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 June 30, 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
------------------------------------------------------------------------------
(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 June 30, 1996
- ---------------------------------------- -----------------------------
Common Stock, par value $0.10 per share 37,104,607
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 Six Months
Ended June 30 Ended June 30
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenue:
Sales $1,250.7 $1,118.6 $2,345.0 $2,125.2
Other revenue 16.1 7.8 54.9 22.2
-------- -------- -------- --------
Total revenue 1,266.8 1,126.4 2,399.9 2,147.4
-------- -------- -------- --------
Costs and expenses:
Cost of sales 944.5 793.6 1,744.8 1,522.1
Selling, general and
administrative expenses 162.9 151.2 325.7 292.6
Research and development 45.4 42.9 89.3 81.2
-------- -------- -------- --------
Total costs and expenses 1,152.8 987.7 2,159.8 1,895.9
-------- -------- -------- --------
Income from continuing operations
before minority interests,
net interest expense and
income taxes 114.0 138.7 240.1 251.5
Minority interests 12.0 8.1 35.5 25.2
Interest expense (net) 22.7 18.4 45.3 34.7
-------- -------- -------- --------
Income from continuing operations
before income taxes 79.3 112.2 159.3 191.6
Provision for income taxes 21.9 33.2 45.1 56.7
-------- -------- -------- --------
Income from continuing
operations 57.4 79.0 114.2 134.9
Discontinued operation, net of
income taxes (1.1) (1.3) (2.7) (4.8)
-------- -------- -------- --------
Net income $ 56.3 $ 77.7 $ 111.5 $ 130.1
======== ======== ======== ========
Average number of shares 38.1 37.7 38.0 37.6
Earnings (loss) per common share:
Continuing operations $ 1.51 $ 2.09 $ 3.00 $ 3.59
Discontinued operation (0.03) (0.03) (0.07) (0.13)
-------- -------- -------- --------
Net income per common share $ 1.48 $ 2.06 $ 2.93 $ 3.46
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
PAGE 3
FMC Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
(In millions, except per share data)
June 30
1996 December 31
(Unaudited) 1995
----------- -----------
Assets:
Current assets:
Cash and cash equivalents $ 117.6 $ 70.9
Trade receivables, net of allowance
for doubtful accounts of $6.1 and
$11.3 in 1996 and 1995, respectively 928.0 832.9
Inventories 742.7 600.2
Other current assets 206.1 178.3
Deferred income taxes 81.5 98.5
-------- --------
Total current assets 2,075.9 1,780.8
Investments 94.1 98.4
Net assets of discontinued operation 93.6 83.7
Property, plant and equipment at cost 4,086.6 3,935.1
Less--accumulated depreciation 2,274.2 2,229.4
-------- --------
Net property, plant and equipment 1,812.4 1,705.7
Goodwill and intangible assets 336.0 345.6
Other assets 161.6 144.9
Unallocated purchase price of
Frigoscandia Equipment Holding AB 151.2 --
Deferred income taxes 72.7 71.2
-------- --------
Total assets $4,797.5 $4,230.3
======== ========
Liabilities and Stockholders' Equity:
Current liabilities:
Short-term debt $ 896.8 $ 420.8
Accounts payable, trade and other 798.3 835.6
Accrued and other current liabilities 445.3 408.8
Current portion of long-term debt 15.9 29.8
Current portion of accrued pension
and other postretirement benefits 31.1 36.5
Income taxes payable 39.5 35.6
-------- --------
Total current liabilities 2,226.9 1,767.1
Long-term debt, less current portion 965.3 974.4
Accrued pension and other postretirement
benefits, less current portion 285.7 284.6
Reserve for discontinued operations 160.3 168.3
Other liabilities 250.4 264.1
Minority interests in consolidated companies 140.3 118.4
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 37,405,034
shares in 1996 and 37,024,187 shares
in 1995 3.7 3.7
Capital in excess of par value
of common stock 116.3 99.7
Retained earnings 707.6 596.1
Foreign currency translation adjustment (49.7) (36.9)
Treasury stock, common, at cost;
300,427 shares in 1996 and 300,447
shares in 1995 (9.3) (9.2)
-------- --------
Total stockholders' equity 768.6 653.4
-------- --------
Total liabilities and stockholders' equity $4,797.5 $4,230.3
======== ========
See accompanying notes to consolidated financial statements.
