ALBEMARLE CORP

Previous wording

•timing of active and proposed projects;

Current wording

•timing of active and proposed restructuring and cost optimization projects;

Previous wording

•the inability to realize the benefits of our decision to retain our Ketjen business as a wholly-owned subsidiary and to realign our Lithium and Bromine global business units into a new corporate structure, including Energy Storage and Specialties business units; and

Current wording

•the inability to realize the benefits of our decision to retain our Ketjen business as a wholly-owned subsidiary; and

Previous wording

The following is a discussion and analysis of our results of operations for the three-month and six-month periods ended June 30, 2024 and 2023. A discussion of our consolidated financial condition and sources of additional capital is included under a separate heading, “Financial Condition and Liquidity.”

Current wording

The following is a discussion and analysis of our results of operations for the three-month and nine-month periods ended September 30, 2024 and 2023. A discussion of our consolidated financial condition and sources of additional capital is included under a separate heading, “Financial Condition and Liquidity.”

Previous wording

Secular trends favorably impacting demand within the end markets that we serve combined with our diverse product portfolio, broad geographic presence and customer-focused solutions will continue to be key drivers of our future earnings growth. We continue to build upon our existing green solutions portfolio and our ongoing mission to provide innovative, yet commercially viable, clean energy products and services to the marketplace to contribute to our sustainablility-based revenue. For example, our Energy Storage business contributes to the growth of clean miles driven with electric vehicles and more efficient use of renewable energy through grid storage; Specialties enables the prevention of fires starting in electronic equipment, greater fuel efficiency from rubber tires and the reduction of emissions from coal fired power plants; and our Ketjen business enhances the efficiency of natural resources through more usable products from a single barrel of oil, enables safer, greener production of alkylates used to produce more environmentally-friendly fuels, and reduced emissions through cleaner transportation fuels. We believe our disciplined cost reduction efforts and ongoing productivity improvements, among other factors, position us well to take advantage of strengthening economic conditions as they occur, while softening the negative impact of the current challenging global economic environment.

Current wording

Secular trends favorably impacting demand within the end markets that we serve combined with our diverse product portfolio, broad geographic presence and customer-focused solutions will continue to be key drivers of our future earnings growth. We continue to build upon our existing green solutions portfolio and our ongoing mission to provide innovative, yet commercially viable, clean energy products and services to the marketplace to contribute to our sustainability-based revenue. For example, our Energy Storage business contributes to the growth of clean miles driven with electric vehicles and more efficient use of renewable energy through grid storage; Specialties enables the prevention of fires starting in electronic equipment, greater fuel efficiency from rubber tires and the reduction of emissions from coal fired power plants; and our Ketjen business enhances the efficiency of natural resources through more usable products from a single barrel of oil, enables safer, greener production of alkylates used to produce more environmentally-friendly fuels, and reduced emissions through cleaner transportation fuels. We believe our disciplined cost reduction efforts and ongoing productivity improvements, among other factors, position us well to take advantage of strengthening economic conditions as they occur, while softening the negative impact of the current challenging global economic environment.

Previous wording

•Our board of directors declared a quarterly dividend of $0.40 per share on May 7, 2024, which was paid on July 1, 2024 to common shareholders of record at the close of business as of June 14, 2024.

Current wording

•Our board of directors declared a quarterly dividend of $0.405 per share on July 16, 2024, which was paid on October 1, 2024 to common shareholders of record at the close of business as of September 13, 2024.

Previous wording

The current global business environment presents a diverse set of opportunities and challenges in the markets we serve. In particular, we believe that the market for lithium battery and energy storage, particularly for electric vehicles (“EV”), remains strong, providing the opportunity to continue to develop high quality and innovative products while managing the high cost of expanding capacity. The other markets we serve continue to present various opportunities for value and growth as we have positioned ourselves to manage the impact on our business of changing global conditions, such as slow and uneven global growth, currency exchange volatility, crude oil price fluctuation, a dynamic pricing environment, an ever-changing landscape in electronics, the continuous need for cutting edge catalysts and technology by our refinery customers and increasingly stringent environmental standards. During the course of 2023, lithium index pricing dropped significantly, and remained relatively steady at these lower levels during the first half of 2024. Amidst these dynamics, and despite recent downward lithium price pressure, we believe our business fundamentals are sound and that we are strategically well-positioned as we remain focused on increasing sales volumes, optimizing and improving the value of our portfolio primarily through pricing and product development, managing costs and delivering value to our customers and shareholders. We believe that our businesses remain well-positioned to capitalize on new business opportunities and long-term trends driving growth within our end markets and to respond quickly to changes in economic conditions in these markets. However, in order to optimize our cost structure and strengthen our financial flexibility, we are taking proactive actions, including certain restructuring activities and reducing planned capital expenditures. If lithium index pricing trends further downward or remains at low levels for an extended time, we may need to take additional measures to support growth and financial flexibility, including further restructuring actions. At this time, relating to the current situation in the Middle East, our business operations have continued as normal with some shipping and raw material delays. We are monitoring the situation and will continue to make efforts to protect the safety of our employees and the health of our business.

