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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
__TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-12658
ALBEMARLE CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1692118
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
330 SOUTH FOURTH STREET
P. O. BOX 1335
RICHMOND, VIRGINIA 23210
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 804-788-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
COMMON STOCK, $.01 Par Value NEW YORK STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securi ties Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
(i)
Aggregate market value of voting stock held by non-affiliates of
the registrant as of December 31, 1996: $667,549,441.*
Number of shares of Common Stock outstanding as of December 31,
1996: 55,046,183.
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*In determining this figure, an aggregate of 18,215,869 shares of Common Stock
reported in the registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders as beneficially owned by Floyd D. Gottwald, Jr., Bruce C. Gottwald,
and the members of their immediate families have been excluded and treated as
shares held by affiliates. See Item 12 herein. The aggregate market value has
been computed on the basis of the closing price in the New York Stock Exchange
Composite Transactions on December 31, 1996, as reported by The Wall Street
Journal.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Albemarle Corporation's Annual Report to Shareholders for
the year ended December 31, 1996 (the "Annual Report"), are incorporated
by reference into Parts I, II and IV of this Form 10-K.
2. Portions of Albemarle Corporation's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (the "Proxy Statement") are incorporated by
reference into Part III of this Form 10-K.
(ii)
PART I
Item 1. BUSINESS
Albemarle Corporation ("the Company" or "Albemarle") was incorporated
under the laws of the Commonwealth of Virginia on November 24, 1993, as a
wholly-owned subsidiary of Ethyl Corporation ("Ethyl"). Ethyl thereafter
transferred to Albemarle Ethyl's olefins and derivatives, bromine chemicals and
specialty chemicals businesses, and, at the close of business on February 28,
1994, Ethyl distributed to its common shareholders all of the outstanding shares
of Albemarle. Since February 28, 1994, the Company has been a publicly held
operating company.
On March 1, 1996, the Company sold its alpha olefins, poly alpha olefins
and synthetic alcohols businesses ("Olefins Business") to Amoco Chemical Company
("Amoco"). After the sale, Albemarle is engaged in the bromine chemicals and
specialty chemicals businesses.
Unaudited pro forma condensed consolidated statements of income for the
years ended December 31, 1996 and 1995, which the Company believes are important
to enable the reader to obtain a meaningful understanding of Albemarle's results
of operations excluding the Olefins Business, are included in Note 18 of the
Notes to the Consolidated Financial Statements of the Annual Report, and are
incorporated herein by reference. The unaudited pro forma condensed consolidated
statements of income are for informational purposes only and do not purport to
be indicative of the Company's future consolidated results of operations of
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Albemarle or what the consolidated results of operations would have been had
Albemarle operated without the Olefins Business for all of 1996 and 1995.
Description of Business
Albemarle is a major producer of fine and performance chemicals
including polymer intermediates, cleaning product intermediates and additives,
agricultural chemical intermediates, pharmaceutical intermediates, catalysts,
brominated flame retardants, bromine chemicals and potassium and chlorine
chemicals. Albemarle employs approximately 2,800 people.
The following discussion of the Company's businesses as of December 31,
1996, should be read in conjunction with the information contained in the "1996
Financial Review" section of Albemarle's Annual Report as of December 31, 1996,
referred to in Item 7 that follows.
The Company conducts its worldwide chemicals operations through two
global business units -- bromine chemicals and specialty chemicals.
Albemarle manufactures a broad range of chemicals, most of which are
additives to or intermediates for plastics, polymers and elastomers, cleaning
products, agricultural compounds, pharmaceuticals, photographic chemicals,
drilling compounds and biocides. Most sales of the Company's products are made
directly to manufacturers of the products mentioned in the preceding sentence,
including chemical and polymer companies, pharmaceutical
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companies, cleaning product manufacturers, paper and photographic companies,
drilling companies and water treatment companies.
The Company produces the majority of its products in the United States
but also has a significant production facility in France and also has aluminum
alkyls produced for it by Amoco at the Company's former Feluy, Belgium plant.
The processes and technology for most of these products were developed in the
Company's or its predecessor's research and development laboratories.
Products of the bromine chemicals business include elemental bromine,
flame retardants, alkyl bromides, inorganic bromides, a number of bromine fine
chemicals, potassium chemicals and chlorine. Applications for these products
primarily exist in chemical synthesis, polymer products, oil and gas well
drilling and completion fluids, water purification, glass making, cleaning
products, soil fumigation and chemical intermediates for pharmaceutical,
photographic and agricultural chemicals. The remaining products of the olefins
and derivatives business which were not sold to Amoco, operate as a part of
bromine chemicals as the surfactants and biocides business. These products
include tertiary amines for surfactants and biocides, disinfectants and
sanitizers; zeolite A (sodium alumina silicate) used as a phosphate replacement
in laundry detergent builders; and alkenyl succinic anhydride (ASA) used in
paper-sizing formulations. These businesses have many varied customers. The
products are sold to
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suppliers of household, institutional and industrial cleaners, personal care
products and industrial products.
