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 29-Oct-2013All Recent SEC Filings

Show all filings for FMC CORP

Form 10-Q for FMC CORP


29-Oct-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.


Table of Contents

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: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Minerals. Our FMC Agricultural Solutions 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. The FMC Health and Nutrition segment focuses on food ingredients that are used to enhance texture, color, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications and ultrapure biopolymers for medical devices. Our FMC Minerals segment manufactures a wide range of inorganic materials including soda ash and lithium. Soda ash is utilized in markets such as glass and detergents and lithium utilized in energy storage, specialty polymers and pharmaceutical synthesis in industrial uses.
Beginning with the third quarter 2013 our FMC Peroxygens segment has been accounted for as a discontinued operation. Prior period information has been recasted. For additional information on discontinued operations, refer to Note 10 in our notes to the condensed consolidated financial statements within this Form 10-Q.

Third Quarter 2013 Highlights

The following are the more significant developments in our businesses during the three months ended September 30, 2013:
Revenue of $957.4 million for the three months ended September 30, 2013 increased $135.5 million or 16 percent versus the same period last year. Revenue increases are associated with sales growth in all segments. A more detailed review of revenues by segment is discussed under the section titled "Results of Operations" . On a regional basis, sales in Latin America increased by 29 percent, sales in North America were up 11 percent, sales in Asia were up six percent and sales in Europe, Middle East and Africa increased by eight percent.

Our gross margin, excluding acquisition related charges, increased by approximately $8 million or approximately three percent to $306.5 million versus last year's third quarter driven by higher volumes and pricing primarily in our FMC Agricultural Solutions segment partially offset by unfavorable foreign currency impacts. Gross margin percent of 32 percent declined from 36 percent, primarily as a result of unfavorable geographic mix of sales in FMC Agricultural Solutions and the aforementioned unfavorable currency impacts.

Selling, general and administrative expenses, excluding non-operating pension and postretirement charges and acquisition/divestiture related charges, increased by approximately $4 million or four percent to $114.6 million. The increase period over period is largely due to increased spending on targeted growth initiatives to meet the growth in our business. The majority of these increases were experienced in our FMC Agricultural Solutions segment.

Research and Development expenses of $29.0 million increased $0.9 million or three percent.

Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $110.2 million increased $3.1 million or three percent primarily due to higher operating results in FMC Agricultural Solutions, slightly offset by a higher effective tax rate. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations" .

In July 2013, we acquired Epax Nutra Holding III AS and Epax UK Holding III AS (together, "Epax"). Epax is a global supplier of fish-based omega-3 EPA/DHA fatty acid concentrates. Epax will be integrated into our newly formed FMC Health and Nutrition segment from the acquisition date. The acquisition of Epax is an important step in fulfilling our strategic intent to broaden our product and customer base within our Health and Nutrition segment.

In August 2013, we concluded a licensing agreement with Belchim Crop Protection for access to valifenalate, a fungicide which will be introduced into our Agricultural Solutions segment. Our rights are exclusive for use in mixtures in the Americas as well as select countries in Asia. The product is already registered and sold in certain countries in Latin America, and we plan to register in many other countries in our territory.

In late September and early October 2013, we entered into two separate transactions that together provide our Agricultural Solutions segment with a strong foundation for developing, manufacturing and marketing biologically-based products to enhance yields and respond to evolving pest pressures and resistance. Namely, we acquired the assets of the Center for Agricultural and Environmental Biosolutions (CAEB), based in Research Triangle Park, NC, including CAEB's robust library of microorganisms and a pipeline of biological products in various stages of development. Further, in October 2013, we entered into an exclusive collaboration with Chr. Hansen A/S, a leading global biosciences company with expertise in screening, fermentation, and scale up of microbially-based products.

Together with Agricultural Solutions'


Table of Contents

existing capabilities, we believe these transactions establish FMC as an industry leader in the growing market for biologically-based agricultural products.


