FMC Corporation — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing reports full-year results and unaudited quarterly data, including fourth-quarter results. FMC is a single-segment agricultural sciences company; Livent is presented as a discontinued operation.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $4,642.1 million | $4,609.8 million |
| Gross margin | $2,052.0 million; 44% of revenue | $2,083.6 million; 45% |
| Operating profit (as defined in the filing) | $902.2 million | $821.6 million |
| Income from continuing operations | $578.9 million | $543.5 million |
| Net income attributable to FMC stockholders | $551.5 million; diluted EPS $4.22 | $477.4 million; diluted EPS $3.62 |
| Adjusted EBITDA (non-GAAP) | $1,250.4 million | $1,220.5 million |
| Adjusted after-tax earnings from continuing operations (non-GAAP) | $809.0 million | $803.7 million |
| Cash from continuing operating activities | $736.8 million | $555.6 million |
| Free cash flow (non-GAAP) | $544.1 million | $301.8 million |
| Cash and cash equivalents at year-end | $568.9 million | $339.1 million |
| Total debt at year-end | $3,267.8 million | $3,258.8 million |
Revenue increased about 1% as reported and 7% excluding foreign currency effects; currency reduced reported revenue by approximately 6%. Diamide active ingredients Rynaxypyr and Cyazypyr generated combined sales of about $1.8 billion. Cash from operating activities and free cash flow increased substantially year over year. FMC had $1,139.6 million of remaining revolving-credit capacity and reported compliance with debt covenants. Its actual leverage ratio was 2.9 versus a 4.25 maximum at year-end.
Fourth quarter: Revenue was $1,152.2 million versus $1,197.3 million in Q4 2019; gross margin was $501.4 million versus $556.0 million. Income from continuing operations was $38.9 million versus $30.7 million. Net income attributable to FMC stockholders was $49.5 million versus a loss of $3.2 million; diluted EPS was $0.38 versus $(0.02).
Material changes and notable items
- Annual reported revenue was nearly flat, while organic growth reflected higher volumes and pricing, partly offset by foreign-exchange headwinds. North America revenue fell 8%, primarily due to shipment timing, channel destocking and supply-chain disruptions; Latin America rose 1% as reported, EMEA 4%, and Asia 6%.
- Gross margin declined 2% and the margin rate eased from 45% to 44%, mainly due to foreign currency. SG&A and R&D expenses declined, reflecting pandemic-related cost controls; R&D projects were deferred or phased differently, not cancelled.
- FMC acquired the remaining global Fluindapyr fungicide rights from Isagro for approximately $65 million. The asset acquisition was expensed immediately as in-process R&D, contributing $65.6 million to 2020 charges.
- FMC completed the final phase of its global SAP system implementation in November 2020. Stabilization was expected to continue into Q1 2021.
- Environmental reserves, net of recoveries, were $564.4 million at year-end. The filing estimates reasonably possible environmental losses exceeding accruals by approximately $170 million. It also cites approximately $80 million of reasonably possible losses above accruals for specified Brazilian tax, duty and product-liability matters.
Outlook, risks and contingencies
For 2021, management forecast global crop-protection market growth in the low single digits. FMC projected revenue of $4.9–$5.1 billion, adjusted EBITDA of $1.32–$1.42 billion and adjusted diluted EPS of $6.65–$7.35. These are non-GAAP forecasts; the company did not provide GAAP outlook because certain components were not reasonably predictable. FMC forecast free cash flow of $530–$620 million and planned $400–$500 million of share repurchases.
Management cited better crop commodity prices and easing COVID-related impacts on crop demand as supportive. Risks include continued pandemic-related logistics and labor disruption, foreign-exchange movements, weather and crop-market cyclicality, raw-material availability and costs, regulatory and pesticide-registration changes, generic competition, and potential erosion of diamide economics as composition-of-matter patents expire in certain markets beginning in late 2022. Other significant exposures include environmental remediation, litigation, foreign-customer receivables and execution of the new ERP system.
The Supreme Court denied FMC’s petition in the Pocatello Tribal litigation in January 2021. FMC disclosed a $20.5 million payment in Q1 2021 and estimated total undiscounted future fees and related costs of $104.5 million, with $82.6 million recognized on a discounted basis. FMC also reported about 9,100 pending asbestos claims; the filing says future exposure beyond the established reserve cannot be reasonably estimated. Environmental spending was forecast at $115–$125 million for 2021 across continuing and discontinued sites.
Key facts for investors to verify
- Whether 2021 revenue, adjusted EBITDA, adjusted EPS and free-cash-flow guidance is achieved, and the reconciliation of non-GAAP results to GAAP.
- Whether North American supply and logistics constraints resolve, and whether planned capacity investment supports diamide growth.
- Cash conversion and working-capital trends, including collection of Latin American receivables and customer advances.
- Environmental reserve adequacy and developments in Pocatello, Middleport, Portland Harbor and Brazilian contingencies.
- Debt maturities, covenant headroom, planned share repurchases and the effect of foreign-exchange and interest-rate changes.
- Whether diamide patent, data-protection and manufacturing advantages mitigate generic competition after patent expirations.