In most bromine chemicals product lines the Company's plants operated
below capacity during 1996, with the exception of SAYTEX(R) BT-93(R)W which
operated at full capacity. An expansion of brine field and bromine capacities at
the Company's Magnolia, Arkansas facility that started in 1995, was continued.
The overall result of the current phase of the program will be a bromine
production capacity increase of thirty (30) percent. Also expanded in 1996 were
plant capacities to produce SAYTEX(R) 8010, SAYTEX RB-49, SAYTEX BT-93(R)R,
SAYTEX BT-93W and SAYTEX RB-100 flame retardants. The Company continues to focus
on expansion of its bromine production capabilities and an expanded mineral
leasing program.
The Company's subsidiary Albemarle PPC ("APPC") operates a plant in
Thann, France. APPC is one of the world's largest producers of organic and
inorganic brominated compounds used mainly in pharmaceutical, photographic and
agricultural chemical intermediates. APPC also operates an electrolysis unit to
produce high-purity caustic potash and potassium carbonate used in the glass,
water treatment, cleaning product and food industries. A 20% expansion of
manufacturing capability at the Company's organic bromide production facility in
Thann, France was completed in 1996 to satisfy growing market needs for bromine
fine chemicals and our own captive demand for an intermediate for production of
naproxen. APPC strengthens the Company's position in bromine chemicals and
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provides substantial additional manufacturing and research and development
capabilities in Europe.
The specialty chemicals business produces a broad range of chemicals,
including pharmaceutical and agricultural intermediates, polymer curatives,
catalysts and antioxidants.
The Company's primary pharmaceutical intermediate, ibuprofen, is a
widely-used pharmaceutical that provides fever reduction and temporary relief of
aches and pains and menstrual cramps. Bulk ibuprofen is formulated into tablets
by pharmaceutical companies who sell to customers in both the prescription and
over-the-counter markets. Ibuprofen products account for more than 25% of the
U.S. over-the-counter analgesic market. They compete against other painkillers
containing aspirin, acetaminophen, ketoprofen and naproxen. The Company is one
of the world's largest producers of ibuprofen.
During 1995 and 1996, existing facilities were modified to provide a 500
metric ton commercial production capability for bulk naproxen. In 1997, the
Company plans to start up commercial production of bulk naproxen with initial
sales commencing as customers obtain U.S. Food and Drug Administration ("FDA")
approval.
Agricultural intermediates are sold to chemical companies that supply
finished products to farmers, governments and others. These products include
orthoalkylated anilines for the acetanilide family of pre-emergent herbicides
used on corn, soybeans and other crops, and organophosphorus products for
insecticide use. A new
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agricultural intermediate (an urease inhibitor), primarily for use on corn to
improve the effectiveness of nitrogen-based fertilizers, is undergoing
commercial-scale trials and expanded testing in 1997.
Aluminum alkyls are used as co-catalysts in the production of
polyolefins, such as polyethylene and polypropylene, elastomers, alpha olefins
such as hexene, octene, and decene, and organotin heat stabilizers, and in the
preparation of organic intermediates. The Company has continued to expand and
debottleneck its production capacity at Pasadena, Texas and Orangeburg, South
Carolina. It has also strengthened its supply chain for methylaluminoxane
("MAO"), a co-catalyst used in metallocene catalyst systems, by increasing
capacity for MAO and for the key raw materials needed to make MAO. The Company
has continued to build its organometallics base and expand the portfolio of
products and capabilities it offers its customers pursuing the development and
commercialization of metallocene based polymers.
The Company is also expanding its efforts in polymer curatives, products
used to control polyurethane and epoxy system polymerization. Also produced are
antioxidants and alkylated hindered phenolics that are used to maintain the
performance integrity of thermoplastic resins.
In most specialty chemicals product lines the Company's plants operated
near capacity during 1996, with the exception of bulk ibuprofen and halide
aluminum alkyls which had excess capacity. An expansion in alkylated aromatics
capacity was started in 1995 and completed in 1996 at one of the Company's
facilities.
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The Company operates on a worldwide basis with (i) a manufacturing plant
located in France in addition to facilities in the United States, (ii) offices
and distribution terminals in Belgium, France, Japan and Singapore as well as
the United States and (iii) offices in the People's Republic of China and Hong
Kong. The Company has no significant assets in countries in which those assets
would be deemed to be exposed to substantial risk. See Note 17 -- "Geographic
Area Information" of Notes to The Consolidated Financial Statements in the
Annual Report.
