<PAGE>1
Page 1 of 15 Pages
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Transition Period from _____________to________________
Commission File Number 1-12658
ALBEMARLE CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1692118
----------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 SOUTH FOURTH STREET
P. O. BOX 1335
RICHMOND, VIRGINIA 23210
- ----------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (804) 788-6000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Number of shares of common stock, $.01 par value, outstanding as
of April 30, 1998: 53,120,366
<PAGE>2
ALBEMARLE CORPORATION
I N D E X
Page
Number
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets
- March 31, 1998 and
December 31, 1997 3-4
Consolidated Statements of Income
- Three Months Ended
March 31, 1998 and 1997 5
Consolidated Statements of Comprehensive
Income - Three Months Ended March 31, 1998
and 1997 6
Condensed Consolidated Statements of Cash
Flows - Three Months Ended March 31, 1998
and 1997 7
Notes to the Consolidated Financial Statements 8-9
ITEM 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition and
Additional Information 10-13
PART II. OTHER INFORMATION
ITEM 3. Legal Proceedings 13
ITEM 4. Submission of Matters to a Vote of
Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>3
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
--------------------
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars In Thousands)
----------------------
<CAPTION>
March 31, December 31,
1998 1997
------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,244 $ 34,322
Accounts receivable, less allowance
for doubtful accounts
(1998 - $2,528; 1997 - $2,449) 146,762 154,421
Inventories:
Finished goods 69,810 65,998
Raw materials 11,901 7,424
Stores, supplies and other 16,869 16,861
------------- ---------------
98,580 90,283
Deferred income taxes and prepaid
expenses 19,276 17,710
-------------- ---------------
Total current assets 306,862 296,736
-------------- ---------------
Property, plant and equipment, at cost 1,200,596 1,188,252
Less accumulated depreciation and
amortization (704,160) (691,612)
-------------- ---------------
Net property, plant and equipment 496,436 496,640
Other assets and deferred charges 81,720 77,204
Goodwill and other intangibles - net of
amortization 16,810 17,601
-------------- ---------------
Total assets $ 901,828 $ 888,181
-------------- ---------------
-------------- ---------------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>4
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars In Thousands)
----------------------
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,789 $ 50,668
Long-term debt, current portion 375 379
Accrued expenses 48,981 47,578
Dividends payable 4,781 4,952
Income taxes payable 19,141 8,983
------------- --------------
Total current liabilities 129,067 112,560
------------- --------------
Long-term debt 88,968 91,414
Other noncurrent liabilities 72,500 69,704
Deferred income taxes 96,938 97,167
Shareholders' equity:
Common stock, $.01 par value,
issued - 53,128,551 in 1998
and 53,886,802 in 1997, respectively 531 539
Additional paid-in capital 199,987 218,841
Accumulated other comprehensive
income (3,421) (1,445)
Retained earnings 317,258 299,401
------------- --------------
Total shareholders' equity 514,355 517,336
------------- --------------
Total liabilities and shareholders'
equity $ 901,828 $ 888,181
------------- --------------
------------- --------------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>5
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In Thousands Except Per-Share Amounts)
---------------------------------------
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---------- -----------
<S> <C> <C>
Net sales $ 215,149 $ 198,394
Cost of goods sold 147,328 132,032
---------- -----------
Gross profit 67,821 66,362
Selling, general and administrative
expenses 26,575 26,599
Research and development expenses 7,054 7,397
----------- -----------
Operating profit 34,192 32,366
Interest and financing expenses 952 197
Other income, net (666) (62)
----------- -----------
Income before income taxes 33,906 32,231
Income taxes 11,257 12,054
----------- -----------
NET INCOME $ 22,649 $ 20,177
----------- -----------
----------- -----------
BASIC EARNINGS PER SHARE $ .42 $ .37
----------- -----------
----------- -----------
Shares used to compute basic
earnings per share 53,469 55,046
----------- -----------
----------- -----------
DILUTED EARNINGS PER SHARE $ .42 $ .36
----------- -----------
----------- -----------
Shares used to compute
diluted earnings per share 53,981 55,535
----------- -----------
----------- -----------
Cash dividends declared per
share of common stock $ .09 $ .07
----------- -----------
----------- -----------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>6
<TABLE>
ALBEMARLE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(Dollars in Thousands)
----------------------
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---------- -----------
<S> <C> <C>
Net income $ 22,649 $ 20,177
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments (1,976) (11,292)
----------- -----------
Comprehensive income $ 20,673 $ 8,885
----------- -----------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>7
<TABLE>
ALBEMARLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars In Thousands)
----------------------
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
--------- ----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR $ 34,322 $ 14,242
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 22,649 20,177
Adjustments to reconcile
