Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FMC > SEC Filings for FMC > Form 10-Q on 1-May-2013All Recent SEC Filings

Show all filings for FMC CORP | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for FMC CORP


1-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 2012 (the "2012 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 I of the 2012 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 2012 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 these critical accounting policies with the Audit Committee of our Board of Directors. 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 2012 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition.
Environmental obligations and related recoveries

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 AND REGULATORY ITEMS See Note 2 to our condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.

OVERVIEW

We are a diversified chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and market-leading products. We operate in three distinct business segments:
Agricultural Products, Specialty Chemicals and Industrial Chemicals. Our Agricultural Products segment develops, markets and sells all three major classes of crop protection chemicals - insecticides, herbicides and fungicides - with particular strength in insecticides and herbicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as pest control in non-agricultural markets. Specialty Chemicals consists of our BioPolymer and lithium businesses. This segment focuses on food ingredients that are used to enhance texture, color, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications, ultrapure biopolymers for medical devices and lithium for energy storage, specialty polymers and pharmaceutical synthesis. Our Industrial Chemicals segment


Table of Contents

manufactures a wide range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and silicates. This segment serves a diverse group of markets, from economically-sensitive industrial sectors to technology-intensive specialty markets. The products in this segment are sought by customers for their critical reactivity or specific functionality in markets such as glass, detergents, chemicals and pulp and paper. First Quarter 2013 Highlights

The following are the more significant developments in our businesses during the three months ended March 31, 2013:
Revenue of $990.2 million for the three months ended March 31, 2013 increased $49.5 million or five percent versus the same period last year. Revenue increases are associated with sales growth in our Agricultural Products and Specialty Chemicals businesses, partially offset by declines in our Industrial Chemicals segment. A more detailed review of revenues by segment is discussed under the section titled "Results of Operations" . On a regional basis, sales in North America were up 19 percent, sales in Europe, Middle East and Africa were up 11 percent, sales in Asia were up one percent while sales in Latin America decreased by 16 percent.

Our gross margin, excluding acquisition-related charges, increased by $19.0 million or approximately five percent to $369.7 million versus last year's first quarter driven by higher volumes and selling prices primarily in our Agricultural Products segment. Gross margin percent of 37 percent remained consistent period to period.

Selling, general and administrative expenses, excluding non-operating pension and postretirement charges, decreased slightly by $1.4 million or one percent to $118.6 million.

Research and Development expenses of $29.8 million increased $1.3 million or five percent.

Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $151.5 million increased $16.1 million or 12 percent primarily due to higher operating results in Agricultural Products. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations" .

In April 2013, we made the decision to simplify our organizational structure to focus on three core business segments. The new segments better reflect the markets where we participate and lead today, and where we expect to grow in the future. For more information on this change see Note 20 within the notes to the condensed consolidated financial statements within this Form 10-Q.


Table of Contents

RESULTS OF OPERATIONS
Overview
The following presents a reconciliation of our segment operating profit to net income attributable to FMC stockholders as seen through the eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings before interest and income taxes excluding corporate expenses, other income (expense), net and corporate special income/(charges).

                                 SEGMENT RESULTS RECONCILIATION
                                                                   Three Months Ended March 31
(in Millions)                                                        2013               2012
Revenue
Agricultural Products                                           $      495.2       $      454.2
Specialty Chemicals                                                    236.0              215.9
Industrial Chemicals                                                   259.6              272.6
Eliminations                                                            (0.6 )             (2.0 )
Total                                                           $      990.2       $      940.7
Income (loss) from continuing operations before income taxes
Agricultural Products                                           $      163.3       $      130.5
Specialty Chemicals                                                     45.5               43.0
Industrial Chemicals                                                    32.9               52.2
Eliminations                                                            (0.1 )              0.1
Segment operating profit                                               241.6              225.8
Corporate and other                                                    (19.8 )            (23.5 )
Operating profit before the items listed below                         221.8              202.3

