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 March 31, 1996
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
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(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 March 31, 1996
- ---------------------------------------- --------------------------------------
Common Stock, par value $0.10 per share 37,228,971
PAGE 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------
Consolidated Statements of Income (Unaudited)
- ---------------------------------------------
(In millions, except per share data)
Three Months
Ended March 31
------------------
1996 1995
-------- --------
Revenue:
Sales $1,112.1 $1,015.5
Other revenue 32.2 14.5
-------- --------
Total revenue 1,144.3 1,030.0
-------- --------
Costs and expenses:
Cost of sales 812.6 741.7
Selling, general and
administrative expenses 164.2 142.2
Research and development 43.8 38.3
-------- --------
Total costs and expenses 1,020.6 922.2
-------- --------
Income from operations 123.7 107.8
Minority interests 23.3 16.6
Interest expense (net) 22.6 16.3
-------- --------
Income before income taxes 77.8 74.9
Provision for income taxes 22.6 22.5
-------- --------
Net income $ 55.2 $ 52.4
======== ========
Average number of shares 38.0 37.5
======== ========
Earnings per common share $ 1.45 $ 1.40
======== ========
See accompanying notes to consolidated financial statements.
PAGE 3
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------
Consolidated Balance Sheets
- ---------------------------
(In millions, except per share data) March 31
1996 December 31
(Unaudited) 1995
Assets: ----------- -----------
Current assets:
Cash and cash equivalents $ 107.6 $ 70.9
Trade receivables, net of allowance
for doubtful accounts of $7.5 and
$11.6 in 1996 and 1995, respectively 827.2 837.8
Inventories 700.4 615.0
Other current assets 234.9 182.6
Deferred income taxes 88.5 98.5
-------- --------
Total current assets 1,958.6 1,804.8
Investments 98.0 99.1
Property, plant and equipment at cost 4,211.9 4,171.2
Less -- accumulated depreciation 2,356.1 2,341.6
-------- --------
Net property, plant and equipment 1,855.8 1,829.6
Goodwill and intangible assets 335.8 345.6
Other assets 157.4 150.9
Deferred income taxes 73.4 71.1
-------- --------
Total assets $4,479.0 $4,301.1
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $ 650.9 $ 420.8
Accounts payable, trade and other 779.0 848.5
Accrued and other current liabilities 398.7 419.4
Current portion of long-term debt 16.2 29.8
Current portion of accrued pension
and other postretirement benefits 36.5 36.4
Income taxes payable 43.3 37.8
-------- --------
Total current liabilities 1,924.6 1,792.7
Long-term debt, less current portion 959.0 974.4
Accrued pension and other postretirement
benefits, less current portion 284.6 284.6
Reserve for discontinued operations 164.9 168.3
Other liabilities 262.7 270.3
Minority interests in consolidated companies 177.5 157.4
Stockholders' equity:
Preferred stock, no par value, authorized
5,000,000 shares; no shares issued in
1996 or 1995 - -
Common stock, $0.10 par value, authorized
60,000,000 shares; issued 37,228,971
shares in 1996 and 37,024,187 shares
in 1995 3.7 3.7
Capital in excess of par value
of capital stock 109.1 99.7
Retained earnings 651.3 596.1
Foreign currency translation adjustment (49.2) (36.9)
Treasury stock, common, at cost;
300,447 shares in 1996 and 1995 (9.2) (9.2)
-------- --------
Total stockholders' equity 705.7 653.4
-------- --------
Total liabilities and stockholders' equity $4,479.0 $4,301.1
======== ========
See accompanying notes to consolidated financial statements.
