<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For 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 (I.R.S. Employer
incorporation or organization) Identification No.)
330 SOUTH FOURTH STREET
P. O. BOX 1335
RICHMOND, VIRGINIA 23210
- ------------------------------- ---------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code - (804) 788-6000
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 X No
---- ----
Number of shares of common stock, $.01 par value, outstanding as
of July 31, 1996: 56,244,909
<PAGE>2
ALBEMARLE CORPORATION
I N D E X
Page
Number
----------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995 3-4
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 6
Notes to the Consolidated Financial Statements 7-10
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11-15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
Exhibit 99-List of Albemarle Corporation Officers 19
<PAGE>3
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
--------------------
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars In Thousands)
----------------------
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 44,292 $ 33,130
Accounts receivable, less allowance
for doubtful accounts (1996-$2,009;
1995-$1,615) 152,963 198,125
Inventories:
Finished goods 59,098 132,334
Work-in-process 3,277 5,767
Raw materials 10,565 15,125
Stores, supplies and other 16,723 24,371
------------ -------------
89,663 177,597
Deferred income taxes and prepaid expenses 18,532 19,935
------------ -------------
Total current assets 305,450 428,787
------------ -------------
Property, plant and equipment, at cost 1,105,846 1,493,846
Less accumulated depreciation and amortization (626,279) (807,951)
------------ -------------
Net property, plant and equipment 479,567 685,895
Other assets and deferred charges 63,289 60,814
Goodwill and other intangibles - net of amortization 25,343 28,995
------------ -------------
Total assets $ 873,649 $ 1,204,491
------------ -------------
------------ -------------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>4
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars In Thousands)
----------------------
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 67,029 $ 102,788
Long term debt, current portion 451 17,020
Accrued expenses 57,945 65,017
Dividends payable 3,111 3,634
Income taxes payable 49,838 5,760
------------ -------------
Total current liabilities 178,374 194,219
------------ -------------
Long-term debt 12,972 200,092
Other noncurrent liabilities 62,240 54,512
Deferred income taxes 105,985 133,102
Shareholders' equity:
Common stock, $.01 par value,
Issued - 56,438,659 in 1996 and
66,076,853 in 1995, respectively 564 661
Additional paid-in capital 275,650 498,827
Foreign currency translation adjustments 18,877 27,604
Retained earnings 218,987 95,474
------------ -------------
Total shareholders' equity 514,078 622,566
------------ -------------
Total liabilities and shareholders' equity $ 873,649 $ 1,204,491
------------ -------------
------------ -------------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>5
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------
(In Thousands Except Per-Share Amounts)
---------------------------------------
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 196,039 $ 319,705 $ 466,210 $ 632,962
Cost of goods sold 139,266 254,511 335,326 500,837
--------- --------- --------- ---------
Gross profit 56,773 65,194 130,884 132,125
Selling, general and
administrative expenses 29,679 33,614 63,224 64,781
Research and development
expenses 6,711 7,446 13,837 14,223
--------- --------- -------- ---------
Operating profit 20,383 24,134 53,823 53,121
Interest and financing expenses 203 3,490 2,044 7,094
Gain on sale of business -- -- (158,157) --
Other income, net (1,785) (418) (3,552) (822)
---------- --------- -------- --------
Income before income taxes 21,965 21,062 213,488 46,849
Income taxes 7,330 8,596 83,229 19,775
---------- --------- --------- ---------
NET INCOME $ 14,635 $ 12,466 $ 130,259 $ 27,074
---------- --------- --------- ---------
---------- --------- --------- ---------
EARNINGS PER SHARE $ .26 $ . 19 $ 2.10 $ .41
---------- --------- --------- ---------
---------- --------- --------- ---------
Shares used to compute
earnings per share 57,282 66,241 61,973 66,181
---------- --------- --------- ---------
---------- --------- --------- ---------
Cash dividends declared
per share of common stock $ .055 $ .05 $ .11 $ .10
---------- --------- --------- ---------
---------- --------- --------- ---------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>6
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars In Thousands)
----------------------
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 33,130 $ 32,114