Current wording

The current global business environment presents a diverse set of opportunities and challenges in the markets we serve. In particular, we believe that the market for lithium battery and energy storage, particularly for electric vehicles (“EV”), remains strong, providing the opportunity to continue to develop high quality and innovative products while managing the high cost of expanding capacity. The other markets we serve continue to present various opportunities for value and growth as we have positioned ourselves to manage the impact on our business of changing global conditions, such as slow and uneven global growth, currency exchange volatility, crude oil price fluctuation, a dynamic pricing environment, an ever-changing landscape in electronics, the continuous need for cutting edge catalysts and technology by our refinery customers and increasingly stringent environmental standards. During the course of 2023, lithium index pricing dropped significantly, and remained relatively steady at these lower levels during the first nine months of 2024. Amidst these dynamics, and despite recent downward lithium price pressure, we believe our business fundamentals are sound and that we are strategically well-positioned as we remain focused on increasing sales volumes, optimizing and improving the value of our portfolio primarily through pricing and product development, managing costs and delivering value to our customers and shareholders. We believe that our businesses remain well-positioned to capitalize on new business opportunities and long-term trends driving growth within our end markets and to respond quickly to changes in economic conditions in these markets.

Previous wording

Energy Storage: We expect Energy Storage net sales and profitability to decrease year-over-year in 2024 if lithium market prices remain at their current levels. Due to many of our contracts being index-referenced and variable-priced, our business is more aligned with changes in market and index pricing. The first part of 2023 saw record high lithium price levels which increased prior year results. As a result, increases or further decreases in lithium market pricing could have a material impact on our results. We do expect the lower pricing to be partially offset by higher sales volume driven primarily by additional capacity from La Negra, Chile, Kemerton, Western Australia, Meishan and Qinzhou, China, as well as additional tolling volume supported by increased spodumene production out of Australia. The Meishan, China lithium conversion plant achieved first commercial sales during the second quarter of 2024. During the fourth quarter of 2023, we recorded a $604 million charge to reduce the value of certain spodumene and finished goods to their net realizable value following the decline in lithium market pricing at the end of the year. We could record additional inventory valuation charges in 2024 if lithium prices continue to deteriorate during the projected period of conversion and sale. While we ramp up our new capacity, we will continue to utilize tolling arrangements to meet growing customer demand. Global EV sales are expected to continue to increase over the prior year, driving continued demand for lithium batteries.

Current wording

Energy Storage: We expect Energy Storage net sales and profitability to decrease year-over-year in 2024 as lithium market prices remain at lower levels compared to the prior year. Due to many of our contracts being index-referenced and variable-priced, our business is more aligned with changes in market and index pricing. The first part of 2023 saw record high lithium price levels which increased prior year results. As a result, increases or further decreases in lithium market pricing could have a material impact on our results. We do expect the lower pricing to be partially offset by higher sales volume driven primarily by additional capacity from La Negra, Chile, Meishan and Qinzhou, China, as well as additional tolling volume supported by increased spodumene production out of Australia. The Meishan, China lithium conversion plant achieved first commercial sales during the second quarter of 2024. During the fourth quarter of 2023, we recorded a $604 million charge to reduce the value of certain spodumene and finished goods to their net realizable value following the decline in lithium market pricing at the end of the year. We could record additional inventory valuation charges in 2024 if lithium prices continue to deteriorate during the projected period of conversion and sale. While we ramp up our new capacity, we will continue to utilize tolling arrangements to meet growing customer demand. Global EV sales are expected to continue to increase over the prior year, driving continued demand for lithium batteries.

Previous wording

Ketjen: Total Ketjen results in 2024 are expected to increase year-over-year due to higher revenue and lower input costs. The fluidized catalytic cracking (“FCC”) market is expected to remain stable. Hydroprocessing catalysts (“HPC”) demand is lumpier, but we have seen increased demand as refineries are taking turnarounds. Additionally, we have signed an agreement to supply unique technologies to new markets, such as the hydrotreated vegetable oil market, which supports the energy transition for sustainable aviation fuels and supports our business growth.

Current wording

Ketjen: Total Ketjen results in 2024 are expected to increase year-over-year due to higher revenue and favorable product mix. The fluidized catalytic cracking (“FCC”) market is expected to remain stable. Hydroprocessing catalysts (“HPC”) demand is project-driven, but we have seen increased demand as refineries are taking turnarounds.

Previous wording

On a longer-term basis, we believe increased global demand for transportation fuels, new refinery start-ups and ongoing adoption of cleaner fuels will be the primary drivers of growth in our Ketjen business. We believe delivering superior end-use performance continues to be the most effective way to create sustainable value in the refinery catalysts industry. We also believe our technologies continue to provide significant performance and financial benefits to refiners challenged to meet tighter regulations around the world, including those managing new contaminants present in North America tight oil, and those in the Middle East and Asia seeking to use heavier feedstock while pushing for higher propylene yields.

Current wording

On a longer-term basis, we believe increased global demand for transportation fuels, new refinery start-ups and ongoing adoption of cleaner fuels will be the primary drivers of growth in our Ketjen business. We believe delivering superior end-use performance continues to be the most effective way to create sustainable value in the refinery catalysts industry. We also believe our technologies continue to provide significant performance and financial benefits to refiners challenged to meet tighter regulations around the world.