PAGE 4
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- -------------------------------------------------
(In millions)
Six Months
Ended June 30
-----------------------
1996 1995
-------- --------
Reconciliation from income from continuing
operations to cash used in operating
activities of continuing operations:
Income from continuing operations $ 114.2 $ 134.9
Adjustments for non-cash components of
income from continuing operations:
Depreciation and amortization 122.5 109.6
Deferred income taxes 14.5 33.6
Equity in net earnings of affiliates (5.6) (2.7)
Amortization of accrued pension costs 1.8 1.1
Minority interests 35.5 25.2
Other 14.8 3.9
(Increase) in assets:
Trade receivables (95.1) (122.2)
Inventories (142.5) (128.3)
Other current assets and other assets (194.6) (339.2)
(Decrease) increase in liabilities:
Accounts payable, accrued and other
current liabilities and other liabilities (9.3) 89.5
Income taxes payable 3.9 5.8
Restructuring reserve (5.2) (30.1)
Accrued pension and other
postretirement benefits, net (6.1) 4.3
------- -------
Cash used in operating activities of
continuing operations $(151.2) $(214.6)
======= =======
See accompanying notes to consolidated financial statements.
PAGE 5
FMC Corporation and Consolidated Subsidiaries
- ---------------------------------------------------
Consolidated Statements of Cash Flows (Unaudited)
- ---------------------------------------------------
(In millions)
Six Months
Ended June 30
-----------------
1996 1995
------- -------
Cash used in operating activities of continuing
operations $(151.2) $(214.6)
Cash (required) by discontinued operations (19.6) (39.2)
Cash provided (required) by investing
activities:
Capital spending (260.0) (255.0)
Disposal of property, plant and
equipment 24.6 21.5
Decrease in investments 10.0 13.1
------- -------
(225.4) (220.4)
------- -------
Cash provided (required) by financing
activities:
Net proceeds from issuance of commercial
paper 10.5 -
Increase in other short-term debt 455.2 447.9
Net borrowings under credit facilities - 89.0
Repayment of long-term debt (23.0) (16.8)
Distributions to limited partner (15.9) (22.5)
Issuance of capital stock, net 16.6 3.4
------- -------
443.4 501.0
------- -------
Effect of exchange rate changes on cash
and cash equivalents (0.5) 2.2
------- -------
Increase in cash and cash equivalents 46.7 29.0
Cash and cash equivalents, beginning
of period 70.9 98.2
------- -------
Cash and cash equivalents, end
of period $ 117.6 $ 127.2
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized, was $42.1 million and $43.0
million, and cash paid for income taxes, net of refunds, was $13.1 million and
$13.9 million for the six-month periods ended June 30, 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 of FMC Corporation ("FMC" or "the company") as of
June 30, 1996, and the related consolidated statements of income and of cash
flows for the interim periods ended June 30, 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 and six-month
periods ended June 30, 1996 and 1995 are not necessarily indicative of the
results of operations for the full year.
Prior period balances have been reclassified to conform with the current
period's presentation, including the reclassification of operations constituting
the Precious Metals segment as a discontinued operation (Note 3) and the
completion of purchase accounting related to the acquisition of Moorco
International Inc. ("Moorco") (Note 4).
The company's 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 June 30, 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 $395 million in outstanding commercial paper has been
classified as long-term debt at June 30, 1996.
Short-term debt at June 30, 1996 includes $539 million of advances under
uncommitted U.S. credit facilities and $245 million of commercial paper. The
remaining amounts of short-term debt represent borrowings by FMC's foreign
subsidiaries.
On July 2, 1996 the company issued $100 million of 7.75% Senior Debentures due
2011 pursuant to a $500 million universal shelf registration filed in 1995. The
net proceeds from such issuance totaled approximately $98 million and were used
to reduce variable rate short-term debt.