PAGE 4
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- -------------------------------------------------
(In millions)
Three Months
Ended March 31
----------------
1996 1995
------ ------
Reconciliation from net income to cash
(required) by operating activities:
Net income $ 55.2 $ 52.4
Adjustments for non-cash components of
net income:
Depreciation and amortization 65.0 58.6
Deferred income taxes 7.3 12.2
Minority interests 23.3 16.6
Other 4.3 -
(Increase) decrease in assets:
Trade receivables 10.6 (52.8)
Inventories (85.4) (51.5)
Other current assets and other assets (52.9) (52.6)
(Decrease) increase in liabilities:
Accounts payable, accrued and other
current liabilities and other liabilities (94.0) (34.8)
Income taxes payable 5.5 2.9
Restructuring reserve (3.8) (13.1)
Accrued pension and other
postretirement benefits, net (0.9) (2.9)
------ ------
Cash (required) by operating activities $(65.8) $(65.0)
====== ======
See accompanying notes to consolidated financial statements.
PAGE 5
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- -------------------------------------------------
(In millions)
Three Months
Ended March 31
------------------
1996 1995
-------- -------
Cash (required) by operating activities $ (65.8) $(65.0)
Cash (required) by discontinued operations (2.9) (2.0)
Cash provided (required) by investing
activities:
Capital spending (123.3) (93.1)
Disposal of property, plant and
equipment 23.0 2.6
Decrease in investments 4.4 13.3
------- ------
(95.9) (77.2)
------- ------
Cash provided (required) by financing
activities:
Net proceeds from issuance of
commercial paper 104.1 -
Increase in other short-term debt 121.1 100.0
Proceeds from issuance of
long-term debt - 3.7
Repayment of long-term debt (29.0) (0.1)
Net borrowings under credit facilities - 89.0
Distributions to limited partner (3.3) (3.3)
Issuance of capital stock, net 9.4 1.3
------- ------
202.3 190.6
------- ------
Effect of exchange rate changes on cash
and cash equivalents (1.0) 1.2
------- ------
Increase in cash and cash equivalents 36.7 47.6
Cash and cash equivalents, beginning
of year 70.9 98.4
------- ------
Cash and cash equivalents, end
of period $ 107.6 $146.0
======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized, was $23.2 million and $18.8
million, and cash paid for income taxes, net of refunds, was $0.7 million and
$3.4 million for the three-month periods ended March 31, 1996 and 1995,
respectively.
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 as of March 31, 1996, and the related
consolidated statements of income and cash flows for the interim periods ended
March 31, 1996 and 1995 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-month periods ended March 31, 1996 and 1995 are not necessarily
indicative of the results of operations for the full year.
Certain prior period balances have been reclassified to conform with the current
period's presentation.
The accounting policies are set forth in Note 1 to the company's 1995 financial
statements which are incorporated by reference in the company's 1995 Annual
Report on Form 10-K.
Note 2: Debt
- -------------
The company has $500 million in committed credit facilities consisting of a $250
million, 364-day non-amortizing revolving credit agreement due in December 1996
and a $250 million, five-year non-amortizing revolving credit agreement due in
December 1999. As of March 31, 1996, the company had advances under the five-
year revolving credit agreement of $100 million.
In November 1995, the company commenced a short-term commercial paper program
supported by the committed facilities. Committed credit available under the
revolving credit facilities provides management with the ability to refinance a
portion of its debt on a long-term basis and, as it is management's intent to do
so, $150 million of the total $384 million in outstanding commercial paper has
been classified as long-term debt at March 31, 1996.
Short-term debt at March 31, 1996 includes $310 million of advances under
uncommitted U.S. credit facilities, $16 million under the 364-day non-amortizing
revolving credit agreement, and $234 million of commercial paper. The remaining
amounts of short-term debt represent borrowings by FMC's foreign subsidiaries.
Note 3: Accounting Standards Adopted
- -------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
was adopted by the company effective January 1, 1996. SFAS No. 121 establishes
criteria for recognizing, measuring and disclosing impairments of long-lived
assets. The adoption of SFAS No. 121 did not have a material impact on the
company's consolidated financial position or results of operations.
The company also adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," effective January 1, 1996. Upon adoption of SFAS No. 123, the
company has continued its current accounting for employee stock-based
compensation plans in accordance with Accounting Principles Board Opinion No.
