ALBEMARLE CORPORATION
Forward-looking Statements
Some of the information presented in this Quarterly Report on Form 10-Q may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on our current expectations, which are in turn based on assumptions that
we believe are reasonable based on our current knowledge of our business and
operations. We have used words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "would," "will" and variations
of such words and similar expressions to identify such forward-looking
statements.
These forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions, which are difficult to
predict and many of which are beyond our control. There can be no assurance that
our actual results will not differ materially from the results and expectations
expressed or implied in the forward-looking statements. Factors that could cause
actual results to differ materially from the outlook expressed or implied in any
forward-looking statement include, without limitation, information related to:
•changes in economic and business conditions;
•changes in financial and operating performance of our major customers and
industries and markets served by us;
•the timing of orders received from customers;
•the gain or loss of significant customers;
•competition from other manufacturers;
•changes in the demand for our products or the end-user markets in which our
products are sold;
•limitations or prohibitions on the manufacture and sale of our products;
•availability of raw materials;
•increases in the cost of raw materials and energy, and our ability to pass
through such increases to our customers;
•changes in our markets in general;
•fluctuations in foreign currencies;
•changes in laws and government regulation impacting our operations or our
products;
•the occurrence of regulatory actions, proceedings, claims or litigation;
•the occurrence of cyber-security breaches, terrorist attacks, industrial
accidents, natural disasters or climate change;
•hazards associated with chemicals manufacturing;
•the inability to maintain current levels of product or premises liability
insurance or the denial of such coverage;
•political unrest affecting the global economy, including adverse effects from
terrorism or hostilities;
•political instability affecting our manufacturing operations or joint ventures;
•changes in accounting standards;
•the inability to achieve results from our global manufacturing cost reduction
initiatives as well as our ongoing continuous improvement and rationalization
programs;
•changes in the jurisdictional mix of our earnings and changes in tax laws and
rates;
•changes in monetary policies, inflation or interest rates that may impact our
ability to raise capital or increase our cost of funds, impact the performance
of our pension fund investments and increase our pension expense and funding
obligations;
•volatility and uncertainties in the debt and equity markets;
•technology or intellectual property infringement, including through
cyber-security breaches, and other innovation risks;
•decisions we may make in the future;
•the ability to successfully execute, operate and integrate acquisitions and
divestitures;
•uncertainties as to the duration and impact of the novel coronavirus
("COVID-19") pandemic; and
•the other factors detailed from time to time in the reports we file with the
U.S. Securities and Exchange Commission ("SEC").
We assume no obligation to provide revisions to any forward-looking statements
should circumstances change, except as otherwise required by securities and
other applicable laws. The following discussion should be read together with our
condensed consolidated financial statements and related notes included in this
Quarterly Report on Form 10-Q.
24
--------------------------------------------------------------------------------
Table of Contents
The following is a discussion and analysis of our results of operations for the
three-month periods ended March 31, 2021 and 2020. A discussion of our
consolidated financial condition and sources of additional capital is included
under a separate heading "Financial Condition and Liquidity."
Overview
We are a leading global developer, manufacturer and marketer of
highly-engineered specialty chemicals that are designed to meet our customers'
needs across a diverse range of end markets. We believe our purpose is making
the world safe and sustainable by powering the potential of people. The end
markets we serve include energy storage, petroleum refining, consumer
electronics, construction, automotive, lubricants, pharmaceuticals, crop
protection and custom chemistry services. We believe that our commercial and
geographic diversity, technical expertise, innovative capability, flexible,
low-cost global manufacturing base, experienced management team and strategic
focus on our core base technologies will enable us to maintain leading market
positions in those areas of the specialty chemicals industry in which we
operate.
Secular trends favorably impacting demand within the end markets that we serve
combined with our diverse product portfolio, broad geographic presence and
customer-focused solutions will continue to be key drivers of our future
earnings growth. We continue to build upon our existing green solutions
portfolio and our ongoing mission to provide innovative, yet commercially
viable, clean energy products and services to the marketplace to contribute to
our sustainable revenue. For example, our Lithium business contributes to the
growth of clean miles driven with electric miles and more efficient use of
renewable energy through grid storage; Bromine Specialties enables the
prevention of fires starting in electronic equipment, greater fuel efficiency
from rubber tires and the reduction of emissions from coal fired power plants;
and the Catalysts business creates efficiency of natural resources through more
usable products from a single barrel of oil, enables safer, greener production
of alkylates used to produce more environmentally-friendly fuels, and reduced
emissions through cleaner transportation fuels. We believe our disciplined cost
reduction efforts and ongoing productivity improvements, among other factors,
position us well to take advantage of strengthening economic conditions as they
occur, while softening the negative impact of the current challenging global
economic environment.
First Quarter 2021
During the first quarter of 2021:
•Our board of directors declared a quarterly dividend of $0.39 per share on
February 25, 2021 , which was paid on April 1, 2021 to shareholders of record at
the close of business as of March 12, 2021 .
•We announced the planned capacity expansion at our lithium production facility
in Silver Peak , Nevada beginning in 2021. We plan to invest $30 million to $50
million to double the current production at the Silver Peak site by 2025, making
full use of the brine water rights.
•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, which was exercised. The total
gross proceeds from this offering were approximately $1.5 billion , before
deducting expenses, underwriting discounts and commissions.
•On February 25, 2021 , we signed a definitive agreement to sell our fine
chemistry services ("FCS") business to W. R. Grace & Co. ("Grace") for proceeds
of approximately $570 million , consisting of $300 million in cash and the
issuance to Albemarle of preferred equity of a Grace subsidiary having an
aggregate stated value of $270 million . The sale is expected to close in the
second quarter of 2021, subject to the satisfaction of customary closing
conditions, including approvals from regulatory authorities.
