|
3,783,225
|
|
|
$
|
3,069,417
|
|
|
$
|
3,173,341
|
|
Foreign Currency Forward Contracts—In the fourth quarter of 2019, we entered into a foreign currency forward contract, with a notional value of 727.9 million Australian Dollars, to hedge the cash flow exposure of non-functional currency purchases during the construction of the Kemerton plant in Australia. This derivative financial instrument is used to manage risk and is not used for trading or other speculative purposes. This foreign currency forward contract has been designated as a hedging instrument under ASC 815, Derivatives and Hedging. At December 31, 2020 and 2019, we had outstanding designated foreign currency forward contracts with notional values totaling the equivalent of $75.4 million and $481.2 million, respectively.
We also enter into foreign currency forward contracts in connection with our risk management strategies that have not been designated as hedging instruments under ASC 815, Derivatives and Hedging, in an attempt to minimize the financial 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 December 31, 2020 and 2019, we had outstanding non-designated foreign
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
currency forward contracts with notional values totaling $611.1 million and $1.15 billion, respectively, hedging our exposure to various currencies including the Euro, Chinese Renminbi, Chilean Peso and Australian Dollar.
The following table summarizes the fair value of our foreign currency forward contracts included in the consolidated balance sheets as of December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
December 31,
|
|
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Designated as hedging instruments(a)
|
$
|
7,043
|
|
|
$
|
5,369
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Not designated as hedging instruments(b)
|
6,563
|
|
|
2,032
|
|
|
4,803
|
|
|
3,613
|
|
Total
|
$
|
13,606
|
|
|
$
|
7,401
|
|
|
$
|
4,803
|
|
|
$
|
3,613
|
|
(a) Included $6.2 million in Other current assets and $0.9 million in Other assets at December 31, 2020 and $3.7 million in Other current assets and $1.7 million in Other assets at December 31, 2019.
(b) Included $6.6 million in Other current assets and $4.8 million in Accrued expenses at December 31, 2020 and $2.0 million in Other current assets and $3.6 million in Accrued expenses at December 31, 2019.
The following table summarizes the net gains (losses) recognized for our foreign currency forward contracts during the years ended December 31, 2020, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Designated as hedging instruments:
|
|
|
|
|
|
Gain recognized in Other comprehensive income (loss)
|
$
|
1,602
|
|
|
$
|
4,847
|
|
|
$
|
—
|
|
Not designated as hedging instruments:
|
|
|
|
|
|
Losses recognized in Other expenses, net(a)
|
$
|
(7,665)
|
|
|
$
|
(25,765)
|
|
|
$
|
(19,851)
|
|
(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 expenses, net.
In addition, for the years ended December 31, 2020, 2019 and 2018, we recorded net cash settlements of $19.4 million, $23.6 million and $25.2 million, respectively, primarily within Changes in current assets and liabilities, in our consolidated statements of cash flows.
As of December 31, 2020, there are no unrealized gains or losses related to the cash flow hedge expected to be reclassified to earnings in the next twelve months.
The counterparties to our foreign currency forward contracts are major financial institutions with which we generally have other financial relationships. We are exposed to credit loss in the event of nonperformance by these counterparties. However, we do not anticipate nonperformance by the counterparties.
