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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For Quarterly Period Ended June 30, 2024
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-12658
_________________________________________________
ALBEMARLE CORPORATION
(Exact name of registrant as specified in its charter)
_________________________________________________
| | | | | | | | |
Virginia | | 54-1692118 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
4250 Congress Street, Suite 900
Charlotte, North Carolina 28209
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code - (980) 299-5700
_________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
COMMON STOCK, $.01 Par Value | | ALB | | New York Stock Exchange |
DEPOSITARY SHARES, each representing a 1/20th interest in a share of 7.25% Series A Mandatory Convertible Preferred Stock | | ALB PR A | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
| | | |
Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | | | |
| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock, $.01 par value, outstanding as of July 24, 2024: 117,533,235
ALBEMARLE CORPORATION
INDEX – FORM 10-Q
PART I. FINANCIAL INFORMATION
| | | | | |
Item 1. | Financial Statements (Unaudited). |
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2024 | | 2023 | | 2024 | | 2023 | |
Net sales | $ | 1,430,385 | | | $ | 2,370,190 | | | $ | 2,791,121 | | | $ | 4,950,442 | | |
Cost of goods sold(a) | 1,440,963 | | | 1,811,703 | | | 2,762,761 | | | 3,115,415 | | |
Gross (loss) profit | (10,578) | | | 558,487 | | | 28,360 | | | 1,835,027 | | |
Selling, general and administrative expenses | 168,948 | | | 397,070 | | | 346,660 | | | 551,376 | | |
Capital project assets write-off | 292,315 | | | — | | | 309,515 | | | — | | |
Research and development expenses | 20,770 | | | 21,419 | | | 44,302 | | | 41,890 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Operating (loss) profit | (492,611) | | | 139,998 | | | (672,117) | | | 1,241,761 | | |
Interest and financing expenses | (35,187) | | | (25,577) | | | (73,156) | | | (52,354) | | |
Other income, net | 33,666 | | | 53,954 | | | 83,567 | | | 136,446 | | |
(Loss) income before income taxes and equity in net income of unconsolidated investments | (494,132) | | | 168,375 | | | (661,706) | | | 1,325,853 | | |
Income tax (benefit) expense | (30,660) | | | 42,987 | | | (34,381) | | | 319,950 | | |
(Loss) income before equity in net income of unconsolidated investments | (463,472) | | | 125,388 | | | (627,325) | | | 1,005,903 | | |
Equity in net income of unconsolidated investments (net of tax) | 286,878 | | | 551,051 | | | 467,378 | | | 947,239 | | |
Net (loss) income | (176,594) | | | 676,439 | | | (159,947) | | | 1,953,142 | | |
Net income attributable to noncontrolling interests | (11,604) | | | (26,396) | | | (25,803) | | | (64,519) | | |
Net (loss) income attributable to Albemarle Corporation | (188,198) | | | 650,043 | | | (185,750) | | | 1,888,623 | | |
Mandatory convertible preferred stock dividends | (41,688) | | | — | | | (53,272) | | | — | | |
Net (loss) income attributable to Albemarle Corporation common shareholders | $ | (229,886) | | | $ | 650,043 | | | $ | (239,022) | | | $ | 1,888,623 | | |
| | | | | | | | |
Basic (loss) earnings per share attributable to common shareholders | $ | (1.96) | | | $ | 5.54 | | | $ | (2.03) | | | $ | 16.10 | | |
Diluted (loss) earnings per share attributable to common shareholders | $ | (1.96) | | | $ | 5.52 | | | $ | (2.03) | | | $ | 16.03 | | |
Weighted-average common shares outstanding – basic | 117,528 | | | 117,332 | | | 117,489 | | | 117,282 | | |
Weighted-average common shares outstanding – diluted | 117,528 | | | 117,769 | | | 117,489 | | | 117,805 | | |
(a)Included purchases from related unconsolidated affiliates of $582.2 million and $421.0 million for the three-month periods ended June 30, 2024 and 2023, respectively, and $1.1 billion and $774.2 million for the six-month periods ended June 30, 2024 and 2023, respectively.
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net (loss) income | $ | (176,594) | | | $ | 676,439 | | | $ | (159,947) | | | $ | 1,953,142 | |
Other comprehensive (loss) income, net of tax: | | | | | | | |
Foreign currency translation and other | (46,751) | | | (5,635) | | | (96,971) | | | 40,581 | |
| | | | | | | |
| | | | | | | |
Cash flow hedge | 6,617 | | | 1,026 | | | (12,043) | | | 2,127 | |
| | | | | | | |
| | | | | | | |
Total other comprehensive (loss) income, net of tax | (40,134) | | | (4,609) | | | (109,014) | | | 42,708 | |
Comprehensive (loss) income | (216,728) | | | 671,830 | | | (268,961) | | | 1,995,850 | |
Comprehensive income attributable to noncontrolling interests | (11,816) | | | (26,396) | | | (25,814) | | | (64,511) | |
Comprehensive (loss) income attributable to Albemarle Corporation | $ | (228,544) | | | $ | 645,434 | | | $ | (294,775) | | | $ | 1,931,339 | |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | |
| June 30, | | December 31, |
| 2024 | | 2023 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,830,227 | | | $ | 889,900 | |
Trade accounts receivable, less allowance for doubtful accounts (2024 – $2,762; 2023 – $2,808) | 785,553 | | | 1,213,160 | |
Other accounts receivable | 412,181 | | | 509,097 | |
Inventories | 1,800,114 | | | 2,161,287 | |
Other current assets | 397,630 | | | 443,475 | |
| | | |
Total current assets | 5,225,705 | | | 5,216,919 | |
Property, plant and equipment, at cost | 12,788,646 | | | 12,233,757 | |
Less accumulated depreciation and amortization | 2,951,614 | | | 2,738,553 | |
Net property, plant and equipment | 9,837,032 | | | 9,495,204 | |
Investments | 1,160,674 | | | 1,369,855 | |
| | | |
| | | |
Other assets | 320,598 | | | 297,087 | |
Goodwill | 1,600,938 | | | 1,629,729 | |
Other intangibles, net of amortization | 243,335 | | | 261,858 | |
Total assets | $ | 18,388,282 | | | $ | 18,270,652 | |
Liabilities And Equity | | | |
Current liabilities: | | | |
Accounts payable to third parties | $ | 1,138,975 | | | $ | 1,537,859 | |
Accounts payable to related parties | 184,198 | | | 550,186 | |
Accrued expenses | 508,334 | | | 544,835 | |
| | | |
