UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
__TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-12658
ALBEMARLE CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1692118
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 SOUTH FOURTH STREET
P. O. BOX 1335
RICHMOND, VIRGINIA 23210
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 804-788-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
COMMON STOCK, $.01 Par Value NEW YORK STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securi ties 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 at least the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
(i)
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Aggregate market value of voting stock held by non-affiliates of
the registrant as of December 31, 1996: $667,549,441.*
Number of shares of Common Stock outstanding as of December 31,
1996: 55,046,183.
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*In determining this figure, an aggregate of 18,215,869 shares of Common Stock
reported in the registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders as beneficially owned by Floyd D. Gottwald, Jr., Bruce C. Gottwald,
and the members of their immediate families have been excluded and treated as
shares held by affiliates. See Item 12 herein. The aggregate market value has
been computed on the basis of the closing price in the New York Stock Exchange
Composite Transactions on December 31, 1996, as reported by The Wall Street
Journal.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Albemarle Corporation's Annual Report to Shareholders for
the year ended December 31, 1996 (the "Annual Report"), are incorporated
by reference into Parts I, II and IV of this Form 10-K.
2. Portions of Albemarle Corporation's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (the "Proxy Statement") are incorporated by
reference into Part III of this Form 10-K.
(ii)
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PART I
Item 1. BUSINESS
Albemarle Corporation ("the Company" or "Albemarle") was incorporated
under the laws of the Commonwealth of Virginia on November 24, 1993, as a
wholly-owned subsidiary of Ethyl Corporation ("Ethyl"). Ethyl thereafter
transferred to Albemarle Ethyl's olefins and derivatives, bromine chemicals and
specialty chemicals businesses, and, at the close of business on February 28,
1994, Ethyl distributed to its common shareholders all of the outstanding shares
of Albemarle. Since February 28, 1994, the Company has been a publicly held
operating company.
On March 1, 1996, the Company sold its alpha olefins, poly alpha olefins
and synthetic alcohols businesses ("Olefins Business") to Amoco Chemical Company
("Amoco"). After the sale, Albemarle is engaged in the bromine chemicals and
specialty chemicals businesses.
Unaudited pro forma condensed consolidated statements of income for the
years ended December 31, 1996 and 1995, which the Company believes are important
to enable the reader to obtain a meaningful understanding of Albemarle's results
of operations excluding the Olefins Business, are included in Note 18 of the
Notes to the Consolidated Financial Statements of the Annual Report, and are
incorporated herein by reference. The unaudited pro forma condensed consolidated
statements of income are for informational purposes only and do not purport to
be indicative of the Company's future consolidated results of operations of
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Albemarle or what the consolidated results of operations would have been had
Albemarle operated without the Olefins Business for all of 1996 and 1995.
Description of Business
Albemarle is a major producer of fine and performance chemicals
including polymer intermediates, cleaning product intermediates and additives,
agricultural chemical intermediates, pharmaceutical intermediates, catalysts,
brominated flame retardants, bromine chemicals and potassium and chlorine
chemicals. Albemarle employs approximately 2,800 people.
The following discussion of the Company's businesses as of December 31,
1996, should be read in conjunction with the information contained in the "1996
Financial Review" section of Albemarle's Annual Report as of December 31, 1996,
referred to in Item 7 that follows.
The Company conducts its worldwide chemicals operations through two
global business units -- bromine chemicals and specialty chemicals.
Albemarle manufactures a broad range of chemicals, most of which are
additives to or intermediates for plastics, polymers and elastomers, cleaning
products, agricultural compounds, pharmaceuticals, photographic chemicals,
drilling compounds and biocides. Most sales of the Company's products are made
directly to manufacturers of the products mentioned in the preceding sentence,
including chemical and polymer companies, pharmaceutical
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companies, cleaning product manufacturers, paper and photographic companies,
drilling companies and water treatment companies.
The Company produces the majority of its products in the United States
but also has a significant production facility in France and also has aluminum
alkyls produced for it by Amoco at the Company's former Feluy, Belgium plant.
The processes and technology for most of these products were developed in the
Company's or its predecessor's research and development laboratories.
Products of the bromine chemicals business include elemental bromine,
flame retardants, alkyl bromides, inorganic bromides, a number of bromine fine
chemicals, potassium chemicals and chlorine. Applications for these products
primarily exist in chemical synthesis, polymer products, oil and gas well
drilling and completion fluids, water purification, glass making, cleaning
products, soil fumigation and chemical intermediates for pharmaceutical,
photographic and agricultural chemicals. The remaining products of the olefins
and derivatives business which were not sold to Amoco, operate as a part of
bromine chemicals as the surfactants and biocides business. These products
include tertiary amines for surfactants and biocides, disinfectants and
sanitizers; zeolite A (sodium alumina silicate) used as a phosphate replacement
in laundry detergent builders; and alkenyl succinic anhydride (ASA) used in
paper-sizing formulations. These businesses have many varied customers. The
products are sold to
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suppliers of household, institutional and industrial cleaners, personal care
products and industrial products.
In most bromine chemicals product lines the Company's plants operated
below capacity during 1996, with the exception of SAYTEX(R) BT-93(R)W which
operated at full capacity. An expansion of brine field and bromine capacities at
the Company's Magnolia, Arkansas facility that started in 1995, was continued.
The overall result of the current phase of the program will be a bromine
production capacity increase of thirty (30) percent. Also expanded in 1996 were
plant capacities to produce SAYTEX(R) 8010, SAYTEX RB-49, SAYTEX BT-93(R)R,
SAYTEX BT-93W and SAYTEX RB-100 flame retardants. The Company continues to focus
on expansion of its bromine production capabilities and an expanded mineral
leasing program.
The Company's subsidiary Albemarle PPC ("APPC") operates a plant in
Thann, France. APPC is one of the world's largest producers of organic and
inorganic brominated compounds used mainly in pharmaceutical, photographic and
agricultural chemical intermediates. APPC also operates an electrolysis unit to
produce high-purity caustic potash and potassium carbonate used in the glass,
water treatment, cleaning product and food industries. A 20% expansion of
manufacturing capability at the Company's organic bromide production facility in
Thann, France was completed in 1996 to satisfy growing market needs for bromine
fine chemicals and our own captive demand for an intermediate for production of
naproxen. APPC strengthens the Company's position in bromine chemicals and
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provides substantial additional manufacturing and research and development
capabilities in Europe.
The specialty chemicals business produces a broad range of chemicals,
including pharmaceutical and agricultural intermediates, polymer curatives,
catalysts and antioxidants.
The Company's primary pharmaceutical intermediate, ibuprofen, is a
widely-used pharmaceutical that provides fever reduction and temporary relief of
aches and pains and menstrual cramps. Bulk ibuprofen is formulated into tablets
by pharmaceutical companies who sell to customers in both the prescription and
over-the-counter markets. Ibuprofen products account for more than 25% of the
U.S. over-the-counter analgesic market. They compete against other painkillers
containing aspirin, acetaminophen, ketoprofen and naproxen. The Company is one
of the world's largest producers of ibuprofen.
During 1995 and 1996, existing facilities were modified to provide a 500
metric ton commercial production capability for bulk naproxen. In 1997, the
Company plans to start up commercial production of bulk naproxen with initial
sales commencing as customers obtain U.S. Food and Drug Administration ("FDA")
approval.
Agricultural intermediates are sold to chemical companies that supply
finished products to farmers, governments and others. These products include
orthoalkylated anilines for the acetanilide family of pre-emergent herbicides
used on corn, soybeans and other crops, and organophosphorus products for
insecticide use. A new
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agricultural intermediate (an urease inhibitor), primarily for use on corn to
improve the effectiveness of nitrogen-based fertilizers, is undergoing
commercial-scale trials and expanded testing in 1997.
Aluminum alkyls are used as co-catalysts in the production of
polyolefins, such as polyethylene and polypropylene, elastomers, alpha olefins
such as hexene, octene, and decene, and organotin heat stabilizers, and in the
preparation of organic intermediates. The Company has continued to expand and
debottleneck its production capacity at Pasadena, Texas and Orangeburg, South
Carolina. It has also strengthened its supply chain for methylaluminoxane
("MAO"), a co-catalyst used in metallocene catalyst systems, by increasing
capacity for MAO and for the key raw materials needed to make MAO. The Company
has continued to build its organometallics base and expand the portfolio of
products and capabilities it offers its customers pursuing the development and
commercialization of metallocene based polymers.
The Company is also expanding its efforts in polymer curatives, products
used to control polyurethane and epoxy system polymerization. Also produced are
antioxidants and alkylated hindered phenolics that are used to maintain the
performance integrity of thermoplastic resins.
In most specialty chemicals product lines the Company's plants operated
near capacity during 1996, with the exception of bulk ibuprofen and halide
aluminum alkyls which had excess capacity. An expansion in alkylated aromatics
capacity was started in 1995 and completed in 1996 at one of the Company's
facilities.
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The Company operates on a worldwide basis with (i) a manufacturing plant
located in France in addition to facilities in the United States, (ii) offices
and distribution terminals in Belgium, France, Japan and Singapore as well as
the United States and (iii) offices in the People's Republic of China and Hong
Kong. The Company has no significant assets in countries in which those assets
would be deemed to be exposed to substantial risk. See Note 17 -- "Geographic
Area Information" of Notes to The Consolidated Financial Statements in the
Annual Report.
Competition
The Company operates in a highly competitive marketplace, competing against
a number of other companies in each of its product lines. Some markets involve a
significant number of competitors, while others involve only a few. The
competitors of the Company are both larger and smaller in terms of resources and
market share. Competition generally is based on product performance, reputation
for quality, price and customer service and support. The degree and nature of
competition depends on the type of product involved.
In general, the Company competes in all of its markets on the basis of
the quality and price of its products as well as customer services, by
maintaining a broad range of products and by focusing resources on products in
which the Company has a competitive advantage. The Company endeavors to improve
its reputation for quality products, competitive prices and excellent customer
service
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and support. Competition in connection with all of the Company's products
requires continuing investments in research and development, product and process
improvements and specialized customer services. Through research and
development, the Company and its subsidiaries will seek to increase margins by
introducing value-added products and products based on proprietary technologies.
Raw Materials
Raw materials used by the Company include ethylene, potassium chloride,
aluminum, ortho-toluidine, bisphenol-A, chlorine, phenol, isobutylene, caustic
soda, toluene, diphenyl oxide, sodium silicate, dimethlyamine, maleic anhydride,
ethanol, phosphorus, sulfuric acid, hydrogen cyanide, and nitrogen, as well as
electricity and natural gas as fuels, most of which are readily available from
numerous suppliers and are purchased or provided under contracts at prices the
Company believes are competitive. The Company also produces bromine in Arkansas
from its extensive brine reserves backed by an active leasing program. The
Company has signed supply agreements with the Dead Sea Bromine group of
companies. The contracts essentially cover the bromine requirements for the
production of bromine fine chemicals in our Thann, France facility and provide
additional bromine if requested for the Company's other bromine needs.
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Major Customers
Due to the diversity of product lines in which the Company competes, no
major portion of the Company's sales or earnings was generated by one customer
nor is the Company overly reliant on contracts with any one public, private or
governmental entity.
Several of the Company's customers manufacture products for cyclical
industries such as the agricultural, automotive, electronics and building and
construction industries. As a result, demand for the products of the Company
from customers in such industries also is cyclical. In addition, the
profitability of sales of certain of the Company's products depends on the level
of industry plant capacity utilization.
Due to the diversity and size of the Company's operations, there is little
seasonal variation in revenues or earnings, except for certain agricultural
products.
Significant Developments Since Last Form 10-K
On March 1, 1996, the Company announced the sale of its Olefins Business
to Amoco for $487.3 million, including plant and equipment, other assets,
inventory and accounts receivable net of expenses and related trade payables
paid by the Company.
The sale involved the transfer of approximately 550 people who supported
these businesses. Certain assets located primarily in Pasadena, Texas, Deer
Park, Texas and Feluy, Belgium were included in the sale. The transaction
included numerous operating and service agreements primarily focusing on the
sharing of common facilities at the Pasadena, Texas plant and the operation for
the
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Company of the aluminum alkyls portion of the Feluy Plant site by Amoco. In
connection with the sale of the Olefins Business, the Company also implemented
an early-retirement and work-force reduction program for certain salaried
employees. The effort is expected to result in annual cost savings to the
Company. A Form 8-K report relating to the sale was filed with the Securities
and Exchange Commission ("SEC") on March 15, 1996.
On April 1, 1996, the Company purchased 9,484,465 shares of its common
stock, at a price of $23 per share plus expenses for a total aggregate cost of
$219.4 million, through a tender offer, which began on March 4, 1996 and
concluded on April 1, 1996. A Form 13E-4 for Albemarle Corporation was filed
with the SEC on March 4, 1996. Later in 1996 the Company purchased an additional
1,756,500 shares for $32.1 million, at an average price of $18.25 per share, in
market transactions.
Research and Patents
The Company's research and development supports each of the major business
areas.
With respect to bromine chemicals, the research focus is on new and
improved flame retardants targeted to satisfy increasing market needs for
performance and quality in products manufactured from polystyrene,
acrylonitrile-butadiene-styrene (ABS) and engineered thermoplastics. Development
efforts are focused on efficiently debottlenecking plant capacity to meet the
strong demand for the above businesses and additionally on expanding and
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developing new markets for bromine fine chemicals. This effort is expected to
continue through 1997.
The primary focus of specialty chemicals' research in 1996 was new
catalysts (metallocenes), new pharmaceutical intermediates and new agricultural
intermediates. This effort is expected to continue into 1997 and beyond.
In addition to the U.S. research facility in Baton Rouge, Louisiana, the
Company's European businesses are supported by the research and development
facilities at Louvain-la-Neuve, Belgium, and Thann, France, as well as at
various other plant locations.
The Company spent approximately $30.4 million, $29.5 million and $28.1
million in 1996, 1995 and 1994, respectively, on research and development, which
amounts qualified under the technical accounting definition of research and
development. Total R&D department spending for 1996 was some $43.7 million,
including $13.3 million related to technical services support to customers and
the Company's plants, testing of existing products, cost reduction, quality
improvement and environmental studies.
The Company considers patents, licenses and trademarks to be of
significance to its business. As of December 31, 1996, the Company owned more
than 1,200 active United States and foreign patents, including 23 U.S. patents
and 64 foreign patents issued in 1996. Some of these patents are licensed to
others. In addition, rights under the patents and inventions of others have been
acquired by the Company through licenses. The Company's patent
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position is actively managed and is deemed by it to be adequate for the conduct
of its business.
Environmental Regulation
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 is currently
complying with and expects to continue to comply in all material respects with
all 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 (PRP) and may be liable for a
share of the costs associated with cleaning up various hazardous waste sites.
Management believes that in most cases, the Company's participation 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 by
the Company or its predecessor company. In de minimis PRP matters, the Company's
policy generally is to negotiate a
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consent decree and to pay any apportioned settlement, enabling the Company to be
effectively relieved of any further liability as a PRP, except for remote
contingencies. In other than de minimis PRP matters, the Company's records
indicate that unresolved exposures should be immaterial. The Company accrues and
expenses its proportionate share of PRP costs in accordance with FASB Statement
No. 5 "Accounting for Contingencies" and FASB Interpretation No. 14. Because
management has been actively involved in evaluating environmental matters, the
Company is able to conclude that the outstanding environmental liabilities for
unresolved PRP sites should not be material.
Albemarle's environmental operating and safety costs charged to expense,
which are not considered to be normal operating costs, were approximately $11.5
million in 1996 versus approximately $9.0 million in 1995 and $8.9 million in
1994, excluding depreciation of previous capital expenditures, and are expected
to be approximately in the same range over the next few years. Costs for
remediation have been accrued and payments related to sites are charged against
accrued liabilities, which at December 31, 1996 totaled approximately $8.2
million. There is a reasonable possibility that future remediation costs in
excess of amounts already recorded could amount to $7.0 million before income
taxes. However, the Company believes that any sum it may be required to pay in
connection with environmental remediation matters in excess of the amounts
recorded would occur over a period of time and should not have a material
adverse impact on its financial condition or
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results of operations, but could have a material adverse impact in a particular
reporting period.
