PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 1-2376
FMC Corporation
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-0479804
--------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Randolph Drive, Chicago, Illinois 60601
----------------------------------------------------------
(312) 861-6000
------------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1994
- - --------------------------------------- ---------------------------------
Common Stock, par value $0.10 per share 36,462,177
PAGE 2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
FMC Corporation and Consolidated Subsidiaries
- - ------------------------------------------------
Consolidated Statements of Income (Unaudited)
- - ------------------------------------------------
(In thousands, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ----------------------
1994 1993 1994 1993
---------- -------- ---------- ----------
Revenue:
Sales $1,009,609 $926,512 $2,971,673 $2,807,464
Equity in net earnings
of affiliates 1,599 1,422 5,101 4,363
Other revenue 4,052 2,634 30,176 16,289
---------- -------- ---------- ----------
Total revenue 1,015,260 930,568 3,006,950 2,828,116
---------- -------- ---------- ----------
Costs and expenses:
Cost of sales 750,148 704,310 2,153,837 2,097,658
Selling, general and
administrative expenses 149,034 133,841 437,952 393,622
Research and development 40,591 35,661 117,633 105,274
Other (income) and
expense, net (4,291) (4,489) (13,676) (9,620)
---------- -------- ---------- ----------
Total costs and expenses 935,482 869,323 2,695,746 2,586,934
---------- -------- ---------- ----------
Earnings before interest,
minority interests, and taxes 79,778 61,245 311,204 241,182
Minority interests 15,344 766 50,543 1,512
Interest income 1,636 2,700 5,310 8,179
Interest expense 18,206 17,465 51,336 55,560
---------- -------- ---------- ----------
Income before income taxes 47,864 45,714 214,635 192,289
Provision for income taxes 13,169 10,428 66,536 49,009
---------- -------- ---------- ----------
Income before extraordinary
item 34,695 35,286 148,099 143,280
Extraordinary item related to
debt refinancing, net of
taxes (Note 3) - - - (4,683)
---------- -------- ---------- ----------
Net income $ 34,695 $ 35,286 $ 148,099 $ 138,597
========== ======== ========== ==========
Average number of shares:
Primary 37,298 36,958 37,137 36,935
========== ======== ========== ==========
Fully diluted 37,465 38,393 37,211 39,233
========== ======== ========== ==========
Earnings per common share:
Primary:
Income before
extraordinary item $ 0.93 $ 0.95 $ 3.99 $ 3.88
Extraordinary item - - - (0.13)
---------- -------- ---------- ----------
Net income $ 0.93 $ 0.95 $ 3.99 $ 3.75
========== ======== ========== ==========
Fully diluted:
Income before
extraordinary item $ 0.93 $ 0.94 $ 3.98 $ 3.77
Extraordinary item - - - (0.12)
---------- -------- ---------- ----------
Net income $ 0.93 $ 0.94 $ 3.98 $ 3.65
========== ======== ========== ==========
See accompanying notes to consolidated financial statements.
PAGE 3
FMC Corporation and Consolidated Subsidiaries
- - ---------------------------------------------
Consolidated Balance Sheets
- - ---------------------------
(In thousands, except per share data)
September 30
1994 December 31
Assets: (Unaudited) 1993
- - ------- ------------ -----------
Current assets:
Cash $ 17,758 $ 20,450
Marketable securities 96,786 57,071
Trade receivables, net of allowance
for doubtful accounts of $9,561 and
$9,086 in 1994 and 1993, respectively 652,423 573,181
Inventories 430,372 268,107
Other current assets 169,231 143,439
Deferred income taxes 109,012 129,479
---------- ----------
Total current assets 1,475,582 1,191,727
Investments and other 155,450 76,197
Property, plant and equipment 3,803,372 3,498,394
Less -- accumulated depreciation 2,307,463 2,108,145
---------- ----------
Net property, plant and equipment 1,495,909 1,390,249
---------- ----------
Patents, deferred charges, and intangibles
of acquired companies 157,566 91,741
Deferred income taxes 76,558 95,199
---------- ----------
Total assets $3,361,065 $2,845,113
========== ==========
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities:
Short-term debt $ 55,099 $ 66,904
Accounts payable, trade and other 658,125 501,163
Accrued and other liabilities 542,592 481,357
Current portion of long-term debt 17,862 15,029
Current portion of accrued pension
and other postretirement benefits 23,136 37,119
Income taxes payable 83,354 86,432
---------- ----------
Total current liabilities 1,380,168 1,188,004
---------- ----------
Long-term debt, less current portion 878,242 749,855
Accrued pension and other postretirement
benefits, less current portion 304,652 302,725
Reserve for discontinued operations
and restructuring 286,968 344,267
Minority interests in consolidated
companies 118,551 43,379
Stockholders' equity:
Common stock, $0.10 par value,
authorized 60,000,000 shares;
issued 36,760,028 shares in
1994 and 36,278,032 shares
in 1993 3,676 3,647
Capital in excess of par value of
capital stock 88,663 79,582
Retained earnings 355,232 207,133
Foreign currency translation adjustment (46,062) (64,766)
Treasury stock, common, at cost;
297,851 shares in 1994 and
289,146 shares in 1993 (9,025) (8,713)
---------- ----------
Total stockholders' equity 392,484 216,883
---------- ----------
Total liabilities and stockholders'
equity $3,361,065 $2,845,113
========== ==========
See accompanying notes to consolidated financial statements.
