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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
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 (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
Pacific Stock Exchange
Preferred Share Purchase Rights 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [_]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF MARCH 1, 2002 WAS $1,186,791,031. THE NUMBER OF SHARES OF THE
REGISTRANT'S COMMON STOCK, $0.10 PAR VALUE, OUTSTANDING AS OF THAT DATE WAS
31,573,929. THE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES EXCLUDES
THE VALUE OF THOSE SHARES HELD BY TEN PERCENT STOCKHOLDERS AND EXECUTIVE
OFFICERS AND DIRECTORS OF THE REGISTRANT.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM 10-K REFERENCE
-------- -------------------
Portions of Proxy Part III
Statement for
2002 Annual Meeting of
Stockholders
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PART I
FMC Corporation was incorporated in 1928 under Delaware law and has its
principal executive offices at 1735 Market Street, Philadelphia, Pennsylvania
19103. As used in this report, except where otherwise stated or indicated by
the context, FMC, the company or the Registrant means FMC Corporation and its
consolidated subsidiaries and their predecessors.
ITEM 1. BUSINESS
General
FMC is a diversified chemical company serving agricultural, industrial and
consumer markets globally with innovative solutions, applications and quality
products. As one of the world's leading producers of chemicals, FMC employs
approximately 6,000 people and has 37 manufacturing facilities in 19 countries.
The company operates in three distinct business segments: Agricultural
Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products
provides crop protection and pest control products for worldwide markets.
Specialty Chemicals includes food ingredients that are used to enhance
structure, texture and taste; pharmaceutical additives for binding and
disintegrant use; and lithium specialties for pharmaceutical synthesis and
energy storage. Industrial Chemicals encompasses a wide range of inorganic
materials in which FMC possesses market and technology leadership, including
soda ash, hydrogen peroxide, phosphorus and specialty peroxygens in both North
America and in Europe through FMC's subsidiary, FMC Foret, S.A. ("Foret").
Effective December 31, 2001, the company completed its previously announced
plan to separate into two separately traded public companies. FMC has retained
the three chemical segments. A separate company, FMC Technologies, Inc.
("Technologies"), operates the businesses that comprised the former Energy
Systems and Food and Transportation Systems segments. The company's plan of
separation was first announced publicly on October 31, 2000. On May 31, 2001,
FMC contributed the two non-chemical business segments to Technologies, which
at the time was a wholly-owned subsidiary of FMC. The company completed an
initial public offering of approximately 17% of Technologies' stock in June
2001 and completed the separation on December 31, 2001 by distributing all
remaining shares of Technologies owned by FMC as a tax-free dividend to its
stockholders. The majority of historical data in this Report regarding the
company's financial condition or results of operations have been reclassified
to reflect the separation of Technologies' businesses.
Financial Information About Industry Segments.
See Note 20 in the company's 2001 consolidated financial statements at pages
64 through 66 of this report which is incorporated herein by reference.
General Description of the Business Segments
The following is a description of the company's three business segments.
Agricultural Products
The majority of Agricultural Product sales are from insecticide chemistries
including carbamates and pyrethroids. The remaining sales are from herbicides
including clomazone and the newer chemistries of sulfentrazone and
carfentrazone. Key crops for FMC include cotton, corn, fruits, rice and
vegetables. This segment has a leading global position in pyrethroid chemistry
and a portfolio of commercialized herbicides with growth opportunities.
Agricultural Products differentiates itself by its flexibility to react to
worldwide market conditions, direct distribution in key markets, solid product
stewardship programs and focused research and development ("R&D").
2
Agricultural Products is a business characterized by R&D innovation in order
to both grow and maintain share. In an increasingly competitive market, the
development of innovative R&D and market access programs has been and will
continue to be essential. FMC has a focused strategy to:
. gain near term growth through label expansions in carfentrazone and newer
generation pyrethroids;
. develop novel insecticide chemistry in a strategic alliance with Ishihara
Sangyo Kaisha, Ltd. ("ISK") for use on certain pests in the Americas;
. expand a leading genomics-based research program in a strategic alliance
with Devgen to identify target specific insect sites and chemistries; and
. focus our sales and marketing organization in the Americas and expand
market access abroad through regional alliances in Europe and Asia.
Specialty Chemicals
BioPolymer and lithium-based operations make up the Specialty Chemicals
segments. BioPolymer provides products that add structure, texture and taste to
a wide range of beverage, dairy, meat and low-fat products as well as act as
binders and disintegrants for dry tablet drugs. Lithium is a technology-based
business in which mined lithium is refined into many end uses including
pharmaceutical synthesis and energy storage in batteries.
Specialty Chemicals has leading or significant positions in alginates,
carrageenan, microcrystalline cellulose and lithium-based products. This
segment's customers consist primarily of industrial companies engaged in the
food, pharmaceutical and specialty additives businesses. Remaining sales are to
the personal care, dental, industrial and energy storage markets.
The ongoing strength of Specialty Chemicals is the development of
customer-focused solutions and new product concepts. Key elements include plans
to:
. grow market share with large food and pharmaceutical firms as their
partner for developing new food categories and innovative drugs;
. explore complementary technologies that could further enhance the product
offering of the food and pharmaceutical franchises;
. focus on high value-added applications for lithium specialties and
continue to exit more commodity-like markets; and
. invest in large market potential opportunities for lithium including
hybrid electric vehicles and concrete restoration.
Industrial Chemicals
Industrial Chemicals sales comprise several products: soda ash, peroxygens
(hydrogen peroxide and active oxidants) and phosphorus. FMC's alkali chemicals
division manufactures soda ash and related derivatives for the U.S. and Asian
glass, detergents and chemicals markets. FMC is the largest producer in the
world of natural soda ash and has enjoyed strong growth outside the U.S. based
upon the superior cost economics of naturally occurring soda ash from Green
River, Wyoming versus synthetic soda ash produced abroad.
Sales of peroxygens, including hydrogen peroxide and specialty derivatives,
make up approximately 25% of Industrial Chemicals' sales. FMC is the market
leader in the U.S. for hydrogen peroxide and is the worldwide leader in the
specialty markets for persulfates and peracetic acid. The array of end-use
markets served includes pulp and paper, polymers, electronics and food.
FMC is a 50% owner of a joint venture with Solutia, Inc. in phosphorus
chemicals, Astaris LLC ("Astaris"). Astaris offers a wide range of phosphorus
compounds for markets ranging from agriculture to detergents. During late 2001,
Astaris undertook significant restructuring of its supply chain to move away
from production of elemental phosphorus to lower cost purified phosphoric acid.
3
FMC's European Industrial Chemicals subsidiary, Foret, leverages its strong
brand name in southern Europe to provide sulfur derivatives, peroxygens and
phosphorus products to Europe, Africa and the Middle East.
The focus of Industrial Chemicals is toward maximizing cash generation
through cost reduction initiatives and prudent capital management. The segment
has three key strategies:
. focus on the development of new and innovative process and mining
technologies to continue to lower unit production costs;
. manage capacity effectively in order to keep utilization rates high and
control fixed costs; and
. shift commercial resources towards the development of specialty niches
that have few competitive alternatives and higher corresponding margins.
Source and Availability of Raw Materials
FMC's raw material requirements vary by business segment and include mineral
related natural resources, processed chemicals, seaweed, and energy sources
such as oil, gas, coal, and electricity generated by hydroelectric and nuclear
power.
Ores used in Industrial Chemicals manufacturing processes, such as trona,
are extracted from mines in the United States on property held by FMC under
long-term leases subject to periodic adjustment of royalty rates. Raw materials
used by Specialty Chemicals include lithium carbonate, which is obtained from a
South American manufacturer under a long-term sourcing agreement, alginates and
carrageenan, which are derived from various types of seaweed that are sourced
by the company on a global basis and wood pulp which is purchased from several
North American producers. Raw materials used by Agricultural Products,
primarily processed chemicals, are obtained from worldwide sources.
The company does not use single source suppliers for the majority of its raw
material purchases and believes the available supplies of raw materials are
adequate.
Patents
FMC owns a number of U.S. and foreign patents, trademarks and licenses that
are cumulatively important to its business. FMC does not believe that the loss
of any one or group of related patents, trademarks or licenses would have a
material adverse effect on the overall business of FMC.
Seasonality
The seasonal nature of the crop protection market and the geographic spread
of the Agricultural Products business generally produce stronger earnings in
the second and third quarters. Agricultural products sold into the northern
hemisphere (North America, Europe and parts of Asia) serve seasonal
agricultural markets from March through September, while markets in the
southern hemisphere (Latin America, parts of Asia and Australia) are served
from July through December.
The remainder of FMC's businesses is generally not subject to significant
seasonal fluctuations.