Competition
The Company operates in a highly competitive marketplace, competing against
a number of other companies in each of its product lines. Some markets involve a
significant number of competitors, while others involve only a few. The
competitors of the Company are both larger and smaller in terms of resources and
market share. Competition generally is based on product performance, reputation
for quality, price and customer service and support. The degree and nature of
competition depends on the type of product involved.
In general, the Company competes in all of its markets on the basis of
the quality and price of its products as well as customer services, by
maintaining a broad range of products and by focusing resources on products in
which the Company has a competitive advantage. The Company endeavors to improve
its reputation for quality products, competitive prices and excellent customer
service
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and support. Competition in connection with all of the Company's products
requires continuing investments in research and development, product and process
improvements and specialized customer services. Through research and
development, the Company and its subsidiaries will seek to increase margins by
introducing value-added products and products based on proprietary technologies.
Raw Materials
Raw materials used by the Company include ethylene, potassium chloride,
aluminum, ortho-toluidine, bisphenol-A, chlorine, phenol, isobutylene, caustic
soda, toluene, diphenyl oxide, sodium silicate, dimethlyamine, maleic anhydride,
ethanol, phosphorus, sulfuric acid, hydrogen cyanide, and nitrogen, as well as
electricity and natural gas as fuels, most of which are readily available from
numerous suppliers and are purchased or provided under contracts at prices the
Company believes are competitive. The Company also produces bromine in Arkansas
from its extensive brine reserves backed by an active leasing program. The
Company has signed supply agreements with the Dead Sea Bromine group of
companies. The contracts essentially cover the bromine requirements for the
production of bromine fine chemicals in our Thann, France facility and provide
additional bromine if requested for the Company's other bromine needs.
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Major Customers
Due to the diversity of product lines in which the Company competes, no
major portion of the Company's sales or earnings was generated by one customer
nor is the Company overly reliant on contracts with any one public, private or
governmental entity.
Several of the Company's customers manufacture products for cyclical
industries such as the agricultural, automotive, electronics and building and
construction industries. As a result, demand for the products of the Company
from customers in such industries also is cyclical. In addition, the
profitability of sales of certain of the Company's products depends on the level
of industry plant capacity utilization.
Due to the diversity and size of the Company's operations, there is little
seasonal variation in revenues or earnings, except for certain agricultural
products.
Significant Developments Since Last Form 10-K
On March 1, 1996, the Company announced the sale of its Olefins Business
to Amoco for $487.3 million, including plant and equipment, other assets,
inventory and accounts receivable net of expenses and related trade payables
paid by the Company.
The sale involved the transfer of approximately 550 people who supported
these businesses. Certain assets located primarily in Pasadena, Texas, Deer
Park, Texas and Feluy, Belgium were included in the sale. The transaction
included numerous operating and service agreements primarily focusing on the
sharing of common facilities at the Pasadena, Texas plant and the operation for
the
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Company of the aluminum alkyls portion of the Feluy Plant site by Amoco. In
connection with the sale of the Olefins Business, the Company also implemented
an early-retirement and work-force reduction program for certain salaried
employees. The effort is expected to result in annual cost savings to the
Company. A Form 8-K report relating to the sale was filed with the Securities
and Exchange Commission ("SEC") on March 15, 1996.
On April 1, 1996, the Company purchased 9,484,465 shares of its common
stock, at a price of $23 per share plus expenses for a total aggregate cost of
$219.4 million, through a tender offer, which began on March 4, 1996 and
concluded on April 1, 1996. A Form 13E-4 for Albemarle Corporation was filed
with the SEC on March 4, 1996. Later in 1996 the Company purchased an additional
1,756,500 shares for $32.1 million, at an average price of $18.25 per share, in
market transactions.
Research and Patents
The Company's research and development supports each of the major business
areas.
With respect to bromine chemicals, the research focus is on new and
improved flame retardants targeted to satisfy increasing market needs for
performance and quality in products manufactured from polystyrene,
acrylonitrile-butadiene-styrene (ABS) and engineered thermoplastics. Development
efforts are focused on efficiently debottlenecking plant capacity to meet the
strong demand for the above businesses and additionally on expanding and
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developing new markets for bromine fine chemicals. This effort is expected to
continue through 1997.
The primary focus of specialty chemicals' research in 1996 was new
catalysts (metallocenes), new pharmaceutical intermediates and new agricultural
intermediates. This effort is expected to continue into 1997 and beyond.
In addition to the U.S. research facility in Baton Rouge, Louisiana, the
Company's European businesses are supported by the research and development
facilities at Louvain-la-Neuve, Belgium, and Thann, France, as well as at
various other plant locations.
The Company spent approximately $30.4 million, $29.5 million and $28.1
million in 1996, 1995 and 1994, respectively, on research and development, which
amounts qualified under the technical accounting definition of research and
development. Total R&D department spending for 1996 was some $43.7 million,
including $13.3 million related to technical services support to customers and
the Company's plants, testing of existing products, cost reduction, quality
improvement and environmental studies.