Previous wording

Corporate: We continue to focus on cash generation, working capital management and process efficiencies. We expect our global effective tax rate will vary based on the locations in which income is actually earned and remains subject to potential volatility from changing legislation in the United States, such as the Inflation Reduction Act and the recently released Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”) which became effective in early 2024, and other tax jurisdictions. In January 2024, we announced that we were taking measures to unlock near-term cash flow and generate long-term financial flexibility by re-phasing organic growth investments and optimizing our cost structure. As part of these measures, during the second quarter of 2024, the Company indefinitely suspended construction of the previously announced fourth train at its Kemerton conversion plant in Western Australia, as well as deferred spending and investments with respect to certain other capital projects. In July 2024, the Company concluded to stop construction of the third train at its Kemerton conversion plant and the Company announced that it will put the second train at the Kemerton conversion plant into care and maintenance. As a result of the actions taken at Kemerton Train 3 and Train 2 in the third quarter of 2024, there is a reasonable possibility within the next 12 months the Company may reach a conclusion a valuation allowance will be needed.

Current wording

Corporate: We continue to focus on cash generation, working capital management and process efficiencies. We expect our global effective tax rate will vary based on the locations in which income is actually earned and remains subject to potential volatility from changing legislation in the United States, such as the Inflation Reduction Act and the recently released Pillar Two Global Anti-Base Erosion Rules (“Pillar Two”) which became effective in early 2024, and other tax jurisdictions. In 2024, we have taken actions as part of an effort that will focus on preserving our world-class resource advantages, optimizing our global conversion network, improving our cost competitiveness and efficiency, reducing capital intensity and enhancing our financial flexibility. As part of these measures, we stopped construction or deferred spending on certain capital projects, such as the Kemerton conversion plant noted above. In addition, we will incur severance and other restructuring charges associated with the Company’s transition to a new fully integrated functional operating model.

Previous wording

Our chief operating decision maker uses adjusted EBITDA (as defined below) to assess the ongoing performance of the Company’s business segments and to allocate resources. Effective January 1, 2024, the Company changed its definition of adjusted EBITDA for financial accounting purposes. The updated definition includes Albemarle’s share of the pre-tax earnings of the Windfield joint venture, whereas the prior definition included Albemarle’s share of Windfield earnings net of tax. This calculation is consistent with the definition of adjusted EBITDA used in the leverage financial covenant calculation in the February 2024 amendment to the 2022 Credit Agreement, which is a material agreement for the Company and aligns the information presented to various stakeholders. This presentation more closely represents the materiality and financial contribution of the strategic investment in Windfield to the Company’s earnings, and more closely represents a measure of EBITDA. The Company’s updated definition of adjusted EBITDA is earnings before interest and financing expenses, income tax expenses, the proportionate share of Windfield income tax expense, depreciation and amortization, as adjusted on a consistent basis for certain non-operating, non-recurring or unusual items in a balanced manner and on a segment basis. These non-operating, non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business and enterprise planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides additional useful measurements to review the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Total adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Total adjusted EBITDA should not be considered as an alternative to Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, or any other financial measure reported in accordance with U.S. GAAP. Adjusted EBITDA for the prior period has been recast to conform to the current year presentation.

Current wording

Our chief operating decision maker uses adjusted EBITDA (as defined below) to assess the ongoing performance of the Company’s business segments and to allocate resources. Effective January 1, 2024, the Company changed its definition of adjusted EBITDA for financial accounting purposes. The updated definition includes Albemarle’s share of the pre-tax earnings of the Windfield joint venture, whereas the prior definition included Albemarle’s share of Windfield earnings net of tax. This calculation is consistent with the definition of adjusted EBITDA used in the leverage financial covenant calculation in the February 9, 2024 amendment to our revolving, unsecured amended and restated credit agreement dated October 28, 2022 (as so amended, the 2022 Credit Agreement”), which is a material agreement for the Company and aligns the information presented to various stakeholders. This presentation more closely represents the materiality and financial contribution of the strategic investment in Windfield to the Company’s earnings, and more closely represents a measure of EBITDA. The Company’s updated definition of adjusted EBITDA is earnings before interest and financing expenses, income tax expenses, the proportionate share of Windfield income tax expense, depreciation and amortization, as adjusted on a consistent basis for certain non-operating, non-recurring or unusual items in a balanced manner and on a segment basis. These non-operating, non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, non-operating pension and OPEB items and other significant non-recurring items. In addition, management uses adjusted EBITDA for business and enterprise planning purposes and as a significant component in the calculation of performance-based compensation for management and other employees. The Company has reported adjusted EBITDA because management believes it provides additional useful measurements to review the Company’s operations, provides transparency to investors and enables period-to-period comparability of financial performance. Total adjusted EBITDA is a financial measure that is not required by, or presented in accordance with, U.S. GAAP. Total adjusted EBITDA should not be considered as an alternative to Net (loss) income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP, or any other financial measure reported in accordance with U.S. GAAP. Adjusted EBITDA for the prior period has been recast to conform to the current year presentation.

Previous wording

(c)See Note 8, “Restructuring and Capital Project Assets Write-off,” to the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details.

Current wording

(c)See Note 9, “Restructuring Charges and Asset Write-offs,” to the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details.

Previous wording

(d)(Loss) gain of ($17.8) million and $15.0 million recorded in Other income, net for the three months ended June 30, 2024 and 2023, respectively, resulting from the net change in fair value of investments in public equity securities.

Current wording

(d)Loss of $5.0 million and $26.4 million recorded in Other (expenses) income, net for the three months ended September 30, 2024 and 2023, respectively, resulting from the net change in fair value of investments in public equity securities.

Previous wording

•SG&A - $5.2 million of expenses related to certain historical legal and environmental matters.

Current wording

•SG&A - $0.1 million of expenses related to certain historical legal matters.

