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, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 1-2376
FMC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0479804
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
1735 Market Street
Philadelphia, Pennsylvania 19103
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 215/299-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -----------------------
Common Stock, $0.10 par value.. New York Stock Exchange
Chicago Stock Exchange
DRAFT
Preferred Share Purchase Rights Pacific Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 MARCH 31, 2002.
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Common Stock, par value $0.10 per share 31,686,962
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FMC Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Income
(in millions, except per share data) (unaudited)
Three Months Ended
March 31,
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2002 2001
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Revenue $434.2 $447.2
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Cost of sales or services 322.8 326.3
Selling, general and administrative expenses 57.9 61.7
Research and development expenses 20.6 23.6
Restructuring and other charges (Note 6) 7.0 1.0
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Total costs and expenses 408.3 412.6
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Income from continuing operations before minority interests, interest income and
expense, income taxes and cumulative effect of change in accounting principle 25.9 34.6
Minority interests 0.5 0.4
Interest expense, net 15.4 14.4
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Income from continuing operations before income taxes and cumulative effect of
change in accounting principle 10.0 19.8
Provision for income taxes 1.0 5.4
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Income from continuing operations before cumulative effect of change in accounting
principle 9.0 14.4
Discontinued operations, net of income taxes (Note 2) -- (40.0)
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Income (loss) before cumulative effect of change in accounting principle 9.0 (25.6)
Cumulative effect of change in accounting principle, net of income taxes (Note 3) -- (0.9)
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Net income (loss) $ 9.0 $(26.5)
=======================================================================================================
Basic earnings (loss) per common share (Note 10)
Continuing operations $ 0.29 $ 0.47
Discontinued operations -- (1.30)
Cumulative effect of change in accounting principle (Note 3) -- (0.03)
- -------------------------------------------------------------------------------------------------------
Net income (loss) $0 .29 $(0.86)
=======================================================================================================
Diluted earnings (loss) per common share (Note 10)
Continuing operations $ 0.28 $ 0.47
Discontinued operations -- (1.30)
Cumulative effect of change in accounting principle (Note 3) -- (0.03)
- -------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.28 $(0.86)
=======================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
March 31,
FMC Corporation and Consolidated Subsidiaries 2002 December 31,
Condensed Consolidated Balance Sheets (in millions, except share data) (unaudited) 2001
- -------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 14.2 $ 23.4
Trade receivables, net of allowance of $8.8 in 2002 and $8.4 in 2001 (Note 13) 406.4 441.7
Inventories 204.8 207.2
Other current assets 118.0 99.6
Deferred income taxes 50.2 48.4
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 793.6 820.3
Investments 29.1 25.2
Property, plant and equipment, net (Note 5) 1,058.0 1,087.8
Goodwill (Note 3) 111.1 113.5
Other assets 141.1 135.6
Deferred income taxes 299.6 294.8
- -------------------------------------------------------------------------------------------------------------------------
Total assets $2,432.5 $2,477.2
=========================================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Short-term debt (Note 7) $ 285.4 $ 136.5
Accounts payable, trade and other 212.2 327.7
Accrued and other liabilities 284.2 337.0
Guarantees of vendor financing (Note 14) 55.4 56.0
Current portion of long-term debt (Note 7) 154.1 135.2
Current portion of accrued pensions and other postretirement benefits 20.8 18.2
Income taxes payable 36.2 27.8
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,048.3 1,038.4
Long-term debt, less current portion (Note 7) 623.1 651.8
Accrued pension and other postretirement benefits, less current portion 103.0 109.2
Reserves for discontinued operations (Notes 8 and 9) 188.2 201.9
Other long-term liabilities (Notes 8 and 9) 202.3 212.3
Minority interests in consolidated companies 42.1 44.8
Commitments and contingent liabilities (Notes 12 and 14)
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Stockholders' equity
Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2002 or 2001 -- --
Common stock, $0.10 par value, authorized 130,000,000 shares in 2002 and 2001; issued
39,620,053 shares in 2002 and 39,234,578 shares in 2001 4.0 3.9
Capital in excess of par value of common stock 228.9 217.5
Retained earnings 700.8 691.8
Accumulated other comprehensive loss (Note 11) (200.1) (186.8)
Treasury stock, common, at cost; 7,933,091 shares in 2002 and 7,929,281 shares in 2001 (508.1) (507.6)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 225.5 218.8
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,432.5 $2,477.2
=========================================================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
FMC Corporation and Consolidated Subsidiaries (unaudited)
Condensed Consolidated Statements of Cash Flows Three Months Ended
(in millions) March 31,
- ------------------------------------------------------------------------------------------------------------
2002 2001
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Cash provided (required) by operating activities of continuing operations:
Income from continuing operations before cumulative effect of change in
accounting principle $ 9.0 $ 14.4
Adjustments to reconcile income from continuing operations before cumulative
effect of change in accounting principle to cash provided (required) by operating
activities of continuing operations:
Depreciation and amortization 26.2 31.6
Restructuring and other charges (Note 6) 7.0 1.0
Deferred income taxes (6.4) (12.1)
Minority interests 0.5 0.9
Other (2.2) 5.2
Changes in operating assets and liabilities, excluding the effect of acquisitions and
divestitures of businesses:
Accounts receivable sold (Note 14) 66.0 13.2
Trade receivables, net (30.7) (45.7)
Inventories 0.3 (34.8)
Other current assets and other assets (18.4) (35.9)
Accounts payable, trade, accrued and other liabilities and other long-term liabilities (184.3) (88.1)
Income taxes payable 8.3 (6.8)
Accrued pension and other postretirement benefits, net (5.2) (1.3)
- ------------------------------------------------------------------------------------------------------------
Cash required by operating activities (129.9) (158.4)
Cash required by discontinued operations (Note 8) (12.5) (93.1)
============================================================================================================
FMC Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
(in millions)
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Cash provided (required) by investing activities:
Capital expenditures (19.8) (38.6)
Proceeds from disposal of property, plant and equipment 3.6 1.8
Decrease in investments 1.3 2.0
- -------------------------------------------------------------------------------
Cash required by investing activities (14.9) (34.8)
===============================================================================
Cash provided (required) by financing activities:
Net proceeds from issuance of commercial paper 23.7 201.2
Net increase under committed credit facilities 106.0 174.8
Net increase (decrease) in other short-term debt 19.2 (16.5)
Increase in long-term debt 0.5 --
Funding to Technologies -- (35.5)
Repayment of long-term debt (10.4) (49.0)
Distributions to minority partners (1.8) (2.3)
Issuances of common stock 11.0 25.3
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Cash provided by financing activities 148.2 298.0
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Effect of exchange rate changes on cash and cash equivalents (0.1) (0.2)
===============================================================================
Increase (decrease) in cash and cash equivalents (9.2) 11.5
Cash and cash equivalents, beginning of period 23.4 7.3
===============================================================================
Cash and cash equivalents, end of period $ 14.2 $ 18.8
===============================================================================
Supplemental disclosure of cash flow information: Cash paid for interest
was $16.7 million and $27.8 million, and cash paid for income taxes, net of
refunds, was $1.5 million and $3.7 million for the three-month periods
ended March 31, 2002 and 2001, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
FMC Corporation and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1: Financial Information and Accounting Policies
The condensed consolidated balance sheet as of March 31, 2002, and the related
condensed consolidated statements of income and cash flows for the quarters
ended March 31, 2002 and 2001 have been reviewed by our independent accountants.