The Company considers patents, licenses and trademarks to be of
significance to its business. As of December 31, 1996, the Company owned more
than 1,200 active United States and foreign patents, including 23 U.S. patents
and 64 foreign patents issued in 1996. Some of these patents are licensed to
others. In addition, rights under the patents and inventions of others have been
acquired by the Company through licenses. The Company's patent
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position is actively managed and is deemed by it to be adequate for the conduct
of its business.
Environmental Regulation
The Company is subject to federal, state, local and foreign requirements
regulating the handling, manufacture and use of materials (some of which may be
classified as hazardous or toxic by one or more regulatory agencies), the
discharge of materials into the environment and the protection of the
environment. To the best of the Company's knowledge, Albemarle is currently
complying with and expects to continue to comply in all material respects with
all existing environmental laws, regulations, statutes and ordinances. Such
compliance with federal, state, local and foreign environmental protection laws
has not in the past had, and is not expected to have in the future, a material
effect on earnings or the competitive position of Albemarle.
Among other environmental requirements, the Company is subject to the
federal Superfund law, and similar state laws, under which the Company may be
designated as a potentially responsible party (PRP) and may be liable for a
share of the costs associated with cleaning up various hazardous waste sites.
Management believes that in most cases, the Company's participation is de
minimis. Further, almost all such sites represent environmental issues that are
quite mature and have been investigated, studied and, in many cases, settled by
the Company or its predecessor company. In de minimis PRP matters, the Company's
policy generally is to negotiate a
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consent decree and to pay any apportioned settlement, enabling the Company to be
effectively relieved of any further liability as a PRP, except for remote
contingencies. In other than de minimis PRP matters, the Company's records
indicate that unresolved exposures should be immaterial. The Company accrues and
expenses its proportionate share of PRP costs in accordance with FASB Statement
No. 5 "Accounting for Contingencies" and FASB Interpretation No. 14. Because
management has been actively involved in evaluating environmental matters, the
Company is able to conclude that the outstanding environmental liabilities for
unresolved PRP sites should not be material.
Albemarle's environmental operating and safety costs charged to expense,
which are not considered to be normal operating costs, were approximately $11.5
million in 1996 versus approximately $9.0 million in 1995 and $8.9 million in
1994, excluding depreciation of previous capital expenditures, and are expected
to be approximately in the same range over the next few years. Costs for
remediation have been accrued and payments related to sites are charged against
accrued liabilities, which at December 31, 1996 totaled approximately $8.2
million. There is a reasonable possibility that future remediation costs in
excess of amounts already recorded could amount to $7.0 million before income
taxes. However, the Company believes that any sum it may be required to pay in
connection with environmental remediation matters in excess of the amounts
recorded would occur over a period of time and should not have a material
adverse impact on its financial condition or
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results of operations, but could have a material adverse impact in a particular
reporting period.
Capital expenditures for pollution-abatement and safety projects for the
Company, including such costs that are included in other projects, were
approximately $14.7 million, $22 million and $20.3 million in 1996, 1995 and
1994, respectively. For each of the next few years, capital expenditures for
these types of projects are likely to be in the same range. Management's
estimates of the effects of compliance with governmental pollution-abatement and
safety regulations are subject to (i) the possibility of changes in the
applicable statutes and regulations or in judicial or administrative
construction of such statutes and regulations and (ii) uncertainty as to whether
anticipated solutions to pollution problems will be successful or whether
additional expenditures may prove necessary.
FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations are substantially all in the chemicals
industry. Geographic area information for the Company's operations for the three
years ended December 31, 1996, is presented in the Annual Report on page 14 (and
Note 17 to the Consolidated Financial Statements on pages 35-36) and is
incorporated herein by reference.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Financial information about the Company's foreign and domestic
operations and export sales for the three years ended December 31, 1996, is set
forth in the Annual Report on page 14 and in Note 17 of the Notes to The
Consolidated Financial Statements on pages 35- 36 and is incorporated herein by
reference. Domestic export sales to non-affiliates may be made worldwide but are
made primarily in the Far East, Latin America and Europe. Sales by foreign
subsidiaries are primarily in Europe, the Middle East and the Far East.
Item 2. PROPERTIES
The Company's principal executive offices are located at 330 South
Fourth Street, Richmond, Virginia 23219, and its principal administrative
offices are located at 451 Florida Street, Baton Rouge, Louisiana 70801. The
Company leases its executive offices and administrative offices in Richmond,
Virginia; and Baton Rouge, Louisiana; and its regional offices in Brussels,
Belgium; Singapore; and Tokyo, Japan; as well as various sales and other
offices.
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The following is a brief description of the principal plants and related
facilities of the Company, all of which are owned ex cept as stated below.
