FMC Corporation — 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012. The filing also reports unaudited fourth-quarter results. FMC is a global diversified chemicals company operating in Agricultural Products, Specialty Chemicals and Industrial Chemicals.
Financial performance
| Metric | 2012 | 2011 |
|---|---|---|
| Revenue | $3,748.3 million | $3,377.9 million |
| Gross margin | $1,341.2 million; 35.8% of revenue | $1,167.4 million; 34.6% |
| Income from continuing operations | $465.9 million | $414.0 million |
| Net income attributable to FMC stockholders | $416.2 million; diluted EPS $3.00 | $365.9 million; diluted EPS $2.55 |
| Operating cash flow, continuing operations | $409.9 million | $425.6 million |
| Capital expenditures | $206.6 million | $189.5 million |
| Cash and cash equivalents, year-end | $77.1 million | $158.9 million |
| Total debt, year-end | $965.1 million | $825.6 million |
Revenue rose 11% and gross margin dollars increased about 15%. Net income attributable to FMC stockholders grew about 14%; adjusted after-tax continuing earnings, a non-GAAP measure, were $483.3 million versus $428.9 million. The effective tax rate was 23.9%, compared with 24.8%. Investing cash outflow was $393.6 million, including $143.2 million for acquisitions; financing cash outflow was $48.2 million. Approximate operating cash flow less capital expenditures was $203 million.
At year-end, current assets were $2,181.8 million and current liabilities $1,135.4 million. The company reported $1,296 million available under its revolving credit facility; it was in compliance with debt covenants. Long-term debt, including current maturities, totaled $914.5 million; short-term debt was $50.6 million.
Segments and fourth-quarter results
- Agricultural Products: Revenue rose 20% to $1,763.8 million; operating profit increased 29% to $450.7 million. Growth was broad-based, particularly in Latin America, supported by strong markets, pricing and newer products.
- Specialty Chemicals: Revenue increased 4% to $913.8 million, while operating profit fell 5% to $189.5 million. Higher prices and acquisitions were offset by weaker volumes, currency effects and higher costs, including lithium production disruptions.
- Industrial Chemicals: Revenue grew 4% to $1,076.1 million; operating profit rose 7% to $165.4 million. Pricing and volumes in Alkali and favorable Peroxygens mix helped, partly offset by energy and royalty costs and weak zeolites performance.
- Fourth quarter: Revenue was $1,000.0 million versus $908.6 million in 2011; net income attributable to FMC stockholders was $102.2 million versus $77.9 million, and diluted EPS was $0.74 versus $0.55. Q4 2012 included a $13.3 million pretax Lithium-related charge and a favorable $14.9 million tax valuation-allowance adjustment.
Outlook, strategy and notable items
- Management expected another record year in 2013, with revenue growth in all segments and higher earnings, partly offset by increased spending on growth initiatives. It expected strong operating cash flow. No consolidated numerical earnings or revenue target was provided.
- Segment outlook: Agricultural Products revenue growth in the high teens and operating-profit growth in the mid-teens; Specialty Chemicals revenue and operating-profit growth in the high single digits; Industrial Chemicals revenue growth in the mid-single digits, with operating profit expected to be flat.
- Planned 2013 capital expenditures and contract-manufacturer spending were expected to be about 30% above 2012, mainly for BioPolymer, lithium and soda ash capacity. FMC also planned approximately $40 million of net environmental remediation spending, plus about $10 million for environmental-control capital projects and $30 million for environmental compliance costs.
- Growth investments included acquisitions of Phytone and Pectine Italia, a planned MCC facility in Thailand costing more than $100 million, and crop-protection licensing and collaboration agreements. FMC discontinued its Argentine potash project after a $13.3 million non-cash write-down and exited zeolites operations in Spain.
- A January 2013 Lithium restructuring was expected to incur $10–15 million of mostly cash charges. FMC repurchased $144.9 million of shares in 2012; $244.8 million remained under its $250 million authorization. Dividends paid in 2012 were $47.8 million.
Risks and contingencies
- Key business risks include agricultural weather and seasonality, pesticide registration and regulation, generic competition, commodity pricing, raw-material and energy costs, supply interruptions, foreign exchange and political/economic conditions—particularly in Brazil and Argentina.
- Environmental reserves were $236.5 million before recoveries; net environmental reserves were $216.0 million. Estimated reasonably possible environmental losses, net of expected recoveries, exceeded accrued amounts by approximately $160 million. The company noted substantial estimation uncertainty and possible future earnings impacts.
- FMC had approximately 12,100 asbestos claims pending at year-end and said it could not reasonably estimate exposure beyond its established reserve. Hydrogen-peroxide antitrust matters in Europe and Canada also had no reasonably estimable exposure at the filing date.
- Other material sensitivities include pension assumptions: the year-end discount rate declined to 4.15% from 4.95%, increasing pension and postretirement obligations by $121.3 million. Management planned a $40 million U.S. pension contribution in 2013.
Important facts for investors to verify
- Whether 2013 segment growth and profit expectations were achieved, especially the high-teens Agricultural Products revenue outlook and flat Industrial Chemicals profit outlook.
- Cash conversion and working-capital requirements: operating cash flow declined despite higher earnings, while receivables and inventories increased materially.
- Debt and liquidity trends, including cash balances, revolving-credit availability, planned capital spending and shareholder distributions.
- Execution and returns on the Thailand MCC expansion, lithium capacity and other acquisitions and growth investments.
- Developments in environmental remediation estimates, the Pocatello tribal dispute, asbestos claims and European/Canadian antitrust litigation.
- The filing reports audited annual statements with an unqualified audit opinion; fourth-quarter financial information is unaudited.