Albemarle Corp 10-Q for FY2020 Q1

About this 10-Q

Headline figures

Albemarle Corp (ALB)

10-Q 2020-05-11 For: 2020-03-31

Added on April 09, 2026

Albemarle Corp filed this 10-Q on May 11, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $738.85M; down 11.2% from $832.06M a year earlier
Net income: $107.2M; down 19.7% from net income of $133.57M a year earlier
Diluted EPS: $1.01; down 19.8% from $1.26 a year earlier

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Virginia		54-1692118
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol	Name of each exchange on which registered
COMMON STOCK, $.01 Par Value	ALB	New York Stock Exchange




		Page Number(s)
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Income - Three Months Ended March 31, 2020 and 2019	3

	Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended March 31, 2020 and 2019	4

	Condensed Consolidated Balance Sheets - March 31, 2020 and December 31, 2019	5

	Consolidated Statements of Changes in Equity - Three Months Ended March 31, 2020 and 2019	6

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2020 and 2019	7

	Notes to the Condensed Consolidated Financial Statements	8-24

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25-37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	39

SIGNATURES		41

EXHIBITS



	Three Months Ended March 31,
	2020			2019
Net sales	$	738,845		$	832,064
Cost of goods sold	496,827			548,578
Gross profit	242,018			283,486
Selling, general and administrative expenses	101,877			113,355
Research and development expenses	16,097			14,977
Operating profit	124,044			155,154
Interest and financing expenses	(16,885		)	(12,586		)
Other income, net	8,314			11,291
Income before income taxes and equity in net income of unconsolidated investments	115,473			153,859
Income tax expense	18,442			37,514
Income before equity in net income of unconsolidated investments	97,031			116,345
Equity in net income of unconsolidated investments (net of tax)	26,604			35,181
Net income	123,635			151,526
Net income attributable to noncontrolling interests	(16,431		)	(17,957		)
Net income attributable to Albemarle Corporation	$	107,204		$	133,569
Basic earnings per share	$	1.01		$	1.26
Diluted earnings per share	$	1.01		$	1.26
Weighted-average common shares outstanding – basic	106,227			105,799
Weighted-average common shares outstanding – diluted	106,512			106,356



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	March 31,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	553,228		$	613,110
Trade accounts receivable, less allowance for doubtful accounts (2020 – $3,700; 2019 – $3,711)	518,703			612,651
Other accounts receivable	73,765			67,551
Inventories	853,500			768,984
Other current assets	155,985			162,813
Total current assets	2,155,181			2,225,109
Property, plant and equipment, at cost	6,973,817			6,817,843
Less accumulated depreciation and amortization	1,947,848			1,908,370
Net property, plant and equipment	5,025,969			4,909,473
Investments	543,670			579,813
Other assets	219,202			213,061
Goodwill	1,559,055			1,578,785
Other intangibles, net of amortization	344,561			354,622
Total assets	$	9,847,638		$	9,860,863
Liabilities And Equity
Current liabilities:
Accounts payable	$	573,075		$	574,138
Accrued expenses	491,579			553,160
Current portion of long-term debt	35,615			187,336
Dividends payable	40,715			38,764
Current operating lease liability	23,826			23,137
Income taxes payable	28,116			32,461
Total current liabilities	1,192,926			1,408,996
Long-term debt	3,105,225			2,862,921
Postretirement benefits	50,673			50,899
Pension benefits	285,851			292,073
Other noncurrent liabilities	768,757			754,536
Deferred income taxes	402,681			397,858
Commitments and contingencies (Note 9)
Equity:
Albemarle Corporation shareholders’ equity:
Common stock, $.01 par value, issued and outstanding – 106,319 in 2020 and 106,040 in 2019	1,063			1,061
Additional paid-in capital	1,393,681			1,383,446
Accumulated other comprehensive loss	(526,489		)	(395,735		)
Retained earnings	3,009,749			2,943,478
Total Albemarle Corporation shareholders’ equity	3,878,004			3,932,250
Noncontrolling interests	163,521			161,330
Total equity	4,041,525			4,093,580
Total liabilities and equity	$	9,847,638		$	9,860,863