25, as permitted under SFAS No. 123, and, if material, will disclose the pro
forma effect of the fair value accounting method under SFAS No. 123 in the notes
to its December 31, 1996 consolidated financial statements.
PAGE 7
Note 4: Business Combinations
- ------------------------------
In June 1995, FMC acquired all of the common shares of Moorco International Inc.
("Moorco") for $28 per share, or approximately $350 million (including
acquisition costs and debt assumed). Moorco is the leading worldwide
manufacturer of meters for the petroleum industry and a leading manufacturer of
valves for the process and power generation industries. The acquisition was
financed with the company's existing cash and borrowings from short-term credit
facilities.
In conjunction with the acquisition of Moorco, goodwill and other intangible
assets of $218.4 million were recorded (which will be amortized over 15 to 40
years), and $15.5 million of acquired in-process research and development was
charged to research and development expense in the third quarter of 1995.
The following unaudited pro forma information is intended to show the results of
FMC's operations as if the acquisition of Moorco had occurred on January 1,
1995, after giving effect to certain adjustments, including the increased
amortization of goodwill and other intangible assets, decreased depreciation,
cost savings from certain synergies created under the combined operations,
additional interest expense on incremental acquisition indebtedness, and the
related income tax effects of these adjustments:
Three months ended March 31, 1995
---------------------------------
(in millions, except per share data)
(unaudited)
Sales $1,064.0
Net income $ 51.6
Earnings per common share $ 1.38
The unaudited pro forma results of operations are not necessarily indicative of
the results that would have occurred had the acquisition actually been
consummated on January 1, 1995, and are not intended to be a projection of
future results.
The company also completed other smaller acquisitions during 1995. The purchase
prices for Moorco and the other acquisitions were satisfied from cash flow from
operations and short-term and long-term financing. Other than Moorco, the
company's acquisitions did not have a material pro forma effect on the company's
consolidated results of operations.
Results of operations of the acquired companies have been included in the
company's consolidated statements of income from the respective dates of
acquisition.
Joint venture. In July 1995, FMC completed a joint venture agreement involving
the sale of 20 percent of its soda ash business, FMC Wyoming Corporation, to
Sumitomo Corporation and Nippon Sheet Glass Company, Ltd. The company's results
subsequent to the date of the joint venture reflect the minority interest
attributable to the joint venture partners.
Pending acquisition. On March 11, 1996, FMC signed a letter of intent for the
purchase of Frigoscandia Equipment Holding AB by FMC. Frigoscandia Equipment,
headquartered in Helsingborg, Sweden, is the global leader in equipment for
industrial in-line freezing and has a strong market position in other types of
food processing equipment, such as fryers, ovens and portioners. Contract
negotiations are continuing.
PAGE 8
Note 5: Sale of Automotive Service Equipment Division
- ------------------------------------------------------
Effective March 31, 1996, FMC sold its Automotive Service Equipment Division to
Snap-on Incorporated. The business was comprised of under-car service products
sold under the FMC and John Bean brand names. The gain on the sale, net of 1996
operating losses, resulted in an immaterial pre-tax gain for the quarter ended
March 31, 1996.
Note 6: Environmental
- ----------------------
FMC is subject to various federal, state and local environmental laws and
regulations that govern emissions of air pollutants, discharges of water
pollutants, and the manufacture, storage, handling and disposal of hazardous
substances, hazardous wastes and other toxic materials. The most significant
environmental liabilities of the company primarily consist of obligations
relating to the remediation and/or study of sites at which the company is
alleged to have disposed of hazardous substances. In particular, the company is
subject to liabilities arising under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and similar state laws that impose
responsibility on persons who arranged for the disposal of hazardous substances
and on current and previous owners and operators of a facility for the clean up
of the hazardous substances released from the facility into the environment. In
addition, the company is subject to liabilities under the corrective action
provisions of the Resource Conservation and Recovery Act ("RCRA") and analogous
state laws that require owners and operators of facilities that treat, store or
dispose of hazardous waste to clean up releases of hazardous waste constituents
into the environment associated with past or present practices.
