SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2002
OR
_ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to ______.
Commission file number 33-75622
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
SAVINGS PLAN FOR THE EMPLOYEES
OF ALBEMARLE CORPORATION
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Albemarle Corporation
330 South Fourth Street
Richmond, Virginia 23219
Appendix I
SAVINGS PLAN FOR THE EMPLOYEES OF
ALBEMARLE CORPORATION
ANNUAL REPORT
DECEMBER 31, 2002 AND 2001
1
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
INDEX OF FINANCIAL STATEMENTS AND SCHEDULE
Page(s)
Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for Benefits
at December 31, 2002 and 2001 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002 4
Notes to Financial Statements 5-11
Supplemental Schedule: *
Schedule of Assets (Held at End of Year) 12
* Other schedules required by 29 CFR 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 ("ERISA") have been omitted because they are not
applicable.
2
Report of Independent Auditors
To the Administrator of the Savings Plan
For the Employees of Albemarle Corporation:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Savings Plan for the Employees of Albemarle Corporation (the "Plan") at
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the year ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
June 4, 2003
3
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2002 and 2001
(in US dollars)
2002 2001
----------------------------------------- -----------------------------------------
Participant Nonparticipant Participant Nonparticipant
Directed Directed Total Directed Directed Total
Assets:
Cash - interest bearing $ 159,403 $ - $ 159,403 $ 136,438 $ - $ 136,438
Investments at fair value (see Note 3) 166,768,289 58,726,449 225,494,738 181,244,470 50,110,073 231,354,543
Receivables:
Employer contributions - 26,137 26,137 - 27,714 27,714
Employee contributions 61,310 - 61,310 63,420 - 63,420
Dividends and interest 78,144 - 78,144 72,627 - 72,627
------------ ----------- ------------ ------------ ----------- ------------
Net assets available for benefits $167,067,146 $58,752,586 $225,819,732 $181,516,955 $50,137,787 $231,654,742
============ =========== ============ ============ =========== ============
The accompanying notes are an integral part of the financial statements.
4
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
for the year ended December 31, 2002
(in US dollars)
Participant Nonparticipant
Directed Directed Total
------------- ------------ -------------
Additions:
Dividends and interest $ 3,935,124 $ 1,661,480 $ 5,596,604
Employee contributions (see Note 2) 12,534,650 - 12,534,650
Employer contributions, net (see Note 2) - 5,336,635 5,336,635
Net (depreciation) appreciation in fair value
of investments (see Note 3) (14,588,481) 9,288,191 (5,300,290)
------------- ------------ -------------
Total additions 1,881,293 16,286,306 18,167,599
------------- ------------ -------------
Deductions:
Benefit payments 20,849,579 3,102,020 23,951,599
Administrative expenses 10,585 - 10,585
Other (4,443) 44,868 40,425
------------- ------------ -------------
Total deductions 20,855,721 3,146,888 24,002,609
------------- ------------ -------------
Net (decrease) increase (18,974,428) 13,139,418 (5,835,010)
Transfers 4,524,619 (4,524,619) -
Net assets available for benefits, beginning
of year 181,516,955 50,137,787 231,654,742
------------- ------------ -------------
Net assets available for benefits,
end of year $167,067,146 $58,752,586 $225,819,732
============= ============ =============
The accompanying notes are an integral part of the financial statements.
5
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
General: The accompanying financial statements of the Savings Plan For The
Employees Of Albemarle Corporation (the "Plan") have been prepared in conformity
with accounting principles generally accepted in the United States of America.
Accounting Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the Plan to make significant estimates and assumptions that affect the
reported amounts of assets as of the date of the financial statements and the
reported amounts of changes in assets available for benefits during the
reporting periods. Actual results could differ from those estimates.
Risks and Uncertainties: The Plan provides for various mutual fund investment
options in stocks, bonds and fixed income securities. Investments are exposed to
various risks, such as interest rate, market and credit. Due to the level of
risk associated with certain investment securities and the level of uncertainty
related to changes in the value of investment securities, it is at least
reasonably possible that changes in risks in the near term would materially
affect participants' account balances and the amounts reported in the statements
of assets available for benefits and the statement of changes in assets
available for benefits.