Note 3: Discontinued Operation - Subsequent Event
- --------------------------------------------------
On July 15, 1996, FMC's management approved a plan to dispose of shares of FMC
Gold Company through a reincorporation of FMC Gold Company in Canada and a
secondary offering in Canada of substantially all of FMC's 80% interest. In
connection with the approval of the plan of disposal, the operations
constituting the Precious Metals segment have been accounted for as a
discontinued operation. The prior period consolidated financial statements
presented herein have been restated to conform with the 1996 presentation.
The reincorporation and offering were completed on July 31, 1996 and an option
on the part of the underwriters to purchase the remaining 8% interest held by
FMC was executed on August 9, 1996. FMC received gross cash proceeds of $107.2
million, plus a right to receive the second installment under installment
receipts totaling $107.2 million due July 31, 1997. FMC is examining
alternatives for monetizing these installment receipts. Cash proceeds were used
to
PAGE 7
repay $75 million in loans owing to FMC Gold Company and to pay transaction and
other related costs. The company expects to record an immaterial gain on the
transaction during the quarter ending September 30, 1996. Estimated transaction
and other related costs, and anticipated losses of FMC Gold Company for the
period from July 15, 1996 through July 31, 1996 have been deferred and will
reduce the expected gain.
Results of discontinued operations for the three-month and six-month periods
ended June 30, 1996 include the following:
Three Months Six Months
Ended June 30, 1996 Ended June 30, 1996
-------------------- --------------------
Sales $18.3 $36.1
===== =====
Net loss $(1.1) $(2.7)
===== =====
At June 30, 1996, the net assets of discontinued operations were comprised of:
Assets:
Current assets $ 25.5
Property, plant and
equipment, net 119.3
Other assets 4.6
------
Total assets 149.4
------
Liabilities:
Accounts payable and
other liabilities 55.8
------
Net assets $ 93.6
======
In addition, the company's reserve for discontinued operations contains residual
liabilities of $160.3 million and $168.3 million at June 30, 1996 and December
31, 1995, respectively, related to operations previously discontinued. See Note
3 to the company's 1995 consolidated financial statements and Note 5 below.
There have been no significant changes to FMC Gold Company's Beartrack legal
proceedings from the information reported in the company's December 31, 1995
Annual Report on Form 10-K.
Note 4: Business Combinations and Divestitures
- -----------------------------------------------
Frigoscandia Equipment Holding AB. In June 1996, FMC acquired Frigoscandia
Equipment Holding AB ("Frigoscandia") from ASG AB for approximately $165 million
plus transaction costs and the assumption of Frigoscandia's debt. Frigoscandia,
headquartered in Helsingborg, Sweden, is the global leader in equipment for
industrial in-line freezing and also manufactures food processing equipment such
as fryers, ovens and portioners.
The acquisition will be accounted for under the purchase method of accounting
and, accordingly, the purchase price will be allocated to the assets acquired
and liabilities assumed based on the estimated fair value of such assets and
liabilities at the date of acquisition. Due to the timing of the transaction,
however, FMC's consolidated balance sheet at June 30, 1996 includes the
historical accounts of Frigoscandia as of the acquisition date, adjusted only
for certain known elements of purchase accounting. The remaining excess
purchase price at June 30, 1996 is classified as "Unallocated Purchase Price of
Frigoscandia Equipment Holding AB" on the company's consolidated balance sheet
and will be allocated to the assets acquired (which will include goodwill and
other intangible assets to be amortized over periods not exceeding 40 years) and
liabilities assumed based on the results of appraisals and other analyses which
are currently in process.
PAGE 8
Moorco International Inc. In June 1995, FMC acquired all of the common shares
of 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.
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 continuing 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, costs 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:
Six months ended June 30, 1995
------------------------------
(In millions, except per share data)
(Unaudited)
Sales $2,225.8
Income from continuing operations $ 132.7
Earnings per common share:
Continuing operations $ 3.53
The unaudited pro forma results of continuing 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 and 1996. The
purchase prices for Moorco, Frigoscandia 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.
Sale of Automotive Service Equipment Division. In March 1996, FMC sold its
Automotive Service Equipment Division to Snap-On Incorporated, resulting in an
immaterial pre-tax gain.
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 are net of minority interest
attributable to the joint venture partners.