LOCATION PRINCIPAL OPERATIONS
-------- --------------------
Baton Rouge, Louisiana Research and product-development
(2 facilities, one on leased activities
land)
Pasadena, Texas Production of aluminum alkyls,
alkenyl succinic anhydride,
orthoalkylated anilines and
phenols, zeolite A and other
chemicals; research activities
Louvain-la-Neuve, Belgium Research and customer technical
service activities
Magnolia, Arkansas Production of flame retardants and
(West Plant) bromine
Magnolia, Arkansas Production of flame retardants,
(South Plant) bromine, ethylene dibromide,
several inorganic bromides,
agricultural chemical
intermediates, and tertiary
amines; research activities
Orangeburg, South Carolina Production of specialty
chemicals, including
pharmaceutical intermediates,
fuel additives, manganese
antiknocks, orthoalkylated
phenols and polymer modifiers;
research activities
Thann, France Production of organic and
inorganic brominated
pharmaceutical, photographic and
agrochemical intermediates,
high-purity caustic potash and
potassium carbonate; product
development activities
Feluy, Belgium Production of aluminum alkyls
(Leased by Amoco under a 99 year
lease but operated for the
Company)
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The Company currently is adding capacity in the flame retardants and
specialty chemicals areas. The Company believes that its plants, including
planned expansions, will be adequate at projected sales levels for 1997.
Operating rates of certain plants vary with product mix and normal seasonal
sales swings. The Company believes that its plants generally are well maintained
and in good operating condition.
Item 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved from time to time in legal
proceedings of types regarded as common in the Company's businesses,
particularly administrative or judicial proceedings seeking remediation under
environmental laws, such as Superfund, and products liability litigation.
While it is not possible to predict or determine the outcome of the
proceedings presently pending, in the Company's opinion they will not ultimately
result in any liability that would have a material adverse effect upon the
results of operations or financial condition of the Company and its subsidiaries
on a consolidated basis.
An administrative proceeding with the federal Occupational Safety and
Health Administration (OSHA), involving a potential penalty in excess of
$100,000, but not more than $119,000, was previously reported in the Company's
1996 reports on Form 10-Q. The Company filed a notice of contest and is
contesting vigorously. In the fourth quarter of 1996, OSHA issued two additional
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citations, one of which involved a potential penalty in excess of $100,000, but
not more than $110,000. The Company filed a notice of contest and is contesting
vigorously these additional citations. Each of these citations arose out of a
series of unrelated fires in the MEMC Electronic Materials, Inc. ("MEMC")
Polysilicon plant in Pasadena, Texas that was sold to MEMC but which is operated
by the Company under contract.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
ADDITIONAL INFORMATION - OFFICERS OF THE COMPANY
The names and ages of all officers of the Company, as of March 1, 1997,
are set forth on the following page. The term of office of each such officer is
until the meeting of the Board of Directors following the next annual
shareholders' meeting (April 23, 1997). All of such officers have been employed
by the Company or its predecessor for at least the last five years, with the
exception of Dirk Betlem and William M. Gottwald, MD. Dirk Betlem joined the
Company's predecessor June 1, 1993, following nearly 30 years with E.I. duPont
de Nemours in a variety of management positions in the U.S. and Europe, most
recently as Vice President, Imaging Systems and earlier in a variety of
manufacturing positions and management positions in Europe, the Middle East and
Africa. William M. Gottwald joined Albemarle after being associated with Ethyl
Corporation since 1981, most recently as senior vice president
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responsible for finance, planning and information resources. He served as a
director and Executive Committee member of Albemarle from 1994 until early 1996.
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Name Age Office
- ----------------------- --- --------------------------------
*Floyd D. Gottwald, Jr. 74 Chairman of the Board and of the
Executive Committee, Chief
Executive Officer, Director
*Charles B. Walker 58 Vice Chairman of the Board, Chief
Financial Officer, Director
*Dirk Betlem 58 President and Chief Operating
Officer, Director
Thomas G. Avant 58 Senior Vice President - Finance
and Managing Director Americas
E. Whitehead Elmore 58 Senior Vice President, General
Counsel, Corporate Secretary
John G. Dabkowski 48 Vice President and General
Manager - Specialty Chemicals
Dixie E. Goins 46 Vice President - Research and
Development
William M. Gottwald, MD 49 Vice President - Corporate
Strategy and Secretary to the
Executive Committee
Robert G. Kirchhoefer 56 Treasurer
Victor L. McDearman 52 Vice President and General
Manager - Bromine Chemicals
Charles E. Moore 56 Vice President - Engineering
George A. Newbill 53 Vice President - Manufacturing
Gary L. Ter Haar 60 Vice President - Health and
Environment
Michael D. Whitlow 45 Vice President - External Affairs
and Investor Relations
Edward G. Woods 55 Vice President - Business
Development
*Member of the Executive Committee
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Certain Agreements Between Albemarle and Ethyl
Albemarle and Ethyl entered into agreements, dated as of February 28,
1994, pursuant to which the Company and Ethyl agreed to coordinate certain
facilities and services of adjacent operating facilities at plants in Pasadena,
Texas and Feluy, Belgium. Effective March 1, 1996, certain of these agreements
have been transferred to Amoco as part of the Olefins Business sale. In
addition, Albemarle and Ethyl, as discussed in a previous Form 10-K, entered
into agreements providing for the blending by Albemarle for Ethyl of certain
products and the production of others at the Company's Orangeburg, South
Carolina, plant.