The review is described more fully in their report included herein. In the
opinion of management the condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States applicable to interim period financial statements and reflect all
adjustments necessary for a fair statement of our results of operations and cash
flows for the quarters ended March 31, 2002 and 2001 and of its financial
position as of March 31, 2002. All such adjustments are of a normal recurring
nature. The results of operations for the quarters ended March 31, 2002 and 2001
are not necessarily indicative of the results of operations for the full year.
The company's accounting policies are set forth in detail in Note 1 to the 2001
consolidated financial statements on Form 10-K. Certain prior year amounts have
been reclassified to conform to the current quarter's presentation. Effective
January 1, 2002, FMC adopted Statement of Financial Accounting Standards (SFAS)
No. 142, "Goodwill and Other Intangible Assets" and SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets" (see Note 3).
Note 2: FMC's Reorganization
In October 2000, the company announced it was initiating a strategic
reorganization (the "reorganization" or "separation") that ultimately would
split the company into two independent publicly held companies - a chemical
company and a machinery company. The remaining chemical company, which continues
to operate as FMC Corporation, includes the Agricultural Products, Specialty
Chemicals and Industrial Chemicals business segments. The new machinery company,
FMC Technologies, Inc. ("Technologies") includes FMC's former Energy Systems and
Food and Transportation Systems business segments.
On June 1, 2001, in accordance with the Separation and Distribution Agreement
(the "Agreement") between the two companies, FMC distributed substantially all
of the net assets comprising the businesses of Technologies. On June 19, 2001,
Technologies completed an initial public offering ("IPO") of 17% of its equity
through the issuance of common stock. FMC continued to own the remaining 83% of
Technologies through December 31, 2001.
Subsequent to the IPO, Technologies made payments of $480.1 million to FMC in
exchange for the net assets distributed to Technologies on June 1, 2001. The
payments received by FMC were used to retire short-term and long-term debt.
During the second quarter of 2001, FMC recognized a $140.0 million gain in
stockholders' equity on the sale of Technologies' stock.
On November 29, 2001, FMC's Board of Directors approved the spin-off of the
company's remaining 83% ownership in Technologies through a tax-free
distribution to FMC's stockholders. Effective December 31, 2001, the company
distributed approximately 1.72 shares of Technologies common stock for every 1.0
share of FMC common stock. The distribution resulted in a reduction of
stockholders' equity of $509.5 million.
The company recorded a loss from discontinued operations of $40.0 million
after-tax in the first quarter of 2001 related to the spin-off of Technologies.
Included in this amount are losses of FMC's spun-off Technologies business,
including interest expense of $6.9 million ($4.2 million after-tax), which was
allocated to discontinued operations in accordance with Accounting Principles
Board Statement No. 30 and later relevant accounting guidance, and an additional
income tax provision of $28.8 million related to the reorganization of our
worldwide entities in anticipation of the separation of Technologies from FMC.
Note 3: Recently Adopted Accounting Pronouncements
Goodwill and Intangible Assets. Prior to January 1, 2002 the company amortized
goodwill and identifiable intangible assets (such as trademarks) on a
straight-line basis over their estimated useful life not to exceed 40 years. The
recoverability of the net book value of these assets was periodically reviewed
based on the expected future undiscounted cash flows.
On January 1, 2002 the company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." With the adoption of SFAS No. 142, goodwill and other
indefinite intangible assets ("intangibles") are no longer subject to
amortization, rather they are subject to at least an annual assessment for
impairment by applying a fair value based test. FMC is currently conducting the
transitional goodwill and indefinite life intangibles impairment tests required
by SFAS No. 142, which must be completed within six months of adoption. The
company will complete its impairment tests on goodwill in the second quarter of
2002 and each year, beginning in 2003, will conduct an assessment of impairment
based on fair value in accordance with the requirements of SFAS No. 142.
Goodwill amortization was $4.2 million ($2.8 million after tax), or $0.09 per
diluted share in 2001. Goodwill amortization for the three months ended March
31, 2001 was $1.1 million ($0.7 million after tax), or $0.02 per diluted share.
Goodwill amortization for the first quarter of 2002 would also have been $1.1
million ($0.7 million after tax).
Goodwill at March 31, 2002 and December 31, 2001 was $111.1 million and $113.5
million, respectively. The majority of FMC's goodwill is attributed to an
acquisition in the Specialty Chemicals segment. The decrease in the goodwill
balance since year-end 2001 is attributed to the devaluation of Norwegian krone
in the first quarter of 2002 in FMC's BioPolymer operations within its Specialty
Chemicals segment. There are no material indefinite life intangibles, other than
goodwill, at March 31, 2002.
FMC's definite life intangibles totaled $7.9 million as of March 31, 2002. At
March 31, 2002 these definite life intangibles are allocated among FMC's
segments as follows: $3.6 million in Agricultural Products, $2.8 million in
Specialty Chemicals and $1.5 million in Industrial
Chemicals. All definite life intangibles assets are amortizable and consist
primarily of patents, industry licenses and other intangibles.
On January 1, 2002 the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This Statement establishes a single accounting model,
based on the framework established in SFAS No. 121, for long-lived assets to be
disposed of by sale. The Statement retains most of the requirements of SFAS No.
121 related to the recognition of the impairment of long-lived assets to be held
and used. There was no impact of adopting SFAS No. 144 in the first quarter of
2002.