6
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
1. Summary of Significant Accounting Policies, continued:
Securities Valuation:
Investments are stated at values determined as follows:
Common stocks - fair value based on the last published sale
price on the New York Stock Exchange
Mutual funds and
Equity Index Trust - net asset value of shares or units held by
the Plan at year-end based on the quoted
market value of the underlying assets
Retirement
Preservation Trust - net asset value of units held by the Plan
at year-end, with the underlying assets
valued as follows:
investments in Guaranteed Insurance
Contracts ("GIC's") and Bank Investment
Contracts ("BIC's") with benefit responsive
features are carried at cost plus accrued
interest ("contract value") and money
market instruments and US Government agency
obligations are valued at amortized cost
Loans to participants - balances due at cost which approximate fair
value
Securities Transactions and Related Investment Income: Securities transactions
are accounted for on a trade-date basis and dividend income is recorded on the
ex-dividend date. Interest income is recorded as earned. The Plan presents in
the statement of changes in net assets available for benefits the "net
appreciation (depreciation) in fair value of investments" which consists of
realized gains and losses and changes in the unrealized appreciation
(depreciation) on those investments. Investment income is allocated to
participant accounts in proportion to the participant's account balance.
2. Description of Plan:
a. General: The Plan is a defined contribution plan. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974. Merrill Lynch
serves as the Plan's trustee. Information regarding Plan benefits, priority of
distributions upon termination of the Plan, and vesting is provided in the Plan
agreement, which is available at the main office of the Plan administrator at
451 Florida Street, Baton Rouge, Louisiana 70801.
7
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
2. Description of Plan, continued:
b. Contributions: Participants in the Plan make pre-tax and/or after-tax
contributions as defined in the Plan document limited to a percentage of their
base salaries. Albemarle Corporation ("Albemarle" or the "Company") contributes
50% of the first 10% of base salary that a participant contributes to the Plan.
Contributions made by Albemarle are invested in the Albemarle Corporation Common
Stock Fund, which contains both participant and nonparticipant directed
balances. Participants may also contribute amounts representing distributions
from other qualified defined benefit or defined contribution plans. The Plan
allows non-highly compensated participants, as defined by the Plan document, to
make a pre-tax or after-tax election contribution ranging from a minimum of one
percent (1%) to a maximum of fifteen percent (15%). A "catch up" contribution
provision was implemented in 2002 for employees who will be age 50 and above as
of December 31, 2002 due to changes in the tax laws relating to the Economic
Growth and Tax Relief Reconciliation Act of 2001. The catch-up provision allows
the employees to make an additional pre-tax contribution of 1% to 50% of pre-tax
salary up to an annual maximum of $1,000 to the Plan. Such additional
contribution does not qualify for matching contributions from the Company.
c. Vesting: Participant contributions are 100% vested at all times. Effective in
2002, all participants who are or were actively employed January 1, 2002 are
100% vested in the employer contributions to the Plan upon date of enrollment.
The prior vesting schedule was based on years of service, as follows: 60% for
three years of service, 80% for four years of service, and 100% for five or more
years of service is still applicable for employees who terminated prior to or on
December 31, 2001. In the event employment is terminated as a result of
attaining normal retirement age, electing retirement under the terms of the
Company's defined benefit pension plan, total and permanent disability, or
death, or in the event the Plan is terminated, participants will have a 100%
vested interest in that portion of their account which represents employer
contributions.
d. Investment options: The Plan consists of eleven active funds and two inactive
funds. The active funds are as follows:
o Albemarle Corporation Common Stock Fund, invested in common stock of
Albemarle.
o Merrill Lynch Retirement Preservation Trust, a collective trust maintained by
Merrill Lynch Trust Company of America and invested primarily in a broadly
diversified portfolio of GIC's and BIC's, synthetic GIC's and separate accounts
in obligations of U.S. government and U.S. government agency securities, and in
high-quality money market securities.
o PIMCO Total Return Fund, invested in shares of a registered investment company
that invests in a diversified portfolio of fixed income securities of varying
maturities, including some high-yield and foreign fixed income securities.
o Merrill Lynch Balanced Capital Fund, Inc., invested in shares of a registered
investment company that invests in domestic and/or foreign equity, debt, and
convertible securities.