net income to cash flows from
operating activities:
Depreciation and amortization 17,607 16,097
Working capital decrease (increase)
excluding cash and cash equivalents 15,206 (21,603)
Other, net (2,680) 850
---------- ------------
Net cash provided from operating
activities 52,782 15,521
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and
acquisition cost (18,361) (27,424)
Other, net (215) 8
---------- ------------
Net cash used in investing
activities (18,576) (27,416)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock (19,029) -
Proceeds from borrowings 3,865 12,555
Repayments of long-term debt (6,324) (8,440)
Dividends paid (4,963) (3,853)
Proceeds from stock options exercised 167 6
---------- ------------
Net cash (used in) provided from
financing activities (26,284) 268
---------- ------------
Increase (decrease) in cash and cash
equivalents 7,922 (11,627)
---------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 42,244 $ 2,615
---------- ------------
---------- ------------
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>8
ALBEMARLE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands Except Per-Share Amounts)
(Unaudited)
1. In the opinion of management, the accompanying consolidated
financial statements of Albemarle Corporation and
Subsidiaries ("Albemarle" or "the Company") contain all
adjustments necessary to present fairly, in all material
respects, the Company's consolidated financial position as of
March 31, 1998 and December 31, 1997, the actual consolidated
results of operations, comprehensive income and condensed
consolidated cash flows for the three-month periods ended
March 31, 1998 and 1997. All adjustments are of a normal
and recurring nature. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1997
Annual Report & Form 10-K filed on March 20, 1998. The
December 31, 1997 consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. The
results of operations for the three-month period ended March
31, 1998, are not necessarily indicative of the results to be
expected for the full year. Certain amounts in the
accompanying consolidated financial statements and notes
thereto for the period ended March 31, 1997, have been
compiled and included herein in connection with the adoption
of Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income" effective January 1, 1998.
2. Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ -------------
<S> <C> <C>
Variable-rate bank loans $ 70,700 $ 77,000
Foreign bank borrowings 17,519 13,645
Miscellaneous 1,124 1,148
------------ -------------
Total 89,343 91,793
Less amounts due within one
year 375 379
----------- -------------
Long-term debt $ 88,968 $ 91,414
----------- -------------
----------- -------------
</TABLE>
<PAGE>9
3. Basic and diluted earnings per share for the three-month
periods ended March 31, 1998 and 1997, are calculated as
follows:
<TABLE>
<S> <C> <C>
BASIC EARNINGS PER SHARE 1998 1997
---------- ----------
Numerator:
Income available to stockholders,
as reported $ 22,649 $ 20,177
---------- ----------
Denominator:
Average number of shares of common
stock outstanding 53,469 55,046
---------- ----------
Basic earnings per share $ .42 $ .37
DILUTED EARNINGS PER SHARE
Numerator:
Income available to stockholders,
as reported $ 22,649 $ 20,177
Denominator:
Average number of shares of common
stock outstanding 53,469 55,046
Shares issuable upon exercise of
stock options 512 489
---------- ----------
Total shares 53,981 55,535
---------- ----------
Diluted earnings per share $ .42 $ .36
---------- ----------
---------- ----------
</TABLE>
4. The FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", in June, 1997, which
became effective for fiscal years beginning after December
31, 1997. SFAS No. 131 establishes standards for reporting
information about operating segments, including related
disclosures about products and services, geographic areas,
and major customers. Interim reporting disclosures are not
required in the first year of adoption and are therefore not
provided. The Company has not determined the impact on its
disclosures resulting from adoption of this standard; however,
at the time of adoption of SFAS No. 131, this standard is not
expected to have a material impact on the financial position
or results of operations of the Company.
<PAGE>10
ITEM 2. Management's Discussion And Analysis Of Results Of
Operations And Financial Condition
The following is management's discussion and analysis of certain
significant factors affecting the results of operations of
Albemarle Corporation ("Albemarle" or "the Company") during the
periods included in the accompanying consolidated statements of
income and changes in the Company's financial condition since
December 31, 1997.
Some of the information presented in the following discussion
constitutes forward-looking comments within the meaning of the
Private Securities Litigation Reform Act of 1995. Although the
Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its businesses
and operations, there can be no assurance that actual results
will not differ materially from its expectations. Factors which
could cause actual results to differ from expectations include,
without limitation, the timing of orders received from customers,
the gain or loss of significant customers, competition from other
manufacturers, changes in the demand for the Company's products,
increases in the cost of the product, changes in the market in
general, fluctuations in foreign currencies and significant
changes in new product introduction resulting in an increase in
capital project requests and approvals leading to additional
capital spending.