Capital expenditures for pollution-abatement and safety projects for the
Company, including such costs that are included in other projects, were
approximately $14.7 million, $22 million and $20.3 million in 1996, 1995 and
1994, respectively. For each of the next few years, capital expenditures for
these types of projects are likely to be in the same range. Management's
estimates of the effects of compliance with governmental pollution-abatement and
safety regulations are subject to (i) the possibility of changes in the
applicable statutes and regulations or in judicial or administrative
construction of such statutes and regulations and (ii) uncertainty as to whether
anticipated solutions to pollution problems will be successful or whether
additional expenditures may prove necessary.
FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations are substantially all in the chemicals
industry. Geographic area information for the Company's operations for the three
years ended December 31, 1996, is presented in the Annual Report on page 14 (and
Note 17 to the Consolidated Financial Statements on pages 35-36) and is
incorporated herein by reference.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Financial information about the Company's foreign and domestic
operations and export sales for the three years ended December 31, 1996, is set
forth in the Annual Report on page 14 and in Note 17 of the Notes to The
Consolidated Financial Statements on pages 35- 36 and is incorporated herein by
reference. Domestic export sales to non-affiliates may be made worldwide but are
made primarily in the Far East, Latin America and Europe. Sales by foreign
subsidiaries are primarily in Europe, the Middle East and the Far East.
Item 2. PROPERTIES
The Company's principal executive offices are located at 330 South
Fourth Street, Richmond, Virginia 23219, and its principal administrative
offices are located at 451 Florida Street, Baton Rouge, Louisiana 70801. The
Company leases its executive offices and administrative offices in Richmond,
Virginia; and Baton Rouge, Louisiana; and its regional offices in Brussels,
Belgium; Singapore; and Tokyo, Japan; as well as various sales and other
offices.
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The following is a brief description of the principal plants and related
facilities of the Company, all of which are owned ex cept as stated below.
LOCATION PRINCIPAL OPERATIONS
-------- --------------------
Baton Rouge, Louisiana Research and product-development
(2 facilities, one on leased activities
land)
Pasadena, Texas Production of aluminum alkyls,
alkenyl succinic anhydride,
orthoalkylated anilines and
phenols, zeolite A and other
chemicals; research activities
Louvain-la-Neuve, Belgium Research and customer technical
service activities
Magnolia, Arkansas Production of flame retardants and
(West Plant) bromine
Magnolia, Arkansas Production of flame retardants,
(South Plant) bromine, ethylene dibromide,
several inorganic bromides,
agricultural chemical
intermediates, and tertiary
amines; research activities
Orangeburg, South Carolina Production of specialty
chemicals, including
pharmaceutical intermediates,
fuel additives, manganese
antiknocks, orthoalkylated
phenols and polymer modifiers;
research activities
Thann, France Production of organic and
inorganic brominated
pharmaceutical, photographic and
agrochemical intermediates,
high-purity caustic potash and
potassium carbonate; product
development activities
Feluy, Belgium Production of aluminum alkyls
(Leased by Amoco under a 99 year
lease but operated for the
Company)
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The Company currently is adding capacity in the flame retardants and
specialty chemicals areas. The Company believes that its plants, including
planned expansions, will be adequate at projected sales levels for 1997.
Operating rates of certain plants vary with product mix and normal seasonal
sales swings. The Company believes that its plants generally are well maintained
and in good operating condition.
Item 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved from time to time in legal
proceedings of types regarded as common in the Company's businesses,
particularly administrative or judicial proceedings seeking remediation under
environmental laws, such as Superfund, and products liability litigation.
While it is not possible to predict or determine the outcome of the
proceedings presently pending, in the Company's opinion they will not ultimately
result in any liability that would have a material adverse effect upon the
results of operations or financial condition of the Company and its subsidiaries
on a consolidated basis.
An administrative proceeding with the federal Occupational Safety and
Health Administration (OSHA), involving a potential penalty in excess of
$100,000, but not more than $119,000, was previously reported in the Company's
1996 reports on Form 10-Q. The Company filed a notice of contest and is
contesting vigorously. In the fourth quarter of 1996, OSHA issued two additional
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citations, one of which involved a potential penalty in excess of $100,000, but
not more than $110,000. The Company filed a notice of contest and is contesting
vigorously these additional citations. Each of these citations arose out of a
series of unrelated fires in the MEMC Electronic Materials, Inc. ("MEMC")
Polysilicon plant in Pasadena, Texas that was sold to MEMC but which is operated
by the Company under contract.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
ADDITIONAL INFORMATION - OFFICERS OF THE COMPANY
The names and ages of all officers of the Company, as of March 1, 1997,
are set forth on the following page. The term of office of each such officer is
until the meeting of the Board of Directors following the next annual
shareholders' meeting (April 23, 1997). All of such officers have been employed
by the Company or its predecessor for at least the last five years, with the
exception of Dirk Betlem and William M. Gottwald, MD. Dirk Betlem joined the
Company's predecessor June 1, 1993, following nearly 30 years with E.I. duPont
de Nemours in a variety of management positions in the U.S. and Europe, most
recently as Vice President, Imaging Systems and earlier in a variety of
manufacturing positions and management positions in Europe, the Middle East and
Africa. William M. Gottwald joined Albemarle after being associated with Ethyl
Corporation since 1981, most recently as senior vice president
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responsible for finance, planning and information resources. He served as a
director and Executive Committee member of Albemarle from 1994 until early 1996.
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Name Age Office
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*Floyd D. Gottwald, Jr. 74 Chairman of the Board and of the
Executive Committee, Chief
Executive Officer, Director
*Charles B. Walker 58 Vice Chairman of the Board, Chief
Financial Officer, Director
*Dirk Betlem 58 President and Chief Operating
Officer, Director
Thomas G. Avant 58 Senior Vice President - Finance
and Managing Director Americas
E. Whitehead Elmore 58 Senior Vice President, General
Counsel, Corporate Secretary
John G. Dabkowski 48 Vice President and General
Manager - Specialty Chemicals
Dixie E. Goins 46 Vice President - Research and
Development
William M. Gottwald, MD 49 Vice President - Corporate
Strategy and Secretary to the
Executive Committee
Robert G. Kirchhoefer 56 Treasurer
Victor L. McDearman 52 Vice President and General
Manager - Bromine Chemicals
Charles E. Moore 56 Vice President - Engineering
George A. Newbill 53 Vice President - Manufacturing
Gary L. Ter Haar 60 Vice President - Health and
Environment
Michael D. Whitlow 45 Vice President - External Affairs
and Investor Relations
Edward G. Woods 55 Vice President - Business
Development
*Member of the Executive Committee
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Certain Agreements Between Albemarle and Ethyl
Albemarle and Ethyl entered into agreements, dated as of February 28,
1994, pursuant to which the Company and Ethyl agreed to coordinate certain
facilities and services of adjacent operating facilities at plants in Pasadena,
Texas and Feluy, Belgium. Effective March 1, 1996, certain of these agreements
have been transferred to Amoco as part of the Olefins Business sale. In
addition, Albemarle and Ethyl, as discussed in a previous Form 10-K, entered
into agreements providing for the blending by Albemarle for Ethyl of certain
products and the production of others at the Company's Orangeburg, South
Carolina, plant.
Certain Agreements Between Albemarle and MEMC
Albemarle and MEMC entered into agreements, dated as of July 31, 1995,
pursuant to which the Company provides operating and support services to MEMC.
Pasadena, Texas Agreements
The Pasadena, Texas plant consists of facilities for the production of
electronic materials products. Albemarle operates for MEMC the facilities that
produce electronic materials (the "MEMC Pasadena Plant Site"). The operating
agreement relating to the MEMC Pasadena Plant Site (the "MEMC Operating
Agreement") provides that Albemarle will produce certain electronic materials
products meeting MEMC's specifications and provide certain services and
utilities customarily used by or reasonably necessary to
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maintain the MEMC Pasadena Plant Site in accordance with design capacity. The
MEMC Operating Agreement is a five year agreement, but after two years, at
MEMC's option, and upon one year's notice, MEMC may terminate the agreement.
MEMC reimburses Albemarle for certain costs specified in the MEMC Operating
Agreement and pays to Albemarle an annual operating fee. In addition, Albemarle
shall receive a bonus or shall refund to MEMC a portion of the operating fee
dependent upon agreed performance criteria for each contract year. After
expiration or termination of the MEMC Operating Agreement, Albemarle will supply
certain utilities and services to the MEMC Pasadena Plant Site pursuant to a
utilities and services agreement (the "Utilities and Services Agreement"). All
of the utilities and services are supplied at Albemarle's cost plus a percentage
fee. Albemarle is to furnish certain utilities and services for a minimum of
five years from the effective date of the Utilities and Services Agreement,
subject to the right of MEMC to terminate any one or more utilities or services
on twelve months' notice. Albemarle will make available to MEMC certain other
utilities and services for the duration of MEMC's lease of the property upon
which the MEMC Pasadena Plant Site is located.
Certain Agreements between Albemarle and Amoco
Albemarle and Amoco entered into agreements, dated as of March 1, 1996,
pursuant to which the Company provides operating and support services and
products to Amoco, and Amoco provides operating and support services and
products to Albemarle.
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<PAGE>
Pasadena, Texas Agreements
After the sale, Amoco owns and operates the linear alpha olefins and
synthetic alcohols facilities ("Amoco Pasadena Plant"). Albemarle owns and
operates all remaining Albemarle plants ("Albemarle Pasadena Plant"), and
operates MEMC Pasadena, Inc.'s electronic materials facility.
As a result of the sale, Albemarle supplies to Amoco (among others):
certain utilities utilized by Amoco at the Amoco Pasadena Plant, including
electricity, infrastructure, natural gas, steam, boiler feedwater, nitrogen,
water, flare, wastewater treatment and other utilities; certain services, such
as facilities maintenance, security, parking, shops, pipe racks, laundry and
change house, telephone switching, administrative services, and laboratory,
technical and analytical services; aluminum alkyls and certain other products
for use in the olefins and alcohols units; operation of minor Amoco facilities
associated with the production of alpha olefins and alcohols; certain logistical
services related to stores, receiving, warehousing, railroads and truck
trailers; and mutual aid and fire protection.
As a result of the sale, Amoco supplies to Albemarle (among others):
certain utilities utilized by Albemarle at the Albemarle Pasadena Plant,
including refrigerated isobutylene, instrument air, steam, boiler feedwater,
flare and other utilities; ethylene, linear alpha olefins, sodium aluminate, and
certain other products for use in the Albemarle Pasadena Plant and other
Albemarle
-25-
<PAGE>
facilities; certain material handling services (tank farm and terminal
facility); and mutual aid and fire protection.
Virtually all of the utilities, services and products supplied by
Albemarle to Amoco and from Amoco to Albemarle in Pasadena, Texas are supplied
at the provider's cost plus a percentage fee. Most of the utilities, services
and products supplied by Albemarle to Amoco and from Amoco to Albemarle have an
initial term of 10 years, with an automatic extension for an additional 10 year
term, unless terminated by either party at the end of the initial term upon 2
years notice. With respect to products supplied by Albemarle to Amoco, and with
respect to decanol, sodium aluminate and alkoxide supplied by Amoco to
Albemarle, Amoco may terminate the supply of such product on 180 days notice.
With respect to products supplied by Amoco to Albemarle, Albemarle may terminate
the supply of such product on 180 days notice. With respect to rail car and
truck trailer services, the term is indefinite and may be terminated on 2 years
notice by either party. With respect to wastewater treatment services, the term
is indefinite and may be terminated by Amoco upon 6 months notice or by either
party upon termination of operations.
Feluy, Belgium
After the sale, Amoco possesses (under a 99-year lease, with certain
purchase options) and operates the linear alpha olefins and poly alpha olefin
facilities. In addition, Amoco possesses (under the same lease) and operates the
aluminum alkyls facilities
-26-
<PAGE>
exclusively for Albemarle (term: 10 years-Albemarle has the right to extend for
one additional 10 year term). Albemarle supplies aluminum alkyl products to
Amoco for use in the linear alpha olefins facility (term: 10 years-Amoco has
right to extend for one additional 10 year term). The operation services and
products supplied by Albemarle to Amoco and from Amoco to Albemarle are at the
provider's cost plus a percentage fee.
Other Agreements
For a limited period of time after the closing date (term: ranging from
1 month to 1 year, depending upon the service involved), and in order to
facilitate a smooth transition of the transferred businesses to Amoco, Albemarle
supplies to Amoco certain interim services (including, by Albemarle; office and
laboratory space, technical service, administrative and logistical support,
information technology services, pilot plant operations, product stewardship,
order processing, operation of facilities, etc.). These interim services are
supplied at Albemarle's cost plus a percentage fee. Albemarle's Japanese
affiliate acts as an authorized sales representative of Amoco for olefins,
alcohols and poly alpha olefins in Japan on a commission basis for a period of
two years following March 1, 1996. Albemarle provides certain consulting
services with respect to Japanese sales of those products for a period of up to
eighteen months from March 1, 1996. Albemarle also may act as a distributor of
linear alpha olefins and poly alpha olefins in the oil field services business.
-27-
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained on page 15 of the Annual Report under the
caption "Shareholder Data & Market Prices of Common Stock" is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information for the five years ended December 31, 1996, contained in
the "Five-Year Summary" on pages 8 and 9 of the Annual Report is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The textual and tabular information concerning the years 1996, 1995 and
1994 contained in the "Financial Review" section on pages 10 through 14 of the
Annual Report is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements contained on pages 16 through 20,
the Notes to The Consolidated Financial Statements contained on pages 21 through
37 and the Report of Independent Accountants on page 38 of the Annual Report are
incorporated herein by reference.
-28-
<PAGE>
Recently Issued Accounting Standards:
The Financial Accounting Standards Board recently issued FASB Statement
No. 128, "Earnings per Share" which is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods.
Management has not yet made a determination of the impact that adoption of
FASB Statement No. 128 is expected to have on the financial statements of
Albemarle.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
-29-
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" concerning directors is incorporated herein by
reference. See "Additional Information Officers of the Company" at the end of
Part I above for information about the officers of the Company.
Item 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" concerning executive
compensation is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption
"Stock Ownership" is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the captions
"Certain Relationships and Related Transactions" and "Stock Ownership" are
incorporated herein by reference.
-30-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1)
The following consolidated financial and informational statements
of the registrant included on pages 16 to 38 in the Annual Report
are incorporated herein by reference:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income, Changes in Shareholders' Equity
and Cash Flows for the years ended December 31, 1996, 1995, and
1994
Notes to The Consolidated Financial Statements
Report of Independent Accountants
(a) (2)
No Financial Statement Schedules are provided in accordance with
Item 14 (a) (2) as the information is either not applicable, not
required or has been furnished in the Consolidated Financial
Statements or Notes thereto.
(a) (3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.1 Amendment to Restated Articles of Incorporation of the
registrant (filed as exhibit 3.1 to the Company's Form
10-K for 1994 (No. 1-12658), and incorporated herein by
reference).
3.2 Amended By-laws of the registrant (filed as exhibit 3.2
to the Company's Form 10-K for 1995 (No. 1-12658), and
incorporated herein by reference).
10.1 Credit Agreement, dated as of September 24, 1996, between
the Company, NationsBank, N.A., as administrative agent
and Bank of America Illinois, The Bank of New York and the
Chase Manhattan Bank, as co-agents and certain commercial
banks (filed as Exhibit 10.1 to the Company's Third
Quarter 1996 Form 10-Q (No. 1-12658) and incorporated
herein by reference).
10.2 The Company's 1994 Omnibus Stock Incentive Plan, adopted
on February 28, 1994 (filed as Exhibit 10.1 to the
Company's Form S-1 (No. 33-77452), and incorporated
herein by reference).
-31-
<PAGE>
10.3 The Company's Bonus Plan, adopted on February 8, 1994
(filed as Exhibit 10.8 to the Company's Form 10 (No. 1-
12658), and incorporated herein by reference).
10.4 Savings Plan for the Employees of the Company, adopted on
February 28, 1994 (filed as Exhibit 10.9 to the Company's
Form 10 (No. 1-12658), and incorporated herein by
reference).
10.5 The Company's Excess Benefit Plan (filed as Exhibit 10.10
to the Company's Form 10 (No. 1-12658), and incorporated
herein by reference).
10.6 The Company's Supplemental Retirement Plan (filed as
Exhibit 10.11 to the Company's Form 10 (No. 1-12658), and
incorporated herein by reference).
10.7 The Company's Agreement between Certain Executives (filed
as Exhibit 10.12 to the Company's Form 10 (No. 1-12658),
and incorporated herein by reference).
11. Statements re: Computation of Earnings Per Share -
Historical (filed herewith).