•Using the proceeds of the underwritten public offering of shares of our common
stock, we repaid the outstanding principal balances of the 1.875% senior notes
due in 2021, the floating rate notes due in 2022, the unsecured credit facility
originally entered into on August 14, 2019 , as amended and restated on December
15, 2020 (the "2019 Credit Facility") and the commercial paper notes. In
addition, we repaid €123.8 million of the 1.125% notes due in 2025 and
$128.4 million of the 4.15% senior notes due in 2029. As a result, we recorded a
loss on early extinguishment of debt of $27.8 million , representing the tender
premiums, fees, unamortized discounts and unamortized deferred financing costs
from the redemption of this debt during the first quarter of 2021.
•Our net sales for the quarter were $829.3 million , up 12% from net sales of
$738.8 million in the first quarter of 2020.
•Diluted earnings per share were $0.84 , a 17% decrease from first quarter of
2020 results.
•Net cash provided by operations was $157.9 million in the first quarter of
2021, an increase of 2% from the first quarter of 2020.
25
--------------------------------------------------------------------------------
Table of Contents
Outlook
The current global business environment presents a diverse set of opportunities
and challenges in the markets we serve. In particular, the market for lithium
battery and energy storage, particularly that for electric vehicles ("EVs"),
remains strong, providing the opportunity to continue to develop high quality
and innovative products while managing the high cost of expanding capacity. The
other markets we serve continue to present various opportunities for value and
growth as we have positioned ourselves to manage the impact on our business of
changing global conditions, such as slow and uneven global growth, currency
exchange volatility, crude oil price fluctuation, a dynamic pricing environment,
an ever-changing landscape in electronics, the continuous need for cutting edge
catalysts and technology by our refinery customers and increasingly stringent
environmental standards. Amidst these dynamics, we believe our business
fundamentals are sound and that we are strategically well-positioned as we
remain focused on increasing sales volumes, optimizing and improving the value
of our portfolio primarily through pricing and product development, managing
costs and delivering value to our customers and shareholders. We believe that
our businesses remain well-positioned to capitalize on new business
opportunities and long-term trends driving growth within our end markets and to
respond quickly to changes in economic conditions in these markets.
Currently, the COVID-19 pandemic is having an impact on overall global economic
conditions. While we have not seen a material impact to our operations to date,
the ultimate impact on our business will depend on the length and severity of
the outbreak throughout the world. All of our information technology systems are
running as designed and all sites are operating at normal capacity while we
continue to comply with all government and health agency recommendations and
requirements, as well as protecting the safety of our employees and communities.
We believe we have sufficient inventory to continue to produce at current
levels, however, government mandated shutdowns could impact our ability to
acquire additional materials and disrupt our customers' purchases. At this time
we cannot predict the expected overall financial impact of the COVID-19 pandemic
on our business, but we are planning for various economic scenarios and continue
to make efforts to protect the safety of our employees and the health of our
business.
Lithium: We expect results to be higher year-over-year during 2021 in Lithium,
due mainly to North American plant restarts, efficiency improvements and
tolling, offset by pricing pressure in certain markets and higher unit costs
from plant start-ups at La Negra, Chile and Kemerton, Western Australia . There
is no new capacity coming online during 2021 to drive significant additional
sales volume, although we expect our new plants in La Negra and Kemerton to
begin producing sales in 2022. EV sales have started to rebound after a marked
slowdown during the second quarter of 2020, with full year 2020 and first
quarter 2021 showing a healthy increase in total EV sales over the prior year.
We continue to keep the Wodgina spodumene mine idled until demand supports
bringing the mine back to production.
On a longer-term basis, we believe that demand for lithium will continue to grow
as new lithium applications advance and the use of plug-in hybrid electric
vehicles and full battery electric vehicles increases. This demand for lithium
is supported by a favorable backdrop of steadily declining lithium ion battery
costs, increasing battery performance, continuing significant investments in the
battery and EV supply chain by our customers and automotive OEM's, favorable
global public policy toward e-mobility/renewable energy usage, and additional
stimulus measures taken in Europe in light of the COVID-19 pandemic that we
expect to bolster EV demand. Our outlook is also bolstered by long-term supply
agreements with key strategic customers, reflecting our standing as a preferred
global lithium partner, highlighted by our scale, access to geographically
diverse, low-cost resources and long-term track record of reliability of supply
and operating execution.
Bromine Specialties: We expect both net sales and profitability to be modestly
higher in 2021, as we recover from the lower demand due to shutdowns related to
the COVID-19 pandemic and ongoing cost savings initiatives. While we have not
experienced a material impact from the COVID-19 pandemic to date, sales in 2020
were adversely impacted and we are likely to see continued adverse impacts into
2021.
On a longer-term basis, we continue to believe that improving global standards
of living, widespread digitization, increasing demand for data management
capacity and the potential for increasingly stringent fire safety regulations in
developing markets are likely to drive continued demand for fire safety
products. Our long-term drilling outlook is uncertain at this time and will
follow a long-term trajectory in line with oil prices. We are focused on
profitably growing our globally competitive bromine and derivatives production
network to serve all major bromine consuming products and markets. The
combination of our solid, long-term business fundamentals, strong cost position,
product innovations and effective management of raw material costs will enable
us to manage our business through end-market challenges and to capitalize on
opportunities that are expected with favorable market trends in select end
markets.
Catalysts: Total Catalysts results in 2021 are expected to be down
year-over-year. In the first quarter of 2021, both the refining catalyst and
performance catalyst solutions ("PCS") businesses were negatively impacted by
the U.S. Gulf Coast winter storm. While we expect PCS volumes to improve
slightly over lower 2020 levels, we expect 2021 results to be flat to slightly
down year-over-year due to the impact of the storms. In addition, we expect 2021
refining catalyst volumes to be lower year-over-year resulting from a recent
change in customer order patterns in North America and the impact of the storms.
The
26
--------------------------------------------------------------------------------
Table of Contents
fluidized catalytic cracking ("FCC") market is expected to gradually recover
from the COVID-19 pandemic in line with increased travel and depletion of global
gasoline inventories, however, demand may not return to normal levels until late
2022 at the earliest. Hydroprocessing catalysts ("HPC") demand tends to be
lumpier than FCC demand and is also expected to continue to be negatively
impacted as refiners defer spending into 2021 and 2022.