PAGE 4
FMC Corporation and Consolidated Subsidiaries
- - ---------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- - -------------------------------------------------
(Dollars in thousands)
Nine Months
Ended September 30
---------------------
1994 1993
--------- --------
Reconciliation from income before
extraordinary item to cash provided by
operating activities:
Income before extraordinary item: $ 148,099 $143,280
Adjustments for non-cash components:
Depreciation and amortization 165,846 165,242
Deferred income taxes 36,738 14,661
Equity in net earnings of affiliates (5,101) (4,363)
Amortization of accrued pension costs (8,643) (4,611)
Interest on zero-coupon senior
subordinated convertible debentures - 7,419
Minority interests 50,543 1,512
Other (3,171) 5,686
--------- --------
384,311 328,826
--------- --------
Tax benefit of extraordinary item - 2,664
--------- --------
(Increase) decrease in assets
Trade receivables (70,840) (40,421)
Inventories (73,797) 48,000
Other current assets (24,897) (18,667)
(Decrease) increase in liabilities
Accounts payable and accruals 107,005 (4,784)
Income taxes payable (3,159) (6,588)
Restructuring reserve (36,280) -
Accrued pension and other
postretirement benefits, net (12,555) (11,409)
--------- --------
(114,523) (33,869)
--------- --------
Cash provided by operating activities $ 269,788 $297,621
========= ========
Supplemental disclosure of cash flow information
- - ------------------------------------------------
Cash paid for interest was $46.6 million and $42.7 million, and cash paid for
income taxes, net of refunds, was $28.1 million and $29.3 million for the nine-
month periods ended September 30, 1994 and 1993, respectively.
See accompanying notes to consolidated financial statements.
PAGE 5
FMC Corporation and Consolidated Subsidiaries
- - ---------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- - -------------------------------------------------
(Dollars in thousands)
Nine Months
Ended September 30
--------------------
1994 1993
--------- ---------
Cash provided by operating activities $ 269,788 $ 297,621
--------- ---------
Cash required by discontinued
operations (18,649) (17,052)
--------- ---------
Cash provided (required) by investing
activities:
Capital spending (235,252) (175,645)
Disposal of property, plant and
equipment 9,683 6,347
(Increase) decrease in investments
and other (76,904) 5,965
--------- ---------
(302,473) (163,333)
--------- ---------
Cash provided (required) by financing
activities:
Net (decrease) in short-term debt (12,393) (22,735)
Net borrowings under credit facilities 110,000 92,000
Proceeds from issuance of domestic
long-term debt 90,000 198,915
Repayment of domestic long-term debt (2,802) (228,501)
Net (decrease) in foreign
long-term debt (66,534) (26,989)
Distributions to limited partner (40,784) -
Premium on early retirement of debt - (3,413)
Issuance of capital stock, net 8,798 2,676
--------- ---------
86,285 11,953
--------- ---------
Effect of exchange rate changes on cash
and marketable securities 2,072 (3,417)
--------- ---------
Increase in cash and marketable
securities 37,023 125,772
Cash and marketable securities, beginning
of year 77,521 24,278
--------- ---------
Cash and marketable securities, end
of period $ 114,544 $ 150,050
========= =========
See accompanying notes to consolidated financial statements.
PAGE 6
FMC Corporation and Consolidated Subsidiaries
- - ---------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
- - ------------------------------------------------------
Note 1: Financial information
- - ------------------------------
The consolidated balance sheet at September 30, 1994, and the related statements
of income and cash flows for the interim periods ended September 30, 1994 and
1993 have been reviewed by FMC's independent auditors. The review is discussed
more fully in their report included herein. In the opinion of management, such
financial statements have been prepared in conformity with generally accepted
accounting principles and reflect all adjustments necessary for a fair statement
of the results of operations for the interim periods. All such adjustments are
of a normal recurring nature. The results of operations for the three and nine-
month periods ended September 30, 1994 and 1993 are not necessarily indicative
of the results of operations for the full year.
At December 31, 1993, reserves for potential environmental obligations were
recorded net of $54 million in recoveries, including recoveries from insurance
companies, the federal government and other potentially responsible parties.
Beginning in 1994, recoveries, excluding those relating to discontinued
operations, are recorded as an asset and those relating to discontinued
operations remain recorded in the reserve for discontinued operations and
restructuring. At September 30, 1994, recoveries of $32 million and $18
million, are recorded as an asset and as an offset to the reserve for
discontinued operations and restructuring, respectively. Recoveries will
continue to be recorded when probable and reasonably estimable.
