Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (07-31-08 04:19 AM)

Albemarle Corp. CEO MARK C ROHR bought 5000 shares on 7-24-2008 at $36.74

BUSINESS OVERVIEW

Albemarle Corporation was incorporated in Virginia in 1993. Our principal executive offices are located at 330 South Fourth Street, Richmond, Virginia 23219, and our principal operations offices are located at 451 Florida Street, Baton Rouge, Louisiana 70801. Unless the context otherwise indicates, the terms “Albemarle,” “we,” “us,” “our” or “the company” mean Albemarle Corporation and our consolidated subsidiaries.

We are a leading global developer, manufacturer and marketer of highly engineered specialty chemicals. Our products and services enhance the value of our customers’ end-products by improving performance, providing essential product attributes, lowering cost and simplifying processing. We sell a highly diversified mix of products to a wide range of customers, including manufacturers of consumer electronics, building and construction materials, automotive parts, packaging, pharmachemicals and agrichemicals, and petroleum refiners. We believe that our commercial and geographic diversity, technical expertise, flexible, low-cost global manufacturing base and experienced management team enable us to maintain leading market positions in those areas of the specialty chemicals industry in which we operate.

We and our joint ventures currently operate 46 facilities, including production, research and development facilities, and administrative and sales offices in North and South America, Europe, Australia and Asia. We serve more than 3,400 customers in over 100 countries. For information regarding our joint ventures see Note 8, “Investments” to our consolidated financial statements included in Item 8 beginning on page 43.

Business Segments

Our operations are managed and reported as three operating segments: Polymer Additives, Catalysts and Fine Chemicals.

For financial information regarding our operating segments, including revenues generated for each of the last three fiscal years from each of the product categories included in our operating segments, and geographic areas, see Note 22, “Operating Segments and Geographic Area Information” to our consolidated financial statements included in Item 8 beginning on page 43.

Polymer Additives

Our Polymer Additives segment consists of two product categories: flame retardants and stabilizers and curatives.

Flame Retardants. Our flame retardants help materials in a wide variety of finished products meet fire-safety requirements. Some of the products that benefit from our flame retardants include plastic enclosures for consumer electronics, printed circuit boards, wire and cable, electrical connectors, foam insulation, foam seating in furniture, and automobiles and textiles. We compete in all of the major flame retardant markets: brominated, mineral and phosphorus. Our brominated flame retardants include products such as Saytex ® and Pyro-Chek ® ; our mineral-based flame retardants include products such as Martinal ® and Magnifin ® ; and our phosphorus-based flame retardants include products such as Antiblaze ® and Ncendx ® . Our strategy is to have a broad range of chemistries applicable to each major flame retardant application.

Stabilizers and Curatives. We produce plastic and other additives, such as curatives, antioxidants and stabilizers, which are often specially developed and formulated for a customer’s specific manufacturing requirements. Our plastic additives products include curatives for polyurethane and epoxy system polymerization, as well as for ultraviolet curing of various inks and coatings. This business also produces antioxidants and stabilizers to improve the performance integrity of thermoplastic resins.

Our Ethacure ® curatives are used in cast elastomers, coatings, reaction injection molding (RIM) and specialty adhesives that are incorporated into products such as wheels, tires and rollers. Our line of Ethanox ® antioxidants is used by manufacturers of polyolefins to maintain physical properties during the manufacturing process, including the color of the final product. These antioxidants are found in applications such as slit film, wire and cable, food packaging and pipes.

We also produce antioxidants used in fuels and lubricants. Our line of Ethanox ® fuel and lubricant antioxidants are used by refiners and fuel marketers to extend fuel storage life and protect fuel systems, and by oil marketers and lubricant manufacturers to extend the useful life of lubricating oils, fluids and greases used in engines and various types of machinery.

Our joint venture, Stannica LLC, produces organic and inorganic tin intermediates used as a key raw material in the production of tin based PVC heat stabilizers. Tin stabilizers are used in the processing of rigid (pipe, window profiles, siding, fencing) and some flexible (packaging) PVC applications. PVC heat stabilizers help prevent the thermal degradation of PVC resins during periods of elevated temperature exposure, such as during processing, and help extend the useful life of finished products.

Customers

The Polymer Additives segment offers more than 70 products to a variety of end-markets. We sell our products mostly to chemical manufacturers and processors, such as polymer resin suppliers, lubricant manufacturers, refiners and other specialty chemical companies.

Sales of polymer additives are growing rapidly in Asia due to the underlying growth in consumer demand and the shift of the production of consumer electronics from the United States, or U.S., and Europe to Asia. In response to this development, we have established a sales and marketing network in China, Japan, Korea and Singapore with products sourced from the United States, Europe and the Middle East. In addition, we have two joint venture manufacturing sites in China, Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited.

A number of customers of our Polymer Additives segment manufacture products for cyclical industries, including the consumer electronics, building and construction, and automotive industries. As a result, demand from our customers in such industries is also cyclical.

Competition

Our Polymer Additives segment serves the following markets: the United States, Asia, Europe and the Middle East, each of which is highly competitive. Product performance and quality, price competition and contract terms are the primary factors in determining which qualified supplier is awarded a contract. Research and development, product and process improvements, specialized customer services, the ability to attract and retain skilled personnel, and maintenance of a good safety record, however, have also been important factors to compete effectively in the Polymer Additives marketplace.

Competition also arises from the substitution of different polymers and resin systems in end-products in an effort to reduce costs or change product qualities. For flame retardants, competition can be introduced from alternative chemistries, which has caused us to expand our product portfolio to include bromine, phosphorus and mineral chemistries that are common in over 80% of end uses today. For other additives, competition is introduced by low-cost antioxidant suppliers. We have begun to offer our basic products from lower cost sources, and have pursued new blending technology to produce better, more easily processed forms of antioxidant blends.

We are a market leader in the brominated flame retardant business and our most significant competitors are Chemtura Corporation and Israel Chemicals Ltd. Industrial Products division, or Israel Chemicals. We are also a market leader in the phosphorus-based flame retardant business and in the mineral-based flame retardants business. Our most significant competitor in the phosphorus-based flame retardant business is Israel Chemicals. Almatis, Kyowa Chemical Industry Co., Ltd. and Nabaltec GmbH are our most significant competitors in the mineral-based flame retardants business. We are a market leader in the plastic additives business and our most significant competitors are Ciba Specialty Chemicals, Chemtura Corporation and Songwon of Korea.

Raw Materials and Significant Supply Contracts

The major raw materials we use in our Polymer Additives operations are bromine, bisphenol-A phenol, benzene, caustic soda, phosphorus oxychloride, aluminum trihydrate, polystyrene, isobutylene, and phosphorous derivatives, most of which are readily available from numerous independent suppliers and are purchased under contracts at prices we believe are competitive. The cost of raw materials is generally based on market prices although we may use contracts with price caps or other tools, as appropriate, to mitigate price volatility. Many of our customers operate under long-term supply contracts that provide for either the pass-through of raw material and energy cost changes, or pricing based on short-term “tenders” in which changing market conditions are quickly reflected in the pricing of the finished product.

The bromine we use in our Polymer Additives segment comes from two locations: Arkansas and the Dead Sea. Our brine reserves in Arkansas are supported by an active brine rights leasing program. We believe that we have in excess of 50 years of proven bromine reserves in Arkansas. In addition, through our 50% interest in Jordan Bromine Company Limited, or JBC, a consolidated joint venture with operations in Safi, Jordan, we produce bromine from the Dead Sea, which has virtually inexhaustible reserves.

We entered into a range of phosphorus derivative supply agreements with Rhodia S.A. as part of the acquisition of the Rhodia polyurethane flame retardants business.

Catalysts

Our Catalysts segment includes refinery catalysts and polyolefin catalysts product categories.

Refinery Catalysts. Our two main refinery catalysts product lines are hydroprocessing, or HPC, catalysts and fluidized catalytic cracking, or FCC, catalysts and additives.

HPC catalysts are primarily used to reduce the quantity of sulfur and other impurities in petroleum products as well as to convert heavy feedstock into lighter, more valuable products. FCC catalysts assist in the cracking of petroleum streams into derivative, higher-value products such as fuels and petrochemical feedstock. Our FCC additives can be used to remove sulfur in gasoline and to reduce emissions of sulfur dioxide and nitrogen oxide in FCC units, to increase liquefied petroleum gas olefins yield and to boost octane in gasoline. We offer more than 90 different HPC catalysts products and more than 70 different FCC catalysts and additives products to our customers.

Polyolefin Catalysts . We manufacture aluminum- and magnesium-alkyls, which are used as co-catalysts in the production of polyolefins, elastomers, alpha olefins, such as hexene, octene and decene, and organotin heat stabilizers and in the preparation of organic intermediates. We also produce metallocene/single-site catalysts, which aid in the development and production of new polymers that increase impact strength, clarity and melt characteristics of plastic films. We are continuing to build on our organometallics base and to expand the portfolio of products and capabilities we offer our customers.

Customers

Our Catalysts segment customers include multinational corporations such as ExxonMobil Corporation, Royal Dutch Petroleum Company and ChevronTexaco Corporation; independent petroleum refining companies such as Valero Energy Corporation and Tesoro Petroleum Corporation; and national petroleum refining companies such as Saudi Aramco Mobil Refinery Company Ltd., PetrĂłleo Brasileiro S.A. and PetrĂłleos Mexicanos.

We estimate that there are currently approximately 450 FCC units being operated globally, each of which requires a constant supply of FCC catalysts. In addition, we estimate that there are approximately 2,000 HPC units being operated globally, each of which typically requires replacement HPC catalysts once every one to three years.