On a longer-term basis, we believe increased global demand for transportation
fuels, new refinery start-ups and ongoing adoption of cleaner fuels will be the
primary drivers of growth in our Catalysts business. We believe delivering
superior end-use performance continues to be the most effective way to create
sustainable value in the refinery catalysts industry. We also believe our
technologies continue to provide significant performance and financial benefits
to refiners challenged to meet tighter regulations around the world, including
those managing new contaminants present in North America tight oil, and those in
the Middle East and Asia seeking to use heavier feedstock while pushing for
higher propylene yields. Longer-term, we believe that the global crude supply
will get heavier and more sour, a trend that bodes well for our catalysts
portfolio. With superior technology and production capacities, and expected
growth in end market demand, we believe that Catalysts remains well-positioned
for the future. In PCS, we expect growth on a longer-term basis in our
organometallic business due to growing global demand for plastics driven by
rising standards of living and infrastructure spending. We have discontinued
efforts to sell our PCS business.
All Other: The FCS business is reported outside the Company's reportable
segments as it does not fit in the Company's core businesses. On February 25,
2021 , we signed a definitive agreement to sell the FCS business to Grace for
proceeds of approximately $570 million , consisting of $300 million in cash and
the issuance to Albemarle of preferred equity of a Grace subsidiary having an
aggregate stated value of $270 million . The sale is expected to close in the
second quarter of 2021, subject to the satisfaction of customary closing
conditions, including approvals from regulatory authorities. We expect the near
future prospects for the FCS business to continue to be positively impacted by
the timing of customer orders in a strong pharmaceutical and agriculture
contract manufacturing environment.
Corporate: In the first quarter of 2021, we increased our quarterly dividend
rate to $0.39 per share. We continue to focus on cash generation, working
capital management and process efficiencies. In addition, we expect our global
effective tax rate for 2021 to continue to vary based on the locales in which
income is actually earned and remains subject to potential volatility from
changing legislation in the U.S. and other tax jurisdictions.
We remain committed to evaluating the merits of any opportunities that may arise
for acquisitions or other business development activities that will complement
our business footprint. Additional information regarding our products, markets
and financial performance is provided at our website, www.albemarle.com. Our
website is not a part of this document nor is it incorporated herein by
reference.
Results of Operations
The following data and discussion provides an analysis of certain significant factors affecting our results of operations during the periods included in the accompanying consolidated statements of income.
First Quarter 2021 Compared to First Quarter 2020
Selected Financial Data (Unaudited)
Net Sales In thousands Q1 2021 Q1 2020 $ Change % Change Net sales$ 829,291 $ 738,845 $ 90,446 12 % ?$108.6 million of higher sales volume across all of our reportable segments ?$35.0 million of unfavorable pricing, primarily driven by Lithium and partially offset by Bromine Specialties ?$17.0 million of favorable currency translation resulting from the weakerU.S. Dollar against various currencies 27 --------------------------------------------------------------------------------
Table of Contents Gross Profit In thousands Q1 2021 Q1 2020 $ Change % Change Gross profit$ 263,687 $ 242,018 $ 21,669 9 % Gross profit margin 31.8 % 32.8 % ?Higher sales volume in each of our reportable segments, partially offset by unfavorable pricing in Lithium ?Lower commission expenses inChile resulting from the lower pricing in Lithium ?Increased production and utility costs of approximately$33 million in Bromine Specialties and Catalysts resulting from theU.S. Gulf Coast winter storm ?Increased freight costs in Bromine Specialties and Catalysts ?Favorable currency exchange impacts resulting from the weakerU.S. Dollar against various currencies Selling, General and Administrative Expenses In thousands Q1 2021 Q1 2020 $ Change % Change Selling, general and administrative expenses$ 93,187 $ 101,877 $ (8,690) (9) % Percentage of Net sales 11.2 % 13.8 % ?Productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative ?$2.3 million decrease in severance expenses and acquisition and integration related costs for various significant projects ?Partially offset by$5.5 million of expenses in 2021 primarily related to non-routine labor and compensation related costs that are outside normal compensation arrangements
Research and Development Expenses
In thousands Q1 2021 Q1 2020
$ Change % Change
Research and development expenses
Percentage of Net sales 1.8 % 2.2 %
?Decreased research and development spend in each of the reportable segments
Interest and Financing Expenses In thousands Q1 2021 Q1 2020 $ Change % Change
Interest and financing expenses
$ (26,997) 160 % ?$27.8 million loss on early extinguishment of debt, representing the tender premiums, fees, unamortized discounts and unamortized deferred financing costs from the redemption of debt during the first quarter of 2021 ?Decreased debt balance as certain debt instruments were repaid in the first quarter of 2021 Other Income, Net In thousands Q1 2021 Q1 2020 $ Change % Change Other income, net$ 11,312 $ 8,314 $ 2,998 36 % •$2.9 million increase in foreign exchange gains •$2.5 million increase in non-operating pension and OPEB benefits •$3.9 million of expenses in 2021 primarily related to asset retirement obligation charges to update of an estimate at a site formerly owned byAlbemarle . •$2.6 million net gain resulting from the settlement of legal matters related to a business sold in 2020 Income Tax Expense In thousands Q1 2021 Q1 2020 $ Change % Change Income tax expense$ 22,107 $ 18,442 $ 3,665 20 % Effective income tax rate 17.9 % 16.0 % •Change in geographic mix of earnings, mainly attributable to our share of the income of ourJordan Bromine Company Limited ("JBC") joint venture, a Free Zones company under the laws of the Hashemite Kingdom ofJordan •2021 includes discrete tax expense due to an out-of-period adjustment for an overstated deferred tax liability for the three-month period endedDecember 31, 2017 , offset by a benefit due to the release of a foreign valuation allowance 28