Results of Operations
- ---------------------
First Quarter 1998 Compared with First Quarter 1997
- ---------------------------------------------------
NET SALES
Net sales for the first quarter of 1998 amounted to $215.1
million, an increase of eight percent or $16.8 million from first
quarter 1997. The higher net sales were primarily due to
increased shipments of pharmachemicals, flame retardants, polymer
additives and intermediates, organometallics and agrichemicals,
partly offset by lower prices in polymer additives and
intermediates.
OPERATING COSTS AND EXPENSES
Cost of goods sold increased 12% ($15.3 million) in the first
quarter of 1998 from first quarter 1997 primarily reflecting
the impact of higher shipments and lower foreign exchange
gains in 1998 versus 1997. Excluding the effect of foreign
exchange gains in first quarter 1998 and 1997, gross margin
as a percent of net sales would have been 31.1% in both periods.
<PAGE>11
Selling, general and administrative expenses and research and
development expenses declined slightly in 1998 versus the 1997
quarter. The decline in first quarter 1998 resulted primarily
from the Company's cost reduction program which began in 1996 and
lower outside consulting costs, offset in part by higher employee
related costs in the 1998 period. As a percentage of net sales,
selling, general and administrative expenses and research and
development expenses were 15.6% in 1998 versus 17.1% in the 1997
quarter.
OPERATING PROFIT
Operating profit in the first quarter of 1998 increased
approximately 6% from the corresponding period in 1997 primarily
due to increased shipments in pharmachemicals, flame retardants
and polymer additives and intermediates, and improved costs in
bromine and derivatives and surface actives offset in part by
higher production costs in organometallics and catalysts.
INTEREST AND FINANCING EXPENSES AND OTHER INCOME
Interest and financing expenses for first quarter 1998 increased
to $1.0 million from $.2 million for first quarter 1997 due to
higher average outstanding debt. Other income increased $.6
million primarily due to higher interest income in the 1998
period.
INCOME TAXES
Income taxes for first quarter 1998 decreased $.8 million
compared to first quarter 1997 as the effective tax rate declined
to 33.2% in the 1998 quarter from 37.4% in the 1997 quarter.
The higher tax rate in first quarter 1997 versus first quarter
1998 does not reflect the benefit of tax planning strategies
and improved earnings in certain foreign subsidiaries in the
latter half of 1997 which resulted in a 1997 annual effective
income tax rate of 33.8%.
Financial Condition and Liquidity
- ----------------------------------
Cash and cash equivalents at March 31, 1998, were $42.2 million,
representing an increase of $7.9 million from $34.3 million at
year-end 1997.
Cash flows from operating activities for the first three months
of 1998 together with borrowings of $3.9 million were used to
cover purchases of common stock, capital expenditures, payment of
dividends, repayment of debt and increase cash and cash
equivalents.
The Company anticipates that cash provided from operations in the
future will be sufficient to pay its operating expenses, satisfy
debt-service obligations and make dividend payments.
<PAGE>12
The change in the Company's foreign currency translation
adjustments, net of related deferred taxes, was primarily due to
the strengthening of the U.S. dollar.
The noncurrent portion of the Company's long-term debt amounted
to $89.0 million at March 31, 1998, compared to $91.4 million at
the end of 1997. The Company's long-term debt, including the
current portion, as a percentage of total capitalization amounted
to 14.8% at March 31, 1998.
The Company's capital expenditures in the first quarter of 1998
were lower than in the first quarter of 1997. For the year,
capital expenditures are forecasted to be above the 1997 level.
Capital spending will be financed primarily with cash flow from
operations with any additional cash provided from debt. The
amount and timing of any additional borrowing will depend on the
Company's specific cash requirements.
The Company is subject to federal, state, local and foreign
requirements regulating the handling, manufacture and use of
materials (some of which may be classified as hazardous or toxic
by one or more regulatory agencies), the discharge of materials
into the environment and the protection of the environment. To
the best of the Company's knowledge, it currently is complying
with and expects to continue to comply in all material respects
with existing environmental laws, regulations, statutes and
ordinances. Such compliance with federal, state, local and
foreign environmental protection laws has not in the past had,
and is not expected to have in the future, a material effect on
earnings or the competitive position of Albemarle.
Among other environmental requirements, the Company is subject to
the federal Superfund law, and similar state laws, under which
the Company may be designated as a potentially responsible party
and may be liable for a share of the costs associated with
cleaning up various hazardous waste sites.
Outlook
- -------
First quarter 1998 saw the continued strengthening of the U.S.
dollar against the Japanese yen and the Deutsche mark, which has
had a negative impact on the Company's results during the period.