Certain prior period balances have been reclassified to conform with the current
period's presentation.
The accounting policies followed by the company are set forth in Note 1 to the
company's financial statements in the 1993 FMC Corporation Annual Report, which
is incorporated by reference in Form 10-K.
Note 2: Other income and expense, net
- - --------------------------------------
Other income and expense, net in the three-month periods ended September 30,
1994 and 1993 includes pension-related income of $2.9 million and $2.1 million,
respectively, and LIFO-related income of $1.4 million and $2.4 million ($0.02
and $0.04 per share), respectively.
Other income and expense, net in the nine-month periods ended September 30, 1994
and 1993 includes pension-related income of $8.6 million and $4.6 million,
respectively, and LIFO-related income of $5.0 million and $5.0 million ($0.08
and $0.08 per share), respectively.
PAGE 7
Note 3: Long-term debt
- - -----------------------
On September 1, 1994, Sweetwater County, Wyoming issued $45 million of Solid
Waste Disposal Revenue Bonds. The proceeds were loaned to the company pursuant
to a Loan Agreement dated September 1, 1994 which includes an interest rate of
6.9 percent payable semi-annually through maturity, September 1, 2024.
On June 1, 1994, Sweetwater County, Wyoming issued $45 million of Solid Waste
Disposal Revenue Bonds. The proceeds were loaned to the company pursuant to a
Loan Agreement dated June 1, 1994 which includes an interest rate of 7 percent
payable semi-annually through maturity, June 1, 2024.
The loan proceeds from the two issues described above were recorded in
investments and are being used to fund a $90 million capital investment in the
soda ash business.
At September 30, 1994 the company had a maximum credit limit of $500 million
under its Revolving Credit Agreements. During the first quarter of 1994, the
company modified its Revolving Credit Agreement whereby the maximum credit limit
was reduced from $700 million to $500 million. On April 25, 1994 FMC further
modified its Revolving Credit Agreement whereby the maximum credit limit was
reduced from $500 million to $250 million. Also on April 25, the company
entered into a new 364 day Revolving Credit Agreement with a maximum credit
limit of $250 million. Terms of the new agreement are virtually identical to
those of the previous $700 million agreement.
During the first nine months of 1993, the company repurchased the remaining $655
million, less unamortized discount of $481 million, of 7-1/2% zero coupon senior
subordinated convertible debentures with an original maturity date of 2011, $32
million of 7-1/2% sinking fund debentures, originally due 2001, and $19 million
of industrial revenue bonds. As a result of the write-off of unamortized debt
issue costs, as well as other costs and expenses included, the company incurred
an extraordinary charge of $4.7 million, net of tax benefits of $2.7 million for
the nine-month period ended September 30, 1993.
In August 1993, the company issued $200 million of 6.375% senior notes due 2003.
The proceeds were used to reduce advances under the predecessor revolving credit
agreement.
PAGE 8
Note 4: Acquisitions
- - ---------------------
On June 24, 1994, the company acquired the Fluid Control Systems product line
from National-Oilwell, a Houston-based oil field equipment company. The Fluid
Control Systems product line is a leader in a variety of high-performance oil
field applications, including engineered production and injection manifolds, a
family of valves and fittings used to control and distribute the flow of
production from oil and gas wells. Fluid Control Systems will be part of the
Fluid Control division within the Energy and Transportation Equipment Group.
On May 27, 1994, the company acquired the Jetway Systems Division of Pneumo-Abex
Inc. Jetway is a leader in design, production and installation of passenger
boarding bridges and other aircraft support systems. Jetway Systems will be
part of the Airline Equipment Division within the Energy and Transportation
Equipment Group.
On June 30, 1993, the company acquired the assets of Kongsberg Offshore a.s., a
wholly owned subsidiary of Siemens a.s. Kongsberg Offshore a.s. provides subsea
and metering systems on a worldwide basis as well as turnkey subsea systems,
including systems integration, project management and FMC subsea products.
Also on June 30, 1993, the company acquired SOFEC, Inc., a Houston based
engineering and construction company. SOFEC, Inc., is an engineering and
construction company that designs, fabricates and installs offshore mooring
systems for export and import terminals and for floating storage and production
facilities for offshore oil and gas.
The company also completed a number of other smaller acquisitions during the
nine-month periods ended September 30, 1994 and 1993 respectively.
The purchase prices for the aforementioned acquisitions were satisfied from
operations supplemented with cash, marketable securities, and long-term
financing. The company has accounted for these acquisitions by the purchase
method. These acquisitions did not have a material impact on the consolidated
results of operations.
Note 5: Accounting Standards Adopted
- - ------------------------------------
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" was adopted by the company effective January 1, 1994.
Statement No. 112 requires accrual of the expected cost of providing certain
benefits to former or inactive employees after employment but before retirement.