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 130,259 27,074
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization 36,795 46,909
Gain on sale of business, net of income taxes
of $63,780 (94,377) --
Working capital increases excluding cash and
cash equivalents, net of the effects of the
sale of business:
Income tax payment on gain on sale of business (37,153) --
Other working capital increase (31,761) (13,311)
Other, net (8,295) (4,207)
---------- ---------
Net cash (used in) provided from operating activities (4,532) 56,465
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (39,442) (52,541)
Proceeds from sale of business, net of expenses and
$42,297 of trade accounts payable retained
by the Company 487,345 --
Acquisition of business -- (2,138)
Other, net 1,588 857
--------- ---------
Net cash provided from (used in) investing activities 449,491 (53,822)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 6,507 40,622
Repayments of long-term debt (208,190) (35,041)
Purchases of common stock (225,575) --
Dividends paid (7,269) (6,606)
Other, net 730 --
---------- ---------
Net cash (used in) financing activities (433,797) (1,025)
---------- ---------
Increase in cash and cash equivalents 11,162 1,618
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,292 $ 33,732
---------- ---------
---------- ---------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>7
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(In Thousands Except Per-Share Amounts)
(Unaudited)
1. In the opinion of management, the accompanying consolidated
financial statements contain all adjustments necessary to
present fairly, in all material respects, the Company's
consolidated financial position as of June 30, 1996 and
December 31, 1995, the consolidated results of
operations for the three- and six-month periods ended June 30,
1996 and 1995, and the condensed consolidated cash flows for
the six months ended June 30, 1996 and 1995. All adjustments
are of a normal and recurring nature. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the
Company's 1995 Annual Report which was incorporated by
reference in the Company's Form 10-K filed on March 28, 1996.
The December 31, 1995 consolidated balance sheet data was
derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles. The results of operations for the
three- and six-month periods ended June 30, 1996, are not
necessarily indicative of the results to be expected for the
full year.
2. On March 1, 1996, the Company sold its alpha olefins, poly
alpha olefins, and synthetic alcohol businesses ("Olefins
Business") to Amoco Chemical Company ("Amoco") for
approximately $500 million, including plant and equipment
(primarily located in Pasadena, Texas, Deer Park, Texas and
Feluy, Belgium), other assets, inventory and accounts
receivable, net of expenses and trade accounts payable retained and
paid to date by the Company, and certain business-related liabilities
transferred at the date of sale. The sale involved the
transfer of approximately 550 people who supported these
businesses. The gain on the sale was $158.2 million ($94.4
million after income taxes or $1.52 per share), net of $44.3
million of costs incurred in connection with the sale for
early retirements and work-force reductions, abandonment costs
of certain facilities and certain other costs (including
environmental) related to the sale and/or the businesses sold.
In connection with the sale of the Olefins Business, the
Company utilized approximately $20 million of its Belgian net
operating loss carryforward to offset, in part, the Belgian
portion of the taxable gain.
The transaction includes numerous operating and service
agreements primarily focusing on the sharing of common
facilities at the Pasadena plant site of Albemarle and the
Feluy plant site that will be operated by Amoco.
The net sales and operating loss before allocation of corporate
expenses for the Olefins Business for the three-months
ended June 30, 1995 were $115.3 and ($11.1) million.
In addition, the net sales and operating loss before allocation
of corporate expenses for the six-months ended June 30, 1995 were
$233.8 million and ($17.3) million.
<PAGE>8
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(In Thousands Except Per-Share Amounts)
(Unaudited)
3. Debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- --------------
<S> <C> <C>
Variable-rate bank loans $ 4,600 $ 130,000
Foreign bank borrowings 7,652 85,919
Miscellaneous 1,171 1,193
------------- --------------
Total 13,423 217,112
Less current maturities 451 17,020
------------- --------------
Long-term debt $ 12,972 $ 200,092
------------- --------------
------------- --------------
</TABLE>
The reduction in long-term debt reflects payments resulting
from use of the proceeds received from the sale of the Olefins
Business.