8
o Merrill Lynch Equity Index Trust I, a collective trust maintained by Merrill
Lynch Trust Company of America indexed to the S&P 500 Index and invested in a
portfolio of equity securities designed to substantially match the S&P 500
index.
o Davis New York Venture Fund, Inc. invested in shares of a registered
investment company that invests primarily in common stocks or convertible
securities of companies with a market capitalization of at least $5 billion.
o Alliance Premier Growth Fund, invested in shares of a registered investment
company that invests primarily in equity securities of a limited number of
carefully selected, large capitalization companies.
o Franklin Small - Mid Cap Growth Fund, invested in shares of a registered
investment company that invests at least 65% of its total assets in equity
securities of small-capitalization growth companies seeking to invest at least
one-third of its total assets in companies with market capitalization of $550
million or less. Up to 35% of the total assets in the Fund are invested in
equity securities of large-capitalization companies which Fund management
believes have stronger growth potential.
o Templeton Foreign Fund, invested in shares of a registered investment company
that invests primarily in common stocks and debt obligations of companies and
governments outside the Unites States.
o Oppenheimer International Growth Fund, invested in shares of a registered
investment company that invests primarily in common stocks of growth companies
that are domiciled outside the United States or have their primary operations
outside the U.S.
o Oppenheimer Capital Appreciation Fund, invested in shares of a registered
investment company that invests primarily in common stocks of growth companies,
mainly mid - and large - capitalization companies.
Inactive funds are the Tredegar Corporation Common Stock Fund, which holds
investments in common stock of Tredegar Corporation, and the Ethyl Corporation
Common Stock Fund, which holds investments in common stock of Ethyl Corporation.
Participants currently in the Plan may select a program for investment in any of
the eleven active funds, or in any combination thereof. Participants may not
contribute to the two inactive funds nor transfer funds from other options into
those funds; however, dividends earned are reinvested in the inactive funds.
Transfers may be made between active funds and out of the inactive funds. In
addition, participants have a one-time election to transfer the
nonparticipant-directed portion from the Albemarle Corporation Common Stock fund
to other active funds during the course of their employment.
e. Participant loans: Participants may borrow from their fund accounts a minimum
of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their
account balance. Loan transactions are treated as a transfer to (from) the
investment fund from (to) the Loan fund. Loan terms range from 1-5 years. The
loans are collateralized by the balance in the participant's account and bear
interest at a rate of prime plus one percent on the last day of the quarter. The
interest rate as of December 31, 2002 and 2001, was 5.25% and 5.75%,
respectively. Principal and interest is paid ratably through payroll deductions.
9
2. Description of Plan, continued:
f. Payment of benefits: Benefits are recorded when paid. Employees may decide
whether benefits will be received directly in the form of a lump sum or rolled
over to an individual IRA account or to another qualified plan.
g. Forfeitures: Employees who leave Albemarle before becoming fully vested in
Albemarle contributions forfeit the value of their nonvested account.
Forfeitures during a plan year serve to reduce required Company contributions.
For the year ended December 31, 2002, $59,574 of forfeitures was used to reduce
required Company contributions and $26,722 of forfeitures became available and
will be used as a reduction of required Company contributions for the 2003 plan
year.
h. ESOP: Effective December 14, 2001, the Albemarle Corporation common stock
held in the Plan was designated as an Employee Stock Ownership Plan (the
"ESOP"). As a result, effective in 2002, participants may elect to have cash
dividends paid on stock held by the ESOP and allocated to the participants'
accounts distributed directly to them or reinvested. In addition, a
diversification election has been added to the ESOP. Notwithstanding the
one-time election already allowed, beginning in 2002, participants who are
between age 55 and age 60 and have at least 10 years of service with Albemarle
may elect to diversify up to 25% of the value of the shares purchased through
Albemarle's matching contributions. When participants reach age 60 and have at
least 10 years of service with Albemarle, they may diversify up to 50% of the
value of the shares purchased through Albemarle's matching contributions. The
amount of Albemarle common stock that may be diversified will be determined as
of the last day of the preceding Plan year and is based on the value of the
nonparticipant-directed portion of Albemarle common stock held in the
participant's account increased by the value of previous diversifications,
multiplied by 25% (50% if the participant is over age 60), and then offset by
the amount of any diversification elections made previously.
3. Investments:
The following table presents investments held at year-end that represent five
percent (5%) or more of net assets available for benefits:
2002 2001
Albemarle Corporation common stock $92,616,504* $88,657,265*
Merrill Lynch Equity Index Trust I 32,604,913 38,953,547
Franklin Small - Mid Cap Growth Fund 10,793,382 13,884,742
Merrill Lynch Retirement Preservation Trust 46,579,217 41,396,845
*Nonparticipant-directed investments total $58,726,449 and $50,110,073 for 2002
and 2001, respectively.