Competition

Our Catalysts segment serves the following markets: the United States, Latin America, Asia, Europe and the Middle East, each of which is highly competitive. Product performance and quality, price competition and contract terms are the primary factors in determining which qualified supplier is awarded a contract. Research and development, product and process improvements, specialized customer services, the ability to attract and retain skilled personnel, and the maintenance of a good safety record, however, have also been important factors to compete effectively in the Catalysts marketplace. Through our research and development, we strive to differentiate our business by developing value-added products and products based on proprietary technologies.

In the Catalysts segment, HPC and FCC catalysts competition is primarily from major catalysts companies. We are a market leader in the HPC and FCC catalysts markets and our major competitors in the HPC catalysts market are Criterion Catalysts and Technologies and W.R. Grace & Co./Advanced Refining Technologies. Our major competitors in the FCC catalysts market are W.R. Grace & Co. and BASF. Some of the major catalysts companies have alliances with global major refiners to facilitate new product development and introduction. Our major competitors in the polyolefin market include Akzo Nobel N.V., Axens NV, Basell Service Company B.V., Chemtura Corporation, Tosoh Corporation, Univation Technologies LLC, and W.R. Grace & Co.

Raw Materials

The major raw materials we use in our Catalysts operations include aluminum, ethylene, alpha olefins, sodium silicate, sodium aluminate, kaolin, molybdenum, nickel and cobalt, most of which are readily available from numerous independent suppliers and are purchased or provided under contracts at prices we believe are competitive. The cost of raw materials is generally based on market prices although we may use contracts with price caps or other tools, as appropriate, to mitigate price volatility. Certain critical raw materials may nevertheless be subject to significant volatility. For example, molybdenum prices increased more than four-fold in 2004 to an average of $16.66/lb and increased to $32.20/lb in 2005, decreased to $24.95/lb in 2006, and then increased to $30.30/lb in 2007. Our profitability may be reduced if we are unable to pass along such price increases to our customers.

Fine Chemicals

Our Fine Chemicals segment consists of two product categories: performance chemicals and fine chemistry services and intermediates.

Performance Chemicals. Performance chemicals include products such as elemental bromine, alkyl bromides, inorganic bromides and a number of bromine fine chemicals. Our products are used in chemical synthesis, oil and gas well drilling and completion fluids, paper manufacturing, water purification, glass manufacturing, photography and various other industrial applications. Other performance chemicals that we produce include tertiary amines for surfactants, biocides, disinfectants and sanitizers; potassium and chlorine-based products used in industrial applications; alkenyl succinic anhydride used in paper-sizing formulations; and aluminum oxides used in a wide variety of refractory, ceramic and polishing applications. We sell these products to customers throughout the world for use in personal care products, automotive insulation, foundry bricks and other industrial products.

Fine Chemistry Services and Intermediates. In addition to supplying the specific fine chemical products and performance chemicals for the pharmaceutical and agricultural uses described below, our fine chemistry services business offers custom manufacturing, research and chemical scale-up services for companies. We believe that these services position us to support customers in developing their new products, such as new drugs.

Our most significant pharmaceutical bulk active is ibuprofen. Ibuprofen is widely used to provide temporary pain relief and fever reduction. Bulk ibuprofen is formulated by pharmaceutical companies that sell in both the prescription and over-the-counter markets. This product competes against other painkillers, including aspirin and acetaminophen. We are one of the largest global producers of ibuprofen. We also produce a range of intermediates used in the manufacture of a variety of over-the-counter and prescription drugs.

Our agrichemicals are sold to agrichemical manufacturers and distributors that produce and distribute finished agricultural herbicides, insecticides, fungicides and soil fumigants. Our products include orthoalkylated anilines used in the acetanilide family of pre-emergent herbicides used with corn, soybeans and other crops and methyl bromide, which is used as a soil fumigant. We also manufacture and supply a variety of custom chemical intermediates for the agricultural industry.

In recent years, the market for methyl bromide has changed significantly, driven by the Montreal Protocol of 1990 and related regulation prompted by findings regarding the chemical’s potential to deplete the ozone layer. Methyl bromide is injected into the soil by end users before planting to eliminate bacteria, nematodes, fungus and weeds. Methyl bromide is used on high-value crops, such as strawberries, tomatoes, melons and peppers.

We will continue to sell methyl bromide in our current markets throughout 2008, as current regulations allow, with reduced critical-use allowances compared to 2007. In accordance with the Montreal Protocol and the U.S. Clean Air Act, completion of the phase-out of methyl bromide as a fumigant in the United States, Western Europe and Japan took effect in 2005. Methyl bromide, however, can continue to be used for “critical uses” where there are no other alternatives. Growers submit applications on a yearly basis detailing the amount of methyl bromide they will need for critical uses. Once approved by the U.S. Environmental Protection Agency, or EPA, the United States submits the application for approval by the parties to the Montreal Protocol. The critical use process is done annually and will continue until feasible alternatives are available. Certain other markets for methyl bromide, including quarantine and pre-shipment and chemical intermediate uses, are not restricted by the Montreal Protocol.

Customers

The Fine Chemicals segment manufactures more than 100 products, which are used in a variety of end-markets. Sales of products and services are mostly to chemical manufacturers and processors, including pharmaceutical, agricultural, drilling and oil services, water treatment and photographic companies, and to other specialty chemical companies.

Pricing for many of our fine chemicals is based upon negotiation with customers. The critical factors that affect prices are the level of technology differentiation we provide, the maturity of the product and the level of assistance required to bring a new product through a customer’s developmental process.

Competition

Our Fine Chemicals segment serves the following markets: the United States, Asia, Europe, and the Middle East, each of which is highly competitive. Product performance and quality, price competition and contract terms are the primary factors in determining which qualified supplier is awarded a contract. Research and development, product and process improvements, specialized customer services, the ability to attract and retain skilled personnel, and the maintenance of a good safety record, however, have also been important factors to compete effectively in the Fine Chemicals marketplace.

We are a market leader in the bromine-based products groups and primarily compete with two other integrated global bromine producers, Chemtura Corporation and Israel Chemicals. We are a leading producer of pharmaceutical bulk actives ( i.e . ibuprofen and propofol) and we primarily compete with a few major Western competitors, such as BASF Corporation, AstraZeneca PLC, Clariant Ltd. and Cilag AG; however, there is increasing competition from Asian and Indian sources. We are seeking to differentiate ourselves from our competitors by developing new innovative products, offering cost reductions and enhancing the services that we offer.

Raw Materials

The major raw materials we use in our Fine Chemicals operations include potassium chloride, chlorine, ammonia, aluminum chloride, alpha olefins, methyl amines and propylene, most of which are readily available from numerous independent suppliers.

The bromine that we use in our Fine Chemicals segment comes from two locations: Arkansas and the Dead Sea. Our brine reserves in Arkansas are supported by an active brine rights leasing program. We believe that we have in excess of 50 years of proven bromine reserves in Arkansas. In addition, through our 50% interest in JBC, a consolidated joint venture with operations in Safi, Jordan, we produce bromine from the Dead Sea, which has virtually inexhaustible reserves.

Sales, Marketing and Distribution

We have an international strategic account program that uses cross-functional teams to serve large global customers. This program emphasizes creative strategies to improve and strengthen strategic customer relationships with emphasis on creating value for customers and promoting post-sale service. We also use more than 50 selected distributors, commissioned sales representatives and specialists in specific market areas, some of which are subsidiaries of large chemical companies.

Research and Development

We believe that in order to generate revenue growth, maintain our margins, and remain competitive, we must continually invest in research and development, product and process improvements and specialized customer services. Through research and development, we continue to seek increased margins by introducing value added products and proprietary processes and innovative green chemistry technologies. Our green chemistry efforts focus on the development of safe products that benefit society and are gentler to the environment. Among our green chemistry objectives are elimination of waste, efficient use of raw materials and energy, avoidance of toxic reagents and solvents, and implementation of safe, environmentally friendly manufacturing processes. Green chemistry is encouraged with our researchers through periodic focus group discussions and special rewards and recognition for outstanding new green developments.

Our research and development efforts support each of our business segments. The focus of research in Polymer Additives is divided among new and improved flame retardants, plastic and other additives and blends, and curing agents. Flame retardant research is focused primarily on developing new flame retardants and improving existing flame retardants to meet higher performance requirements required by today’s polymer producers, formulators, and original equipment manufacturers. Plastic and other additives research is focused primarily on developing improved capabilities to deliver commodity and value added plastic and other additive blends to the polymer market. Curatives research is focused primarily on improving and extending our line of curing agents and formulations.

Catalysts research is focused on the needs of both our refinery catalysts customers and our polyolefin catalysts customers. Refinery catalysts research is focused primarily on the development of more effective catalysts and related additives to produce clean fuels and to maximize the production of the highest value refined products. In the polyolefin area, we are focused primarily on developing catalysts, co-catalysts and finished catalysts systems to polymer producers to meet the market’s demand for improved polyolefin polymers and elastomers.

The primary focus of our Fine Chemicals research program is the development of efficient processes for the manufacture of chemical intermediates and actives for the pharmaceutical and agrichemical industries. Another area of research is the development of biocides for industrial and recreational water treatment and other applications, especially products based on bromine chemistry.

Our total research and development spending was $76.9 million, $58.0 million and $53.0 million in 2007, 2006 and 2005, respectively. In accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 2, “Accounting for Research and Development Costs,” we have recognized research and development expenses of $62.7 million, $46.3 million and $41.7 million in 2007, 2006 and 2005, respectively.

Intellectual Property

Our intellectual property, including our patents, licenses and trade names, is an important component of our business. As of December 31, 2007, we owned approximately 1,600 active U.S. and foreign patents and had over 1,600 pending U.S. and foreign patent applications. In July 2007, we acquired controlling interests in our two joint ventures, Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. There is one active patent and nine pending patent applications held jointly by the two joint ventures. In connection with our July 2004 acquisition of the Akzo Nobel refinery catalysts business, we obtained 50% interests in three joint ventures, each of which has its own intellectual property portfolio. In addition, we have acquired rights under the patents and inventions of others through licenses and license our patents and inventions to third parties.