Competitive Conditions
FMC encounters substantial competition in each of its three business
segments. This competition is expected to continue in both the United States
and markets outside the United States. FMC markets its products through its own
sales organization and through independent distributors and sales
representatives. The number of the company's principal competitors varies from
segment to segment. In general, FMC competes by operating in a cost-efficient
manner and by leveraging its industry experience to provide advanced
technology, high product quality and reliability and quality customer and
technical service.
4
FMC's Agricultural Products segment competes in the global crop protection
market for insecticides and herbicides. The industry is characterized by a
small number of large competitors and a large number of smaller, often regional
competitors such as FMC. Industry products include crop protection chemicals
and, for major competitors, genetically engineered (crop biotechnology)
products. Competition from generic producers has increased as a significant
number of product patents have expired in the last decade. In general, FMC
competes as a product innovator by focusing on insecticide discovery and
development and licensing products from alliance partners when the products
complement FMC's product portfolio. FMC also differentiates itself by reacting
quickly in key markets, establishing effective product stewardship programs,
and developing strategic alliances, which strengthen market access in key
countries.
With leading or significant positions in markets that include alginate,
carrageenan, microcrystalline cellulose and lithium-based products, Specialty
Chemicals competes on the basis of product differentiation, customer service
and price. BioPolymer competes with both direct suppliers of cellulose and
seaweed extract as well as suppliers of other hydrocolloids, which may provide
similar functionality in specific applications. In cellulose, competitors are
typically smaller than FMC, while in seaweed extracts, FMC competes with other
broad-based chemical companies. Both of FMC's two most significant competitors
in lithium each extract the element from naturally occurring, lithium-rich
brines located in the Andes mountains of Argentina and Chile which are believed
to be the world's most significant and lowest cost sources of lithium.
Industrial Chemicals serves the alkali, hydrogen peroxide and phosphorus
markets predominantly in the United States and to a lesser extent, Europe. The
Alkali Chemicals Division is the world's largest producer of natural soda ash.
In North America, the soda ash business competes with five domestic producers
of natural soda ash, three of which operate in the vicinity of our mine and
processing facility in Green River, Wyoming. Outside of North America and
Europe, FMC sells soda ash through American Natural Soda Ash Corporation
(ANSAC), a foreign sales association organized under the Webb-Pomerene Act.
Internationally, FMC's natural soda ash competes with synthetic soda ash
manufactured by numerous producers, ranging from integrated multinational
companies to smaller regional players. The Hydrogen Peroxide Division maintains
a leading position in the North American market for hydrogen peroxide. There
are currently five firms competing in the hydrogen peroxide market in North
America. The primary competitive factor affecting the sales of soda ash and
hydrogen peroxide is price. FMC seeks to maintain its competitive position by
employing low cost processing technology. At Foret, FMC possesses a strong cost
and market position in phosphates, perborates, peroxygens, zeolites and sulfur
derivatives. In each of these markets FMC faces significant competition from a
range of multinational and regional chemical producers. FMC participates in the
phosphorus business in the United States through Astaris, FMC's joint venture
with Solutia Inc. Astaris competes primarily with Rhodia which is the only
other global producer competing with Astaris across a wide variety of
phosphorus chemicals in the North American market. Competition in phosphorus is
based primarily on price and product differentiation through customer service.
Research and Development Expense
FMC's research and development expenditures in the last three years are set
forth below:
Year Ended December 31,
-----------------------
2001 2000 1999
----- ----- ------
In Millions
Agricultural Products $72.5 $66.7 $ 60.9
Specialty Chemicals.. 15.9 19.1 21.2
Industrial Chemicals. 11.4 12.0 18.5
----- ----- ------
Total............. $99.8 $97.8 $100.6
===== ===== ======
Compliance with Environmental Laws and Regulations
See Note 13 "Environmental Obligations" in the company's 2001 consolidated
financial statements at pages 53 through 55 in this report which is
incorporated herein by reference.
5
Employees
FMC employs approximately 6,000 people in its domestic and foreign
operations. Approximately 18% of such employees are represented by collective
bargaining agreements in the United States. In 2002, one of the company's six
collective bargaining agreements will expire, covering less than 100 employees.
FMC believes that it maintains good employee relations and has successfully
concluded virtually all of its recent negotiations without a work stoppage. In
those rare instances where a work stoppage has occurred, there has been no
material effect on consolidated sales and earnings. FMC cannot predict,
however, the outcome of future contract negotiations.
Financial Information About Geographic Areas
See Table on "Geographic Segment Information Revenue and Long-lived Assets"
in Note 20 to the company's 2001 consolidated financial statements at page 66
in this report which is incorporated herein by reference.
ITEM 2. PROPERTIES
FMC leases executive offices in Philadelphia and subleases administrative
offices from Technologies in Chicago. The company operates 37 manufacturing
facilities and mines in 19 countries. Its major research facility is in
Princeton, NJ.
Trona ore, used for soda ash production in Green River, WY, is mined
primarily from property held under long-term leases. FMC owns the land and
mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. A
number of FMC's chemical plants require the basic raw materials which are
provided by these FMC-owned or leased mines, without which other sources would
have to be obtained. With regard to FMC's mining properties operated under
long-term leases, no single lease or related group of leases is material to the
businesses or to the company as a whole.
Most of FMC's plant sites are owned, with some under lease. FMC believes its
properties and facilities meet present requirements and are in good operating
condition and that each of its significant manufacturing facilities is
operating at a level consistent with capacity utilization prevalent in the
industries in which it operates. The number and location of FMC's production
properties for continuing operations are:
Latin
America
United And Western Asia-
States Canada Europe Pacific Total
------ ------- ------- ------- -----
Agricultural Products 5 1 -- 3 9
Specialty Chemicals.. 3 2 5 4 14
Industrial Chemicals. 5 1 8 -- 14
-- - -- -- --
Total............. 13 4 13 7 37
== = == == ==
ITEM 3. LEGAL PROCEEDINGS
See Note 1 "Principal Accounting Policies--Environmental Obligations," Note
13 "Environmental Obligations" and Note 19 "Commitments and Contingent
Liabilities" in the company's consolidated financial statements beginning on
page 32, page 53 and page 63, respectively, of this report which is
incorporated herein by reference.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of the Registrant
The executive officers of FMC Corporation, the offices currently held by
them, their business experience since January 1, 1997 and earlier and their
ages as of March 1, 2002, are as follows:
Age on Office, year of election and other
Name 3/1/2002 information
- ---- -------- ----------------------------------
William G. Walter 56 Chairman of the Board, Chief Executive Officer and President (01-present);
Executive Vice President (00); Vice President and General Manager--
Specialty Chemicals Group (97); General Manager--Alkali Division (92);
International Managing Director--Agricultural Products Group (91); Division
Manager, Defense Systems International (86); Director of Market/Sales--
Construction Equipment Group (82).
W. Kim Foster 53 Senior Vice President and Chief Financial Officer (01-present); Vice President
and General Manager--Agricultural Products Group (98); Director,
International, Agricultural Products Group (97-98); Division Manager, Airport
Products and Systems Division (91-97).
Robert I. Harries 58 Senior Vice President and General Manager Industrial Chemicals Group and
Shared Services (01-present); Vice President and General Manager--Chemical
Products Group (94).
Thomas C. Deas, Jr 51 Vice President and Treasurer (01-present); Vice President, Treasurer and CFO,
Applied Tech Products Corp. (98); Vice President, Treasurer and CFO, Airgas,
Inc. (97); Vice President, Treasurer and CFO, Maritrans, Inc. (96); Vice
President--Treasury and Assistant Treasurer, Scott Paper Company (88).
Milton Steele 53 Vice President and General Manager Agricultural Products Group (01-present);
International Director, Agricultural Products (99); General Manager
BioProduct Division (98); General Manager, Asia Pacific (96); Area Manager,
Asia Pacific (92).
Andrea E. Utecht 53 Vice President, General Counsel and Secretary (01-present); Senior Vice
President, Secretary and General Counsel, AtoFina Chemicals, Inc. (96).
Graham R. Wood 48 Vice President, Corporate Controller (01-present); Group Controller--
Agricultural Products Group (99); Chief Financial Officer--European Region
(95); Group Controller--FMC Foodtech (93).
No family relationships exist among any of the above-listed officers, and
there are no arrangements or understandings between any of the above-listed
officers and any other person pursuant to which they serve as an officer. All
officers are elected to hold office for one (1) year or until their successors
are elected and qualified.
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The company's common stock of $0.10 par value is traded on the New York
Stock Exchange, the Pacific Stock Exchange and the Chicago Stock Exchange
(Symbol: FMC). There were 8,022 registered common stockholders as of December
31, 2001. The 2001 and 2000 quarterly summaries of the high and low prices of
the company's common stock are represented herein under Item 8 (see Note 21
"Quarterly Financial Information" on page 67 of this report). No cash dividends
were paid in 2001, 2000 or 1999.