Previous wording

•SG&A - $0.7 million of facility closure expenses related to offices in Germany and $0.6 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.

Current wording

•SG&A - $0.7 million of facility closure expenses related to offices in Germany and $0.3 million of a loss from the sale of legacy properties not part of our operations.

Previous wording

•Other income, net - $3.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses, partially offset by a $2.7 million gain in the fair value of preferred equity of a Grace subsidiary.

Current wording

•Other (expenses) income, net - $8.2 million gain in the fair value of preferred equity of a Grace subsidiary and a $7.2 million gain resulting from insurance proceeds related to a prior legal matter.

Previous wording

First Six Months 2024 Compared to First Six Months 2023

Current wording

First Nine Months 2024 Compared to First Nine Months 2023

Previous wording

(c)See Note 8, “Restructuring and Capital Project Assets Write-off,” to the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details.

Current wording

(c)See Note 9, “Restructuring Charges and Asset Write-offs,” to the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details.

Previous wording

(d)Loss of $33.7 million recorded in Other income, net for the six months ended June 30, 2024 resulting from the sale of investments in public equity securities and a (loss) gain of ($27.2) million and $60.8 million recorded in Other income, net for the six months ended June 30, 2024 and 2023, respectively, resulting from the net change in fair value of investments in public equity securities.

Current wording

(d)Loss of $33.7 million recorded in Other income, net for the nine months ended September 30, 2024 resulting from the sale of investments in public equity securities and a (loss) gain of ($32.2) million and $34.4 million recorded in Other income, net for the nine months ended September 30, 2024 and 2023, respectively, resulting from the net change in fair value of investments in public equity securities.

Previous wording

(f)Included amounts for the three months ended June 30, 2024 recorded in:

Current wording

(f)Included amounts for the nine months ended September 30, 2024 recorded in:

Previous wording

•SG&A - $5.1 million of expenses related to certain historical legal and environmental matters.

Current wording

•SG&A - $5.3 million of expenses related to certain historical legal and environmental matters.

Previous wording

•Other income, net - $17.6 million of income from PIK dividends of preferred equity in a Grace subsidiary, a $17.3 million gain primarily from the sale of assets at a site not part of our operations, a $2.4 million gain primarily resulting from the adjustment of indemnification related to a previously disposed business and a $0.6 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations, partially offset by $2.9 million of charges for asset retirement obligations at a site not part of our operations.

Current wording

•Other income, net - $26.8 million of income from PIK dividends of preferred equity in a Grace subsidiary, a $17.3 million gain primarily from the sale of assets at a site not part of our operations, a $0.6 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations and a $0.4 million net gain primarily resulting from the adjustment of indemnification related to previously disposed businesses, partially offset by $2.9 million of charges for asset retirement obligations at a site not part of our operations.

Previous wording

•SG&A - $1.9 million of charges primarily for environmental reserves at sites not part of our operations, $1.4 million of facility closure expenses related to offices in Germany and $0.6 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.

Current wording

•SG&A - $2.1 million of facility closure expenses related to offices in Germany, $1.9 million of charges primarily for environmental reserves at sites not part of our operations and $1.0 million primarily related to shortfall contributions for a multiemployer plan financial improvement plan.

Previous wording

•Other income, net - $3.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses and $3.6 million of charges for asset retirement obligations at a site not part of our operations, partially offset by a $2.7 million gain in the fair value of preferred equity of a Grace subsidiary.

Current wording

•Other income, net - $10.9 million gain in the fair value of preferred equity of a Grace subsidiary and a $7.2 million gain resulting from insurance proceeds of a prior legal matter, partially offset by $3.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses and $3.6 million of charges for asset retirement obligations at a site not part of our operations.

Previous wording

During the first six months of 2024, cash on hand, cash provided by operations and net proceeds from the issuance of mandatory convertible preferred stock of $2.2 billion funded the repayment of a net balance of $620.0 million of commercial paper, $1.0 billion of capital expenditures for plant, machinery and equipment, dividends to common shareholders of $93.9 million and dividends to mandatory convertible preferred shareholders of $39.4 million. Our operations provided $460.8 million of cash flows during the first six months of 2024, as compared to $794.7 million for the first six months of 2023. The change compared to prior year was primarily due to decreased earnings from the Energy Storage segment, driven by lower lithium market prices, and lower dividends received from unconsolidated investments, partially offset by positive working capital changes year-over-year of $1.6 billion. The inflow from working capital in 2024 was primarily driven by the impact of lower lithium pricing in accounts receivable and inventories. This was partially offset by lower accounts payable driven by similar lower lithium pricing. Overall, our cash and cash equivalents increased by $940.3 million to $1.8 billion at June 30, 2024 from $889.9 million at December 31, 2023.

Current wording

During the first nine months of 2024, cash on hand, cash provided by operations and net proceeds from the issuance of mandatory convertible preferred stock of $2.2 billion funded the repayment of a net balance of $620.0 million of commercial paper, $1.3 billion of capital expenditures for plant, machinery and equipment, dividends to common shareholders of $140.9 million and dividends to mandatory convertible preferred shareholders of $81.1 million. Our operations provided $701.4 million of cash flows during the first nine months of 2024, as compared to $1.4 billion for the first nine months of 2023. The change compared to prior year was primarily due to decreased earnings from the Energy Storage segment, driven by lower lithium market prices, and lower dividends received from unconsolidated investments, partially offset by positive working capital changes year-over-year of $2.2 billion. The inflow from working capital in 2024 was primarily driven by the impact of lower lithium pricing in inventories and accounts receivable. This was partially offset by lower accounts payable driven by similar lower lithium pricing. Overall, our cash and cash equivalents increased by $774.6 million to $1.7 billion at September 30, 2024 from $889.9 million at December 31, 2023.