NOTE 23—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
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
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 December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Quoted Prices in Active Markets for Identical Items (Level 1)
|
|
Quoted Prices in Active Markets for Similar Items (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Investments under executive deferred compensation plan(a)
|
$
|
32,447
|
|
|
$
|
32,447
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Private equity securities(b)
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Private equity securities measured at net asset value(b)(c)
|
$
|
4,626
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts(d)
|
$
|
13,606
|
|
|
$
|
—
|
|
|
$
|
13,606
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Obligations under executive deferred compensation plan (a)
|
$
|
32,447
|
|
|
$
|
32,447
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts(d)
|
$
|
4,803
|
|
|
$
|
—
|
|
|
$
|
4,803
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Quoted Prices in Active Markets for Identical Items (Level 1)
|
|
Quoted Prices in Active Markets for Similar Items (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Investments under executive deferred compensation plan(a)
|
$
|
28,715
|
|
|
$
|
28,715
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Private equity securities(b)
|
$
|
32
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Private equity securities measured at net asset value(b)(c)
|
$
|
4,890
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts(d)
|
$
|
7,401
|
|
|
$
|
—
|
|
|
$
|
7,401
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Obligations under executive deferred compensation plan(a)
|
$
|
28,715
|
|
|
$
|
28,715
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts(d)
|
$
|
3,613
|
|
|
$
|
—
|
|
|
$
|
3,613
|
|
|
$
|
—
|
|
(a)We maintain an EDCP that was adopted in 2001 and subsequently amended. The purpose of the EDCP is to provide current tax planning opportunities as well as supplemental funds upon the retirement or death of certain of our employees. The EDCP is intended to aid in attracting and retaining employees of exceptional ability by providing them with these benefits. We also maintain a Benefit Protection Trust (the “Trust”) that was created to provide a source of funds to assist in meeting the obligations of the EDCP, subject to the claims of our creditors in the event of our insolvency. Assets of the Trust are consolidated in accordance with authoritative guidance. The assets of the Trust consist primarily of mutual fund investments (which are accounted for as trading securities and are marked-to-market on a monthly basis through the consolidated statements of income) and cash and cash equivalents. As such, these assets and obligations are classified within Level 1.
(b)Primarily consists of private equity securities classified as available-for-sale and are reported in Investments in the consolidated balance sheets. The changes in fair value are reported in Other expenses, net, in our consolidated statements of income.
(c)Holdings in 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. The fair value amounts of $4.6 million and $4.9 million as of December 31, 2020 and 2019, respectively, are included in this table to permit reconciliation to the marketable equity securities presented in Note 10, “Investments.”
(d)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 22, “Fair Value of Financial Instruments,” for further details about our foreign currency forward contracts.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 24—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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Sales to unconsolidated affiliates
|
$
|
22,589
|
|
|
$
|
20,068
|
|
|
$
|
35,094
|
|
Purchases from unconsolidated affiliates(a)
|
$
|
168,072
|
|
|
$
|
210,351
|
|
|
$
|
256,701
|
|
(a)Purchases from unconsolidated affiliates primarily relate to purchases from our Windfield joint venture.
Our consolidated balance sheets include accounts receivable due from and payable to unconsolidated affiliates in the ordinary course of business as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Receivables from related parties
|
$
|
4,098
|
|
|
$
|
7,163
|
|
Payables to related parties
|
$
|
30,123
|
|
|
$
|
35,502
|
|
NOTE 25—Segment and Geographic Area Information:
Our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. This business structure aligns with the markets and customers we serve through each of the segments. This structure also facilitates the continued standardization of business processes across the organization, and is consistent with the manner in which information is presently used internally by the Company’s chief operating decision maker to evaluate performance and make resource allocation decisions.
Summarized financial information concerning our reportable segments is shown in the following tables. The “All Other” category includes only the fine chemistry services business that does not fit into any of our core businesses.
The Corporate category is not considered to be a segment and includes corporate-related items not allocated to the operating segments. Pension and OPEB service cost (which represents the benefits earned by active employees during the period) and amortization of prior service cost or benefit are allocated to the reportable segments, All Other, and Corporate, whereas the remaining components of pension and OPEB benefits cost or credit (“Non-operating pension and OPEB items”) are included in Corporate. Segment data includes intersegment transfers of raw materials at cost and allocations for certain corporate costs.