11.1 Statements re: Computation of Pro Forma Earnings Per Share
- for years ended December 31, 1996 and 1995 (filed
herewith).
11.2 Statements re: Computation of Pro Forma Earnings Per
Share - for year ended December 31, 1996 (filed
herewith).
13. The registrant's Annual Report to Shareholders for the
year ended December 31, 1996 (Note 1).
21. Subsidiaries of the Company (filed herewith).
23.1 Consent of Independent Certified Public Accountants,
Coopers & Lybrand L.L.P. (filed herewith).
--------------------------
Note 1. With the exception of the information incorporated in this
Form 10-K by reference thereto, the Annual Report shall not be
deemed "filed" as part of this Form 10-K.
(b) No report on Form 8-K was filed in the last quarter of the
period covered by this report.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
-32-
<PAGE>
(d) Financial Statement Schedules - Schedules are omitted as the
information is either not applicable, not required or has been
furnished in the financial statements or notes thereto.
-33-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Floyd D. Gottwald, Jr.
------------------------------
Floyd D. Gottwald, Jr.
Chairman of the Board
Dated: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 26, 1997.
Signature Title
--------- -----
/s/ Floyd D. Gottwald, Jr. Chairman of the Board,
- ------------------------------- Chairman of the Executive
(Floyd D. Gottwald, Jr.) Committee, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Charles B. Walker Vice Chairman of the Board,
- ------------------------------- Chief Financial Officer
(Charles B. Walker) and Director
(Principal Financial Officer)
-34-
<PAGE>
Signature Title
--------- -----
/s/ Thomas G. Avant Senior Vice President - Finance
- ------------------------------- (Principal Accounting Officer)
(Thomas G. Avant) and Managing Director Americas
/s/ Craig R. Andersson Director
- -------------------------------
(Craig R. Andersson)
/s/ Dirk Betlem President and Director
- -------------------------------
(Dirk Betlem)
/s/ John D. Gottwald Director
- -------------------------------
(John D. Gottwald)
/s/ Andre B. Lacy Director
- -------------------------------
(Andre B. Lacy)
/s/ Seymour S. Preston, III Director
- -------------------------------
(Seymour S. Preston, III)
/s/ Emmett J. Rice Director
- -------------------------------
(Emmett J. Rice)
/s/ Anne M. Whittemore Director
- -------------------------------
(Anne M. Whittemore)
-35-
<PAGE>
EXHIBIT INDEX
Number and Name of Exhibit Page Number
- -------------------------- -----------
3.1 Amendment to Restated Articles Incorporated by reference
of Incorporation of the - see Page 31
registrant
3.2 Amended By-laws of the Incorporated by reference
registrant - see Page 31
10.1 Credit Agreement, dated as of Incorporated by reference
September 24, 1996, between the - see Page 31
Company, NationsBank, N.A., as
administrative agent and Bank of
America Illinois, The Bank of
New York and the Chase Manhattan
Bank, as co-agents and certain
commercial banks
10.2 1994 Omnibus Stock Incentive Incorporated by reference
Plan - see Page 31
10.3 Bonus Plan Incorporated by reference
- see Page 32
10.4 Savings Plan for Employees Incorporated by reference
- see Page 32
10.5 Excess Benefit Plan Incorporated by reference
- see Page 32
10.6 Supplemental Retirement Plan Incorporated by reference
- see Page 32
10.7 Agreement Between Certain Incorporated by reference
Executives - see Page 32
11. Computation of Earnings Per Page 38
Share - Historical
11.1 Computation of Pro Forma Page 39
Earnings Per Share for years
ended December 31, 1996 and 1995
11.2 Computation of Pro Forma Page 40
Earnings Per Share for year
ended December 31, 1996
-36-
<PAGE>
13. The registrant's Annual Report Pages 41 through 71
to Shareholders for the year
ended December 31, 1996
21. Subsidiaries of the Company Page 72
23.1 Consent of Independent Certified Page 73
Public Accountants, Coopers &
Lybrand L.L.P.
-37-
<TABLE>
Exhibit 11
ALBEMARLE CORPORATION
COMPUTATION OF EARNINGS PER SHARE - HISTORICAL
for the years ended December 31, 1996, 1995 and 1994 (1)
(In thousands except per share amounts)
<CAPTION>
Historical Historical Pro Forma
1996 1995 1994 (1)
-------- ------- -------
<S> <C>
Net income $156,059 $78,230 $50,304
======== ======= =======
Average number of shares of common stock outstanding 58,353 66,069 63,596
Shares issuable upon the assumed exercise of outstanding
stock options 489 283 208
-------- ------- -------
Shares of common stock and common stock equivalents 58,842 66,352 63,804
======== ======= =======
Earnings per share (2) $ 2.65 $ 1.18 $ .79
======== ======= =======
</TABLE>
Notes:
(1) Earnings per share is computed as if the Company's common stock distributed
to Ethyl shareholders had been outstanding for the entire periods presented
and also includes common stock equivalents based on outstanding stock
options.
(2) Primary earnings per share and fully-diluted earnings per share are the
same amounts and are computed based on net income.
-38-
<TABLE>
Exhibit 11.1
ALBEMARLE CORPORATION
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
for the years ended December 31, 1996 and 1995 (1)
(In thousands except per share amounts)
<CAPTION>
Pro Forma Pro Forma
1996 1995
---- ----
<S> <C>
Net income adjusted to reflect operations without
the Olefins Business $61,054 $89,180
======= =======
Average number of shares of common stock outstanding 58,353 66,069
Shares issuable upon the assumed exercise of outstanding
stock options 489 283
------- --------
Shares of common stock and common stock equivalents 58,842 66,352
======= =======
Earnings per share (2) $ 1.04 $ 1.34
======= =======
</TABLE>
Notes:
(1) Earnings per share is computed as if the Company's common stock
distributed to Ethyl shareholders had been outstanding for the
entire periods presented and also includes common stock
equivalents based on outstanding stock options.
(2) Primary earnings per share and fully-diluted earnings per share
are the same amounts and are computed based on net income
adjusted to reflect operations without the Olefins Business.
-39-
Exhibit 11.2
ALBEMARLE CORPORATION
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
for the year ended December 31, 1996 (1)
(In thousands except per share amounts)
Pro Forma
1996
----
Net income after effect of applying FASB Statement
No. 123 "Accounting for Stock-Based Compensation" $155,863
========
Average number of shares of common stock outstanding 58,353
Shares issuable upon the assumed exercise of outstanding
stock options 489
Shares of common stock and common stock equivalents 58,842
========
Earnings per share (2) $ 2.65
========
Notes:
(1) Earnings per share is computed as if the Company's common stock
distributed to Ethyl shareholders had been outstanding for the
entire periods presented and also includes common stock
equivalents based on outstanding stock options.
(2) Primary earnings per share and fully-diluted earnings per share
are the same amounts and are computed based on net income after
effect of applying FASB Statement No. 123.
-40-
<TABLE>
<CAPTION>
Five Year Summary
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands Except Per-Share Amounts)
Years Ended December 31 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Results of Operations (1)
Net sales $ 854,481
Costs and expenses 761,055
Special charges (2) --
- ----------------------------------------------------------------------------------------------------------------------------
Operating profit 93,426
Interest and financing expenses (3) 2,529
Gain on sales of businesses (4) (158,157)
Other income, net (4,025)
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 253,079
Income taxes (5) 97,020
- ----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 156,059
Cumulative effect of accounting changes for: (6)
Postretirement health benefits (net of tax) --
Deferred income taxes --
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 156,059
============================================================================================================================
Financial Position and Other Data (1)
Total assets $ 846,261
Operations:
Working capital $ 111,193
Current ratio 1.75 to 1
Depreciation and amortization $ 71,044
Capital expenditures $ 90,439
Acquisitions of businesses $ --
Research and development expenses $ 30,442
Gross margin as a % of net sales 28.5
Total long-term debt (3) $ 31,863
Equity (7) $ 505,198
Total long-term debt as a % of total capitalization 5.9
Common Stock (8)
Earnings per share $ 2.65
Shares used to compute earnings per share 58,842
Cash dividends declared per share $ .25
Shareholders' equity per share $ 9.18
Return on equity 27.7%
===========================================================================================================================
</TABLE>
(1) Includes the actual consolidated results of operations of the Company for
the years ended December 31, 1996 and 1995, and for the ten months ended
December 31, 1994, as well as the historical combined results of operations
and net assets of Ethyl Corporation's former operations, spun off at the
close of business on February 28,1994, consisting of its olefins and
derivatives, bromine chemicals and specialty chemicals (the "predecessor
businesses") for the two months ended February 28, 1994, and for the two
years ended December 31, 1993.
(2) Special charges in 1993 totaling $7,322 ($4,550 after income taxes) consist
of work-force reduction program costs in the U.S. and Europe amounting to
$5,622 and employee relocation costs of $1,700 associated with the move of
certain functions from Richmond, Virginia, to Baton Rouge, Louisiana in
1994.
(3) Total long-term debt and interest and financing expenses for 1996 reflect
the paydown of debt from the proceeds received from the March 1, 1996, sale
of the alpha olefins, poly alpha olefins and synthetic alcohols businesses
("Olefins Business"). Total long-term debt and interest and financing
expenses for 1994 include the impact of $303.4 million of debt assumed in
connection with the spin-off of the Company from Ethyl.
(4) 1996-gain on the sale of the Olefins Business ($94,377 after income taxes).
1995-gain on the sale of the electronic materials business ($14,542 after
income taxes). 1994-gain on the sale of the Solimide business and other
related assets ($6,732 after income taxes).
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(In Thousands Except Per-Share Amounts)
Years Ended December 31 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Results of Operations (1)
Net sales $1,244,222 $1,080,922
Costs and expenses 1,127,259 986,891
Special charges (2) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit 116,963 94,031
Interest and financing expenses (3) 13,265 14,484
Gain on sales of businesses (4) (23,427) (8,400)
Other income, net (4,468) (1,434)
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 131,593 89,381
Income taxes (5) 53,363 38,103
- ------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 78,230 51,278
Cumulative effect of accounting changes for: (6)
Postretirement health benefits (net of tax) -- --
Deferred income taxes -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 78,230 $ 51,278
==============================================================================================================================
Financial Position and Other Data(1)
Total assets $1,204,491 $1,139,190
Operations:
Working capital $ 234,568 $ 213,038
Current ratio 2.21 to 1 2.20 to 1
Depreciation and amortization $ 94,131 $ 93,276
Capital expenditures $ 112,412 $ 70,379
Acquisitions of businesses $ 2,138 $ 5,818
Research and development expenses $ 29,541 $ 28,063
Gross margin as a % of net sales 22.3 22.7
Total long-term debt (3) $ 217,112 $ 256,462
Equity (7) $ 622,566 $ 545,009
Total long-term debt as a % of total capitalization 25.9 32.0
Common Stock (8)
Earnings per share $ 1.18
Shares used to compute earnings per share 66,352
Cash dividends declared per share $ .21 $ .20
Shareholders' equity per share $ 9.42 $ 8.25
Return on equity 13.4% 8.2%
==============================================================================================================================
</TABLE>
<TABLE> Albemarle Corporation and Subsidiaries
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(In Thousands Except Per-Share Amounts)
Years Ended December 31 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Results of Operations (1)
Net sales $ 903,418 $818,223
Costs and expenses 847,434 756,784
Special charges (2) 7,322 --
- -------------------------------------------------------------------------------------------------------------------------------
Operating profit 48,662 61,439
Interest and financing expenses (3) 7,797 4,923
Gain on sales of businesses (4) -- --
Other income, net (1,640) (1,998)
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 42,505 58,514
Income taxes (5) 20,695 16,771
- -------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 21,810 41,743
Cumulative effect of accounting changes for: (6)
Postretirement health benefits (net of tax) -- (18,548)
Deferred income taxes -- 16,632
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 21,810 $ 39,827
===============================================================================================================================
Financial Position and Other Data(1)
Total assets $1,084,960 $937,524
Operations:
Working capital $ 181,622 $163,221
Current ratio 2.25 to 1 2.28 to 1
Depreciation and amortization $ 88,460 $ 74,028
Capital expenditures $ 88,085 $ 99,563
Acquisitions of businesses $ 116,631 --
Research and development expenses $ 30,303 $ 31,997
Gross margin as a % of net sales 21.3 22.8
Total long-term debt (3) $ 95,447 $114,937
Equity (7) $ 700,233 $589,791
Total long-term debt as a % of total capitalization 12.0 16.3
Common Stock (8)
Earnings per share
Shares used to compute earnings per share
Cash dividends declared per share
Shareholders' equity per share
Return on equity 3.4% 7.1%
================================================================================================================================
</TABLE>
(5) 1993 income taxes include a nonrecurring deferred income tax charge of
$2,249 required by FASB Statement No. 109, resulting from changes in federal
income tax legislation, which increased the corporate income tax rate in
1993.
(6) Change in accounting for postretirement health benefits ($29,377 before
income taxes) and deferred income taxes in accordance with FASB Statements
106 and 109, respectively, applied retroactively to January 1, 1992.
(7) 1996 equity includes the effects of the purchase of 9,484,465 common shares
through a tender offer concluded on April 1, 1996, and additional second and
third quarter purchases of 275,400 and 1,481,100 common shares,
respectively. 1994 equity includes a $303.4 million reduction for debt
transferred in connection with the spin-off of the Company from Ethyl, as
well as the effect of the sale of 6,863,416 new shares of the Company's
common stock on May 11, 1994, in a private placement for $100 million.
(8) No annual earnings per share and shareholders' equity per share information
is presented for the historical results of operations of the Company and the
predecessor businesses while a part of Ethyl since the Company had no
separate capital structure until March 1, 1994.
Financial Review
- --------------------------------------------------------------------------------
Albemarle Corporation ("the Company" or "Albemarle") became an independent
company upon the spin-off by Ethyl Corporation ("Ethyl") of its olefins and
derivatives, bromine chemicals and specialty chemicals businesses ("the
predecessor businesses"). At the close of business on February 28, 1994, Ethyl
distributed to its common shareholders all of the outstanding common shares of
Albemarle.
On March 1, 1996, the Company sold its alpha olefins, poly alpha olefins and
synthetic alcohols businesses ("Olefins Business") to Amoco Chemical Company
("Amoco"). After the sale, Albemarle is engaged in the bromine chemicals and
specialty chemicals businesses.
In the financial data and the discussion that follows, analysis of certain
significant factors affecting the Company's results of operations during the
periods included in the accompanying consolidated statements of income and
changes in the Company's financial condition is made on a historical basis.
Historical results of Albemarle include the consolidated actual operations,
assets and liabilities of the Company for the years ended December 31, 1996 and
1995, the ten months ended December 31, 1994, and the combined historical
operations, assets and liabilities of the predecessor businesses while a part of
Ethyl for the two months ended February 28, 1994. For simplicity of
presentation, these financial statements for all periods are collectively
referred to as consolidated financial statements. Information about net sales,
operating profit, capital expenditures and geographical areas also is presented.
In addition, a discussion of consolidated financial condition and sources of
additional capital is included under a separate heading, "Financial Condition
and Liquidity" on page 12. Unaudited pro forma condensed consolidated statements
of income for the years ended December 31, 1996 and 1995, which the Company
believes are important to enable the reader to obtain a meaningful understanding
of Albemarle's results of operations excluding the Olefins Business, are
included in Note 18 "Supplemental Pro Forma Condensed Consolidated Financial
Information (Unaudited)" of the Notes to the Consolidated Financial Statements
on pages 36 and 37. The unaudited pro forma condensed consolidated statements of
income are for informational purposes only and do not purport to be indicative
of the Company's future consolidated results of operations nor what the
consolidated results of operations would have been had Albemarle operated
without the Olefins Business for all of 1996 and 1995.
Net Sales
(In Millions)
[graph]
1994 1995 1996
1,080 1,244 854
* On March 1, 1996 the Company sold the Olefins Business
RESULTS OF OPERATIONS
Net Sales
Net sales for 1996 amounted to $854.5 million, down from $1,244.2 million in
1995. Excluding net sales of the Olefins Business sold March 1, 1996, and the
electronic materials business sold July 31, 1995, Albemarle's net sales for 1996
would have shown an increase of five percent from 1995 due primarily to higher
shipments of organometallics and a higher sales mix of bromine fine chemicals,
partly offset by lower shipments and prices of flame retardants and
pharmaceutical intermediates.