Previous wording

Capital expenditures for the six-month period ended June 30, 2024 of $1.0 billion were primarily associated with plant, machinery and equipment. We expect our capital expenditures to be at the high-end of $1.7 billion to $1.8 billion in 2024, primarily for Energy Storage growth and capacity increases, including in Chile, China and the U.S., as well as productivity and continuity of operations projects in all segments. In January 2024, we announced that we were taking measures to unlock near-term cash flow and generate long-term financial flexibility by re-phasing organic growth investments and optimizing our cost structure. As part of these measures, during the second quarter of 2024, the Company indefinitely suspended construction of the previously announced fourth train at its Kemerton conversion plant in Western Australia, as well as deferred spending and investments with respect to certain other capital projects. In July 2024, the Company concluded to stop construction of the third train at its Kemerton conversion plant. Train 1 of our Kemerton, Western Australia plant is operating and producing battery-grade product subject to customer qualification. In addition, our lithium conversion plant in Meishan, China achieved first commercial sales in the second quarter of 2024.

Current wording

Capital expenditures for the nine-month period ended September 30, 2024 of $1.3 billion were primarily associated with plant, machinery and equipment. We expect our capital expenditures to be at the lower-end of $1.7 billion to $1.8 billion in 2024, primarily for Energy Storage growth and capacity increases, including in Chile, China and the U.S., as well as productivity and continuity of operations projects in all segments. Capital expenditures in 2024 also include spending for construction of Kemerton Trains 3 and 4 and certain other capital projects, which were stopped as part of our announced comprehensive review of our cost and operating structure.

Previous wording

In January 2024, the Company sold equity securities of a public company for proceeds of approximately $81.5 million. As a result of the sale, the Company realized a loss of $33.7 million in the six months ended June 30, 2024.

Current wording

In January 2024, the Company sold equity securities of a public company for proceeds of approximately $81.5 million. As a result of the sale, the Company realized a loss of $33.7 million in the nine months ended September 30, 2024.

Previous wording

Net current assets were $3.3 billion and $1.7 billion at June 30, 2024 and December 31, 2023, respectively. The increase is primarily due to the increased cash and cash equivalents balance as a result of the $2.2 billion of net proceeds from the issuance of Mandatory Convertible Preferred Stock in March 2024, and the resulting paydown of commercial paper. In addition, accounts receivable, inventory and accounts payable balances all decreased from December 31, 2023 due to the lower lithium market prices. Additional changes in the components of net current assets are primarily due to the timing of the sale of goods and other ordinary transactions leading up to the balance sheet dates. The additional changes are not the result of any policy changes by the Company, and do not reflect any change in either the quality of our net current assets or our expectation of success in converting net working capital to cash in the ordinary course of business.

Current wording

Net current assets were $2.8 billion and $1.7 billion at September 30, 2024 and December 31, 2023, respectively. The increase is primarily due to the increased cash and cash equivalents balance as a result of the $2.2 billion of net proceeds from the issuance of Mandatory Convertible Preferred Stock in March 2024, and the resulting paydown of commercial paper. In addition, accounts receivable, inventory and accounts payable balances all decreased from December 31, 2023 due to the lower lithium market prices. Additional changes in the components of net current assets are primarily due to the timing of the sale of goods and other ordinary transactions leading up to the balance sheet dates. The additional changes are not the result of any policy changes by the Company, and do not reflect any change in either the quality of our net current assets or our expectation of success in converting net working capital to cash in the ordinary course of business.

Previous wording

On May 7, 2024, our board of directors declared a cash dividend of $0.40, which was paid on July 1, 2024 to shareholders of record at the close of business as of June 14, 2024.

Current wording

On July 16, 2024, our board of directors declared a cash dividend of $0.405, which was paid on October 1, 2024 to shareholders of record at the close of business as of September 13, 2024.

Previous wording

At June 30, 2024 and December 31, 2023, our cash and cash equivalents included $1.1 billion and $857.6 million, respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are indefinitely reinvested and which we plan to use to support our continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash associated with earnings from our foreign subsidiaries to the U.S. for normal operating needs through intercompany dividends, but only from subsidiaries whose earnings we have not asserted to be indefinitely reinvested or whose earnings qualify as “previously taxed income” as defined by the Internal Revenue Code. During the first six months of 2024, we repatriated $28.8 million of cash as part of these foreign earnings cash repatriation activities. There were no cash repatriations during the first six months of 2023.

Current wording

At September 30, 2024 and December 31, 2023, our cash and cash equivalents included $980.8 million and $857.6 million, respectively, held by our foreign subsidiaries. The majority of these foreign cash balances are associated with earnings that we have asserted are indefinitely reinvested and which we plan to use to support our continued growth plans outside the U.S. through funding of capital expenditures, acquisitions, research, operating expenses or other similar cash needs of our foreign operations. From time to time, we repatriate cash associated with earnings from our foreign subsidiaries to the U.S. for normal operating needs through intercompany dividends, but only from subsidiaries whose earnings we have not asserted to be indefinitely reinvested or whose earnings qualify as “previously taxed income” as defined by the Internal Revenue Code. During the first nine months of 2024 and 2023, we repatriated $28.8 million and $3.0 million, respectively, of cash as part of these foreign earnings cash repatriation activities.