Interest expense, net                                                  (11.7 )            (11.3 )
Corporate special (charges) income:
Restructuring and other (charges) income                                (9.9 )             (1.7 )
Non-operating pension and postretirement charges (1)                   (12.7 )             (9.1 )
Acquisition-related charges                                                -               (3.4 )
Provision for income taxes                                             (47.3 )            (44.8 )
Discontinued operations, net of income taxes                            (5.2 )             (7.4 )
Net income attributable to noncontrolling interests                     (4.1 )             (5.5 )
Net income attributable to FMC stockholders                     $      130.9       $      119.1


____________________


(1) Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement costs from our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization of prior service cost in our operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

The following chart, which is provided to assist the readers of our financial statements, depicts certain after-tax charges (gains). These items are excluded in the measures we use to evaluate business performance and determine certain performance-based compensation. These after-tax items are discussed in detail within the "Other results of operations" section that follows. Additionally, the chart below discloses our Non-GAAP financial measure "Adjusted after-tax earnings from continuing operations attributable to FMC stockholders" reconciled from the GAAP financial measure "Net income attributable to FMC stockholders". We believe that this measure provides useful information about our operating results to investors and securities analysts. We also believe that excluding the effect of restructuring and other income and charges, non-operating pension and


Table of Contents

postretirement charges, acquisition-related charges and certain tax adjustments from operating results allows management and investors to compare more easily the financial performance of our underlying businesses from period to period. This measure should not be considered as a substitute for net income (loss) or other measures of performance or liquidity reported in accordance with GAAP.

                               ADJUSTED EARNINGS RECONCILIATION
                                                                 Three Months Ended March 31
(in Millions)                                                      2013               2012
Net income attributable to FMC stockholders (GAAP)            $      130.9       $      119.1
Corporate special charges (income), pre-tax                           22.6               14.2
Income tax expense (benefit) on Corporate special charges
(income)                                                              (8.2 )             (5.3 )
Corporate special charges (income), net of income taxes               14.4                8.9
Discontinued operations, net of income taxes                           5.2                7.4
Tax adjustments                                                        1.0                  -
Adjusted after-tax earnings from continuing operations
attributable to FMC stockholders (Non-GAAP)                   $      151.5       $      135.4

Three months ended March 31, 2013 compared to three months ended March 31, 2012 In the discussion below, please refer to our chart titled "Segment Results Reconciliation" within the Results of Operations section. All comparisons are between the periods unless otherwise noted. Segment Results
For management purposes, segment operating profit is defined as segment revenue less operating expenses (segment operating expenses consist of costs of sales and services, selling, general and administrative expenses and research and development expenses). We have excluded the following items from segment operating profit: corporate staff expense, interest income and expense associated with corporate debt facilities and investments, income taxes, gains (or losses) on divestitures of businesses, restructuring and other charges (income), non-operating pension and postretirement charges, investment gains and losses, loss on extinguishment of debt, asset impairments, Last-in, First-out ("LIFO") inventory adjustments, acquisition-related charges, and other income and expense items.
Information about how some of these items relate to our businesses at the segment level is discussed in Note 19 of our condensed consolidated financial statements filed in this Form 10-Q and in Note 19 of our 2012 consolidated financial statements in our 2012 Form 10-K.
Effective in fiscal year 2013, our segment presentations including allocation of certain corporate expenses were updated to reflect how we currently make financial decisions and allocate resources. The presentation change was also made since we believe the changes provide a better understanding of the underlying profitability of each individual business segment. For more information on this presentation change see Note 19 to our condensed consolidated financial statements included within this Form 10-Q. The Segment Results as discussed below for all periods presented have been updated to reflect this presentation change. Agricultural Products

Three Months Ended March 31 Increase/(Decrease) ($ in Millions) 2013 2012 $ % Revenue $ 495.2 $ 454.2 $ 41.0 9 % Operating Profit 163.3 130.5 32.8 25

Revenue of $495.2 million increased approximately nine percent versus the prior year quarter due to sales growth in North America, Asia and Europe/Middle East/Africa ("EMEA"), offset by a decline in Latin America.
Sales in North America of $226.4 million increased 48 percent driven by strong early season demand for pre-emergent herbicides and at-plant insecticides. Revenue in Asia of $75.5 million and sales in EMEA of $37.4 million increased five percent, respectively, due mostly to growth from new products partially offset by droughts in Australia. Revenue in Latin