Net sales for 1995 increased $163.3 million (15%) from 1994 due to both
higher shipments and improved pricing primarily in linear alpha olefins, flame
retardants and poly alpha olefins, offset in part by lower shipments of
pharmaceutical intermediates and the exclusion of sales from the Solimide(R) and
electronic materials businesses which were sold in September 1994 and July 1995,
respectively. In 1995 linear alpha olefins sales as a percent of total sales
amounted to 25% versus 23% in 1994.
Operating Costs and Expenses
Cost of goods sold in 1996 decreased $355.9 million from 1995 primarily due
to the absence of shipments of the Olefins Business for ten months in 1996 and
the electronic materials business for all of 1996 versus 1995 and higher foreign
exchange gains in 1996 with the result that the gross profit margin increased to
28.5% in 1996 from 22.3% in 1995. The reductions in 1996 cost of goods sold were
partially offset by higher costs in pharmaceutical intermediates, related
primarily to naproxen sampling and start-up costs, as well as higher operating
costs resulting from underutilization of assets in flame retardants in 1996.
Average energy unit costs were higher in 1996. Both natural gas and electricity
prices were higher in 1996 than in the prior year. Raw material prices were
generally lower in 1996 than in the prior year with ethylene, aluminum,
potassium chloride and phthalic anhydride having the largest decreases.
10
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
Cost of goods sold in 1995 increased $131.9 million (16%) from the 1994
period, with the result that the gross profit margin decreased slightly to 22.3%
in the 1995 period from 22.7% in the 1994 period. The increase in cost of goods
sold in 1995 reflects increased shipments (up 9% from 1994) and higher raw
material costs, mainly ethylene. Higher production also led to improved
operating rates. Ethylene and caustic costs were higher in 1995 versus 1994
while chlorine costs were lower. Average energy unit costs were lower in 1995.
Both natural gas and electricity prices were lower in 1995 than in the prior
year. The increase in ethylene prices, which began in 1994, peaked during early
1995 while supplies were still limited. However, during the second half of 1995
ethylene prices started to decline due to increased capacity. Albemarle obtained
ethylene from several large suppliers, but the majority came from two suppliers
under long-term contracts.
Selling, general and administrative expenses, combined with research and
development expenses, decreased $10.4 million (6%) in 1996 from 1995, primarily
due to lower employee related expenses as a result of the March 1, 1996, sale of
the Olefins Business and the July 31, 1995, sale of the electronic materials
business, offset in part by normal salary increases and the expense associated
with the exercise of certain stock appreciation rights and the award of
restricted stock. This compares to a $8.5 million (6%) increase in 1995 from
1994 due mainly to increased technical services expenses, normal salary
increases and the inclusion of Albemarle Asano Corporation ("Albemarle Asano")
beginning July 1, 1994. As a percentage of net sales, selling, general and
administrative expenses, including research and development expenses, increased
to 17.5% in 1996 from 12.9% in 1995 versus 14% in 1994.
Operating Profit
Operating profit in 1996 decreased 20% from 1995. Excluding the results of
businesses sold, operating profit was also down significantly primarily due to
lower shipments and higher costs in pharmaceutical intermediates and flame
retardants. Pharmaceutical intermediate costs were higher primarily due to the
expenses associated with commercializing naproxen for introduction in mid 1997
while the flame retardants business was heavily impacted by a lengthy slowdown
in the electronics industry resulting in higher costs associated with the
underutilization of assets.
Operating profit in 1995 increased 24% from 1994. Most of this increase was
the result of both higher shipments and improved pricing, especially in flame
retardants. Higher shipments in European-based bromine fine chemicals and
special intermediates contributed to the favorable results while pharmaceutical
intermediates and potassium and chlorine shipments were down.
Interest and Financing Expenses and Other Income
Interest and financing expenses in 1996 decreased $10.7 million from 1995
primarily due to lower average debt outstanding, reflecting paydown of debt with
proceeds from the sale of the Olefins Business. This compared to a $1.2 million
decrease in 1995 from 1994, due to lower average debt outstanding, offset in
part by higher average interest rates.
Other income, net, decreased to $4.0 million in 1996 from $4.5 million in
1995, which increased $3.1 million from $1.4 million in 1994, due primarily to
interest income of $1.7 million on the Company's variable-rate notes receivable
obtained in connection with the sale of the electronic materials business. (See
Note 12 "Special Items" of the Notes to the Consolidated Financial Statements on
pages 33 and 34.)
Operating Profit
(In Millions)
[graph]
1994 1995 1996
93 117 94
Gain on Sale of Businesses
The Company's 1996 earnings include a gain of approximately $158.2 million
($94.4 million after income taxes) on the sale of the Olefins Business. In 1995
the Company's earnings included a gain of approximately $23.4 million ($14.5
million after income taxes) on the sale of the electronic materials business and
in 1994 the Company recorded a gain on the sale of its Solimide business of
approximately $8.4 million ($6.7 million after income taxes). (See Note 12
"Special Items" of the Notes to the Consolidated Financial Statements on pages
33 and 34.)
Income Taxes
Income taxes in 1996 increased $43.7 million (82%) compared to 1995 on a 92%
increase in pre-tax income while the effective income tax rate was 38.3% in 1996
versus a 40.6% rate for 1995.
11
<PAGE>
Financial Review
- --------------------------------------------------------------------------------
The 1996 rate was lower than the 1995 rate due primarily to improved earnings in
the Company's Belgian subsidiary while the 1995 rate was affected by a deferred
income tax charge of approximately $2.9 million recognized in 1995 as a result
of an increase in the French statutory tax rate.
Income taxes in 1995 increased $15.3 million (40%) compared to 1994 on a 47%
increase in pre-tax income. The 1995 effective income tax rate of 40.6% was
lower than the 42.6% rate for 1994. The 1995 rate was favorably impacted by
lower net operating losses experienced by the Belgian subsidiary, offset in part
by an increase in the French statutory tax rate, while the 1994 rate was
affected by a lower tax rate on the gain on the sale of the Solimide business
(resulting from a higher tax basis than book basis). Excluding the gain on the
sale mentioned above, the effective tax rate in 1994 would have been 44%.
R&D Spending
(In Millions)
[graph]
1994 1995 1996
50.0 51.9 43.7
(Before adjustments to conform to FASB Statement No.2)
The tax rates for 1995 and 1994 were higher than normal due to the absence of
a full tax benefit on the Company's Belgian subsidiary's operating losses. The
Company provided valuation allowances in these years against the deferred tax
assets related to these net operating losses due to the uncertainty of the
assets' realization. (See Note 11 "Income Taxes" of the Notes to the
Consolidated Financial Statements on pages 32 and 33 for details of changes in
effective income tax rates.)
OUTLOOK
Looking back, 1996 was a difficult year. However, as the Company moves into
1997 and beyond, the focus will be on plant efficiencies, cost reductions and
growth based upon the introduction of new products. Albemarle's business units,
in partnership with Research and Development activities, have set a long-term
objective once the program is completely on stream to create each year new
products approaching $100 million in sales. The Company also is planning to work
with those global customers who desire to outsource more of their product
manufacturing, especially in the bromine area.
In Bromine Chemicals, plans call for new flame retardant and bromine fine
chemicals products. The Company also plans to broaden its long-range portfolio
with non-halogen flame retardants to supplement bromine-based flame retardants
and to expand the portfolio of surface active agents involving bromine
chemistry, such as ABZOL(TM) cleaners.
In Specialty Chemicals, the Company is pleased with last year's introduction
of a new agricultural intermediate, a urease inhibitor for use with
nitrogen-based fertilizers, and expects to continue commercial-scale trials and
expanded testing in 1997. In pharmaceuticals, the Company plans to start up
commercial production of bulk naproxen with initial sales expected to start in
mid-year 1997 as customers obtain U.S. Food and Drug Administration approval. In
special intermediates, the Company expects increased sales from ETHACURE 300(R)
curative, a more environmentally friendly urethane curative used in cast
elastomers. In the catalyst area, the program for new metallocene catalysts
continues to develop with the aim of the Company's becoming a full service
catalyst supplier to the polymer industry.
Although the Company has no acquisitions to announce, management continues to
pursue possible acquisitions in broad areas including high value polymer
additives, non-polymer markets, special fine chemicals and new
technologies/companies that fit with our core competencies.
FINANCIAL CONDITION
AND LIQUIDITY
Cash and cash equivalents at December 31, 1996, were $14.2 million, which
represents a decrease of $18.9 million from $33.1 million at year-end 1995. Cash
provided from operations was $28.5 million which included installment income tax
payments of $79.4 million on the gain from the sale of the Olefins Business.
Excluding the impact of the installment income tax payments, which were paid
from the proceeds on the sale of the Olefins Business, cash flows from
operations would have been $107.9 million, which together with $27.3 million of
proceeds from borrowings, were used to cover operating activities in 1996,
including a working capital increase (reflecting mainly higher accounts
receivable and inventories), capital expenditures, payment of quarterly
dividends to common shareholders, and purchase of 1,756,500 shares of common
stock for $32.1 million. Proceeds from the sale of the Olefins Business of
$487.3 million, net of expenses and trade payables paid by the Company,
12
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
supplemented by $18.9 million from cash on hand, were used to purchase 9,484,465
shares of common stock, repay long-term debt and pay income tax installments
related to the sale.
Cash flows provided from operating activities of $116.2 million for the year
ended December 31, 1995, together with the prepayment of long-term notes of $55
million and cash proceeds of $4.2 million from the sale of the electronic
materials business, were sufficient to cover operating activities in 1995,
including a working capital increase (reflecting mainly higher inventories and
accounts receivable, offset in part by an increase in accrued expenses), capital
expenditures, payment of quarterly dividends to common shareholders and
repayment of a portion of long-term debt.
The Company anticipates that cash provided from operations in the future will
be sufficient to cover its operating expenses, debt service obligations and
dividend payments to common shareholders.
The noncurrent portion of the Company's long-term debt amounted to $24.4
million at December 31, 1996, compared to $200.1 million at the end of 1995. The
Company's total long-term debt, including the current portion, as a percentage
of total capitalization at December 31, 1996, was approximately 5.9%. (See Note
7 "Long-Term Debt" of the Notes to the Consolidated Financial Statements on
pages 25 and 26 for details of the Company's long-term borrowings.)
The Company, at December 31, 1996, had the flexibility to borrow up to a
total of $500 million (no amounts outstanding at December 31, 1996) under its
Competitive Advance and Revolving Credit Facility Agreement ("Credit
Agreement"). The Credit Agreement contains certain covenants typical for a
credit agreement of its size and nature, including financial covenants requiring
the Company to maintain consolidated indebtedness (as defined) of not more than
60% of the sum of the Company's consolidated shareholders' equity (as defined)
and consolidated indebtedness. The amount and timing of any borrowings will
depend on the Company's specific cash requirements.
The Company's foreign currency translation adjustments, net of related
deferred taxes, at December 31, 1996, decreased from December 31, 1995,
primarily due to the strengthening of the U.S. dollar.
Capital expenditures in 1996 of $90.4 million were significantly lower than
the 1995 level of $112.4 million. The Company's capital spending program is
expected to increase modestly over the next few years based on 1996
expenditures. This increase is expected to expand capacities at existing
facilities to support an expected increase in sales. Capital spending for
environmental and safety projects is expected to be about the same over the next
few years. Future capital spending is expected to be financed primarily with
cash provided from operating activities, with the balance, if necessary,
provided by additional long-term debt. The Company continues to evaluate
potential acquisitions of facilities and/or businesses, particularly in areas
which our know-how adds value.
Environmental Matters
The Company is subject to federal, state, local and foreign requirements
regulating the handling, manufacture or 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 is currently
complying with and expects to continue to comply in all material respects with
all 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 ("PRP") and may be liable for a share of the
costs associated with cleaning up various hazardous waste sites. Management
believes that in most cases, the Company's participation 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 by the Company or
its predecessor company. In de minimis PRP matters, the Company's policy
generally is to negotiate a consent decree and to pay any apportioned
settlement, enabling the Company to be effectively relieved of any further
liability as a PRP, except for remote contingencies. In other than de minimis
PRP matters, the Company's records indicate that unresolved exposures should be
immaterial. The Company accrues and expenses its proportionate share of PRP
costs in accordance with FASB Statement No. 5 "Accounting for Contingencies" and
FASB Interpretation No. 14. Because management has been actively involved in
evaluating environmental matters, the Company is able to conclude that the
outstanding environmental liabilities for unresolved PRP sites should not be
material.
13
<PAGE>
Financial Review
- --------------------------------------------------------------------------------
The Company's environmental and safety operating costs charged to expense,
which are not considered to be normal operating costs, were approximately $11.5
million in 1996 versus approximately $9.0 million in 1995 and $8.9 million in
1994, excluding depreciation of previous capital expenditures, and are expected
to be in the same range in the next few years. Costs for remediation have been
accrued and payments related to sites are charged against accrued liabilities,
which at December 31, 1996, totaled approximately $8.2 million. There is a
reasonable possibility that future remediation costs in excess of amounts
already recorded could be up to $7.0 million before income taxes. However, the
Company believes that any sum it may be required to pay in connection with
environmental remediation matters in excess of the amounts recorded would occur
over a period of time and should not have a material adverse impact on its
financial condition or results of operations, but could have a material adverse
impact in a particular quarterly reporting period.
Capital expenditures for pollution-abatement and safety projects for the
Company, including such costs that are included in other projects, were
approximately $14.7 million, $22 million and $20.3 million in 1996, 1995 and
1994, respectively. For each of the next few years, capital expenditures for
these types of projects are likely to be in the same range. Management's
estimates of the effects of compliance with governmental pollution-abatement and
safety regulations are subject to (i) the possibility of changes in the
applicable statutes and regulations or in judicial or administrative
construction of such statutes and regulations, and (ii) uncertainty as to
whether anticipated solutions to pollution problems will be successful, or
whether additional expenditures may prove necessary.
Capital Expenditures
(In Millions)
[graph]
1994 1995 1996
68 112 90
Geographic Areas
The following discussion is based on information provided in Note 17
"Geographic Area Information" of the Notes to the Consolidated Financial
Statements on pages 35 and 36.
Domestic operating profit includes profit from U.S. export sales and profit
from sales to foreign affiliates of products that are resold in foreign markets.
Intercompany transfers from foreign areas to the United States are not material.
Export sales decreased 36% in 1996 from 1995 primarily due to the sale of the
Olefins Business. In 1995 export sales decreased 5% from 1994 primarily due to
the absence of export sales to Japan since all sales in 1995 in Japan were made
by the Company's Japanese subsidiary, Albemarle Asano.
Sales of foreign subsidiaries for 1996 decreased 33% from 1995 primarily due
to the absence, after March 1, 1996, of sales by Albemarle S.A. related to the
Olefins Business sold. In 1995, sales of foreign subsidiaries increased 44% from
1994, primarily due to an increase in olefins and derivatives sales by Albemarle
S.A. and the inclusion of Albemarle Asano sales beginning July 1, 1994.
The operating results of the foreign operations were profitable in 1996
versus operating losses in the previous two years. Operating profit for 1996
reflects favorable foreign exchange gains and the effects in Belgium of the sale
of the Olefins Business. The foreign operating loss for 1995 decreased 91% from
1994 reflecting primarily increased operating rates at the Feluy, Belgium,
facility.
Total assets were $846.3 million at the end of 1996 versus $1,204.5 million
at the end of 1995 and $1,139.2 million at the end of 1994. Identifiable assets
in the U.S. decreased $118.2 million in 1996 from 1995 primarily due to the sale
of the Olefins Business, while 1995 showed an increase of $39.3 million from
1994. Foreign identifiable assets decreased in 1996 from 1995 by $240.1 million
also due primarily to the sale of the Olefins Business, but increased by $26.0
million in 1995 from 1994 mainly due to an increase in inventories.
14
<PAGE>
How Albemarle Used The Revenues It Received*
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In Millions) (Unaudited) 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C>
[] Materials, services, etc. $ 480.2 55.9% $ 776.5 62.1%
[] Payrolls & employee benefits 185.7 21.6 220.5 17.7
[] Current income & other taxes 55.7 6.5 81.3 6.5
[] Regular dividends declared 14.5 1.7 13.9 1.1
[] Interest expense 2.5 0.3 13.3 1.1
[] For use in the business including
expansion & modernization 119.9 14.0 143.2 11.5
-------------------------------------------
Total revenues $ 858.5 100.0% $1,248.7 100.0%
===========================================
</TABLE>
* Excludes the proceeds from the March 1, 1996, sale of the Olefins Business and
the July 31, 1995, sale of the electronic materials business.