4. The provision for income taxes on the operating results of the
Company in the accompanying consolidated statement of income
for the three- and six-month periods ended June 30, 1995 is
higher than combined federal and state income tax rates
primarily due to the absence of tax benefits on net operating
losses of the Company's Belgian subsidiary as the Company
provided valuation allowances against the deferred tax assets
related to these net operating losses due to the uncertainty
of the assets' realization.
5. On April 1, 1996, the Company purchased 9,484,465 shares of
its common stock, at a price of $23 per share for a total
aggregate price (including expenses) of $219.4 million, through a
self tender offer, which began on March 4, 1996 and concluded on
April 1, 1996, that had been announced by the Company on March
1, 1996, following the sale of its Olefins Business to Amoco.
Additionally, the company purchased another 275,400 common
shares in the second quarter of 1996.
6. The following unaudited supplemental pro forma condensed
consolidated statement of income for the six months ended June
30, 1996 is presented assuming that the disposition of the Olefins
Business had occurred as of January 1, 1995. The related pro
forma information is presented for informational purposes only
and is not necessarily indicative of the results of operations
of the Company or what the results of operations would have
been had the Company operated without the Olefins Business
during the six months ended June 30, 1996. Additionally, the
accompanying pro forma information, consistent with the data
presented in the Company's Form 8-K filed on March 15, 1996,
does not give any effect to the purchase of 9,484,465 shares
of common stock acquired in the tender offer nor to the additional
275,400 shares purchased in the second quarter of 1996.
<PAGE>9
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
6. Continued.
<TABLE>
Pro Forma Condensed Consolidated
Statement of Income
Six Months Ended June 30, 1996
---------------------------------------
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 466,210 $ (79,763) (a)
799 (b) $387,246
Cost of goods sold 335,326 (71,200) (a)
420 (b) 264,546
---------- ----------- -----------
Gross profit 130,884 (8,184) 122,700
Selling, R&D and general
expenses 77,061 (5,064) (a) 71,997
---------- ----------- -----------
Operating profit 53,823 (3,120) 50,703
Interest and financing expenses 2,044 (1,563) (c) 481
Gain on sale of business (158,157) 158,157 (d) --
Other income, net (3,552) 18 (a)
(60) (e) (3,594)
---------- ----------- ------------
Income before income taxes 213,488 (159,672) 53,816
Income taxes 83,229 (63,780) (d)
(580) (f) 18,869
---------- ----------- ------------
Net income $ 130,259 $ (95,312) $ 34,947
---------- ----------- ------------
---------- ----------- ------------
Earnings per share $ 2.10 $ .56
---------- ----------- ------------
---------- ----------- ------------
Shares used to compute
earnings per share 61,973 61,973 (g)
----------- ----------- ------------
----------- ----------- ------------
<FN>
See accompanying notes to the pro forma condensed consolidated statement
of income.
</TABLE>
<PAGE>10
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(In Thousands Except Per-Share Amounts)
(Unaudited)
6. Continued.
Notes to the pro forma condensed consolidated statement of income
are described below:
(a) To eliminate the results of operations of the Olefins Business
for the period January 1, 1996 thru February 29, 1996 as though
the sale to Amoco occurred on January 1, 1995 and to reflect
reductions in administrative and other costs which occurred
because of personnel, employee benefits (including compensation)
and other cost reductions assumed implemented following the
sale of the Olefins Business to Amoco.
(b) To record service fee income and incremental sales revenue
generated from providing various services and products under
contracts to Amoco and to record costs and expenses for
services and products provided by Amoco. The service and
supply arrangements were entered into in connection with the
sale of the Olefins Business to Amoco.
(c) To reflect the pro forma interest cost savings resulting from
the repayment of certain domestic and Belgian debt using the
proceeds received from the sale of the Olefins Business.
(d) To eliminate the gain and the related income taxes on the
March 1, 1996, sale of the Olefins Business.
(e) To record the related amortization of certain advance rents
received from Amoco upon closing of the sale of the Olefins
Business associated with an arrangement in the nature of an
operating lease in Belgium.