Note 5: 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
PAGE 9
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 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 June 30, 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 $290 million and $302 million, before
recoveries, have been provided at June 30, 1996 and December 31, 1995,
respectively, of which $122 million and $132 million are included in the reserve
for discontinued operations at June 30, 1996 and December 31, 1995,
respectively. The company's total environmental reserves include approximately
$262 million and $270 million for remediation activities and $28 million and $32
million for remedial investigation/feasibility study costs at June 30, 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 June 30, 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 liabilities 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 aggregate
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.
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 $134 million of recoveries ($56 million as other assets and $78
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 June 30, 1996 and December 31, 1995, respectively. The majority
of recorded assets related to recoveries from third parties are associated with
existing contractual arrangements with U.S. government agencies.
PAGE 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF CONTINUING OPERATIONS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
LIQUIDITY AND FINANCIAL CONDITION
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Total cash and cash equivalents at June 30, 1996 and December 31, 1995 were
$117.6 million and $70.9 million, respectively. As of June 30, 1996, the company
had total borrowings of $1.9 billion, up from $1.4 billion at December 31, 1995.
The increase in debt resulted primarily from capital expenditures, working
capital requirements and acquisitions. Advances under uncommitted facilities of
$539 million at June 30, 1996, up from $201 million at December 31, 1995, as
well as increases in commercial paper borrowings of $109 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 June 30, 1996, the company had advances under the five-year
revolving credit agreement of $100 million, and commercial paper borrowings
(supported by committed credit facilities) of $395 million.
Capital and acquisition spending of $409 million for the six months ended June
30, 1996 decreased $123 million versus the first half of 1995. The decrease is
primarily driven by lower acquisition spending, partially offset by spending
related to the development of a lithium resource in Argentina and the expansion
of hydrogen peroxide production capacity at Bayport, Texas. The company
continues to evaluate potential acquisitions on an ongoing basis.
Expected cash requirements for the remainder of 1996 include approximately $230
million to $250 million for planned capital expenditures, excluding potential
acquisitions, and net after-tax interest payments of approximately $30 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 sources. As
discussed in Note 2 to the company's June 30, 1996 consolidated financial
statements, 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 June 30,
1996, no securities had been offered under this shelf registration. However, as
discussed in Note 2 to the company's June 30, 1996 consolidated financial
statements, on July 2, 1996, the company issued $100 million of Senior
Debentures for net proceeds of approximately $98 million. The debentures carry
an interest rate of 7.75% with interest payable semi-annually through maturity
on July 1, 2011. The net proceeds were used to reduce variable rate short-term
debt.
The company's ratios of earnings to fixed charges were 4.0x and 4.8x for the six
months ended June 30, 1996 and 1995, respectively. The decrease in the six-month
ratio from 1995 to 1996 primarily reflects lower earnings and higher interest
charges resulting from increased borrowings.
EFFECT OF ACQUISITION OF FRIGOSCANDIA EQUIPMENT HOLDING AB
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
In June 1996, FMC acquired Frigoscandia Equipment Holding AB - the global leader
in equipment for industrial in-line freezing - for approximately $165 million
plus transaction costs and the assumption of Frigoscandia's debt. The company
anticipates that a portion of the unallocated purchase price at June 30, 1996
will be allocated to goodwill and other intangible assets. Portions of the
purchase price may also be allocated to property, plant and equipment. In
addition, the acquisition financing will result in additional interest expense.
Appraisals and other efforts necessary to complete the purchase accounting for
Frigoscandia are in process.
PAGE 11
DISCONTINUED OPERATION
----------------------
Between July 31, 1996 and August 9, 1996 FMC sold all of its 80% interest in FMC
Gold Company through a secondary offering. Cash proceeds of the sale were used
to repay $75 million in loans owing to FMC Gold Company and to pay transaction
and other related costs. The Company expects to record an immaterial gain on the
transaction during the quarter ending September 30, 1996. Anticipated losses of
FMC Gold Company for the period from July 15, 1996 through July 31, 1996 plus
transaction and other related costs were deferred at June 30, 1996 and will
reduce the expected gain. The Precious Metals segment is classified as a
discontinued operation in the company's June 30, 1996 consolidated financial
statements. See Note 3 to the consolidated financial statements.