Shareholder Data & Market Prices of Common Stock
- --------------------------------------------------------------------------------
The Company's common stock is traded primarily on the New York Stock Exchange
under the symbol ALB. There were 55,046,183 shares of common stock held by 9,847
shareholders of record as of December 31, 1996.
DIVIDEND INFORMATION & SHAREHOLDERS' EQUITY PER SHARE
The Company's current common stock dividend rate is $.28 per share on an
annual basis after the Board of Directors on August 28, 1996, increased the
quarterly dividend rate, payable October 1, 1996, by 27%, from $.055 to $.07 per
share. The Company's quarterly dividend rate, payable October 1, 1995, was
previously increased on July 27, 1995 from $.05 to $.055, or 10%.
Shareholders' equity per share at December 31, 1996, was $9.18, down 2.5%
from $9.42 at December 31, 1995, primarily reflecting the impact of the purchase
of 9,484,465 common shares through a tender offer concluded on April 1, 1996,
and additional second and third quarter purchases of 275,400 and 1,481,100
common shares, respectively. The December 31, 1995 shareholders' equity per
share of $9.42 was up 14.2% from $8.25 at December 31,1994.
MARKET PRICES OF COMMON STOCK
(In Dollars)
<TABLE>
<CAPTION>
1996
- ----------------------------------------------------------------------------------------------------------------
Quarter High Low Close
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
First 22 3/4 17 1/4 22 3/8
Second 24 1/8 18 1/4 18 1/4
Third 19 1/4 14 3/8 17 1/8
Fourth 19 1/8 15 1/2 18 1/8
- ----------------------------------------------------------------------------------------------------------------
1995
- ----------------------------------------------------------------------------------------------------------------
Quarter High Low Close
- ----------------------------------------------------------------------------------------------------------------
First 14 1/2 12 1/4 12 3/4
Second 16 1/8 12 5/8 15 5/8
Third 19 1/4 15 1/8 18 3/4
Fourth 20 16 1/4 19 3/8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Consolidated Balance Sheets
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands of Dollars)
- ---------------------------------------------------------------------------------------------------------------------------
December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,242 $ 33,130
Accounts receivable, less allowance for doubtful accounts
(1996 - $1,290; 1995 - $1,615) 141,293 198,125
Inventories:
Finished goods 58,271 137,950
Raw materials 10,148 15,125
Work-in-process 247 151
Stores, supplies and other 15,833 24,371
- ---------------------------------------------------------------------------------------------------------------------------
84,499 177,597
Deferred income taxes and prepaid expenses 19,107 19,935
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 259,141 428,787
- ---------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 1,148,832 1,493,846
Less accumulated depreciation and amortization (653,108) (807,951)
- ---------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 495,724 685,895
- ---------------------------------------------------------------------------------------------------------------------------
Other assets and deferred charges 68,304 60,814
Goodwill and other intangibles - net of amortization 23,092 28,995
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 846,261 $1,204,491
===========================================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 66,968 $ 102,788
Long-term debt, current portion 7,457 17,020
Accrued expenses 55,783 65,017
Dividends payable 3,853 3,634
Income taxes payable 13,887 5,760
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 147,948 194,219
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt 24,406 200,092
Other noncurrent liabilities 64,166 54,512
Deferred income taxes 104,543 133,102
Shareholders' equity:
Common stock, $.01 par value, issued - 55,046,183 in 1996
and 66,076,853 in 1995 550 661
Additional paid-in capital 250,890 498,827
Foreign currency translation adjustments 16,677 27,604
Retained earnings 237,081 95,474
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 505,198 622,566
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 846,261 $1,204,491
===========================================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
17
<PAGE>
Consolidated Statements Of Income
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Amounts)
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $ 854,481 $1,244,222 $1,080,922
Cost of goods sold 611,353 967,204 835,350
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit 243,128 277,018 245,572
Selling, general and administrative expenses 119,260 130,514 123,478
Research and development expenses 30,442 29,541 28,063
- ---------------------------------------------------------------------------------------------------------------------------
Operating profit 93,426 116,963 94,031
Interest and financing expenses 2,529 13,265 14,484
Gain on sales of businesses (158,157) (23,427) (8,400)
Other income, net (4,025) (4,468) (1,434)
- ---------------------------------------------------------------------------------------------------------------------------
Income before income taxes 253,079 131,593 89,381
Income taxes 97,020 53,363 38,103
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 156,059 $ 78,230 $ 51,278
===========================================================================================================================
Earnings per share (See Note 1) $ 2.65 $ 1.18
=========================================================================================================
Shares used to compute earnings per share 58,842 66,352
===========================================================================================================================
Cash dividends declared per share of common stock $ .25 $ .21 $ .20
===========================================================================================================================
See accompanying notes to the consolidated financial statements.
18
<PAGE>
Consolidated Statements Of Changes In Shareholders' Equity
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
</TABLE>
<TABLE>
<CAPTION>
(In Thousands of Dollars Except Share Data)
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Shares Amounts Shares Amounts Shares Amounts
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stock (authorized 150,000,000 shares)
Beginning balances 66,076,853 $ 661 66,067,881 $ 661 -- $ --
Issued upon exercise of stock options and SARs 178,840 2 8,972 -- -- --
Award of restricted stock 34,680 -- -- -- -- --
Shares issued pursuant to spin-off from Ethyl -- -- -- -- 59,207,385 399,957
Shares purchased and retired (11,244,190) (113) -- -- (2,920) (39)
Private placement of common stock, net -- -- -- -- 6,863,416 99,468
Adjustment from no par value to $.01 per share -- -- -- -- -- (498,725)
- ---------------------------------------------------------------------------------------------------------------------------
Ending balances 55,046,183 550 66,076,853 661 66,067,881 661
- ---------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital
Beginning balances 498,827 498,725 --
Exercise of stock options and SARs 2,636 102 --
Award of restricted stock 832 -- --
Shares purchased and retired (251,405) -- --
Adjustment from no par value to $.01 per share -- -- 498,725
- ---------------------------------------------------------------------------------------------------------------------------
Ending balances 250,890 498,827 498,725
- ---------------------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustments
Beginning balances 27,604 14,505 (2,545)
Translation adjustments (10,927) 13,099 7,445
Reclass from Ethyl's equity investment -- -- 9,605
- ---------------------------------------------------------------------------------------------------------------------------
Ending balances 16,677 27,604 14,505
- ---------------------------------------------------------------------------------------------------------------------------
Ethyl's equity investment
Beginning balances -- -- 702,778
Net income for two months ended February 28, 1994 -- -- 7,290
General corporate expense allocations from Ethyl -- -- 2,194
Cash transfers from Ethyl -- -- 700
Reclass of foreign currency translation adjustment -- -- (9,605)
Debt assumed from Ethyl prior to spin-off -- -- (303,400)
Distribution of Ethyl's investment in the Company -- -- (399,957)
- ---------------------------------------------------------------------------------------------------------------------------
Ending balances -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Retained earnings
Beginning balances 95,474 31,118 --
Net income for years ended 1996 and 1995, and ten
months ended December 31, 1994, respectively 156,059 78,230 43,988
Cash dividends declared (14,452) (13,874) (12,870)
- ---------------------------------------------------------------------------------------------------------------------------
Ending balances 237,081 95,474 31,118
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity $505,198 $622,566 $545,009
===========================================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
19
<PAGE>
Consolidated Statements Of Cash Flows
- ------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In Thousands of Dollars)
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash and cash equivalents at beginning of year $ 33,130 $ 32,114 $ 32,488
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income 156,059 78,230 51,278
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 71,044 94,131 93,276
Gain on sales of businesses (158,157) (23,427) (8,400)
Deferred income taxes (21,404) (2,368) (5,172)
Change in assets and liabilities, net of effects of sales
of businesses and acquisition:
(Increase) in accounts receivable (9,830) (11,190) (39,203)
(Increase) in inventories (3,234) (27,807) (13,546)
Increase in accounts payable 13,001 686 19,803
(Decrease) increase in accrued expenses (11,596) 10,182 3,505
Other, net (7,414) (2,200) 9,194
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 28,469 116,237 110,735
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (90,439) (112,412) (70,379)
Acquisition of business -- (2,138) (5,818)
Proceeds from sales of businesses, net of expenses and $42,297
of trade accounts payable paid by the Company in 1996 487,345 4,195 19,850
Collections on notes receivable from sale of business -- 55,000 --
Other, net 2,318 1,592 2,349
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities 399,224 (53,763) (53,998)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Purchases of common stock (251,518) -- --
Repayments of long-term debt (210,069) (48,254) (157,524)
Proceeds from borrowings 27,341 237 5,991
Dividends paid (14,233) (13,543) (9,567)
Proceeds from private placement of common stock, net -- -- 99,468
Net settlements with Ethyl Corporation -- -- 4,560
Other, net 1,898 102 (39)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (446,581) (61,458) (57,111)
- ---------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (18,888) 1,016 (374)
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 14,242 $ 33,130 $ 32,114
===========================================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
20
<PAGE>
Notes To The Consolidated Financial Statements
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
NOTE 1 - Summary of Significant Accounting Policies:
- --------------------------------------------------------------------------------
Consolidation
The consolidated financial statements include the accounts and operations of
Albemarle Corporation and all of its wholly-owned and majority-owned
subsidiaries ("the Company" or "Albemarle"). All significant intercompany
accounts and transactions are eliminated in consolidation.
Basis of Presentation
Albemarle Corporation became an independent company upon the spin-off by
Ethyl Corporation ("Ethyl") of its olefins and derivatives, bromine chemicals
and specialty chemicals businesses ("the predecessor businesses"). At the close
of business on February 28, 1994, Ethyl distributed to its common shareholders
all of the outstanding common shares of Albemarle. The distribution was made in
the form of a tax-free dividend. One share of the Company's common stock was
distributed to Ethyl common shareholders for every two shares of Ethyl common
stock held.
The accompanying financial statements include the combined accounts of the
predecessor businesses while part of Ethyl for the two-month period ended
February 28, 1994. For the period March 1, 1994, through December 31, 1994, all
accounts of the Company and its subsidiaries are presented on a consolidated
basis. For simplicity of presentation, these financial statements for all
periods presented are collectively referred to as consolidated financial
statements.
Ethyl provided certain corporate general and administrative services to the
predecessor businesses including legal, financial and other services for the two
months ended February 28, 1994. These expenses were allocated to the predecessor
businesses based upon the net sales of the predecessor businesses. Management
considers this allocation methodology to yield a reasonable allocation of the
general corporate expenses that were incurred by Ethyl on behalf of the
predecessor businesses and reflects a reasonable estimate of the level of
expenses that might have been incurred had the predecessor businesses operated
on a stand-alone basis.
On March 1, 1996, the Company sold its alpha olefins, poly alpha olefins and
synthetic alcohols businesses ("Olefins Business") to Amoco Chemical Company
("Amoco"). Due to the significance of the sale on the operations of the Company,
certain unaudited pro forma disclosures have been included. See Note 18
"Supplemental Pro Forma Condensed Consolidated Financial Information
(Unaudited)".
Certain amounts in the accompanying consolidated financial statements and
notes thereto have been reclassified to conform to the current presentation.
Cash and Cash Equivalents
Cash and cash equivalents in the accompanying consolidated financial
statements consist of cash and time deposits of the Company for the years ended
December 31, 1996 and 1995. Time deposits are stated at cost, which approximates
market value.
Foreign Currency Translation Adjustments
The assets and liabilities of all foreign subsidiaries were prepared in their
respective local currencies and translated into U.S. dollars based on the
current exchange rate in effect at the balance sheet dates, while income and
expenses were translated at average rates for the periods presented. Translation
adjustments [net of deferred income (tax benefits) taxes of $(6,675,000),
$8,001,000, and $10,496,000 in 1996, 1995 and 1994, respectively] are reflected
as foreign currency translation adjustments in the shareholders' equity section
of the consolidated balance sheets and in the consolidated statements of changes
in shareholders' equity and accordingly have no effect on net income.
Transaction adjustments are included in income. Foreign currency transaction
adjustments resulted in gains of $8,049,000 and $555,000 in 1996 and 1995,
respectively, and a loss of $719,000 in 1994.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
on the last-in, first-out ("LIFO") basis for substantially all domestic
inventories except stores and supplies, and on either the weighted-average or
first-in, first-out cost basis for other inventories. Cost elements included in
finished goods and work-in-process inventories are raw materials, direct labor
and manufacturing overhead. Raw materials include purchase and delivery costs.
Stores and supplies include purchase costs.
21
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
Property, Plant and Equipment
Accounts include costs of assets constructed or purchased, related delivery
and installation costs and interest incurred on significant capital projects
during their construction periods. Expenditures for renewals and betterments
also are capitalized, but expenditures for repairs and maintenance are expensed
as incurred. The cost and accumulated depreciation applicable to assets retired
or sold are removed from the respective accounts, and gains or losses thereon
are included in income. Depreciation is computed primarily by the straight-line
method based on the estimated useful lives of the assets.
The Company evaluates historical and expected undiscounted operating cash
flows of the related business units or fair value of property, plant and
equipment to determine the future recoverability of any property, plant and
equipment recorded. For purposes of determining these evaluations, undiscounted
cash flows are grouped at levels which management uses to operate the business,
which in some cases include businesses on a worldwide basis. Recorded property,
plant and equipment is reevaluated on the same basis at the end of each
accounting period, if any significant permanent changes in business or
circumstances have occurred which might impair recovery.
The costs of brine wells, leases and royalty interests are primarily
amortized over the estimated average life of the well. On a yearly basis, for
all wells, this approximates a unit-of-production method based upon estimated
reserves and production volumes.
Environmental Compliance and Remediation
Environmental compliance costs include the cost of purchasing and/or
constructing assets to prevent, limit and/or control pollution or to monitor the
environmental status at various locations. These costs are capitalized and
depreciated based on estimated useful lives.
Environmental compliance costs also include maintenance and operating costs
with respect to pollution prevention and control facilities and other
administrative costs. Such operating costs are expensed as incurred.
Environmental remediation costs of facilities used in current operations are
generally immaterial and are expensed as incurred. Remediation costs and
post-remediation costs at facilities or off-plant disposal sites that relate to
an existing condition caused by past operations are accrued as liabilities and
expensed when such costs are reasonably estimated.
Goodwill and Other Intangibles
Goodwill and other intangibles consist principally of goodwill, sales
contracts, product licenses and patents. Goodwill amounting to $18,026,000 and
$20,547,000 at December 31, 1996 and 1995, respectively, net of accumulated
amortization and effects of foreign currency translation adjustments, arose from
the 1993 acquisition of Potasse et Produits Chimiques SA ("PPC") and is being
amortized on a straight-line basis over periods of 16 to 20 years. Intangible
assets ($5,066,000 and $8,448,000 at December 31, 1996 and 1995, respectively,
net of accumulated amortization and effects of foreign currency translation
adjustments) are amortized on a straight-line basis over periods from three to
17 years. Amortization of goodwill and other intangibles amounted to $4,255,000,
$4,379,000 and $4,658,000 for 1996, 1995 and 1994, respectively. Accumulated
amortization of goodwill and other intangibles was $31,361,000 and $27,164,000
at the end of 1996 and 1995, respectively.
The Company evaluates historical and expected undiscounted operating cash
flows of the related business units to determine the future recoverability of
any goodwill recorded. For purposes of determining these evaluations,
undiscounted cash flows are grouped at levels which management uses to operate
the business, which in some cases include businesses on a worldwide basis.
Recorded goodwill is reevaluated on the same basis at the end of each accounting
period whenever any significant permanent change in business or circumstances
has occurred which might impair recovery.
Research and Development Expenses
Company-sponsored research and development expenses related to present and
future products are expensed as incurred.
Interest Expense
The Company's consolidated net income for the two months ended February 28,
1994 reflects foreign interest expense on foreign long-term debt instruments
that were transferred to the predecessor businesses upon completion of the
spin-off. Consequently, the interest expense reflected in the December 31, 1994,
consolidated statement of income is not intended to reflect interest expense
that the predecessor businesses may have incurred had the predecessor businesses
been an independent company for the entire year. See Note 1 "Earnings Per Share
and Selected Unaudited Pro Forma Data" which gives effect to interest expense
under an assumed debt structure. As discussed in "Ethyl's Equity Investment,"
transactions with Ethyl were treated as if settled immediately through Ethyl's
equity investment.