Current portion of long-term debt | 3,213 | | | 625,761 | |
Dividends payable | 60,668 | | | 46,666 | |
| | | |
| | | |
Income taxes payable | 63,070 | | | 255,155 | |
Total current liabilities | 1,958,458 | | | 3,560,462 | |
Long-term debt | 3,519,504 | | | 3,541,002 | |
Postretirement benefits | 25,925 | | | 26,247 | |
Pension benefits | 141,627 | | | 150,312 | |
| | | |
| | | |
Other noncurrent liabilities | 758,283 | | | 769,100 | |
Deferred income taxes | 501,330 | | | 558,430 | |
Commitments and contingencies (Note 6) | | | |
Equity: | | | |
Albemarle Corporation shareholders’ equity: | | | |
Common stock, $.01 par value, authorized – 275,000, issued and outstanding – 117,528 in 2024 and 117,356 in 2023 | 1,175 | | | 1,174 | |
Mandatory convertible preferred stock, Series A, no par value, $1,000 stated value, authorized – 15,000, issued and outstanding – 2,300 in 2024 and 0 in 2023 | 2,235,105 | | | — | |
Additional paid-in capital | 2,969,851 | | | 2,952,517 | |
Accumulated other comprehensive loss | (637,551) | | | (528,526) | |
Retained earnings | 6,653,979 | | | 6,987,015 | |
Total Albemarle Corporation shareholders’ equity | 11,222,559 | | | 9,412,180 | |
Noncontrolling interests | 260,596 | | | 252,919 | |
Total equity | 11,483,155 | | | 9,665,099 | |
Total liabilities and equity | $ | 18,388,282 | | | $ | 18,270,652 | |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Thousands, Except Per Share Amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In Thousands, Except Share Data) | | | | | Mandatory Convertible Preferred Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total Albemarle Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Common Stock | | |
Shares | | Amounts | | Shares | | Amounts | | | | | | |
Balance at March 31, 2024 | 117,527,167 | | | $ | 1,175 | | | 2,300,000 | | | $ | 2,235,379 | | | $ | 2,962,585 | | | $ | (597,205) | | | $ | 6,930,868 | | | $ | 11,532,802 | | | $ | 266,917 | | | $ | 11,799,719 | |
Net (loss) income | | | | | | | | | | | | | (188,198) | | | (188,198) | | | 11,604 | | | (176,594) | |
Other comprehensive (loss) income | | | | | | | | | | | (40,346) | | | | | (40,346) | | | 212 | | | (40,134) | |
Cash dividends declared, $0.40 per common share | | | | | | | | | | | | | (47,003) | | | (47,003) | | | (18,137) | | | (65,140) | |
Mandatory convertible preferred stock cumulative dividends | | | | | | | | | | | | | (41,688) | | | (41,688) | | | | | (41,688) | |
Stock-based compensation | | | | | | | | | 7,325 | | | | | | | 7,325 | | | | | 7,325 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Issuance of common stock, net | 1,463 | | | — | | | | | | | — | | | | | | | — | | | | | — | |
Issuance of mandatory convertible preferred stock, net | | | | | — | | | (274) | | | | | | | | | (274) | | | | | (274) | |
Withholding taxes paid on stock-based compensation award distributions | (456) | | | — | | | | | | | (59) | | | | | | | (59) | | | | | (59) | |
Balance at June 30, 2024 | 117,528,174 | | | $ | 1,175 | | | 2,300,000 | | | $ | 2,235,105 | | | $ | 2,969,851 | | | $ | (637,551) | | | $ | 6,653,979 | | | $ | 11,222,559 | | | $ | 260,596 | | | $ | 11,483,155 | |
| | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2023 | 117,299,392 | | | $ | 1,173 | | | — | | | $ | — | | | $ | 2,931,961 | | | $ | (513,337) | | | $ | 6,792,938 | | | $ | 9,212,735 | | | $ | 246,335 | | | $ | 9,459,070 | |
Net income | | | | | | | | | | | | | 650,043 | | | 650,043 | | | 26,396 | | | 676,439 | |
Other comprehensive loss | | | | | | | | | | | (4,609) | | | | | (4,609) | | | — | | | (4,609) | |
Cash dividends declared, $0.40 per common share | | | | | | | | | | | | | (46,936) | | | (46,936) | | | — | | | (46,936) | |
Stock-based compensation | | | | | | | | | 10,369 | | | | | | | 10,369 | | | | | 10,369 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Issuance of common stock, net | 71,688 | | | 1 | | | | | | | (1) | | | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
Withholding taxes paid on stock-based compensation award distributions | (31,201) | | | — | | | | | | | (6,293) | | | | | | | (6,293) | | | | | (6,293) | |
Balance at June 30, 2023 | 117,339,879 | | | $ | 1,174 | | | — | | | $ | — | | | $ | 2,936,036 | | | $ | (517,946) | | | $ | 7,396,045 | | | $ | 9,815,309 | | | $ | 272,731 | | | $ | 10,088,040 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In Thousands, Except Share Data) | | | | | Mandatory Convertible Preferred Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total Albemarle Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Common Stock | | |
Shares | | Amounts | | Shares | | Amounts | | | | | | |
Balance at December 31, 2023 | 117,356,270 | | | $ | 1,174 | | | — | | | $ | — | | | $ | 2,952,517 | | | $ | (528,526) | | | $ | 6,987,015 | | | $ | 9,412,180 | | | $ | 252,919 | | | $ | 9,665,099 | |
Net (loss) income | | | | | | | | | | | | | (185,750) | | | (185,750) | | | 25,803 | | | (159,947) | |
Other comprehensive (loss) income | | | | | | | | | | | (109,025) | | | | | (109,025) | | | 11 | | | (109,014) | |
Common stock dividends declared, $0.80 per common share | | | | | | | | | | | | | (94,014) | | | (94,014) | | | (18,137) | | | (112,151) | |
Mandatory convertible preferred stock cumulative dividends | | | | | | | | | | | | | (53,272) | | | (53,272) | | | | | (53,272) | |
Stock-based compensation | | | | | | | | | 16,382 | | | | | | | 16,382 | | | | | 16,382 | |
| | | | | | | | | | | | | | | | | | | |
Exercise of stock options | 1,420 | | | — | | | | | | | 86 | | | | | | | 86 | | | | | 86 | |
| | | | | | | | | | | | | | | | | | | |
Issuance of common stock, net | 262,213 | | | 2 | | | | | | | 11,543 | | | | | | | 11,545 | | | | | 11,545 | |
| | | | | | | | | | | | | | | | | | | |
Issuance of mandatory convertible preferred stock, net | | | | | 2,300,000 | | | 2,235,105 | | | | | | | | | 2,235,105 | | | | | 2,235,105 | |
Withholding taxes paid on stock-based compensation award distributions | (91,729) | | | (1) | | | | | | | (10,677) | | | | | | | (10,678) | | | | | (10,678) | |