FMC's annual meeting of stockholders will be held at 2 p.m. on Tuesday,
April 23, 2002, at the Top of the Tower, 1717 Arch Street, 50/th/ Floor,
Philadelphia, PA 19103. Notice of the meeting, together with proxy materials,
will be mailed approximately 40 days prior to the meeting to stockholders of
record as of March 1, 2002.
Transfer Agent and Registrar of Stock: Shareholder Communications,
Computershare Investor Services, LLC, P.O. Box A3504, Chicago, IL 60690-3504.
A copy of this report on Form 10-K for 2001 is available upon written
request to: FMC Corporation, Communications Department, 1735 Market Street,
Philadelphia, PA, 19103.
ITEM 6. SELECTED FINANCIAL DATA
The company's summary of selected financial data and related notes for the
years 1997 through 2001 are included herein under Item 8 (see "Five Year
Summary of Selected Financial Data" on pages 68 and 69 of this report).
FORWARD-LOOKING INFORMATION
Statement under the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995: FMC Corporation ("FMC" or the "company") and its
representatives may from time to time make written or oral statements that are
"forward-looking" and provide other than historical information, including
statements contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations within, in the company's Annual Report, in
the company's other filings with the Securities and Exchange Commission, or in
reports to its stockholders. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different from any results, levels of activity, performance or achievements
expressed or implied by any forward-looking statement. These factors include,
among other things, the risk factors listed below.
In some cases, FMC has identified forward-looking statements by such words
or phrases as "will likely result," "is confident that," "expect," "expects,"
"should," "could," "may," "will continue to," "believe," "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 and phrases. Such forward-looking
statements 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. These 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. The
company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
In connection with the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995, the company is hereby identifying important
factors that could affect the company's financial performance and could cause
the company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
8
Among the factors that could have an impact on our ability to achieve
operating results and meet our other goals are:
Industry Risks:
Pricing and volumes in our markets are sensitive to a number of industry
specific and global issues and events including:
. Capacity Utilization--Our Industrial Chemicals businesses are sensitive to
industry capacity utilization. As a result, pricing tends to fluctuate
when capacity utilization changes occur within our industry.
. Competition--All of our segments face competition, which could affect our
ability to raise prices or successfully enter certain markets.
. Climatic Conditions--Our Agricultural Products markets are affected by
climatic conditions, which could adversely affect crop pricing and pest
infestations. The nature of these events makes them difficult to predict.
. Changing Regulatory Environment--Changes in the regulatory environment,
particularly in the United States, could adversely impact our ability to
continue selling certain products in our domestic and foreign markets.
. Changes in Our Customer Base--Our customer base has the potential to
change, especially when long-term supply contracts are renegotiated. Our
Industrial Chemical and Specialty Chemical businesses are most sensitive
to this risk.
. Energy Costs--Energy costs represent a significant portion of our
manufacturing costs and dramatic increases in such costs could have an
adverse affect on our results of operations.
. Unforeseen Economic and Political Change--Our business could be adversely
affected by unforeseen economic and political changes in the international
markets where we compete including: war, civil unrest, inflation rates,
recessions, trade restrictions, foreign ownership restrictions and
economic embargoes imposed by the United States or any of the foreign
countries in which FMC does business; change in governmental laws and
regulations and the level of enforcement of these laws and regulations;
other governmental actions; and other external factors over which we have
no control.
. Litigation and Environmental Risks--Current reserves relating to FMC's
ongoing litigation and environmental liabilities may prove inadequate.
. Production Hazards--Our facilities are subject to operating hazards, which
may disrupt our business.
Technology Risks:
. Failure to make continued improvements in our product technology and new
product introductions could impede our competitive position, particularly
in Agricultural Products and Specialty Chemicals.
. Failure to continue to make process improvements to reduce costs could
impede our competitive position.
Financial Risks:
. We have a significant amount of indebtedness, which could adversely affect
our financial condition and limit our ability to grow and compete
successfully in our markets. We also rely on a revolving credit facility
that requires renegotiation as circumstances warrant. This also subjects
us to the impact of changing interest rates.
9
. We have certain commitments and guarantees which could adversely affect
our liquidity and financial condition.
. We are an international company and therefore face foreign exchange rate
risks. We are particularly sensitive to the euro and the Brazilian real.
To a lesser extent, we are sensitive to Asian currencies, particularly the
Japanese yen.
. We have a number of agreements with our former subsidiary, FMC
Technologies, Inc., dealing with matters such as tax sharing and
insurance. Under certain circumstances, we may incur liabilities under
these agreements and become entitled to be indemnified by FMC
Technologies, Inc. Our ability to be indemnified will depend on the
ability of FMC Technologies, Inc. to pay us.
The company wishes to caution that the preceding list of important factors
may not be all inclusive and specifically declines 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.
With respect to forward-looking statements set forth in the notes to our
consolidated financial statements, including those relating to environmental
obligations, contingent liabilities and legal proceedings, some of the factors
that could affect the ultimate disposition of those contingencies are changes
in applicable laws, the development of facts in individual cases, settlement
opportunities and the actions of plaintiffs, judges and juries.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Reorganization of our Company
We implemented our plan to split FMC into separate chemical and machinery
companies in 2001 through a two-step process. The first step included an
initial public offering ("IPO") of 17 percent of our machinery businesses,
named FMC Technologies, Inc. ("Technologies"), which took place in the second
quarter of 2001. Technologies consists of our former Energy Systems and Food
and Transportation Systems business segments. Subsequent to the IPO,
Technologies made payments of $480.1 million to our company in exchange for the
net assets distributed to Technologies on June 1, 2001, which we used to retire
short-term and long-term debt. The second step, the distribution of our
remaining 83 percent ownership in Technologies (the "spin-off") occurred on
December 31, 2001. Total net assets distributed on December 31, 2001 were
$509.5 million.
We believe that the spin-off of Technologies will allow our company to focus
its efforts in the chemical industry through improved customer orientation,
increased innovation and overall growth. In an effort to align our business
with our future growth plans, we took various strategic measures, including the
restructuring of businesses, reduction of staff, plant shutdowns and the
writedown of certain underperforming assets. We believe these steps will
increase our company's financial flexibility as market conditions change.
Risk and our Significant Accounting Policies
As would be expected, these changes in our company have altered our overall
risk environment as described below and elsewhere in this report.
In addition to risk factors, we have also identified and reviewed our
significant accounting policies, all of which are described in Note 1 to our
consolidated financial statements, while noting that the preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and
assumptions that require judgment. These estimates and assumptions can
significantly affect the reported amounts of assets, liabilities, revenues and
expenses at the date of our financial statements and for the reporting periods
shown. Our disclosures of contingent assets and liabilities at the date of our
financial statements are similarly affected by estimates and assumptions.
10
Some of these accounting estimates and assumptions are particularly
sensitive because of their significance to our consolidated financial
statements and because of the possibility that future events affecting them may
differ markedly from what had been assumed when the financial statements were
prepared.
For example, we provide for environmental related obligations when they are
believed to be probable and amounts can be reasonably estimated. Also, we
review the recoverability of the net book values of our investments in
affiliates and, our fixed and intangible assets whenever events or
circumstances suggest that the net book value of these assets may not be
recoverable. When this is the case, we record an impairment loss. We also
continually assess the return on our business segments, which sometimes results
in a plan to restructure the operations of a business. When such a plan is
final, we record an accrual for severance and other contractual commitments and
obligations. Finally, our reserves for discontinued operations consist of
obligations for discontinued operations, for environmental remediation and
study obligations from some of our former chemical plant sites, and product
liabilities and other potential claims, including those related to retiree
medical and life insurance benefits. (See a further discussion on all of the
policies in Notes 1, 3, 6, 7, 11, 12 and 13 to our consolidated financial
statements.)
Results of Operations
General
All results discussed in this analysis address the continuing operations of
our chemical businesses. Technologies results have been reclassified to
discontinued operations within our consolidated statements of income and
consolidated statements of cash flows for the periods ended December 31, 2001,
2000 and 1999. Accordingly, the results of the Energy Systems and Food and
Transportation Systems business segments will not be included in the results of
operations discussion and analysis.
Our loss from continuing operations for the year ended December 31, 2001,
was $306.3 million compared to income of $125.6 million and $158.7 million in
2000 and 1999, respectively. Income from continuing operations before
cumulative effect of change in accounting principle, excluding special items
defined below for the year ended December 31, 2001, was $99.6 million compared
to $153.5 million and $132.0 million in 2000 and 1999, respectively. Special
items in 2001 consisted of asset impairments and restructuring and other
charges totaling $603.5 million ($405.9 million after tax). Special items in
2000 consisted of asset impairments and restructuring and other charges
totaling $45.3 million ($27.9 million after tax). Special items in 1999
consisted of asset impairments, restructuring and other charges and gains on
divestitures of businesses totaling a gain of $21.3 million ($26.7 million
after tax).