--------------------------------------------------------------------------------
Table of Contents Equity in Net Income of Unconsolidated Investments In thousands
Q1 2021 Q1 2020 $ Change % Change
Equity in net income of unconsolidated
investments $ 16,511 $ 26,604 $ (10,093) (38) %
?Lower earnings from our Lithium segment joint venture,
Net Income Attributable to Noncontrolling Interests In thousands Q1 2021 Q1 2020 $ Change % Change Net income attributable to noncontrolling interests$ (22,021) $ (16,431) $ (5,590) 34 %
?Increase in consolidated income related to our JBC joint venture from higher sales volume
Net Income Attributable toAlbemarle Corporation In thousands Q1 2021 Q1 2020 $ Change % Change Net income attributable toAlbemarle Corporation $ 95,677 $ 107,204 $ (11,527) (11) % Percentage of Net sales 11.5 % 14.5 % Basic earnings per share$ 0.85 $ 1.01 $ (0.16) (16) % Diluted earnings per share$ 0.84 $ 1.01 $ (0.17) (17) % ?Increased sales volume from each of our reportable segments, partially offset by unfavorable pricing, primarily in Lithium ?Increased production and utility costs in Bromine Specialties and Catalysts resulting from the winter storms in the southernU.S. ?Increased interest expense primarily due to a loss on early extinguishment of debt of$27.8 million in 2021 ?Lower equity in net income of unconsolidated investments from the Talison joint venture ?Increased effective tax rate ?Productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative ?Earnings per share also decreased due to underwritten public offering of our common stock inFebruary 2021 , increasing share count by 9.8 million shares Other Comprehensive Income (loss), Net of Tax In thousands Q1 2021 Q1 2020 $ Change % Change Other comprehensive income (loss), net of tax$ (23,982) $ (130,708) $ 106,726 (82) % ?Foreign currency translation and other$ (28,142) $ (81,977) $ 53,835 (66) % ?2021 included unfavorable movements in the Euro of approximately$13 million , the Brazilian Real of approximately$6 million , the Japanese Yen of approximately$5 million and a net unfavorable variance in various other currencies totaling approximately$4 million ?2020 included unfavorable movements in the Euro of approximately$55 million , the Brazilian Real of approximately$16 million , the Chilean Peso of approximately$5 million and a net unfavorable variance in various other currencies totaling approximately$6 million ?Cash flow hedge$ (1,600) $ (51,460) $ 49,860 ?Net investment hedge$ 5,110 $ 2,081 $ 3,029 146 % Segment Information Overview. We have identified three reportable segments according to the nature and economic characteristics of our products as well as the manner in which the information is used internally by the Company's chief operating decision maker to evaluate performance and make resource allocation decisions. Our reportable business segments consist of: (1) Lithium, (2) Bromine Specialties and (3) Catalysts. 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,
29
--------------------------------------------------------------------------------
Table of Contents
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, the generally accepted accounting
principles in the United States ("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.
Three Months Ended March 31, Percentage Change
2021 % 2020 % 2021 vs 2020
(In thousands, except percentages)
Net sales:
Lithium $ 278,976 33.6 % $ 236,818 32.1 % 18 %
Bromine Specialties 280,447 33.8 % 231,592 31.3 % 21 %
Catalysts 220,243 26.6 % 207,207 28.0 % 6 %
All Other 49,625 6.0 % 63,228 8.6 % (22) %
Total net sales $ 829,291 100.0 % $ 738,845 100.0 % 12 %
Adjusted EBITDA:
Lithium $ 106,436 46.3 % $ 78,637 40.0 % 35 %
Bromine Specialties 94,640 41.1 % 83,262 42.4 % 14 %
Catalysts 25,427 11.1 % 47,470 24.2 % (46) %
All Other 21,479 9.3 % 22,824 11.6 % (6) %
Corporate (17,928) (7.8) % (35,828) (18.2) % 50 %
Total adjusted EBITDA $ 230,054 100.0 % $ 196,365 100.0 % 17 %
30-------------------------------------------------------------------------------- Table of Contents See below for a reconciliation of adjusted EBITDA, the non-GAAP financial measure, from Net income attributable toAlbemarle Corporation , the most directly comparable financial measure calculated and reported in accordance withU.S. GAAP, (in thousands): Bromine Reportable Lithium Specialties
Catalysts Segments Total All Other Corporate
Consolidated Total Three months endedMarch 31, 2021 Net income (loss) attributable toAlbemarle Corporation $ 74,630 $ 82,113 $ 12,916 $ 169,659 $ 20,016 $ (93,998) $ 95,677 Depreciation and amortization 31,806 12,527 12,511 56,844 1,463 3,953 62,260 Acquisition and integration related costs(a) - - - - - 2,162 2,162 Interest and financing expenses(c) - - - - - 43,882 43,882 Income tax expense - - - - - 22,107 22,107 Non-operating pension and OPEB items - - - - - (5,465) (5,465) Other(c) - - - - - 9,431 9,431 Adjusted EBITDA$ 106,436 $ 94,640
$ 230,054 Three months ended March 31, 2020 Net income (loss) attributable toAlbemarle Corporation $ 53,240 $ 71,665 $ 34,892 $ 159,797 $ 20,846 $ (73,439) $ 107,204 Depreciation and amortization 25,397 11,597 12,578 49,572 1,978 2,144 53,694 Restructuring and other(d) - - - - - 1,847 1,847 Acquisition and integration related costs(a) - - - - - 2,951 2,951 Interest and financing expenses - - - - - 16,885 16,885 Income tax expense - - - - - 18,442 18,442 Non-operating pension and OPEB items - - - - - (2,908) (2,908) Other(e) - - - - - (1,750) (1,750) Adjusted EBITDA$ 78,637 $ 83,262
$ 196,365
(a)Costs related to the acquisition, integration and potential divestitures for
various significant projects, recorded in Selling, general and administrative
expenses ("SG&A").
(b)Included in Interest and financing expenses is a loss on early extinguishment
of debt of $27.8 million . See Note 8, "Long-Term Debt," for additional
information.
(c)Included amounts for the three months ended March 31, 2021 recorded in:
•SG&A - $5.5 million of expenses primarily related to non-routine labor and
compensation related costs that are outside normal compensation arrangements.
•Other income, net - $3.9 million of expenses primarily related to asset
retirement obligation charges to update of an estimate at a site formerly owned
by Albemarle .