(f) To record the income tax effects of the adjustments set forth
in Notes (a) through (c) and (e) above, calculated at an
assumed state and federal combined income tax rate of 37.92%
for domestic items and an assumed combined rate of 35% for
items related to the Company's Belgian subsidiary which
includes the utilization of a portion of its net operating
loss carryforwards and the estimated additional income taxes
which would have resulted if undistributed Belgian foreign
earnings had been remitted to the Company.
(g) The average number of shares used to compute earnings per
share does not include the effects of the Company's April 1,
1996 self tender offer as if it had occurred on January 1,
1995. The average number of shares would have been 57,231,000
had the offer been assumed to have been completed on January 1,
1995.
<PAGE>11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------------------
The following is management's discussion and analysis of certain
significant factors affecting Albemarle Corporation's ("Albemarle"
or "the Company") results of operations during the periods included
in the accompanying consolidated statements of income and changes
in the Company's financial condition since December 31, 1995.
On March 1, 1996, the Company sold its alpha olefins, poly alpha
olefins and synthetic alcohol businesses ("Olefins Business") to
Amoco Chemical Company ("Amoco"). After the sale, Albemarle is
engaged in the bromine chemicals, specialty chemicals and
detergents and surfactants businesses.
Results of Operations
- ---------------------
Second Quarter 1996 Compared with Second Quarter 1995
- ------------------------------------------------------
NET SALES
Net sales for the second quarter of 1996 amounted to $196.0
million, down from $319.7 million in 1995. Excluding the second
quarter 1995 net sales of the Olefins Business sold March 1, 1996
and the electronic materials business sold in July 1995,
Albemarle's net sales for the second quarter of 1996 would have
increased three percent or $4.8 million. The increase in net sales
in the remaining businesses was primarily due to higher shipments
of organometallics, agricultural intermediates and bromine fine
chemicals, partly offset by decreases in shipments of flame
retardants, pharmaceutical intermediates and zeolites.
OPERATING COSTS AND EXPENSES
Cost of goods sold decreased 45% ($115.2 million) in 1996 from the
corresponding period in 1995 on a 39% decrease in net sales with
the result that gross profit margin increased to 29.0% in the 1996
quarter from 20.4% in the 1995 period. The decrease in cost of
goods sold was primarily due to the exclusion of shipments of the
Olefins Business and the electronic materials business in the
second quarter of 1996 versus second quarter 1995 as well as higher
foreign exchange gains offset in part by higher costs in
pharmaceutical intermediates related primarily to the production of
commercial-scale customer samples of naproxen in the 1996 period.
Selling, general and administrative expenses, combined with
research and development expenses, decreased 11% ($4.7 million) in
1996 from the 1995 quarter, primarily due to lower employee related
expenses as a result of the sale of the Olefins Business and the
electronic materials business, offset in part by higher data
processing expenses and the expense associated with the exercise of
certain employee stock appreciation rights. As a percentage of net
sales, selling, general and administrative expenses, including
research and development expenses, increased to 18.6% in 1996 from
12.8% in the 1995 quarter.
<PAGE>12
OPERATING PROFIT
Operating profit in the second quarter of 1996 decreased 15.5% from
the corresponding period in 1995. Excluding the results of
businesses sold in both periods (including the Olefins Business and
the electronic materials business) operating profit was
significantly lower for the second quarter than the corresponding
period of 1995. Most of the decrease in operating profit was due
to lower shipments and higher costs in pharmaceutical intermediates
and lower shipments of zeolites and flame retardants.
INTEREST AND FINANCING EXPENSES AND OTHER INCOME
Interest and financing expenses in 1996 decreased to $.2 million
from $3.5 million in 1995 due primarily to lower average outstanding
debt. Other income, which consisted primarily of interest income due
to the investment of a portion of the proceeds from the sale of the
Olefins Business, increased $1.4 million.
INCOME TAXES
Income taxes decreased $1.3 million in the 1996 quarter compared to
the 1995 quarter, on a $.9 million increase in pretax income from
operations due to a lower effective income tax rate for the second
quarter of 1996 (33.4%) versus a 40.8% rate for the corresponding
period of 1995. The effective income tax rate and related income
tax expense for the second quarter of 1996 were favorable due to
the cumulative effect of an adjustment to the year-to-date
effective income tax rate resulting from planned utilization of
foreign tax credits while the rate in 1995 was higher than normal
primarily because the Company provided valuation allowances against
net operating losses of its Belgian subsidiary.