The effect of adoption was not material, and accordingly, has been included as
part of costs and expenses.
PAGE 9
Note 6: Formation of United Defense, L.P.
- - ------------------------------------------
On January 28, 1994, FMC and Harsco Corporation ("Harsco") announced completion
of a series of agreements, first announced in December 1992, to combine certain
assets and liabilities of FMC's Defense Systems Group ("DSG") and Harsco's BMY
Combat Systems Division ("BMY"). The effective date of the combination was
January 1, 1994. The combined company, United Defense, L. P. ("UDLP"), operates
as a limited partnership, with FMC as the Managing General Partner with a 60
percent equity interest and Harsco Defense Holding as the Limited Partner
holding a 40 percent equity interest.
Beginning in the first quarter 1994, all sales and earnings of UDLP are included
in FMC's consolidated financial statements. The limited partner's share of the
partnership's earnings is included in minority interest. Sales and profits for
1994 versus 1993 are affected by the formation of the venture. All of the
assets and liabilities of UDLP are also consolidated in the balance sheet
resulting in increases to trade receivables, inventories, deferred charges,
accounts payable, and minority interests.
The following summary, prepared on a pro forma basis, combines the operating
results of FMC and BMY as if the combination had occurred on January 1, 1993.
The pro forma earnings include amortization of an intangible asset and a
minority interest in UDLP for Harsco's equity interest. The pro forma operating
results are not necessarily indicative of what would have occurred had the
combination actually taken place on January 1, 1993.
(Dollars in millions, Three Months Ended Nine Months Ended
except per share amounts) September 30, 1993 September 30, 1993
------------------ ------------------
Revenue 994 3,078
Net Income 32 134
Earnings per common share:
Primary 0.87 3.63
Fully diluted 0.86 3.54
Note 7: Accounting Standards Not Adopted
- - -----------------------------------------
Statement of Financial Accounting Standards No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," was
issued by the Financial Accounting Standards Board in October 1994. The
statement requires disclosures about derivative financial instruments--futures,
forward, swap and option contracts, and other financial instruments with similar
characteristics. The Statement is effective for financial statements issued for
fiscal years ending after December 15, 1994. The company plans to adopt the new
standard for the financial statements included in the annual report to
shareholders for 1994.
PAGE 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
FINANCIAL CONDITION
-------------------
As of September 30, 1994, the company's committed credit line under the
Revolving Credit Agreements exceeded committed and uncommitted facility
borrowings by $390 million.
Certain balance sheet accounts including Trade Receivables, Inventories,
Deferred Charges, and Accounts Payable at September 30, 1994 have increased
compared to December 31, 1993 primarily due to the formation of United Defense,
L.P., acquisitions, and the cyclical nature of certain businesses.
On September 1, 1994, Sweetwater County, Wyoming issued an additional $45
million of Solid Waste Disposal Revenue Bonds. The proceeds were loaned to the
company pursuant to a Loan Agreement dated September 1, 1994 which includes an
interest rate of 6.9 percent payable semi-annually through maturity, September
1, 2024. On June 1, 1994, Sweetwater County, Wyoming issued $45 million of
Solid Waste Disposal Revenue Bonds. The proceeds were loaned to the company
pursuant to a Loan Agreement dated June 1, 1994 which includes an interest rate
of 7 percent payable semi-annually through maturity, June 1, 2024. The loan
proceeds from both issues were recorded in investments and are being used to
fund a soda ash business capital project which is more fully described below.
Spending charged to the restructuring reserve, primarily for severance,
downsizing, consolidations, and product line rationalizations was $14 million in
the third quarter and $36 million year-to-date. In the second quarter, the
company initiated the planned program to reduce functional support staff across
the company. The company is reducing functional staffing levels by
approximately 1,000 positions, and the program is expected to be largely
completed by year-end 1994. The costs associated with this reduction were
included in the $172.3 million restructuring reserve provided in 1993. In the
third quarter, the company continued severance and downsizing activities in the
industrial chemicals and machinery and equipment segments. Projected cash
requirements for the remainder of 1994 are approximately $15-20 million for
severance, downsizing and other restructuring related costs. The company
estimates the restructuring efforts will reduce cost levels an average of $70
million per year in 1995 and 1996 compared to 1993.
On May 4, 1994 FMC Gold Company, an 80% owned subsidiary of FMC, announced plans
to invest $57 million to develop the Beartrack property located near Salmon,
Idaho. The decision to proceed with the development was based largely on
improved project economics and issuance of a biological opinion by the National
Marine Fisheries Service ("NMFS") that the proposed Beartrack mine was "not
likely to jeopardize" the continued existence of the Snake River salmon. The
company has submitted a request to the Army Corps of Engineers ("ACOE") for
renewal of one of the permits necessary to complete construction of the
Beartrack mine. ACOE is studying that request at this time, and the company is
participating actively in ACOE's review.