The Company expects this trend to continue through the end of
1998. The Company continues to emphasize plant efficiencies and
revenue growth in its continuing efforts to mitigate these
currency effects. The Company used forward exchange contracts in
the 1998 first quarter and likely will use this option from time
to time where appropriate to lessen the effects of currency
exchange rates.
<PAGE>13
The Company continues to sell Polymer Chemicals products into
Asia Pacific, reflecting continued strong demand by European and
U.S. consumers for the Asia Pacific's electronic products
containing the Company's additives. While no significant
reduction in sales volumes has occurred due to the Asia Pacific's
current economic conditions, the Company continues to watch the
situation closely.
New product development is a primary focus for the Company in its
growth strategy. Currently, customers are qualifying two new
flame retardants, and sales of commercial quantities of these
products should develop, assuming successful completion of the
qualification process. As reported in the 1997 Form 10-K,
Ethacure 300 curative, used in cast polyurethane elastomers and
other applications, is scheduled for plant start up during
mid-year 1998. Naproxen, a pharmaceutical bulk active, is being sold
in the U.S. and to a limited extent outside the U.S., however,
sales continue to lag expectations. Other new products are under
development, including new pharmaceutical, agricultural, cleaning
and polymer chemicals.
The Company continues to seek alliances and pursue acquisitions
in synergistic specialty chemicals. Identification of
opportunities continues.
PART II - OTHER INFORMATION
- ----------------------------
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 products liability and toxic tort
litigation and administrative or judicial proceedings seeking
remediation under environmental laws, such as Superfund.
While it is not possible to predict or determine the outcome of the
proceedings presently pending, in the Company's opinion they should
not result ultimately in liabilities that are likely to have a
material adverse effect upon the results of operations or financial
condition of the Company and its subsidiaries on a consolidated
basis.
<PAGE>14
Item 4. Submission Of Matters To A Vote Of Security Holders
----------------------------------------------------
At the annual meeting of shareholders held on April 22, 1998, the
shareholders elected the directors nominated in the Proxy with the
following affirmative votes and votes withheld:
Director Affirmative Votes Votes Withheld
- -------- ----------------- --------------
Craig R. Andersson 48,520,610 84,915
Dirk Betlem 48,522,341 83,184
Floyd D. Gottwald, Jr. 48,510,498 95,027
John D. Gottwald 48,520,034 85,491
Andre' B. Lacy 48,519,070 86,455
Seymour S. Preston, III 48,522,097 83,428
Emmett J. Rice 48,508,492 97,033
Charles E. Stewart 48,519,458 86,067
Charles B. Walker 48,516,418 89,107
Anne M. Whittemore 48,520,281 85,244
Shareholders also approved the Albemarle Corporation 1998 Incentive
Plan as described in the 1998 Proxy Statement. A copy of the Plan
was filed with the Securities and Exchange Commission along with
the Company's Proxy Statement. The Plan received 41,731,921
affirmative votes and 2,510,170 negative votes, with 352,740
abstentions and 4,010,695 broker non-votes.
The shareholders also approved the selection of Coopers & Lybrand
L.L.P. as the Company's auditors with 48,391,151 affirmative votes,
110,084 negative and 104,290 abstentions.
ITEM 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter
for which this report is filed.
<PAGE>15
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALBEMARLE CORPORATION
---------------------
(Registrant)
Date: May 5, 1998 By: s/Thomas G. Avant
------------------
Thomas G. Avant
Senior Vice President
(Principal Accounting
Officer)
Date: May 5, 1998 By: s/Robert G. Kirchhoefer
------------------------
Robert G. Kirchhoefer
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY SUCH QUARTERLY
REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> $42,244
<SECURITIES> $0
<RECEIVABLES> $149,290
<ALLOWANCES> $2,528
<INVENTORY> $98,580
<CURRENT-ASSETS> $306,862
<PP&E> $1,200,596
<DEPRECIATION> $704,160
<TOTAL-ASSETS> $901,828
<CURRENT-LIABILITIES> $129,067
<BONDS> $0
$0
$0
<COMMON> $531
<OTHER-SE> $513,824
<TOTAL-LIABILITY-AND-EQUITY> $901,828
<SALES> $215,149
<TOTAL-REVENUES> $215,149
<CGS> $147,328
<TOTAL-COSTS> $180,957
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $0
<INTEREST-EXPENSE> $952
<INCOME-PRETAX> $33,906
<INCOME-TAX> $11,257
<INCOME-CONTINUING> $22,649
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $22,649
<EPS-PRIMARY> $0.42
<EPS-DILUTED> $0.42
</TABLE>
