<PAGE>1
Page 1 of 15 Pages
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 March 31, 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 offices) (Zip Code)
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 April 30, 1996: 56,634,714
<PAGE>2
ALBEMARLE CORPORATION
I N D E X
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995 3-4
Consolidated Statements of Income - Three Months
Ended March 31, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 6
Notes to the Consolidated Financial Statements 7-8
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 13
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>3
PART I - FINANCIAL INFORMATION
- - ------------------------------
ITEM 1. Financial Statements
--------------------
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars In Thousands)
----------------------
<CAPTION>
March 31, December 31,
1996 1995
-------------- --------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 329,693 $ 33,130
Accounts receivable, less allowance
for doubtful accounts (1996- $1,769;
1995 - $1,615) 157,147 198,125
Inventories:
Finished goods 56,232 132,334
Work-in-process 3,980 5,767
Raw materials 9,660 15,125
Stores, supplies and other 16,183 24,371
-------------- --------------
86,055 177,597
Deferred income taxes and prepaid expenses 22,134 19,935
-------------- --------------
Total current assets 595,029 428,787
-------------- --------------
Property, plant and equipment, at cost 1,095,340 1,493,846
Less accumulated depreciation and
amortization (614,569) (807,951)
--------------- -------------
Net property, plant and equipment 480,771 685,895
Other assets and deferred charges 62,767 60,814
Goodwill and other intangibles - net of
amortization 26,918 28,995
-------------- --------------
Total assets $1,165,485 $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>
March 31, December 31,
1996 1995
-------------- --------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 78,882 $ 102,788
Long-term debt, current portion 461 17,020
Accrued expenses 75,073 65,017
Dividends payable 3,635 3,634
Income taxes payable 94,722 5,760
-------------- --------------
Total current liabilities 252,773 194,219
-------------- --------------
Long-term debt 9,249 200,092
Other noncurrent liabilities 57,812 54,512
Deferred income taxes 114,603 133,102
Shareholders' equity:
Common stock, $.01 par value,
Issued - 66,108,586 in 1996 and 66,076,853
in 1995, respectively 661 661
Additional paid-in capital 499,402 498,827
Foreign currency translation adjustments 23,522 27,604
Retained earnings 207,463 95,474
-------------- --------------
Total shareholders' equity 731,048 622,566
-------------- -------------
Total liabilities and shareholders' equity $1,165,485 $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
March 31,
-------------------------
1996 1995
------------- ------------
<S> <C> <C>
Net sales $ 270,171 $ 313,257
Cost of goods sold 196,060 246,326
------------- ------------
Gross profit 74,111 66,931
Selling, general and administrative expenses 33,545 31,167
Research and development expenses 7,126 6,777
------------- ------------
Operating profit 33,440 28,987
Interest and financing expenses 1,841 3,604
Gain on sale of business (158,157) -
Other income, net (1,767) (404)
------------- ------------
Income before income taxes 191,523 25,787
Income taxes 75,899 11,179
------------- ------------
NET INCOME $ 115,624 $ 14,608
------------- ------------
------------- ------------
EARNINGS PER SHARE $ 1.73 $ 0.22
------------- -----------
------------- -----------
Shares used to compute earnings per share 66,663 66,121
------------- -----------
------------- -----------
Cash dividends declared per share of common
stock $ .055 $ .05
------------- ------------
------------- ------------
<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>
Three Months Ended
March 31,
-----------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 33,130 $ 32,114
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 115,624 14,608
Adjustments to reconcile net income to cash
flows from operating activities:
Depreciation and amortization 20,630 23,158
Gain on sale of business, net of income
taxes of $63,780 (94,377) -
Working capital increase excluding cash
and cash equivalents, net of the effects
of the sale of business (22,972) (2,695)
Other, net (1,800) (1,991)
--------------- -------------
Net cash provided from operating activities 17,105 33,080
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,652) (22,156)
Proceeds from sale of business, net of
$26,731 of trade accounts payable retained
by the Company 509,771 -
Other, net 1,308 337
--------------- --------------
Net cash provided from (used in) investing
activities 488,427 (21,819)
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 2,022
Repayments of long-term debt (205,518) (10,599)
Dividends paid (3,634) (3,303)
Other, net 183 -
--------------- -------------
Net cash used in financing activities (208,969) (11,880)
--------------- -------------
Increase (decrease) in cash and cash equivalents 296,563 (619)
--------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 329,693 $ 31,495
--------------- -------------
--------------- -------------
<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 of Albemarle Corporation ("Albemarle" or
"the Company") contain all adjustments necessary to present
fairly, in all material respects, the Company's consolidated
financial position as of March 31, 1996 and the actual
consolidated results of operations and cash flows for the
three-month periods ended March 31, 1996 and 1995. All
adjustments are of a normal and recurring nature. These
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-month period ended March 31, 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 $510 million, including plant and equipment
(primarily located in Pasadena, Texas, Deer Park, Texas and
Feluy, Belgium), other assets, inventory and accounts
receivable, net of 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 552 people who supported these businesses. The
gain on the sale was $158.2 million ($94.4 million after
income taxes or $1.41 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 related to the sale, including environmental
costs related to the businesses sold of $3.3 million.