Results of Operations
- ---------------------
Six Months 1996 Compared with Six Months 1995
- ---------------------------------------------
NET SALES
Net sales for the first six months of 1996 amounted to $466.2
million, down from $633.0 million in 1995. Excluding the net sales
in both periods of the Olefins Business sold March 1, 1996
and the electronic materials business sold in July 1995,
Albemarle's net sales for the first six months of 1996 would have
increased three percent ($11 million) over the 1995 period. The
increase in the remaining businesses was primarily due to higher
shipments of organometallics, bromine fine chemicals and
agricultural intermediates partly offset by decreases in shipments
of pharmaceutical intermediates, flame retardants and zeolites.
OPERATING COSTS AND EXPENSES
Cost of goods sold decreased 33% ($165.5 million) in 1996 from the
corresponding period in 1995 on a 26% ($166.8 million) decrease in
net sales with the result that gross profit margin increased to
28.1% for the first six months of 1996 from 20.9% in the 1995
period. The decrease in cost of goods sold was primarily due to
decreases
<PAGE>13
OPERATING COSTS AND EXPENSES - continued
in shipments, mainly due to the exclusion in 1996 of shipments of
the Olefins Business for four months and the electronic materials
business for six months versus the first six months in 1995 as well
as higher foreign exchange gains offset in part by higher costs in
pharmaceutical intermediates related to the production of
commercial-scale samples of naproxen.
Selling, general and administrative expenses, combined with
research and development expenses, decreased 2% ($1.9 million) in
the first six months of 1996 from 1995, primarily due to lower
employee related expenses as a result of the sale of the Olefins
Business and the electronic materials business and lower outside
services, offset in part by higher data processing expenses and the
expense associated with the exercise of certain stock appreciation
rights. As a percentage of net sales, selling, general and
administrative expenses, including research and development
expenses, increased to 16.5% in the first half of 1996 from 12.5%
in 1995.
OPERATING PROFIT
Operating profit in the first six months of 1996 increased 1.3%
($.7 million) over the corresponding period in 1995. Excluding the
results of businesses sold in both periods (including the Olefins
Business and the electronic materials business) operating profit
was significantly lower for the first six months of 1996 than for
the corresponding period of 1995. Most of the decrease in
operating profit was due to lower shipments and higher costs in
pharmaceutical intermediates and lower shipments of zeolites and
flame retardants.
INTEREST AND FINANCING EXPENSES AND OTHER INCOME
Interest and financing expenses in 1996 decreased to $2.0 million
from $7.1 million in 1995 due primarily to lower average outstanding
debt. Other income, which consisted primarily of interest income due
to the investment of a portion of the proceeds from the sale of the
Olefins Business, increased $2.7 million.
INCOME TAXES
Income taxes in the first half of 1996 increased $63.4 million from
the 1995 period, reflecting an effective income tax rate of 39.0%,
down from the 42.2% rate for the corresponding period in 1995, on
a $166.6 million increase in pretax income. Excluding the effect
of the gain on the sale of the Olefins Business, income taxes in
the first six months of 1996 decreased $.4 million compared to the
1995 period, reflecting an effective income tax rate of 35.2%, down
from the 42.2% rate for the first six months of 1995, on a $8.5
million increase in pretax income from operations. The rate for the
first six months of 1996 was favorably impacted by improved
operating results from the Company's former Belgium subsidiary and
the planned benefits in 1996 of foreign tax credits while the rate
in 1995 was higher than normal primarily because the Company
provided valuation allowances against net operating losses of its
Belgian subsidiary.
<PAGE>14
GAIN ON SALE OF BUSINESS
The Company's earnings for the first six months of 1996 included a
gain resulting from the March 1, 1996 sale of the Olefins Business
to Amoco for approximately $500 million, including plant and
equipment (primarily located in Pasadena, Texas, Deer Park, Texas
and Feluy, Belgium), other assets, inventory and accounts
receivable, net of expenses and trade accounts payable retained and
paid to date by the Company and certain business-related liabilities
transferred at the date of sale. The sale involved the transfer of
approximately 550 people who supported these businesses. The gain
on the sale was $158.2 million ($94.4 million after income taxes or
$1.52 per share), net of costs incurred in connection with the
sale. (See Note 2 of the Notes to the Consolidated Financial
Statements on page 7.)