At March 31, 1996, reserves were provided for potential environmental
obligations which management considers probable and for which a reasonable
estimate of the obligation could be made. Reserves of $296 million and $302
million, before recoveries, have been provided at March 31, 1996 and December
31, 1995, respectively, of which $127 million and $132 million are included in
the reserve for discontinued operations at March 31, 1996 and December 31, 1995,
respectively. The company's total environmental reserves include approximately
$266 million and $270 million for remediation activities and $30 million and $32
million for remedial investigation/feasibility study costs at March 31, 1996 and
December 31, 1995, respectively. In addition, the company has estimated that
reasonably possible environmental loss contingencies may exceed amounts accrued
by as much as $150 million at March 31, 1996.
Although potential environmental remediation expenditures in excess of the
current reserves and estimated loss contingencies could be significant, the
impact on the company's future financial results is not subject to reasonable
estimation due to numerous uncertainties concerning the nature and scope of
contamination at many sites, identification of remediation alternatives under
constantly changing requirements, selection of new and diverse clean-up
technologies to meet compliance standards, the timing of potential expenditures,
and the allocation of costs among Potentially Responsible Parties ("PRPs") as
well as other third parties.
The liability arising from potential environmental obligations that have not
been reserved for at this time may be material to any one quarter's or year's
results of operations in the future. Management, however, believes the
liability arising from the potential environmental obligations is not likely to
have a material adverse effect on the company's liquidity or financial condition
and may be satisfied over the next 20 years or longer.
PAGE 9
To ensure FMC is held responsible only for its equitable share of site
remediation costs, FMC has initiated, and will continue to initiate, legal
proceedings for contributions from other PRPs, and for a determination of
coverage against its comprehensive general liability insurance carriers.
Approximately $135 million of recoveries ($56 million as other assets and $79
million as an offset to the reserve for discontinued operations) and
approximately $140 million of recoveries ($56 million as other assets and $84
million as an offset to the reserve for discontinued operations), have been
recorded as probable realization on claims against insurance companies and other
third parties at March 31, 1996 and December 31, 1995, respectively. The
substantial majority of recorded assets related to recoveries from third parties
are associated with existing contractual arrangements with U.S. government
agencies.
Note 7: Potential Sale of FMC Gold Company
- -------------------------------------------
In September 1995, FMC Gold Company, an 80 percent owned subsidiary of FMC,
engaged the investment banking firm of CIBC Wood Gundy Securities Inc. ("Wood
Gundy") to act as its financial adviser in connection with the possible sale of
FMC Gold Company. On February 9, 1996, FMC Gold announced that it would augment
its previously announced sale process to include a range of options based on
current gold equity market conditions and interest in individual properties.
FMC Gold Company has retained J.P. Morgan & Co., Inc. to join Wood Gundy as
financial advisers for this process. At this time, there can be no assurance as
to whether any transaction will result from FMC Gold Company's work with Wood
Gundy and J.P. Morgan & Co., Inc. or as to the value, timing or structure of any
such transaction. Decisions by FMC Gold Company's management with respect to
the value or structure of a potential sale could have a material impact on the
valuation of FMC Gold Company and its assets.
Note 8: Commitments and Contingencies
- --------------------------------------
There have been no significant changes to FMC Gold Company's Beartrack
proceedings from the information reported in the company's December 31, 1995
Annual Report on Form 10-K.