Regulation

Our business is subject to a broad array of employee health and safety laws and regulations, including those under the Occupational Safety and Health Act, or OSHA. We also are subject to similar state laws and regulations, and foreign laws and regulations for our non-U.S. operations. We devote significant resources and have developed and implemented comprehensive programs to promote the health and safety of our employees. We maintain an active health, safety and environmental program. We finished 2007 with an occupational injury and illness rate of 0.55.

Our business and our customers also may be subject to significant new requirements under the European Commission’s Proposal for the Registration, Evaluation and Authorization of Chemicals, or REACH. REACH will impose obligations on European Union manufacturers and importers of chemicals and other products into the European Union to compile and file comprehensive reports, including testing data, on each chemical substance, and perform chemical safety assessments. Additionally, substances of high concern—such as Carcinogenic, Mutagenic and Reprotoxic (CMRs); Persistent, Bioaccumulative and Toxic (PBTs); very Persistent, very Bioaccumulative (vPvB); and endocrine disruptors—will be subject to an authorization process. Authorization may result in restrictions in the use of products by application or even banning the product. REACH came into effect in 2007 with the highest priority chemicals to be reviewed in approximately three years. The regulations impose significant additional burdens on chemical producers, importers, downstream users of chemical substances and preparations, and the entire supply chain. Our significant manufacturing presence and sales activities in the European Union will require us to incur significant additional compliance costs, including the hiring of additional employees to coordinate the additional reporting requirements, and may result in increases in the costs of raw materials we purchase and the products we sell. Increases in the costs of our products could result in a decrease in their overall demand; additionally, customers may seek products that are not regulated by REACH which could also result in a decrease in their demand.

Environmental Regulation

We are subject to numerous foreign, federal, state and local environmental laws and regulations, including those governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated properties. Ongoing compliance with such laws and regulations is an important consideration for us. Key aspects of our operations are subject to them, and we incur substantial capital and operating costs in our efforts to comply with them.

Liabilities associated with the investigation and cleanup of hazardous substances, as well as personal injury, property damages, or natural resource damages arising from the release of, or exposure to, such hazardous substances, may be imposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that a responsible party may be held liable for more than its share of the losses involved, or even the entire loss). Such liabilities also may be imposed on many different entities with a relationship to the hazardous substances at issue, including, for example, entities that formerly owned or operated the property affected by the hazardous substances and entities that arranged for the disposal of the hazardous substances at the affected property, as well as entities that currently own or operate such property. We are subject to such laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, in the United States, and similar foreign and state laws. Our management is actively involved in evaluating environmental matters and, based on information currently available to us, we have concluded that our outstanding environmental liabilities for unresolved waste sites currently known to us should not be material to operations.

We record accruals for environmental and asset retirement obligation matters in accordance with the guidelines of the AICPA Statement of Position 96-1, “Environmental Remediation Liabilities” and SFAS No. 143 “Accounting for Asset Retirement Obligations,” respectively, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Future developments and increasingly stringent environmental laws and regulations could require us to make additional unforeseen environmental expenditures. We cannot assure you that, as a result of former, current or future operations, there will not be some future impact on us relating to new regulations or additional environmental remediation or restoration liabilities. See “Safety and Environmental Matters” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 40.

Recent Acquisitions and Joint Ventures

Over the last three years, we have devoted a significant amount of resources to acquisitions, including the subsequent integration of acquired businesses, and to joint ventures. These acquisitions and joint ventures have expanded our base business, provided our customers with a wider array of products and presented new alternatives for discovery through additional chemistries. The following is a summary of our acquisitions and joint ventures during the last three years:

On July 31, 2007, we acquired controlling interests in our two antioxidant joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. Our ownership interests in these Polymer Additives business segment joint ventures increased from 25% to 75%. The acquisition of the additional interests totaled approximately $37.4 million payable in cash due primarily within one year. Additional consideration of up to a total of approximately $7.3 million cumulatively for the two joint ventures will be payable between the first and second anniversary of the closing date if the joint ventures meet certain specified performance criteria subsequent to the acquisition date.

On September 30, 2006, we acquired the assets and fine chemistry services and pharmaceuticals business associated with the South Haven, Michigan facility of DSM Pharmaceutical Products (DSM), a business group of Royal DSM NV, for approximately $26.0 million.

Employees

As of December 31, 2007, we had 4,130 employees of whom 2,230, or 54%, are employed in the United States; 1,310, or 32%, are employed in Europe; and 590, or 14%, are employed in Asia. Approximately 20% of our U.S. employees are unionized. We have bargaining agreements at three of our U.S. locations:


•

Baton Rouge, Louisiana—United Steel Workers (USW);


•

Orangeburg, South Carolina—International Brotherhood of Teamsters—Industrial Trades Division; and


•

Pasadena, Texas—United Steel Workers (USW); Sheet Metal Workers International Association; United Association of Journeymen & Apprentices of Plumbing and Pipefitting Industry; and International Brotherhood of Electrical Workers.

We believe that we have good working relationships with these unions, and we have operated without a labor work stoppage at each of these locations for more than 10 years. Bargaining agreements expire at our Pasadena, Texas location in 2008, at our Baton Rouge, Louisiana location in 2009 and at our Orangeburg, South Carolina site in 2010.

We have three works councils representing the majority of our European sites—Amsterdam and Amersfoort, the Netherlands; Port-de-Bouc, France; and Bergheim, Germany—covering approximately 1,100 employees. In addition, we have approximately 60 employees at our manufacturing facility in Avonmouth, United Kingdom that are represented by unions through a current collective bargaining agreement. We believe that our relationship with these councils and bargaining representatives is generally good.

Stock Split

On February 7, 2007, the Company’s Board of Directors approved a two-for-one stock split in the form of a share distribution. The Company distributed approximately 47.8 million shares of common stock on March 1, 2007, to shareholders of record as of February 20, 2007. The par value of the common stock remains $0.01 per share. All share and per share amounts have been retroactively adjusted to reflect this two-for-one stock split.

CEO BACKGROUND

William M. Gottwald was elected Chairman of our Board of Directors on March 28, 2001, having previously served as Vice President, Corporate Strategy of our company since 1996. Dr. Gottwald joined our company in 1996 after being associated with Ethyl Corporation (provider of value-added manufacturing and supply solutions to the chemical industry and subsidiary of NewMarket Corporation) for 15 years in several assignments, including Senior Vice President and President of Whitby, Inc., an Ethyl subsidiary. Dr. Gottwald has been a member of our Board of Directors since 1999. He is also a director of Tredegar Corporation.

Mark C. Rohr was elected President and Chief Executive Officer of our company effective October 1, 2002. Mr. Rohr served as President and Chief Operating Officer of our company from January 1, 2000 through September 30, 2002. Previously, Mr. Rohr served as Executive Vice President, Operations of our company from March 22, 1999 through December 31, 1999. Before joining our company, Mr. Rohr served as Senior Vice President, Specialty Chemicals of Occidental Chemical Corporation (chemical manufacturer with interests in basic chemicals, vinyls, petrochemicals and specialty products and subsidiary of Occidental Petroleum Corporation). Mr. Rohr currently serves on the Board of Directors of Celanese Inc.

John M. Steitz was appointed to Executive Vice President and Chief Operating Officer of our company effective April 11, 2007. Mr. Steitz served as Senior Vice President, Business Operations since January 1, 2004 and as Vice President, Business Operations from October 2002 until January 2004. From July 2000 until October 2002, Mr. Steitz served as Vice President, Fine Chemicals on a global basis. Before joining our company, he was Vice President and General Manager, Pharmaceutical Chemicals of Mallinckrodt, Incorporated (global provider of specialty healthcare products in the areas of diagnostic imaging, respiratory care and pain relief, and business unit of Tyco Healthcare) for 22 years.

Richard J. Diemer, Jr. joined our company on August 15, 2005, and was elected Senior Vice President and Chief Financial Officer effective September 1, 2005. Before joining our company, he served as the Senior Portfolio Manager, Equities at Honeywell International Inc. (provider of aerospace products and services, control technologies for buildings, home and industry, automotive products, turbochargers and specialty materials) since December 2004. Prior to that, he was Vice President, Equity Research from March 2002 to December 2004 and Chief Financial Officer of Honeywell Specialty Materials (subsidiary of Honeywell International, Inc.) from July 2000 to March 2002.

Luther C. Kissam, IV was appointed Senior Vice President, Law and Manufacturing, and Secretary effective January 8, 2008. Mr. Kissam joined our company in September 2003 and served as Vice President, General Counsel and Secretary from that time until December 16, 2005 when he was promoted to Senior Vice President, General Counsel and Secretary. Before joining our company, Mr. Kissam served as Vice President, General Counsel and Secretary of Merisant Company (manufacturer and marketer of sweetener and consumer food products), having previously served as Associate General Counsel of Monsanto Company (provider of agricultural products and solutions).

John G. Dabkowski joined our company in June 1973 and was named Vice President, Business Development effective April 11, 2007. Mr. Dabkowski served as Vice President, Polymer Additives since September 2004 and as Vice President, Polymer Chemicals from September 1997 until September 2004. Previously, he served as Vice President and General Manager of Specialty Chemicals from March 1994 until September 1997.

Ronald R. Gardner was elected Vice President, Fine Chemicals effective January 1, 2007. Mr. Gardner served as a Divisional Vice President, Performance Chemicals since 2002, and was Business Director, Bromine and Derivatives including Jordan Bromine start up and integration since 2001. Previously, he worked in research and development, manufacturing, international distribution, project management, and international business management (including a five-year assignment in Europe) since joining our company in May 1973.