PAGE 12
RESULTS OF CONTINUING OPERATIONS
--------------------------------
Second Quarter 1996 Compared to Second Quarter 1995
---------------------------------------------------
Industry Segment Data (Unaudited)
---------------------------------
(In millions)
Three Months Ended
June 30
-------
1996 1995
---- ----
Sales
- -----
Performance Chemicals $ 345.2 $ 324.2
Industrial Chemicals 264.4 242.7
Machinery and Equipment 371.4 313.6
Defense Systems 277.0 242.4
Eliminations (7.3) (4.3)
-------- --------
$1,250.7 $1,118.6
======== ========
Income from continuing operations
- ---------------------------------
before income taxes (1)
- -----------------------
Performance Chemicals $ 61.3 $ 62.2
Industrial Chemicals 32.5 44.8
Machinery and Equipment 18.4 16.1
Defense Systems 18.3 32.6
-------- --------
Operating profit from
continuing operations 130.5 155.7
Corporate (22.3) (26.1)
Net interest expense (22.7) (18.4)
Other income and (expense), net (6.2) 1.0
-------- --------
$ 79.3 $ 112.2
======== ========
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 restated to be consistent
with the current period's presentation.
As described in Note 3 to the company's June 30, 1996 consolidated financial
statements, the operations constituting FMC's Precious Metals segment have been
reclassified as a discontinued operation and results of prior periods have been
restated for comparative purposes.
(1) Results for all segments are net of minority interests in 1996 and 1995 of
$(12.0) million and $(8.1) million, respectively, the majority of which,
$(9.3) million and $(7.8) million, pertains to Defense Systems.
PAGE 13
General
- -------
Sales of $1.3 billion increased 12 percent from last year's quarter, driven
primarily by strong growth in Machinery and Equipment and Defense Systems.
Second quarter 1996 segment earnings (net of minority interest) were $131
million, compared with $156 million (net of minority interest) in the 1995
quarter. The earnings decrease primarily represents continued weakness in the
pulp and paper industry in the industrial chemicals segment and the partial
recognition of a favorable legal judgment in 1995 in the defense segment. Net
interest expense of $23 million increased from $18 million in last year's period
due to higher debt associated with increased capital expenditures, working
capital requirements and acquisitions. Income from continuing operations of $57
million decreased compared with $79 million in the second quarter of 1995.
Earnings per share from continuing operations were $1.51 compared with $2.09
last year.
Performance Chemicals
- ---------------------
Performance Chemicals sales of $345 million increased 6 percent from $324
million in last year's period, driven primarily by higher volumes of
agricultural products for international markets, which more than offset the
impact of reduced North American cotton acreage and wet weather in the Midwest.
Earnings of $61 million were roughly even with the prior-year period, reflecting
improvements in agricultural products, offset by lower specialty chemicals
results. Specialty chemicals continued to be affected by weak food ingredient
sales in North America and higher raw material prices. FMC believes these raw
material prices have peaked, with declines expected for the remainder of the
year. Overall, the specialty chemicals businesses have been improving since the
fourth quarter of 1995, and that trend is expected to continue through the
remainder of the year.
Industrial Chemicals
- --------------------
Industrial Chemicals sales of $264 million increased 9 percent from $243
million, primarily reflecting the benefit of higher phosphorus volumes and price
increases in key product lines. Earnings of $33 million in the 1996 quarter
decreased 27 percent from $45 million in the 1995 quarter due to lower hydrogen
peroxide volumes, reflecting continued weakness in the pulp and paper industry;
start-up costs for the company's major cost reduction and expansion projects;
and profits allocated to minority shareholders of the soda ash joint venture,
formed in the third quarter of 1995.
Second quarter 1996 sales of alkali products increased over second quarter 1995
primarily due to price increases. Sales increases were more than offset by
start-up costs for the company's major cost reduction and expansion project and
profits allocated to minority shareholders of the soda ash joint venture.
Phosphorus sales increased in the second quarter of 1996 due to higher volumes
and prices. Significantly higher earnings in 1996 primarily reflect the price
increases.