PAGE 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
LIQUIDITY AND FINANCIAL CONDITION
---------------------------------
Total cash and cash equivalents at March 31, 1996 and December 31, 1995 were
$107.6 million and $146.0 million, respectively. As of March 31, 1996, the
company had total borrowings of $1.6 billion, up from $1.4 billion at December
31, 1995. The increase in debt resulted primarily from capital expenditures and
working capital requirements. Advances under uncommitted facilities of $310
million at March 31, 1996, up from $201 million at December 31, 1995, as well as
increases in commercial paper borrowings of $104 million (net of discount),
represented the primary sources of the additional borrowings. The company has
$500 million in committed credit facilities consisting of a $250 million, 364-
day non-amortizing revolving credit agreement due in December 1996 and a $250
million, five-year non-amortizing revolving credit agreement due in December
1999. As of March 31, 1996, the company had advances under the long-term
revolving credit agreement of $100 million and commercial paper borrowings,
supported by committed credit facilities, of $384 million.
Capital and acquisition spending of $123 million for the three months ended
March 31, 1996 increased $30 million versus the first three months of 1995. The
increase is primarily driven by spending in the company's chemical businesses,
largely for the expansion of the Green River soda ash facility, a plant to
manufacture a new family of herbicides, and the development of a new lithium
resource in Argentina.
Expected cash requirements for the remainder of 1996 include approximately $325
million to $375 million for planned capital expenditures, excluding potential
acquisitions, and net after-tax interest payments of approximately $40 million
based on current debt levels and interest rates. Cash to meet these
requirements will be provided primarily by the company's operations and, if
necessary, by existing cash balances and available short- or long-term credit
facilities. As discussed in Note 2, the company commenced a short-term
commercial paper program in the fourth quarter of 1995 to further expand its
short-term financing options.
In 1995, the company filed a universal shelf registration under which $500
million of debt and/or equity securities may be publicly offered. At March 31,
1996, no securities had been offered under this shelf registration.
The company's ratios of earnings to fixed charges were 4.1x and 4.5x for the
three months ended March 31, 1996 and 1995, respectively. The decrease in the
three-month ratio from 1995 to 1996 primarily reflects higher interest charges
resulting from the increased borrowings.
The aggregate restructuring reserve remaining at March 31, 1996 totaled $14.4
million, which management believes will be sufficient to complete the remaining
activities contemplated in the restructuring programs to reduce costs and
improve operating efficiencies.
PAGE 11
RESULTS OF OPERATIONS
---------------------
First quarter 1996 compared to first quarter 1995
-------------------------------------------------
Industry Segment Data (Unaudited)
---------------------------------
(In millions)
Three Months Ended
March 31
-------------------
1996 1995
-------- --------
Sales
- -----
Performance Chemicals $ 304.1 $ 284.9
Industrial Chemicals 241.9 228.4
Machinery and Equipment 322.9 264.1
Defense Systems 233.1 235.3
Precious Metals 17.8 9.0
Eliminations (7.7) (6.2)
-------- --------
$1,112.1 $1,015.5
======== ========
Income before taxes
- -------------------
Performance Chemicals $ 38.9 $ 42.5
Industrial Chemicals (1) 38.4 39.8
Machinery and Equipment 13.5 8.2
Defense Systems (1) 36.9 28.3
Precious Metals (1) (2.2) (4.5)
-------- --------
Operating profit 125.5 114.3
Corporate (23.5) (21.7)
Net interest expense (22.6) (16.3)
Other income and (expense), net (1.6) (1.4)
-------- --------
$ 77.8 $ 74.9
======== ========
FMC has modified its presentation of segment results, effective first quarter
1996, to better align presentation with management's evaluation of segment
performance. Accordingly, business segment results are presented net of
minority interest, reflecting only FMC's share of earnings. The corporate line
primarily includes staff expenses, and other income and expense consists of all
other corporate items, including certain immaterial amounts previously allocated
to business segments. Segment results for 1995 have been reclassified to be
consistent with the current period's presentation.
(1) Amounts are net of minority interests in 1996 and 1995, respectively, of
$23.3 million and $16.6 million, the majority of which, $22.1 million and
$17.1 million, pertain to Defense Systems.
PAGE 12
General
- -------
Sales of $1.1 billion increased 10 percent from last year's quarter, driven by
continuing growth in Machinery and Equipment, Performance Chemicals and
Industrial Chemicals as well as the acquisition of Moorco International Inc.