(d)In 2020, we recorded severance expenses as part of business reorganization
plans, impacting each of our businesses and Corporate, primarily in the U.S. ,
Germany and with our Jordanian joint venture partner. During the three months
ended March 31, 2020 , we recorded expenses of $0.7 million in Cost of goods
sold, $1.5 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 expected to primarily be paid through 2021.
(e)Included amounts for the three months ended March 31, 2020 recorded in:
•Other income, net - $2.6 million net gain resulting from the settlement of
legal matters related to a business sold, partially offset by a $0.8 million
loss resulting from the adjustment of indemnifications related to previously
disposed businesses.
31--------------------------------------------------------------------------------
Table of Contents Lithium In thousands Q1 2021 Q1 2020 $ Change % Change Net sales$ 278,976 $ 236,818 $ 42,158 18 % ?$67.1 million of higher sales volume, driven by some customers accelerating orders under long-term commitments ?$32.5 million of unfavorable pricing impacts, primarily in battery- and tech-grade carbonate due to lower contract pricing reflecting 2020 price adjustments agreed to with customers ?$7.6 million of favorable currency translation resulting from the weakerU.S. Dollar against various currencies Adjusted EBITDA$ 106,436 $ 78,637 $ 27,799 35 % ?Higher sales volume, partially offset by unfavorable pricing impacts ?Lower commission expenses inChile resulting from the lower pricing in Lithium ?Productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative ?Lower equity in net income of unconsolidated investments from the Talison joint venture ?$2.5 million of unfavorable currency translation resulting from a stronger Chilean Peso Bromine Specialties In thousands Q1 2021 Q1 2020 $ Change % Change Net sales$ 280,447 $ 231,592 $ 48,855 21 % ?$34.0 million of higher sales volume related to increased demand across all products ?$10.9 million of favorable pricing impacts, primarily in the flame retardants division and as a result of a favorable first quarter 2021 customer mix ?$3.9 million of favorable currency translation resulting from the weakerU.S. Dollar against various currencies Adjusted EBITDA$ 94,640 $ 83,262 $ 11,378 14 % ?Higher sales volume and favorable pricing impacts as a result of a favorable first quarter 2021 customer mix ?Productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative ?Increased production and utility costs of approximately$6 million resulting from theU.S. Gulf Coast winter storm ?Increased freight costs Catalysts In thousands Q1 2021 Q1 2020 $ Change % Change Net sales$ 220,243 $ 207,207 $ 13,036 6 % ?$13.3 million of higher sales volume, primarily from clean fuel technologies ?$5.7 million of unfavorable pricing impacts, primarily in FCC ?$5.4 million of favorable currency translation resulting from the weakerU.S. Dollar against various currencies Adjusted EBITDA$ 25,427 $ 47,470 $ (22,043) (46) % ?Unfavorable pricing impacts, primarily in FCC ?Increased production and utility costs of approximately$26 million resulting from theU.S. Gulf Coast winter storm ?Increased freight costs ?2020 was overstated by$11.7 million related to errors primarily regarding inventory values and overstated freight costs, which were corrected in the second quarter of 2020 ?Partially offset by productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative ?Favorable clean fuel technologies volume All Other In thousands Q1 2021 Q1 2020 $ Change % Change Net sales$ 49,625 $ 63,228 $ (13,603) (22) %
?
$ 21,479 $ 22,824 $ (1,345) (6) %
?Unfavorable pricing in our
32
--------------------------------------------------------------------------------Table of Contents Corporate In thousands Q1 2021 Q1 2020 $ Change % Change Adjusted EBITDA$ (17,928) $ (35,828) $ 17,900 50 % ?$13.4 million of favorable currency exchange impacts, including a$10 million decrease in foreign currency losses from our Talison joint venture ?Productivity improvements and a reduction in professional fees and other administrative costs, including those resulting from our previously announced cost savings initiative Financial Condition and Liquidity Overview The principal uses of cash in our business generally have been capital investments and resource development costs, funding working capital and service of debt. We also make contributions to our defined benefit pension plans, pay dividends to our shareholders and repurchase shares of our common stock. Historically, cash to fund the needs of our business has been principally provided by cash from operations, debt financing and equity issuances. We are continually focused on working capital efficiency particularly in the areas of accounts receivable, payables and inventory. We anticipate that cash on hand, cash provided by operating activities, proceeds from divestitures and borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund capital expenditures and other investing activities, fund pension contributions and pay dividends for the foreseeable future. Cash Flow During the first three months of 2021, cash on hand, cash provided by operations and the$1.5 billion net proceeds from our underwritten public offering of common stock funded$179.7 million of capital expenditures for plant, machinery and equipment, debt principal payments of approximately$1.5 billion , early extinguishment of debt fees of$23.7 million and dividends to shareholders of$41.1 million . Our operations provided$157.9 million of cash flows during the first three months of 2021, as compared to$155.1 million for the first three months of 2020. The change compared to prior year was primarily due to increased sales in each of our reportable segments and higher dividends received from unconsolidated investments, partially offset by an increase in working capital outflows. The outflow from working capital in 2021 was primarily driven by higher receivables balances due to increased sales and the timing of the collection, partially offset by a decrease in inventory balances in Bromine Specialties and Catalysts. Overall, our cash and cash equivalents increased by$176.9 million to$569.9 million atMarch 31, 2021 from$746.7 million atDecember 31, 2020 . OnFebruary 8, 2021 , we completed an underwritten public offering of 8,496,773 shares of our common stock at a price to the public of$153.00 per share. We also granted to the underwriters an option to purchase up to an additional 1,274,509 shares, which was exercised. The total gross proceeds from this offering were approximately$1.5 billion , before deducting expenses, underwriting discounts and commissions. In the first quarter of 2021, we made the following debt principal payments using the net proceeds from this underwritten public offering: •€123.8 million of the 1.125% notes due inNovember 2025 •€393.0 million, the remaining balance, of the 1.875% Senior notes originally due inDecember 2021 •$128.4 million of the 3.45% Senior notes due inNovember 2029 •$200.0 million, the remaining balance, of the floating rate notes originally due inNovember 2022 •€183.3 million, the outstanding balance, of the 2019 Credit Facility •$325.0 million, the outstanding balance, of the commercial paper notes OnFebruary 25, 2021 , we signed a definitive agreement to sell ourFCS business to Grace for proceeds of approximately$570 million , consisting of$300 million in cash and the issuance toAlbemarle of preferred equity of a Grace subsidiary having an aggregate stated value of$270 million . The preferred equity, guaranteed