PAGE 11
On October 21, 1994, the Sierra Club Legal Defense Fund, Inc., ("Sierra"), on
behalf of certain other organizations, sued NMFS and other federal agencies for
violation of the Endangered Species Act (the "Act") alleging that NMFS'
biological opinion failed to satisfy the requirements of the Act.
During the third quarter of 1994, the Pacific Rivers Council and the Wilderness
Society (the "PRC"), represented by Sierra and others, in a lawsuit currently
pending in Federal District Court in Idaho (Pacific Rivers Council v. Thomas),
filed a motion seeking an injunction against all ongoing and future forest
activities which may affect endangered salmon, including mining, within various
national forests in Idaho including the Salmon National Forest in which the
Beartrack property is located. In that lawsuit, the PRC seeks to require the
U.S. Forest Service to consult under the Act with the NMFS regarding existing
land resource management plans for the subject forests and their potential
impacts on endangered salmon. If the injunction sought by the PRC were to
enter, further development and operation of the Beartrack property could be
halted. The company, along with other mining and timber companies, has been
granted limited leave to intervene in the lawsuit and has filed a memorandum in
opposition to the PRC's motion for an injunction at least as it might apply to
the Beartrack property based on, inter alia, the fact that the company has
already obtained the requisite biological opinion by NMFS and the fact that the
Beartrack property is at least 6.5 miles from the closest habitat for salmon.
The company believes that the biological opinion was carefully considered and
fully supported by the record and that it will prevail in Sierra's lawsuit and
in the PRC's broad-based attempt to enjoin further development. Accordingly,
the company intends to continue development of Beartrack.
The Beartrack property encompasses approximately 30 square miles of mining
claims and contains approximately one million ounces of proven and probable
reserves. At October 31, 1994 FMC Gold Company's investment in Beartrack was
approximately $34 million. In addition, FMC Gold had commitments of
approximately $14 million relating to Beartrack.
During the first half of 1994, FMC announced the first phase of a major
investment in the soda ash business. The $90 million investment is expected to
lower soda ash production costs at FMC's Green River facility. Construction is
currently underway, and the project is scheduled for completion in 1996.
At the October 1994 FMC Board of Directors meeting, a $50 million project was
approved to develop a lithium resource in Argentina, which will combine a high-
quality brine resource with new extraction technologies. Development of this
resource is expected to improve FMC's competitive position, particularly in the
specialty lithium compound markets, where growth efforts are focused. The
project is scheduled for completion in 1997 and will replace our existing
lithium resource located in North Carolina.
PAGE 12
On November 2, 1994 FMC announced that its Board of Directors approved a capital
expenditure of $88 million to build a manufacturing facility to produce a new
family of herbicides developed by its Agricultural Chemical Group. The new
facility will be built at FMC's existing Baltimore site, and construction is
expected to be completed by mid-1996.
The first new herbicide to be manufactured at the plant will be sulfentrazone, a
new pre-emergent broad-leaved herbicide for the control of weeds in soybeans and
sugarcane. Sulfentrazone controls many economically important weeds, including
morning glory and nutsedge. FMC submitted the registration package for
sulfentrazone to the U.S. Environmental Protection Agency this past August and
expects registration in time for the 1997 soybean planting season.
Expected cash requirements for the remainder of 1994 include approximately $75-
125 million for planned capital expenditures and potential acquisitions, and net
after-tax interest payments of approximately $10 million based on current debt
levels. Cash to meet these requirements is expected to be provided by the
company's operations supplemented, if necessary, with cash balances and
available credit facilities.
RESULTS OF OPERATIONS
---------------------
Third quarter 1994 compared to third quarter 1993
-------------------------------------------------
Industry Segment Data (Unaudited)
-----------------------------------
(Dollars in millions)
Three Months Ended
September 30
--------------------
1994 1993
-------- ------
Sales
- - -----
Performance Chemicals (1) $ 265.2 $237.7
Industrial Chemicals (1) 212.3 215.3
Machinery and Equipment 242.6 218.7
Defense Systems 286.3 236.0
Precious Metals 11.3 26.3
Elimination (8.1) (7.5)
-------- ------
$1,009.6 $926.5
======== ======
Income before taxes
- - -------------------
Performance Chemicals (1) $ 43.2 $ 28.0
Industrial Chemicals (1) 27.2 20.1
Machinery and Equipment 5.6 (4.6)
Defense Systems 39.2 40.0
Precious Metals (7.3) 1.4
-------- ------
Operating profit 107.9 84.9
Corporate and other (32.4) (28.1)
Net interest expense (16.6) (14.8)
Other income and (expense), net 4.3 4.5
Minority interests (2) (15.3) (0.8)
-------- ------
Total $ 47.9 $ 45.7
======== ======
(1) Certain chemical products with high value-added content and specialty
applications that formerly had been included in the Industrial Chemicals
segment have been reclassified to the Performance Chemicals segment.