The following table displays the results for the years 2001, 2000 and 1999
through a reconciliation between as-reported income (loss) 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.
Years Ended December 31
-----------------------
2001 2000 1999
------- ------ ------
(In Millions)
Income (loss) from continuing operations before cumulative
effect of change in accounting principle--as reported............ $(306.3) $125.6 $158.7
Asset impairments.................................................. 323.1 10.1 23.1
Restructuring and other charges.................................... 280.4 35.2 11.1
Gains on divestitures of businesses................................ -- -- (55.5)
Tax effect of asset impairments, restructuring and other charges
and gains on divestitures of businesses.......................... (197.6) (17.4) (5.4)
------- ------ ------
Income from continuing operations before cumulative
effect of change in accounting principle, excluding special items $ 99.6 $153.5 $132.0
======= ====== ======
11
Results of Operations--2001 Compared to 2000
In the following discussion, "year" refers to the year ending December 31,
2001 and "prior year" refers to the year ending December 31, 2000. All
comparisons are between these periods unless otherwise noted.
Revenue was $1,943.0 million in 2001, down from $2,050.3 million in 2000.
Revenue in the United States decreased 8.6 percent compared with 2000, while
revenue outside the United States, including exports, decreased 2.2 percent
from 2000. Sales in the United States represented 45.4 percent of our 2001
revenue, slightly less than in 2000.
Income from continuing operations, before the cumulative effect of change in
accounting principle, net of income taxes, excluding asset impairments and
restructuring and other charges was $99.6 million in 2001 compared to $153.5
million in 2000. This decline can be attributed to an overall economic downturn
impacting the chemical industry worldwide and other factors discussed under
"Segment Results" below.
Asset impairments totaled $323.1 million ($233.8 million after tax) for 2001
compared to $10.1 million ($6.2 million after tax) in 2000.
Based upon a comprehensive review of our long-lived assets we recorded asset
impairment charges of $211.9 million related to our U.S. based phosphorus
business. The components of asset impairments related to this business, include
a $171.0 million impairment of environmental assets built to comply with a
Resource Conservation and Recovery Act ("RCRA") Consent Decree ("Consent
Decree") at the Pocatello, Idaho facility and a $36.5 million impairment charge
for our investment in Astaris, LLC ("Astaris"), our phosphorus joint venture
with Solutia, Inc. ("Solutia"). (See Notes 4 and 13 to our consolidated
financial statements.) Driving these charges were a decline in market
conditions, the loss of a potential site on which to develop an economically
viable second purified phosphoric acid ("PPA") plant and our agreement to pay
into a fund for the Shoshone-Bannock Tribes as a result of an agreement to
support a proposal to amend the Consent Decree permitting the earlier closure
of the largest remaining waste disposal pond at Pocatello. In addition, we
recorded an impairment charge of $98.9 million related to our Specialty
Chemicals segment's lithium operations in Argentina. We established this
operation, which includes a lithium mine and processing facilities,
approximately five years ago in a remote area of the Andes Mountains. With the
entry of a South American manufacturer into this business, resulting in
decreased revenues and following the continuation of other unfavorable market
conditions, our lithium assets in Argentina became impaired as the total
capital invested is not expected to be recovered. An additional $12.3 million
of charges related to the impairment of assets in our cyanide operations.
During the second quarter of 2000, we recorded asset impairments of $10.1
million ($6.2 million after tax). Impairments of $9.0 million were recognized
because of the formation of Astaris (see Note 4 to our consolidated financial
statements), including the write down of certain phosphorus assets retained by
our company and the accrual of costs related to our planned closure of two
phosphorus facilities. Other asset impairments were due to the impact of
underlying changes within the Specialty Chemicals segment.
See Note 1 to our consolidated financial statements for further discussion
on our accounting policies related to asset impairments.
Restructuring and other charges. A change in market conditions and in our
corporate strategy resulted in restructuring and other charges of $280.4
million ($172.1 million after tax) in the year. A charge of $35.2 million
($21.7 million after tax) was recorded in 2000.
We believe that the restructuring and other charges recorded in 2001 have
enabled us to engage in long-term growth opportunities for all of our business
segments. See Note 1 to our consolidated financial statements for further
discussion on our accounting policies related to restructuring and other
charges.
We had several minor restructuring activities related to corporate
reorganization in the first quarter of 2001 totaling approximately $1.0 million.
12
During the second quarter of 2001, we recorded $175.0 million in
restructuring and other charges including $160.0 million related to our
Industrial Chemicals segment's U.S. based phosphorus business. The components
included in restructuring and other charges related to the phosphorus business
were as follows: a $68.7 million reserve for further required Consent Decree
spending at the Pocatello site; $42.7 million of financing obligations to the
Astaris joint venture and other related costs; and a $40.0 million reserve for
payments to the Shoshone-Bannock Tribes and $8.6 million of other related
charges. In addition, restructuring charges for the quarter included $8.0
million related to our corporate reorganization. The remaining charges of $7.0
million were for the restructuring of two smaller chemical facilities. We
reduced our workforce by approximately 135 people in connection with these
restructuring activities.
During the third quarter of the year, we recorded restructuring charges of
$8.5 million. These charges were largely for reorganization costs and corporate
restructuring activities including severance and contract commitment costs.
(See Note 2 to our consolidated financial statements).
We recorded restructuring and other charges of $95.9 million in the fourth
quarter of 2001. Most of these charges related to our decision to shutdown
operations at Pocatello. These charges include: $36.3 million for our share of
Astaris shutdown costs including environmental cleanup, waste removal and other
activities; also included are $44.6 million of Pocatello costs related to plant
demolition, plant shutdown, severance and other activities. In addition, $12.5
million of severance and other costs related to the Agricultural Products
segment were recorded primarily as a result of our decision to refocus certain
research and development activities. The remaining charges reflected
restructuring initiatives in our Specialty Chemicals segment and in corporate.
We reduced our workforce by approximately 182 people in connection with the
third and fourth quarter restructuring activities.
During 2000, we recorded restructuring and other charges of $35.2 million
($21.7 million after tax). Restructuring charges of $20.6 million were
attributable to the formation of Astaris and the concurrent reorganization of
our Industrial Chemicals sales, marketing and support organizations, the
reduction of office space requirements in our Philadelphia chemical
headquarters and pension expense related to the separation of phosphorus
personnel from our company. In addition, we recorded environmental accruals of
$12.5 million because of increased cost estimates for ongoing remediation of
several phosphorus properties. Other restructuring charges included $2.1
million for other projects. Of the approximately 350 employee severances that
were expected to occur through the completion of these programs in 2000, 281
occurred at December 31, 2000 while the remainder occurred in 2001.
Income (loss) from continuing operations was a loss of $306.3 million in
2001 compared to income of $125.6 million in 2000. Most of the decline can be
attributed to after-tax asset impairments and restructuring and other charges
of $405.9 million in 2001 compared to after-tax charges of $27.9 million in
2000. Also contributing to the decline were poor economic conditions affecting
the chemical industry worldwide.
Corporate expenses (excluding restructuring and other charges in 2001 and
2000) were $36.3 million in 2001 and $36.2 million in 2000.
Other income and expense, net is comprised primarily of LIFO inventory
adjustments and pension income or expense. Net other expense for the year was
$1.6 million compared to net other income of $9.6 million in 2000. This
variance is largely attributable to increased pension costs and lower
amortization of a deferred pension asset.
Net interest expense in 2001 was $58.3 million compared to $61.8 million in
2000. The decrease in net interest expense in 2001 was primarily the result of
lower average debt levels during the year.
13
Provision (benefit) for income taxes. We recorded an income tax benefit of
$166.6 million in 2001 resulting in an effective tax rate of 35.2 percent
compared to income tax expense of $33.0 million and an effective tax rate of
20.8 percent in 2000. The differences between the effective tax rates for these
periods and the statutory U.S. Federal income tax rate relate primarily to
differing foreign tax rates, the impairment of certain Argentina assets,
foreign sales corporation benefits, incremental state taxes and non-deductible
goodwill amortization.
Discontinued operations. We recorded a loss from discontinued operations of
$42.5 million ($30.5 million after tax) in 2001. Included in this amount are
earnings of Technologies, including interest expense of $11.2 million, which
was allocated to discontinued operations in accordance with Accounting
Principles Board Statement No. 30 ("APB 30") and later relevant accounting
guidance, costs related to the spin-off and additional income tax provision
related to the reorganization of our worldwide entities in anticipation of the
separation of Technologies from FMC. In addition, we recorded a charge of $18.0
million for updated estimates of environmental remediation costs related to our
other discontinued businesses.