Previous wording

Given the current economic conditions, specifically around the market pricing of lithium, and the related impact on the Company’s future earnings, on February 9, 2024 we amended our revolving, unsecured amended and restated credit agreement dated October 28, 2022 (the “2022 Credit Agreement”), which provides for borrowings of up to $1.5 billion and matures on October 28, 2027. Borrowings under the 2022 Credit Agreement bear interest at variable rates based on a benchmark rate depending on the currency in which the loans are denominated, plus an applicable margin which ranges from 0.910% to 1.375%, depending on the Company’s credit rating from Standard & Poor’s Ratings Services LLC (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”). With respect to loans denominated in U.S. dollars, interest is calculated using the term Secured Overnight Financing Rate (“SOFR”) plus a term SOFR adjustment of 0.10%, plus the applicable margin. The applicable margin on the facility was 1.125% as of June 30, 2024. As of June 30, 2024 there were no borrowings outstanding under the 2022 Credit Agreement.

Current wording

Given current economic conditions, specifically around the market pricing of lithium, and the related impact on the Company’s future earnings, on October 31, 2024, we further amended the 2022 Credit Agreement, which provides for borrowings of up to $1.5 billion and matures on October 28, 2027. Borrowings under the 2022 Credit Agreement bear interest at variable rates based on a benchmark rate depending on the currency in which the loans are denominated, plus an applicable margin which ranges from 0.910% to 1.375%, depending on the Company’s credit rating from Standard & Poor’s Ratings Services LLC (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Inc. (“Fitch”). With respect to loans denominated in U.S. dollars, interest is calculated using the term Secured Overnight Financing Rate (“SOFR”) plus a term SOFR adjustment of 0.10%, plus the applicable margin. The applicable margin on the facility was 1.20% as of September 30, 2024. As of September 30, 2024 there were no borrowings outstanding under the 2022 Credit Agreement.

Previous wording

Borrowings under the 2022 Credit Agreement are conditioned upon satisfaction of certain customary conditions precedent, including the absence of defaults. The February 2024 amendment was entered into to modify the financial covenants under the 2022 Credit Agreement to avoid a potential covenant violation over the following 18 months given the current market pricing of lithium. Following the February 2024 amendment, the 2022 Credit Agreement subjects the Company to two financial covenants, as well as customary affirmative and negative covenants. The first financial covenant requires that the ratio of (a) the Company’s consolidated net funded debt plus a proportionate amount of Windfield’s net funded debt to (b) consolidated Windfield-Adjusted EBITDA (as such terms are defined in the 2022 Credit Agreement) be less than or equal to (i) 3.50:1 prior to the second quarter of 2024, (ii) 5.00:1 for the second quarter of 2024, (iii) 5.50:1 for the third quarter of 2024, (iv) 4.00:1 for the fourth quarter of 2024, (v) 3.75:1 for the first and second quarters of 2025 and (vi) 3.50:1 after the second quarter of 2025. The maximum permitted leverage ratios described above are subject to adjustment in accordance with the terms of the 2022 Credit Agreement upon the consummation of an acquisition after June 30, 2025 if the consideration includes cash proceeds from issuance of funded debt in excess of $500 million.

Current wording

Borrowings under the 2022 Credit Agreement are conditioned upon satisfaction of certain customary conditions precedent, including the absence of defaults. The October 2024 amendment was entered into to modify the financial covenants under the 2022 Credit Agreement to avoid a potential covenant violation over the following 18 months given the current market pricing of lithium. The amended 2022 Credit Agreement subjects the Company to two financial covenants, as well as customary affirmative and negative covenants. The amended first financial covenant requires that the ratio of (a) (i) the Company’s consolidated net funded debt plus a proportionate amount of Windfield’s net funded debt less (ii) the Company’s unrestricted cash and cash equivalents plus a proportionate amount of Windfield’s unrestricted cash and cash equivalents (up to a specified amount) to (b) consolidated Windfield-Adjusted EBITDA (as such terms are defined in the 2022 Credit Agreement) be less than or equal to (i) 5.50:1.0 as of the end of the third quarter of 2024, (ii) 4.00:1.0 as of the end of the fourth quarter of 2024, (iii) 4.75:1.0 as of the end of the first quarter of 2025, (iv) 5.75:1.0 as of the end of the second quarter of 2025, (v) 5.50:1.0 as of the end of the third quarter of 2025, (vi) 5.00:1.0 as of the end of fourth quarter of 2025, (vii) 4.75:1.0 as of the end of each of first and second quarter of 2026, and (viii) 3.50:1.0 as of the end of the third quarter of 2026 and each fiscal quarter thereafter through the third quarter of 2027. The maximum permitted leverage ratios described above are subject to adjustment in accordance with the terms of the 2022 Credit Agreement upon the consummation of an acquisition after June 30, 2026 if the consideration includes cash proceeds from the issuance of funded debt in excess of $500 million.