Results in 1993 for both Industrial and Performance Chemicals have been
restated for comparative reporting purposes.
(2) Minority interests in 1994 relates primarily to Defense Systems - $(15.9)
million - and Precious Metals - $1.0 million. Minority interests in 1993
relates primarily to Precious Metals.
PAGE 13
Sales of $1,010 million in the third quarter of 1994 increased 9 percent
compared with the prior-year quarter, primarily due to increases in Defense
Systems, Energy and Transportation Equipment and Agricultural Chemicals,
partially offset by expected declines in Precious Metals. Earnings before
interest and taxes increased 7 percent to $64 million compared with $60 million
in the prior-year quarter. Strong results from Machinery and Equipment,
Agricultural Chemicals, improving European chemical operations and cost paring
within Industrial Chemicals, more than offset the expected declines in Defense
and Precious Metals. Net interest expense of $17 million increased 12 percent
over the prior-year quarter reflecting higher interest rates in the third
quarter of 1994.
Income before extraordinary item of $35 million was even with $35 million in the
third quarter of 1993. Primary earnings per share were $0.93 compared with
$0.95 last year.
Performance Chemicals sales of $265 million increased 12 percent, compared with
sales of $238 million in last year's period primarily, due to increases in
Agricultural Chemicals. Agricultural Chemicals' results reflect strong North
American and Asian sales. Volume gains in North America were driven by new
product registrations and emergency registrations for rescue markets. Food
Ingredients, Pharmaceuticals and Lithium also posted sales gains in the quarter.
Profits of $43 million increased 54 percent over last year, despite stepped-up
research and development expenses to support the commercialization of a new
class of herbicides, higher sales and marketing expenses to expand the global
market positions of the food ingredients and pharmaceutical businesses, and
spending to develop a new, high-quality lithium brine resource in Argentina.
Industrial Chemicals sales of $212 million decreased slightly compared with $215
million in the prior-year quarter. Profits of $27 million for the segment were
35 percent higher, reflecting the improved performance of the European chemical
operations and cost-paring throughout the segment in 1994. Market conditions in
Industrial Chemicals continue to improve, and the company recently announced
modest price increases for many of its industrial chemicals, including hydrogen
peroxide and soda ash.
PAGE 14
Machinery and Equipment sales of $243 million increased 11 percent, primarily
reflecting the second-quarter Jetway Systems acquisition. Profits of $6 million
compared with a loss of $5 million last year primarily on the strength of
improved manufacturing efficiencies and cost structure in the Food Machinery
businesses. Machinery and Equipment backlog was $513 million at the end of the
quarter, up from $333 million from the beginning of the year due to recently
completed acquisitions.
Defense Systems sales of $286 million increased 21 percent from $236 million in
last year's quarter. The 100 percent consolidation of United Defense, L.P. more
than offset the expected production declines in Ground and Armament Systems
Divisions. Profits (after the limited partner's share of United Defense
earnings) totaled $23 million in the 1994 third quarter as compared to profits
of $40 million in third quarter 1993. Lower profits in 1994 primarily reflect
the aforementioned production declines partially offset by a more profitable mix
of business and favorable cost performance. Defense backlog was $1.2 billion at
the end of the quarter, up from $1.1 billion at the end of 1993, as the
formation of United Defense offset decreases in Ground and Armament Systems
Divisions.
The joint venture in Turkey to produce armored fighting vehicles for the Turkish
army continues to encounter delays in the acceptance of vehicles and delays in
receipt of payment for outstanding receivables. Based on progress to date, the
joint venture expects to resolve such delays in the near future. Negotiations
with the customer are continuing. The joint venture is accounted for as an
investment, and income is recognized as dividends, royalties, and technical fees
are received.
As expected, Precious Metals sales of $11 million declined compared with last
year's third quarter sales of $26 million. The segment posted a loss of $7.3
million, reflecting the closing of the Paradise Peak mine in 1993, the higher
costs of mining activity at Jerritt Canyon, and continued exploration spending.
Certain corporate income and expense items are not allocated to specific
business segments due to their nature.
The effective tax rates for the quarters ended September 30, 1994 and 1993 were
28 percent and 23 percent, respectively. The increase is primarily due to lower
1994 depletion benefits and higher taxes on repatriated earnings. The 1993
effective tax rate also benefited from the change in the federal tax rate's
impact on deferred taxes. Both 1994 and 1993 quarters were favorably affected
by changes in estimated full year effective tax rates.
