Albemarle Corporation Annual Report 2018 Form 10-K (NYSE:ALB) Published: February 28th, 2018 PDF generated by stocklight.com 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 For the fiscal year ended December 31, 2017 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of ¨ 1934 For the transition period from to Commission file number 001-12658 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.) 4350 Congress Street, Suite 700 Charlotte, North Carolina 28209 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (980) 299-5700 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x 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 at least the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer x Accelerated filer ¨ ¨ Smaller reporting ¨ Non-accelerated filer company Emerging growth ¨ company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $11.7 billion based on the last reported sale price of common stock on June 30, 2017, the last business day of the registrant’s most recently completed second quarter. Number of shares of common stock outstanding as of February 20, 2018: 110,638,449 Documents Incorporated by Reference Portions of Albemarle Corporation’s definitive Proxy Statement for its 2018 Annual Meeting of Shareholders to be filed with the U.S. Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, are incorporated by reference into Part III of this Form 10-K. Albemarle Corporation and Subsidiaries Index to Form 10-K Year Ended December 31, 2017 Page PART I Item 1. Business 3 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 22 Item 2. Properties 22 Item 3. Legal Proceedings 24 Item 4. Mine Safety Disclosures 25 Executive Officers of the Registrant 25 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Selected Financial Data 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55 Item 8. Financial Statements and Supplementary Data 57 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 116 Item 9A. Controls and Procedures 116 Item 9B. Other Information 116 PART III Item 10. Directors, Executive Officers and Corporate Governance 117 Item 11. Executive Compensation 117 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 117 Item 13. Certain Relationships and Related Transactions, and Director Independence 118 Item 14. Principal Accountant Fees and Services 118 PART IV Item 15. Exhibits and Financial Statement Schedules 118 Item 16. Form 10-K Summary 123 Signatures 124 Albemarle Corporation and Subsidiaries PART I Item 1. Business. Albemarle Corporation was incorporated in Virginia in 1993. Our principal executive offices are located at 4350 Congress Street, Suite 700, Charlotte, North Carolina 28209. Unless the context otherwise indicates, the terms “Albemarle,” “we,” “us,” “our” or “the Company” mean Albemarle Corporation and its consolidated subsidiaries. We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals that are designed to meet our customers’ needs across a diverse range of end markets. The end markets we serve include energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals, crop protection and custom chemistry services. We believe that our commercial and geographic diversity, technical expertise, innovative capability, flexible, low-cost global manufacturing base, experienced management team and strategic focus on our core base technologies will enable us to maintain leading market positions in those areas of the specialty chemicals industry in which we operate. On January 12, 2015 (the “Acquisition Closing Date”), we completed the acquisition of Rockwood Holdings, Inc. (“Rockwood”) for a purchase price of approximately $5.7 billion. As a result, Rockwood became a wholly-owned subsidiary of Albemarle. The Chemetall® Surface Treatment business, acquired as a part of Rockwood, was sold on December 14, 2016 to BASF SE for cash proceeds of approximately $3.1 billion, net of purchase price adjustments. For additional information about these transactions, see “Recent Acquisitions, Joint Ventures and Divestitures” beginning on page 8, Note 2, “Acquisitions,” and Note 3, “Divestitures,” to our consolidated financial statements included in Part II, Item 8 of this report. We and our joint ventures currently operate 31 production and research and development (“R&D”) facilities, as well as a number of administrative and sales offices, around the world. As of December 31, 2017, we served approximately 2,500 customers, none of which individually represents more than 10% of net sales of the Company, in approximately 100 countries. For information regarding our unconsolidated joint ventures see Note 10, “Investments,” to our consolidated financial statements included in Part II, Item 8 of this report. Business Segments During 2017, we managed and reported our operations under three reportable segments: Lithium and Advanced Materials, Bromine Specialties and Refining Solutions. Each segment has a dedicated team of sales, research and development, process engineering, manufacturing and sourcing, and business strategy personnel and has full accountability for improving execution through greater asset and market focus, agility and responsiveness. Financial results and discussion about our segments included in this Annual Report on Form 10-K are organized according to these categories except where noted otherwise. For financial information regarding our reportable segments, including revenues generated for each of the last three fiscal years from each of the product categories included in our reportable segments, and geographic area information, see Note 24, “Segment and Geographic Area Information,” to our consolidated financial statements included in Part II, Item 8 of this report. In November 2017, we announced that during the first quarter of 2018, the Performance Catalyst Solutions ("PCS") product category will merge with the Refining Solutions reportable segment to form a global business focused on catalysts. As a result, our three reportable segments will include: (1) Lithium, (2) Bromine Specialties and (3) Catalysts. Lithium and Advanced Materials Segment As of December 31, 2017, our Lithium and Advanced Materials segment consisted of two product categories: Lithium and PCS. Lithium. Our Lithium business develops advanced materials for a wide range of industries and end markets. Our Lithium business is a low-cost producer of one of the most diverse product portfolios of lithium derivatives in the industry. We develop and manufacture a broad range of basic lithium compounds,