On January 1, 2001, the company implemented SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No.137 and
SFAS No. 138 (collectively, the "Statement"). The Statement requires the company
to recognize all derivatives in the consolidated balance sheets at fair value,
with changes in the fair value of derivative instruments to be recorded in
current earnings or deferred in other comprehensive income, depending on the
type of hedging transaction and whether a derivative is designated as an
effective hedge. In accordance with the provisions of the Statement, the company
recorded a first-quarter 2001 loss from the cumulative effect of a change in
accounting principle of $0.9 million after-tax in the company's consolidated
statement of earnings, and a deferred gain of $16.4 million after-tax in
accumulated other comprehensive loss.
Note 4: Financial Instruments and Risk Management
Hedge ineffectiveness and the portion of derivative gains or losses excluded
from assessments of hedge effectiveness, related to the company's outstanding
cash flow hedges and which were recorded to earnings during the quarter ended
March 31, 2002, were less than $0.1 million. At March 31, 2002 and March 31,
2001, the net deferred hedging loss in accumulated other comprehensive loss was
$7.1 million and $2.1 million, of which approximately $3.4 million of net losses
are expected to be recognized in earnings during the twelve months ended March
31, 2003, at the time the underlying hedged transactions are realized, and of
which net losses of $3.7 million are expected to be recognized at various times
subsequent to March 31, 2003 and continuing through November 30, 2005.
Note 5: Property, Plant and Equipment
Property, plant and equipment consisted of the following, in millions:
March 31,
2002 December 31,
(unaudited) 2001
----------- ------------
Property, plant and equipment, at cost $ 2,522.1 $ 2,538.2
Accumulated depreciation (1,464.1) (1,450.4)
--------- ---------
Net property, plant and equipment $ 1,058.0 $ 1,087.8
========= =========
Note 6: Restructuring and other charges
In the first quarter of 2002, the company recorded restructuring and other
charges of $7.0 million compared to $1.0 million in the first quarter of 2001.
Of these charges, $2.4 million related to severance and other costs of idling
the Agricultural Product's sulfentrazone plant. In the Industrial Chemicals
segment the mothballing of the Granger caustic facility in Green River, Wyoming
and other restructuring activities resulted in $3.4 million of severance and
other costs. The remaining charges resulted from reorganization costs of $1.2
million related to the spin-off and distribution of Technologies stock.
The restructuring charges in the first quarter of 2001 related to corporate
reorganization costs and several minor restructuring activities within the
Industrial Chemicals segment.
Reserves for restructuring and other charges were $125.0 million and $119.2
million at March 31, 2002 and December 31, 2001, respectively. Restructuring
spending of $3.2 million related to the 2002 programs and $13.6 million related
to programs initiated in the prior year. Spending during the three months ended
March 31, 2002 was primarily for workforce reductions, additional reorganization
costs and shutdown costs.
The following table shows a rollforward of restructuring and other charge
reserves for the quarter ended March 31, 2002 and the related spending and other
changes:
Phosphorus Related
----------------------------------
Pocatello
Shutdown,
Remediation Financing Workforce-related and
and Other Tribal Commitments Facility Shutdown FMC's
Costs Fund to Astaris Costs Reorganization Total
----------- ------ ----------- --------------------- -------------- ------
2002 2001 2002 2001
----- ----- ----- ------
Reserve at12/31/2001 $58.9 $10.0 $28.0 $ -- $13.7 $ -- $ 8.6 $119.2
Increase in Reserves -- -- -- 5.8 -- 1.2 -- 7.0
Cash Payments (4.2) -- -- (2.0) (5.8) (1.2) (3.6) (16.8)
Reclasses and Other 16.6 (1) -- -- -- -- -- -- 16.6
Non-cash Charges -- -- -- (1.0) -- -- -- (1.0)
----- ----- ----- ----- ----- ----- ----- ------
Reserve at
3/31/2002 $71.3 $10.0 $28.0 $ 2.8 $ 7.9 $ -- $ 5.0 $125.0
===== ===== ===== ===== ===== ===== ===== ======
//(1)// Balance classified as current liabilities at December 31, 2001
reclassified to restructuring reserves at March 31, 2002.
The restructuring charges in the first quarter of 2002 will result in the
severance of 162 employees. Of these severances approximately one-third occurred
in the first quarter. The company expects the remainder to take effect in the
second quarter of 2002.
Note 7: Debt
The company has $240.0 million in committed credit under a 364-day
non-amortizing revolving credit agreement due in December 2002. The total amount
outstanding under this facility at March 31, 2002 was $174.0 million compared to
$68.0 million at December 31, 2001. Among other restrictions, this credit
agreement contains covenants relating to liens, consolidated net worth and
earnings (as defined in the agreements). The company is in compliance with all
debt covenants as of March 31, 2002.
In the first quarter the company obtained a $50.0 million committed credit
facility due August 2002 to meet peak seasonal needs. There were no borrowings
under this facility during the quarter ended March 31, 2002.
At March 31, 2002, the current portion of long-term debt includes $28.8 million
in exchangeable senior subordinated debentures bearing interest at 6.75 percent,
maturing in 2005 and exchangeable at any time into Meridian Gold Inc. common
stock (NYSE: MDG) at an exchange price of $15.125 per share, subject to
adjustment. Upon exchange, the company may, at its option, pay an amount equal
to the market price of Meridian Gold Inc. common stock in lieu of delivery of
the shares. The debentures are subordinated in right of payment to all existing
and future senior indebtedness of the company and are currently redeemable at
the option of FMC at par plus any accrued interest at the date of redemption. At
March 31, 2002, FMC did not hold any Meridian Gold shares. On May 3, 2002 FMC
published notice that it will redeem all outstanding debentures on June 3, 2002.
During the three months ended March 31, 2002, the company made payments of $10.4
million for scheduled maturities of long-term debt. Additional payments of $25.0
million and $100.0 million are required in the second and fourth quarters,
respectively, of 2002.
Short-term debt rose to its seasonal peak of $285.4 million at March 31, 2002
compared to $136.5 million at December 31, 2001. Short-term debt consists of
commercial paper, borrowings under committed credit facilities and foreign
borrowings.
The company's short-term commercial paper program is supported by committed
credit facilities. Commercial paper of $57.2 million and $33.0 million was
outstanding at March 31, 2002 and December 31, 2001, respectively.