Table of Contents

America of $155.8 million decreased 19 percent due mostly to a reduction in planted area for cotton and a slow start in the sugarcane segment in Brazil, partially offset by growth in Argentina and Mexico. Agricultural Products' operating profit of $163.3 million increased approximately 25 percent compared to the year-ago quarter, reflecting the sales growth described in the preceding paragraph, a favorable geographic/product mix and selected price increases. Selling, general and administrative costs were approximately $1 million lower compared to the prior year.
In 2013, we expect full-year revenue growth in the high-teens percent reflecting increased volumes due to strong market conditions and growth from new and recently introduced products, including new fungicides, as well as our direct market access initiatives in Asia and Latin America. We expect full-year segment operating profit growth in the mid- to high-teens percent driven by sales gains partially offset by increased SG&A and R&D spending to support growth. Certain Regulatory Issues
In 2009, our bifenthrin product was excluded from the European Commission's official list of approved pesticides. We submitted for reconsideration of that decision and in 2012 bifenthrin was re-approved for use in the European Union. FMC is now in the process of re-submitting for registrations in EU Member States. We can resume selling bifenthrin in the European market once the registrations are approved by the Member States. With the exception of France, we expect that most registrations will be approved over the next 24 months; due to the continued inclusion of bifenthrin on the French "Grenelle" list of pesticides we cannot predict when we may regain a French registration. We believe that the Grenelle listing was unwarranted and contrary to French administrative law, and we are challenging the decision. During 2013, we will not sell any bifenthrin for agricultural use into the EU, similar to the prior year, and the absence of such sales will not have a material effect on the Company's financial condition or results of operations.
We intend to defend vigorously all our products in the U.S., EU and other countries as our pesticide products are reviewed in the ordinary course of regulatory programs during 2013 as part of the ongoing cycle of re-registration of our pesticide products around the world. In 2008, the Brazilian health surveillance agency informed us that they intend to review carbofuran along with 13 other major pesticides, but has yet to issue any required formal announcement that identifies their specific concerns or preliminary position on re-registration. We are cooperating and defending our product in this process. Under the Brazilian regulatory process, any recommendation would require public notice and comment as well as concurrence from the Brazilian environmental and agricultural ministries before any regulatory change is effective. Thus, we do not expect any material sales impact due to regulatory reviews in Brazil during 2013.

Specialty Chemicals

                        Three Months Ended March 31                Increase/(Decrease)
($ in Millions)               2013                  2012                 $                 %

Revenue $ 236.0 $ 215.9 $ 20.1 9 % Operating Profit 45.5 43.0 2.5 6

Revenue in Specialty Chemicals was $236.0 million, an increase of approximately nine percent versus the prior-year quarter. The increase was partially driven by incremental revenue of $8.7 million associated with 2012 acquisitions. Higher selling prices across the segment and volume growth in BioPolymer drove higher revenues period over period.
BioPolymer revenue of $191.9 million increased approximately 17 percent from the prior-year quarter. This increase was due to volume increases of 10 percent in all core product lines, revenue from acquisitions which increased sales by five percent and favorable pricing which increased sales by two percent. Volume growth was partially attributed to recent capacity expansions.
Lithium revenue of $44.1 million decreased approximately 14 percent compared to the prior-year quarter. During the quarter Lithium experienced reduced volumes which impacted revenue by 15 percent which was partially offset by slightly higher pricing which increased sales one percent. The lower volumes were due to continued production constraints and the effects of recent labor disputes in Chilean ports.
Segment operating profit of $45.5 million increased by six percent versus the year ago quarter. The increase in revenue was mostly offset by higher operating costs, particularly in Lithium's Argentina operations.
In 2013, we expect full-year revenue growth of approximately 10 percent driven by higher volumes in BioPolymer. We expect full-year segment operating profit growth in the mid- to high-single digits percent, with sales gains in BioPolymer partially offset by continued weak Lithium performance.