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, taxes, depreciation and amortization, as adjusted on a consistent basis for certain non-recurring or unusual items in a balanced manner and on a segment basis. These non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides transparency to investors and enables period-to-period comparability of financial performance. Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to Net 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.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
(In thousands)
|
Net sales:
|
|
|
|
|
|
Lithium
|
$
|
1,144,778
|
|
|
$
|
1,358,170
|
|
|
$
|
1,228,171
|
|
Bromine Specialties
|
964,962
|
|
|
1,004,216
|
|
|
917,880
|
|
Catalysts
|
797,914
|
|
|
1,061,817
|
|
|
1,101,554
|
|
All Other
|
221,255
|
|
|
165,224
|
|
|
127,186
|
|
Corporate
|
—
|
|
|
—
|
|
|
159
|
|
Total net sales
|
$
|
3,128,909
|
|
|
$
|
3,589,427
|
|
|
$
|
3,374,950
|
|
|
|
|
|
|
|
Adjusted EBITDA:
|
|
|
|
|
|
Lithium
|
$
|
393,093
|
|
|
$
|
524,934
|
|
|
$
|
530,773
|
|
Bromine Specialties
|
323,605
|
|
|
328,457
|
|
|
288,116
|
|
Catalysts
|
130,134
|
|
|
270,624
|
|
|
284,307
|
|
All Other
|
84,821
|
|
|
49,628
|
|
|
14,091
|
|
Corporate
|
(112,915)
|
|
|
(136,862)
|
|
|
(110,623)
|
|
Total adjusted EBITDA
|
$
|
818,738
|
|
|
$
|
1,036,781
|
|
|
$
|
1,006,664
|
|
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, from Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lithium
|
|
Bromine Specialties
|
|
Catalysts
|
|
Reportable Segments Total
|
|
All Other
|
|
Corporate
|
|
Consolidated Total
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Albemarle Corporation
|
$
|
277,711
|
|
|
$
|
274,495
|
|
|
$
|
80,149
|
|
|
$
|
632,355
|
|
|
$
|
76,323
|
|
|
$
|
(332,914)
|
|
|
$
|
375,764
|
|
Depreciation and amortization
|
112,854
|
|
|
50,310
|
|
|
49,985
|
|
|
213,149
|
|
|
8,498
|
|
|
10,337
|
|
|
231,984
|
|
Restructuring and other(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,597
|
|
|
19,597
|
|
Acquisition and integration related costs(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,263
|
|
|
17,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and financing expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73,116
|
|
|
73,116
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,425
|
|
|
54,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating pension and OPEB items
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,668
|
|
|
40,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(c)
|
2,528
|
|
|
(1,200)
|
|
|
—
|
|
|
1,328
|
|
|
—
|
|
|
4,593
|
|
|
5,921
|
|
Adjusted EBITDA
|
$
|
393,093
|
|
|
$
|
323,605
|
|
|
$
|
130,134
|
|
|
$
|
846,832
|
|
|
$
|
84,821
|
|
|
$
|
(112,915)
|
|
|
$
|
818,738
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Albemarle Corporation
|
$
|
341,767
|
|
|
$
|
279,945
|
|
|
$
|
219,686
|
|
|
$
|
841,398
|
|
|
$
|
41,188
|
|
|
$
|
(349,358)
|
|
|
$
|
533,228
|
|
Depreciation and amortization
|
99,424
|
|
|
47,611
|
|
|
50,144
|
|
|
197,179
|
|
|
8,440
|
|
|
7,865
|
|
|
213,484
|
|
Restructuring and other(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,877
|
|
|
5,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of property(d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,411)
|
|
|
(14,411)
|
|
Acquisition and integration related costs(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,684
|
|
|
20,684
|
|
Interest and financing expenses(e)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,695
|
|
|
57,695
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,161
|
|
|
88,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating pension and OPEB items
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,970
|
|
|
26,970
|
|
Stamp duty(b)
|
64,766
|
|
|
—
|
|
|
—
|
|
|
64,766
|
|
|
—
|
|
|
—
|
|
|
64,766
|
|
Windfield tax settlement(f)
|
17,292
|
|
|
—
|
|
|
—
|
|
|
17,292
|
|
|
—
|
|
|
—
|
|
|
17,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(g)
|
1,685
|
|
|