Income from segment operations (net of minority interests) totaled $126 million,
compared with $114 million in last year's quarter, reflecting improved
performance in Machinery and Equipment and Defense, partly offset by lower
operating income in the Performance Chemicals and Industrial Chemicals segments.
Net interest expense of $23 million increased from $16 million in last year's
period, reflecting higher debt associated with increased capital expenditures,
working capital requirements and acquisitions. In the first quarter 1996, net
income was $55 million and earnings per share were $1.45, compared with $52
million and $1.40, respectively, in last year's period.
Performance Chemicals
- ---------------------
Performance Chemicals sales of $304 million increased 7 percent compared with
results of $285 million in last year's period, reflecting continued market
growth across most product lines. Earnings of $39 million in the 1996 quarter
decreased compared with $43 million in last year's period. The lower results
were due primarily to a decline in North American sales of food ingredients;
significantly higher costs for carrageenan and wood pulp (key raw materials in
the food and pharmaceutical businesses); and weather-related manufacturing
difficulties in the lithium business.
Sales and earnings related to insecticides and herbicides increased on continued
higher volumes in North America, Europe and Asia-Pacific, reflecting increased
market demand, new product registrations and label expansions.
Sales of food ingredients, pharmaceutical, and BioProducts increased slightly in
the first quarter 1996 but earnings declined due to higher costs for
carrageenan, wood pulp, and other key raw materials.
Lithium sales increased in first quarter 1996, due to higher volumes and price
increases. However, earnings decreased from the first quarter 1995's record
level due mainly to weather-related manufacturing difficulties, higher
maintenance spending and other reductions from production shortfalls.
Industrial Chemicals
- --------------------
During the first quarter 1996, Industrial Chemicals sales of $242 million
increased 6 percent compared with 1995 sales of $228 million, primarily
reflecting the benefit of price increases across major product lines. The
decline in earnings from $40 million in the first quarter of 1995 to $38 million
in the 1996 quarter reflects the reduction for the 20 percent minority interest
in the soda ash joint venture (formed in the third quarter of 1995), expenses
related to the company's major cost reduction and expansion projects, and lower
hydrogen peroxide volumes resulting from the slowdown in demand from pulp and
paper producers.
First quarter 1996 sales of alkali products increased over first quarter 1995
sales due mainly to price increases, partly offset by lower volumes due to the
impact of pre-price increase buying. Earnings were down slightly, primarily due
to the minority interest reduction reflected in 1996 first quarter results.
Phosphorus sales increased significantly in the first quarter 1996, reflecting
higher volumes, as well as the benefit of higher prices across major product
lines. However, earnings increased at a slower rate over the same period due to
higher production costs.
Peroxygen sales increased slightly from the year-ago period due to improved
hydrogen peroxide pricing, partly offset by lower sales volumes into the pulp
and paper market. Earnings remained flat due to costs associated with
expansions of facilities incurred during the 1996 first quarter.
PAGE 13
FMC Foret sales in the 1996 first quarter were down slightly due to lower
domestic and export volume, partly offset by increases in domestic and export
prices. Earnings remained consistent with the same period in 1995, although the
1995 period included the favorable impact of certain reversals of previously
accrued expenses.
Machinery and Equipment
- -----------------------
Machinery and Equipment sales of $323 million increased 22 percent from $264
million in the 1995 quarter, and profits of $14 million increased significantly
compared with $8 million in the prior-year period. These results reflect a
recovery in food processing markets, improving energy equipment margins, and the
impact of acquisitions, net of increased amortization of goodwill and other
intangible assets resulting from acquisitions.
Petroleum equipment sales increased in first quarter 1996 primarily due to
higher western region subsea sales and increased sales to Statoil. Earnings
increased slightly due to these sales increases offset partially by the absence
of favorable one-time 1995 items at FMC's Kongsberg operation.