Table of Contents

RESULTS OF OPERATIONS
Overview
The following presents a reconciliation of our segment operating profit to the 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 September 30            Nine Months Ended September 30
(in Millions)                                        2013                   2012                 2013                 2012
Revenue
FMC Agricultural Solutions                    $         530.2         $         423.6     $       1,468.0       $       1,271.4
FMC Health and Nutrition                                190.4                   173.7               572.2                 512.7
FMC Minerals                                            237.8                   224.6               706.8                 710.3
Eliminations                                             (1.0 )                     -                (2.9 )                   -
Total                                         $         957.4         $         821.9     $       2,744.1       $       2,494.4
Income (loss) from continuing operations
before income taxes
FMC Agricultural Solutions                    $         114.2         $         100.9     $         402.2       $         343.7
FMC Health and Nutrition                                 41.1                    40.3               129.1                 126.0
FMC Minerals                                             27.7                    34.6                92.1                 127.1
Eliminations                                             (0.1 )                   0.1                (0.3 )                 0.1
Segment operating profit                                182.9                   175.9     $         623.1       $         596.9
Corporate and other                                     (20.1 )                 (16.2 )             (60.2 )               (56.6 )
Operating profit before the items listed
below                                                   162.8                   159.7               562.9                 540.3

Interest expense, net                                    (9.8 )                  (9.8 )             (31.4 )               (30.3 )
Corporate special (charges) income:
Restructuring and other (charges) income                (32.1 )                  (5.5 )             (47.3 )                (9.1 )
Non-operating pension and postretirement
charges (1)                                              (5.7 )                  (8.1 )             (30.0 )               (26.3 )
Acquisition related charges (2)                          (6.7 )                  (0.6 )              (6.7 )                (7.2 )
Provision for income taxes                              (32.0 )                 (29.9 )            (113.1 )              (113.2 )
Discontinued operations, net of income taxes            (56.6 )                 (11.2 )             (58.3 )               (24.7 )
Net income attributable to noncontrolling
interests                                                (2.0 )                  (4.6 )              (9.3 )               (15.5 )
Net income attributable to FMC stockholders   $          17.9         $          90.0     $         266.8       $         314.0


____________________


(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.

(2) Charges related to the expensing of the inventory fair value step-up resulting from the application of purchase accounting for acquisitions and costs incurred associated the completion of acquisitions. Charges for the three and nine months ended September 30, 2013, represented amortization of inventory fair value step-up and professional fees associated with the completion of our Epax acquisition within our FMC Health and Nutrition segment. The charges for the three and nine month periods ended September 30, 2012 relate to a number of acquisitions completed in 2011 and in the second quarter of 2012. On the condensed consolidated statements of income, the charges associated with inventory fair value step-up are included in "Costs of sales and services" and fees associated with concluding the acquisitions are included in "Selling, general and administrative expenses".


Table of Contents

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 postretirement charges, acquisition/divestiture 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 September
                                                                  30                    Nine Months Ended September 30
(in Millions)                                            2013             2012             2013                2012
Net income attributable to FMC stockholders (GAAP)   $    17.9         $    90.0     $       266.8       $       314.0
Corporate special charges (income), pre-tax               44.5              14.2              84.0                42.6
Income tax expense (benefit) on Corporate special
charges (income)                                         (16.2 )            (5.3 )           (31.1 )             (15.9 )
Corporate special charges (income), net of income
taxes                                                     28.3               8.9              52.9                26.7
Discontinued operations, net of income taxes              56.6              11.2              58.3                24.7
Tax adjustments                                            7.4              (3.0 )             9.1                (1.9 )
Adjusted after-tax earnings from continuing
operations attributable to FMC stockholders
(Non-GAAP)                                           $   110.2         $   107.1     $       387.1       $       363.5

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/divestiture 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 consolidated financial statements in our 2012 Form 10-K.
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. Also, beginning in the third quarter of 2013, our FMC Peroxygens segment has been accounted for as a discontinued operation.
For more information on these presentation changes see Notes 10 and 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 the presentation change and reporting of FMC Peroxygens as a discontinued operation.