Previous wording

Beginning in the fourth quarter of 2024, the second financial covenant requires that the ratio of the Company’s consolidated EBITDA to consolidated interest charges (as such terms are defined in the 2022 Credit Agreement) be no less than 2.00:1 for fiscal quarters through June 30, 2025, and no less than 3.00:1 for all fiscal quarters thereafter. The 2022 Credit Agreement also contains customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness. The occurrence of an event of default under the 2022 Credit Agreement could result in all loans and other obligations becoming immediately due and payable and the commitments under the 2022 Credit Agreement being terminated. Following the $2.2 billion issuance of mandatory convertible preferred stock in March 2024 and the amendments to the financial covenants, the Company expects to maintain compliance with the amended financial covenants in the near future. However, a significant downturn in lithium market prices or demand could impact the Company’s ability to maintain compliance with its amended financial covenants and it could require the Company to seek additional amendments to the 2022 Credit Agreement and/or issue debt or equity securities to fund its activities and maintain financial flexibility. If the Company were unable to obtain such necessary additional amendments, this could lead to an event of default and its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

Current wording

Beginning in the fourth quarter of 2024, the amended second financial covenant requires that the ratio of the Company’s consolidated EBITDA to consolidated interest charges (as such terms are defined in the 2022 Credit Agreement) be no less than (i) 1.00:1.0 for fiscal quarters through June 30, 2025, (ii) 2.00:1 for the third quarter of 2025, (iii) 2.50:1 for the fourth quarter of 2025, and (iv) 3.00:1.0 for all fiscal quarters thereafter. The 2022 Credit Agreement also contains customary default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants and cross-defaults to other material indebtedness. The occurrence of an event of default under the 2022 Credit Agreement could result in all loans and other obligations becoming immediately due and payable and the commitments under the 2022 Credit Agreement being terminated. Following the $2.2 billion issuance of mandatory convertible preferred stock in March 2024 and the amendments to the financial covenants, the Company expects to maintain compliance with the amended financial covenants in the near future. However, a significant downturn in lithium market prices or demand could impact the Company’s ability to maintain compliance with its amended financial covenants and it could require the Company to seek additional amendments to the 2022 Credit Agreement and/or issue debt or equity securities to fund its activities and maintain financial flexibility. If the Company were unable to obtain such necessary additional amendments, this could lead to an event of default and its lenders could require the Company to repay its outstanding debt. In that situation, the Company may not be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay the lenders.

Previous wording

On May 29, 2013, we entered into agreements to initiate a commercial paper program on a private placement basis under which we may issue unsecured commercial paper notes (the “Commercial Paper Notes”) from time-to-time. On May 17, 2023, we entered into definitive documentation to increase the size of our existing commercial paper program. The maximum aggregate face amount of Commercial Paper Notes outstanding at any time is $1.5 billion (up from $750 million prior to the increase). The proceeds from the issuance of the Commercial Paper Notes are expected to be used for general corporate purposes, including the repayment of other debt of the Company. The 2022 Credit Agreement is available to repay the Commercial Paper Notes, if necessary. Aggregate borrowings outstanding under the 2022 Credit Agreement and the Commercial Paper Notes will not exceed the $1.5 billion current maximum amount available under the 2022 Credit Agreement. The Commercial Paper Notes will be sold at a discount from par, or alternatively, will be sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The maturities of the Commercial Paper Notes will vary but may not exceed 397 days from the date of issue. The definitive documents relating to the commercial paper program contain customary representations, warranties, default and indemnification provisions. During the six months ended June 30, 2024, we repaid a net amount of $620.0 million of commercial paper notes using the net proceeds received from the issuance of mandatory convertible preferred stock.

Current wording

On May 29, 2013, we entered into agreements to initiate a commercial paper program on a private placement basis under which we may issue unsecured commercial paper notes (the “Commercial Paper Notes”) from time-to-time. On May 17, 2023, we entered into definitive documentation to increase the size of our existing commercial paper program. The maximum aggregate face amount of Commercial Paper Notes outstanding at any time is $1.5 billion (up from $750 million prior to the increase). The proceeds from the issuance of the Commercial Paper Notes are expected to be used for general corporate purposes, including the repayment of other debt of the Company. The 2022 Credit Agreement is available to repay the Commercial Paper Notes, if necessary. Aggregate borrowings outstanding under the 2022 Credit Agreement and the Commercial Paper Notes will not exceed the $1.5 billion current maximum amount available under the 2022 Credit Agreement. The Commercial Paper Notes will be sold at a discount from par, or alternatively, will be sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The maturities of the Commercial Paper Notes will vary but may not exceed 397 days from the date of issue. The definitive documents relating to the commercial paper program contain customary representations, warranties, default and indemnification provisions. During the nine months ended September 30, 2024, we repaid a net amount of $620.0 million of commercial paper notes using the net proceeds received from the issuance of mandatory convertible preferred stock.

Previous wording

The non-current portion of our long-term debt amounted to $3.52 billion at June 30, 2024, compared to $3.54 billion at December 31, 2023. In addition, at June 30, 2024, we had the ability to borrow $1.5 billion under our commercial paper program and the 2022 Credit Agreement, and $143.6 million under other existing lines of credit, subject to various financial covenants under the 2022 Credit Agreement. We have the ability and intent to refinance our borrowings under our other existing lines of credit with borrowings under the 2022 Credit Agreement, as applicable. Therefore, the amounts outstanding under those lines of credit, if any, are classified as long-term debt. We believe that at June 30, 2024 we were, and currently are, in compliance with all of our debt covenants.