by Grace, can be redeemed by Grace at any time and will accrue payment-in-kind ("PIK") dividends at an annual rate of 12% beginning two years after issuance. The sale is expected to close in the second quarter of 2021, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities. Capital expenditures for the three-month period endedMarch 31, 2021 of$179.7 million were primarily associated with plant, machinery and equipment. We expect our capital expenditures to be between$850 million and$950 million in 2021, 33 -------------------------------------------------------------------------------- Table of Contents primarily for Lithium growth and capacity increases, primarily inAustralia ,Chile andSilver Peak ,Nevada , as well as productivity and continuity of operations projects in all segments. We currently expect the construction of the Kemerton,Australia and La Negra,Chile plants to be completed by the end of 2021, with sales volume from these plants beginning in 2022. Net current assets were$1.06 billion and$404.3 million atMarch 31, 2021 andDecember 31, 2020 , respectively. The increase is primarily due to the repayment of the current portion of long-term debt using proceeds from our underwritten public offering of our common stock, partially offset by the use of cash for capital expenditures. Additional changes in the components of net current assets are primarily due to the timing of the sale of goods and other ordinary transactions leading up to the balance sheet dates. The additional changes are not the result of any policy changes by the Company, and do not reflect any change in either the quality of our net current assets or our expectation of success in converting net working capital to cash in the ordinary course of business. OnFebruary 25, 2021 , we increased our quarterly dividend rate to$0.39 per share, an increase from the quarterly rate of$0.385 per share paid in 2020. OnFebruary 25, 2021 , we declared a cash dividend of$0.39 , which was paid onApril 1, 2021 to shareholders of record at the close of business as ofMarch 12, 2021 . AtMarch 31, 2021 andDecember 31, 2020 , our cash and cash equivalents included$402.4 million and$492.8 million , respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are indefinitely reinvested and which we plan to use to support our continued growth plans outside theU.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash associated with earnings from our foreign subsidiaries to theU.S. for normal operating needs through intercompany dividends, but only from subsidiaries whose earnings we have not asserted to be indefinitely reinvested or whose earnings qualify as "previously taxed income" as defined by the Internal Revenue Code. There were no repatriations of cash from foreign operations during the first three months of 2021 or 2020. While we continue to closely monitor our cash generation, working capital management and capital spending in light of continuing uncertainties in the global economy, we believe that we will continue to have the financial flexibility and capability to opportunistically fund future growth initiatives. Additionally, we anticipate that future capital spending, including business acquisitions, share repurchases and other cash outlays, should be financed primarily with cash flow provided by operations and cash on hand, with additional cash needed, if any, provided by borrowings. The amount and timing of any additional borrowings will depend on our specific cash requirements. Long-Term Debt We currently have the following notes outstanding: Issue Month/Year Principal (in millions) Interest Rate Interest Payment Dates Maturity Date November 2019 €371.7 1.125% November 25 November 25, 2025 November 2019 €500.0 1.625% November 25 November 25, 2028 November 2019(a)$171.6 3.45% May 15 and November 15 November 15, 2029 November 2014(a)$425.0 4.15% June 1 and December 1 December 1, 2024 November 2014(a)$350.0 5.45% June 1 and December 1 December 1, 2044 (a) Denotes senior notes. Our senior notes are senior unsecured obligations and rank equally with all our other senior unsecured indebtedness from time to time outstanding. The notes are effectively subordinated to any of our existing or future secured indebtedness and to the existing and future indebtedness of our subsidiaries. As is customary for such long-term debt instruments, each of these notes outstanding has terms that allow us to redeem the notes before its maturity, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of these notes to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis using the comparable government rate (as defined in the indentures governing these notes) plus between 25 and 40 basis points, depending on the note, plus, in each case, accrued interest thereon to the date of redemption. Holders may require us to purchase such notes at 101% upon a change of control triggering event, as defined in the indentures. These notes are subject to typical events of default, including bankruptcy and insolvency events, nonpayment and the acceleration of certain subsidiary indebtedness of$40 million or more caused by a nonpayment default. 34 -------------------------------------------------------------------------------- Table of Contents Our Euro notes issued in 2019 are unsecured and unsubordinated obligations and rank equally in right of payment to all our other unsecured senior obligations. The Euro notes are effectively subordinated to any of our existing or future secured indebtedness and to the existing and future indebtedness of our subsidiaries. As is customary for such long-term debt instruments, each of these notes outstanding has terms that allow us to redeem the notes before their maturity, in whole at any time or in part from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal thereof and interest thereon (exclusive of interest accrued to, but excluding, the date of redemption) discounted to the redemption date on an annual basis using the bond rate (as defined in the indentures governing these notes) plus between 25 and 35 basis points, depending on the note, plus, in each case, accrued and unpaid interest on the principal amount being redeemed to, but excluding, the date of redemption. Holders may require us to purchase such notes at 101% upon a change of control triggering event, as defined in the indentures. These notes are subject to typical events of default, including bankruptcy and insolvency events, nonpayment and the acceleration of certain subsidiary indebtedness exceeding$100 million caused by a nonpayment default. Our revolving, unsecured credit agreement dated as ofJune 21, 2018 , as amended onAugust 14, 2019 and further amended onMay 11,2020 (the "2018 Credit Agreement") currently provides for borrowings of up to$1.0 billion and matures onAugust 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'sRatings Services LLC ("S&P"),Moody's Investors Services, Inc. ("Moody's") andFitch Ratings, Inc. ("Fitch"). The applicable margin on the facility was 1.325% as ofMarch 31, 2021 . As ofMarch 31, 2021 there were no borrowings outstanding under the 2018 Credit Agreement. OnAugust 14, 2019 , the Company entered into the$1.2 billion 2019 Credit Facility with several banks and other financial institutions, which was amended and restated onDecember 15, 2020 . The lenders' commitment to provide new loans under the amended 2019 Credit Facility terminates onDecember 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 ofMarch 31, 2021 . InMarch 2021 , the Company repaid the outstanding balance of €183.3 million under the 2019 Credit Facility. As part of theDecember 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 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 requires that the Company's consolidated net funded debt to consolidated EBITDA ratio (as such terms are defined in the Credit Agreements) to be less than or equal to 4.50:1 for the fiscal quarters throughSeptember 30, 2021 , 4.00:1 for the fiscal quarter endingDecember 31, 2021 , and 3:50:1 for fiscal quarters thereafter, subject to adjustments in accordance with the terms of the Credit Agreements relating to a consummation of an acquisition where the consideration includes cash proceeds from issuance of funded debt in excess of$500 million . 