Balance at June 30, 2024 | 117,528,174 | | | $ | 1,175 | | | 2,300,000 | | | $ | 2,235,105 | | | $ | 2,969,851 | | | $ | (637,551) | | | $ | 6,653,979 | | | $ | 11,222,559 | | | $ | 260,596 | | | $ | 11,483,155 | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2022 | 117,168,366 | | | $ | 1,172 | | | — | | | $ | — | | | $ | 2,940,840 | | | $ | (560,662) | | | $ | 5,601,277 | | | $ | 7,982,627 | | | $ | 208,220 | | | $ | 8,190,847 | |
Net income | | | | | | | | | | | | | 1,888,623 | | | 1,888,623 | | | 64,519 | | | 1,953,142 | |
Other comprehensive income (loss) | | | | | | | | | | | 42,716 | | | | | 42,716 | | | (8) | | | 42,708 | |
Common stock dividends declared, $0.80 per common share | | | | | | | | | | | | | (93,855) | | | (93,855) | | | — | | | (93,855) | |
Stock-based compensation | | | | | | | | | 20,027 | | | | | | | 20,027 | | | | | 20,027 | |
| | | | | | | | | | | | | | | | | | | |
Exercise of stock options | 1,220 | | | — | | | | | | | 81 | | | | | | | 81 | | | | | 81 | |
| | | | | | | | | | | | | | | | | | | |
Issuance of common stock, net | 276,860 | | | 3 | | | | | | | (3) | | | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Withholding taxes paid on stock-based compensation award distributions | (106,567) | | | (1) | | | | | | | (24,909) | | | | | | | (24,910) | | | | | (24,910) | |
Balance at June 30, 2023 | 117,339,879 | | | $ | 1,174 | | | — | | | $ | — | | | $ | 2,936,036 | | | $ | (517,946) | | | $ | 7,396,045 | | | $ | 9,815,309 | | | $ | 272,731 | | | $ | 10,088,040 | |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Cash and cash equivalents at beginning of year | $ | 889,900 | | | $ | 1,499,142 | |
Cash flows from operating activities: | | | |
Net (loss) income | (159,947) | | | 1,953,142 | |
Adjustments to reconcile net (loss) income to cash flows from operating activities: | | | |
Depreciation and amortization | 262,030 | | | 180,356 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Non-cash capital project assets write-off | 276,013 | | | — | |
Stock-based compensation and other | 15,439 | | | 20,017 | |
Equity in net income of unconsolidated investments (net of tax) | (467,378) | | | (947,239) | |
Dividends received from unconsolidated investments and nonmarketable securities | 270,926 | | | 1,079,439 | |
Pension and postretirement expense | 2,529 | | | 3,933 | |
Pension and postretirement contributions | (9,428) | | | (8,632) | |
Realized loss on investments in marketable securities | 33,746 | | | — | |
Unrealized loss (gain) on investments in marketable securities | 23,777 | | | (61,434) | |
| | | |
Deferred income taxes | (129,087) | | | (144,720) | |
Working capital changes | 460,937 | | | (1,155,408) | |
| | | |
Other, net | (118,711) | | | (124,767) | |
Net cash provided by operating activities | 460,846 | | | 794,687 | |
Cash flows from investing activities: | | | |
Acquisitions, net of cash acquired | — | | | (8,240) | |
| | | |
Capital expenditures | (1,026,936) | | | (919,295) | |
| | | |
| | | |
| | | |
| | | |
Sales (purchases) of marketable securities, net | 82,578 | | | (123,979) | |
| | | |
Investments in equity investments and nonmarketable securities | (148) | | | (1,192) | |
Net cash used in investing activities | (944,506) | | | (1,052,706) | |
Cash flows from financing activities: | | | |
| | | |
Proceeds from issuance of mandatory convertible preferred stock, net of issuance costs | 2,236,750 | | | — | |
Repayments of long-term debt and credit agreements | (56,453) | | | — | |
Proceeds from borrowings of long-term debt and credit agreements | 56,453 | | | 300,000 | |
Other debt repayments, net | (627,390) | | | (1,500) | |
| | | |
Dividends paid to common shareholders | (93,916) | | | (93,317) | |
Dividends paid to mandatory convertible preferred shareholders | (39,376) | | | — | |
Dividends paid to noncontrolling interests | (18,137) | | | (53,145) | |
| | | |
Proceeds from exercise of stock options | 86 | | | 81 | |
Withholding taxes paid on stock-based compensation award distributions | (10,677) | | | (24,910) | |
| | | |
Other | (2,758) | | | — | |
Net cash provided by financing activities | 1,444,582 | | | 127,209 | |
Net effect of foreign exchange on cash and cash equivalents | (20,595) | | | 231,406 | |
Increase in cash and cash equivalents | 940,327 | | | 100,596 | |
Cash and cash equivalents at end of period | $ | 1,830,227 | | | $ | 1,599,738 | |
See accompanying Notes to the Condensed Consolidated Financial Statements.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1—Basis of Presentation:
In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Albemarle Corporation and our wholly-owned, majority-owned and controlled subsidiaries (collectively, “Albemarle,” “we,” “us,” “our” or the “Company”) contain all adjustments necessary for a fair statement, in all material respects, of our consolidated balance sheets as of June 30, 2024 and December 31, 2023, our consolidated statements of (loss) income, consolidated statements of comprehensive (loss) income and consolidated statements of changes in equity for the three- and six-month periods ended June 30, 2024 and 2023 and our condensed consolidated statements of cash flows for the six-month periods ended June 30, 2024 and 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 15, 2024. The December 31, 2023 consolidated balance sheet data herein was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). The results of operations for the three- and six-month periods ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year.
NOTE 2—Inventories:
The following table provides a breakdown of inventories at June 30, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | |
| June 30, | | December 31, |
| 2024 | | 2023 |
Finished goods | $ | 1,203,222 | | | $ | 1,624,893 | |
Raw materials and work in process(a) | 448,372 | | | 401,050 | |
Stores, supplies and other | 148,520 | | | 135,344 | |
Total(b) | $ | 1,800,114 | | | $ | 2,161,287 | |
(a)Includes $274.3 million and $213.4 million at June 30, 2024 and December 31, 2023, respectively, of work in process in our Energy Storage segment.
(b)During the year ended December 31, 2023, the Company recorded a $604.1 million charge in Cost of goods sold to reduce the value of certain spodumene and finished goods to their net realizable value following the decline in lithium market pricing at the end of the year.