Current wording

The non-current portion of our long-term debt amounted to $3.57 billion at September 30, 2024, compared to $3.54 billion at December 31, 2023. In addition, at September 30, 2024, we had the ability to borrow $1.5 billion under our commercial paper program and the 2022 Credit Agreement, and $222.8 million under other existing lines of credit, subject to various financial covenants under the 2022 Credit Agreement. We have the ability and intent to refinance our borrowings under our other existing lines of credit with borrowings under the 2022 Credit Agreement, as applicable. Therefore, the amounts outstanding under those lines of credit, if any, are classified as long-term debt. We believe that at September 30, 2024 we were, and currently are, in compliance with all of our debt covenants.

Previous wording

In the ordinary course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, including bank guarantees and letters of credit, which totaled approximately $201.7 million at June 30, 2024. None of these off-balance sheet arrangements has, or is likely to have, a material effect on our current or future financial condition, results of operations, liquidity or capital resources.

Current wording

In the ordinary course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, including bank guarantees and letters of credit, which totaled approximately $126.0 million at September 30, 2024. None of these off-balance sheet arrangements has, or is likely to have, a material effect on our current or future financial condition, results of operations, liquidity or capital resources.

Previous wording

Total expected 2024 contributions to our domestic and foreign qualified and nonqualified pension plans, including the Albemarle Corporation Supplemental Executive Retirement Plan, are expected to approximate $14 million. We may choose to make additional pension contributions in excess of this amount. We have made contributions of $8.4 million to our domestic and foreign pension plans (both qualified and nonqualified) during the six-month period ended June 30, 2024.

Current wording

Total expected 2024 contributions to our domestic and foreign qualified and nonqualified pension plans, including the Albemarle Corporation Supplemental Executive Retirement Plan, are expected to approximate $14 million. We may choose to make additional pension contributions in excess of this amount. We have made contributions of $11.9 million to our domestic and foreign pension plans (both qualified and nonqualified) during the nine-month period ended September 30, 2024.

Previous wording

The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled $226.3 million at June 30, 2024 and $220.6 million at December 31, 2023. Related assets for corresponding offsetting benefits recorded in Other assets totaled $74.2 million at June 30, 2024 and $73.0 million at December 31, 2023. We cannot estimate the amounts of any cash payments associated with these liabilities for the remainder of 2024 or the next twelve months, and we are unable to estimate the timing of any such cash payments in the future at this time.

Current wording

The liability related to uncertain tax positions, including interest and penalties, recorded in Other noncurrent liabilities totaled $240.1 million at September 30, 2024 and $220.6 million at December 31, 2023. Related assets for corresponding offsetting benefits recorded in Other assets totaled $74.4 million at September 30, 2024 and $73.0 million at December 31, 2023. We cannot estimate the amounts of any cash payments associated with these liabilities for the remainder of 2024 or the next twelve months, and we are unable to estimate the timing of any such cash payments in the future at this time.

Previous wording

We expect 2024 capital expenditures to be down from 2023 levels. In January 2024, we announced an intentional re-phasing of larger projects to focus on those that are significantly progressed, near completion and in start up. At that time we also announced actions to optimize our cost structure by reducing costs primarily related to sales, general and administrative expenses, including a reduction in headcount and lower spending on contracted services. During the six months ended June 30, 2024, the Company decided to indefinitely suspend construction of the fourth train at its Kemerton conversion plant in Western Australia. Additionally, in July 2024, the Company announced a comprehensive review of cost and operating structure to maintain a competitive position, further generate long-term financial flexibility and drive long-term value creation. As part of this review, the Company concluded to stop construction of the third train at its Kemerton conversion plant. The Company also announced that it will put the second train at the Kemerton conversion plant into care and maintenance. Restructuring costs associated with putting Kemerton Train 2 into care and maintenance are expected to be recorded in the third quarter of 2024. The first train of Kemerton will continue to operate and is currently focusing on commercialization efforts.

Current wording

We expect 2024 capital expenditures to be down from 2023 levels. In January 2024, we announced an intentional re-phasing of larger projects to focus on those that are significantly progressed, near completion and in start up. At that time, we also announced actions to optimize our cost structure by reducing costs primarily related to sales, general and administrative expenses, including a reduction in headcount and lower spending on contracted services. During the nine months ended September 30, 2024, the Company stopped construction of Kemerton Trains 3 and 4, as well as put the Kemerton Train 2 on care and maintenance. Kemerton Train 1 will continue to operate and is currently focusing on commercialization efforts. As part of the comprehensive review of our cost and operating structure, we are planning to reduce capital expenditures by approximately 50% versus 2024 to a range of $800 million to $900 million.

Previous wording

On April 25, 2024, we entered into a Master Receivables Purchase Agreement under which we may sell up to $250.0 million of available and eligible outstanding customer accounts receivable generated by sales to two specified customers. The agreement is uncommitted and has an initial term that expires April 25, 2025, unless earlier terminated by the purchaser. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the consolidated balance sheets at the time of the sales transaction. As of June 30, 2024, there were no accounts receivable sold under this Master Receivables Purchase Agreement.

Current wording

In 2024, we entered into a Master Receivables Purchase Agreement under which we may sell up to $250.0 million of available and eligible outstanding customer accounts receivable generated by sales to two specified customers. This agreement is uncommitted and has initial terms that expire on April 25, 2025, unless earlier terminated by the purchaser. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the consolidated balance sheets at the time of the sales transaction. As of September 30, 2024, there were no accounts receivable sold under this Master Receivables Purchase Agreement.