PAGE 15
Nine months 1994 compared to nine months 1993
---------------------------------------------
Industry Segment Data (Unaudited)
-------------------------------------
(Dollars in millions)
Nine Months Ended
September 30
----------------------------
1994 1993
-------- --------
Sales
- - -----
Performance Chemicals (1) $ 814.7 $ 765.8
Industrial Chemicals (1) 630.5 652.4
Machinery and Equipment 687.8 611.9
Defense Systems 811.7 704.0
Precious Metals 50.0 98.9
Eliminations (23.0) (25.5)
-------- --------
$2,971.7 $2,807.5
======== ========
Income before taxes
- - -------------------
Performance Chemicals(1) $ 147.4 $ 133.6
Industrial Chemicals(1) 90.9 56.9
Machinery and Equipment 24.4 2.2
Defense Systems 127.6 115.7
Precious Metals (7.6) 9.6
-------- --------
Operating profit 382.7 318.0
Corporate and other $ (85.3) (86.4)
Net interest expense (46.0) (47.4)
Other income and (expense), net 13.7 9.6
Minority interest (2) (50.5) (1.5)
-------- --------
Total $ 214.6 $ 192.3
======== ========
(1) Certain chemical products with high value-added content and specialty
applications that formerly had been included in the Industrial Chemicals
segment have been reclassified to the Performance Chemicals segment. Results
in 1993 for both Industrial and Performance Chemicals have been restated for
comparative reporting purposes.
(2) Minority interests in 1994 relates primarily to Defense Systems -$(49.4)
million - and Precious Metals - $0.1 million. Minority interests in 1993
relates primarily to Precious Metals.
PAGE 16
Sales of $3.0 billion in the first nine months of 1994 increased 6 percent from
$2.8 billion in the 1993 period. Earnings of $261 million before interest and
taxes increased 9 percent compared with the first nine months of 1993. Strong
growth at Performance Chemicals, improved manufacturing efficiencies and cost
improvements at Industrial Chemicals, and the successful integration of
acquisitions and growth at Machinery and Equipment more than offset the expected
declines at Defense Systems and Precious Metals. Net interest expense declined
3 percent to $46 million, reflecting refinancing of higher cost debt in 1993,
partially offset by higher interest rates in 1994. For the first nine months of
1994, income before extraordinary items increased 3 percent to $148 million.
Primary earnings per share were $3.99 compared with $3.88 per share last year.
After extraordinary items related to debt refinancing, net income for the first
nine months of 1993 was $139 million or $3.75 per share.
Performance Chemicals sales of $815 million rose 6 percent compared with $766
million in last year's period. Results benefited from continued strong growth
in existing and new applications for food ingredients products, a recovery in
the domestic market for lithium products, higher volumes and new formulations
for pharmaceutical ingredients used in over-the-counter medications and strong
agricultural chemicals volumes throughout North America. Despite higher
research, marketing and sales spending to support the commercialization of two
new herbicides and the future growth of the pharmaceutical and food ingredients
businesses, profits of $147 million compared with $134 million in last year's
period.
Industrial Chemicals sales of $631 million declined 3 percent in the first nine
months of 1994 as compared to the year ago period. Stronger European chemical
sales volumes were negated by unfavorable exchange rate movements. Lower soda
ash volumes and prices also contributed to lower sales. Profits of $91 million
increased 60 percent compared with $57 million last year. Profits benefited
from improved performance of the European chemical operations, improved
manufacturing efficiencies, and cost-paring throughout the segment. These
favorable impacts were partially offset by lower soda ash pricing and volumes,
the expected continued decline of phosphorus volumes in the home laundry
detergent market and unfavorable exchange rate movements.
PAGE 17
Machinery and Equipment sales of $688 million rose 12 percent from $612 million,
primarily due to higher Energy & Transportation Equipment sales. Food Machinery
and Energy & Transportation Equipment posted significantly higher profits
increasing the segment's profits to $24 million from $2 million. Energy &
Transportation Equipment results benefited from the successful integration and
growth of recent oil field services acquisitions and the Jetway Systems
acquisition in May, as well as market share gains in the energy equipment
business. Food Machinery sales increased slightly during the first nine months
of 1994 as several of our food machinery markets showed signs of recovery in the
third quarter. Food Machinery profits significantly increased in the first nine
months of 1994 compared to 1993 due to continued cost-cutting and improved
manufacturing efficiencies throughout the businesses.
On June 20, 1994, FMC completed the sale of its palletizer product line to
Simplimatic Engineering Company, a Lynchburg, Va. based product handling and
automation subsidiary of Paris-based CarnaudMetalbox at no significant gain or
loss.
Defense Systems sales were $812 million for the first nine months of 1994
compared to $704 million for the same period last year. Additional sales
resulting from the consolidation of United Defense, L.P. more than offset the
expected production declines in Ground and Armament Systems Divisions. Profits
(after the limited partner's share of United Defense earnings) totaled $78
million in the first nine months of 1994 as compared to profits of $116 million
for the same period in 1993. The lower profits primarily reflect the reduced
production rate of Bradley Fighting Vehicles and the shutdown of the Vertical
Launching Systems production line in fourth quarter 1993, partially offset by a
more profitable mix of business and improved cost performance.
As announced during the first half of 1994, UDLP was designated by the
Department of the Army to be the prime contractor and systems integrator for the
Bradley Modernization Program. As prime contractor, UDLP is strategically
positioned to lead the design and development of the electronic system to
improve fire control and integrate communications hardware and software on the
battlefield.