22
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
Pension Plans and Other Postretirement Benefits
Annual costs of pension plans are determined actuarially based on Financial
Accounting Standards Board ("FASB") Statement No. 87, "Employers' Accounting for
Pensions" ("FASB Statement No. 87"). The Company's policy is to fund U.S.
pension plans at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974 and generally for obligations under its
foreign plans to deposit funds with trustees and/or under insurance policies.
Annual costs of other postretirement plans are accounted for based on FASB
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" ("FASB Statement No. 106"). The policy of the Company is to fund
postretirement health benefits for retirees on a pay-as-you-go basis.
Profit Sharing and Employee Savings Plan
The Company's employees may participate in the Albemarle defined contribution
401(k) profit sharing and employee savings plan which is generally available to
all full-time salaried and non-union hourly employees and to employees who are
covered by a collective bargaining agreement pursuant to the terms of such
agreement. The plan is funded with contributions by participants and the
Company. Expenses recorded for the 401(k) plan by the Company approximated
$4,900,000, $5,100,000 and $4,900,000 in 1996, 1995 and 1994, respectively.
Income Taxes
Albemarle Corporation, as a parent company, and its domestic subsidiaries
filed its first consolidated U.S. income tax return for the ten months ended
December 31, 1994. Beginning in 1995, the Company and its subsidiaries filed
consolidated U.S. Federal income tax returns and individual foreign income tax
returns. The predecessor businesses taxable income for the two months ended
February 28, 1994, was subject to inclusion in the Ethyl U.S. consolidated
income tax return for the 1994 tax year. The provision for income taxes
reflected in the accompanying consolidated financial statements for the two
months ended February 28, 1994, represents the predecessor businesses' share of
Ethyl's income tax expense which approximates the expense which would have been
recognized had the predecessor businesses filed separate income tax returns. In
connection with the spin-off, the Company and Ethyl entered into a tax sharing
agreement whereby Ethyl agreed to indemnify and hold harmless the Company
against all taxes attributable to the predecessor businesses prior to the
spin-off, with the exception of the Company's subsidiaries which remained
responsible for their taxes.
Deferred income taxes result from temporary differences in the recognition of
income and expenses for financial and income tax reporting purposes, using the
liability or balance sheet method. Such temporary differences result primarily
from differences between the financial statement carrying amounts and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. It is the Company's policy to
record deferred income taxes on any undistributed earnings of foreign
subsidiaries that are not deemed to be, or are not intended to be, permanently
reinvested in those subsidiaries.
Ethyl's Equity Investment
Ethyl's equity investment reflects the historical activity between the
predecessor businesses and Ethyl through February 28, 1994, the date of the
spin-off. Transactions with Ethyl are reflected as though they were settled
immediately as an addition to or reduction of Ethyl's equity investment and
there are no amounts due to or from Ethyl at the end of any period. For various
reasons, including the effect of purchase method adjustments, it was not
practicable to determine the portion of Ethyl's equity investment represented by
retained earnings.
Earnings Per Share and Selected Unaudited Pro Forma Data
Annual earnings per share information has been omitted from the accompanying
consolidated statement of income for the year ended December 31, 1994, since the
Company as the predecessor businesses was not a separate entity with its own
capital structure until March 1, 1994. (See "Basis of Presentation".) If the
distribution of the Company's common stock to Ethyl shareholders had occurred as
of January 1, 1994, and if certain interest charges had been incurred as of that
date on the debt transferred under an assumed debt structure, a decrease in net
income of $974,000 (net of tax benefits of $595,000) would have occurred,
resulting in consolidated net income on a pro forma basis for the year ended
December 31, 1994, of $50,304,000. Earnings per share on a pro forma basis would
have been $.77 based on 66,276,000 shares assuming 6,863,416 new shares of
common stock issued on May 11, 1994, in a private placement had been outstanding
for the entire year with a further reduction in interest expense resulting from
application of the $100 million in proceeds to long-term debt for the entire
year.
23
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
Derivative Instruments and Hedging of Foreign Currency Exposures
The Company's current policy is to manage foreign currency exposure by
maintaining assets and liabilities in approximate balance and to make use of
derivative financial instruments only for the following:
The Company and its Japanese subsidiary, Albemarle Asano Corporation
("Albemarle Asano"), make use of forward exchange contracts to manage the
foreign currency activity and any exposures relating to intercompany
transactions between the two entities. Gains and losses on forward exchange
contracts are recognized currently in income. The Company had outstanding
forward exchange contracts at December 31, 1996 totaling $9,300,000. For the
years 1996 and 1995, the Company recognized $694,000 and $2,332,000,
respectively, in income before income taxes on its forward exchange contracts.
Stock-Based Compensation
FASB Statement No. 123, "Accounting for Stock-Based Compensation," ("FASB
Statement No. 123") encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB Opinion No. 25") and related
interpretations (See Note 8, "Capital Stock"). Accordingly, compensation cost
for stock options is measured as the excess, if any, of the amount an employee
must pay to acquire the stock over the quoted market price of the Company's
stock at the date of the grant.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
NOTE 2 - Supplemental Cash Flow Information:
- --------------------------------------------------------------------------------
Supplemental information for the consolidated statements of cash flows is as
follows:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash paid during the year for:
Income taxes (including amounts paid while part of Ethyl) $110,771 $49,439 $ 44,543
Interest and financing expenses (net of capitalization) 2,910 13,382 16,130
Supplemental non-cash financing transaction:
Assumption of debt in connection with spin-off from Ethyl -- -- 303,400
===========================================================================================================================
</TABLE>
A reconciliation of the net change in Ethyl's equity investment to the cash
flow effect of the net settlements with Ethyl for the two months ended February
28, 1994, is as follows:
<TABLE>
<CAPTION>
(In Thousands) 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net settlements with Ethyl $2,894
Foreign currency translation effect 1,666
- ---------------------------------------------------------------------------------------------------------------------------
Cash flow effect of net settlements with Ethyl $4,560
===========================================================================================================================
</TABLE>
NOTE 3 - Inventories
- --------------------------------------------------------------------------------
Domestic inventories stated on the LIFO basis amounted to $35,167,000 and
$85,770,000 at December 31, 1996 and 1995, respectively, which are below
replacement cost by approximately $34,868,000 and $15,619,000, respectively. The
sale of the Olefins Business and other management initiatives resulted in a
liquidation of several LIFO layers. The liquidation effect on income before
income taxes resulting from the sale of the Olefins Business was a charge of
$14,817,000, which is reflected in the calculation of the gain from the sale.
The remaining liquidation effect also resulted in a charge of $3,466,000 to
income during 1996.
24
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
NOTE 4 - Deferred Income Taxes and Prepaid Expenses:
- --------------------------------------------------------------------------------
Deferred income taxes and prepaid expenses consist of the following:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred income taxes - current $15,083 $13,940
Prepaid expenses 4,024 5,995
- ---------------------------------------------------------------------------------------------------------------------------
Total $19,107 $19,935
===========================================================================================================================
</TABLE>
NOTE 5 - Property, Plant and Equipment:
- --------------------------------------------------------------------------------
Property, plant and equipment, at cost consist of the following:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Land $ 19,343 $ 20,847
Land improvements 39,291 44,441
Buildings 88,281 95,614
Machinery and equipment 958,950 1,268,559
Construction in progress 42,967 64,385
- ---------------------------------------------------------------------------------------------------------------------------
Total $1,148,832 $1,493,846
===========================================================================================================================
</TABLE>
The cost of the property, plant and equipment is depreciated, generally by
the straight-line method, over the following useful lives: land improvements--5
to 30 years; buildings--10 to 40 years; and machinery and equipment--3 to 25
years.
Interest capitalized on significant capital projects in 1996, 1995 and 1994
was $823,000, $2,260,000 and $987,000, respectively, while amortization of
capitalized interest (which is included in depreciation expense) in 1996, 1995
and 1994 was $1,610,000, $2,841,000 and $2,709,000, respectively.
NOTE 6 - Accrued Expenses:
- --------------------------------------------------------------------------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Employee benefits, payroll and related taxes $21,958 $27,169
Taxes other than payroll 8,075 12,854
Other 25,750 24,994
- ---------------------------------------------------------------------------------------------------------------------------
Total $55,783 $65,017
===========================================================================================================================
</TABLE>
NOTE 7 - Long-Term Debt:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-term debt consists of the following:
(In Thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Variable-rate bank loans $16,300 $130,000
Foreign bank borrowings 14,392 85,919
Miscellaneous 1,171 1,193
- ---------------------------------------------------------------------------------------------------------------------------
Total 31,863 217,112
Less amounts due within one year 7,457 17,020
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt $24,406 $200,092
===========================================================================================================================
</TABLE>
Maturities of long-term debt for the next five years are as follows:
1997 - $7,457,000; 1998 - $430,000; 1999 - $434,000; 2000 - $389,000; 2001 -
$21,250,000 and 2002 through 2016 - $1,903,000.
25
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- -------------------------------------------------------------------------------
On September 24, 1996, the Company entered into a new five-year, $500 million
unsecured Competitive Advance and Revolving Credit Facility Agreement (the
"Credit Agreement") with a consortium of banks at various interest rate options
to replace its existing credit facility. No amounts were outstanding at December
31, 1996, under the Credit Agreement. The Credit Agreement contains certain
covenants typical for a credit agreement of its size and nature, including
financial covenants requiring the Company to limit consolidated indebtedness (as
defined) to not more than 60% of the sum of the Company's consolidated
shareholders' equity (as defined) and consolidated indebtedness. Amounts
outstanding at September 24, 2001, mature on that date. At December 31, 1995,
$100 million in borrowings under the predecessor credit agreement was
outstanding. Part of the proceeds from the sale of the Olefins Business were
used to retire this debt in 1996. The average interest rate on 1996 borrowings
under the predecessor Credit Agreement was 6.1%.
The Company has five additional agreements with banks which provide immediate
uncommitted credit lines, on a short-term basis, up to a maximum of
approximately $140 million at the individual bank's money market rate. At
December 31, 1996, $16.3 million in borrowings from these agreements was
outstanding which the Company has the ability to refinance with borrowings under
the Credit Agreement. Therefore, these amounts have been classified as long-term
debt. The average interest rate on borrowings under these agreements was 5.55%
in 1996, with a year-end interest rate of 7.35% on balances outstanding at
December 31, 1996.
Foreign bank borrowings at December 31, 1996, consisted of 1.32 billion
Japanese yen ($11.6 million) and 14.79 million French francs ($2.8 million).
At December 31, 1995, foreign bank borrowings included 2.31 billion Belgian
francs ($77.9 million) with the Generale de Banque, Brussels, Belgium. This debt
was also retired in 1996 with part of the proceeds from the sale of the Olefins
Business. The average interest rate on these borrowings while outstanding in
1996 was 3.38%.
NOTE 8 - Capital Stock:
- --------------------------------------------------------------------------------
Preferred Stock
The Company has the authority to issue 15,000,000 shares of preferred stock,
in one or more classes or series. No shares of the Company's preferred stock
have been issued to date.
Stock Purchases
On April 1, 1996, the Company purchased 9,484,465 shares of its common stock,
at a price of $23 per share plus expenses for a total aggregate cost of $219.4
million, through a tender offer, which began on March 4, 1996, and concluded on
April 1, 1996, following the sale of the Olefins Business to Amoco.
Additionally, the Company purchased 275,400 and 1,481,100 common shares in the
second and third quarters of 1996, respectively, at an aggregate cost of $32.1
million. The Company still has authorization from its Board of Directors to
purchase approximately 4.2 million additional shares.
Stock Option Plan
On February 8, 1994, an Omnibus Stock Incentive Plan ("Plan") was adopted by
the Company. Under the Plan, a maximum of 3,200,000 shares of the Company's
common stock may be issued as restricted stock or upon the exercise of incentive
or nonqualified stock options and stock appreciation rights ("SARs"). Such
options, SARs and restricted stock may be granted to participants under the
Plan. Initial options and related SARs were granted March 1, 1994, to officers
and key employees to purchase a total of 1,499,500 shares of the Company's
common stock. All of these options and related SARs expire no later than ten
years from the date of grant and the exercise price was set at $13.125 per
share, the closing price of the Company's common stock on March 1, 1994. These
options and related SARs became exercisable in full at December 31, 1995, based
upon the growth in operating earnings of the Company from the base year earnings
for the year ended December 31, 1993. The compensation expense associated with
the exercise of SARs in 1996 amounted to approximately $1.5 million.
In addition, holders of options under the Ethyl Stock Option Plan who became
employees of the Company were given the choice of retaining those options or
surrendering them in favor of receiving options to purchase shares of the
Company's common stock. Employees of the Company who elected to surrender their
Ethyl options received options for shares of the Company's common stock as set
forth below. For these options, the Company adopted the same terms as were
applicable when they were issued under the terms of the Ethyl Stock Option Plan.
On May 6, 1996, 34,680 shares of restricted stock were awarded and issued
under the Plan. One half vest in one year with the remaining half vesting in two
years. The fair value of the restricted stock was $24 per share at the award
date, which was the market price of the Company's stock on that date. Of the
aggregate compensation expense associated with the awards, which included
certain tax benefits to the recipients, approximately $1.1 million was
recognized in expense in 1996.
26
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
The Company granted 293,000 additional options to officers and key employees
during 1996. These options expire 10 years from the date of grant with an
exercise price of $17.375 per share, the closing price of the Company's common
stock on August 28, 1996. These options become exercisable based upon growth in
operating earnings of the Company from the base year earnings for the year ended
December 31, 1996.
Stock option activity in 1994, 1995 and 1996 is shown below:
<TABLE>
<CAPTION>
Weighted-
Average
Share Available Options Exercise
for Grant Activity Options Price Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Shares available for grant 3,200,000
Options converted from Ethyl
Corporation at February 28, 1994 (287,855) 287,855 $ 9.45 - $14.81
Granted (1,499,500) 1,499,500 $13.13
Lapsed 7,974 (7,974) $13.52
- -----------------------------------------------------------------------------------------------------------------
December 31, 1994 1,420,619 1,779,381 $ 9.45 - $14.81
- -----------------------------------------------------------------------------------------------------------------
Exercised -- (8,972) $11.39
- -----------------------------------------------------------------------------------------------------------------
December 31, 1995 1,420,619 1,770,409 $ 9.45 - $14.81 $13.05
- -----------------------------------------------------------------------------------------------------------------
Granted (293,000) 293,000* $17.38 $17.38
Exercised -- (301,646) $ 9.45 - $13.47 $13.00
Lapsed 10,000 (10,000) $13.13 $13.13
Restricted stock awards (34,680)
- -----------------------------------------------------------------------------------------------------------------
December 31, 1996 1,102,939 1,751,763 $ 9.45 - $17.38 $13.78
=================================================================================================================
</TABLE>
* The weighted average fair value of options granted during 1996 was $6.47.
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted- Weighted- Weighted-
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices @ 12/31/96 Contractual Life Price @ 12/31/96 Price
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
$11.78 7,378 0.7 years $11.78 7,378 $11.78
9.45 3,724 1.7 years 9.45 3,724 9.45
12.29 16,245 2.7 years 12.29 16,245 12.29
10.36 18,156 3.8 years 10.36 18,156 10.36
12.12 39,835 5.0 years 12.12 39,835 12.12
13.47 to 14.81 56,839 6.0 years 13.64 56,839 13.64
13.13 1,116,586 7.2 years 13.13 1,116,586 13.13
13.13 200,000 0.5 years 13.13 200,000 13.13
17.38 293,000 9.7 years 17.38 -- --
- ---------------------------------------------------------------------------------------------------------------------------
1,751,763 1,458,763
===========================================================================================================================
</TABLE>
As discussed in Note 1, "Summary of Significant Accounting Policies", the
Company accounts for stock-based compensation plans under APB Opinion No. 25. If
compensation cost had been determined based on the fair value at the grant date
for awards made in 1996 under the Plan consistent with the method of FASB
Statement No. 123, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996
- ------------------------------------------------------------------------------
<S> <C>
Net income as reported $156,059
pro forma $155,863
- ------------------------------------------------------------------------------
Earnings as reported $ 2.65
pro forma $ 2.65
==============================================================================
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996: dividend yield 2.61%; expected volatility
of 29.33%; risk-free interest rate of 6.39%; and expected lives of eight years.