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. The occurrence of an event of default under the Credit Agreements could result in all loans and other obligations becoming immediately due and payable and the credit facility being terminated. Certain representations, warranties and covenants under the 2018 Credit Agreement were conformed to those under the 2019 Credit Facility following the amendments to those agreements. OnMay 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$1.0 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. InMarch 2021 we repaid all outstanding Commercial Paper Notes and had none outstanding atMarch 31, 2021 . The non-current portion of our long-term debt amounted to$2.03 billion atMarch 31, 2021 , compared to$2.77 billion atDecember 31, 2020 . In addition, atMarch 31, 2021 , we had availability to borrow$1.5 billion under our commercial paper 35 -------------------------------------------------------------------------------- Table of Contents program and the Credit Agreements, and$131.2 million under other existing lines of credit, subject to various financial covenants under our Credit Agreements. We have the ability and intent to refinance our borrowings under our other existing credit lines with borrowings under the Credit Agreements, as applicable. Therefore, the amounts outstanding under those credit lines, if any, are classified as long-term debt. We believe that as ofMarch 31, 2021 , we were, and currently are, in compliance with all of our long-term debt covenants. Off-Balance Sheet Arrangements In the ordinary course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, including bank guarantees and letters of credit, which totaled approximately$86.9 million atMarch 31, 2021 . None of these off-balance sheet arrangements has, or is likely to have, a material effect on our current or future financial condition, results of operations, liquidity or capital resources. Other Obligations Our contractual obligations have not significantly changed based on our ordinary business activities and projected capital expenditures noted above from the information we provided in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , with the exception of the debt repayments made in the first quarter of 2021, as noted above. Following the debt repayments, our annual maturities of long-term debt atMarch 31, 2021 and our expected interest payments on those long-term debt obligations are as follows (in millions): Maturities of Long-term Debt Expected Interest Payments Remainder of 2021 $ 0.6 $ 57.2 2022 - 57.2 2023 - 57.2 2024 425.0 55.7 2025 443.7 39.1 Thereafter 1,161.4 413.3 For variable-rate debt obligations, projected interest payments are calculated using theMarch 31, 2021 weighted average interest rate of approximately 0.37%. Total expected 2021 contributions to our domestic and foreign qualified and nonqualified pension plans, including theAlbemarle Corporation Supplemental Executive Retirement Plan, should approximate$25 million , including contributions expected to be made in 2020 that we deferred to 2021. We may choose to make additional pension contributions in excess of this amount. We have made contributions of$14.7 million to our domestic and foreign pension plans (both qualified and nonqualified) during the three-month period endedMarch 31, 2021 . The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled$13.9 million atMarch 31, 2021 and$14.7 million atDecember 31, 2020 . Related assets for corresponding offsetting benefits recorded in Other assets totaled$23.2 million atMarch 31, 2021 and$24.1 million atDecember 31, 2020 . We cannot estimate the amounts of any cash payments associated with these liabilities for the remainder of 2021 or the next twelve months, and we are unable to estimate the timing of any such cash payments in the future at this time. We are subject to federal, state, local and foreign requirements regulating the handling, manufacture and use of materials (some of which may be classified as hazardous or toxic by one or more regulatory agencies), the discharge of materials into the environment and the protection of the environment. To our knowledge, we are currently complying, and expect to continue to comply, in all material respects with applicable environmental laws, regulations, statutes and ordinances. Compliance with existing federal, state, local and foreign environmental protection laws is not expected to have a material effect on capital expenditures, earnings or our competitive position, but the costs associated with increased legal or regulatory requirements could have an adverse effect on our operating results. Among other environmental requirements, we are subject to the federal Superfund law, and similar state laws, under which we may be designated as a potentially responsible party ("PRP"), and may be liable for a share of the costs associated with cleaning up various hazardous waste sites. Management believes that in cases in which we may have liability as a PRP, our liability for our share of cleanup is de minimis. Further, almost all such sites represent environmental issues that are quite mature and have been investigated, studied and in many cases settled. In de minimis situations, our policy generally is to negotiate a consent decree and to pay any apportioned settlement, enabling us to be effectively relieved of any further liability as a PRP, except for remote contingencies. In other than de minimis PRP matters, our records indicate that unresolved PRP 36 -------------------------------------------------------------------------------- Table of Contents exposures should be immaterial. We accrue and expense our proportionate share of PRP costs. Because management has been actively involved in evaluating environmental matters, we are able to conclude that the outstanding environmental liabilities for unresolved PRP sites should not have a material adverse effect upon our results of operations or financial condition. Liquidity Outlook We anticipate that cash on hand and cash provided by operating activities, divestitures and borrowings will be sufficient to pay our operating expenses, satisfy debt service obligations, fund any capital expenditures and share repurchases, make acquisitions, make pension contributions and pay dividends for the foreseeable future. Our main focus during the uncertainty surrounding the COVID-19 pandemic is to continue to maintain financial flexibility by continuing our cost savings initiative, while still protecting our employees and customers, committing to shareholder returns and maintaining an investment grade rating. Over the next three years, in terms of uses of cash, we will continue to invest in growth of the businesses and return value to shareholders. Additionally, we will continue to evaluate the merits of any opportunities that may arise for acquisitions of businesses or assets, which may