Jack P. Harsh was elected Vice President, Human Resources of our company effective December 1, 1998. Mr. Harsh joined our company effective November 16, 1998, from Union Carbide Corporation (producer of chemicals and polymers and subsidiary of The Dow Chemical Company), where he directed human resources for the solvents, intermediates and monomers business and supply-chain planning organization.

John J. Nicols joined our company in February 1990 and served as Vice President, Fine Chemicals of our company from June 2002 until January 1, 2007 when he was elected Vice President, Catalysts. Previously, Mr. Nicols served as a Divisional Vice President since March 2002, and Global Business Director since February 1999.

Anthony S. Parnell was elected Vice President, Global Sales, Service and Operations Planning effective January 1, 2007. Previously, Mr. Parnell served as Vice President, Americas Sales Operations since 2002, and was Managing Director of Albemarle’s European Operations from 1996 until 2002. He previously served in various commercial leadership positions at our company and Ethyl Corporation since 1982.

Luc Van Muylem was named Vice President, Polymer Additives of our company effective April 11, 2007. Mr. Van Muylem previously served as Division Vice President, Flame Retardants and has over 30 years of industry experience.

Geoffrey C. Stanford joined our company in October 2005 and was named Corporate Controller effective January 1, 2006 and an officer effective April 11, 2007. Before joining our company, Mr. Stanford served as Corporate Controller for Global Industries, Ltd. (offshore construction company) from 1999 until 2005.

C. Kevin Wilson joined our company in May 2004 and was elected Treasurer effective July 1, 2004. Before joining our company, Mr. Wilson served as Vice President and Treasurer of Solutia Inc. (specialty chemicals manufacturer) from January 2001 until May 2004, having previously served as Assistant Treasurer and Director, Finance of Solutia from August 1997 until January 2001.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview and Outlook

We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals. Our products and services enhance the value of our customers’ end-products by improving performance, providing essential product attributes, lowering cost and simplifying processing. We sell a highly diversified mix of products to a wide range of customers, including manufacturers of consumer electronics, building and construction materials, automotive parts, packaging, pharmachemicals and agrichemicals, and petroleum refiners. We believe that our commercial and geographic diversity, technical expertise, flexible, low-cost global manufacturing base, and experienced management team enable us to maintain leading market positions in those areas of the specialty chemicals industry in which we operate.

Growth of our Polymer Additives segment is expected to come from increasing demand for electrical and electronic equipment, new construction and increasingly stringent fire-safety regulations in many countries around the world. Growth in our Catalysts segment is expected to be driven by global demand for petroleum products, generally deteriorating quality of crude oil feedstock and implementation of more stringent fuel quality requirements as a part of clean air initiatives. The Fine Chemicals segment continues to benefit from the continued rapid pace of innovation and the introduction of new products, coupled with the movement by pharmaceutical companies to outsource certain research, product development and manufacturing functions.

2007 Highlights


•

Acquisition of controlling interests in our Chinese joint ventures. We acquired controlling interests, by increasing our ownership interests from 25% to 75%, in our two antioxidant joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. We believe these entities together make up one of the largest Chinese providers of antioxidants for the polyolefin industry.


•

Closure of our Dayton, Ohio facility. We announced the closure of our Dayton, Ohio fine chemistry facility. The operations of this cGMP (pharmaceutical-grade) pilot plant will be moved to our recently acquired, multi-scale cGMP manufacturing facility in South Haven, Michigan, to more efficiently utilize equipment and staffing at the two sites. In connection with this shutdown and planned consolidation, we recorded a charge in 2007 amounting to $4.9 million ($3.2 million after income taxes, or $0.03 per share). This plant closure and consolidation is part of our strategic focus on operating improvements in our Fine Chemicals segment.


•

Catalyst Plant Expansions. At the end of 2007, our new hydroprocessing catalysts expansion at our Bayport, Texas facility was completed and we began operations in that facility. In addition, we announced a major expansion of our polyolefin catalysts production in Baton Rouge, Louisiana, which is expected to be operational at the end of 2008.


•

Debt agreement exchange. In March 2007, we exchanged our prior senior credit agreement for a new five-year, revolving, unsecured senior credit facility to improve operating flexibility and to take advantage of favorable market conditions. Our new credit agreement exchanged our previous $450.0 million five-year term loan facility and $300.0 million revolving credit facility for a $675.0 million unsecured five-year revolving credit facility and also provides for an additional $200.0 million in credit, if needed, upon additional loan commitments by our existing and/or additional lenders.


•

Debt rating upgrades. S&P and Moody’s awarded us upgrades to our debt rating: S&P to BBB with an outlook-stable and Moody’s to Baa2 with an outlook-stable.


•

Research and Development Spending. We increased research and development spending by approximately 35.4% compared to 2006. We expanded our investments in new catalysts to satisfy the expanding needs in both traditional and alternative fuels markets as well as to develop new polymer additives and fine chemicals products.


•

Stock Repurchase Plan. We repurchased an aggregate of 2,369,810 shares of our common stock in open-market or privately-negotiated transactions at an average price of $42.71 per share. In addition, we repurchased an additional 4,000,000 shares of our common stock in February 2008 at an average price of $37.22 per share.




•


Increased Dividends . We increased our dividend for the 13 th consecutive year, ending the year at an annual dividend rate of $0.42 per share. In February 2008, we increased our quarterly dividend to $0.12 per share of common stock ($0.48 annually).

2008 Outlook

Polymer Additives: We expect growth of our Polymer Additives segment to come from increasing demand for electrical and electronic equipment, new construction and increasingly stringent fire-safety regulations in many countries around the world. In 2008, we expect modest volume growth while achieving pricing initiatives to offset raw material and energy costs that continue to rise.

We are increasing our presence in China as we build a foundation for expanding our business in Asia. Our technology center in Nanjing is now operational. This center provides technical support for our Polymer Additives customers in the Asia Pacific region. In addition, the construction of our phosphorous flame retardant plant in Nanjing is on schedule for a start up in the first half of 2008. We intend to produce phosphorous flame-retardants at this site to serve the rapidly growing Asia-Pacific construction and electronic markets.

New product development momentum continues in Polymer Additives. The trend in some electronic components toward halogen free flame retardants is creating numerous development opportunities with our diverse customer base. We are beginning to commercialize a new patent protected environmentally friendly form of one of our proprietary products. We also recently introduced to the market a new technical innovation in our mineral flame retardant business.

Catalysts : We expect revenue growth in our Catalysts segment to be driven by global demand for petroleum products, generally deteriorating quality of crude oil feedstock and implementation of more stringent fuel quality requirements as a part of clean air initiatives. We expect Catalysts profit growth in 2008 will come primarily from new product introductions, new markets that we penetrate, FCC pricing improvements and the continued growth in our polyolefin catalysts business.

As oil demand remains elevated, we believe refiners will process more sour crudes, which will require additional HPC catalysts to remove the metals and impurities, further driving demand for these catalysts. The HPC catalysts expansion at our Bayport, Texas facility is now operational delivering products. This plant will add approximately 10,000 metric tons to our capacity, more than double the capacity at our Bayport site, and increase our global HPC capacity (including capacity at our joint venture Nippon Ketjen) by approximately 30%. We believe this will provide us with the capacity to meet the strong growth in demand for 2008 and 2009 that we expect in this business. We continue to believe we will need additional HPC capacity in 2009 and thereafter due to expected increased demand.

Our focus in FCC catalysts is on improving margins to support the value these products bring to the market. While we believe there remains room for further margin improvement, we believe to be successful we must continue to deliver high-performing, superior quality products to meet the growing demands of refiners processing increasingly heavy crudes. In addition, we expect to continue to see incremental margin benefits in future quarters due to the FCC price increases that were announced in 2007. Our FCC business continues to be faced with high raw material costs increases related to energy, metals, imported rare earths, and transportation costs. We believe, however, that our price increases will offset increasing raw material and energy costs, but there is no guarantee that will occur.

We are focused on new product development in catalysts and have introduced high-throughput experimentation to more rapidly test and develop new technologies. Our marketing and research groups are tightly aligned so we can continue to bring innovative technologies to the market. We will continue to explore new opportunities for our catalysts in the alternative fuels business which includes biodiesel, Canadian oil sands, gas to liquids (GTL), and coal to liquids (CTL) markets. These opportunities become increasingly viable as oil remains at historically high levels.

Fine Chemicals: The Fine Chemicals segment continues to benefit from the continued rapid pace of innovation and the introduction of new products, coupled with the movement by pharmaceutical companies to outsource certain research, product development and manufacturing functions. We expect stable growth throughout 2008. In addition to an overall focus on margin improvement, our two strategic areas of focus in Fine Chemicals have been to maximize our bromine franchise value and to continue the growth of our fine chemistry services business.

We are focused on profitably growing our globally competitive bromine and derivatives production network to serve all major bromine consuming products and markets. In addition, we will continue our focus on developing our fine chemistry services business. Our new products pipeline in this business has approximately doubled in the last three years, allowing us to develop preferred outsourcing positions serving leading chemical and pharmaceutical innovators in diverse industries. We remain confident in continuing to generate growth in profitable niche products leveraged from this service business.

Corporate and Other: We are continuing our focus on reducing working capital and repaying debt in 2008. In addition, we will continue to focus on tax efficiency, however incremental income is more likely to be earned in locales with higher incremental rates. We believe our global effective tax rate may be in the range of 23.5% to 24.5%, but will vary based on the locales in which incremental income is actually earned. We have increased our quarterly dividend payout in 2008 to $0.12 per share. Under our existing share repurchase program, we expect to accelerate the amount of shares repurchased in 2008 as compared to 2007. In February 2008, we repurchased 4,000,000 shares of our common stock. In addition, we remain committed to evaluating the merits of any opportunities that may arise for acquisitions that complement our business footprint.

Results of Operations

The following data and discussion provides an analysis of certain significant factors affecting our results of operations during the periods included in the accompanying condensed consolidated statements of income.