10
3. Investments, continued:
During 2002, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$5,300,290 as follows:
Common stock $ 14,799,908
Mutual funds (10,722,434)
Common /collective trusts (9,377,764)
-------------
$ (5,300,290)
4. Federal Income Taxes:
The Internal Revenue Service advised the plan administrator on February 28,
2003, that the Plan constitutes a qualified trust under Section 401 of the
Internal Revenue Code (the "Code") and is therefore exempt from federal income
taxes. Although, the Plan has been amended since February 28, 2003, the plan
administrator and the Plan's legal counsel believe that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the Code. Until such time as participants withdraw all or part of their
accumulated account balance, their invested funds are not subject to federal
income taxes for contributions made by them and on their behalf by Albemarle or
for investment income received on such investments.
5. Administration Expenses:
Expenses of the Trustee in administering the Plan are paid from Plan assets,
while certain recordkeeping fees and other administrative charges are borne by
Albemarle.
6. Plan Termination:
Although Albemarle has not expressed any intent to do so, it has the right under
the Plan to discontinue its contributions at any time and terminate the Plan
subject to the provisions of the Employee Retirement Income Security Act of
1974. In the event of Plan termination, the assets of the Plan shall be
allocated to participants in proportion to their account balances as of the
effective date of termination.
7. Related Party Transactions:
Certain Plan investments are shares of mutual funds managed by Merrill Lynch,
the trustee of the Plan. Participants have the option of investing in Albemarle
common stock. Purchases of 386,120 shares of Company common stock totaled
$10,804,422 for the year ended December 31, 2002. Distributions made in and
sales of 755,071 shares of Company common stock totaled $20,708,597 for the year
ended December 31, 2002.
11
8. Unallocated Assets:
Unallocated assets at December 31, 2002 and 2001 were $215,955 and $208,711,
respectively. Unallocated assets include forfeitures, fee and conversion amounts
from the previous record-keeper, interest and dividends receivable and cash held
in money market funds.
9. Reconciliation of Financial Statements to Form 5500:
The following is a reconciliation of net assets available for benefits per the
financial statements at December 31, 2002 to Form 5500:
Net assets available for benefits per the financial statements $225,819,732
Amounts allocated to withdrawing participants (237,818)
-------------
Net assets available for benefits per the Form 5500 $225,581,914
-------------
12
SAVINGS PLAN FOR THE EMPLOYEES OF ALBEMARLE CORPORATION
SCHEDULE H, LINE 4i- SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2002
(a) (b) (c) (d) (e)
Identity Description Cost of Current
Each Item Value*
** Merrill Lynch Retirement Preservation Collective trust invested in GIC's, BIC's, obligations $ - $ 46,579,217
Trust of U.S. Government agencies and high quality money
market securities
PIMCO Total Return Fund Mutual fund that invests in fixed income securities - 9,879,955
** Merrill Lynch Balanced Capital Fund, Inc. Mutual fund that invests in equity, debt and - 6,618,709
convertible securities
** Merrill Lynch Equity Index Trust I Collective trust indexed to the S&P 500 Index - 32,604,913
Davis New York Venture Fund, Inc. Mutual fund that invests in companies with at least - 6,833,705
$5 billion in market capitalization
Alliance Premier Growth Fund Mutual fund that invests in selected equity securities - 5,663,402
of large capitalized companies
Franklin Small-Mid Cap Growth Fund Mutual fund that invests in companies with $550 million or - 10,793,382
less in market capitalization
Templeton Foreign Fund Mutual fund that invests in international equity and debt - 71,866
securities
Oppenheimer Capital Appreciation Fund Mutual fund that invests in selected equity securities of - 2,286,609
growth companies
Oppenheimer International Growth Fund Mutual fund that invests in selected equity securities of - 1,118,700
growth companies domiciled outside the U.S.
** Albemarle Corporation common stock $.01 par value, 3,255,413 shares 58,813,387 92,616,504
Ethyl Corporation common stock $1.00 par value, 303,593 shares - 1,970,321
Tredegar Corporation common stock No par value, 347,051 shares - 5,205,767
** Participant loans Terms from 1-5 years with interest rates from 5.75% to 10.5% - 3,251,688
------------
Total plan investments $225,494,738
============
*See Note 1 of Notes to Financial Statements.
**Denotes a party-in-interest to the Plan.