FMC Corporation — 2010 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2010; comparisons are primarily with fiscal 2009. FMC is a global diversified chemicals company with Agricultural Products, Specialty Chemicals, and Industrial Chemicals segments. Figures are in U.S. dollars unless noted.
Financial performance
| Metric | 2010 | 2009 |
|---|---|---|
| Revenue | $3,116.3 million | $2,826.2 million |
| Income from continuing operations | $218.5 million | $257.0 million |
| Net income attributable to FMC stockholders | $172.5 million | $228.5 million |
| Diluted EPS | $2.36 | $3.12 |
| Cash from operating activities, continuing operations | $399.7 million | $343.5 million |
| Capital expenditures | $142.3 million | $161.2 million |
| Cash and cash equivalents at year-end | $161.5 million | $76.6 million |
| Total debt at year-end | $637.9 million | $643.9 million |
Revenue rose about 10%, reflecting higher volumes and improved demand. Stockholder net income fell about 25%, mainly because of increased restructuring charges, corporate expenses, interest expense, taxes, and environmental costs. Cash flow from continuing operations improved, although receivables absorbed $109.9 million of cash and pension contributions were substantial. Debt included $134.9 million maturing within one year. FMC reported $469.6 million available under its domestic facility and $289.1 million under its European facility, and was in compliance with credit covenants.
Segments and material changes
- Agricultural Products: Revenue increased 18% to $1,241.8 million; segment operating profit rose 7% to $309.5 million. Growth reflected sales gains in North America, Latin America—particularly Brazil—and Asia, including newer products. Higher inventory, distribution, selling and administrative costs partly offset growth.
- Specialty Chemicals: Revenue increased 9% to $824.5 million; segment operating profit rose 16% to $185.0 million. Lithium revenue benefited from stronger volumes, while BioPolymer gained from volume, pricing and mix. Higher raw-material costs were a partial offset.
- Industrial Chemicals: Revenue increased 3% to $1,054.8 million; segment operating profit rose 37% to $122.9 million. Volume recovery and lower raw-material and energy costs more than offset lower selling prices. Management reported segment operating margins of approximately 24.9%, 22.4% and 11.7%, respectively, for the three segments in 2010, calculated as segment operating profit divided by revenue.
- FMC decided to exit European phosphate production and shut its Huelva, Spain facility at year-end. The decision followed a Spanish ruling restricting phosphogypsum storage and the absence of an economic alternative. The shutdown contributed $110.4 million in 2010 restructuring charges, including $69.4 million of accelerated depreciation and $37.0 million of severance and employee-benefit costs.
Fourth-quarter results and unusual items
Fourth-quarter 2010 revenue was $810.5 million, compared with $722.1 million in fourth-quarter 2009. FMC reported a $53.5 million net loss attributable to stockholders in fourth-quarter 2010, versus $62.1 million of income a year earlier. The quarter included $116.2 million of restructuring and other charges ($80.7 million after tax) and a $39.2 million valuation allowance against Spanish deferred tax assets, principally associated with the Huelva shutdown.
Outlook, risks and contingencies
- 2011 outlook: Management expected higher consolidated revenue and earnings and strong segment cash flow. Agricultural Products revenue and operating profit were expected to grow at high-single-digit rates; Specialty Chemicals revenue at a mid-single-digit rate and operating profit at a low-teens rate; Industrial Chemicals revenue was expected to decline about 5% because phosphate revenue would cease, while operating profit was expected to grow in the mid-twenties. These are management expectations, not guarantees.
- FMC expected 2011 capital expenditures to be about 15% above 2010, primarily for BioPolymer, lithium and soda ash capacity. Planned 2011 environmental remediation spending was approximately $35.0 million, with additional environmental-control capital spending of $6.6 million and unreserved compliance costs of $23.9 million.
- Environmental exposure: Environmental reserves were $224.9 million net of recoveries at year-end; the filing estimated reasonably possible environmental losses could exceed accrued amounts by approximately $110 million. Site estimates may change with remediation requirements, agency decisions and allocation among responsible parties.
- Legal matters: About 12,000 asbestos claims were pending at year-end. FMC also faced Canadian hydrogen-peroxide antitrust class actions for which it said potential loss could not be reasonably estimated, and a Middleport, New York environmental lawsuit it considered without merit. The European Commission hydrogen-peroxide fine remained under appeal; a $41.2 million letter of credit secured the fine and accrued interest.
- Regulatory and operating risks: FMC identified pesticide registration and regulatory reviews, competition and pricing, crop and weather conditions, raw-material and energy costs, foreign-exchange movements, customer credit and collection risks, and pension funding assumptions. Carbofuran and bifenthrin faced regulatory challenges in the U.S. and Europe.
- Capital returns: FMC repurchased $135.0 million of stock under its announced program in 2010. In February 2011, the board authorized an additional $250 million of repurchases. The quarterly dividend was raised to $0.15 per share for the dividend approved in February 2011.
Important facts for investors to verify
- Whether 2011 segment growth and profit expectations were achieved, especially Industrial Chemicals’ recovery following the phosphate exit.
- The cash and earnings effects of Huelva closure costs, environmental obligations, and the Spanish deferred-tax valuation allowance.
- Cash conversion and customer collections, particularly Agricultural Products receivables in Brazil, alongside planned pension contributions and capital spending.
- Debt maturities, revolving-credit availability and any changes to covenant compliance.
- Developments in pesticide registrations, environmental remediation estimates, asbestos claims, Canadian antitrust litigation and the appealed European Commission fine.
KPMG issued an unqualified opinion on the financial statements and on the effectiveness of internal control over financial reporting as of December 31, 2010.