(In Thousands, Except Share Data)						Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total Albemarle Shareholders’ Equity			Noncontrolling Interests			Total Equity
	Common Stock
	Shares		Amounts
Balance at January 1, 2020	106,040,215		$	1,061		$	1,383,446		$	(395,735	)	$	2,943,478		$	3,932,250		$	161,330		$	4,093,580
Net income												107,204			107,204			16,431			123,635
Other comprehensive (loss) income									(130,754		)				(130,754		)	46			(130,708		)
Cash dividends declared, $0.385 per common share												(40,933		)	(40,933		)	(14,286		)	(55,219		)
Stock-based compensation						3,867									3,867						3,867
Exercise of stock options	193,537		2			10,193									10,195						10,195
Issuance of common stock, net	132,320		1			(1		)							—						—
Shares withheld for withholding taxes associated with common stock issuances	(47,458	)	(1		)	(3,824		)							(3,825		)				(3,825		)
Balance at March 31, 2020	106,318,614		$	1,063		$	1,393,681		$	(526,489	)	$	3,009,749		$	3,878,004		$	163,521		$	4,041,525

Balance at January 1, 2019	105,616,028		$	1,056		$	1,368,897		$	(350,682	)	$	2,566,050		$	3,585,321		$	173,787		$	3,759,108
Net income												133,569			133,569			17,957			151,526
Other comprehensive loss									(6,856		)				(6,856		)	(47		)	(6,903		)
Cash dividends declared, $0.3675 per common share												(38,935		)	(38,935		)	—			(38,935		)
Stock-based compensation						7,277									7,277						7,277
Exercise of stock options	114,128		1			2,675									2,676						2,676
Issuance of common stock, net	340,111		3			(3		)							—						—
Increase in ownership interest of noncontrolling interest						(523		)							(523		)	68			(455		)
Shares withheld for withholding taxes associated with common stock issuances	(120,256	)	(1		)	(10,254		)							(10,255		)				(10,255		)
Balance at March 31, 2019	105,950,011		$	1,059		$	1,368,069		$	(357,538	)	$	2,660,684		$	3,672,274		$	191,765		$	3,864,039



Total purchase price:
Cash paid	$	820,000
Fair value of 40% interest in Kemerton assets	480,000
Purchase agreement completion adjustment and other adjustments	23,566
Total purchase price	$	1,323,566

Net assets acquired:
Inventories	$	33,900
Other current assets	10,695
Property, plant and equipment:
Land improvements	2,912
Buildings and improvements	19,268
Machinery and equipment	163,808
Mineral rights and reserves	1,058,700
Construction in progress	103,700
Other assets	1,000
Current liabilities	(10,695		)
Long-term debt^(a)	(55,806		)
Other noncurrent liabilities	(23,296		)
Total identifiable net assets	1,304,186
Goodwill	19,380
Total net assets acquired	$	1,323,566


(a)	Represents 60% ownership interest in finance lease acquired. See Note 10, “Leases,” for further information on the Company’s leases.



	Lithium			Bromine Specialties		Catalysts			All Other		Total
Balance at December 31, 2019	$	1,370,846		$	20,319	$	181,034		$	6,586	$	1,578,785
Acquisitions^(a)	(12,382		)	—		—			—		(12,382		)
Foreign currency translation adjustments and other	(5,335		)	—		(2,013		)	—		(7,348		)
Balance at March 31, 2020	$	1,353,129		$	20,319	$	179,021		$	6,586	$	1,559,055


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



	Customer Lists and Relationships			Trade Names and Trademarks^(a)			Patents and Technology			Other			Total
Gross Asset Value
Balance at December 31, 2019	$	422,462		$	18,087		$	55,020		$	41,282		$	536,851
Foreign currency translation adjustments and other	(1,606		)	(357		)	(310		)	(2,581		)	(4,854		)
Balance at March 31, 2020	$	420,856		$	17,730		$	54,710		$	38,701		$	531,997
Accumulated Amortization
Balance at December 31, 2019	$	(116,749	)	$	(7,938	)	$	(36,197	)	$	(21,345	)	$	(182,229	)
Amortization	(5,544		)	—			(341		)	(215		)	(6,100		)
Foreign currency translation adjustments and other	420			14			130			329			893
Balance at March 31, 2020	$	(121,873	)	$	(7,924	)	$	(36,408	)	$	(21,231	)	$	(187,436	)
Net Book Value at December 31, 2019	$	305,713		$	10,149		$	18,823		$	19,937		$	354,622
Net Book Value at March 31, 2020	$	298,983		$	9,806		$	18,302		$	17,470		$	344,561