27
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
NOTE 9 - Rental Expense and Other Data:
- --------------------------------------------------------------------------------
Rental Expense
The Company has a number of operating lease agreements, primarily for office
space, transportation equipment and storage facilities. Future minimum lease
payments for the next five years for all noncancelable leases as of December 31,
1996, are $6,126,000 for 1997, $4,991,000 for 1998, $3,531,000 for 1999,
$2,729,000 for 2000, $2,606,000 for 2001, and amounts payable after 2001 are
$4,397,000. Rental expense was approximately $15,000,000 for 1996, $20,420,000
for 1995, and $17,540,000 for 1994.
Contractual Commitments
Contractual obligations for plant construction and purchases of real property
and equipment amounted to approximately $18,300,000 at December 31, 1996.
Service Agreements
The Company and Ethyl are parties to arm's length agreements, dated as of
February 28, 1994, pursuant to which the Company and Ethyl agreed to coordinate
certain facilities and services of adjacent operating facilities at plants in
Orangeburg, South Carolina, Pasadena, Texas and Feluy, Belgium. In addition, the
Company and Ethyl are parties to agreements providing for the blending by the
Company of Ethyl's additive products and the production of antioxidants and
manganese-based antiknock compounds at the Orangeburg plant. The Company's
billings to Ethyl in 1996 and 1995 in connection with these agreements amounted
to approximately $34 million and $48 million, respectively.
The Company and MEMC Pasadena, Inc. ("MEMC Pasadena") are parties to
operating and lease agreements dated as of July 31, 1995, primarily for leasing
the MEMC Pasadena site which is located at Albemarle's Pasadena plant and on
which the electronic materials facility is located, and for operating,
maintaining and protecting the electronic materials facility which is to include
supplying utilities and performing all services at the facility. MEMC Pasadena
agrees to reimburse Albemarle for all the costs and expenses incurred as a
result of these agreements. In addition, MEMC Pasadena agrees to pay Albemarle
an annual operating fee of $1.5 million. The Company's billings to MEMC
Pasadena, in connection with these agreements amounted to approximately $41
million in 1996 and $13 million in 1995.
The Company and Amoco are parties to numerous operating and service
agreements, dated as of March 1, 1996, primarily focusing on the sharing of
certain common facilities and services of adjacent operating facilities at the
Pasadena, Texas, plant site of Albemarle. In addition, the Company and Amoco are
parties to agreements by which Amoco operates the Company's aluminum alkyls
facilities at the Feluy site, and the Company operates satellite olefins and
alcohols facilities at the Pasadena site. The Company's billings to Amoco in
1996, in connection with these agreements amounted to approximately $41.6
million. Amoco's billings to the Company in 1996 in connection with the
agreements amounted to $17 million.
Environmental
The Company accrues for environmental remediation costs and post-remediation
costs on an undiscounted basis at facilities or off-plant disposal sites that
relate to existing conditions caused by past operations in the accounting period
in which responsibility is established and when the related costs are estimable.
In developing these cost estimates, evaluation is given to currently available
facts regarding each site, with consideration given to existing technology,
presently enacted laws and regulations, prior experience in remediation of
contaminated sites, the financial capability of other potentially responsible
parties and other factors, subject to uncertainties inherent in the estimation
process. Additionally, these estimates are reviewed periodically, with
adjustments to the accruals recorded as necessary. The Company has recorded
liabilities of approximately $8,200,000 and $4,200,000 at December 31, 1996 and
1995, respectively, which represents management's best estimate of the Company's
future remediation and other anticipated environmental costs relating to past
operations.
Although it is difficult to quantify the potential financial impact of
compliance with environmental protection laws, management estimates, based on
the latest available information, that there is a reasonable possibility that
future environmental remediation costs to be incurred over a period of time
associated with the Company's past operations in excess of amounts already
recorded, could be up to $7,000,000 before income taxes. However, the Company
believes that any sum it may be required to pay in connection with environmental
remediation matters in excess of the amounts recorded will not have a material
adverse impact on its financial condition or results of operations, but could
have a material adverse impact in a particular quarterly reporting period.
28
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
Litigation
The Company is from time-to-time subject to routine litigation incidental to
its businesses. The Company is not party to any pending litigation proceedings
that are expected to have a material adverse effect on the Company's results of
operations or financial condition. Accordingly, no additional disclosures are
required.
NOTE 10 - Pension Plans and Other Benefits:
- --------------------------------------------------------------------------------
Pension Plans
The Company has primarily noncontributory defined benefit pension plans
covering most employees. The benefits for these plans are based primarily on
years of service and employees' compensation. The funding policy for each plan
complies with the requirements of relevant governmental laws and regulations.
Plan assets consist principally of common stock, U.S. government and corporate
obligations and group annuity contracts.
Components of pension income and prepaid pension expense information for
all periods presented for salaried and hourly plans were derived from actuarial
calculations of these components from the Ethyl plans prior to the spin-off and
the Albemarle plans subsequent to the spin-off. All amounts applicable to hourly
plans, for which operations were included in predecessor businesses, were
assigned to Albemarle. The actuarial present value of benefit obligations for
active salaried employees employed by Albemarle and the related components of
pension income and prepaid pension expense were allocated to Albemarle. The
actuarial present value of benefit obligations for the predecessor businesses'
salaried employees who retired prior to January 1, 1994, and the related
components of pension income and prepaid pension expense were allocated to
Ethyl. Plan assets were allocated to Albemarle primarily based upon the same
methodology used to allocate the present value of projected benefit obligations.
During 1994, based on final employee information, the Company and Ethyl reached
a final determination of the amounts of the defined benefit plan assets and
projected benefit obligations to be assigned to Albemarle as a result of the
spin-off. Accordingly, the plans' assets and projected benefit obligations
reported at December 31, 1993, were reduced by $13,932,000 and $27,857,000,
respectively, as of January 1, 1994, as those amounts were allocated to Ethyl.
The expected returns and interest cost reported for 1994 were computed based
upon the reduced amounts.
The components of Albemarle's net pension income for the years ended December
31, 1996 and 1995, and for the ten months ended December 31, 1994, and from the
Ethyl pension plans for the two months ended February 28, 1994, are as follows:
<TABLE>
<CAPTION>
(In Thousands)
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Return on Plan assets:
Actual return $ 57,353 $ 23,889 $ 5,422
Expected return (lower) higher than actual (27,220) 4,036 20,910
- ---------------------------------------------------------------------------------------------------------------------------
Expected return 30,133 27,925 26,332
Amortization of transition asset 2,718 2,718 1,510
Service cost (benefits earned during the year) (7,367) (7,274) (8,406)
Interest cost on projected benefit obligation (18,950) (17,406) (16,463)
Amortization of prior service costs (1,436) (810) (1,612)
- ---------------------------------------------------------------------------------------------------------------------------
Net pension income $ 5,098 $ 5,153 $ 1,361
===========================================================================================================================
</TABLE>
Amortization of the transition asset is based on the amount determined at the
date of adoption of FASB Statement No. 87.
Net pension income and plan obligations are calculated using assumptions of
estimated discount and long-term interest rates and rates of projected increases
in compensation. The discount rates for measuring benefit obligations were
assumed to be 7.5% at December 31, 1996, 7.25% at December 31, 1995, 8.25% at
December 31, 1994, and 7.25% at February 28, 1994. The rates of projected
compensation increase were assumed to be primarily 4.5% at the end of all
periods. The expected long-term rate of return on plan assets was assumed to be
9.5% for the years ended December 31, 1996 and 1995, and for the last ten months
of 1994, and 9% for the first two months of 1994. Net pension income (see table
above) is determined using assumptions as of the beginning of each year. Funded
status (see table on the following page) is determined using assumptions as of
the end of each year.
29
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
In addition to the net pension income shown on the previous page, the Company
also recognized a one-time curtailment loss and special termination benefits
charge in 1996 of $5.5 million, which was included in the net gain on the sale
of the Olefins Business (See Note 12, "Special Items"), as required by FASB
Statement No. 88 "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination of Benefits" ("FASB Statement
No. 88") reflecting the effects of the transfer of approximately 550 people who
supported the Olefins Business sold to Amoco.
The following table presents a reconciliation of the funded status of the
pension plans to prepaid pension expense based on actual personnel in 1996 and
1995, and is included in the line item "Other assets and deferred charges" of
the consolidated balance sheets:
<TABLE>
<CAPTION>
(In Thousands)
December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Plan assets at fair value $354,874 $306,681
- ---------------------------------------------------------------------------------------------------------------------------
Less actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested benefits
of $225,751 and $206,268, respectively) 236,661 217,967
Projected compensation increase 37,448 45,307
- ---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 274,109 263,274
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 80,765 43,407
Unrecognized net (gain) loss (27,888) 8,296
Unrecognized transition asset being amortized (13,129) (15,848)
Unrecognized prior service cost being amortized 11,663 15,177
- ---------------------------------------------------------------------------------------------------------------------------
Prepaid pension expense $ 51,411 $ 51,032
===========================================================================================================================
</TABLE>
Foreign Pension Plans
Pension coverage for employees of Albemarle's foreign subsidiaries is
provided through separate plans. Obligations under such plans are systematically
provided for by depositing funds with trustees or under insurance policies. The
pension cost, actuarial present value of benefit obligations and plan assets
have been combined with the Company's other pension disclosure information
presented.
Other Postretirement Benefits
Albemarle provides postretirement medical benefits and life insurance for
certain groups of retired employees. Medical and life insurance benefit costs
are funded principally on a pay-as-you-go basis. Although the availability of
medical coverage after retirement varies for different groups of employees, the
majority of employees who retire before becoming eligible for Medicare can
continue group coverage by paying the full cost of a composite monthly premium
designed to cover the claims incurred by active and retired employees. The
availability of group coverage for Medicare-eligible retirees also varies by
employee group with coverage designed either to supplement or coordinate with
Medicare. Retirees generally pay a portion of the cost of the coverage.
The components of net periodic postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
(In Thousands)
Years Ended December 31 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Service cost (benefits attributed to employee service during the year) $1,855 $1,816 $2,401
Interest cost on accumulated postretirement benefit obligation 3,222 3,093 3,040
Return on plan assets (gain) (660) (665) (664)
Amortization of prior service costs 98 98 98
Amortization of unrecognized net gains (349) (629) (57)
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $4,166 $3,713 $4,818
===========================================================================================================================
</TABLE>
In addition to the net periodic postretirement benefit cost shown above, the
Company recognized a one-time curtailment gain in 1996 of approximately $726,000
which was included in the gain on the sale of the Olefins Business (See Note 12,
"Special Items"), as required by FASB Statement No. 88, reflecting the effects
of the transfer of approximately 550 people who supported the Olefins Business
sold to Amoco.
30
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
Summary information on the Albemarle plans is presented below. Benefit
obligations and the related components of postretirement benefit costs for
substantially all predecessor businesses' retired salaried employees, who
retired prior to January 1, 1994, were assigned to Ethyl. Benefit obligations
for retired predecessor businesses' wageroll employees who retired prior to
January 1, 1994, and the related components of postretirement benefit costs were
allocated to Albemarle. Benefit obligations and the related components of
postretirement benefit costs for active employees assigned to Albemarle were
allocated to Albemarle. Plan assets were allocated to Albemarle based upon the
same methodology used to allocate the benefit obligations.
<TABLE>
<CAPTION>
(In Thousands)
Years Ended December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Financial status of plans:
Accumulated postretirement benefit obligation ("APBO"):
Retirees $18,364 $ 11,113
Fully eligible, active plan participants 5,737 10,044
Other active plan participants 22,949 27,823
- ---------------------------------------------------------------------------------------------------------------------------
Total APBO 47,050 48,980
Less plan assets at fair value 7,339 7,205
Less unrecognized prior service cost 1,078 1,176
Plus unrecognized net gain 9,784 4,929
- ---------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $48,417 $45,528
===========================================================================================================================
</TABLE>
Plan assets for retiree life insurance are held under an insurance contract
and reserved for retiree life insurance benefits. The accrued postretirement
benefit cost is included in "Other noncurrent liabilities" in the consolidated
balance sheets.
For 1994, the net periodic postretirement benefit cost shown on the previous
page reflects the spin-off of Albemarle from Ethyl, effective March 1, 1994. At
that time, the assumptions for Albemarle's postretirement plans were revised to
reflect the applicable rates as of the spin-off date. The discount rates for
measuring benefit obligations were 7.5% at December 31, 1996, 7.25% at December
31, 1995, 8.25% at December 31, 1994, and 7.25% at February 28, 1994. The
expected long-term rate of return was assumed to be 9.5% for 1996 and 1995 and
for the last ten months of 1994 and 9% for the first two months of 1994. The
rate of projected compensation increase was assumed to be 4.5% at the end of all
periods. The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 11% in 1996, 12% in 1995 and
13% in 1994, declining by 1% per year to an ultimate rate of 7%, except that
managed care costs were assumed to be 8% in 1996, 9% in 1995 and 10% in 1994,
declining by 1% per year to 6%.
If the health care cost trend rate assumptions were increased by 1%, the APBO
as of December 31, 1996, would be increased by approximately $5.3 million. The
effect of this change on the sum of the service cost and interest cost
components of net periodic postretirement benefit cost for 1996 would be an
increase of about $0.7 million.
Changes in Estimates
The higher discount rates at December 31, 1996, decreased the pension
accumulated benefit obligation by about $8.0 million and the pension projected
benefit obligation by approximately $9.2 million. The higher discount rate at
December 31, 1996, primarily decreased the accumulated postretirement benefit
obligation by approximately $1.8 million. As a result of the changes in rates,
the combined decrease in pension and postretirement benefit costs in 1997 will
be approximately $0.6 million.
Other Postemployment Benefits
The Company also provides certain postemployment benefits to former or
inactive employees who are not retirees. The Company funds postemployment
benefits on a pay-as-you go basis. These benefits include salary continuance,
severance and disability health care which are accounted for under FASB
Statement No. 112 "Employers' Accounting for Postemployment Benefits", adopted
in 1994. The effect of adopting this pronouncement in 1994 was not material to
the Company's financial position or results of operations. The accrued
postemployment benefit liability was approximately $1,897,000 at the end of
1996, an increase of about $222,000 from 1995.
31
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
NOTE 11 - Income Taxes:
- --------------------------------------------------------------------------------
The income tax provisions included in the accompanying consolidated
statements of income for 1996, 1995, and 1994, as well as the related tax
accounts contained in the accompanying December 31, 1996 and 1995 consolidated
balance sheets, have been computed as if the Company had been a separate
taxpayer for all years presented. Income (loss) before income taxes and current
and deferred income taxes are composed of the following:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income (loss) before income taxes:
Domestic $233,776 $141,281 $113,914
Foreign 19,303 (9,688) (24,533)
- ---------------------------------------------------------------------------------------------------------------------------
Total $253,079 $131,593 $ 89,381
===========================================================================================================================
Current income taxes:
Federal $101,698 $ 48,593 $ 38,258
State 12,478 5,058 4,381
Foreign 4,248 2,080 636
- ---------------------------------------------------------------------------------------------------------------------------
Total 118,424 55,731 43,275
- ---------------------------------------------------------------------------------------------------------------------------
Deferred income taxes (benefits):
Federal (18,070) (2,959) (3,179)
State (2,415) (471) (506)
Foreign (919) 1,062 (1,487)
- ---------------------------------------------------------------------------------------------------------------------------
Total (21,404) (2,368) (5,172)
- ---------------------------------------------------------------------------------------------------------------------------
Total income taxes $ 97,020 $ 53,363 $ 38,103
===========================================================================================================================
</TABLE>
The significant differences between the U.S. federal statutory rate and the
effective income tax rate are as follows:
<TABLE>
<CAPTION>
% of Income
Before Income Taxes
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Federal statutory rate 35.0% 35.0% 35.0%
Sales of businesses 4.5 0.5 (1.4)
Foreign sales corporation benefit (1.1) (1.8) (1.8)
State taxes, net of federal tax benefit 1.0 1.8 2.6
(Lower) or higher net tax on Belgian subsidiary due to
(inclusion) or absence of tax benefits on net operating losses (3.5) 2.1 7.8
Additional taxes on repatriation of foreign subsidiaries earnings 2.3 -- --
Increase in French statutory tax rate -- 2.2 --
Depletion (0.4) (0.8) (1.1)
Other items, net .5 1.6 1.5
- ---------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 38.3% 40.6% 42.6%
===========================================================================================================================
</TABLE>
In December 1995, the Company's French subsidiary recognized approximately
$2,909,000 in deferred income taxes as a result of French tax legislation
imposing a surtax which increased the French corporate tax rate to 36.7%.