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.
<PAGE>8
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(In Thousands Except Per-Share Amounts)
(Unaudited)
3. Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Variable-rate bank loans $ - $ 130,000
Foreign bank borrowings 8,538 85,919
Miscellaneous 1,172 1,193
------------ --------------
Total 9,710 217,112
Less amounts due within one year 461 17,020
------------ --------------
Long-term debt $ 9,249 $ 200,092
------------ --------------
------------ --------------
</TABLE>
The reduction in long-term debt reflects repayments 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-month period ended March 31, 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, 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.
<PAGE>9
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, after a strategic review of its alpha olefins,
poly alpha olefins and synthetic alcohol businesses ("Olefins
Business"), the Company entered into a definitive agreement to
sell, and simultaneously closed the sale of its 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
- - ---------------------
First Quarter 1996 Compared with First Quarter 1995
- - ---------------------------------------------------
NET SALES
Net sales for the first quarter of 1996 amounted to $270.2
million, down from $313.3 million in 1995. Excluding the first
quarter 1996 and 1995 net sales of the Olefins Business sold
March 1, 1996, and excluding first quarter 1995 net sales of the
electronic materials business sold in July 1995, Albemarle's net
sales for the first quarter of 1996 would have shown an increase
of three percent, or $6.2 million. This increase in the
remaining businesses was primarily due to higher shipments of
certain bromine chemical products, partly offset by decreases in
shipments of pharmaceutical intermediates.
OPERATING COSTS AND EXPENSES
While net sales in 1996 decreased 14%, cost of goods sold
decreased 20% in 1996 from 1995 with the result that the gross
profit margin increased to 27.4% in the 1996 quarter from 21.4%
in the 1995 period. The decrease in cost of goods sold was
primarily due to decreases in shipments, mainly due to having
only two months of the Olefins Business' shipments in 1996 versus
three months in 1995, and lower raw material prices, offset in
part by increased plant costs primarily due to weather-related
operating problems and lower production volumes in certain
products in our bromine plant in Arkansas.
<PAGE>10
Selling, general and administrative expenses, combined with
research and development expenses, increased 7% in 1996 from the
1995 quarter. As a percentage of net sales, selling, general and
administrative expenses, including research and development
expenses, increased to 15% in 1996 from 12.1% in the 1995 quarter
in part due to the decrease in net sales for the 1996 quarter.
OPERATING PROFIT
Operating profit in the first quarter of 1996 increased 15.4%
over the corresponding period in 1995. Most of the increase came
from poly alpha olefins and linear alpha olefins, offset in part
by pharmaceutical intermediates. Linear alpha olefins and poly
alpha olefins operations were favorably impacted by lower priced
ethylene in the 1996 quarter.
INTEREST AND FINANCING EXPENSES AND OTHER INCOME
Interest and financing expenses in 1996 decreased to $1.8 million
from $3.6 million in 1995 due 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.
GAIN ON SALE OF BUSINESS
The Company's 1996 first quarter earnings included a gain
resulting from the March 1, 1996 sale of the Olefins Business to
Amoco for approximately $510 million, including plant and
equipment (primarily located in Pasadena, Texas, Deer Park, Texas
and Feluy, Belgium), other assets, inventory and accounts
receivable, net of trade accounts payable retained and paid to date
by the Company and certain business-related liabilities transferred
at the date of sale. The gain on the sale was $158.2 million
($94.4 million after income taxes or $1.41 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.)
INCOME TAXES
Income taxes for the first quarter 1996 of $75.9 million reflects
an effective income tax rate of 39.6% compared to 43.4% for the 1995
period. Excluding the effect of the gain on the sale of the
Olefins Business, income taxes increased $.9 million in the 1996
quarter compared to the 1995 quarter, on a $7.5 million increase in
pretax income from operations. The effective tax rate of 36.3%
for the first quarter of 1996, excluding effects of the gain on
the sale of the Olefins Business, was down from the 43.4% rate
for the first quarter of 1995. The rate in 1996 was favorably
impacted by the Company's Belgian subsidiary which had positive
operating results for the 1996 quarter, while the rate in 1995
was higher than normal primarily due to the absence of tax
benefits on net operating losses of the Belgian subsidiary.
<PAGE>11
Financial Condition and Liquidity
- - ---------------------------------
Cash and cash equivalents at March 31, 1996, were $329.7 million.
This represents an increase of $296.6 million from $33.1 million
at year-end 1995, primarily due to proceeds received from the
sale of the Olefins Business.