The Company purchases certain of its inventory from its equity method investments (primarily the Windfield Holdings Pty. Ltd. (“Windfield”) joint venture) and eliminates the balance of intra-entity profits on purchases of such inventory that remains unsold at the balance sheet in Inventories, specifically finished goods and equally reduces Equity in net income of unconsolidated investments (net of tax) on the consolidated statements of (loss) income. The balance of intra-entity profits on inventory purchased from equity method investments in Inventories totaled $237.7 million and $559.6 million at June 30, 2024 and December 31, 2023, respectively. The intra-entity profit is recognized in Equity in net income of unconsolidated investments (net of tax) in the period that converted inventory is sold to a third-party customer. In the same period, the intra-entity profit is also recognized as higher Cost of goods sold on the consolidated statements of (loss) income.
NOTE 3—Investments:
Proportionately Consolidated Joint Ventures
On October 18, 2023, the Company closed on the restructuring of the MARBL lithium joint venture in Australia (“MARBL”) with Mineral Resources Limited (“MRL”). This updated structure is intended to simplify the commercial operation agreements previously entered into, allowed us to retain full control of downstream conversion assets and provide greater strategic opportunities for each company based on their global operations and the evolving lithium market.
Under the amended agreements, Albemarle acquired the remaining 40% ownership of the Kemerton lithium hydroxide processing facility in Australia that was jointly owned with MRL through the MARBL joint venture. Following this restructuring, Albemarle and MRL each own 50% of the Wodgina Lithium Mine Project (“Wodgina”), and MRL operates the Wodgina mine on behalf of the joint venture. During the fourth quarter of 2023, Albemarle paid MRL approximately $380 million in cash, which included $180 million of consideration for the remaining ownership of Kemerton as well as a payment for the economic effective date of the transaction being retroactive to April 1, 2022.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
This joint venture is unincorporated with each investor holding an undivided interest in each asset and proportionately liable for each liability; therefore our proportionate share of assets, liabilities, revenue and expenses are included in the appropriate classifications in the consolidated financial statements.
Unconsolidated Joint Ventures
The following table details the Company’s equity in net income of unconsolidated investments (net of tax) for the three-month and six-month periods ended June 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Windfield | $ | 278,995 | | | $ | 545,943 | | | $ | 451,674 | | | $ | 933,242 | |
Other joint ventures | 7,883 | | | 5,108 | | | 15,704 | | | 13,997 | |
Total | $ | 286,878 | | | $ | 551,051 | | | $ | 467,378 | | | $ | 947,239 | |
The Company holds a 49% equity interest in Windfield, where the ownership parties share risks and benefits disproportionate to their voting interests. As a result, the Company considers Windfield to be a variable interest entity (“VIE”), however this investment is not consolidated as the Company is not the primary beneficiary. The carrying amount of the Company’s 49% equity interest in Windfield, which is the Company’s most significant VIE, was $626.7 million and $712.0 million at June 30, 2024 and December 31, 2023, respectively. The Company’s unconsolidated VIEs are reported in Investments on the consolidated balance sheets. The Company does not guarantee debt for, or have other financial support obligations to, these entities, and its maximum exposure to loss in connection with its continuing involvement with these entities is limited to the carrying value of the investments.
The following table summarizes the unaudited results of operations for the Windfield joint venture, which met the significant subsidiary test for subsidiaries not consolidated or 50% or less owned persons under Rule 10-01 of Regulation S-X, for the three-month and six-month periods ended June 30, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net sales | $ | 541,982 | | | $ | 2,319,020 | | | $ | 731,991 | | | $ | 4,278,318 | |
Gross profit | 391,610 | | | 2,244,236 | | | 541,592 | | | 4,145,936 | |
Income before income taxes | 326,322 | | | 2,151,879 | | | 420,952 | | | 3,936,029 | |
Net income | 226,689 | | | 1,506,326 | | | 293,100 | | | 2,755,228 | |
Public Equity Securities
Included in the Company’s investments balance are holdings in equity securities of public companies. The fair value is measured using publicly available share prices of the investments, with any changes reported in Other income, net in our consolidated statements of (loss) income. During the six-month period ended June 30, 2023, the Company purchased approximately $121.9 million of shares in publicly-traded companies. In addition, during the three-month and six-month periods ended June 30, 2024, the Company recorded unrealized mark-to-market losses of $17.8 million and $27.2 million, respectively, in Other income, net for all public equity securities held at the end of the balance sheet date. During the three-month and six-month periods ended June 30, 2023, the Company recorded unrealized mark-to-market gains of $15.0 million and $60.8 million, respectively, in Other income, net for all public equity securities held at the end of the balance sheet date.
In January 2024, the Company sold equity securities of a public company for proceeds of approximately $81.5 million. As a result of the sale, the Company realized a loss of $33.7 million in the six months ended June 30, 2024.
Other
As part of the proceeds from the sale of the fine chemistry services (“FCS”) business on June 1, 2021, W.R. Grace & Co. (“Grace”) issued Albemarle preferred equity of a Grace subsidiary having an aggregate stated value of $270 million. The preferred equity can be redeemed at Grace’s option under certain conditions and began accruing payment-in-kind (“PIK”) dividends at an annual rate of 12% on June 1, 2023. In addition, the preferred equity can be redeemed by Albemarle when the
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
accumulated balance reaches 200% of the original value. This preferred equity had a fair value of $297.8 million and $289.3 million at June 30, 2024 and December 31, 2023, respectively, which is reported in Investments in the consolidated balance sheets.
NOTE 4—Goodwill and Other Intangibles:
The following table summarizes the changes in goodwill by reportable segment for the six-month period ended June 30, 2024 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Energy Storage | | Specialties | | Ketjen | | | | Total |
Balance at December 31, 2023(a) | $ | 1,424,484 | | | $ | 32,639 | | | $ | 172,606 | | | | | $ | 1,629,729 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Foreign currency translation adjustments | (22,719) | | | (51) | | | (6,021) | | | | | (28,791) | |
Balance at June 30, 2024(a) | $ | 1,401,765 | | | $ | 32,588 | | | $ | 166,585 | | | | | $ | 1,600,938 | |
(a) Balance at June 30, 2024 and December 31, 2023 includes an accumulated impairment loss of $6.8 million in Ketjen. As a result, the balance of Ketjen at June 30, 2024 and December 31, 2023 fully consists of goodwill related to the Refining Solutions reporting unit.