Table of Contents

Industrial Chemicals

Three Months Ended March 31 Increase/(Decrease) ($ in Millions) 2013 2012 $ % Revenue $ 259.6 $ 272.6 $ (13.0 ) (5 )% Operating Profit 32.9 52.2 (19.3 ) (37 )

Revenue in Industrial Chemicals was $259.6 million, a decrease of approximately five percent versus the prior-year quarter. Revenue decreased due to unfavorable pricing which impacted sales by six percent, offset slightly by higher volumes of one percent.
Alkali revenues of $174.5 million decreased four percent as higher overall volume increases were more than offset by reduced export pricing, particularly in Asia.
Peroxygens revenues of $73.9 million decreased eight percent compared to the prior year quarter. The decrease was due to lower volumes primarily in the persulfate market and the absence of zeolites revenue as a result of our phase out of the zeolites operations in fourth quarter of 2012.
Environmental Solutions revenue of $11.2 million increased approximately eight percent driven primarily by higher volumes.
Segment operating profit of $32.9 million decreased approximately 37 percent versus the year ago quarter. The decrease was primarily driven by lower overall pricing in Alkali and reduced volumes in Peroxygens.
In 2013, we expect full-year revenue growth in the mid-single digit percent driven primarily by volumes and higher prices in soda ash in the second half of the year. We expect full-year segment operating profit declines in the mid-single digit percent, reflecting slower than anticipated export soda ash pricing.
Other Results of Operations
Corporate and other
Corporate and other expenses of $19.8 million in the first quarter of 2013 decreased by $3.7 million from $23.5 million in the same period in 2012. The decrease is primarily driven by a reduction in our last-in, first-out (LIFO) inventory reserve charge compared to prior period of $2.5 million. Except for LIFO related charges that are included as a component of "Cost of sales and services" all other Corporate and other expenses are included as a component of the line item "Selling, general and administrative expenses" on our condensed consolidated statements of income.
Interest expense, net
Interest expense, net for the first quarter of 2013 was $11.7 million as compared to the first quarter of 2012 of $11.3 million. Corporate special (charges) income
Restructuring and other charges (income) These charges totaled $9.9 million in the first quarter of 2013 compared to $1.7 million in the first quarter of 2012. Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income). See the table and further discussion regarding our restructuring and other charges (income) in Note 7 to our condensed consolidated financial statements included in this Form 10-Q. Restructuring and asset disposal charges in 2013 of $8.4 million were primarily associated with the announced Lithium restructuring. Other charges (income) net in 2013 of $1.5 million were primarily associated with environmental charges associated with remediation at continuing operating sites.
Restructuring and asset disposal charges in 2012 of $1.1 million were primarily associated with continuing charges related to facility restructurings and shutdowns which were announced in years prior to 2012. Other charges (income) net in 2012 of $0.6 million were primarily associated with charges for environmental remediation at operating sites.
The liabilities associated with the restructuring charges listed above are also included within Note 7 to our condensed consolidated financial statements included in this Form 10-Q. We believe the restructuring plans implemented are on schedule and the benefits and savings either have been or will be achieved.


Table of Contents

Non-operating pension and postretirement charges The charge for the three months ended March 31, 2013 was $12.7 million compared to $9.1 million for the three months ended March 31, 2012. The increase in charges was primarily the result of higher amortization impacts of actuarial losses of $4.4 million. These expenses are included as a component of the line item "Selling, general and administrative expenses" on our condensed consolidated statements of income.
Acquisition-related charges
There were no acquisition-related charges for the three months ended March 31, 2013. Charges for the three months ended March 31, 2012 related to the expensing of the inventory fair value step-up resulting from the application of purchase accounting associated with acquisitions completed prior to 2012. On the condensed consolidated statements of income, these charges are included in "Costs of sales and services".
Provision for income taxes
Provision for income taxes was $47.3 million resulting in an effective tax rate of 25.2 percent compared to expense of $44.8 million resulting in an effective tax rate of 25.3 percent for the three months ended March 31, 2013 and 2012, respectively.
Discontinued operations, net of income taxes Our discontinued operations represent adjustments to retained liabilities primarily related to operations discontinued prior to 2002. The primary liabilities retained include environmental liabilities, other postretirement . . .

  Add FMC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FMC - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.