FMC Corporation — 2014 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014. This is an annual filing; fourth-quarter figures are identified separately below. FMC is a global diversified chemicals company with Agricultural Solutions, Health and Nutrition, and Minerals segments.
Financial performance
| Metric | 2014 | 2013 | Change |
|---|---|---|---|
| Revenue | $4,037.7 million | $3,874.8 million | +4% |
| Gross profit (GAAP) | $1,375.0 million | $1,340.4 million | +3% |
| Income from continuing operations | $411.5 million | $467.3 million | -12% |
| Net income attributable to FMC stockholders | $307.5 million | $293.9 million | +5% |
| Diluted EPS | $2.29 | $2.16 | +$0.13 |
| Cash from continuing operating activities | $418.9 million | $378.8 million | +$40.1 million |
GAAP gross margin was approximately 34.1% of revenue versus 34.6% in 2013. Continuing-operations diluted EPS was $2.96, down from $3.33. Adjusted after-tax earnings from continuing operations, a company-defined non-GAAP measure, were $541.1 million, up 2% from $528.4 million.
Fourth quarter: Revenue was $1,092.2 million, down from $1,130.7 million a year earlier. Net income attributable to FMC stockholders was $76.5 million versus $27.1 million; however, continuing-operations income attributable to stockholders was $82.7 million versus $128.1 million. Diluted EPS was $0.57, including a $0.05 loss per share from discontinued operations; continuing-operations diluted EPS was $0.62 versus $0.95.
Segments and material changes
- Agricultural Solutions: Revenue rose 1% to $2,173.8 million, while segment operating profit fell 8% to $497.8 million. Currency, product mix, and increased selling and research spending weighed on profit; Latin American sales declined amid weak Brazilian demand and drought.
- Health and Nutrition: Revenue increased 9% to $828.2 million and operating profit rose 11% to $187.9 million, supported by higher health-market volumes and demand for pharmaceutical excipients. Higher seaweed costs and weaker Chinese beverage demand partly offset growth.
- Minerals: Revenue increased 7% to $1,035.7 million and operating profit rose 30% to $166.7 million. Lithium revenue grew 15%, principally from higher volume; Alkali revenue increased 4%, with improved pricing and volumes.
- Regional revenue increased in North America, Asia Pacific and EMEA, while Latin American revenue declined. The company cited unfavorable currency and agricultural product mix as pressures on consolidated margin.
Cash, debt and liquidity
- Cash and cash equivalents were $109.5 million at year-end, including $84.8 million held by foreign subsidiaries.
- Total debt was $1,678.6 million, down from $1,851.9 million in 2013. Commercial paper outstanding was $486.6 million. FMC reported $924.0 million of available capacity under its $1.5 billion revolving facility, after facility usage and commercial paper support.
- Operating cash flow from continuing operations was $418.9 million; capital expenditures were $224.7 million. Cash required for continuing investing activities was $233.7 million and for financing activities was $350.0 million.
- The board-authorized share repurchase program had $250 million remaining; no shares were repurchased under that program in 2014. Cash dividends paid were $78.1 million, and declared dividends were $0.60 per share.
Outlook, transactions and risks
- Management expected 2015 Agricultural Solutions segment earnings to increase 15%–30%, including contributions from the planned Cheminova acquisition. Health and Nutrition earnings were expected to rise by a mid-single-digit percentage.
- After the Alkali Chemicals sale, FMC expected its renamed FMC Lithium segment to report 2015 earnings of $15–$25 million. Management expected lithium price increases from energy-storage demand to be offset by reduced third-party carbonate sourcing and higher Argentine operating costs.
- FMC agreed to acquire Cheminova for approximately $1.4 billion, excluding approximately $0.3 billion of net debt to be assumed, and expected closing in early 2015. It also signed an agreement to sell Alkali Chemicals to Tronox for $1.64 billion, subject to approvals and closing conditions. Proceeds were intended to fund the acquisition. Alkali Chemicals remained in continuing operations in the 2014 statements; FMC said it would be presented as discontinued operations in subsequent reporting.
- 2014 included $145.0 million of acquisition/divestiture-related charges, including a $99.6 million unrealized loss on the Cheminova purchase-price hedge, plus $23.6 million of business-separation costs. Discontinued operations recorded a loss of $89.4 million, including environmental and legal provisions and the final Peroxygens divestiture charge.
- Environmental reserves, net of recoveries, were $284.3 million; estimated reasonably possible environmental losses exceeded accrued amounts by approximately $210 million. The filing notes significant uncertainty in estimating future environmental costs.
- Other principal risks include successful completion and integration of the transactions, acquisition financing and leverage, currency exposure, pesticide registration and other regulatory changes, agricultural seasonality and weather, competition and generic products, raw-material and energy costs, Argentine economic and foreign-exchange conditions, manufacturing disruptions, and litigation. FMC had approximately 11,000 pending asbestos claims and said excess exposure beyond its reserve could not be reasonably estimated.
Important facts for investors to verify
- Whether the Cheminova acquisition and Alkali Chemicals divestiture closed as expected, their final financing and proceeds, and the resulting debt and segment presentation.
- Whether projected segment earnings and anticipated acquisition synergies were achieved, especially in Agricultural Solutions and Lithium.
- How much of the $99.6 million hedge loss and other transaction charges affected reported versus adjusted results, and the company’s reconciliation of non-GAAP measures.
- Changes in environmental reserves and possible losses, including the Pocatello and Middleport matters, and developments in asbestos and other litigation.
- Cash conversion and receivable collection, particularly in Brazil, together with liquidity, debt covenant headroom, and pension funding needs.