901
|
|
|
794
|
|
|
3,380
|
|
|
—
|
|
|
19,655
|
|
|
23,035
|
|
Adjusted EBITDA
|
$
|
524,934
|
|
|
$
|
328,457
|
|
|
$
|
270,624
|
|
|
$
|
1,124,015
|
|
|
$
|
49,628
|
|
|
$
|
(136,862)
|
|
|
$
|
1,036,781
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Albemarle Corporation
|
$
|
428,212
|
|
|
$
|
246,509
|
|
|
$
|
445,604
|
|
|
$
|
1,120,325
|
|
|
$
|
6,018
|
|
|
$
|
(432,781)
|
|
|
$
|
693,562
|
|
Depreciation and amortization
|
95,193
|
|
|
41,607
|
|
|
49,131
|
|
|
185,931
|
|
|
8,073
|
|
|
6,694
|
|
|
200,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,838
|
|
|
3,838
|
|
Gain on sale of business(h)
|
—
|
|
|
—
|
|
|
(210,428)
|
|
|
(210,428)
|
|
|
—
|
|
|
—
|
|
|
(210,428)
|
|
Acquisition and integration related costs(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,377
|
|
|
19,377
|
|
Interest and financing expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,405
|
|
|
52,405
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144,826
|
|
|
144,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating pension and OPEB items
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,285
|
|
|
5,285
|
|
Legal accrual(i)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,027
|
|
|
27,027
|
|
Environmental accrual(j)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,597
|
|
|
15,597
|
|
Albemarle Foundation contribution(k)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
|
15,000
|
|
Indemnification adjustments(l)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,240
|
|
|
25,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(m)
|
7,368
|
|
|
—
|
|
|
—
|
|
|
7,368
|
|
|
—
|
|
|
6,869
|
|
|
14,237
|
|
Adjusted EBITDA
|
$
|
530,773
|
|
|
$
|
288,116
|
|
|
$
|
284,307
|
|
|
$
|
1,103,196
|
|
|
$
|
14,091
|
|
|
$
|
(110,623)
|
|
|
$
|
1,006,664
|
|
(a)During the year ended December 31, 2020, we recorded severance expenses as part of business reorganization plans, impacting each of our businesses and Corporate, primarily in the U.S., Belgium, Germany and with our Jordanian joint venture partner. We recorded expenses of $0.7 million in Cost of goods sold, $19.2 million in SG&A and a $0.3 million gain in Net income attributable to noncontrolling interests for the portion of severance expense allocated to our Jordanian joint venture partner. The balance of unpaid severance is recorded in Accrued expenses and is primarily expected to be paid through 2021. In addition, we recorded severance payments as part of a business reorganization plans of $5.9 million recorded in Selling, general and administrative expenses for the year
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
ended December 31, 2019 and $0.1 million and $3.7 million recorded in Cost of goods sold and Selling, general and administrative expenses, respectively, for the year ended December 31, 2018.
(b)See Note 2, “Acquisitions,” for additional information.
(c)Included amounts for the year ended December 31, 2020 recorded in:
•Cost of goods sold - $1.3 million of expense related to a legal matter as part of a prior acquisition in our Lithium business.
•SG&A - $3.1 million of shortfall contributions for our multiemployer plan financial improvement plan and $3.8 million of a net expense primarily relating to the increase of environmental reserves at non-operating businesses we have previously divested.
•Other expenses, net - $7.2 million gain related to the sale of our ownership percentage in the SOCC joint venture, $3.6 million of a net gain primarily relating to the sale of intangible assets in our Bromine business and property in Germany not used as part of our operations and a $2.5 million net gain resulting from the settlement of legal matters related to a business sold or a site in the process of being sold, partially offset by $9.6 million of losses resulting from the adjustment of indemnifications related to previously disposed businesses and $1.2 million of expenses related to other costs outside of our regular operations.