Certain Agreements Between Albemarle and MEMC
Albemarle and MEMC entered into agreements, dated as of July 31, 1995,
pursuant to which the Company provides operating and support services to MEMC.
Pasadena, Texas Agreements
The Pasadena, Texas plant consists of facilities for the production of
electronic materials products. Albemarle operates for MEMC the facilities that
produce electronic materials (the "MEMC Pasadena Plant Site"). The operating
agreement relating to the MEMC Pasadena Plant Site (the "MEMC Operating
Agreement") provides that Albemarle will produce certain electronic materials
products meeting MEMC's specifications and provide certain services and
utilities customarily used by or reasonably necessary to
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maintain the MEMC Pasadena Plant Site in accordance with design capacity. The
MEMC Operating Agreement is a five year agreement, but after two years, at
MEMC's option, and upon one year's notice, MEMC may terminate the agreement.
MEMC reimburses Albemarle for certain costs specified in the MEMC Operating
Agreement and pays to Albemarle an annual operating fee. In addition, Albemarle
shall receive a bonus or shall refund to MEMC a portion of the operating fee
dependent upon agreed performance criteria for each contract year. After
expiration or termination of the MEMC Operating Agreement, Albemarle will supply
certain utilities and services to the MEMC Pasadena Plant Site pursuant to a
utilities and services agreement (the "Utilities and Services Agreement"). All
of the utilities and services are supplied at Albemarle's cost plus a percentage
fee. Albemarle is to furnish certain utilities and services for a minimum of
five years from the effective date of the Utilities and Services Agreement,
subject to the right of MEMC to terminate any one or more utilities or services
on twelve months' notice. Albemarle will make available to MEMC certain other
utilities and services for the duration of MEMC's lease of the property upon
which the MEMC Pasadena Plant Site is located.
Certain Agreements between Albemarle and Amoco
Albemarle and Amoco entered into agreements, dated as of March 1, 1996,
pursuant to which the Company provides operating and support services and
products to Amoco, and Amoco provides operating and support services and
products to Albemarle.
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Pasadena, Texas Agreements
After the sale, Amoco owns and operates the linear alpha olefins and
synthetic alcohols facilities ("Amoco Pasadena Plant"). Albemarle owns and
operates all remaining Albemarle plants ("Albemarle Pasadena Plant"), and
operates MEMC Pasadena, Inc.'s electronic materials facility.
As a result of the sale, Albemarle supplies to Amoco (among others):
certain utilities utilized by Amoco at the Amoco Pasadena Plant, including
electricity, infrastructure, natural gas, steam, boiler feedwater, nitrogen,
water, flare, wastewater treatment and other utilities; certain services, such
as facilities maintenance, security, parking, shops, pipe racks, laundry and
change house, telephone switching, administrative services, and laboratory,
technical and analytical services; aluminum alkyls and certain other products
for use in the olefins and alcohols units; operation of minor Amoco facilities
associated with the production of alpha olefins and alcohols; certain logistical
services related to stores, receiving, warehousing, railroads and truck
trailers; and mutual aid and fire protection.
As a result of the sale, Amoco supplies to Albemarle (among others):
certain utilities utilized by Albemarle at the Albemarle Pasadena Plant,
including refrigerated isobutylene, instrument air, steam, boiler feedwater,
flare and other utilities; ethylene, linear alpha olefins, sodium aluminate, and
certain other products for use in the Albemarle Pasadena Plant and other
Albemarle
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facilities; certain material handling services (tank farm and terminal
facility); and mutual aid and fire protection.
Virtually all of the utilities, services and products supplied by
Albemarle to Amoco and from Amoco to Albemarle in Pasadena, Texas are supplied
at the provider's cost plus a percentage fee. Most of the utilities, services
and products supplied by Albemarle to Amoco and from Amoco to Albemarle have an
initial term of 10 years, with an automatic extension for an additional 10 year
term, unless terminated by either party at the end of the initial term upon 2
years notice. With respect to products supplied by Albemarle to Amoco, and with
respect to decanol, sodium aluminate and alkoxide supplied by Amoco to
Albemarle, Amoco may terminate the supply of such product on 180 days notice.