Comparison of 2007 to 2006

Net Sales

For 2007, we recorded net sales of $2,336.2 million, a decrease of $32.3 million, or 1%, compared to net sales of $2,368.5 for 2006. This decrease was due primarily to reduced volumes in all segments and the disposition of our Thann, France facility, partially offset by improved pricing/mix in all segments. Overall, volumes declined 10%, price/mix increased 7% and foreign currency increased 2% compared to 2006.

Polymer Additives’ net sales for 2007 decreased $15.9 million, or 2%, compared to 2006 primarily due to an 11% decline in volume, partially offset by an improvement in price/mix of 7% and an increase of 2% related to foreign currency. Catalysts’ net sales increased $55.2 million, or 7%, due mainly to an 8% improvement in price/mix and an increase of 3% related to foreign currency,

partially offset by a 4% decline in volume. Fine Chemicals’ net sales decreased $71.6 million, or 12%, primarily due to the disposition of our Thann, France facility in addition to reduced volumes of 8%, partially offset by improved price/mix of 4% and an increase of 2% in foreign currency. For a detailed discussion of revenues and segment income before taxes for each segment see “Segment Information Overview” below.

Gross Profit

For 2007, our gross profit increased $71.7 million, or 13%, from 2006 to $622.5 million due to improved pricing partially offset by reduced volumes and increased manufacturing and raw material costs. Our gross profit margin for 2007 increased to 26.6% from 23.3% in 2006 due partially to the disposition of our Thann, France facility, which had historically low profit margins.

Selling, General and Administrative Expenses

For 2007, our selling, general and administrative, or SG&A, expenses increased $7.2 million, or 3%, from 2006. This increase was primarily due to an increase in salaries and other employee benefit expenses of $4.2 million and outside legal and consulting services of $2.7 million. As a percentage of net sales, SG&A expenses were 10.5% in 2007 versus 10.0% in 2006.

Research and Development Expenses

For 2007, our research and development, or R&D, expenses increased $16.4 million, or 35%, from 2006. This increase was primarily due to higher investments in new catalysts to satisfy the needs in both traditional and alternative fuels markets and in new polymer additives and fine chemicals products. As a percentage of net sales, R&D expenses were 2.7% in 2007 versus 2.0% in 2006.

Interest and Financing Expenses

Interest and financing expenses for 2007 decreased $5.7 million, or 13%, from 2006 to $38.3 million due to lower average outstanding debt levels as well as an increased amount of capitalized interest in 2007 as a result of our Bayport, Texas plant expansion.

Other Income (Expenses), Net

Other income (expenses), net for 2007 increased $6.3 million from 2006 to $6.2 million primarily due to a $3.0 million foreign exchange adjustment on foreign denominated debt of JBC, which occurred in 2006, and an increase in interest income of $1.6 million.

Income Taxes

Our effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to available tax credits and tax planning opportunities available to us. For 2007, our effective income tax rate was 19.8% compared to 1.6% for 2006. The effective tax rate in 2007 reflects a $2.1 million benefit from an enacted tax rate reduction in Germany as well as adjustments totaling $8.4 million identified in the completion of various income tax filings. We believe the adjustments did not have a material effect on our reported financial position and results of operations for the year ended December 31, 2007. In 2007, we recorded a valuation allowance of $9.4 million, including $8.9 million relating to a capital loss carryforward that will more likely than not expire unused. The 2006 period was impacted by the reduction in pre-tax income caused by the Thann divestiture charge of $89.2 million and the associated tax benefit of $30.8 million, or 34.5%, on that charge. Excluding the Thann charge and related tax impact, the effective tax rate for 2006 was 14.8%.

Minority Interests in Income of Consolidated Subsidiaries

Minority interests’ share of net income was $17.6 million in 2007 compared to $13.2 million in 2006. This increase of $4.4 million is due primarily to increased earnings of JBC primarily due to improved pricing and margins. In addition, the expense in 2006 includes a benefit for the minority interest portion of the foreign exchange adjustment on foreign denominated debt of JBC. See Other Income (Expenses), Net above.

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $24.6 million for 2007 compared to $25.0 million in 2006. This decrease of $0.4 million is due primarily to lower equity earnings from our Catalysts segment joint venture Nippon Ketjen as a result of decreased volumes. This decrease is partially offset by additional equity earnings in our other Catalysts segment joint ventures.

Net Income

Our net income increased 61% to $229.7 million in 2007 from $143.0 million in 2006 primarily due to improved margins and the Fine Chemicals segment Thann divestiture charge of $89.2 million ($58.4 million after income taxes) in 2006.

Segment Information Overview. We have identified three reportable segments as required by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Our Polymer Additives segment is comprised of the flame retardants and stabilizers and curatives product areas. Our Catalysts segment is comprised of the refinery catalysts and polyolefin catalysts product areas. Our Fine Chemicals segment is comprised of the performance chemicals and fine chemistry services and intermediates product areas. Segment income represents operating profit (adjusted for significant non-recurring items) and equity in net income of unconsolidated investments and is reduced by minority interests in income of our consolidated subsidiaries, Stannica LLC, JBC, Ningbo Jinhai Albemarle Chemical and Industry Company Limited, and Shanghai Jinhai Albemarle Fine Chemicals Company Limited. Segment data includes intersegment transfers of raw materials at cost, foreign exchange transaction gains and losses and allocations for certain corporate costs.

Polymer Additives

The Polymer Additives segment recorded net sales for 2007 of $904.5 million, down $15.9 million, or 2%, versus 2006. Net sales declined in our flame retardant portfolio primarily due to reduced volumes in our tetrabrom product line, partially offset by higher year over year pricing in certain of our proprietary products and favorable foreign exchange rates. Net sales improved in stabilizers and curatives due to the effects of improved pricing and favorable foreign exchange rates partially offset by slightly reduced volumes. Segment income decreased by 11% to $130.7 million due mainly to lower tetrabrom volumes and increased raw material and other costs, partially offset by improved pricing and favorable foreign exchange rates, for 2007 as compared to 2006.

Catalysts

Our Catalysts segment recorded net sales for 2007 of $894.2 million, up $55.2 million, or 7%, versus 2006. This increase is a result of pricing improvements in FCC refinery catalysts and polyolefin catalysts partially offset by reduced volumes in refinery catalysts. Segment income increased 25%, or $31.1 million, to $154.6 million due mainly to higher pricing and additional equity earnings in several of our Catalysts segment joint ventures, partially offset by increased raw material costs and a decrease in equity earnings from our Nippon Ketjen joint venture. In addition, Catalysts segment income for 2007 includes a $2.1 million pre-tax benefit from the elimination of an employee benefit plan.

Fine Chemicals

Fine Chemicals segment net sales for 2007 were $537.5 million, down $71.6 million, or 12%, versus 2006. This decrease was due mainly to the disposition of our Thann, France facility, a decline in our custom service products, and is partially offset by the acquisition of the South Haven, Michigan facility and improved pricing in our bromine portfolio and fine chemistry services business. Segment income for 2007 was $86.9 million, up $24.7 million, or 40%, from 2006 due mainly to increased pricing, improved plant production efficiencies and favorable foreign exchange rates.

Corporate and Other

For 2007, our Corporate and Other expenses decreased $4.2 million, or 8%, to $50.4 million from 2006. This decrease was primarily due to a reduction in certain employee benefit expenses partially offset by an increase in legal and consulting costs.

Comparison of 2006 to 2005

Net Sales

For 2006, we recorded net sales of $2,368.5 million, an increase of $261.0 million, or 12%, compared to net sales of $2,107.5 for 2005. This increase was mainly due to improved pricing and increased volume in our Polymer Additives and Catalysts segments, improved pricing in our Fine Chemicals segment and the addition of our South Haven, Michigan facility, partially offset by the effects of the divestiture of our Thann facility. Overall, prices increased 10% and volumes grew 4% compared to 2005.

Polymer Additives’ net sales were $920.4 million, up $122.6 million, or 15%, for 2006 compared to the same period in 2005 as prices rose 11% and volume grew 6%. Catalysts’ net sales were $839.0 million, up $101.4 million, or 14%, due mainly to a 9% increase in prices and a 7% increase in volume. Fine Chemicals’ net sales increased to $609.1 million, up $37.0 million, or 6%, primarily due to improved pricing of 10%; however, this increase was partially offset by reduced volumes of 2%. For a detailed discussion of revenues and segment income before taxes for each segment see “Segment Information Overview” below.

Gross Profit

For 2006, our gross profit increased $127.4 million to $550.8 million, or 30%, from 2005 due to increased volume and improved pricing. These increases were partially offset by increased raw material and manufacturing. In addition, our Catalysts segment had higher manufacturing costs associated with a planned shutdown at our Pasadena, Texas polyolefin catalysts plant. Our gross profit margin for 2006 increased to 23.3% from 20.1% in 2005.

Selling, General and Administrative Expenses

For 2006, our SG&A expenses increased $18.1 million, or 8%, from 2005. This increase was primarily due to higher SG&A costs from increased consulting fees related to the implementation of a Belgian-based European trading company of $2.5 million, and increased wages and incentive compensation of $11.3 million. As a percentage of net sales, SG&A expenses were 10.0% in 2006 versus 10.4% in 2005.

Research and Development Expenses

For 2006, our R&D expenses increased $4.6 million, or 11%, from 2005. As a percentage of net sales, R&D expenses were 2.0% in each of 2006 and 2005.

Interest and Financing Expenses

Interest and financing expenses for 2006 amounted to $44.0 million, an increase of $2.0 million from $42.0 million in 2005. This increase was primarily due to the consolidation of JBC effective August 1, 2005, and the impact of an additional $2.5 million on our interest and financing expenses in 2006 compared to 2005 resulting from the inclusion of the debt of JBC. The higher interest and financing expenses were also impacted by higher rates on our average outstanding debt in 2006. Interest and financing expenses for 2005 included the write-off of $1.4 million of deferred financing expenses associated with a $450 million 364-day bridge loan that we retired in January 2005.