During 2000, we recorded a net loss from discontinued operations of $17.7
million ($15.0 million after tax). Of this amount, $64.0 million are earnings
of the spun-off Technologies business, including allocated interest expense of
$30.9 million. Also included are a $80.0 million loss for a settlement of
litigation related to our discontinued Defense Systems business and a charge of
$1.7 million for interest charges on postretirement benefit obligations.
Net income (loss). We recorded a net loss of $337.7 million for 2001
compared to net income of $110.6 million in 2000. This variance reflects the
effect of significant asset impairments and restructuring and other charges
recorded in 2001.
Additional information regarding discontinued operations and the related
accounting policies can be found in Notes 1, 3 and 20 to our consolidated
financial statements.
Segment Results--2001 Compared to 2000
(See Note 20 to our consolidated financial statements for detailed segment
results.)
Segment operating profit is presented before taxes, asset impairments and
restructuring and other charges. Information about how each of these items
relates to our businesses at the segment level is discussed below and in Note
20 to our consolidated financial statements.
Agricultural Products
Agricultural Products revenue decreased to $653.1 million in 2001 from
$664.7 million in 2000. Agricultural Products segment operating profit declined
to $72.8 million, down 17.1 percent from the prior year.
The decrease in Agricultural Products revenues was largely due to a lack of
sulfentrazone sales to E.I. du Pont de Nemours and Company ("DuPont") in 2001.
In 1998 we entered into an exclusive agreement with DuPont to provide them
sulfentrazone in North America for use on soybeans. However, the sale of
formulated products incorporating sulfentrazone did not reach expectations and
the contract purchases were cancelled in 2001. DuPont no longer has exclusive
rights to the use of sulfentrazone on soybeans in North America. We began
developing new markets in 2001, expanding our sulfentrazone sales, including
sales into the soybean market in North America. We believe that we have
recovered approximately one third of the sulfentrazone volumes lost from the
absence of DuPont's purchases. Somewhat offsetting the sulfentrazone sales
decline in North America was an increase in carfentrazone sales into the rice
and cotton defoliation markets as a result of new product registrations. We
believe that sulfentrazone sales will increase slightly in 2002; however, we
will idle our production facility early in 2002 to allow product inventories to
align with expected sales volumes.
14
Agricultural Products sales were also affected by weakened Asian markets due
to depressed crop prices, unfavorable climatic conditions and lower pricing in
some Asian markets due to weaker exchange rates. Asian revenue shortfalls were
offset by stronger demand for herbicides in Latin and South America due mainly
to the introduction of several new herbicide registrations in 2001.
Agricultural Products operating profit declined to $72.8 million from $87.8
million as a result of a decline in operating margins to 11.1 percent in 2001
from 13.2 percent in 2000. This lower profitability reflects reduced volumes of
sulfentrazone, weaker pricing due to lower crop prices, and weaker currencies
in Asia and Brazil. The adverse impact of the lower sulfentrazone volumes in
North America was significantly offset by a one time contract penalty payment
from DuPont of $20.0 million which was paid in the first half of 2001.
Additionally, Agricultural Products incurred higher selling costs in North
America in 2001 as it pursued new sulfentrazone markets through direct selling
instead of through DuPont's sales channels.
During the fourth quarter of 2001, Agricultural Products began a
restructuring of its operations to focus on key markets and products. We will
concentrate our future research and development ("R&D") activities on our core
strength of insecticides and reduce all work on herbicides, while continuing
our efforts to maximize the market potential of already commercialized
herbicide chemistries including clomazone, carfentrazone and sulfentrazone.
Additionally, we have reduced our direct sales and support staffs outside
North, South and Latin America, relying instead on new and expanded strategic
alliances with Ishihara Sangyo Kaisha, Ltd ("ISK") in Asia and Belchim in
Europe. A restructuring charge of $12.5 million ($7.8 million after tax) was
taken in the fourth quarter to implement these plans. This restructuring should
be complete by the end of the first quarter 2002.
We believe that Agricultural Products will have a challenging year in 2002,
but the actions we have taken to expand product labels, improve market access
and reduce costs should allow us to recover the earnings decline that resulted
from the loss of DuPont's sulfentrazone business.
Specialty Chemicals
Specialty Chemicals revenue was $472.0 million in 2001, down from $488.8
million in 2000 due to lower revenue in both the FMC BioPolymer AS
("BioPolymer") and Lithium businesses. Specialty Chemicals segment operating
profit declined to $87.5 million, or 5.3 percent from $92.4 million in the
prior year.
BioPolymer revenue decreases resulted from a combination of weaker demand
and lower selling prices for alginate and carrageenan in specialty markets,
partially offset by strong growth from microcrystalline cellulose in the
pharmaceutical and food ingredients markets. Specialty markets, which include
pet food, textiles and household products, experienced the impacts of a slowing
economy and lower competitor pricing. Customer inventory corrections and a weak
euro also drove sales lower.
Lithium revenue decreases resulted from our strategic exit from the
commodity lithium carbonate market and slower industrial markets, particularly
in Europe. The lithium carbonate market has experienced substantially lower
prices since the entry of a new competitor in 1997 which resulted in our
decision to exit the market. These sales declines were offset by continued
growth in lithium specialty products.
Specialty Chemicals operating profit decreased to $87.5 million in 2001 from
$92.4 million in 2000 despite relatively flat operating margins as compared to
2000. The decrease in operating profit can be attributed to a decrease in
BioPolymer volumes and prices in the pet food, textile and household products
markets offset, in part, by lower operating costs and an improved mix in
lithium. A weaker euro, compared to the prior year, also unfavorably impacted
earnings.
15
Industrial Chemicals
Industrial Chemicals revenue decreased to $822.0 million in 2001, compared
to $905.6 million in 2000. Industrial Chemical segment operating profit
declined by 36.6 percent to $72.6 million in 2001 from $114.5 million in 2000.
Revenue decreases reflected weaker demand in most markets for Industrial
Chemicals. Weaker end-market demand for glass and the entry of a new competitor
resulted in lower soda ash volumes and revenue compared to the prior year.
Price increases announced in the late summer of 2001 are not expected to have
any material effect on revenues until 2002. In hydrogen peroxide, weakness in
the pulp and textile markets resulted in decreased revenues despite the price
increases initiated in late 2000 and the application of an energy surcharge in
early 2001. Softer demand in the polymer and electronics end-markets also
resulted in lower volumes for specialty peroxygens.
Foret, our Spain-based operation, recorded increases in sales that reflected
strong phosphate and zeolite markets. Phosphate volumes improved as a result of
a recovery in their export markets, particularly in the Middle East and North
Africa. Zeolite sales increased as a result of an acquisition in the third
quarter of 2001 and stronger sales to new and existing customers. Conversely,
peroxygen sales declined on lower export sales. Foret's increase in sales was
offset by unfavorable translation, due to a weaker euro in 2001.
These revenue comparisons were further affected by the inclusion of the
sales of our U.S. based phosphorus business in the first three months of 2000.
Subsequent U.S. phosphorus sales have been deconsolidated and recorded in
earnings from equity investments as part of Astaris, which was formed effective
April 1, 2000 (see Note 4 to our consolidated financial statements). We account
for Astaris on an equity basis for Industrial Chemicals and therefore, the
sales of Astaris are not reflected in our consolidated revenues after March
2000.
Industrial Chemicals operating profit (net of minority interests) decreased
36.6 percent to $72.6 million in 2001 from $114.5 million in 2000. Driving the
Industrial Chemicals segment's profit decreases were lower sales volumes in
hydrogen peroxide, soda ash and active oxidants and reduced earnings from
Astaris, as discussed below. Additionally, during 2000 we hedged our natural
gas requirements for 2001, which, due to the forward pricing in the market at
that time, resulted in generally higher gas costs in 2001 versus the prior
year. Offsetting these unfavorable factors were increased pricing in several
products.
Our U.S. based phosphorus business is comprised of our 50 percent interest
in Astaris for the manufacture and sale of our phosphorus-based products, and
the activities of our corporate phosphorus division, which manages remediation
and other environmental projects associated with the Astaris elemental
phosphorus plant in Pocatello, Idaho. Astaris has experienced a difficult
business environment as a result of the economic slowdown and significant
changes in its manufacturing and sourcing strategy. During the first quarter of
2001, Astaris was asked by its electric power provider, Idaho Power Company, to
assist in combating the energy crisis in the state of Idaho. Historically, the
Astaris elemental phosphorus facility has been the largest consumer of power in
the state. Astaris agreed to work with Idaho Power and signed a two-year
agreement to resell 50 megawatts of power to Idaho Power at rates below the
then current market prices, but above the rate paid by Astaris under its power
contract. The gross economic value of the power contract, in the nine months of
2001 during which the contract was in effect, was $68.0 million of which half,
or $34.0 million, is reflected in FMC's earnings in Astaris. However, this
decision required Astaris to shutdown one of the two remaining operating
furnaces in Pocatello and to source raw materials including purified phosphoric
acid and other products from third-party suppliers at an additional cost to
Astaris of approximately $60.0 million ($30.0 million is reflected in FMC's
earnings in Astaris). This significant restructuring of the supply chain also
adversely impacted Astaris' sales. Sales declined due to the intentional
reduction of volume capacity and Astaris' inability to meet customer material
needs. In December 2001, the Idaho Public Utility Commission ("IPUC") was
petitioned by its staff to reduce the future amounts to be paid to Astaris
under the power resale contract. This petition is subject to the approval of
the full IPUC, which is expected to make a decision later in 2002. Any adverse
decision would be subject to appeal.