In 1998, a universal shelf registration statement became effective, under which
$500.0 million of debt or equity securities could be offered. Unused capacity of
$345.0 million remains available under the 1998 shelf registration at March 31,
2002.
Note 8: Other Long-Term Liabilities and Reserves for Discontinued Operations
At December 31, 2001 the company classified long-term environmental reserves
related to its continuing businesses in the reserves for discontinued operations
and other liabilities. In the first quarter of 2002 the company reclassified
these environmental reserves to other long-term liabilities for the balance
sheets presented at March 31, 2002 and December 31, 2001. The reserves
reclassified to other long-term liabilities were $91.7 million and $94.4 million
at March 31, 2002 and December 31, 2001, respectively.
Reserves for discontinued operations at March 31, 2002 and December 31, 2001
were $188.2 million and $201.9 million, respectively. At March 31, 2002,
substantially all discontinued operations reserves were related to
environmental, post-employment benefit, self-insurance and other long-term
obligations associated with operations discontinued between 1976 and 1997.
In the first quarter of 2001 FMC paid an $80.0 million settlement of litigation
out of its reserves for discontinued operations related to the company's
discontinued defense operations.
Other long-term liabilities at March 31, 2002 and December 31, 2001 were $202.3
million and $212.3 million, respectively and included environmental reserves
related to the company's continuing businesses, restructuring reserves and
compensation and benefits reserves. (See Note 3 to the company's December 31,
2001 consolidated financial statements and Note 9 below.)
Note 9: Environmental Obligations
The company has provided reserves for potential environmental obligations, which
management considers probable and for which a reasonable estimate of the
obligation could be made. Accordingly, reserves of $249.8 million and $260.4
million, excluding recoveries, have been provided at March 31, 2002 and December
31, 2001, respectively. The long-term portions of these reserves, totaling
$217.5 million and $217.3 million, are included in other long-term liabilities
and reserves for discontinued operations. The short-term portion of these
obligations is recorded as other current liabilities.
Cash recoveries of $1.3 million have been recorded as realized claims against
third parties in the first quarter of 2002. Total cash recoveries recorded for
the year ended December 31, 2001 were $12.5 million. At March 31, 2002 and
December 31, 2001 reserves for recoveries were $40.1 million and $41.5 million,
respectively, the majority of which relate to existing contractual arrangements
with U.S. government agencies and insurance carriers. These reserves are
recorded as an offset to the reserve for discontinued operations and other
long-term liabilities.
The company has estimated that reasonably possible contingent environmental
losses may exceed amounts accrued by as much as $70.0 million at March 31, 2002.
Obligations that have not been reserved for 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 materially adverse effect on the company's liquidity or financial
condition and may be satisfied over the next twenty years or longer.
A more complete description of the company's environmental contingencies and the
nature of its potential obligations are included in Notes 1 and 13 to FMC's
December 31, 2001 consolidated financial statements.
Note 10: Capital Stock
On August 27, 1999, the Board of Directors authorized $50.0 million of open
market repurchases of FMC common stock, which the company has not commenced as
of March 31, 2002. Depending on market conditions, the company may, from time to
time, purchase additional shares of its common stock on the open market.
For the period ended March 31, 2002, the company had 31,476,554 average shares
outstanding and 933,521 additional shares assuming conversion of stock options
and other dilutive potential common shares (calculated under the treasury stock
method).
Note 11: Comprehensive Loss
Comprehensive loss includes all changes in stockholders' equity during the
period except those resulting from investments by owners and distributions to
owners. The company's comprehensive loss for the quarters ended March 31, 2002
and 2001 consisted of the following, in millions:
(in millions)
March 31, March 31,
2002 2001
--------- ---------
Net income (loss) $ 9.0 $(26.5)
Other comprehensive earnings (loss):
Foreign currency translation adjustment (22.8) (6.4)
Net deferral of hedging gains (losses) 9.0 (11.7)
Cumulative effect of a change in accounting
principle (Note 3) -- 16.4
------ ------
Comprehensive loss $ (4.8) $(28.2)
====== ======
Note 12: Related Party Transactions
FMC's chemical and machinery businesses became two independent companies in 2001
through the spin-off of Technologies (see Note 2 for a discussion of FMC's
reorganization). Prior to Technologies' IPO, FMC and Technologies entered into
certain agreements for the purposes of governing the ongoing relationship
between the two companies (see Note 18 to the 2001 consolidated financial
statements). In the first quarter of 2002 FMC paid Technologies $4.7 million for
transition services and other costs. FMC and Technologies continue to engage in
transition services for areas such as benefits, insurance and administrative
services. These amounts were not material as of March 31, 2002.
A guaranty agreement, executed on December 31, 2001, provides for the
performance by Technologies of certain obligations under a number of contracts,
debt instruments and reimbursement agreements. Prior to the spin-off, these
obligations related to the businesses of Technologies. As of March 31, 2002,
this guarantee agreement covered obligations totaling $159.2 million compared to
$289.0 million at December 31, 2001. Under the Separation and Distribution
Agreement, Technologies has indemnified FMC for these obligations and any
related legal fees.
Note 13: Accounts Receivable Securitization
The company sells trade receivables without recourse through its wholly owned,
bankruptcy-remote subsidiary, FMC Funding Corporation. This subsidiary then
sells the receivables to a securitization company under an accounts receivable
financing facility on an ongoing basis. These transactions resulted in
reductions of accounts receivable of $145.0 million and $79.0 million at March
31, 2002 and December 31, 2001, respectively. The agreement for the sale of
accounts receivable provides for continuation of the program on a revolving
basis expiring in November 2002.
Note 14: Commitments and Contingencies
During the third quarter of 2000, in connection with the finalization of an
external financing agreement with Astaris LLC ("Astaris"), FMC's phosphorus
joint venture with Solutia, Inc., the company provided an agreement to lenders
of Astaris under which the company has agreed to make equity contributions to
Astaris sufficient to make up one half of any short-fall in Astaris' earnings
below certain levels. Astaris' earnings did not meet the agreed levels for the
first quarter of 2002 and the company does not expect that such earnings will
meet the levels agreed for the remainder of 2002. The company contributed $31.3
million to Astaris under this arrangement in 2001 and expects to contribute a
similar amount in 2002. The proportional amount of Astaris' indebtedness subject
to this agreement from FMC was $118.0 million and $111.9 million at March 31,
2002 and December 31, 2001, respectively.