Peroxygen sales decreased slightly from the year-ago period. Earnings decreased
compared with the 1995 second quarter due to lower hydrogen peroxide volumes
reflecting the downturn in the pulp and paper industry plus start-up costs
related to the company's expansion project.
FMC Foret sales and earnings increased in the second quarter 1996 due to
increased domestic and export prices offset slightly by lower volumes.
PAGE 14
Machinery and Equipment
- -----------------------
Machinery and Equipment sales of $371 million increased 18 percent from $314
million in the 1995 quarter, and profits of $18 million increased 14 percent
from $16 million in the prior-year period. These results reflect improving
subsea margins, the benefits of acquisitions, and recovering markets in food
processing. Machinery and Equipment second quarter results do not reflect the
acquisition of Frigoscandia Equipment Holding A.B. ("Frigoscandia"), which was
completed at the end of the quarter. Frigoscandia is the global leader in
industrial in-line freezing equipment and enhances FMC's thermal processing
product line.
Petroleum equipment sales increased in second quarter 1996 primarily due to
higher western region subsea sales and increased sales to Statoil. Earnings
increased primarily as a result of the higher western region subsea sales.
Sales of energy and transportation measurement equipment in second quarter 1996
increased due to the acquisition of Moorco's Smith Meter business in June 1995.
Moorco's Crosby Valve and Gage business, also acquired in June 1995, contributed
to the overall increase in Machinery and Equipment sales and earnings.
Food processing systems sales increased compared with second quarter 1995
primarily due to the acquisition of FranRica in the third quarter of 1995 and
improving markets in food processing. Earnings were flat compared with second
quarter 1995.
Defense Systems
- ---------------
Defense Systems sales of $277 million increased 14 percent from the year-ago
period on the strength of the Crusader program. Profits of $18 million, net of
minority interest, decreased significantly compared with $33 million, net of
minority interest, in the prior-year period, due primarily to the partial
recognition of a favorable legal judgment in the 1995 quarter. The remainder of
the difference results from a shift from higher margin production contracts to
lower margin research and development programs.
Ground Systems second quarter 1996 sales were lower than the same period in 1995
primarily due to lower volumes and the completion of certain contracts during
1995. Earnings were lower compared with second quarter 1995 due primarily to
these lower volumes.
Armament sales and earnings increased substantially during second quarter 1996
compared with second quarter 1995 due to increased Crusader program revenues,
vertical launching revenues and aftermarket revenues.
The Paladin production operation produced increased sales and earnings in the
second quarter 1996 compared with the same period in 1995 reflecting higher
vehicle deliveries.
As indicated in the company's 1995 annual report, FMC was notified during the
quarter ended June 30, 1996 that the Armored Gun System, a development program
FMC had worked on since 1984, was cancelled by the U.S. government. Cancellation
of the program is not expected to have a material impact on FMC's financial
position, results of operations or cash flows.
Corporate
- ---------
Corporate expenses declined $4 million from last year's quarter due to savings
related to reduced staffing levels.
Net Interest Expense
- --------------------
Net interest expense in the quarter increased to $23 million from $18 million in
last year's period, reflecting higher debt levels associated with acquisitions,
increased capital spending and working capital largely associated with increased
sales.
PAGE 15
Other Income and Expense
- ------------------------
Other expenses increased $7 million from 1995's quarter, largely due to higher
LIFO and pension expense.
Effective Tax Rates
- -------------------
The effective tax rates for the quarters ended June 30, 1996 and 1995 were 28
percent and 30 percent, respectively. The decrease in 1996 is primarily due to
a change in business mix.
Order Backlog
- -------------
FMC's backlog of unfilled orders as of June 30, 1996 was $2.6 billion (excluding
Frigoscandia) versus $2.0 billion at December 31, 1995. Machinery and Equipment
backlog of $919 million increased from $545 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; strengthening food processing markets; and the benefit of acquisitions
in the energy business. 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 or Performance Chemicals due to the nature of these
businesses.