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



	March 31,		December 31,
	2020		2019
Finished goods^(a)	$	562,231	$	495,639
Raw materials and work in process^(b)	221,173		205,781
Stores, supplies and other	70,096		67,564
Total	$	853,500	$	768,984


(b)	Included $117.8 million and $109.3 million at March 31, 2020 and December 31, 2019, respectively, of work in process in our Lithium segment.



	March 31,		December 31,
	2020		2019
1.125% notes, net of unamortized discount and debt issuance costs of $4,342 at March 31, 2020 and $5,659 at December 31, 2019	$	547,156	$	549,241
1.625% notes, net of unamortized discount and debt issuance costs of $5,938 at March 31, 2020 and $5,696 at December 31, 2019	545,560		549,204
1.875% Senior notes, net of unamortized discount and debt issuance costs of $1,585 at March 31, 2020 and $1,831 at December 31, 2019.	431,820		434,241
3.45% Senior notes, net of unamortized discount and debt issuance costs of $3,274 at March 31, 2020 and $3,533 at December 31, 2019	296,725		296,467
4.15% Senior notes, net of unamortized discount and debt issuance costs of $2,275 at March 31, 2020 and $2,398 at December 31, 2019	422,724		422,603
5.45% Senior notes, net of unamortized discount and debt issuance costs of $3,811 at March 31, 2020 and $3,850 at December 31, 2019	346,189		346,150
Floating rate notes, net of unamortized debt issuance costs of $962 at March 31, 2020 and $1,169 at December 31, 2019	199,037		198,831
Revolving credit facility	250,000		—
Commercial paper notes	35,000		186,700
Variable-rate foreign bank loans	7,300		7,296
Finance lease obligations	59,329		59,524
Total long-term debt	3,140,840		3,050,257
Less amounts due within one year	35,615		187,336
Long-term debt, less current portion	$	3,105,225	$	2,862,921



	March 31, 2020			December 31, 2019
Operating leases:
Other assets	$	141,827		$	133,864

Current operating lease liability	23,826			23,137
Other noncurrent liabilities	119,233			114,686
Total operating lease liabilities	143,059			137,823
Finance leases:
Net property, plant and equipment	59,320			59,494

Current portion of long-term debt	615			636
Long-term debt	58,713			58,888
Total finance lease liabilities	59,328			59,524
Weighted average remaining lease term (in years):
Operating leases	15.8			11.4
Finance leases	28.2			28.3
Weighted average discount rate (%):
Operating leases	4.08		%	3.84		%
Finance leases	4.56		%	4.56		%


(a)	Increase primarily due to the build-up of inventory in Lithium and Catalysts for forecasted sales during the remainder of 2020.



Beginning balance at December 31, 2019	$	42,592
Expenditures	(918		)
Accretion of discount	216
Foreign currency translation adjustments	(183		)
Ending balance at March 31, 2020	41,707
Less amounts reported in Accrued expenses	9,379
Amounts reported in Other noncurrent liabilities	$	32,328



	Three Months Ended March 31,
	2020		2019
Operating lease cost	$	8,740	$	9,421
Finance lease cost:
Amortization of right of use assets	154		178
Interest on lease liabilities	650		33
Total finance lease cost	804		211

Short-term lease cost	2,883		1,966
Variable lease cost	1,948		1,086
Total lease cost	$	14,375	$	12,684



	Operating Leases		Finance Leases
Remainder of 2020	$	23,100	$	1,652
2021	18,498		2,129
2022	14,652		4,408
2023	13,205		4,408
2024	12,181		4,408
Thereafter	148,998		94,324
Total lease payments	230,634		111,329
Less imputed interest	87,575		52,001
Total	$	143,059	$	59,328


(a)	Severance payments as part of a business reorganization plan, $0.7 million recorded in Cost of goods sold, $1.5 million recorded in Selling, general and administrative expenses and a $0.3 million gain recorded in Net income attributable to noncontrolling interest for the portion of severance expense allocated to our Jordanian joint venture partner.