Other Income (Expenses), Net

For 2006, our other income (expenses), net was nominal, but decreased $1.6 million from 2005. This decrease was primarily due to a foreign exchange adjustment of approximately $3.0 million on foreign denominated debt at JBC partially offset by an increase in interest income of $1.5 million.

Income Taxes

Our income taxes for 2006 were $2.2 million, a decrease of $25.4 million, or 92%, from 2005. Income taxes for 2006 benefited $22.2 million from earnings in jurisdictions with lower tax rates than the U.S. statutory rate due to designating the undistributed earnings of most of our foreign subsidiaries as permanently reinvested as of September 30, 2006, $9.2 million from the impact of tax rate changes (principally the Netherlands and various states) on our deferred tax liabilities and $8.8 million from foreign tax credits related to repatriation of high taxed earnings from foreign subsidiaries.

Income taxes for 2005 benefited $5.6 million from the repatriation of overseas earnings under the provisions of the American Jobs Creation Act of 2004, known as the Homeland Investment Act, and $6.7 million from foreign tax credits related to repatriation of high taxed earnings from foreign subsidiaries. In the fourth quarter of 2005, we determined that certain of our reported income tax accounts were overstated based on our detailed reviews. Accordingly, in the fourth quarter of 2005 we recorded an income tax benefit of $7.6 million associated with the revaluation of deferred tax balances related to income tax rate changes in the Netherlands. In addition, the deferred income tax account, as recorded under Accounting Principles Board, or APB, Opinion No. 23 “Accounting for Income Taxes—Special Areas,” reflects an additional expense of $5.2 million related to the proper recording and identification of earnings and profits, or E&P, adjustments in connection with acquired companies. The net impact of these two adjustments, amounting to an income tax benefit of $2.4 million, did not have a material effect on our reported financial position and results of operations for the year ended December 31, 2005 or any prior periods presented.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

First Quarter 2008

During the first quarter of 2008:


•

quarterly net sales increased to a record $668.2 million;


•

quarterly Catalysts segment income increased to a record $51.7 million;


•

we recorded a pre-tax charge of $3.3 million ($2.1 million after income taxes, or $0.02 per share) related to severance in conjunction with personnel reductions at the Company’s Richmond headquarters and Singapore sales office;


•

we increased our quarterly dividend to $0.12 per share of common stock ($0.48 annually);


•

we repurchased an aggregate of 4,062,700 shares of our common stock in open market or privately negotiated transactions at an average price of $37.20 per share;


•

in April 2008 we signed a non-binding letter of intent to acquire Sorbent Technologies Corporation, a full-service mercury control provider for coal fired power plants; and


•

on April 30, 2008 we announced the relocation of our corporate headquarters to Baton Rouge, LA from Richmond, VA.

Outlook

We believe that absent a major global recession, demand for our products will remain strong for 2008 and 2009. While we are concerned with current general business conditions, our business fundamentals remain sound. We are experiencing dramatic cost increases in raw materials and energy in all of our businesses that continue to pressure operating margins and we will continue to work with our customer base to pass through these rapidly escalating costs.

Polymer Additives: We expect growth of our Polymer Additives segment over time to come from increasing demand for electrical and electronic equipment, new construction and increasingly stringent fire-safety regulations in many countries around the world. In 2008, we expect modest volume growth while we work to achieve pricing initiatives to offset the substantial increases in raw material and energy costs.

We are increasing our presence in China with expansions underway that we believe will help us grow our business in Asia. Our technology center in Nanjing provides technical support for our Polymer Additives customers in the Asia Pacific region. In addition, the construction of our phosphorous flame retardant plant in Nanjing remains on schedule for a start up in the first half of 2008. Phosphorous flame-retardants produced at this site will serve the rapidly growing Asia-Pacific construction and electronic markets.

New product development momentum continues in Polymer Additives. The trend in some electronic components toward halogen free flame retardants is creating numerous development opportunities with our diverse customer base. We are beginning to market a new patent protected environmentally friendly form of one of our proprietary products. We also began marketing a new technical innovation in our mineral flame retardant business.

Catalysts : We expect revenue growth in our Catalysts segment to be driven by strong global demand for petroleum products, generally deteriorating quality of crude oil feedstock and implementation of more stringent fuel quality requirements as a part of clean air initiatives. We expect Catalysts profit growth in 2008 will come primarily from new product introductions, new markets that we penetrate, FCC pricing improvements, and the continued growth in our polyolefin catalysts business.

As oil demand remains elevated, we believe refiners will process more sour crudes, which will require additional HPC catalysts to remove the metals and impurities, further driving demand for these catalysts. The HPC catalysts expansion at our Bayport, Texas facility is now operational. This plant expansion adds approximately 10,000 metric tons to our capacity, more than double the capacity formerly at our Bayport site, and increases our global HPC capacity (including capacity at our joint venture Nippon Ketjen) by approximately 30%. We believe this will provide us with the capacity to meet the strong growth in demand for 2008 and 2009 that we expect in this business. We continue to believe we will need to add additional HPC capacity in 2009 due to expected increased demand.

Our focus in FCC catalysts is on improving margins to support the value these products bring to the market. While we believe there remains room for further margin improvement, we believe to be successful we must continue to deliver high-performing, superior quality products to meet the growing demands of refiners processing increasingly heavy crudes. In addition, we expect to continue to see incremental margin benefits in future quarters due to the FCC price increases that we announced in 2007. Our FCC business continues to be faced with substantial raw material costs increases related to energy, metals, imported rare earths, and transportation costs. While we believe that our price increases will help offset increasing raw material and energy costs, we cannot guarantee that these price increases will continue to offset these costs in the future.

We are focused on new product development in catalysts and have introduced high-throughput experimentation to more rapidly test and develop new technologies. Our marketing and research groups are tightly aligned so we can continue to bring innovative technologies to the market. We will continue to exploit our research capabilities to explore new opportunities for our catalysts in the alternative fuels business which includes biodiesel, Canadian oil sands, gas to liquids (GTL), and coal to liquids (CTL) markets. These opportunities become increasingly viable as oil remains at historically high levels.

Fine Chemicals: The Fine Chemicals segment continues to benefit from the continued rapid pace of innovation and the introduction of new products, coupled with the movement by pharmaceutical companies to outsource certain research, product development and manufacturing functions. We expect stable growth throughout 2008. In addition to an overall focus on margin improvement, our strategic areas of focus in Fine Chemicals are to maximize our bromine franchise value, to continue the growth of our fine chemistry services business, and to achieve pricing initiatives to the extent possible to offset the substantial escalation in raw material and energy costs.

We are focused on profitably growing our globally competitive bromine and derivatives production network to serve all major bromine consuming products and markets. In addition, we will continue our focus on developing our fine chemistry services business. Our new products pipeline in this business has approximately doubled in the last three years, allowing us to develop preferred outsourcing positions serving leading chemical, agricultural and pharmaceutical innovators in diverse industries. We remain confident in continuing to generate growth in profitable niche products leveraged from this service business.

Corporate and Other: We continue to focus on reducing working capital and repaying debt in 2008. In addition, we remain focused on tax efficiency, however incremental income is more likely to be earned in locales with higher incremental rates. We believe our global effective tax rate will approximate 22%, but will vary based on the locales in which incremental income is actually earned. Anticipating the increased material cost we are experiencing and the difficult economic outlook, we restricted discretionary spending company-wide. We will maintain an intense focus on this area and we are launching several company-wide cost efficiency initiatives as it relates to our operational and transactional processing efficiency. Notwithstanding these pressures, we have increased our quarterly dividend payout in 2008 to $0.12 per share. In addition, under our existing share repurchase program, we expect to accelerate the amount of shares repurchased in 2008 as compared to 2007. During the first quarter, we repurchased approximately 4.1 million shares of our common stock for approximately $151 million. We remain committed, however, to evaluating the merits of potential acquisition opportunities that complement our business footprint.

Additional information regarding our products, markets and financial performance is provided at our web site, www.albemarle.com . Our web site is not a part of this document nor is it incorporated herein by reference.

Results of Operations

The following data and discussion provides an analysis of certain significant factors affecting our results of operations during the periods included in the accompanying consolidated statements of income.

First Quarter 2008 Compared with First Quarter 2007

Net Sales

For the three-month period ended March 31, 2008, we recorded net sales of $668.2 million, a 13% increase compared to net sales of $589.2 million for the three-month period ended March 31, 2007. This increase was due primarily to improved pricing and product mix in all segments. Price and product mix had a positive impact on sales of 5% and foreign currency and volume each contributed 4% improvements in net sales compared to the same period last year. Polymer Additives net sales increased $30.3 million, or 14%, for the three-month period ended March 31, 2008 compared to the same period in 2007. Compared to the same period last year, volumes contributed 7% of the increase, foreign currency 4% and price and product mix 3%. Catalysts net sales increased $40.3 million, or 17%, compared to the same period last year due mainly to price and product mix improvements contributing 13% and foreign currency which positively impacted net sales by 4%. Fine Chemicals net sales increased $8.4 million, or 6%, compared to the same period last year primarily due to foreign currency contributions of 3%, improvements in price and product mix contributing 2% and volumes positively impacting net sales by 1%. For a detailed discussion of revenues and segment income before taxes for each segment see “Segment Information Overview” below.

Gross Profit

For the three-month period ended March 31, 2008, our gross profit increased $7.6 million, or 5%, to $167.4 million from the corresponding 2007 period due to improved pricing and product mix, favorable foreign currency exchange rates, partially offset by increased raw material and other costs. Our gross profit margin for the three-month period ended March 31, 2008 decreased to 25.1% from 27.1% for the corresponding period in 2007 due to increased raw material and other costs.

