FMC Corporation — 2009 Form 10-K
Reporting period: Fiscal year ended December 31, 2009, with fourth-quarter information noted separately. FMC is a global chemical company operating in Agricultural Products, Specialty Chemicals, and Industrial Chemicals. Management attributed weaker overall demand to the global economic downturn.
Financial performance
| Metric | 2009 | 2008 |
|---|---|---|
| Revenue | $2,826.2 million | $3,115.3 million |
| Income from continuing operations | $257.0 million | $346.5 million |
| Net income attributable to FMC stockholders | $228.5 million | $304.6 million |
| Diluted EPS | $3.12 | $4.02 |
| Cash provided by operating activities | $343.5 million | $357.4 million |
| Cash and cash equivalents at year-end | $76.6 million | $52.4 million |
| Total debt at year-end | $643.9 million | $623.6 million |
Gross profit was $882.6 million, or approximately 31.2% of revenue, versus $980.9 million, or 31.5%, in 2008. Segment operating profit, FMC’s measure excluding corporate costs and specified items, was $538.2 million (19.0% of revenue), down from $598.5 million (19.2%). The company reported $132.8 million of restructuring and other charges, compared with $49.6 million in 2008. After-tax income from continuing operations excluding restructuring and other charges, a non-GAAP measure, was $304.1 million versus $351.1 million.
Fourth quarter: Revenue was $722.1 million, compared with $737.7 million in 2008. Net income attributable to stockholders was $62.1 million versus $46.3 million; diluted net EPS was $0.85 versus $0.63. Fourth-quarter 2009 results included $47.9 million of restructuring and other charges ($30.6 million after tax).
Segments and changes versus 2008
- Agricultural Products: Revenue of $1,051.6 million declined 1%; operating profit rose 18% to $289.0 million. North American and Brazilian growth, pricing, new products, productivity, and lower raw-material costs supported profit; Europe and Asia were weaker.
- Specialty Chemicals: Revenue declined 1% to $753.1 million; operating profit increased 5% to $159.6 million. BioPolymer revenue rose 8%, supported by acquisitions, pricing, and mix; Lithium revenue fell 24% on weak demand.
- Industrial Chemicals: Revenue fell 21% to $1,026.7 million; operating profit fell 55% to $89.7 million. Lower volumes amid weak global demand—particularly in flat glass, detergents, and pulp and paper—were the principal causes; currency effects and weaker Foret phosphate pricing also weighed.
Liquidity, debt, and cash flow
Operating cash flow was $343.5 million; investing activities used $200.7 million, including $161.2 million of capital expenditures; financing activities used $77.8 million. Cash flow included a $75 million voluntary contribution to the U.S. qualified pension plan. FMC issued $300 million of 5.20% senior notes due 2019 and used the proceeds primarily to repay revolving-credit borrowings. At year-end it had no borrowings under either committed revolving facility and reported approximately $762 million of available capacity, subject to facility terms. Leverage was 1.4 against a 3.5 maximum covenant, and interest coverage was 19.0 against a 3.5 minimum; FMC reported covenant compliance. The company paid $36.3 million in dividends and repurchased $35.0 million of shares under its announced program.
Outlook, risks, and unusual items
- 2010 outlook: Management expected a tempered economic recovery and a year of solid performance, with revenue and earnings increases overall and strong business-segment cash flow. Agricultural Products revenue growth was forecast in the mid-single digits and operating-profit growth in the mid-to-high single digits. Specialty Chemicals revenue was expected to rise about 10% and operating profit in the mid-teens. Industrial Chemicals revenue was expected to be roughly flat, with operating profit up 5–15%.
- Management cited higher volumes and productivity as growth drivers, partly offset by less favorable mix, lower Industrial Chemicals selling prices, growth-investment spending, and higher pension expense. Projected 2010 capital expenditures were approximately 20% below 2009 levels; planned U.S. pension contributions were $80 million.
- Restructuring: 2009 included facility closures or realignments at Barcelona, Santa Clara, Bayport, and Bromborough, among other actions. The company recorded $132.8 million of restructuring and other charges, including facility exit costs, environmental remediation, legal settlements, and a $21 million charge relating to a European Commission animal-feed-phosphate investigation.
- Regulatory and litigation exposure: FMC ceased U.S. carbofuran sales after pesticide tolerances were revoked and was pursuing judicial review. EU non-inclusion decisions affected carbofuran and carbosulfan sales; FMC expected no material 2010 impact from the bifenthrin phase-out. Hydrogen-peroxide antitrust opt-out and Canadian cases remained, despite settlement of the U.S. direct-purchaser class action. An appealed European Commission hydrogen-peroxide fine remained secured by a $42 million letter of credit.
- Environmental and pension risks: Environmental reserves were $204.2 million before recoveries; the company estimated reasonably possible environmental losses could exceed accruals by approximately $75 million. Pension funding and expense remain sensitive to asset returns, discount rates, and other assumptions. Other risks include commodity and energy costs, foreign exchange, regulation, competition, weather-sensitive agricultural demand, supply arrangements, and customer credit—especially in Brazil.
Most important facts for investors to verify
- Reconcile the filing’s selected-data revenue figure of $2,826.6 million with the audited statements and segment disclosures, which report $2,826.2 million.
- Assess how much of 2009 earnings and the fourth-quarter result reflects recurring operations versus restructuring, legal, environmental, tax, and other unusual items.
- Review the assumptions and sensitivity underlying the 2010 segment outlook, particularly the recovery in Industrial Chemicals volumes and expected pricing.
- Track environmental exposures, including the estimated $75 million of reasonably possible losses above recorded reserves, and developments in the European phosphate investigation and remaining antitrust claims.
- Evaluate pension funding needs and the effect of the planned $80 million 2010 contribution alongside debt maturities and available revolving-credit capacity.