Sales of energy and transportation measurement equipment in first quarter 1996
increased due to the acquisition of Moorco's Smith Meter in June 1995 while
earnings remained flat compared to the same period in 1995.
Moorco's Crosby Valve and Gage, also acquired in June 1995, contributed to the
overall increase in Machinery and Equipment sales.
The sale of FMC's Automotive Service Equipment Division to Snap-on Incorporated,
effective March 31, 1996, resulted in an immaterial gain on the sale, favorably
affecting Machinery and Equipment earnings. However, operating losses during
1996 for the division partially offset the gain.
Food processing systems sales increased significantly from the year-ago period
due to improved volumes in most product lines as well as the positive impact
from sales at FranRica, which was acquired in the third quarter of 1995.
Earnings also increased in the first quarter 1996, driven essentially by higher
sales. On April 15, 1996, the company acquired Sandei SRL, a leading
manufacturer of tomato harvesters.
Defense Systems
- ---------------
Defense Systems sales of $233 million were even with last year's period, as
increased development-related revenues on the Crusader program and higher
shipments on the Paladin program offset lower production-related volumes.
Profits of $37 million increased 28 percent compared with $28 million in last
year's quarter. The higher profits reflect increased dividends from the
company's joint venture in Turkey, and improved contract performance. Income
from the Turkish joint venture is recognized as dividends and royalties are
received, and management does not anticipate that 1996's high dividend level
will reoccur in 1997, as the joint venture recovers from an insured warehouse
fire which occurred in 1996.
Ground Systems first quarter 1996 sales were lower than the same period in 1995
primarily due to lower volumes and the completion of certain contracts during
1995. However, lower sales were offset by contract settlements which produced
level earnings for the first quarter 1996 as compared to the same period a year
ago.
Armament sales and earnings increased during first quarter 1996 as compared to
1995. Sales benefited from Crusader program revenues partially offset by lower
volumes of other products. Increased Crusader and aftermarket sales positively
impacted earnings during the quarter.
PAGE 14
The Paladin production operation experienced a strong rise in sales reflecting
higher vehicle deliveries in the first quarter 1996 as compared to the same
period in 1995. Earnings also increased during 1996 as a result of higher
sales.
First quarter 1996 sales of steel products were up slightly from 1995 due to
full production on the M113 overhaul program. Earnings increased in 1996 due to
the absense of M113 start up costs incurred in the first quarter 1995.
Precious Metals
- ---------------
Precious Metals sales of $18 million increased from $9 million in last year's
period. Losses of $2 million compared with a loss of $4 million in the first
quarter of 1995. Results primarily reflect the benefits of production from the
Beartrack mine, which started up in the 1995 third quarter, and lower
exploration spending. As previously announced, FMC Gold is pursuing the
possible sale of the company via a number of alternatives to maximize
shareholder value.
Corporate and Other
- -------------------
Certain corporate income and expense items are not allocated to specific
business segments due to their nature. During the quarter, corporate expenses
increased slightly to $23 million, largely due to one-time events in the 1996
quarter. Net interest expense increased due to higher debt levels resulting
from capital investments, working capital requirements and acquisitions.
The effective tax rates for the quarters ended March 31, 1996 and 1995 were 29
percent and 30 percent, respectively. The decrease is primarily due to lower
taxes on foreign earnings.
Order Backlog
- -------------
FMC's backlog of unfilled orders as of March 31, 1996 was $2.6 billion versus
$2.0 billion at December 31, 1995.
Machinery and Equipment backlog of $923 million increased from $557 million at
the end of 1995. The increase in backlog reflects the recognition of a
significant portion of the previously announced subsea order from Statoil,
Norway's state-owned oil company; continued growth and the benefit of
acquisitions in the energy business; and improvement in food processing markets.
Defense backlog was $1.7 billion at the end of the quarter, up from $1.5 billion
at December 31, 1995. Backlogs are not reported for Industrial Chemicals,
Performance Chemicals or Precious Metals due to the nature of these businesses.