The following table summarizes the changes in other intangibles and related accumulated amortization for the six-month period ended June 30, 2024 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Customer Lists and Relationships | | Trade Names and Trademarks(a) | | Patents and Technology | | Other | | Total |
Gross Asset Value | | | | | | | | | |
Balance at December 31, 2023 | $ | 417,803 | | | $ | 13,405 | | | $ | 46,287 | | | $ | 34,649 | | | $ | 512,144 | |
| | | | | | | | | |
Retirements | — | | | (2,309) | | | (14,506) | | | (4,409) | | | (21,224) | |
Foreign currency translation adjustments and other | (11,338) | | | (264) | | | (745) | | | (769) | | | (13,116) | |
Balance at June 30, 2024 | $ | 406,465 | | | $ | 10,832 | | | $ | 31,036 | | | $ | 29,471 | | | $ | 477,804 | |
Accumulated Amortization | | | | | | | | | |
Balance at December 31, 2023 | $ | (204,481) | | | $ | (3,673) | | | $ | (26,758) | | | $ | (15,374) | | | $ | (250,286) | |
Amortization | (9,877) | | | — | | | (1,276) | | | (452) | | | (11,605) | |
Retirements | — | | | 2,309 | | | 14,506 | | | 4,409 | | | 21,224 | |
Foreign currency translation adjustments and other | 5,409 | | | 40 | | | 453 | | | 296 | | | 6,198 | |
Balance at June 30, 2024 | $ | (208,949) | | | $ | (1,324) | | | $ | (13,075) | | | $ | (11,121) | | | $ | (234,469) | |
Net Book Value at December 31, 2023 | $ | 213,322 | | | $ | 9,732 | | | $ | 19,529 | | | $ | 19,275 | | | $ | 261,858 | |
Net Book Value at June 30, 2024 | $ | 197,516 | | | $ | 9,508 | | | $ | 17,961 | | | $ | 18,350 | | | $ | 243,335 | |
(a) Net Book Value includes only indefinite-lived intangible assets.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 5—Long-Term Debt:
Long-term debt at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| | | | | | | | | | | |
| June 30, | | December 31, |
| 2024 | | 2023 |
1.125% notes due 2025 | $ | 402,661 | | | $ | 416,501 | |
1.625% notes due 2028 | 533,850 | | | 552,200 | |
| | | |
3.45% Senior notes due 2029 | 171,612 | | | 171,612 | |
| | | |
4.65% Senior notes due 2027 | 650,000 | | | 650,000 | |
5.05% Senior notes due 2032 | 600,000 | | | 600,000 | |
5.45% Senior notes due 2044 | 350,000 | | | 350,000 | |
5.65% Senior notes due 2052 | 450,000 | | | 450,000 | |
| | | |
| | | |
Commercial paper notes | — | | | 620,000 | |
| | | |
Interest-free loan | 300,000 | | | 300,000 | |
Variable-rate foreign bank loans | 26,832 | | | 30,197 | |
| | | |
Finance lease obligations | 113,100 | | | 110,245 | |
Other | 22,000 | | | 22,000 | |
Unamortized discount and debt issuance costs | (97,338) | | | (105,992) | |
Total long-term debt | 3,522,717 | | | 4,166,763 | |
Less amounts due within one year | 3,213 | | | 625,761 | |
Long-term debt, less current portion | $ | 3,519,504 | | | $ | 3,541,002 | |
During the six months ended June 30, 2024, we repaid a net amount of $620.0 million of commercial paper notes using the net proceeds received from the issuance of mandatory convertible preferred stock. See Note 7, “Equity,” for additional information.
Given the economic conditions, specifically around the market pricing of lithium, and the related anticipated impact on the Company’s future earnings, on February 9, 2024 we amended our revolving, unsecured amended and restated credit agreement dated October 28, 2022 (the “2022 Credit Agreement”), which provides for borrowings of up to $1.5 billion and matures on October 28, 2027. Borrowings under the 2022 Credit Agreement bear interest at variable rates based on a benchmark rate depending on the currency in which the loans are denominated, plus an applicable margin which ranges from 0.910% to 1.375%, depending on the Company’s credit rating from Standard & Poor’s Rating Services LLC, Moody’s Investors Services, Inc. and Fitch Ratings, Inc. With respect to loans denominated in U.S. dollars, interest is calculated using the term Secured Overnight Financing Rate (“SOFR”) plus a term SOFR adjustment of 0.10%, plus the applicable margin. The applicable margin on the facility was 1.125% as of June 30, 2024. There were no borrowings outstanding under the 2022 Credit Agreement as of June 30, 2024.
Borrowings under the 2022 Credit Agreement are conditioned upon satisfaction of certain customary conditions precedent, including the absence of defaults. The February 2024 amendment was entered into to modify the financial covenants under the 2022 Credit Agreement to avoid a potential covenant violation over the following 18 months given the market pricing of lithium. Following the February 2024 amendment, the 2022 Credit Agreement subjects the Company to two financial covenants, as well as customary affirmative and negative covenants. The first financial covenant requires that the ratio of (a) the Company’s consolidated net funded debt plus a proportionate amount of Windfield’s net funded debt to (b) consolidated Windfield-Adjusted EBITDA (as such terms are defined in the 2022 Credit Agreement) be less than or equal to (i) 3.50:1 prior to the second quarter of 2024, (ii) 5.00:1 for the second quarter of 2024, (iii) 5.50:1 for the third quarter of 2024, (iv) 4.00:1 for the fourth quarter of 2024, (v) 3.75:1 for the first and second quarters of 2025 and (vi) 3.50:1 after the second quarter of 2025. The maximum permitted leverage ratios described above are subject to adjustment in accordance with the terms of the 2022 Credit Agreement upon the consummation of an acquisition after June 30, 2025 if the consideration includes cash proceeds from issuance of funded debt in excess of $500 million.
The second financial covenant requires that, beginning in the fourth quarter of 2024, the ratio of the Company’s consolidated EBITDA to consolidated interest charges (as such terms are defined in the 2022 Credit Agreement) be no less than 2.00:1 for fiscal quarters through June 30, 2025, and no less than 3.00:1 for all fiscal quarters thereafter. The 2022 Credit
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Agreement also contains customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness. The occurrence of an event of default under the 2022 Credit Agreement could result in all loans and other obligations becoming immediately due and payable and the commitments under the 2022 Credit Agreement being terminated. Following the $2.2 billion issuance of mandatory convertible preferred stock in March 2024 and the amendments to the financial covenants, the Company expects to maintain compliance with the amended financial covenants in the near future. However, a significant and extended downturn in lithium market prices or demand could impact the Company’s ability to maintain compliance with its amended financial covenants and it could require the Company to seek additional amendments to the 2022 Credit Agreement and/or issue debt or equity securities to fund its activities and maintain financial flexibility. If the Company were unable to obtain such necessary additional amendments, this could lead to an event of default and its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.