PAGE 16
RESULTS OF CONTINUING OPERATIONS
--------------------------------
Six Months 1996 Compared to Six Months 1995
-------------------------------------------
Industry Segment Data (Unaudited)
---------------------------------
(In millions)
Six Months Ended
June 30
-----------------------
1996 1995
--------- ---------
Sales
- -----
Performance Chemicals $ 649.3 $ 609.1
Industrial Chemicals 506.3 471.1
Machinery and Equipment 694.3 577.7
Defense Systems 510.1 477.7
Eliminations (15.0) (10.4)
-------- --------
$2,345.0 $2,125.2
======== ========
Income from continuing operations
- ---------------------------------
before income taxes (1)
- -----------------------
Performance Chemicals $ 100.2 $ 104.7
Industrial Chemicals 71.0 84.6
Machinery and Equipment 31.8 24.3
Defense Systems 55.2 60.9
-------- --------
Operating profit from
continuing operations 258.2 274.5
Corporate (45.8) (47.9)
Net interest expense (45.3) (34.7)
Other income and (expense), net (7.8) (0.3)
-------- --------
$ 159.3 $ 191.6
======== ========
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 restated to be consistent
with the current period's presentation.
As described in Note 3 to the company's June 30, 1996 consolidated financial
statements, the operations constituting FMC's Precious Metals segment have been
reclassified as a discontinued operation and results of prior periods have been
restated for comparative purposes.
(1) Results for all segments are net of minority interests in 1996 and 1995, of
$(35.5) million and $(25.2) million, respectively, the majority of which,
$(31.4) million and $(24.9) million, pertains to Defense Systems.
Sales of $2.3 billion in the first half of 1996 increased 10 percent from the
1995 period reflecting increased sales in all operating segments. Segment
earnings decreased to $258 million in the first half of 1996 from $275 million
in 1995, primarily related to the continued weakness in the pulp and paper
industry in the Industrial Chemicals segment and the partial recognition of a
favorable legal judgment in 1995 in the Defense Systems segment. Corporate
expenses of $46 million declined from $48 million in the 1995 first half due
primarily to lower staff expenses. Net interest expense increased to $45 million
from $35 million in 1995, reflecting higher borrowings to support acquisitions
and capital expenditures and higher working capital requirements. Other expense
increased primarily related to higher LIFO and pension expense.
PAGE 17
Income from continuing operations before income taxes decreased 17 percent to
$159 million compared with $192 million in the first half of 1995. Income from
continuing operations of $114 million compared with $135 million in last year's
period, and earnings per share from continuing operations were $3.00 compared
with $3.59 per share last year.
Performance Chemicals sales of $649 million rose 7 percent compared with $609
million in last year's period and profits of $100 million declined slightly
compared with $105 million in last year's period. Although sales benefited from
improving markets, profits declined primarily due to higher raw material prices
in the specialty chemicals businesses.
Industrial Chemicals sales increased 7 percent to $506 million while profits
decreased 16 percent to $71 million versus last year's first half. Profits
decreased due to minority interest expense related to the soda ash joint
venture, lower hydrogen peroxide volumes and start-up costs for the company's
major cost reduction and expansion projects. In addition, the 1995 period
included the favorable impact of reversals of certain previously accrued
expenses.
Machinery and Equipment sales of $694 million rose 20 percent from $578 million,
and profits increased to $32 million from $24 million. Energy & Transportation
Equipment sales benefited from higher sales and profits related to the Moorco
acquisition as well as strong first half results at Kongsberg Offshore and
growth in other Energy and Transportation Equipment businesses. Food machinery
sales and profits also increased compared with the first half of 1995, partly
due to the 1995 acquisition of FranRica.
Defense Systems sales were $510 million for the first half of 1996 compared with
$478 million for the same period last year, reflecting higher production
volumes. Profits, net of minority interest, totaled $55 million in the first
half of 1996 compared to profits of $61 million for the same period in 1995, as
the partial recognition of a favorable legal judgment in 1995 more than offset
1996's higher production volumes. Ground Systems lower sales were offset by
contract settlements in the first quarter of 1996.
The effective tax rates for the six-month periods ended June 30, 1996 and 1995
were 28 percent and 30 percent, respectively. The decline in 1996 is primarily
a result of a change in business mix.
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 June 30, 1996 is included on page 18.