Page 15
INDEPENDENT ACCOUNTANTS' REPORTS
--------------------------------
A report by KPMG Peat Marwick LLP, FMC's independent accountants, on the
financial statements included in Form 10-Q for the quarter ended March 31, 1996
is included on page 16.
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 17.
PAGE 16
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 March 31, 1996, and the related consolidated
statements of income and cash flows for the three-month periods ended March 31,
1996 and 1995. These consolidated 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
March 31, 1996, and whose revenues for the three-month period then ended
constituted 14 percent and 20 percent, respectively, of the related consolidated
totals.
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, 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 review and the report of other accountants, 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.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of FMC Corporation and consolidated
subsidiaries as of December 31, 1995 and the related consolidated statements of
income, cash flows and changes in stockholders' equity for the year then ended
(not presented herein); and in our report dated January 17, 1996, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1995 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
Chicago, Illinois
April 15, 1996
Page 17
SIGNATURE
Independent Accountants' Report
-------------------------------
Partners
United Defense LP
Arlington, Virginia
We have reviewed the balance sheet of United Defense, L.P., as of March 31,
1996, and the related statements of income and cash flows for the three-month
periods ended March 31, 1996 and 1995, and the statement of partners' equity for
the three month period ended March 31, 1996. These financial statements (not
presented separately in the FMC Corporation Form 10-Q for the quarter ended
March 31, 1996) 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 reviews, we are not aware of any material modifications that should
be made to the Partnership's financial referred to above for them to be in
conformity with generally accepted accounting principles.
Ernst and Young LLP
Washington, D.C.
April 15, 1996
PAGE 18
Part II - Other Information
---------------------------
Item 1. Legal Proceedings
Beartrack Proceedings
- ---------------------
There have been no significant changes to FMC Gold Company's Beartrack
proceedings from the information reported in the company's December 31, 1995
Annual Report on Form 10-K.
Environmental Proceeding
- ------------------------
As reported in FMC's annual report on Form 10-K for the year ended December 31,
1995, an environmental inspection was conducted in July 1993 at FMC's Phosphorus
Chemicals Division plant in Pocatello, Idaho. In August 1994, the United States
EPA (Region 10) (the "EPA") formally notified FMC of a number of alleged
violations of the RCRA and related environmental regulations governing the
management of hazardous waste generated by the plant, including the operations
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.
Safety
- ------
Following an emergency incident at FMC's Process Additives Division plant in
Nitro, West Virginia on December 5, 1995, when a high pressure switch failed and
phosphorus trichloride product was discharged into a containment area where
water was present, resulting in a release of a cloud of hydrogen chloride and
fumes, the U.S. Occupational Safety and Health Administration commenced an
incident and process safety investigation. This investigation is currently in
progress and no citations have issued. However, there is a potential for
citations and assertion of penalties. Management believes that the resolution
of this investigation and will not likely have a material adverse effect on
FMC's liquidity, results of operations or financial condition.
Page 19
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 Page 1
of per share earnings
assuming full dilution
12 Statement re: computation of Page 2
ratios of earnings to fixed
charges
15 Letters re: unaudited Pages 3 and 4
interim financial information
27 Financial Data Schedule Page 5
(b) Reports on Form 8-K
-------------------
Form 8-K dated February 9, 1996 describing amendments to FMC's Shareholder
Rights Plan.
Page 20
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: April 24, 1996 Ronald D. Mambu
-------------- ---------------
Vice President, Controller and duly
authorized officer
PAGE 1
EXHIBIT INDEX
-------------
Page Number in
Number in Document Numbering
Exhibit Table Description System
------------- ----------- ------------------
11 Statement re: computation 1
of per share earnings
assuming full dilution
12 Statement re: computation of 2
ratios of earnings to fixed
charges
15 Letter re: unaudited 3
interim financial
information (KPMG Peat Marwick LLP)
15 Letter re: unaudited 4
interim financial
information (Ernst & Young LLP)
27 Financial Data Schedule 5