The company provides guarantees to financial institutions on behalf of certain
Agricultural Products customers, principally in Brazil, for their seasonal
borrowing. The customers' obligations to FMC are largely secured by liens on
their crops. Losses under these programs have been minimal. The total of these
guarantees at March 31, 2002 and December 31, 2001 was $55.4 million and $56.0
million, respectively.
The company also provides guarantees to financial institutions on behalf of
certain Agricultural Products customers in Brazil to support their importation
of third party agricultural products. This guarantee program was implemented in
2001 and guarantees at March 31, 2002 were $10.8 million compared to $10.0
million at December 31, 2001.
On June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. from Elf Atochem
North America, Inc. for approximately $51.0 million in cash and a contingent
payment due at year-end 2003. The contingent payment amount, which will be based
on the financial performance of the combined soda ash operations between 2001
and 2003, cannot currently be determined precisely but is expected to be in the
range of $40.0 million to $45.0 million.
The company also has certain other contingent liabilities arising from
litigation, claims, performance guarantees, and other commitments arising in the
ordinary course of business. Management believes that the ultimate resolution of
its known contingencies will not materially affect the consolidated financial
position, results of operations or cash flows of FMC.
Note 15: Segment Information
Quarter ended
March 31,
- ----------------------------------------------------------------------------------
(in millions) 2002 2001
- ----------------------------------------------------------------------------------
Revenue
- ----------------------------------------------------------------------------------
Agricultural Products $131.1 $134.6
Specialty Chemicals 115.8 116.3
Industrial Chemicals 189.8 198.6
Eliminations (2.5) (2.3)
- ----------------------------------------------------------------------------------
Total $434.2 $447.2
==================================================================================
Income from continuing operations before income taxes
and cumulative effect of change in accounting principle
- ----------------------------------------------------------------------------------
Agricultural Products $ 6.3 $ 13.8
Specialty Chemicals 18.2 20.0
Industrial Chemicals 23.1 14.4
- ----------------------------------------------------------------------------------
Segment operating profit 47.6 48.2
Corporate (10.0) (9.4)
Other income and expense, net (3.5) (2.0)
- ----------------------------------------------------------------------------------
Operating profit before restructuring and other charges, and net
interest expense 34.1 36.8
Restructuring and other charges (1) (7.0) (1.0)
Net interest expense (2) (17.1) (16.0)
- ----------------------------------------------------------------------------------
Total $ 10.0 $ 19.8
==================================================================================
(1) See Notes 6 for details of restructuring and other charges
(2) Net interest expense includes the Company's share of interest expense
of the phosphorus joint venture for the three months ended March 31,
2002 ($1.7 million) and for the three months ended March 31, 2001
($1.6 million). The equity in earnings (loss) of the joint venture is
included in the Industrial Chemicals Segment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Item 2 of this report contains certain forward-looking statements that are based
on management's current views and assumptions regarding future events, future
business conditions and the outlook for the company based on currently available
information.
Whenever possible, we have identified these forward-looking statements by such
words or phrases as "will likely result", "is confident that", "expects",
"should", "could", "may", "will continue to", "believes", "anticipates",
"predicts", "forecasts", "estimates", "projects", "potential", "intends" or
similar expressions identifying "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including the negative
of those words or phrases. Such forward-looking statements are based on our
current views and assumptions regarding future events, future business
conditions and the outlook for our company based on currently available
information. The forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, these statements. These statements are qualified by
reference to the section "Forward-Looking Statements" in Part II of the
company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
We further caution that the list of risk factors in the above referenced section
of our form 10-K factors may not be all-inclusive, and we specifically decline
to undertake any obligation to publicly revise any forward-looking statements
that have been made to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents for the first quarter of 2002 and 2001 were $14.2
million and $23.4 million, respectively. We had total borrowings of $1,062.6
million and $923.5 million as of March 31, 2002 and December 31, 2001. The
increase in debt is primarily a function of the normal seasonal cash demands of
our Agricultural Products business, which we are expecting to reverse over the
course of the year.
Cash used in operating activities was $129.9 million for the three months ended
March 31, 2002 compared to $158.4 million for the first three months of 2001
reflecting our normal first quarter working capital build. Our 2002 operating
cash flows benefited from an additional $52.8 million in cash proceeds from our
accounts receivable financing program (see Note 13 to the financial statements).
Cash required by discontinued operations for the first quarter of 2002 and 2001
were $12.5 million and $93.1 million, respectively. The 2001 results were
affected by $80.0 million of cash used for a settlement of litigation related to
our discontinued Defense Systems business.
Cash required by investing activities was $14.9 million for the three months
ended March 31, 2002 compared to $34.8 million for the three months ended March
31, 2001. The lower requirements were a direct result of lower consent decree
spending at Pocatello.
Cash provided by financing activities for the first three months of 2002 of
$148.2 million decreased by $149.8 million when compared to cash provided by
financing activities of $298.0 million for the first three months of 2001. Both
years reflect the impact of short-term seasonal borrowing. The 2001 period also
reflects borrowings to fund the payment of the settlement of litigation
mentioned above.
At March 31, 2002 we had two committed credit facilities. The first facility,
amounting to $240.0 million is a non-amortizing revolving credit agreement due
in December 2002. In January of 2002, we acquired a supplemental $50.0 million
committed credit facility due in August 2002. The total amount outstanding under
the first facility at March 31, 2002 was $174.0 million. There were no
borrowings during the quarter under the second facility. We are in compliance
with all debt covenants on both facilities at March 31, 2002.
At March 31, 2002 we had short-term debt (which includes commercial paper and
the current portion of long-term debt) of $439.5 million. An additional $182.4
million in long-term debt matures in 2003. Also, at March 31, 2002 the current
portion of long-term debt includes $28.8 million in exchangeable senior
subordinate debentures maturing in 2005 and exchangeable at any time into
Meridian Gold Inc. common stock (NYSE: MDG) at and exchange price of $15.125 per
share, subject to adjustment. On May 3, 2002 we published notice for the
redemption of these debentures on June 3, 2002. (See Note 7 to the financial
statements.)
Along with these near-term requirements our future liquidity could also be
affected by letters of credit, bank guarantees, securitization programs,
contingent payments, surety bonds and commitments and guarantees we provide on
behalf of our spun-off Technologies business' vendors, customers and others.