With respect to products supplied by Amoco to Albemarle, Albemarle may terminate
the supply of such product on 180 days notice. With respect to rail car and
truck trailer services, the term is indefinite and may be terminated on 2 years
notice by either party. With respect to wastewater treatment services, the term
is indefinite and may be terminated by Amoco upon 6 months notice or by either
party upon termination of operations.
Feluy, Belgium
After the sale, Amoco possesses (under a 99-year lease, with certain
purchase options) and operates the linear alpha olefins and poly alpha olefin
facilities. In addition, Amoco possesses (under the same lease) and operates the
aluminum alkyls facilities
-26-
exclusively for Albemarle (term: 10 years-Albemarle has the right to extend for
one additional 10 year term). Albemarle supplies aluminum alkyl products to
Amoco for use in the linear alpha olefins facility (term: 10 years-Amoco has
right to extend for one additional 10 year term). The operation services and
products supplied by Albemarle to Amoco and from Amoco to Albemarle are at the
provider's cost plus a percentage fee.
Other Agreements
For a limited period of time after the closing date (term: ranging from
1 month to 1 year, depending upon the service involved), and in order to
facilitate a smooth transition of the transferred businesses to Amoco, Albemarle
supplies to Amoco certain interim services (including, by Albemarle; office and
laboratory space, technical service, administrative and logistical support,
information technology services, pilot plant operations, product stewardship,
order processing, operation of facilities, etc.). These interim services are
supplied at Albemarle's cost plus a percentage fee. Albemarle's Japanese
affiliate acts as an authorized sales representative of Amoco for olefins,
alcohols and poly alpha olefins in Japan on a commission basis for a period of
two years following March 1, 1996. Albemarle provides certain consulting
services with respect to Japanese sales of those products for a period of up to
eighteen months from March 1, 1996. Albemarle also may act as a distributor of
linear alpha olefins and poly alpha olefins in the oil field services business.
-27-
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained on page 15 of the Annual Report under the
caption "Shareholder Data & Market Prices of Common Stock" is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information for the five years ended December 31, 1996, contained in
the "Five-Year Summary" on pages 8 and 9 of the Annual Report is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The textual and tabular information concerning the years 1996, 1995 and
1994 contained in the "Financial Review" section on pages 10 through 14 of the
Annual Report is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements contained on pages 16 through 20,
the Notes to The Consolidated Financial Statements contained on pages 21 through
37 and the Report of Independent Accountants on page 38 of the Annual Report are
incorporated herein by reference.
-28-
Recently Issued Accounting Standards:
The Financial Accounting Standards Board recently issued FASB Statement
No. 128, "Earnings per Share" which is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods.
Management has not yet made a determination of the impact that adoption of
FASB Statement No. 128 is expected to have on the financial statements of
Albemarle.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
-29-
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" concerning directors is incorporated herein by
reference. See "Additional Information Officers of the Company" at the end of
Part I above for information about the officers of the Company.
Item 11. EXECUTIVE COMPENSATION
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" concerning executive
compensation is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption
"Stock Ownership" is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the captions
"Certain Relationships and Related Transactions" and "Stock Ownership" are
incorporated herein by reference.
-30-
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1)
The following consolidated financial and informational statements
of the registrant included on pages 16 to 38 in the Annual Report
are incorporated herein by reference:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income, Changes in Shareholders' Equity
and Cash Flows for the years ended December 31, 1996, 1995, and
1994
Notes to The Consolidated Financial Statements
Report of Independent Accountants
(a) (2)
No Financial Statement Schedules are provided in accordance with
Item 14 (a) (2) as the information is either not applicable, not
required or has been furnished in the Consolidated Financial
Statements or Notes thereto.
(a) (3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.1 Amendment to Restated Articles of Incorporation of the
registrant (filed as exhibit 3.1 to the Company's Form
10-K for 1994 (No. 1-12658), and incorporated herein by
reference).
3.2 Amended By-laws of the registrant (filed as exhibit 3.2
to the Company's Form 10-K for 1995 (No. 1-12658), and
incorporated herein by reference).
10.1 Credit Agreement, dated as of September 24, 1996, between
the Company, NationsBank, N.A., as administrative agent
and Bank of America Illinois, The Bank of New York and the
Chase Manhattan Bank, as co-agents and certain commercial
banks (filed as Exhibit 10.1 to the Company's Third
Quarter 1996 Form 10-Q (No. 1-12658) and incorporated
herein by reference).
10.2 The Company's 1994 Omnibus Stock Incentive Plan, adopted
on February 28, 1994 (filed as Exhibit 10.1 to the
Company's Form S-1 (No. 33-77452), and incorporated
herein by reference).
-31-
10.3 The Company's Bonus Plan, adopted on February 8, 1994
(filed as Exhibit 10.8 to the Company's Form 10 (No. 1-
12658), and incorporated herein by reference).