require additional liquidity. In addition, during the second quarter of 2021, we expect to complete the sale of theFCS business to Grace for proceeds of approximately$570 million , consisting of$300 million in cash and the issuance toAlbemarle of preferred equity of a Grace subsidiary having an aggregate stated value of$270 million . We have discontinued efforts to sell our PCS business. Our cash flows from operations may be negatively affected by adverse consequences to our customers and the markets in which we compete as a result of moderating global economic conditions and reduced capital availability. The COVID-19 pandemic has not had a material impact on our liquidity to date; however, we cannot predict the overall impact in terms of cash flow generation as that will depend on the length and severity of the outbreak. As a result, we are planning for various economic scenarios and actively monitoring our balance sheet to maintain the financial flexibility needed. Although we maintain business relationships with a diverse group of financial institutions as sources of financing, an adverse change in their credit standing could lead them to not honor their contractual credit commitments to us, decline funding under our existing but uncommitted lines of credit with them, not renew their extensions of credit or not provide new financing to us. While the global corporate bond and bank loan markets remain strong, periods of elevated uncertainty related to the COVID-19 pandemic or global economic and/or geopolitical concerns may limit efficient access to such markets for extended periods of time. If such concerns heighten, we may incur increased borrowing costs and reduced credit capacity as our various credit facilities mature. If theU.S. Federal Reserve or similar national reserve banks in other countries decide to tighten the monetary supply in response, for example, to improving economic conditions, we may incur increased borrowing costs (as interest rates increase on our variable rate credit facilities, as our various credit facilities mature or as we refinance any maturing fixed rate debt obligations), although these cost increases would be partially offset by increased income rates on portions of our cash deposits. Overall, with generally strong cash-generative businesses and no significant long-term debt maturities before 2024, we believe we have, and will be able to maintain, a solid liquidity position. As previously 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 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 Catalysts segment, to theU.S. Department of Justice ("DOJ"), theSEC , and the Dutch Public Prosecutor ("DPP"), and are cooperating with the DOJ, theSEC , 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 any investigations by the DOJ, theSEC , or DPP. We are unable to predict what, if any, action may be taken by the DOJ, theSEC , 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 fines, penalties, disgorgement, equitable relief or other losses would have a material adverse effect on our financial condition or liquidity. We had cash and cash equivalents totaling$569.9 million atMarch 31, 2021 , of which$402.4 million is held by our foreign subsidiaries. This cash represents an important source of our liquidity and is invested in bank accounts or money market investments with no limitations on access. The cash held by our foreign subsidiaries is intended for use outside of theU.S. We anticipate that any needs for liquidity within theU.S. in excess of our cash held in theU.S. can be readily satisfied with borrowings under our existingU.S. credit facilities or our commercial paper program. 37 -------------------------------------------------------------------------------- Table of Contents Guarantor Financial InformationAlbemarle Wodgina Pty Ltd Issued Notes Albemarle Wodgina Pty Ltd (the "Issuer"), a wholly owned subsidiary ofAlbemarle Corporation , issued$300.0 million aggregate principal amount of 3.45% Senior Notes due 2029 (the "3.45% Senior Notes") inNovember 2019 . The 3.45% Senior Notes are fully and unconditionally guaranteed (the "Guarantee") on a senior unsecured basis byAlbemarle Corporation (the "Parent Guarantor"). No direct or indirect subsidiaries of the Parent Guarantor guarantee the 3.45% Senior Notes (such subsidiaries are referred to as the "Non-Guarantors"). In 2019, we completed the acquisition of a 60% interest in Mineral Resources Limited's ("MRL") Wodgina hard rock lithium mine project ("Wodgina Project ") inWestern Australia and formed an unincorporated joint venture with MRL, named MARBL Lithium Joint Venture, for the exploration, development, mining, processing and production of lithium and other minerals (other than iron ore and tantalum) from the Wodgina spodumene mine ("MARBL") and for the operation of the Kemerton assets inWestern Australia . We participate in theWodgina Project through our ownership interest in the Issuer. The Parent Guarantor conducts itsU.S. Bromine Specialties and Catalysts operations directly, and conducts its other operations (other than operations conducted through the Issuer) through the Non-Guarantors. The 3.45% Senior Notes are the Issuer's senior unsecured obligations and rank equally in right of payment to the senior indebtedness of the Issuer, effectively subordinated to all of the secured indebtedness of the Issuer, to the extent of the value of the assets securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities of its subsidiaries. The Guarantee is the senior unsecured obligation of the Parent Guarantor and ranks equally in right of payment to the senior indebtedness of the Parent Guarantor, effectively subordinated to the secured debt of the Parent Guarantor to the extent of the value of the assets securing the indebtedness and structurally subordinated to all indebtedness and other liabilities of its subsidiaries. For cash management purposes, the Parent Guarantor transfers cash among itself, the Issuer and the Non-Guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. The transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Issuer and/or the Parent Guarantor's outstanding debt, common stock dividends and common stock repurchases. There are no significant restrictions on the ability of the Issuer or the Parent Guarantor to obtain funds from subsidiaries by dividend or loan. The following tables present summarized financial information for the Parent Guarantor and the Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the Issuer and the Parent Guarantor and (ii) equity in earnings from and investments in any subsidiary that is a Non-Guarantor. Each entity in the combined financial information follows the same accounting policies as described herein and in the our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Summarized Statement of Operations Three Months Ended Year Ended $ in thousands March 31, 2021 December 31, 2020 Net sales(a) $ 417,243$ 1,621,651 Gross profit 81,302 357,431
Loss before income taxes and equity in net income of unconsolidated investments(b)
(62,127) (205,486)
Net loss attributable to the Parent Guarantor and the Issuer
(63,581) (222,097)
(a) Includes net sales to Non-Guarantors of $237.1 million and $893.5 million
for the three months ended ended March 31, 2021 and year ended December 31,
2020 , respectively.
(b) Includes intergroup expenses to Non-Guarantors of $35.1 million and $132.7
million for the three months ended ended March 31, 2021 and year ended December
31, 2020 , respectively.
38--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