Outlook
- -------
The Company is cautiously optimistic that bromine chemicals will
regain strength after a slow first six months due primarily to
weather-related problems in the first quarter; however, there is
concern that the sluggish European economy for these products may
continue to limit growth. While sales in the Far East are
currently limited by high inventories of flame retardants and end
products, customers indicate improvement in the later part of the
year.
In specialty chemicals, pharmaceutical intermediates business
operating results should improve since production of commercial-scale
samples of naproxen has been completed and the associated high
costs terminated. In agricultural intermediates, although early
indications are that a successful new product introduction was
achieved, initial results of the acceptability of the new urease
inhibitor are not expected to become apparent until the end of the
year.
We have been addressing cost reductions following the sale
of our Olefins Business and will continue to focus our efforts on
further cost improvements.
Financial Condition and Liquidity
- ---------------------------------
Cash and cash equivalents at June 30, 1996, were $44.3 million
which represents an increase of $11.2 million from $33.1 million at
year-end 1995.
Approximately $4.5 million of cash was used by operations
in the first six months of 1996 due primarily to an income tax
payment of $37.2 million on the first quarter gain on the sale of
the Olefins Business. Excluding the impact of the income tax payment,
cash flows from operations amounted to $32.6 million, which included
an in increase in working capital of $31.8 million, primarily
reflecting higher accounts receivable and a reduction in accrued
expenses. These cash flows together with $33.1 million of existing
cash and $6.5 million of proceeds from borrowings were sufficient to
cover capital expenditures and payment of dividends.
<PAGE>15
Financial Condition and Liquidity - continued
- ---------------------------------
Proceeds from the sale of the Olefins Business of approximately
$500 million, net of expenses and trade payables retained and
paid to date by the Company, were used to purchase 9,795,865 shares
of common stock, repay long-term debt, pay the first installment of
income taxes related to the sale, pay accrued expenses in connection
with the sale and increase cash and cash equivalents.
The Company anticipates that cash provided from operations in the
future will be sufficient to pay its operating expenses, satisfy
debt-service obligations and make dividend payments to common
shareholders.
The Company's foreign currency translation adjustments, net of
related deferred taxes, at June 30, 1996, decreased 32% from
December 31, 1995, primarily due to the strengthening of the U.S.
dollar.
The non-current portion of the Company's long-term debt amounted to
$13.0 million at June 30, 1996, compared to $200.1 million at the
end of 1995. The reduction in long-term debt reflects repayments
resulting from the proceeds received from the sale of the Olefins
Business. The Company's long-term debt, including the current
portion, as a percentage of total capitalization at June 30, 1996,
amounted to approximately 2.5%.
The Company's capital expenditures in the second quarter of 1996
were lower than in the second quarter of 1995. For the year,
capital expenditures should be below the 1995 level due to the sale
of the Olefins Business. Capital spending will be financed
primarily with cash flow from operations with any additional cash
needed to be provided from additional debt. The amount and timing
of any additional borrowing will depend on the Company's specific
cash requirements.
The Company is 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 the best
of the Company's knowledge, Albemarle currently is complying with
and expects to continue to comply in all material respects with
existing environmental laws, regulations, statutes and ordinances.
Such compliance with federal, state, local and foreign
environmental protection laws has not in the past had, and is not
expected to have in the future, a material effect on earnings or
the competitive position of Albemarle.
Among other environmental requirements, the Company is subject to
the federal Superfund law, and similar state laws, under which the
Company may be designated as a potentially responsible party and
may be liable for a share of the costs associated with cleaning up
various hazardous waste sites.