NOTE 6—Commitments and Contingencies:
Environmental
The following activity was recorded in environmental liabilities for the six months ended June 30, 2024 (in thousands):
| | | | | |
Beginning balance at December 31, 2023 | $ | 34,149 | |
Expenditures | (1,060) | |
| |
Accretion of discount | 576 | |
Liability releases | (2,570) | |
Foreign currency translation adjustments and other | 54 | |
Ending balance at June 30, 2024 | 31,149 | |
Less amounts reported in Accrued expenses | 6,694 | |
Amounts reported in Other noncurrent liabilities | $ | 24,455 | |
Environmental remediation liabilities included discounted liabilities of $25.2 million and $27.4 million at June 30, 2024 and December 31, 2023, respectively, discounted at rates with a weighted-average of 3.6% and 3.7%, respectively, and with the undiscounted amount totaling $52.0 million and $55.4 million at June 30, 2024 and December 31, 2023, respectively. For certain locations where the Company is operating groundwater monitoring and/or remediation systems, prior owners or insurers have assumed all or most of the responsibility.
The amounts recorded represent our future remediation and other anticipated environmental liabilities. These liabilities typically arise during the normal course of our operational and environmental management activities or at the time of acquisition of the site, and are based on internal analysis as well as input from outside consultants. As evaluations proceed at each relevant site, changes in risk assessment practices, remediation techniques and regulatory requirements can occur, therefore such liability estimates may be adjusted accordingly. The timing and duration of remediation activities at these sites will be determined when evaluations are completed. Although it is difficult to quantify the potential financial impact of these remediation liabilities, management estimates (based on the latest available information) that there is a reasonable possibility that future environmental remediation costs associated with our past operations could represent an additional $48 million before income taxes, in excess of amounts already recorded.
We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis although any such sum could have a material adverse impact on our results of operations, financial condition or cash flows in a particular quarterly reporting period.
Litigation
We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings seeking remediation under environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, products liability, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks. Costs for legal services are generally expensed as incurred.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Indemnities
We are indemnified by third parties in connection with certain matters related to acquired and divested businesses. Although we believe that the financial condition of those parties who may have indemnification obligations to the Company is generally sound, in the event the Company seeks indemnity under any of these agreements or through other means, there can be no assurance that any party who may have obligations to indemnify us will adhere to their obligations and we may have to resort to legal action to enforce our rights under the indemnities.
The Company may be subject to indemnity claims relating to properties or businesses it divested, including properties or businesses of acquired businesses that were divested prior to the completion of the acquisition. In the opinion of management, and based upon information currently available, the ultimate resolution of any indemnification obligations owed to the Company or by the Company is not expected to have a material effect on the Company’s financial condition, results of operations or cash flows. The Company had approximately $12.0 million and $14.5 million at June 30, 2024 and December 31, 2023, respectively, recorded in Other noncurrent liabilities, primarily related to the indemnification of certain income and non-income tax liabilities associated with the Chemetall Surface Treatment entities sold in 2017.
Other
The Company has contracts with certain of its customers which serve as guarantees on product delivery and performance according to customer specifications that can cover both shipments on an individual basis, as well as blanket coverage of multiple shipments under certain customer supply contracts. The financial coverage provided by these guarantees is typically based on a percentage of net sales value. The Company is unable to estimate the maximum amount of the potential future liability under performance guarantees. However, the Company accrues for any potential loss for which we believe a future payment is probable and a range of loss can be reasonably estimated. At June 30, 2024, the Company believes its liability under such obligations is immaterial.
NOTE 7—Equity:
Common Stock
On May 9, 2024, the Company filed to amend the Company’s Amended and Restated Articles of Incorporation (the “Charter”) to increase the number of authorized shares of common stock, $0.01 par value per share, from 150,000,000 to 275,000,000 (the “Charter Amendment”). The Charter Amendment became effective May 10, 2024.
On May 7, 2024, the Company’s board of directors declared a cash dividend of $0.40 per share. This dividend was paid on July 1, 2024 to shareholders of record at the close of business as of June 14, 2024. On July 16, 2024, the Company’s board of directors declared a cash dividend of $0.405 per share, which is payable on October 1, 2024 to shareholders of record at the close of business as of September 13, 2024.
Mandatory Convertible Preferred Stock
On March 8, 2024, the Company issued 46,000,000 depositary shares (“Depositary Shares”), each representing a 1/20th interest in a share of Series A Mandatory Convertible Preferred Stock (“Mandatory Convertible Preferred Stock”). The 2,300,000 shares of Mandatory Convertible Preferred Stock issued had a $1,000 per share liquidation preference. As a result of this transaction, the Company received cash proceeds of approximately $2.2 billion, net of underwriting fees and offering costs. The Company intends to use the proceeds for general corporate purposes, which may include, among other uses, funding growth capital expenditures, such as the construction and expansion of lithium operations in Australia and China that are significantly progressed or near completion, following the repayment of commercial paper with a portion of the proceeds in the first quarter of 2024.
Dividends on the Mandatory Convertible Preferred Stock are payable on a cumulative basis when, as and if declared by the Albemarle board of directors, or an authorized committee thereof, at an annual rate of 7.25% on the liquidation preference of $1,000 per share, and may be paid in cash or, subject to certain limitations, in shares of common stock or, subject to certain limitations, any combination of cash and shares of common stock. Dividends that are declared on the Mandatory Convertible Preferred Stock will be payable quarterly to the holders of record on the February 15, May 15, August 15 and November 15 of each year, immediately preceding the relevant dividend payment date, whether or not such holders convert their Depositary Shares, or such Depositary Shares are automatically converted, after a record date and on or prior to the immediately succeeding dividend payment date. The first dividend was paid in June 2024 at $17.12 per share of Mandatory Convertible
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Preferred Stock. Subsequent quarterly cash dividends are expected to be $18.125 per share of Mandatory Convertible Preferred Stock. Dividends are expected to be paid on March 1, June 1, September 1 and December 1 of each year ending on, and including, March 1, 2027.
The Company may not redeem the shares of the Mandatory Convertible Preferred Stock. However, at its option, the Company may purchase the Mandatory Convertible Preferred Stock from time to time on the open market, by tender offer, exchange offer or otherwise.
Unless converted earlier in accordance with its terms, each share of Mandatory Convertible Preferred Stock will automatically convert on the mandatory conversion date, which is expected to be March 1, 2027, into between 7.618 shares and 9.140 shares of common stock, in each case, subject to customary anti-dilution adjustments described in the certificate of designations related to the Mandatory Convertible Preferred Stock (the “Certificate of Designations”). The number of shares of common stock issuable upon conversion will be determined based on the average volume weighted average price per share of common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately prior to March 1, 2027.