(b)	Included acquisition and integration related costs relating to various significant projects. For the three-month periods ended March 31, 2020 and 2019, $3.0 million and $5.3 million was recorded in Selling, general and administrative expenses, respectively.


(c)	Included amounts for the three months ended March 31, 2020 recorded in:


▪	Other income, net - $2.6 million gain resulting from the settlement of a legal matter related to a business sold, partially offset by a $0.8 million loss resulting from the adjustment of indemnifications related to previously disposed businesses.


(d)	Gain recorded in Other income, net related to the sale of land in Pasadena, Texas not used as part of our operations.


▪	Cost of goods sold - $0.4 million related to non-routine labor and compensation related costs in Chile that are outside normal compensation arrangements.


▪	Other income, net - $1.6 million of a net gain resulting from the adjustment of indemnifications and other liabilities related to previously disposed businesses.



	March 31, 2020				December 31, 2019
	Recorded Amount		Fair Value		Recorded Amount		Fair Value
	(In thousands)
Long-term debt	$	3,158,293	$	3,015,381	$	3,069,417	$	3,173,341


(a)	Included $33.2 million in Accrued expenses and $11.4 million in Other liabilities at March 31, 2020 and $3.7 million in Other current assets and $1.7 million in Other assets at December 31, 2019.


(b)	Included less than $0.1 million in Other current assets and $4.4 million in Accrued expenses at March 31, 2020 and $2.0 million in Other current assets and $3.6 million in Accrued expenses at December 31, 2019.


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



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



	March 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)
	March 31, 2020				Quoted Prices in Active Markets for Similar Items (Level 2)		Unobservable Inputs (Level 3)
Assets:
Investments under executive deferred compensation plan^(a)	$	26,753	$	26,753	$	—	$	—
Private equity securities^(b)	$	20	$	20	$	—	$	—
Private equity securities measured at net asset value^(b)(c)	$	4,890	$	—	$	—	$	—
Foreign currency forward contracts^(d)	$	38	$	38			$	—

Liabilities:
Obligations under executive deferred compensation plan^(a)	$	26,753	$	26,753	$	—	$	—
Foreign currency forward contracts^(d)	$	48,908	$	—	$	48,908	$	—


(b)	Primarily consists of private equity securities classified as available-for-sale and are reported in Investments in the condensed consolidated balance sheets. The changes in fair value are reported in Other income, net, in our consolidated statements of income.


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



	Foreign Currency Translation			Pension and Post-Retirement Benefits^(a)			Net Investment Hedge		Cash Flow Hedge^(b)			Interest Rate Swap^(c)			Total
Three months ended March 31, 2020
Balance at December 31, 2019	$	(469,210	)	$	473		$	80,778	$	4,847		$	(12,623	)	$	(395,735	)
Other comprehensive (loss) income before reclassifications	(81,986		)	—			2,081		(51,460		)	—			(131,365		)
Amounts reclassified from accumulated other comprehensive loss	—			9			—		—			648			657
Other comprehensive (loss) income, net of tax	(81,986		)	9			2,081		(51,460		)	648			(130,708		)
Other comprehensive income attributable to noncontrolling interests	(46		)	—			—		—			—			(46		)
Balance at March 31, 2020	$	(551,242	)	$	482		$	82,859	$	(46,613	)	$	(11,975	)	$	(526,489	)
Three months ended March 31, 2019
Balance at December 31, 2018	$	(407,646	)	$	(159	)	$	72,337	$	—		$	(15,214	)	$	(350,682	)
Other comprehensive (loss) income before reclassifications	(10,855		)	—			3,304		—			—			(7,551		)
Amounts reclassified from accumulated other comprehensive loss	—			7			—		—			641			648
Other comprehensive (loss) income, net of tax	(10,855		)	7			3,304		—			641			(6,903		)
Other comprehensive loss attributable to noncontrolling interests	47			—			—		—			—			47
Balance at March 31, 2019	$	(418,454	)	$	(152	)	$	75,641	$	—		$	(14,573	)	$	(357,538	)