16
Additionally, the start-up of the new Astaris PPA plant in Soda Springs,
Idaho in the second half of the year added costs in 2001. Start-up costs for
this plant are expected to continue until early 2002.
Our corporate phosphorus division also affected segment operating profit in
2001. Working with the EPA and the Shoshone-Bannock Tribes we agreed to amend
the July 1999 Consent Decree to permit the capping of a specific waste disposal
pond at the Pocatello site. As part of this settlement, FMC agreed to
contribute $40.0 million to a fund for the Tribes to support various Tribal
activities. ($30.0 million was paid during 2001). This agreement enabled
Astaris to shutdown the Pocatello operation in December 2001.
We expect the results of our U.S. based phosphorus operations to improve in
2002. The new Astaris PPA plant in Idaho should be fully operational in early
2002 and start-up expenses experienced in 2001 should be significantly less in
2002. In addition, spending by the corporate phosphorus division will be lower
in 2002 compared with 2001 due to lower spending on projects under the Consent
Decree. We believe the shutdown of the elemental phosphorus production at
Pocatello will enable Astaris to lower its costs by increasing the share of the
supplies it obtains from lower cost purified phosphoric acid.
Following this challenging year, we believe that results in the Industrial
Chemicals segment will improve in 2002. We will continue to focus on lowering
the cost of production and we expect to benefit from the 2001 restructuring of
our U.S. phosphorus business. However, market demand is expected to continue to
be weak through most of 2002 partially offsetting the improvements in our U.S.
phosphorus business.
Results of Operations - 2000 Compared to 1999
Revenue was $2,050.3 million in 2000, down from $2,320.5 million in 1999.
Revenue in the United States decreased 17.3 percent compared with 1999, while
revenue outside the United States, including exports, decreased by less than
5.9 percent when compared to 1999. Sales in the United States represented 47.1
percent of our 2000 revenue compared to 50.3 percent in 1999.
Revenue. Lower revenue in 2000 when compared with 1999 was principally
attributable to the contribution of our phosphorus operations to a joint
venture and to divestitures of other businesses, and was offset by revenue from
a Specialty Chemicals business acquired in 1999. Beginning April 1, 2000, sales
of phosphorus chemicals were recorded by Astaris and are not reflected as
revenue in our consolidated financial statements. Our interest in Astaris is
accounted for under the equity method and our share of Astaris' operating
earnings is included in operating profit for our Industrial Chemicals segment.
(See Note 4 to our consolidated financial statements.)
Income from continuing operations, before the cumulative effect of change in
accounting principle, net of income taxes excluding asset impairments and
restructuring and other charges (in 2000 and 1999) and gains on divestitures of
businesses (in 1999) was $153.5 million in 2000 compared with $132.0 million in
1999. This increase reflects the performance of our business segments discussed
more fully below and in Note 20 to our consolidated financial statements.
Gains on divestitures of businesses. On July 9, 1999, we completed the sale
of our bioproducts business to Cambrex Corporation for $38.2 million in cash,
resulting in a pre-tax gain of $20.1 million. Our bioproducts business was
included in our Specialty Chemicals segment and had 1999 revenue of $13.3
million (through the date of divestiture).
On July 31, 1999, we completed the sale of our process additives business to
Great Lakes Chemical Corporation for $161.1 million in cash, resulting in a
gain of $35.4 million on both a pre-tax and after-tax basis. Our process
additives business was included in our Specialty Chemicals segment and had 1999
revenue of $98.5 million (through the date of divestiture).
17
Asset impairments recorded by the company amounted to $10.1 million ($6.2
million after tax) and $23.1 million ($14.1 million after tax) for the years
ended December 31, 2000 and 1999, respectively.
During the second quarter of 2000, we recorded asset impairments of $10.1
million. Impairments of $9.0 million were recognized as a result of the
formation of Astaris (see Note 4 to our consolidated financial statements),
including the writedown of certain phosphorus assets retained by our company
and the accrual of costs related to the planned closure of two phosphorus
facilities. Other impairments were due to the impact of underlying changes
within the Specialty Chemicals segment.
In the third quarter of 1999, we recorded asset impairments of $23.1
million. Asset impairments of $14.7 million were required to write off the
remaining net book values of two U.S. lithium facilities. Both facilities were
constructed to run pilot and development quantities for new lithium-based
products. During the third quarter of 1999, management determined that it would
not be feasible to use the facilities as configured. Additionally, an
impairment charge of $8.4 million was required to write off the remaining net
book value of a caustic soda facility in Green River, Wyoming. Estimated future
cash flows related to this facility indicated that an impairment of the full
value had occurred.
Restructuring and other charges. Total restructuring and other charges of
$35.2 million ($21.7 million after tax) were recorded in 2000 compared to $11.1
million ($6.8 million after tax) in 1999.
Restructuring charges of $20.6 million were attributable to the Astaris
formation and the concurrent reorganization of our Industrial Chemicals sales,
marketing and support organizations, the reduction of office space requirements
in our Philadelphia chemical headquarters and pension expense related to the
separation of phosphorus personnel from our company. In addition, we recorded
environmental accruals of $12.5 million because of increased cost estimates for
ongoing remediation of several phosphorus properties. Other restructuring
charges included $2.1 million for several smaller projects.
In the third quarter of 1999, we recorded restructuring and other charges of
$11.1 million ($6.8 million after tax). Restructuring and other charges of $9.2
million resulted primarily from strategic decisions to divest or restructure a
number of businesses and support departments, including certain Agricultural
Products and corporate and shared service support departments. The remaining
charge related to actions, including headcount reductions, required to achieve
planned synergies from acquisitions of businesses in Specialty Chemicals.
Income (loss) from continuing operations of $125.6 million in 2000 was lower
when compared with $158.7 million in 1999, primarily resulting from gains on
divestitures of businesses in 1999 and higher restructuring and other charges
recorded in 2000.
Corporate expenses (excluding restructuring and other charges in 2000 and
1999) of $36.2 million in 2000 reflected a decrease of $5.1 million from 1999.
The company's cost reduction efforts are responsible for this trend.
Net interest expense was $61.8 million and $76.4 million during 2000 and
1999, respectively. The decrease in 2000 was the result of lower average debt
levels when compared with 1999.
Other income and expense, net is comprised primarily of LIFO inventory
adjustments and pension and postretirement plan adjustments. Other income of
$9.6 million remained relatively flat when compared to $9.3 million recorded in
1999.
Discontinued operations. During 2000, we recorded a net loss from
discontinued operations of $17.7 million ($15.0 million after tax). Of this
amount, $64.0 million represents the earnings of the spun-off Technologies
business including interest expense of $30.9 million allocated to discontinued
operations in accordance with APB 30 and later relevant accounting guidance.
Also included is a $80.0 million loss for a settlement of litigation related to
our discontinued Defense Systems business and a charge of $1.7 million for
interest charges on postretirement benefit obligations.
18
We recorded net income from discontinued operations of $73.5 million ($53.9
million after tax) in 1999. Of this amount, $79.2 million related to the
earnings of the spun-off Technologies businesses including allocated interest
expense of $30.3 million. Results of discontinued operations in 1999 included
gains of $53.7 million from the sale of properties in California that were
formerly used by our divested defense business (as discussed below). In
addition, in the fourth quarter of 1999, we provided $59.4 million in response
to updated estimates of environmental remediation costs, primarily at our
former Defense Systems sites, and increased estimates of our liabilities for
general liability, workers' compensation, postretirement benefit obligations,
legal defense, property maintenance and other costs.
During the year ended December 31, 1999, we sold several real estate
properties formerly used by United Defense, L.P., and our Defense Systems
operations divested by our company in 1997. In the second quarter of 1999, we
received $33.5 million in cash, recognizing a gain of $29.5 million, and in the
fourth quarter of 1999, we received $31.0 million in cash, recognizing a gain
of $24.2 million related to property sales.
Net income in 2000 was $110.6 million compared to $212.6 million in 1999.
