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| FMC > SEC Filings for FMC > Form 10-Q on 31-Oct-2008 | All Recent SEC Filings |
31-Oct-2008
Quarterly Report
Item 2 of this report contains certain forward-looking statements that are based
on our current views and assumptions regarding future events, future business
conditions and the outlook for our company based on currently available
information.
Whenever possible, we have identified these forward-looking statements by such words or phrases as "will likely result", "is confident that", "expects", "should", "could", "may", "will continue to", "believes", "anticipates", "predicts", "forecasts", "estimates", "projects", "potential", "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, these statements. These statements are qualified by reference to the section "Forward-Looking Statements" in Part II of our Annual Report on Form 10-K for the year ended December 31, 2007 (the "2007 10-K") and to similar disclaimers in all other reports and forms filed with the Securities and Exchange Commission ("SEC"). We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
We further caution that the list of risk factors in Item 1A in Part 1 of the 2007 10-K may not be all-inclusive, and we specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 2007 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed with the Audit Committee of our Board of Directors those accounting policies that we have deemed critical. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors.
The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Application of Critical Accounting Policies" section in our 2007 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition.
• Environmental
• Impairment and valuation of long-lived assets
• Pensions and other postretirement benefits
• Income taxes
We did not adopt any changes in the current period that had a material effect on these critical accounting policies nor did we make any changes to our accounting policies that would have changed these critical accounting policies.
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS
See Note 2 to our condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting standards and other new accounting standards.
OVERVIEW
We are a diversified, global chemical company providing innovative solutions, applications and market-leading products to a wide variety of markets. We operate in three distinct business segments: Agricultural Products, Specialty Chemicals and Industrial
Chemicals. Our Agricultural Products segment primarily focuses on insecticides, which are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of pests and in pest control for non-agricultural applications, and on herbicides, which are used to reduce the need for manual or mechanical weeding by inhibiting or preventing weed growth. Specialty Chemicals consists of our BioPolymer and lithium businesses and focuses on food ingredients that are used to enhance texture, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications, ultrapure biopolymers for medical devices and lithium specialties for pharmaceutical synthesis, specialty polymers and energy storage. Our Industrial Chemicals segment manufactures a wide range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and phosphorus chemicals.
We had good performance across all of our business segments for the three and nine months ended September 30, 2008. Third quarter revenue increased 31 percent and revenue for the nine months ended September 30, 2008 increased 21 percent compared to the prior year respective periods. Agricultural Products, Specialty Chemicals and Industrial Chemicals' segment operating profit increased 13 percent, 7 percent and 174 percent for the three months ended September 30, 2008, respectively and increased 21 percent, 8 percent and 133 percent for the nine months ended September 30, 2008, respectively compared to the prior respective periods. We continue to be impacted by increases to raw material costs across all of our businesses and, to a lesser extent, higher energy costs.
Our segment results for the three and nine months ended September 30, 2008 were impacted by the following:
• Agricultural Products' segment operating profits increased significantly driven by higher sales in all regions and across all product lines as well as continued global supply chain productivity improvements, partially offset by higher raw material costs, spending on growth initiatives and unfavorable currency translation adjustments.
• Specialty Chemicals' segment operating profits were driven by higher volumes and pricing in BioPolymer and lithium, largely offset by increases in raw material and energy costs and higher export taxes.
• Industrial Chemicals' segment operating profits increased significantly as a result of higher selling prices and volumes, across the segment, particularly in soda ash and phosphates, coupled with favorable currency adjustments and improved power market conditions in Spain, where Foret operates electricity cogeneration facilities and sells excess electricity into the Spanish electrical grid. These increases more than offset higher raw material costs.
Included in our net income were various restructuring and other income and charges. There was a significant decrease in restructuring and other income and charges for the three and nine months ended September 30, 2008 compared to the prior respective periods as a result of the gains on the Princeton and Foret asset sales described below and due to reduced charges related to the phase out of operations at our Baltimore, Maryland agricultural chemicals facility. The Baltimore facility, which is part of our Agricultural Products segment, was closed in the second quarter of 2008. The announcement to phase out the facility was made in the second quarter of 2007.
On March 18, 2008, we completed the sale of our 158-acre Princeton research center to the Princeton HealthCare System. Gross proceeds from the sale were $62.5 million and net proceeds after offsets, commissions and fees totaled approximately $60 million. The gain on the sale was $29.6 million which is included in "Restructuring and other charges (income)" in the condensed consolidated statements of operations for the nine months ended September 30, 2008.
In February 2008, we completed the sale of Foret's sodium sulfate assets. Foret is part of our Industrial Chemicals segment. We recognized a gain on the sale of these assets of $3.6 million which is included in "Restructuring and other charges (income)" in the condensed consolidated statements of operations for the nine months ended September 30, 2008. A portion of the gain includes recognition of a $2.2 million gain related to cumulative translation adjustment. Net proceeds from the transaction were $16.7 million.
In August 2008, we acquired the hydrocolloids ingredients business of International Specialty Products (ISP). This acquisition is intended to strengthen our position in hydrocolloids and enhance service to the global customers in food, pharmaceutical and specialty industries. Under the agreement, we acquired ISP's alginates and food blends business (other than ISP's Germinal blending business based in Brazil), including ISP's Girvan, Scotland, manufacturing facility and employees. The results of operations of the ISP business are included in the Specialty Chemicals segment beginning on the acquisition date of August 18, 2008.
In September 2008, we entered into an agreement with CoLiving Food Ingredients (CoLiving) based in Guangzhou, China. As part of the agreement, we acquired 100% of the shares of CoLiving British Virgin Islands (BVI). As part of the agreement, we acquired 100% of the shares of CoLiving International Company Limited ("BVI"). In acquiring the shares of BVI, we assumed a 75% ownership interest in Guangzhou CoLiving International Biology Technology Co., Ltd. ("CoLiving Biology"). We also purchased all
of the business assets of Guangzhou CoLiving Co., Ltd. with the exception of the remaining minority interest in CoLiving Biology. We also purchased all of the business assets of CoLiving Trading, with the exception of the remaining minority interest in CoLiving International Biology. The acquisition is intended to enhance our position in supplying specialty hydrocolloid products and services to the rapidly growing food ingredient market in China. The results of operations of the CoLiving business are included in the Specialty Chemicals segment beginning on the acquisition date of September 27, 2008.
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