Selling, General and Administrative Expenses

For the three-month period ended March 31, 2008, our selling, general and administrative expenses increased $1.0 million, or 2%, from the three-month period ended March 31, 2007.

Research and Development Expenses

For the three-month period ended March 31, 2008, our research and development expenses increased $1.1 million, or 7%, from the three-month period ended March 31, 2007. This increase was primarily due to higher investments in new catalysts to satisfy the expanding needs in both traditional and alternative fuels markets as well as to develop new fine chemicals products.

Interest and Financing Expenses

Interest and financing expenses for the three-month period ended March 31, 2008 increased $1.3 million to $10.2 million from the corresponding 2007 period due to higher average outstanding debt levels partially offset by lower interest rates.

Other Income, Net

Other income, net for the three-month period ended March 31, 2008 increased $1.9 million to $2.8 million from the corresponding 2007 period due primarily to an increase in foreign currency exchange gains and interest income.

Income Tax Expense

Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to available tax credits. For the three-month period ended March 31, 2008, our effective income tax rate was 21.8% as compared to 23.0% for the three-month period ended March 31, 2007. Based on our current level and location of income we anticipate that our effective tax rate for 2008 will approximate 22%. Minority Interests in Income of Consolidated Subsidiaries

For the three-month period ended March 31, 2008, minority interests’ share of net income was $3.6 million compared to $5.0 million in the same period last year. This decrease of $1.4 million is due primarily to lower earnings of Jordan Bromine Company Limited, or JBC, as a result of decreased volumes.

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $7.1 million for the three-month period ended March 31, 2008 compared to $6.4 million in the same period last year. This increase of $0.7 million is due primarily to increased equity earnings from our Catalysts segment joint venture Eurecat S.A. as a result of increased volumes.

Net Income

Our net income increased to $63.3 million in the three-month period ended March 31, 2008 from $58.1 million in the three-month period ended March 31, 2007 primarily due to improved operating results from our Catalysts segment.

Segment Information Overview. We have identified three reportable segments as required by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Our Polymer Additives segment is comprised of the flame retardants and stabilizers and curatives product areas. Our Catalysts segment is comprised of the refinery catalysts and polyolefin catalysts product areas. Our Fine Chemicals segment is comprised of the performance chemicals and fine chemistry services and intermediates product areas. Segment income represents operating profit (adjusted for significant non-recurring items) and equity in net income of unconsolidated investments and is reduced by minority interests in income of our consolidated subsidiaries, Stannica LLC and JBC. Following the July 31, 2007 acquisition of controlling interests in our two antioxidant joint ventures in China: Ningbo Jinhai Albemarle Chemical and Industry Company Limited and Shanghai Jinhai Albemarle Fine Chemicals Company Limited, the joint ventures are consolidated subsidiaries with minority interests in income recorded for the remaining 25% ownership maintained by a third party. Segment data includes intersegment transfers of raw materials at cost, foreign exchange transaction gains and losses and allocations for certain corporate costs. Polymer Additives

The Polymer Additives segment delivered record net sales for the three-month period ended March 31, 2008 of $244.6 million, up $30.3 million, or 14%, versus the three-month period ended March 31, 2007. Net sales increased in our flame retardant portfolio primarily due to higher volumes and favorable foreign currency exchange rates partially offset by slightly lower pricing due to product mix. Net sales improved in stabilizers and curatives due to the effects of improved pricing, increased volumes and slightly favorable foreign currency exchange rates. Segment income declined 17%, or $5.9 million, to $29.8 million due mainly to higher raw material and other costs, partially offset by favorable foreign currency exchange rates, improved product pricing, mix, and volumes, for the three-month period ended March 31, 2008 as compared to the three-month period ended March 31, 2007.

Catalysts

Our Catalysts segment generated record net sales for the three-month period ended March 31, 2008 of $276.1 million, an increase of $40.3 million, or 17%, versus the three-month period ended March 31, 2007. This increase was due primarily to improved pricing in FCC refinery catalysts, improved product mix in HPC refinery catalysts and polyolefin catalysts, as well as our ability to pass-through to our customers higher raw material costs and favorable foreign currency exchange rates. Segment income increased 31%, or $12.3 million, to $51.7 million for the three-month period ended March 31, 2008 compared to the same period in 2007, due mainly to improved product mix in polyolefin catalysts, improved pricing in FCC refinery catalysts and favorable foreign currency exchange rates, partially offset by higher raw material costs.

Fine Chemicals

Fine Chemicals segment net sales for the three-month period ended March 31, 2008 were $147.5 million, an increase of $8.4 million, or 6%, versus the three-month period ended March 31, 2007. This increase was due mainly to an increase in volumes in our fine chemistry services business. Segment income for the three-month period ended March 31, 2008 was $21.5 million, down $1.0 million, or 4% from the three-month period ended March 31, 2007 due mainly to reduced volumes and higher costs in performance chemicals.

Corporate and other

For the three-month period ended March 31, 2008, our Corporate and other expenses decreased $2.2 million, or 15%, to $12.4 million from the three-month period ended March 31, 2007. This decrease was primarily due to a reduction in certain employee benefit expenses.

Financial Condition and Liquidity

Overview

The principal uses of cash in our business generally have been investment in our assets, funding working capital and repayment of debt. Cash to fund the needs of our business has been provided primarily by operations, debt financing and equity issuances.

We expect business activity levels to continue increasing in 2008. This increase in business activity may cause our working capital needs to increase. We are continuing our program to improve working capital efficiency and working capital metrics particularly in the areas of accounts receivable and inventory. We expect our current cash balances and our availability under our March 2007 credit agreement, which is discussed below, to be sufficient to fund working capital requirements for the foreseeable future.

CONF CALL

Sandra Rodriguez - Director of Investor Relations

Thank you, Amity. Good morning, everyone, and thank you for joining us today for a review of Albemarle's second quarter results, which were released before the market opened today. Our press release contains preliminary results for the quarter, and this information is subject to further review by the company and our auditors, as part of our quarter-end review process. Please note that we have posted supplemental sales information as well as reconciliations for net debt and EBITDA on our website under the Investor Information section at www.albemarle.com.

I'd also like to caution that the remarks today contain forward-looking statements. Factors that could cause results to differ from expectations are listed in our Annual Report on Form 10-K.

Participating with me on the call this morning are Mark Rohr, President and CEO; John Steitz, Executive Vice President and Chief Operating Officer; and Rich Diemer, Senior Vice President and CFO.

Now, I'd like to turn the call over to Mark.

Mark C. Rohr - President and Chief Executive Officer

Thanks Sandra, and good morning to everyone. We are pleased to have the opportunity to share our second quarter results today. And we all look forward to answering your questions after a few remarks.

Before commenting on Albemarle's second quarter consolidated results, I would like to update you on some of our strategic initiatives. You may have seen our recent press release, announcing the June 30th completion of the acquisition of the remaining 25% of our Jinhai Albemarle joint ventures.

We are excited at both of these Chinese facilities as 100% holding on subsidiaries of Albemarle. The acquisition of the leading antioxidant supplier in China, strengthens our foot ground in one of the world's fastest growing markets.

Currently operating at nearly 100% capacity the Shanghai plant expansion which will double antioxidants capacity is expected to be completed in the summer of 2009.

Another strategic opportunity is a joint venture in China between Albemarle and Sinobrom. Pending file approval by the Chinese authorities, we expect to complete the transaction with 75% ownership, in the third quarter of this year. Sinobrom's solid position in the bromine derivatives industry in China, coupled with Albemarle's innovative leadership in a global bromine industry offers unique value to the Chinese bromine market, which will create a strong growth platform for us in this critical region.

In June, we also announced a merger between Albemarle and Sorbent Technologies. Pending Sorbent's shareholder approval, expected later this month we plan to close on the purchase by the end of this month.

Driven by the federal and state regulations to control mercury levels, submitted into the atmosphere, Sorbent's full-service mercury control solution is gaining traction with U.S. power plants, needing to comply with these regulations.

Albemarle's cost position in bromine, creates an excellent synergy with Sorbent's technology, and what we expect to be the leading mercury removal solution on the market. We look forward to the addition of another great technology platform in Albemarle's bromine portfolio.

Our laws with UOP, a division at Honeywell continues to be successful. We delivered on a number of growth opportunities through this venture as we have been awarded a high percentage of new HPC units around the world, particularly in the fast growing Middle East and India markets.

Recently, UOP announced PetroChina, the selection of UOP to supply technology, engineering and equipment to one of their new complexes in Chengdu. Albemarle will supply the HPC catalyst's new UOP designed unit for PetroChina. This is only one of the number of our HPC supply agreements with UOP. They will ramp up substantially as new refineries around the world are brought on stream.

While talking about strategic alliances, I mentioned a couple of other exciting opportunities that faces now.

First, in the pharmaceuticals business we recently signed an agreement with India based Dr. Reddy's Laboratory, whereby Albemarle will supply bulk ibuprofen to Dr. Reddy's for use in a generic ibuprofen tablets. And Dr. Reddy's will also market, sale and distribute Albemarle's ibuprofen to its global customer base, predominantly, in India, Europe, Russia and the U.S. This agreement demonstrates a growing appreciation for the value of the high quality pharmaceuticals, particularly in Russia and India. We expect ibuprofen volumes to pickup through 2009 and 2010 as this venture gets underway.

Another important opportunity before us lies in alternative fuels technology division. Worked with Neste Oil for the past several years to develop the catalysts in process for their next BTL renewable diesel has just resulted in much multiyear order from Neste to provide our innovative catalyst for Neste's new renewable diesel process.

We are extremely pleased to be an integral part of this alternative fuel technology and with the key role our catalysts development and lab to market [ph] capital display in this new business segment. We expect alternative fuel sales to grow dramatically as we enter the next decade.