Precious Metals sales of $50 million declined from sales of $99 million in last
year's period. The segment posted a loss of $7.6 million compared with profits
of $9.6 million in last year's period. The closure of the Paradise Peak mine in
1993, higher costs of mining activity at Jerritt Canyon, and continued
exploration spending contributed to the segment's reduced profitability.
PAGE 18
The effective tax rates for the nine-month periods ended September 30, 1994 and
1993 were 31 percent and 25 percent, respectively. The increase is primarily
due to lower 1994 depletion benefits and higher taxes on repatriated earnings.
The 1993 effective tax rate also benefited from the change in the federal tax
rate's impact on deferred taxes.
OTHER FINANCIAL INFORMATION
---------------------------
FMC's backlog of unfilled orders as of September 30, 1994 was $1.7 billion.
Backlogs are not reported for Industrial Chemicals, Performance Chemicals, and
Precious Metals due to the nature of these businesses.
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
A report by KPMG Peat Marwick LLP, FMC's independent accountants, on the
financial statements included in Form 10-Q for the quarter ended September 30,
1994 is included on page 19.
A report by Ernst and Young LLP, UDLP's independent accountants, on the
financial statements referred to by KPMG Peat Marwick LLP in its report noted
above is included on page 20.
PAGE 19
SIGNATURE
Independent Accountants' Report
-------------------------------
The Board of Directors
FMC Corporation:
We have reviewed the accompanying consolidated balance sheet of FMC Corporation
and consolidated subsidiaries as of September 30, 1994, and the related
consolidated statements of income for the three-month and nine-month periods
ended September 30, 1994 and 1993, and the related consolidated statements of
cash flows for the nine-month periods ended September 30, 1994 and 1993. These
financial statements are the responsibility of the company's management.
We were furnished with the report of other accountants on their review of the
interim financial information of United Defense, L.P., whose total assets as of
September 30, 1994, and whose revenues for the three-month and nine-month
periods ended September 30, 1994 constituted 16 percent, 28 percent, and 27
percent, respectively, of the related consolidated totals.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
October 19, 1994
PAGE 20
SIGNATURE
Independent Accountants' Review Report
--------------------------------------
Partners
United Defense LP
Arlington, Virginia
We have reviewed the accompanying balance sheet of United Defense LP as of
September 30, 1994, and the related statements of income for the three-month
period ended September 30, 1994 and the nine-month period from the effective
date of the Partnership (January 1, 1994) through September 30, 1994 and the
statements of partners' equity and cash flows for the nine-month period from the
effective date of the Partnership (January 1, 1994) through September 30, 1994.
These financial statements are the responsibility of the Partnership's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
Ernst & Young LLP
Washington, D.C.
October 14, 1994
PAGE 21
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- - ------- -----------------
As previously reported in FMC's quarterly report on Form 10-Q for the period
ended September 30, 1993, an environmental inspection was conducted in July 1993
at FMC's Phosphorus Chemicals Division plant in Pocatello, Idaho. In August
1994, the United States Environmental Protection Agency (Region 10) (the "EPA")
formally notified FMC of a number of alleged violations of the Resource
Conservation and Recovery Act ("RCRA") and related environmental regulations
governing the management of hazardous waste generated by the plant, including
the operation of hazardous waste storage and treatment units without required
permits, the failure to implement an adequate groundwater monitoring program and
to comply with related reporting requirements and the existence of several other
improper treatment and disposal practices. There are no legal proceedings
pending at this time; however, the EPA has stated that the alleged violations
may subject FMC to enforcement action under RCRA, including possible actions for
monetary sanctions, injunctive relief or other available remedies. Management
believes that the resolution of these matters will not likely have a material
adverse effect on FMC's liquidity, results of operations or financial condition.
See Part I, Item 2 for a discussion of certain legal proceedings involving the
pending Beartrack development project.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(a) Exhibits
Page Number in
Number in Document Numbering
Exhibit Table Description System
- - ------------------ ------------------------- ------------------------
11 Statement re: computation Document type 2, page 2
of per share earnings
assuming full dilution
15 Letters re: unaudited Document type 2, pages 3
interim financial and 4
information
27 Financial Data Schedule Document type EX-27,
page 5
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
PAGE 22
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FMC CORPORATION
-------------------------------
(Registrant)
Date: November 11, 1994 Frank A. Riddick, III
------------------ -------------------------------
Controller and duly authorized
officer
PAGE 1
EXHIBIT INDEX
-------------
Page Number in
Number in Document Numbering
Exhibit Table Description System
- - ------------- ------------------------- ------------------
11 Statement re: computation 2
of per share earnings
assuming full dilution
15 Letter re: unaudited 3
interim financial
information
15 Letter re: unaudited 4
interim financial
information (Ernst &
Young LLP)
27 Financial Data Schedule 5