<PAGE>16
Part II - OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings
-----------------
An administrative proceeding, involving a potential penalty in
excess of $100,000, was previously reported in the Company's 1996
first quarter report on Form 10-Q. The Company has reached a
settlement in principle for a cash penalty of less than $100,000,
plus a supplemental environmental project to be agreed upon expected
to cost approximately $150,000, and is in negotiations with the EPA
on the forms of the Consent Agreement and Consent Order settling the
matter.
On July 25, 1996, the federal Occupational Safety and Health
Administration issued a citation and notification of a proposed
penalty of $119,000 arising out of a fire in the Pasadena, Texas,
polysilicon plant which the Company sold to MEMC Pasadena, Inc.,
(MEMC) but which the Company operates under contract with MEMC.
The Company will contest vigorously the citation and notification.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule
The following document is filed as an exhibit to this
Form 10-Q pursuant to Item 601 of Regulation S-K:
99. Listing of the names and ages of the Company's
Officers as of July 1, 1996 (filed herewith).
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
<PAGE>17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ALBEMARLE CORPORATION
----------------------
(Registrant)
Date: August 13, 1996 By: s/ Thomas G. Avant
-----------------------
Senior Vice President
(Principal Accounting Officer)
Date: August 13, 1996 By: s/ E. Whitehead Elmore
----------------------------
Senior Vice President,
General Counsel and Secretary
<PAGE>18
EXHIBIT INDEX
-------------
Page
Number
------------
EXHIBIT 99
- -----------
List of Albemarle Corporation Officers 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE
ANNUAL REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ANNUAL REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> $44,292
<SECURITIES> $0
<RECEIVABLES> $154,972
<ALLOWANCES> $2,009
<INVENTORY> $89,663
<CURRENT-ASSETS> $305,450
<PP&E> $1,105,846
<DEPRECIATION> $626,279
<TOTAL-ASSETS> $873,649
<CURRENT-LIABILITIES> $178,374
<BONDS> $0
$0
$0
<COMMON> $564
<OTHER-SE> $513,514
<TOTAL-LIABILITY-AND-EQUITY> $873,649
<SALES> $466,210
<TOTAL-REVENUES> $466,210
<CGS> $335,326
<TOTAL-COSTS> $412,387
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $2,044
<INCOME-PRETAX> $213,488
<INCOME-TAX> $83,299
<INCOME-CONTINUING> $130,259
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $130,259
<EPS-PRIMARY> $2.10
<EPS-DILUTED> $2.10
</TABLE>
<PAGE>19
EXHIBIT 99
LIST OF ALBEMARLE CORPORATION OFFICERS*
--------------------------------------
Name Age Office
- ------------------ ----- ----------------------------
**Floyd D. Gottwald, Jr. 73 Chairman of the Board and of
the Executive Committee, Chief
Executive Officer, Director
**Charles B. Walker 57 Vice Chairman of the Board,
Chief Financial Officer, Director
Thomas G. Avant 58 Senior Vice President - Finance
Dirk Betlem 57 Senior Vice President - International
E. Whitehead Elmore 57 Senior Vice President, General Counsel,
Corporate Secretary
John G. Dabkowski 47 Vice President and General Manager -
Specialty Chemicals
Dixie E. Goins 45 Vice President - Research and
Development
Robert G. Kirchhoefer 55 Treasurer
Victor L. McDearman 52 Vice President and General Manager -
Bromine Chemicals
Charles E. Moore 55 Vice President - Engineering
George A. Newbill 53 Vice President - Manufacturing
Fred H. Speno 58 Vice President - Human Resources
Gary L. Ter Haar 60 Vice President - Health and
Environment
Michael D. Whitlow 43 Vice President - External Affairs
Edward G. Woods 54 Vice President - Business Development
* Among other changes the current list reflects E. Gary Cook's June 12, 1996
resignation as President and Chief Operating Officer and a Director. On
August 12, 1996 the Company announced Dirk Betlem's promotion, effective
August 15, 1996, to President and Chief Operating Officer and his election
to membership on the Board of Directors, Executive Committee of the Board
and Executive Committee as Management Committee. At the same time, the
Company announced the election, effective September 1, 1996, of Dr. William
M. Gottwald as Vice President - Corporate Strategy.
** Member of the Executive Committee