Holders of shares of Mandatory Convertible Preferred Stock have the option to convert all or any portion of their shares of the Mandatory Convertible Preferred Stock at any time. The conversion rate applicable to any early conversion may in certain circumstances be increased to compensate holders of the Mandatory Convertible Preferred Stock for certain unpaid accumulated dividends as described in the Certificate of Designations.
If a Fundamental Change, as defined in the Certificate of Designations, occurs on or prior to March 1, 2027, then holders of the Mandatory Convertible Preferred Stock will be entitled to convert all or any portion of their Mandatory Convertible Preferred Stock at the fundamental change conversion rate, as defined in the Certificate of Designations, as for a specified period of time and to also receive an amount to compensate them for certain unpaid accumulated dividends and any remaining future scheduled dividend payments.
There were 2,300,000 shares of Mandatory Convertible Preferred Stock issued and outstanding at June 30, 2024.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Accumulated Other Comprehensive Loss
The components and activity in Accumulated other comprehensive loss (net of deferred income taxes) consisted of the following during the periods indicated below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2024 | | Three Months Ended June 30, 2023 |
| Foreign Currency Translation and Other | | | | | | Cash Flow Hedge(a) | | | | | | Total | | Foreign Currency Translation and Other | | Cash Flow Hedge(a) | | Total |
Balance, beginning of period | $ | (586,620) | | | | | | | $ | (10,585) | | | | | | | $ | (597,205) | | | $ | (516,662) | | | $ | 3,325 | | | $ | (513,337) | |
Other comprehensive (loss) income before reclassifications | (46,767) | | | | | | | 4,060 | | | | | | | (42,707) | | | (5,652) | | | 1,026 | | | (4,626) | |
Amounts reclassified from accumulated other comprehensive loss | 16 | | | | | | | 2,557 | | | | | | | 2,573 | | | 17 | | | — | | | 17 | |
Other comprehensive (loss) income, net of tax | (46,751) | | | | | | | 6,617 | | | | | | | (40,134) | | | (5,635) | | | 1,026 | | | (4,609) | |
Other comprehensive income attributable to noncontrolling interests | (212) | | | | | | | — | | | | | | | (212) | | | — | | | — | | | — | |
Balance, end of period | $ | (633,583) | | | | | | | $ | (3,968) | | | | | | | $ | (637,551) | | | $ | (522,297) | | | $ | 4,351 | | | $ | (517,946) | |
| | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2024 | | Six Months Ended June 30, 2023 |
| Foreign Currency Translation and Other | | | | | | Cash Flow Hedge(a) | | | | | | Total | | Foreign Currency Translation and Other | | Cash Flow Hedge(a) | | Total |
Balance, beginning of period | $ | (536,601) | | | | | | | $ | 8,075 | | | | | | | $ | (528,526) | | | $ | (562,886) | | | $ | 2,224 | | | $ | (560,662) | |
Other comprehensive (loss) income before reclassifications | (97,004) | | | | | | | (17,282) | | | | | | | (114,286) | | | 40,548 | | | 2,127 | | | 42,675 | |
Amounts reclassified from accumulated other comprehensive loss | 33 | | | | | | | 5,239 | | | | | | | 5,272 | | | 33 | | | — | | | 33 | |
Other comprehensive (loss) income, net of tax | (96,971) | | | | | | | (12,043) | | | | | | | (109,014) | | | 40,581 | | | 2,127 | | | 42,708 | |
| | | | | | | | | | | | | | | | | | | |
Other comprehensive (income) loss attributable to noncontrolling interests | (11) | | | | | | | — | | | | | | | (11) | | | 8 | | | — | | | 8 | |
Balance, end of period | $ | (633,583) | | | | | | | $ | (3,968) | | | | | | | $ | (637,551) | | | $ | (522,297) | | | $ | 4,351 | | | $ | (517,946) | |
(a)We previously entered into a foreign currency forward contract, which was designated and accounted for as a cash flow hedge under ASC 815, Derivatives and Hedging. See Note 14, “Fair Value of Financial Instruments,” for additional information.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The amount of income tax (expense) benefit allocated to each component of Other comprehensive (loss) income for the three-month and six-month periods ended June 30, 2024 and 2023 is provided in the following tables (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2024 | | Three Months Ended June 30, 2023 |
| Foreign Currency Translation and Other | | | | | | Cash Flow Hedge | | | | Total | | Foreign Currency Translation and Other | | Cash Flow Hedge | | Total |
Other comprehensive (loss) income, before tax | $ | (46,747) | | | | | | | $ | 9,453 | | | | | $ | (37,294) | | | $ | (5,631) | | | $ | 1,026 | | | $ | (4,605) | |
Income tax expense | (4) | | | | | | | (2,836) | | | | | (2,840) | | | (4) | | | — | | | (4) | |
Other comprehensive (loss) income, net of tax | $ | (46,751) | | | | | | | $ | 6,617 | | | | | $ | (40,134) | | | $ | (5,635) | | | $ | 1,026 | | | $ | (4,609) | |
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2024 | | Six Months Ended June 30, 2023 |
| Foreign Currency Translation and Other | | | | | | Cash Flow Hedge | | | | Total | | Foreign Currency Translation and Other | | Cash Flow Hedge | | Total |
Other comprehensive (loss) income, before tax | $ | (96,964) | | | | | | | $ | (17,204) | | | | | $ | (114,168) | | | $ | 40,347 | | | $ | 2,127 | | | $ | 42,474 | |
Income tax (expense) benefit | (7) | | | | | | | 5,161 | | | | | 5,154 | | | 234 | | | — | | | 234 | |
Other comprehensive (loss) income, net of tax | $ | (96,971) | | | | | | | $ | (12,043) | | | | | $ | (109,014) | | | $ | 40,581 | | | $ | 2,127 | | | $ | 42,708 | |
NOTE 8—Restructuring and Capital Project Assets Write-off:
In January 2024, the Company announced measures to unlock near-term cash flow and generate long-term financial flexibility by re-phasing organic growth investments and optimizing its cost structure. During the second quarter of 2024, the Company indefinitely suspended construction of the fourth train at its Kemerton conversion plant in Western Australia, as well as deferred spending and investments with respect to certain other capital projects. The Company wrote-off the book value of assets related to these capital projects, which are no longer part of the Company’s modified capital plan, as it determined that these assets will not provide future value or will require significant re-engineering if the related projects are restarted, as well as recorded losses for associated contract cancellation costs. This resulted in charges of $292.3 million and $309.5 million recorded in Operating (loss) profit for the three-month and six-month periods ended June 30, 2024, respectively, and losses of $2.6 million and $5.4 million recorded in Other income, net for the three-month and six-month periods ended June 30, 2024, respectively.