32
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
The deferred income tax assets and deferred income tax liabilities recorded
on the consolidated balance sheets as of December 31, 1996 and 1995, consist of
the following:
<TABLE>
<CAPTION>
(In Thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred tax assets:
Postretirement benefits other than pensions $ 18,567 $ 17,264
Belgian subsidiary net operating loss carryforwards 18,044 29,105
LIFO inventories 5,096 --
Future employee benefits 6,096 5,956
Intercompany profit in inventories 3,816 4,123
Inventory capitalization 1,034 1,322
Other 9,266 5,745
- ---------------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets 61,919 63,515
Valuation allowances (10,015) (21,469)
- ---------------------------------------------------------------------------------------------------------------------------
Net deferred tax assets 51,904 42,046
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation 90,653 109,673
Foreign currency translation adjustments 10,144 16,819
Olefins Business sale deferred gains 8,219 --
Gain on Belgian intercompany loan 7,648 7,648
Pensions 20,455 18,616
Capitalization of interest 2,289 6,940
Other 1,956 1,512
- ---------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 141,364 161,208
- ---------------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 89,460 $119,162
===========================================================================================================================
Reconciliation to consolidated balance sheets:
Current deferred tax assets $ 15,083 $ 13,940
Deferred tax liabilities 104,543 133,102
- ---------------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 89,460 $119,162
===========================================================================================================================
</TABLE>
The Company's Belgian subsidiary's accumulated loss carryforward approximated
$45 million and $72 million at December 31, 1996, and 1995, respectively.
Approximately $27 million of accumulated loss carryforward (approximately $10.8
million tax benefit) was utilized in 1996 to offset Belgian taxable income
generated primarily from the sale of the Olefins Business.
The valuation allowance provided for the Belgian subsidiary's operating loss
carryforward was established because it has been concluded that although the
losses can be carried forward indefinitely, it is more likely than not that a
portion of the benefit would not be realized. Losses prior to 1995 can be offset
only up to one-half of the Belgian subsidiary's profit per year; however, net
operating losses incurred in 1995 and thereafter can be utilized against 100% of
future annual taxable income generated, and effective January 1, 1997,
cumulative operating loss carryforwards from prior years can be utilized 100%
against the Belgian subsidiary's future taxable income.
NOTE 12 - Special Items:
- --------------------------------------------------------------------------------
On March 1, 1996, the Company sold its Olefins Business to Amoco for $487.3
million, including plant and equipment, other assets, inventory and accounts
receivable net of expenses and trade accounts payable paid by the Company, and
certain business-related liabilities transferred at the date of sale. The sale
involved approximately 550 people who supported these businesses. Certain assets
primarily located in Pasadena, Texas, Deer Park, Texas and Feluy, Belgium were
included in the sale. The gain on the sale was $158.2 million ($94.4 million
after income taxes), net of $44.3 million of costs incurred for early
retirements and work-force reductions, abandonment costs of certain facilities
and certain other accruals (including environmental) related to or in
conjunction with the sale. The transaction included 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 operated by Amoco.
33
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
On July 31, 1995, the Company sold the assets and transferred the technology
for its electronic materials business to MEMC Pasadena, Inc. ("MEMC Pasadena"),
a wholly-owned subsidiary of MEMC Electronic Materials, Inc. ("MEMC") of St.
Peters, Missouri, for proceeds of approximately $59.2 million consisting of $4.2
million in cash and two notes totaling $55 million. The gain realized on the
sale was $23.4 million ($14.5 million after income taxes).
On September 30, 1994, the Company sold its Solimide business and certain
other assets, to a U.S. subsidiary of Inspec Group plc of Great Britain for
approximately $19.85 million. The Company recorded a gain on this transaction of
approximately $8.4 million ($6.7 million after income taxes).
NOTE 13 - Fair Value of Financial Instruments:
- --------------------------------------------------------------------------------
In assessing the fair value of financial instruments, the Company uses
methods and assumptions that are based on market conditions and other risk
factors existing at the time of assessment. Fair value information for the
Company's financial instruments is presented below:
Cash and Cash Equivalents - The carrying value approximates fair value due to
their short-term nature.
Long-term Debt - The carrying value of the Company's long-term debt reported
in the accompanying consolidated balance sheets at December 31, 1996 and 1995,
approximates fair value since substantially all of the Company's long-term debt
bears interest based on prevailing variable market rates currently available to
the Company.
NOTE 14 - Related Party Transaction:
- --------------------------------------------------------------------------------
On May 11, 1994, the Company completed the private placement of 6,863,416
shares of its common stock at a price of $14.57 per share, the weighted average
trading price of the Company's common stock for the third through the 12th
business day following public release of the Company's first-quarter financial
results on April 21, 1994, and received $100 million, which was used to retire
debt. Expenses of the private placement were $532,000. The stock was sold to two
entities controlled by Floyd D. Gottwald, Jr., and Bruce C. Gottwald and members
of their families. On April 6, 1994, the Company filed an S-1 registration
statement with the Securities and Exchange Commission to cover the resale of any
of the shares either by the purchasers or by any of the commercial banks that
hold the shares as pledgees.
34
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
NOTE 15 - Quarterly Financial Summary (Unaudited):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
(In Thousands Except Per-Share Amounts) Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
1996
Net sales $ 270,171 $196,039 $183,776 $204,495
Gross profit $ 74,111 $ 56,773 $ 44,760 $ 67,484
Gain on sale of Olefins Business (a) $(158,157) $ -- $ -- $ --
Net income $ 115,624 $ 14,635 $ 7,887 $ 17,913
Earnings per share $ 1.73 $ .26 $ .14 $ .32
Shares used to compute earnings per share (b) 66,663 57,282 56,017 55,406
1995
Net sales $ 313,257 $319,705 $315,211 $296,049
Gross profit $ 66,931 $ 65,194 $ 73,421 $ 71,472
Gain on sale of electronic materials business (c) $ -- $ -- $ (4,925) $(18,502)
Net income $ 14,608 $ 12,466 $ 22,222 $ 28,934
Earnings per share $ .22 $ .19 $ .33 $ .43
Shares used to compute earnings per share 66,121 66,241 66,450 66,599
===========================================================================================================================
</TABLE>
Notes to Quarterly Financial Summary (In Thousands Except Share Amounts):
(a) Represents first-quarter gain resulting from the March 1, 1996, sale of
the Olefins Business to Amoco Chemical Company ($94,377 after income
taxes).
(b) Includes the effects of the purchase of 9,484,465 common shares through
a tender offer concluded on April 1, 1996, and additional second and
third quarter purchases of 275,400 and 1,481,100 common shares,
respectively.
(c) Represents third quarter gain of $4,925 ($3,057 after income taxes) and
fourth quarter gain of $18,502 ($11,485 after income taxes) from the
prepayment of long-term notes associated with the sale of the
electronic materials business to MEMC.
NOTE 16 - Acquisitions:
- --------------------------------------------------------------------------------
On July 1, 1994, Albemarle Asano, a 55%-owned consolidated subsidiary of the
Company, acquired assets from Asano Chemicals Co., Ltd., the minority
shareholder of Albemarle Asano. The purchase price for this acquisition
approximated $5.8 million and was allocated primarily to inventory and certain
other assets. This transaction was financed primarily through Albemarle Asano's
existing equity together with proceeds from long-term debt. On June 30, 1995,
the Company acquired the remaining 45% of Albemarle Asano's outstanding common
stock from Asano Chemicals Co., Ltd., for an acquisition price of $2.1 million,
which approximated 45% of the book value of the net assets acquired at the date
of the acquisition. No pro forma financial information is provided for this
acquisition for the periods presented since its impact was immaterial to the
Company's consolidated results of operations and financial position.
NOTE 17 - Georgraphic Area Information:
- --------------------------------------------------------------------------------
The Company operates in one industry segment which includes the development,
manufacture and marketing of specialty chemical products.
The Company is an international business with manufacturing and/or
distribution facilities in the United States, Belgium, France, Singapore and
Japan. Information regarding the Company and the predecessor businesses'
operations in different geographic locations for the three years ended December
31, 1996, is shown below. As the Company's foreign regions of manufacturing and
35
<PAGE>
Notes To The Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
distribution have similar business environments and operations, they are
presented as one foreign category. Transfers between geographic areas are priced
depending on the product and economic activity of the transferee.
<TABLE>
<CAPTION>
Net Sales
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Domestic unaffiliated:
United States $ 462,444 $ 651,027 $ 617,208
Export 92,137 144,745 152,119
Transfers to foreign affiliates 129,044 160,011 115,049
Foreign unaffiliated 299,900 448,450 311,595
Elimination of transfers (129,044) (160,011) (115,049)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 854,481 $ 1,244,222 $ 1,080,922
===========================================================================================================================
Operating Profit (Loss) (a)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(In Thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
United States $ 114,994 $ 138,809 $ 123,293
Foreign (b) 8,495 (418) (14,510)
- ---------------------------------------------------------------------------------------------------------------------------
Subtotal 123,489 138,391 108,783
Unallocated expenses (30,063) (21,428) (14,752)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 93,426 $ 116,963 $ 94,031
===========================================================================================================================
<CAPTION>
Identifiable Assets as of December 31
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
United States $ 598,443 $ 716,602 $ 677,307
Foreign 247,818 487,889 461,883
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 846,261 $1,204,491 $1,139,190
===========================================================================================================================
</TABLE>
Notes (In Thousands):
(a) Operating profit represents income before income taxes, before gains on
sales of businesses and before interest and financing expenses and other
income, net.
(b) Includes the effects of foreign exchange gains (losses). See Note 1,
"Summary of Significant Accounting Policies".
NOTE 18 - Supplemental Pro Forma Condensed Consolidated Financial Information
(Unaudited):
- --------------------------------------------------------------------------------
As a result of the sale of the Olefins Business, the Company believes that
the following unaudited pro forma condensed consolidated statements of income on
page 37 are important to enable the reader to obtain a meaningful understanding
of the Company's results of operations after the transaction.
The pro forma condensed consolidated statements of income for the years
ended December 31, 1996 and 1995, present the results of operations of the
Company assuming that the disposition of the Olefins Business had occurred as of
January 1, 1995. 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 reflect the impact of the purchase of 9,484,465 shares of common
stock acquired in the Company's tender offer concluded on April 1, 1996, as if
it had occurred on January 1, 1995.
36
<PAGE>
- --------------------------------------------------------------------------------
Albemarle Corporation and Subsidiaries
The unaudited pro forma condensed consolidated statements of income are
presented for informational purposes only and do not purport to be indicative of
the Company's future consolidated results of operations nor what the
consolidated results of operations would have been had the Company operated
without the Olefins Business for all of 1996 and 1995.
Pro Forma Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Amounts)
Years Ended December 31 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
Adjustments Adjustments
Increase Pro Increase Pro
Historical (Decrease) Forma Historical (Decrease) Forma
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $ 854,481 $ (79,763)(1) $1,244,222 $ (475,378)(1)
799 (2) $ 775,517 7,567 (2) $ 776,411
- -----------------------------------------------------------------------------------------------------------------------------
Cost of goods sold 611,353 (71,268)(1) 967,204 (450,524)(1)
420 (2) 540,505 2,292 (2) 518,972
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit 243,128 (8,116) 235,012 277,018 (19,579) 257,439
Selling, R&D and
general expenses 149,702 (5,486)(1) 144,216 160,055 (23,889)(1) 136,166
- -----------------------------------------------------------------------------------------------------------------------------
Operating profit 93,426 (2,630) 90,796 116,963 4,310 121,273
Interest and financing expenses 2,529 (1,563)(3) 13,265 368 (1)
966 (12,256)(3) 1,377
Gain on sales of businesses (158,157) 158,157 (4) (23,427) (23,427)
Other (income) expenses, net (4,025) 14 (1) (4,468) 155 (1)
(60)(5) (4,071) (359)(5) (4,672)
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 253,079 (159,178) 93,901 131,593 16,402 147,995
Income taxes 97,020 (63,780)(4) 53,363
(393)(6) 32,847 5,452 (6) 58,815
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 156,059 $ (95,005) $ 61,054 $ 78,230 $ 10,950 $ 89,180
=============================================================================================================================
Earnings per share $ 2.65 $ 1.04 $ 1.18 $ 1.34
=============================================================================================================================
Shares used to compute
earnings per share 58,842 58,842 (7) 66,352 66,352 (7)
=============================================================================================================================
</TABLE>
The description of adjustments to the pro forma condensed consolidated
statements of income follows:
(1) To eliminate the results of operations of the Olefins Business for the
periods presented 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.
(2) 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.
(3) 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.
(4) To eliminate the gain and the related income taxes on the March 1, 1996,
sale of the Olefins Business.
(5) 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.
(6) To record the income tax effects of adjustments set forth in Notes (1)
through (3) and (5) above, calculated at an assumed combined domestic state
and federal income tax rate of 37.92%. For 1996, the Company's income tax
provision on the results of operations of the remaining businesses was
adjusted for utilization of a portion of the Belgium net operating loss
carryforwards for which a valuation allowance had previously been provided
on the related deferred tax assets and for the estimated additional income
taxes which would have resulted if undistributed foreign earnings had been
remitted to the Company. For 1995, no tax effects have been provided on the
elimination of the results of the operations of the Olefins Business based
in Belgium since valuation allowances had historically been provided on
deferred tax assets associated with Belgian net operating loss
carryforwards generated by this business.
(7) The average number of shares used to compute earnings per share does not
include the effects of the Company's tender offer concluded on April 1,
1996, as if it had occurred on January 1, 1995. The average number of
shares would have been 56,471,000 and 56,868,000 for 1996 and 1995,
respectively, had the offer been assumed to have been completed on January
1, 1995.
37
<PAGE>
Management's Report On The Consolidated Financial Statements
- --------------------------------------------------------------------------------
Albemarle Corporation's management has prepared the consolidated financial
statements and related notes appearing on pages 16 through 37 in conformity with
generally accepted accounting principles. In so doing, management makes informed
judgments and estimates of the expected effects of events and transactions.
Actual results may differ from management's judgments and estimates. Financial
data appearing elsewhere in this annual report are consistent with these
consolidated financial statements.
Albemarle maintains a system of internal controls to provide reasonable, but
not absolute, assurance of the reliability of the financial records and the
protection of assets. The internal control system is supported by written
policies and procedures, careful selection and training of qualified personnel
and an extensive internal audit program.
These consolidated financial statements have been audited by Coopers &
Lybrand L.L.P., independent certified public accountants. Their audit was made
in accordance with generally accepted auditing standards and included an
evaluation of Albemarle's internal accounting controls to the extent considered
necessary to determine audit procedures.
The audit committee of the Board of Directors, composed only of outside
directors, meets with management, internal auditors and the independent
accountants to review accounting, auditing and financial reporting matters. The
independent accountants are appointed by the board on recommendation of the
audit committee, subject to shareholder approval.
Report Of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Albemarle Corporation:
We have audited the accompanying consolidated balance sheets of Albemarle
Corporation and Subsidiaries (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Albemarle
Corporation and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
February 7, 1997
38
Exhibit 21
LIST OF ALBEMARLE CORPORATION SUBSIDIARIES
Albemarle Asano Corporation
Albemarle Asia Pacific Company
Albemarle Chimie S.A.
Albemarle China Corporation
Albemarle Foreign Sales Corporation
Albemarle France S.A.R.L.
Albemarle International Corporation
Albemarle Overseas Development Company
Albemarle PPC
Albemarle S.A.
Albemarle Virginia Corporation
Albemarle Virginia Limited Partnership
Winsor Corporation
-72-
Exhibit 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement on
Form S-1 for Albemarle Corporation (File No. 33-77452) and in the registration
statement on Form S-8 for the Savings Plan for the Employees of Albemarle
Corporation (File No. 33-75622) of our report dated February 7, 1997, on our
audits of the consolidated financial statements of Albemarle Corporation and
Subsidiaries as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995 and 1994, appearing on page 38 of the Albemarle Corporation 1996
Annual Report, which report is incorporated by reference in this Annual Report
on Form 10-K.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
March 26, 1997
-73-
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<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-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ANNUAL REPORT ON FORM 10-K.
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$0
$0
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<INTEREST-EXPENSE> $2,529
<INCOME-PRETAX> $253,079
<INCOME-TAX> $97,020
<INCOME-CONTINUING> $156,059
<DISCONTINUED> $0
<EXTRAORDINARY> $0
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