Now let me shift gears and comment on what has been the single greatest challenge for Albemarle and for the industry as a whole, that is sharply rising raw material, energy and transportation cost. Our full year view on raw material and energy cost is now $220 million above 2007 cost. With a majority of this cost weighted towards the second half of the year.

Surging oil and natural gas prices continue to drive substantially higher prices on petroleum derivatives used in many of our products, and that's just part of the overall impact as these costs ripple through transportation and services.

As we look at the specifics, we've done a good job in Fine Chemicals through this quarter covering inflation. Polymer Additives is in most challenged business area with their exposure to petroleum derivatives and aluminum. Aside from metals we're seeing the largest single raw material cost increase in ATH, currently a $26 million year-over-year.

John will share more details with you but his passing through ATH cost represents a largest raw material challenge for Polymer Additives. Beyond ATH a few other price hikes are certainly outpacing our ability to recover in this segment. The catalyst as you know, while metals cost that continue to rise, we contractually pass through the metals inflation in HPC and FCC pricing. In FCC, in poly oil catalyst we clearly are covering the inflation curve. Throughout the second quarter, our pricing actions with more frequents, and in some cases more drastic than seen in the past, a common theme spanning the chemical space. And we remain focused on standing ahead of the curve through effective pricing actions, productivity gains and production overdrive [ph].

In a bit John will further comment on the impact of inflation on our businesses and how his team has and will continue to combat these headwinds.

Now moving to the company results. I'm pleased to announce second quarter net sales of $621 million and $62 million of net income for the quarter or $0.67 per share, that's a 14% improvement from the $0.55 per share in the second quarter of 2007. Attaining these good results was certainly no small task, disciplined execution at every level of organization is critical to improve operating profitability in such a tough economic climate. And I salute our team for stepping to this challenge to deliver these great results.

On strong pricing mix, a mix our catalyst segment closed the quarter with outstanding segment income margins to 21%, that's a 500 basis point improvement over the same period last year. Driven by improved demand of Albemarle flame retardants, polymer additives reported record quarterly sales revenue of $261 million that's a 16% improvement over 2007, topping first quarter's record sales by 6.5%. As noted raw material pass through impacted segment income margins.

Fine Chemicals delivered very solid results again this quarter. Record quarterly industrial sales of bromides contributed to Fine Chemicals segment margins of 16% for the quarter.

Looking forward we anticipate even higher levels of raw material and energy inflation hit us in the second half. Nonetheless I'm confident in our business portfolio and the strength of our business teams. Most of the markets we serve are robust and we expect our strategic positions in these markets to increase our revenue and earnings growth through the second half of the year.

As we head into the third quarter, we expect sequential top-line growth in all three segments, we will aggressively work our value equation to yield improved profitability, as we cover additional inflation. Year-over-year we remain on track to have strong performance growth and I remain confident we can do so.

One final comment before I close, I'd like to recognize our Bayport manufacturing site for receiving a distinguished service award naming them best in Texas for safety during 2007. It is a great honor to be recognized by the chemical manufacturing industry as a leader in demonstrating commitment to safe operations and exemplary safety. Congratulations to our Bayport team.

So now let me turn over to John Steitz who is going to comment on our operating results.

John M. Steitz - Executive Vice President and Chief Operating Officer

Thanks Mark. Good morning everyone. As I walk through the operating results today, I would like to point out that comparisons exclude the impact of the special item from the second quarter of '07. But together our business has delivered roughly 10% top-line revenue growth year-over-year on relatively flat volumes and improved pricing across most of our businesses.

Furthermore we are able to hold operating profits steady, while dealing with more than $45 million in our input cost over the same period of last year.

With that backdrop let's move on to the individual segment results. Starting with Polymer Additives. We are extremely pleased with Polymer Additives record quarterly sales revenues of $261 million. Overall we saw double-digit year-over-year revenue growth in our flame retardants portfolio and in stabilizers and curatives, which includes revenues from our Jinhai joint ventures.

Volumes were up year-over-year and sequentially in brominated flame retardants and strong electronics demand. We believe without any growth in overall supply chain inventory.

This is offset by decreased volumes in mineral flame retardants on weak auto sector volume. Polymer Additives segment income declined 25% year-over-year. The profit decline in Polymer Additives resulted from raw material and energy cost inflation. And our inability to cover significant amount of the cost of ATH, aluminum trihydrate used in our mineral flame retardant division, where competitive pricing environment in Europe has been extremely difficult and intense.

In addition, earnings were negatively impacted by inventory reductions we took in the quarter. Our highly oil dependant stabilizers and curatives business was also challenged for staying ahead of the raw material and energy environment. All this lead to a tough quarter on segment margins that were diluted by inflating revenues and relentless input costs that have been difficult to recover.

Going forward, we expect volumes and pricing in brominated flame retardants to remain strong, helping to offset cost increases across the segment.

One final comment on polymers. Polymer margins were negatively impacted primarily by a lack of improved pricing to cover the impact of $5 million in ATH inflation. Additionally, almost $3 million of delayed pass through and stabilizers and curatives occurred in second quarter. Not for these two significant impacts, margins in polymers would be in a range of 15%.

Moving to catalyst, where we reported net sales of $208 million. And increased segment income of roughly 33% over the same period of last year to $43 million. Outstanding results on what we expected would be a modest volume quarter. Within our Polymer catalyst division we had strong pricing and revenues in our organometallics.

As expected, our refinery catalysts volumes were down. However, HPC had excellent product mix in the quarter, as value for these higher margin activity catalyst is realized.

Our HPC joint ventures had a very good quarter as well. On lower volumes, our FCC portfolio also saw strong mix in higher margin products. As we look forward, we're encouraged by the increased signs of market tightness and comparative pricing we're seeing in FCC, which should continue to bolster our catalyst value equation.

We've just introduced a very exciting technology breakthrough in hydroprocessing catalyst. Our new KF-770 hydrodesulfurization catalyst [ph] built on our patented STARS technology. KF-770 can help improve the performance of a hydrodesulfurization process by up to 35%. Over the most active hydroprocessing catalyst on the market today. Enabling ultra low sulfur diesel refiners to substantially improve their operations at a time when diesel fuels are in increasing demand.

Turning now to Fine Chemicals. Net sales for the quarter were $152 million, 15% higher than the second quarter of '07 on a sales basis. Fine Chemicals segment income was a robust $24 million. This segment offset continuing pressure from escalating raw material, energy, and transportation costs.

While keeping a finger on the pulse, we've been able to stay ahead of the inflation curve here. Within Performance Chemicals strong clear brine fluids demand in Europe and the Middle East contributed to record quarterly sales in our industrial bromides division this quarter.

Mark commented earlier on some very exciting strategic opportunities ahead of us in Fine Chemicals. We look forward to building upon our solid bromine foundation, with the additions of the Sinobrom joint venture and the Sorbent acquisition.

Our Fine Chemistry services and intermediates portfolio had a great quarter despite normal second quarter seasonal downturns in our ag intermediates volumes.

Our ibuprofen business saw a significant volume increases this quarter, compared to the second quarter of '07 and we anticipate strong double-digit growth for the year. However, we must work hard on the value equation to gain traction over raw material inflation.

Strategic alliances with Dr. Reddy's and other international pharmaceutical producers, further solidifies Albermarle's position as the world's leading high quality ibuprofen producer.

Lastly, just to wrap up on our operational performance this quarter, we delivered solid second quarter results in the face of spiraling inflation and a very cautious economic environment.

Energy costs are impacting our entire supply chain from raw material purchases to manufacturing costs, to distribution and freight. A key factor behind our resilient earnings has been improved pricing efforts and continued cost management discipline. We are planning on a tough environment again in the third quarter, and we think we can execute in that construct. We have a set of really great businesses with some of our business models that are well positioned and well focused on the future.

With that, I'd like to turn over to Rich.

Richard J Diemer, Jr. - Senior Vice President and Chief Financial Officer

Thanks John, and good morning to all. The items I will address on the call today are corporate expenses, income taxes, cash flow and our June 30th balance sheet and financial position.

Unallocated corporate expense was $12.9 million in the second quarter, up $2.1 million from last year, but comparable with our Q1 2008 expense level.

SG&A expense was up 14% year-over-year at 10.9% of revenues in the quarter. And for the year-to-date are at 10.2% of revenues versus 10.6% last year.

R&D expense in the quarter is up 18% over prior year levels. So, we continue to fund future growth opportunities.

Taxes; our effective tax rate for the quarter was 18%. Our current view of our full year effective tax rate is 20%. This is the same as the effective tax rate that we recorded for last year, and is lower than the rate we envisioned at the beginning of this year and after Q1. It is based on our current forecast of the level and mix of income in 2008, and the benefits from tax planning activities we have undertaken.

Our EBITDA this quarter is $110.5 million comparable to last year. We ended the quarter with cash and equivalents of $168 million. CapEx for the quarter was $20 million and we are retaining our full year CapEx estimate in the $90 million to $100 million range.

Deprecation and amortization was $27.5 million. We did not buyback any additional shares in Q2 after executing the buyback of $4.1 million shares in Q1.

At quarter end, we have consolidated debt of $891 million, including $57 million of debt from JBC, our Jordanian bromine venture. $390 million of our debt is fixed rate and $501 million is floating rate, up 44% to 56% split.

Our floating debt interest rate is 3.14% at quarter-end. The weighted average interest rate for Q2 was 4.12%. Net of $168 million cash on hand and excluding $32 million of non-guaranteed JBC debt, our net debt is $691 million, up $141 million from year-end and down $11 million from Q1 levels.

Our debt cap ratio is 39.6% and our net debt cap is 34.6%. Given our business outlook and expected cash flow for the reminder of the year, we are comfortable with our current leverage employee.

And, with that I will pass it back to Sandra.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1387 Views