The Company evaluated the significance of the fourth train at its Kemerton conversion plant in relation to the overall asset group and deemed it to be insignificant. Despite the insignificance of the Kemerton conversion plant to the asset group, the Company elected to evaluate the recoverability of its property, plant and equipment within the corresponding asset group as of June 30, 2024 and concluded that the carrying amount of the associated asset group is recoverable as the undiscounted cash flows of the asset group significantly exceed its carrying value. Accordingly, no impairment loss was recognized during the second quarter of 2024.
In addition, as part of the Company’s continuing plan to optimize its cost structure, the Company recorded severance costs of $2.5 million and $18.9 million during the three-month and six-month periods ended June 30, 2024, respectively, for employees in Corporate and each of the businesses. These expenses were recorded in Selling, general and administrative expenses (“SG&A”) and have primarily been paid, with the remainder expected to be paid in 2024. During the three-month and six-month periods ended June 30, 2023, $7.4 million of severance costs in the Ketjen business were recorded in SG&A.
Subsequent Event
In July 2024, the Company announced a comprehensive review of its cost and operating structure to maintain a competitive position, further generate long-term financial flexibility and drive long-term value creation. As part of this review, the Company concluded to stop construction of the third train at its Kemerton conversion plant. The Company also announced that it will put the second train at the Kemerton conversion plant into care and maintenance. As a result, the Company expects
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
to record a charge in the third quarter of 2024 in the range of approximately $0.9 billion to $1.1 billion, of which approximately $725 million to $800 million consists of the expected write-off of the carrying value of the Kemerton Train 3 assets less any salvage value, with the remainder related to contract cancellation, severance, decommissioning, demolition and other associated restructuring costs for both Kemerton Trains 2 and 3. The Company’s estimated range of the charge takes into account initial estimates for these activities and the determination of salvage value of the fixed assets, among other variables. The restructuring actions associated with these charges are expected to be substantially complete in 2024. The first train of Kemerton will continue to operate and activity around it is currently focused on commercialization efforts.
As a result of the actions taken at Kemerton Train 3 and Train 2 in the third quarter of 2024, there is a reasonable possibility within the next 12 months the Company may reach a conclusion a valuation allowance will be needed.
NOTE 9—Pension Plans and Other Postretirement Benefits:
The components of pension and postretirement benefits cost (credit) for the three-month and six-month periods ended June 30, 2024 and 2023 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Pension Benefits Cost (Credit): | | | | | | | |
Service cost | $ | 1,563 | | | $ | 1,334 | | | $ | 3,129 | | | $ | 2,655 | |
Interest cost | 8,140 | | | 8,558 | | | 16,285 | | | 17,100 | |
Expected return on assets | (8,838) | | | (8,415) | | | (17,668) | | | (16,824) | |
| | | | | | | |
Amortization of prior service benefit | 19 | | | 21 | | | 39 | | | 41 | |
Total net pension benefits cost | $ | 884 | | | $ | 1,498 | | | $ | 1,785 | | | $ | 2,972 | |
Postretirement Benefits Cost: | | | | | | | |
Service cost | $ | 11 | | | $ | 12 | | | $ | 23 | | | $ | 24 | |
Interest cost | 361 | | | 469 | | | 721 | | | 937 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total net postretirement benefits cost | $ | 372 | | | $ | 481 | | | $ | 744 | | | $ | 961 | |
Total net pension and postretirement benefits cost | $ | 1,256 | | | $ | 1,979 | | | $ | 2,529 | | | $ | 3,933 | |
All components of net benefit cost, other than service cost, are included in Other income, net on the consolidated statements of (loss) income.
During the three-month and six-month periods ended June 30, 2024, the Company made contributions of $4.6 million and $9.4 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan. During the three-month and six-month periods ended June 30, 2023, the Company made contributions of $5.8 million and $8.6 million, respectively, to its qualified and nonqualified pension plans and the U.S. postretirement benefit plan.
NOTE 10—Income Taxes:
The effective income tax rates for the three-month and six-month periods ended June 30, 2024 were 6.2% and 5.2%, respectively, compared to 25.5% and 24.1% for the three-month and six-month periods ended June 30, 2023, respectively. The three-month and six-month periods ended June 30, 2024 included the impact of the 15% global minimum tax under the Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”) developed by the Organisation for Economic Co-operation and Development (“OECD”) as part of global tax framework. The Company’s effective income tax rate fluctuates based on, among other factors, the amount and location of income. The lower effective tax rate in the three-month and six-month periods ended June 30, 2024, compared to the three-month and six-month periods ended June 30, 2023, was due to lower 2024 earnings in various jurisdictions. The difference between the U.S. federal statutory income tax rate of 21% and the Company’s effective income tax rate for the three-month and six-month periods ended June 30, 2024 was impacted by a variety of factors, primarily the location in which income was earned, including the impact of the OECD Pillar Two minimum tax and the valuation allowance for losses in certain entities in China, and an uncertain tax position recorded in Chile. The difference between the U.S. federal statutory income tax rate of 21% and the Company’s effective income tax rate for the three-month and six-month periods ended June 30, 2023 was impacted by a variety of factors, primarily the location in which income was earned, foreign-derived intangible income and an uncertain tax position recorded in Chile, and a non-deductible accrual for the agreements in principle to resolve a previously disclosed legal matter with the U.S. Department of Justice (“DOJ”), the SEC, and the Dutch Public Prosecutor (“DPP”).
ALBEMARLE CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 11—Earnings Per Share:
Basic and diluted (loss) earnings per share for the three-month and six-month periods ended June 30, 2024 and 2023 are calculated as follows (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Basic (loss) earnings per share | | | | | | | |
Numerator: | | | | | | | |
Net (loss) income attributable to Albemarle Corporation | $ | (188,198) | | | $ | 650,043 | | | $ | (185,750) | | | $ | 1,888,623 | |
Mandatory convertible preferred stock dividends | (41,688) | | | — | | | (53,272) | | | — | |
Net (loss) income attributable to Albemarle Corporation common shareholders | $ | (229,886) | | | $ | 650,043 | | | $ | (239,022) | | | $ | 1,888,623 | |
Denominator: | | | | | | | |
Weighted-average common shares for basic (loss) earnings per share | 117,528 | | | 117,332 | | | 117,489 | | | 117,282 | |
Basic (loss) earnings per share | $ | (1.96) | | | $ | |