(See Notes 6, 7, 8, 9, 12, 13 and 14 of the financial statements.)
We do not expect to pay down a significant portion of our debt in 2002 due to
continuing cash demands largely caused by restructuring charges, primarily
associated with our Phosphorus business. Consequently, we are evaluating several
financing options, which will be structured to address our current liquidity and
capital resource constraints. We intend to renew our $240.0 million committed
revolving credit agreement before the end of the third quarter of this year. We
are continually assessing the best sources of financing and intend to access the
capital markets in the second and third quarters of 2002 primarily to pre-fund
our upcoming maturities of long-term debt, repay short-term debt and meet other
payment obligations.
DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS
Our primary financial market risks include changes in foreign currency exchange
rates, interest rates and commodity pricing. In managing our exposure to these
risks, we may use derivative financial instruments in accordance with
established policies and procedures. We account for these derivatives in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 133
(see "Recently Adopted Accounting Pronouncements" and Note 1 to our 2001
consolidated
financial statements). We do not use derivative financial instruments for
trading purposes. At March 31, 2002 our derivative holdings consisted primarily
of foreign currency forward contracts and natural gas forward contracts.
When we sell or purchase products or services outside the United States,
transactions are frequently denominated in currencies other than the U.S.
dollar. Exposure to variability in currency exchange rates is mitigated, when
possible, with natural hedges, whereby purchases and sales in the same foreign
currency and with similar maturity dates offset one another.
A significant portion of our business is conducted in currencies other than the
U.S. dollar, which is our reporting currency. We recognize foreign currency
gains and losses arising from our operations in the period incurred. As a
result, currency fluctuations among the U.S. dollar and the currencies in which
we do business have caused and will continue to cause foreign currency
transaction gains and losses, which could be material. Due to the weakness of
the euro in the period from 1999 through 2002, our business results have been
adversely affected by unfavorable U.S. dollar translation of earnings of our
operations in Europe. We cannot predict the effects of exchange rate
fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposures and the potential
volatility of currency exchange rates. We take actions to manage our foreign
currency exposure such as entering into forwards and swaps, where available, but
we cannot ensure that our strategies will adequately protect our operating
results from the effects of exchange rate fluctuations.
The maturity dates of the currency exchange agreements that provide hedge
coverage are consistent with those of the underlying purchase or sales
commitments.
We are exposed to changes in interest rates because of our financing and cash
management activities, which include long-term and short-term debt to maintain
liquidity and fund our business operations. In managing interest rate risk, our
strategic policy is to monitor the ratio of our fixed- to floating-rate debt. We
may, from time to time, use interest rate swaps to manage our exposure to
changes in interest rates. We did not enter into any material interest rate
swaps in the first quarter of 2002.
To address our exposure to risks from changes in commodity prices, we enter into
forward or swap contracts relating to energy purchases used in our manufacturing
processes. The forward energy contracts qualifying as hedges are accounted for
in accordance with SFAS No. 133. The gains or losses on these contracts are
included as an adjustment to the cost of sales or services when the contracts
are settled.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Goodwill and Intangible Assets. Prior to January 1, 2002 we amortized goodwill
and identifiable intangible assets (such as trademarks) on a straight-line basis
over their estimated useful lives not to exceed 40 years. The recoverability of
the net book value of these assets was periodically reviewed based on the
expected future undiscounted cash flows of the businesses to which they relate.
On January 1, 2002 we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets." With the adoption of SFAS No. 142, goodwill and other indefinite
intangible assets ("intangibles") are no longer subject to amortization, rather
they are subject to at least an annual assessment for impairment by applying a
fair value based test. We are currently conducting the transitional goodwill and
indefinite life intangibles impairment tests required by SFAS No. 142, and
expect to be completed by the second quarter of 2002 and each year, beginning in
2003, will conduct an assessment of goodwill impairment based on fair value in
the future in accordance with the requirements of SFAS No. 142.
Goodwill amortization was $4.2 million ($2.8 million after tax), or $0.09 per
diluted share in 2001. Goodwill amortization for the three months ended March
31, 2001 was $1.1 million, or $0.02 per diluted share. Goodwill amortization for
the first quarter of 2002 would also have been $1.1 million.
Goodwill at March 31, 2002 and December 31, 2001 was $111.1 million and $113.5
million, respectively. The majority of our goodwill can be attributed to an
acquisition in our Specialty Chemicals segment. The decrease in goodwill since
year-end 2001 is due to the devaluation of Norwegian krone in the first quarter
of 2002 in FMC's BioPolymer operations within its Specialty Chemicals segment.
There are no material indefinite life intangibles, other than goodwill, at March
31, 2002.
Our definite life intangibles totaled $7.9 million at March 31, 2002. At March
31, 2002 these definite life intangibles are allocated among our segments as
follows: $3.6 million in Agricultural Products, $2.8 million in Specialty
Chemicals and $1.5 million in Industrial Chemicals. All definite life
intangibles are amortizable and consist primarily of patents, industry licenses
and other intangibles.
On January 1, 2002 the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This Statement establishes a single accounting model,
based on the framework established in SFAS No. 121, for long-lived assets to be
disposed of by sale. The Statement retains most of the requirement of SFAS No.
121 related to the recognition of the impairment of long-lived assets to be held
and used. There was no impact of adopting SFAS No. 144 in the first quarter of
2002.
On January 1, 2001, the company implemented SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
SFAS No. 138 (collectively, the "Statement.") The Statement requires the company
to recognize all derivatives in the consolidated balance sheets at fair value,
with changes in the fair value of derivative instruments to be recorded in
current earnings or deferred in other comprehensive income, depending on whether
a derivative is designated as an effective hedge and on the type of hedging
transaction. In accordance with the provisions of the Statement, the company
recorded a first-quarter 2001 loss from the cumulative effect of a change in
accounting principle of $0.9 after-tax in our consolidated statement of earnings
and a deferred gain of $16.4 million after-tax in accumulated other
comprehensive loss.
RESULTS OF OPERATIONS
General
All results discussed in this analysis address the continuing results of our
chemical businesses. The results of Technologies, which was spun-off on December
31, 2001, have been reclassified to discontinued operations within our
consolidated statement of income and consolidated statement of cash flow for the
quarter ended March 31, 2001. See Note 2 to our consolidated financial
statements for an overview of our reorganization and spin-off of Technologies.