Contributing to this decrease was a one-time gain of $55.5 million related to
the divestiture of a Specialty Chemicals business in 1999 offset by a charge of
$66.7 million to discontinued operations in 2000 related to our former Defense
Systems business segment.
Segment Results - 2000 Compared to 1999
Agricultural Products
Agricultural Products revenue increased to $664.7 million in 2000 compared
to $632.4 million in 1999. Operating profits increased to $87.8 million in 2000
compared to $64.3 million in 1999.
Agricultural Products revenue increased because of stronger sales in Latin
and North America, which more than offset lower sales in Asia. North American
revenue improved after a return to more normal pest pressures following 1999's
unusually low levels. Latin American sales improved due to a rapid recovery
from the devaluation of the Brazilian real in 1999, a new distribution
agreement for third-party products in Brazil and a stronger Mexican market.
Increased revenue in 2000 also reflected higher volumes for herbicides and
pyrethroids, offset by lower sales of carbamates.
Operating profits in our Agricultural Products segment increased to $87.8
million in 2000 from $64.3 million in 1999 on increased volumes and lower
costs, partially offset by higher research and development spending to develop
a new herbicide and to fund our strategic alliance with Devgen, a Belgian
biotechnology company, to support the company's insecticide discovery program.
Specialty Chemicals
Specialty Chemicals revenue was $488.8 million in 2000, down from $564.5
million in 1999. Operating profit was $92.4 million compared to $73.5 million.
Lower revenue in 2000 reflected our divestitures of the process additives
and bioproducts businesses, both of which occurred in the third quarter of
1999, and the effect of unfavorable foreign currency exchange rates. Partially
offsetting this decrease in 2000 was revenue from Pronova Biopolymer AS, an
alginate business acquired in mid-1999. The Pronova Biopolymer operation was
combined with certain carrageenan and microcrystalline cellulose businesses and
renamed FMC BioPolymer AS. BioPolymer's revenue reflected a strong market for
pharmaceutical and food-grade microcrystalline cellulose along with growth in
sales to Latin America and Asia, but was partially offset by the impact of
foreign currency translation of the euro to the U.S. dollar.
19
Sales of lithium products were up slightly in 2000. Increased revenue
reflected higher volumes of butyllithium to the polymer and pharmaceutical
markets. Lithium volume increases were offset by lower pricing, primarily the
result of weak European currencies.
Specialty Chemicals' operating profit in 2000 increased to $92.4 million
from $73.5 million in 1999. BioPolymer's increased profitability was based on
lower manufacturing costs in 2000 for carrageenan and realized synergies
associated with the acquisition of the alginate product line when compared with
1999. Lithium's improved operating profitability in 2000 when compared with
1999 was a result of higher sales, and the successful implementation of
manufacturing cost reduction initiatives.
Industrial Chemicals
Industrial Chemicals revenue decreased to $905.6 million in 2000 from
$1,141.3 million in 1999. Operating profit (net of minority interests) declined
to $114.5 million in 2000 from $144.4 million in 1999.
Lower revenue was primarily the result of the contribution of the phosphorus
business to the newly formed Astaris joint venture, effective April 1, 2000.
After that date, phosphorus revenue was no longer consolidated with our
revenue. Phosphorus revenue of $327.0 million through December 31, 1999 is
included in 1999 segment revenue, while revenue in 2000 before the joint
venture formation amounted to $79.2 million. Subsequent to the first quarter of
2000, our equity share of Astaris' earnings was included in segment operating
profit for Industrial Chemicals.
Other factors contributing to reduced revenue were the translation impact of
the weaker euro and competitive pressures both at Spain-based FMC Foret and at
Astaris. Partially offsetting the decline in revenue were increased sales of
hydrogen peroxide, reflecting both volume and price increases compared with
1999, and soda ash, a result of the Tg Soda Ash acquisition in mid-1999.
Reduced profitability for Industrial Chemicals to $114.5 million in 2000 was
primarily the result of increased energy costs for all businesses, but
especially at Astaris, while foreign currency translation losses negatively
affected reported operating profitability at Foret. In addition, segment
profits were down due to phosphorus environmental compliance costs retained by
our company for design, implementation and depreciation of capital assets in
Pocatello, Idaho in connection with the Consent Decree.
Offsetting these declines in profitability were higher earnings for soda ash
and hydrogen peroxide. Soda ash profitability increased in 2000, reflecting the
Tg Soda Ash acquisition and reduced costs despite significant increases in
energy prices. Hydrogen peroxide's favorable operating profits were largely the
result of a strong pulp and paper market. In addition, our share of Astaris'
results reflected the cost reduction benefits of the joint venture's
rationalization and restructuring programs.
Taxes
Although our domestic earnings (losses) are generally subject to tax expense
(benefit) at the statutory rate of 35.0 percent, many factors alter our
consolidated tax rate. These factors include non-deductible or non-taxable
transactions related to goodwill or other items, differing foreign tax rates,
state tax increments, depletion, extraterritorial income exclusion, and other
permanent differences. Our effective tax rate of 35.2 percent on income from
continuing operations in 2001 also includes the beneficial impact of deductible
restructuring and impairment charges recorded during the year. (See Notes 6, 7
and 10 to our consolidated financial statements.)
New Accounting Standards Adopted
On January 1, 2001 we adopted Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS No. 138, "Accounting for Certain
20
Derivative Instruments and Certain Hedging Activities," an amendment of SFAS
No. 133. These Statements establish accounting and reporting standards that
require every derivative instrument to be recorded on the consolidated balance
sheet as either an asset or a liability measured at its fair value. SFAS No.
133, as amended, requires the transition adjustment resulting from adopting
these Statements to be reported in net income or accumulated other
comprehensive income, as appropriate, as the cumulative effect of change in
accounting principle. On January 1, 2001, we recorded the fair value of all
outstanding derivative instruments as assets or liabilities on the consolidated
balance sheet. The transition adjustment was a $0.9 million after-tax loss to
earnings and a $16.4 million after-tax gain to accumulated other comprehensive
income (loss). Both components of the adjustment were recorded as a cumulative
effect of change in accounting principle.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations." SFAS No. 141 requires that all business
combinations be accounted for by the purchase method and adds disclosure
requirements related to business combination transactions. SFAS No. 141 also
establishes criteria for the recognition of intangible assets apart from
goodwill. This Statement applies to all business combinations for which the
acquisition date was July 1, 2001 or later. We had no significant acquisitions
during 2001. We intend to implement the provisions of SFAS No. 141 in any of
our future business combinations.
On June 30, 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which establishes guidelines for the financial accounting
and reporting of acquired goodwill and other intangible assets. With the
adoption of SFAS No. 142, goodwill is no longer subject to amortization;
rather, it will be subject to at least an annual assessment for impairment by
applying a fair value based test. We are required to adopt the provisions of
this pronouncement no later than the beginning of 2002, however, goodwill and
other intangible assets acquired after June 30, 2001, are subject immediately
to the amortization provisions of this statement. We had no material
acquisitions of goodwill or other intangibles in the second half of 2001. We
will adopt the amortization provisions of SFAS No. 142 beginning in the first
quarter of 2002. During 2001, 2000 and 1999, goodwill and other intangible
amortization (pretax and after discontinued operations) was $19.4 million,
$13.5 million and $12.0 million, respectively. We believe adopting SFAS No. 142
will result in approximately a $4.0 million pre-tax benefit to earnings in 2002.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. We are required to adopt the provisions
of this pronouncement no later than the beginning of 2003 and are evaluating
the potential impact of adopting SFAS No. 143.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of." The Statement also supersedes APB No. 30 provisions related
to the accounting and reporting for the disposal of a segment of a business.
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 in SFAS No. 121 related to the
recognition of impairment of long-lived assets to be held and used. The
Statement is effective for years beginning after December 15, 2001. We are
evaluating the potential impact of adopting SFAS No. 144.
Environmental Obligations
Our company, like other industrial manufacturers, is involved with a variety
of environmental matters in the ordinary course of conducting its business and
is subject to federal, state and local environmental laws. We believe strongly
that we have a responsibility to protect the environment, public health and
employee safety. This responsibility includes cooperating with other parties to
resolve issues created by past and present handling of wastes.
21
When issues arise, including notices from the Environmental Protection
Agency or other government agencies identifying our company as a Potentially
Responsible Party ("PRP"), our environmental remediation management assesses
and manages the issues. When necessary, we use multifunctional teams composed
of environmental, legal, financial and communications personnel to ensure that
our actions are consistent with our responsibilities to the environment and
public health, as well as to our employees and shareholders.
Environmental provisions totaling $68.8 million ($42.0 million after tax)
were recorded this year. These provisions largely related to the remediation of
the Pocatello site as discussed in Note 13 of our consolidated financial
statements. Also included were costs related to continued cleanup of certain
discontinued manufacturing operations from previous years. This provision and
those made in 2000 and 1999, and our accounting policies on environmental
remediation, are more fully described in Notes 1 and 13 to our consolidated
financial statements.