(d)Gain of $3.3 million recorded in Selling, general and administrative expenses related to the release of liabilities as part of the sale of a property and $11.1 million gain recorded in Other expenses, net related to the sale of land in Pasadena, Texas not used as part of our operations.
(e)Included in Interest and financing expenses is a loss on early extinguishment of debt of $4.8 million. See Note 14, “Long-Term Debt,” for additional information.
(f)Represents our 49% share of a tax settlement between our Windfield joint venture and an Australian taxing authority, recorded in Equity in net income of unconsolidated investments (net of tax). This is offset in Income tax expense by a discrete tax benefit related to seeking treaty relief from the competent authority to prevent double taxation.
(g)Included amounts for the year ended December 31, 2019 recorded in:
•Cost of goods sold - $0.7 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
•Selling, general and administrative expenses - $1.8 million of shortfall contributions for our multiemployer plan financial improvement plan, $0.9 million of a write-off of uncollectible accounts receivable from a terminated distributor in the Bromine Specialties segment, $1.0 million related to the settlement of terminated agreements, primarily in the Catalysts segment, and $0.8 million related to the settlement of an ongoing audit in the Lithium segment.
•Other expenses, net - $3.1 million of unrecoverable vendor costs outside the operations of the business related to the construction of the future Kemerton production facility, $9.8 million of a net loss primarily resulting from the adjustment of indemnifications and other liabilities related to previously disposed businesses or purchase accounting, $3.6 million of asset retirement obligation charges related to the update of an estimate at a site formerly owned by Albemarle, and $1.2 million of non-operating pension costs from our 50% interest in JBC.
(h)See Note 3, “Divestitures,” for additional information.
(i)Included in Other expenses, net. See Note 17, “Commitments and Contingencies,” for additional information.
(j)Increase in environmental reserve to indemnify the buyer of a formerly owned site recorded in Other expenses, net. As defined in the agreement of sale, this indemnification has a set cutoff date in 2024, at which point we will no longer be required to provide financial coverage.
(k)Included in Selling, general and administrative expenses is a charitable contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to the Albemarle Foundation, a non-profit organization that sponsors grants, health and social projects, educational initiatives, disaster relief, matching gift programs, scholarships and other charitable initiatives in locations where our employees live and operate. This contribution is in addition to the normal annual contribution made to the Albemarle Foundation by the Company, and is significant in size and nature in that it is intended to provide more long-term benefits in the communities where we live and operate.
(l)Included in Other expenses, net is $19.7 million related to the proposed settlement of an ongoing audit of a previously disposed business in Germany, and $5.5 million related to the adjustment of indemnifications previously recorded from disposed businesses.
(m)Included amounts for the year ended December 31, 2018 recorded in:
•Cost of goods sold - $4.9 million for the write-off of fixed assets related to a major capacity expansion in our Jordanian joint venture and $8.8 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.
•Selling, general and administrative expenses - $2.3 million of shortfall contributions for our multiemployer plan financial improvement plan and a $1.2 million contribution, using a portion of the proceeds received from the Polyolefin Catalysts Divestiture, to schools in the state of Louisiana for qualified tuition purposes. This contribution is significant in size and is intended to provide long-term benefits for families in the Louisiana community. This was partially offset by a $1.5 million gain related to a refund from Chilean authorities due to an overpayment made in a prior year.
