FMC Corporation — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also provides unaudited fourth-quarter results. FMC is a global diversified chemicals company with Agricultural Products, Specialty Chemicals and Industrial Chemicals segments.
Financial performance and liquidity
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $3,377.9 million | $3,116.3 million |
| Gross margin | $1,167.4 million; approximately 35% of revenue | $1,050.7 million; approximately 34% |
| Income from continuing operations | $414.0 million | $218.5 million |
| Net income attributable to FMC stockholders | $365.9 million; diluted EPS $5.10 | $172.5 million; diluted EPS $2.36 |
| Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (non-GAAP) | $428.9 million | $361.4 million |
| Cash provided by operating activities of continuing operations | $425.6 million | $399.7 million |
| Capital expenditures | $189.5 million | $142.3 million |
| Cash and cash equivalents, year-end | $158.9 million | $161.5 million |
| Total debt, year-end | $825.6 million | $637.9 million |
- Revenue rose 8% reported; excluding $119.6 million of 2010 revenue from exited phosphate and sulfur-derivatives businesses, management reported growth of 13%. Gross margin increased about 11%, with higher prices largely offset by higher costs.
- Operating cash flow rose to $425.6 million, while investing activities used $358.0 million, including $148.1 million for acquisitions. Financing activities used $25.3 million; the $300 million senior-note issuance helped fund acquisitions and other corporate needs.
- At year-end, long-term debt excluding current maturities was $779.1 million. FMC had $1.4245 billion available under its $1.5 billion revolving credit facility, with no borrowings outstanding; it was in compliance with covenants.
- Cash dividends paid were $41.2 million. FMC repurchased 2.05 million shares for $165.1 million under its announced program.
Fourth-quarter results
2011 fourth-quarter revenue was $908.6 million, versus $810.5 million in 2010. Net income attributable to FMC stockholders was $77.9 million, compared with a $53.5 million loss in the prior-year quarter. Fourth-quarter 2010 results included substantial restructuring charges and a Spanish deferred-tax valuation allowance.
Segment performance and changes
| Segment | 2011 revenue | 2011 operating profit | Change versus 2010 |
|---|---|---|---|
| Agricultural Products | $1,464.5 million | $348.3 million | Revenue +18%; profit +13% |
| Specialty Chemicals | $879.1 million | $199.8 million | Revenue +7%; profit +8% |
| Industrial Chemicals | $1,038.5 million | $154.5 million | Revenue -2%; profit +26% |
- Agricultural Products growth reflected strong demand, especially in Latin America, North America and Asia; profit growth was partly offset by higher raw-material costs and growth spending.
- Specialty Chemicals benefited from higher BioPolymer volumes and pricing and improved lithium pricing. Argentina weather disrupted lithium mining operations.
- Industrial Chemicals revenue was reduced by the 2010 exit from phosphate and sulfur-derivatives businesses. Higher soda ash and peroxygen pricing drove profit growth; FMC restarted its Granger soda ash facility to serve export demand.
- FMC acquired five businesses or product portfolios in 2011, including Ruralco in Argentina, RheinPerChemie, South Pole Biogroup, Adventus intellectual property, and the Rovral and Sportak fungicide lines. Aggregate purchase consideration was $177.5 million, subject to preliminary allocation.
Outlook, management commentary and notable items
- Management expected 2012 revenue and earnings to increase, driven by higher Agricultural Products volumes and higher selling prices and volumes in Specialty and Industrial Chemicals. Higher growth investment and raw-material and energy costs were expected to partly offset earnings gains. Management expected strong segment cash flow.
- Segment outlook: Agricultural Products revenue and operating profit growth of approximately 10%; Specialty Chemicals revenue and operating profit growth of approximately 10%; Industrial Chemicals revenue growth of approximately 10% and operating profit growth of approximately 20%.
- Projected 2012 capital expenditures were approximately 30% above 2011, principally for BioPolymer, lithium and soda ash capacity. Management also anticipated approximately $40 million of net environmental remediation spending, $10 million for environmental-control capital projects and $30 million in environmental compliance costs.
- Restructuring and other charges fell to $32.4 million from $151.9 million, principally because the prior year included major Huelva shutdown charges. The 2011 total included a $21 million charge for phasing out the sodium percarbonate business.
- The European Commission’s hydrogen-peroxide antitrust fine was affirmed; FMC and its subsidiary paid €25.0 million plus €5.1 million interest in 2011. Related European purchaser litigation and Canadian antitrust actions remained unresolved, and potential loss could not be reasonably estimated.
- Environmental reserves were $226.9 million net of recoveries; FMC estimated reasonably possible environmental losses could exceed recorded amounts by approximately $110 million. Estimates remain subject to uncertainty, and additional costs could be material to an individual reporting period.
Key investor verification points
- Reconcile GAAP net income and continuing-operations earnings with management’s $428.9 million non-GAAP adjusted earnings measure and its exclusions.
- Assess the sustainability of segment growth, particularly agricultural demand and pricing, lithium supply and operations, and soda ash export pricing and capacity ramp-up.
- Review the increase in debt, acquisition spending, capital-investment plans, share repurchases and dividend increase against expected cash generation.
- Track environmental obligations, including the estimated $110 million reasonably possible exposure above reserves, and developments at Front Royal, Pocatello and Middleport.
- Monitor pesticide regulatory decisions, including EU bifenthrin approval and Brazilian carbofuran review, as well as unresolved antitrust claims and asbestos-related liabilities.
- Consider pension sensitivity: the year-end discount rate declined to 4.95%, increasing benefit obligations; FMC planned a $65 million U.S. pension contribution in 2012.