Cash flows from operating activities together with $33.1 million
of existing cash, were sufficient to cover operating activities,
capital expenditures and payment of dividends. In addition, the
Company received approximately $510 million, net of trade
payables retained and paid to date by the Company from the sale of
the Olefins Business, which was used to repay long-term debt 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 March 31, 1996, decreased 15% 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 $9.2 million at March 31, 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
March 31, 1996, amounted to 1.3%.
The Company's capital expenditures in the first quarter of 1996
were slightly higher than in the first quarter of 1995. However,
for the year capital expenditures should be slightly 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 long-term debt. The amount and timing of any
additional borrowing will depend on the Company's specific cash
requirements.
<PAGE>12
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.
Recent Developments
- - -------------------
On April 1, 1996, the Company purchased 9,484,465 shares of its
common stock, at a price of $23 per share, 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. The
purchase, which was funded from proceeds received from the sale
of the Olefins Business, represents approximately 14.3 % of the
66,083,821 shares of common stock outstanding immediately prior
to the commencement of the offer. The results of this repurchase
are not reflected herein.
<PAGE>13
Part II - OTHER INFORMATION
- - ---------------------------
ITEM 1. Legal Proceedings
-----------------
An administrative proceeding, involving a potential penalty in
excess of $100,000, was first reported in the Company's 1994
reports on Form 10-Q. The U.S. Environmental Protection Agency
("EPA") filed a motion, which was granted in November, 1995 by
the administrative law judge, to amend the complaint and increase
the proposed penalty by $412,980 to $957,225. The hearing on the
amended complaint was set for May 21, 1996. Subsequently, the
Company received an offer from EPA to settle the amended
complaint. The Company is in negotiations with EPA to settle the
amended complaint, but cannot project at this time the likelihood
that settlement will be reached before the hearing date or, if a
settlement is reached, the terms of such a settlement.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the annual meeting of shareholders held on April 24, 1996, the
shareholders elected the directors nominated in the Proxy Statement with
the following affirmative votes and votes withheld:
Director Affirmative Votes Votes Withheld
Craig R. Andersson 58,363,130 218,289
E. Gary Cook 58,365,991 215,427
Floyd D. Gottwald, Jr. 58,356,324 225,094
John D. Gottwald 58,364,693 216,726
Andre' B. Lacy 58,366,253 215,166
Seymour S. Preston, III 58,365,064 216,354
Emmett J. Rice 58,351,806 229,612
Charles B. Walker 58,346,215 235,203
Anne M. Whittemore 58,352,841 228,577
The shareholders also approved the selection of Coopers & Lybrand
as the Company's auditors with 58,323,021 affirmative votes,
85,516 against and 172,881 abstentions.
Shareholders also approved the Amended Directors' Deferred
Compensation Plan as described in the 1996 Proxy Statement. This
amendment received 57,046,525 affirmative votes and 909,213
negative votes, with 625,680 abstentions.
<PAGE> 14
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) The Company filed a Form 8-K, dated March 15, 1996,
announcing the sale of the assets of the Company's alpha
olefins, poly alpha olefins and synthetic alcohol
businesses ("Olefins Business"), to Amoco Chemical
Company. The Form 8-K included items 2, 7, 99.1, an
unaudited pro forma condensed consolidated balance sheet
as of December 31, 1995, assuming the sale of the Olefins
Business occurred on that date, and an unaudited pro forma
condensed consolidated statement of income for the year
ended December 31, 1995, which presented the results of
operations assuming that the disposition of the Olefins
Business had occurred as of January 1, 1995.
<PAGE>15
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: May 10, 1996 By: s/ E. Gary Cook
----------------------------
E. Gary Cook
President
Chief Operating Officer
Date: May 10, 1996 By: s/ T. G. Avant
-----------------------------
Thomas G. Avant
Senior Vice President
(Principal Accounting Officer)
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $329,693
<SECURITIES> $0
<RECEIVABLES> $158,916
<ALLOWANCES> $1,769
<INVENTORY> $86,055
<CURRENT-ASSETS> $595,029
<PP&E> $1,095,340
<DEPRECIATION> $614,569
<TOTAL-ASSETS> $1,165,485
<CURRENT-LIABILITIES> $252,773
<BONDS> $0
$0
$0
<COMMON> $661
<OTHER-SE> $730,387
<TOTAL-LIABILITY-AND-EQUITY> $1,165,485
<SALES> $270,171
<TOTAL-REVENUES> $270,171
<CGS> $196,060
<TOTAL-COSTS> $236,731
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $1,841
<INCOME-PRETAX> $191,523
<INCOME-TAX> $75,899
<INCOME-CONTINUING> $115,624
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $115,624
<EPS-PRIMARY> $1.73
<EPS-DILUTED> $1.73
</TABLE>