Table of Contents

FMC Agricultural Solutions

                                                                               Nine Months Ended
                                         Three Months Ended September 30         September 30
($ in Millions)                                2013              2012          2013         2012
Revenue                                 $          530.2     $    423.6      1,468.0      1,271.4
Operating Profit                                   114.2          100.9        402.2        343.7

Three Months Ended September 30, 2013 vs. 2012 Revenue of $530.2 million increased approximately 25 percent versus the prior year quarter due to sales growth in Latin America, North America and Asia offset by declines in Europe/Middle East/Africa ("EMEA").
Latin America sales of $359.3 million increased 34 percent due primarily to Brazil reflecting strong market conditions, increased planted area for key crops, volume growth in herbicide and insecticide sales for soybeans and growth from new and recently introduced product. North America sales of $67.5 million increased 22 percent driven by strong demand for herbicides partially offset by weaker pest pressures compared to last year that reduced rescue insecticide demand. Revenue in Asia of $75.2 million increased 13 percent reflecting sales growth in Australia, India, China and Thailand markets. EMEA declined 17 percent to $28.2 million primarily due to lower insecticide sales.
FMC Agricultural Solutions' operating profit of $114.2 million increased approximately 13 percent compared to the year-ago quarter, reflecting the sales growth described in the preceding paragraph, impacted by geographic mix and unfavorable currency impact. Selling, general and administrative costs were approximately $3 million higher compared to the prior year due to increased spending on growth initiatives and higher people-related costs. Nine Months Ended September 30, 2013 vs. 2012 Revenue of $1,468.0 million increased approximately 15 percent versus the prior year period due to sales growth in North America, Latin America and Asia, partially offset by declines in EMEA.
Sales in Latin America of $698.6 million increased 14 percent driven by Brazil volume growth in herbicide and insecticide sales for soybeans, including growth from new and recently launched product. Sales in North America of $426.8 million increased 30 percent driven by strong demand for pre-emergent herbicides and at-plant insecticides as well as growth from new product introductions. Revenue in Asia of $234.3 million increased 14 percent reflecting sales growth in China, Indonesia, Australia and a number of other key countries. EMEA declined 13 percent to $108.3 million primarily due to unfavorable weather conditions and lower insecticide sales.
FMC Agricultural Solutions' operating profit of $402.2 million increased approximately 17 percent compared to the year-ago period, 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 $5 million higher compared to the prior year due to increased spending on growth initiatives and higher people-related costs. In 2013, we expect full-year revenue percentage growth in the high-teens 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 to grow in the mid- to high-teens percentage, driven by sales gains partially offset by increased selling, general and administrative and research and development 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 has submitted 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 challenge that decision. In July 2013, the French Conseil d' Etat court dismissed our challenge. 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


Table of Contents

products around the world. In September 2013, the Brazilian health surveillance agency informed us that they intend to review carbofuran along with six other major pesticides during 2013-14, but has yet to issue any formal announcement that identifies its 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.

FMC Health and Nutrition

                                                                               Nine Months Ended
                                         Three Months Ended September 30         September 30
($ in Millions)                                2013              2012          2013         2012
Revenue                                 $          190.4     $    173.7        572.2        512.7
Operating Profit                                    41.1           40.3        129.1        126.0

Three Months Ended September 30, 2013 vs. 2012 Revenue was $190.4 million, an increase of approximately 10 percent versus the prior-year quarter. Revenue from acquisitions increased sales by approximately eight percent while favorable pricing and currency impacts increased sales by one percent, respectively.
Segment operating profit of $41.1 million increased two percent versus the year ago quarter as revenue growth was slightly offset by acquisition-related start up expenses, increased raw material costs, primarily seaweed, and costs to improve our manufacturing capabilities which we refer to as Manufacturing Excellence.
Nine Months Ended September 30, 2013 vs. 2012 Revenue was $572.2 million, an increase of approximately 12 percent versus the prior-year period. This increase was due to volume increases of four percent in core product lines, revenue from acquisitions which increased sales by five percent and favorable pricing and foreign currency impacts which increased sales . . .

  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
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.