A report by Ernst and Young LLP, United Defense Limited Partnership's
independent accountants, on the financial statements referred to by KPMG Peat
Marwick LLP in its report noted above is included on page 19.
PAGE 18
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 June 30, 1996, and the related consolidated
statements of income for the three-month and six-month periods ended June 30,
1996 and 1995 and the consolidated statements of cash flows for the six month
periods ended June 30, 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 reviews of the
interim financial information of United Defense, L.P., whose total assets as of
June 30, 1996, and whose revenues for the three-month and six-month periods then
ended constituted 12 percent, 22 percent and 21 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 and the report of other accountants, we are not aware of
any material modifications that should be made to the consolidated 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
July 17, 1996
PAGE 19
SIGNATURE
Independent Accountants' Review Report
--------------------------------------
Partners
United Defense LP
Arlington, Virginia
We have reviewed the balance sheet of United Defense L.P. as of June 30, 1996,
and the related statements of income for the three-month and six-month periods
ended June 30, 1996 and 1995, the statements of cash flows for the six-month
periods ended June 30, 1996 and 1995 and the statement of partners' equity for
the six- month period ended June 30, 1996. These financial statements (not
presented separately in the FMC Corporation Form 10-Q for the quarter ended June
30, 1996) are the responsibility of the Partnership's management.
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, 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 statements referred to above for them to
be in conformity with generally accepted accounting principles.
Ernst and Young LLP
Washington, D.C.
July 15, 1996
PAGE 20
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
There have been no significant changes to the environmental proceeding at FMC's
Phosphorus Chemicals Division plant from the information reported in the
company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
Safety
The investigation by the U.S. Occupational Safety and Health Administration into
the December 5, 1995, release of material at FMC's Process Additives Division
plant at Nitro, West Virginia, first reported in the company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996, was terminated and settled on
June 6, 1996. FMC agreed to pay the sum of $500,000 to OSHA as part of a
Settlement Agreement regarding the December 5 release as well as process safety
management at four other FMC plants.
PAGE 21
PART II - OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
Registrant's Annual Meeting of Stockholders was held on April 19, 1996. At the
meeting, stockholders voted on (i) the election of four directors; and (ii)
ratification of the appointment of KPMG Peat Marwick LLP as the Registrant's
independent auditors for 1996. Voting on each such matter was as follows:
Votes Votes Withheld/ Broker
For Against Abstentions Non-Votes
---------- ------- ----------- ---------
1. Election of Directors:
R. N. Burt 32,758,376 -- 272,826 --
J. A. Francois-Poncet 32,750,462 -- 280,740 --
P. G. Gyllenhammar 32,781,866 -- 249,336 --
E. C. Meyer 32,770,713 -- 260,489 --
2. Ratification of Auditors 32,894,735 83,519 52,498 --
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
Number in
Exhibit Table Description
- ------------- -----------
4 Indenture dated as of July 1, 1996 between FMC
Corporation and Harris Trust and Savings
Bank, as trustee
11 Statement re: computation of per share
earnings assuming full dilution
12 Statement re: computation of ratios of
earnings to fixed charges
15 Letters re: unaudited interim financial
information
27 Financial data schedule
(b) Reports on Form 8-K
-------------------
Form 8-K dated May 3, 1996 describing consideration by FMC Gold Company
of reincorporation and a secondary public offering.
Form 8-K dated May 6, 1996 describing FMC Corporation's signing of a
definitive agreement to purchase the outstanding shares of Frigoscandia
Equipment Holding AB.
Form 8-K dated June 13, 1996 describing FMC Corporation's lower earnings
expectations for the 1996 second quarter.
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: August 14, 1996 /s/ Ronald D. Mambu
------------------- -----------------------------------
Vice President, Controller and duly
authorized officer
PAGE 1
EXHIBIT INDEX
-------------
Number in
Exhibit Table Description
------------- -----------
4 Indenture dated as of July 1, 1996 between FMC
Corporation and Harris Trust and Savings
Bank, as trustee
11 Statement re: computation of per share
earnings assuming full dilution
12 Statement re: computation of ratios of
earnings to fixed charges
15 Letters re: unaudited interim financial
information
27 Financial data schedule