10.4 Savings Plan for the Employees of the Company, adopted on
February 28, 1994 (filed as Exhibit 10.9 to the Company's
Form 10 (No. 1-12658), and incorporated herein by
reference).
10.5 The Company's Excess Benefit Plan (filed as Exhibit 10.10
to the Company's Form 10 (No. 1-12658), and incorporated
herein by reference).
10.6 The Company's Supplemental Retirement Plan (filed as
Exhibit 10.11 to the Company's Form 10 (No. 1-12658), and
incorporated herein by reference).
10.7 The Company's Agreement between Certain Executives (filed
as Exhibit 10.12 to the Company's Form 10 (No. 1-12658),
and incorporated herein by reference).
11. Statements re: Computation of Earnings Per Share -
Historical (filed herewith).
11.1 Statements re: Computation of Pro Forma Earnings Per Share
- for years ended December 31, 1996 and 1995 (filed
herewith).
11.2 Statements re: Computation of Pro Forma Earnings Per
Share - for year ended December 31, 1996 (filed
herewith).
13. The registrant's Annual Report to Shareholders for the
year ended December 31, 1996 (Note 1).
21. Subsidiaries of the Company (filed herewith).
23.1 Consent of Independent Certified Public Accountants,
Coopers & Lybrand L.L.P. (filed herewith).
--------------------------
Note 1. With the exception of the information incorporated in this
Form 10-K by reference thereto, the Annual Report shall not be
deemed "filed" as part of this Form 10-K.
(b) No report on Form 8-K was filed in the last quarter of the
period covered by this report.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
-32-
(d) Financial Statement Schedules - Schedules are omitted as the
information is either not applicable, not required or has been
furnished in the financial statements or notes thereto.
-33-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALBEMARLE CORPORATION
(Registrant)
By: /s/ Floyd D. Gottwald, Jr.
------------------------------
Floyd D. Gottwald, Jr.
Chairman of the Board
Dated: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of March 26, 1997.
Signature Title
--------- -----
/s/ Floyd D. Gottwald, Jr. Chairman of the Board,
- ------------------------------- Chairman of the Executive
(Floyd D. Gottwald, Jr.) Committee, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Charles B. Walker Vice Chairman of the Board,
- ------------------------------- Chief Financial Officer
(Charles B. Walker) and Director
(Principal Financial Officer)
-34-
Signature Title
--------- -----
/s/ Thomas G. Avant Senior Vice President - Finance
- ------------------------------- (Principal Accounting Officer)
(Thomas G. Avant) and Managing Director Americas
/s/ Craig R. Andersson Director
- -------------------------------
(Craig R. Andersson)
/s/ Dirk Betlem President and Director
- -------------------------------
(Dirk Betlem)
/s/ John D. Gottwald Director
- -------------------------------
(John D. Gottwald)
/s/ Andre B. Lacy Director
- -------------------------------
(Andre B. Lacy)
/s/ Seymour S. Preston, III Director
- -------------------------------
(Seymour S. Preston, III)
/s/ Emmett J. Rice Director
- -------------------------------
(Emmett J. Rice)
/s/ Anne M. Whittemore Director
- -------------------------------
(Anne M. Whittemore)
-35-
EXHIBIT INDEX
Number and Name of Exhibit Page Number
- -------------------------- -----------
3.1 Amendment to Restated Articles Incorporated by reference
of Incorporation of the - see Page 31
registrant
3.2 Amended By-laws of the Incorporated by reference
registrant - see Page 31
10.1 Credit Agreement, dated as of Incorporated by reference
September 24, 1996, between the - see Page 31
Company, NationsBank, N.A., as
administrative agent and Bank of
America Illinois, The Bank of
New York and the Chase Manhattan
Bank, as co-agents and certain
commercial banks
10.2 1994 Omnibus Stock Incentive Incorporated by reference
Plan - see Page 31
10.3 Bonus Plan Incorporated by reference
- see Page 32
10.4 Savings Plan for Employees Incorporated by reference
- see Page 32
10.5 Excess Benefit Plan Incorporated by reference
- see Page 32
10.6 Supplemental Retirement Plan Incorporated by reference
- see Page 32
10.7 Agreement Between Certain Incorporated by reference
Executives - see Page 32
11. Computation of Earnings Per Page 38
Share - Historical
11.1 Computation of Pro Forma Page 39
Earnings Per Share for years
ended December 31, 1996 and 1995
11.2 Computation of Pro Forma Page 40
Earnings Per Share for year
ended December 31, 1996
-36-
13. The registrant's Annual Report Pages 41 through 71
to Shareholders for the year
ended December 31, 1996
21. Subsidiaries of the Company Page 72
23.1 Consent of Independent Certified Page 73
Public Accountants, Coopers &
Lybrand L.L.P.
-37-