Earnings from continuing operations before cumulative effect of a change in
accounting principle for the quarter ended March 31, 2002 was $9.0 million
compared to $14.4 million in the prior year's quarter. Income from continuing
operations before cumulative effect of a change in accounting principle
excluding special items for the quarter was $13.2 million or $0.41 per share
compared to $16.4 million or $0.51 per share in the prior year. Restructuring
and other charges totaled $7.0 million for the first quarter of 2002 compared to
$1.0 million in the prior year quarter.
The following table displays the results for the quarters ended March 31, 2002
and 2001 through a reconciliation between as reported income from continuing
operations before cumulative effect of change in accounting principle and income
from continuing operations before cumulative effect of change in accounting
principle, excluding special items:
($ in millions) Quarter Ended
March 31,
2002 2001
------ ------
Income from continuing operations before cumulative
effect of change in accounting principle - as reported $ 9.0 $14.4
Restructuring and other charges 7.0 1.0
Tax effect of restructuring and other charges (2.8) 1.0
----- -----
Income from continuing operations before cumulative
effect of change in accounting principle, excluding special items $13.2 $16.4
===== =====
RESULTS OF OPERATIONS - March 31, 2002 compared to March 31, 2001
Revenue. First quarter 2002 revenue decreased $13.0 million, or 3.0 percent, to
$434.2 million, as compared to $447.2 million in the prior year's quarter. Lower
revenue in 2002 when compared with 2001 was principally attributable to weaker
demand in our Industrial Chemicals segment and a decrease in sulfentrazone
revenue in the North American soybean market within our Agricultural Products
segment.
Income from continuing operations was $9.0 million compared to a $14.4 million
in the first quarter of 2001. The majority of this decrease can be attributed to
higher restructuring and other charges in 2002 accompanied by the lack of
sulfentrazone payments from DuPont, which were somewhat offset by the results of
cost reduction programs throughout our business segments.
Restructuring and other charges totaled $7.0 million compared to $1.0 million in
the prior year's quarter. Of these charges, $2.4 million related to severance
and other costs of idling our Agricultural Product's sulfentrazone plant. In the
Industrial Chemicals segment the mothballing of the Granger caustic facility in
Green River and other restructuring activities resulted in $3.4 million of
severance and other costs. The remaining charges related to reorganization costs
of $1.2 million related to the spin-off and distribution of Technologies stock.
The restructuring charges in the first quarter of 2001 related to corporate
reorganization costs and several minor restructuring activities within our
Industrial Chemicals segment.
Income from continuing operations, before the cumulative effect of a change in
accounting principle, net of income taxes, excluding special items was $13.2
million compared to $16.4 million in the prior year's quarter. This decline can
be attributed to the lack of a $10.0 million sulfentrazone-related profit
protection payment from DuPont in 2001 and weaker industrial markets compared to
the prior year somewhat offset by cost reductions related to our focus
initiatives and cost reduction programs throughout our company, especially
within our Agricultural Products and Industrial Chemicals segments (see Segment
Results for further details).
Corporate expenses (excluding restructuring and other charges) were $10.0
million compared to $9.4 million in the first quarter of 2001. This increase
reflects the continuance of certain transition service costs associated with the
spin-off of Technologies. We do not expect these incremental transition costs to
continue beyond the second quarter of 2002.
Other income and expense, net for the quarter was $3.5 million compared to $2.0
million for the period ended March 31, 2001.
Net interest expense for the quarter was $15.4 million compared to $14.4 million
in the prior year's quarter.
Provision for income taxes was $1.0 million in the first quarter of 2002
compared to $5.4 million in the prior year resulting in effective tax rates of
10.0% and 27.2%, respectively. The 2002 rate results largely from the effect of
restucturing charges. Our provision for income taxes on income from continuing
operations before restructuring and other charges was $3.8 million or 22.3% for
the current quarter and $4.4 million or 23.7% in the prior year's quarter. We
expect our effective tax rate excluding special charges to be approximately
22.1% on a full year basis in 2002.
Discontinued operations. We recorded a loss from discontinued operations of
$40.0 million in the first quarter of 2001 related to the spin-off of
Technologies. Included in this amount are losses of our spun-off Technologies
business, including interest expense of $6.9 million, which
was allocated to discontinued operations in accordance with Accounting
Principles Board Statement No. 30 and later relevant accounting guidance, and
additional income tax provision of $28.8 million related to the reorganization
of our worldwide entities in anticipation of the separation of Technologies from
FMC.
Net Income (loss). We recorded net income of $9.0 million for the first quarter
of 2002 compared to a net loss $26.5 million in the first quarter of 2001. This
variance reflects the impact of several one-time tax charges discussed above
under discontinued operations.
Average shares outstanding used in the quarter's diluted earnings (loss) per
common share calculations were 32.4 million in 2002 compared with 30.8 million
in the prior year's quarter. Additional weighted average shares of 1.4 million,
assuming conversion of stock awards, for the quarter ended March 31, 2001 were
not included in the computation of diluted earnings per share as their effect
would be antidilutive.
SEGMENT RESULTS - March 31, 2002 compared to March 31, 2001
Segment operating profit is presented before taxes and restructuring and other
charges. Information about how each of these items relates to our businesses at
the segment level is discussed below, in Note 15 of our consolidated financial
statement filed in this 10-Q and Note 20 of our consolidated financial
statements on Form 10-K for the year ended December 31, 2001.
Agricultural Products
Agricultural Products' revenue for the quarter ended March 31, 2002 was $131.1
million, down from $134.6 million in last year's quarter due to lower
sulfentrazone revenue in the soybean market and decreased demand in Eastern
Europe and East Africa which was somewhat offset by an increase in specialty
markets demand.
Earnings for the 2002 quarter were $6.3 million down from $13.8 million in the
first quarter of 2001. Contributing to this decline was the lack of a $10.0
million profit protection payment from DuPont, which we received in the first
quarter of 2001 as compensation for DuPont's decision to cease sulfentrazone
purchases. Increases in our profitability due to changes in our Fury product
revenue mix as well as lower selling, administrative and research expenses
partially offset the lack of a protection payment from DuPont in 2002.