•Other expenses, net - $1.5 million gain related to the reversal of previously recorded liabilities of disposed businesses.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
Identifiable assets:
|
|
|
|
|
|
Lithium(a)
|
$
|
7,134,229
|
|
|
$
|
6,570,791
|
|
|
$
|
4,605,070
|
|
Bromine Specialties
|
867,648
|
|
|
799,456
|
|
|
753,157
|
|
Catalysts
|
1,066,089
|
|
|
1,163,590
|
|
|
1,134,975
|
|
All Other
|
136,659
|
|
|
146,211
|
|
|
128,185
|
|
Corporate(b)
|
1,246,321
|
|
|
1,180,815
|
|
|
960,287
|
|
Total identifiable assets
|
$
|
10,450,946
|
|
|
$
|
9,860,863
|
|
|
$
|
7,581,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Increase in Lithium identifiable assets at December 31, 2020 and 2019 primarily due to capital expenditures for growth and capacity increases, as well as the acquisition of 60% interest in MRL’s Wodgina Project assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
Lithium
|
$
|
112,854
|
|
|
$
|
99,424
|
|
|
$
|
95,193
|
|
Bromine Specialties
|
50,310
|
|
|
47,611
|
|
|
41,607
|
|
Catalysts
|
49,985
|
|
|
50,144
|
|
|
49,131
|
|
|
|
|
|
|
|
All Other
|
8,498
|
|
|
8,440
|
|
|
8,073
|
|
Corporate
|
10,337
|
|
|
7,865
|
|
|
6,694
|
|
Total depreciation and amortization
|
$
|
231,984
|
|
|
$
|
213,484
|
|
|
$
|
200,698
|
|
Capital expenditures:
|
|
|
|
|
|
Lithium
|
$
|
720,563
|
|
|
$
|
665,585
|
|
|
$
|
500,849
|
|
Bromine Specialties
|
57,486
|
|
|
82,208
|
|
|
79,357
|
|
Catalysts
|
44,448
|
|
|
57,939
|
|
|
52,019
|
|
|
|
|
|
|
|
All Other
|
6,792
|
|
|
7,309
|
|
|
5,232
|
|
Corporate
|
21,188
|
|
|
38,755
|
|
|
62,534
|
|
Total capital expenditures
|
$
|
850,477
|
|
|
$
|
851,796
|
|
|
$
|
699,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
Net Sales(a):
|
|
|
|
|
|
United States
|
$
|
743,834
|
|
|
$
|
858,084
|
|
|
$
|
887,416
|
|
Foreign(b)
|
2,385,075
|
|
|
2,731,343
|
|
|
2,487,534
|
|
Total
|
$
|
3,128,909
|
|
|
$
|
3,589,427
|
|
|
$
|
3,374,950
|
|
(a)Net sales are attributed to countries based upon shipments to final destination.
(b)In 2020, net sales to Korea, China and Japan represented 14%, 14% and 13%, respectively, of total net sales. In 2019, net sales to Korea, China and Japan represented 17%, 13%, and 12%, respectively, of total net sales. In 2018, net sales to Korea, China and Japan represented 13%, 12%, and 10%, respectively, of total net sales.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
Long-Lived Assets(a):
|
|
|
|
|
|
United States
|
$
|
1,007,793
|
|
|
$
|
1,003,496
|
|
|
$
|
929,291
|
|
Australia
|
2,362,377
|
|
|
1,981,642
|
|
|
407,141
|
|
Chile
|
1,814,658
|
|
|
1,687,090
|
|
|
1,406,478
|
|
Jordan
|
256,640
|
|
|
256,363
|
|
|
254,800
|
|
Netherlands
|
181,206
|
|
|
165,782
|
|
|
166,853
|
|
China
|
122,749
|
|
|
109,235
|
|
|
91,160
|
|
Germany
|
90,174
|
|
|
89,568
|
|
|
101,168
|
|
France
|
45,505
|
|
|
44,936
|
|
|
43,698
|
|
Brazil
|
24,393
|
|
|
37,165
|
|
|
40,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other foreign countries
|
66,273
|
|
|
68,499
|
|
|
65,937
|
|
Total
|
$
|
5,971,768
|
|
|
$
|
5,443,776
|
|
|
$
|
3,506,990
|
|
(a) Long-lived assets are comprised of the Company’s Property, plant and equipment and joint ventures included in Investments.
|
|
|
|
|
|
|
|
|
Albemarle Corporation and Subsidiaries
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|