We continue our efforts to reduce costs and improve overall segment
profitability as seen in our shift in focus from sulfentrazone revenue for
soybeans to higher value crops such as tobacco, sugar cane and sun flowers,
although we plan to continue to market sulfentrazone on soybeans in partnership
with third-party chemistries. We continued to reduce our selling, general and
research expenses successfully implementing the majority of our fourth quarter
2001 restructuring efforts. We engaged in additional restructuring activities in
the first quarter of 2002 (see Note 6 to our consolidated financial statements)
and began idling our Baltimore sulfentrazone plant at the end of April 2002. We
believe these efforts will allow our Agricultural Products segment to refocus on
insecticides while realigning our herbicide portfolio towards
higher value crops. We expect total restructuring activities within Agricultural
Products in 2001 and the first quarter of 2002 to result in approximately $20.0
million of annual savings of which approximately $15.0 million will be realized
this year.
Specialty Chemicals
Specialty Chemicals' revenue for the three months ended March 31, 2002 were
$115.8 million, down slightly from $116.3 million in the prior year period.
Revenue reflected increased microcrystalline cellulose revenue resulting from
our new European distribution strategy offset by weaker carrageenan and alginate
revenue in the industrial and specialty markets and weaker lithium demand in
Japan when compared to the first quarter of 2001.
Earnings of $18.2 million in the quarter were down from $20.0 in the prior
year's quarter due to decreased pricing in certain specialty and industrial
markets, increased inventory and production variances and decreased prices due
to competition in the Japanese energy storage markets in the second quarter of
2001.
Industrial Chemicals
Industrial Chemicals' first quarter 2002 revenue of $198.6 million was lower
than last year's revenue by $8.7 million largely reflecting the impact of lower
caustic prices on soda ash volumes and decreased volumes and prices in hydrogen
peroxide. Also contributing to the change in segment revenue were lower selling
prices at FMC Foret somewhat offset by increased volumes.
Earnings for the first quarter of 2002 improved to $23.1 million from $14.4
million in the prior year's quarter. Highlighting our earnings increase were
higher earnings of Astaris resulting from lower consent decree spending and
lower material costs. However, we continue to address start-up issues at our new
Purified Phosphoric Acid plant in Soda Springs, Idaho.
First quarter 2002 revenue in our alkali operations remained relatively flat
from the 2001 quarter with lower alkali volumes resulting from lower caustic
prices being offset by higher foreign and domestic prices for soda ash. Earnings
increased compared to the first quarter of 2001 as a result of lower natural gas
prices and our continued effort to reduce costs.
Peroxygen (hydrogen peroxide and active oxidants) revenue and earnings were down
for the quarter compared to the prior year's quarter. Lower volumes and lower
prices in our pulp and paper markets and printed circuit board markets, due to
Asian competition, were somewhat offset by increased revenue in several other
markets.
FMC Foret saw a decrease in revenue in the first quarter of 2002 when compared
to 2001 due to the devaluation of the euro compared to the prior year period and
lower prices in phosphates and hydrogen peroxide being offset somewhat by volume
increases in zeolites, percarbonates and perborates. Earnings for the quarter
were relatively flat.
The current manufacturing slowdown continues to significantly impact those
markets served by our Industrial Chemicals segment and has led to continued
efforts not only to aggressively reduce
costs but also to refocus our strategies within the segment. As a major example
of refocusing a decline in caustic soda pricing due to a supply surplus has
resulted in our decision to mothball our Granger caustic soda facility in Green
River, Wyoming. This has resulted in the restructuring charges of $2.3 million
in the first quarter of 2002, which we believe will result in approximately $7.0
million of annual savings beginning in the second half of 2002. We also further
refocused in the quarter with the sale of our sodium cyanide operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this item is provided in "Derivative Financial
Instruments and Market Risks," under ITEM 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
INDEPENDENT ACCOUNTANTS' REPORT
A report by KPMG LLP, FMC's independent accountants, on the financial statements
included in Form 10-Q for the quarter ended March 31, 2002 is included on page
22.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
FMC Corporation:
We have reviewed the condensed consolidated balance sheet of FMC Corporation and
consolidated subsidiaries as of March 31, 2002, and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended March 31, 2002 and 2001. These condensed consolidated financial statements
are the responsibility of the Company'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 auditing standards generally accepted in the United States of America, 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, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America. We have previously audited, in accordance with
auditing standards generally accepted in the United States of America, the
consolidated balance sheet of FMC Corporation and consolidated subsidiaries as
of December 31, 2001, 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 February 14, 2002, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2001, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
Our report dated February 14, 2002, on the consolidated financial statements of
FMC Corporation and consolidated subsidiaries as of and for the year ended
December 31, 2001, contains an explanatory paragraph that states as discussed in
Note 1 to the consolidated financial statements, the company changed its method
of accounting for derivative instruments and hedging activities in 2001.
KPMG LLP
Philadelphia, Pennsylvania
April 30, 2002
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There has been no material change in the company's significant legal proceedings
from the information reported in Part I, Item 3 of the company's 2001 Annual
Report on Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed with this Report
1. Condensed Consolidated financial statements of FMC Corporation and its
subsidiaries are incorporated under Item 1 of this Form 10-Q.
2. All required financial statement schedules are included in the consolidated
financial statements or notes thereto as incorporated under Item 1 of this
Form 10-Q.
3. Exhibits: See attached Index of Exhibits
(b) Reports on Form 8-K
During the period beginning March 11, 2002 and ending May 9, 2002, the
Registrant did not file any reports on Form 8-K or Form 8-K/A.
(c) Exhibits
See Index of Exhibits
INDEX OF EXHIBITS FILED WITH OR
INCORPORATED BY REFERENCE INTO
FORM 10-Q OF FMC CORPORATION
FOR THE QUARTER ENDED MARCH 31, 2002
Exhibit
No. Exhibit Description
- ------- -------------------
10.2a Credit Agreement, dated as of January 31, 2002, among FMC Corporation,
the Lenders party thereto, and Citibank, N.A., as Administrative Agent
10.11a Agreement of Amendment to the Receivables Purchase Agreement, dated as
of December 31, 2001, among FMC Funding Corporation, FMC Corporation,
FMC Wyoming Corporation, CIESCO, L.P., Citibank, N.A., and Citicorp
North America, Inc.
11 Statement re Computation of Per Share Earnings
12 Statement re Computation of Ratios of Earnings to Fixed Charges
15 Management Awareness Letter of KPMG LLP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ W. KIM FOSTER
-----------------
W. Kim Foster
Senior Vice President and
Chief Financial Officer
Date: May 15, 2002