In the second quarter of 2000, we provided environmental reserves totaling
$12.5 million related to ongoing remediation of several phosphorus
manufacturing properties as part of the restructuring and other charges
described previously.
Additional information regarding our environmental accounting policies and
environmental liabilities is included in Notes 1 and 13, respectively, to our
consolidated financial statements. Information regarding environmental
obligations associated with our discontinued operations is included in Note 3
to our consolidated financial statements. Estimates of 2002 environmental
spending are included in the section below entitled "Cash Flow Analysis."
Liquidity and Capital Resources
In 2001, we experienced the net cash impact of significant special items
recorded in the year and spending related to the spin-off of Technologies. This
spending was somewhat offset by the cash proceeds received in the IPO of
Technologies. Cash from operations, supplemented with proceeds from the IPO and
a new credit facility, provided funding for our capital spending program, debt
pay down and interest payments throughout 2001.
Capital expenditures totaling $145.6 million in 2001, which included $41.2
million of required Pocatello Consent Decree spending, were down 26.2 percent
from 2000. We believe capital expenditures will be reduced in 2002, largely
because of the absence of this Consent Decree spending. Principal categories of
capital spending in 2002 include replacement of existing plant equipment and
compliance spending related to environmental and safety standards.
We retired $128.3 million of long-term debt in 2001, in part with a portion
of the proceeds from the IPO of Technologies. Cash paid for interest in 2001
was $79.1 million compared with $101.6 million in 2000. This decrease can be
attributed to lower average debt levels in 2001 compared to 2000.
Future cash needs include the scheduled repayment of several significant
financings over the next two years, operating cash requirements and capital
expenditures. We plan to meet these liquidity needs through cash generated from
operations, commercial paper borrowings, accounts receivable securiti-zation,
borrowings under bank credit facilities, and if necessary, the issuance of
additional long-term debt. We maintain a universal shelf registration under
which, at December 31, 2001, $345.0 million of securities could be issued.
We currently maintain a commercial paper financing program with outstanding
borrowings at December 31, 2001 of $33.0 million compared to $16.8 million at
December 31, 2000.
22
Our total committed contracts that will affect cash over the next five years
and beyond are as follows:
Expected Cash Payments by Year
----------------------------------
2006 &
Contractual Commitments 2002 2003 2004 2005 beyond Total
- ----------------------- ------ ------- ----- ------ ------ --------
(In Millions)
Short-term debt.............................. $136.5 $ -- $ -- $ -- $ -- $ 136.5
Long-term debt............................... 135.2 182.2 0.5 89.5 379.6 787.0
Lease obligations............................ 25.8 24.9 23.3 22.7 103.2 199.9
Forward energy and foreign exchange contracts 16.2 6.2 2.4 1.1 -- 25.9
Guarantees of vendor financing............... 56.0 -- -- -- -- 56.0
------ ------- ----- ------ ------ --------
Total........................................ $369.7 $ 213.3 $26.2 $113.3 $482.8 $1,205.3
====== ======= ===== ====== ====== ========
Our five-year, non-amortizing committed revolving credit agreement expired
in December 2001. There were no outstanding balances under this agreement at
the due date. At the same time we entered into a new $240.0 million committed
revolving credit facility to meet certain operating cash needs, capital
expenditures, and commercial paper demands. This credit facility will expire in
December 2002. The total amount outstanding under this facility at December 31,
2001 was $68.0 million, which was used to pay down outstanding commercial
paper. The credit agreement contains financial covenants related to leverage
(measured as the ratio of debt to adjusted earnings), interest coverage
(measured as the ratio of interest expense to adjusted earnings) and
consolidated net worth. We were in compliance with the covenants as of December
31, 2001. We expect to renew or replace this credit facility prior to its
expiration. In January 2002, we arranged a supplemental $50.0 million committed
credit facility to meet short-term seasonal financing needs. This credit
facility expires on August 31, 2002.
We also obtain financing through an accounts receivable securitization. We
sell receivables, without recourse, through our wholly owned bankruptcy-remote
subsidiary, FMC Funding Corporation, which then sells the receivables to an
unrelated finance company. The sold receivables and repurchase obligations
related to the financing are not recorded on our consolidated balance sheets,
because we have limited risk to repurchase the receivables. The financing from
the securitization totaled $79.0 million at December 31, 2001 compared to
$113.0 million on December 31, 2000. The agreement for the sale of accounts
receivable provides for the continuation of the program on a revolving basis
through November 2002. We expect to renew or replace this financing prior to
its expiration.
At December 31, 2001, long-term debt included $28.8 million of 6.75 percent
Exchangeable Senior Subordinated Debentures due 2005. (See Note 11 to our
consolidated financial statements.) These debentures are callable by FMC at par
plus accrued interest upon at least 30 days' prior notice. These debentures are
exchangeable by the holders at any time into the common stock of Meridian Gold,
Inc. (NYSE: MDG), the successor to a former subsidiary of FMC, at an exchange
price of $15.125 per share, subject to adjustment. FMC may elect to pay the
holders in cash an amount equivalent to the value of the Meridian Gold common
stock into which the holders could exchange their debentures. At December 31,
2001, FMC did not hold any shares of Meridian Gold common stock. On February
19, 2002, the closing price of Meridian Gold common stock on the New York Stock
Exchange was $13.16. If the price goes above $15.125, it is reasonably likely
that during 2002 the holders would exercise their exchange rights.
Long-term debt also includes $44.3 million of variable rate industrial and
pollution control revenue bonds that are supported by bank letters of credit.
The letters of credit generally have a term of thirteen months and extend each
month for an additional month unless and until the bank sends us a letter of
non-renewal. At December 31, 2001, no notice of non-renewal had been received.
23
The current rating of our commercial paper and similar short-term
indebtedness is A-3 by Standard & Poor's Ratings Group ("S&P") and P-3 by
Moody's Investors Service, Inc. ("Moody's"). The market for commercial paper
with this rating is limited. The current rating of our senior unsecured
long-term indebtedness is BBB- by S&P and Baa3 by Moody's. A downgrade in our
credit ratings, which may be changed, superseded or withdrawn at any time,
could increase the cost and restrict the availability of future financings. The
following table displays credit facilities, debt obligations and other items
along with the cash payments that could be required to repay them, if required
following a downgrade or series of downgrades in our credit rating:
Potential
Cash
Facility Payments
-------- -------------
(In Millions)
Commercial paper..................... $33.0
Accounts receivable securitization(1) $79.0
Forward energy contracts............. $13.3
- --------
(1) Program terminates upon a reduction in rating to Ba2 by Moody's or BB by
S&P or below
Our future liquidity could be affected by certain letters of credit,
commitments and guarantees we provide to vendors, customers and others for
which we are contingently liable. In connection with the spin-off of
Technologies, we retained liability for various contingent obligations totaling
$289.0 million at December 31, 2001. Contingent obligations include guarantees
of the performance of Technologies under various customer contracts,
reimbursements on behalf of Technologies under letters of credit and surety
bonds, and guarantees of indebtedness of Technologies. We have a guarantee from
Technologies providing for reimbursement to us if we are ever called upon to
satisfy these obligations. Technologies has obtained contractual releases of
FMC reducing the level of liabilities for which we are contingently liable to
$175.0 million at February 12, 2002. Because our expectation that the
underlying obligations will be met and the existence of the guarantee from
Technologies, we believe it is unlikely that we would have to pay any of these
contingent obligations and expect this contingent liability to continue to be
reduced throughout 2002. The majority of these obligations will expire before
the end of 2003.
We have provided an agreement to lenders of Astaris under which we have
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 2001 and we do not expect that such earnings
will meet the levels agreed for 2002. We contributed $31.3 million to Astaris
under this arrangement in 2001 and expect to contribute a similar amount in
2002. The proportional amount of Astaris indebtedness subject to this agreement
from FMC at December 31, 2001 was $111.9 million. Our estimates of future
contributions are based on Astaris forecasts and are subject to some
uncertainty.
We provide guarantees to financial institutions on behalf of certain
Agricultural Products customers for their seasonal borrowing. The customers'
obligations to us are largely secured by liens on their crops. The total of
these guarantees at December 31, 2001 was $56.0 million. (See Note 19 to our
consolidated financial statements.)
On June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. ("TgSA") 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 but could be as much as
$75.0 million.
Our ability to pay the principal and interest on our indebtedness as it
comes due will depend upon our current and future performance. Our performance
is affected by general economic conditions and by financial, competitive,
political, business and other factors. Many of these factors are beyond our
control. We believe that the cash generated from our businesses coupled with
our ability to obtain financing will be sufficient to enable us
24
to make our debt payments as they become due. We also actively evaluate
opportunities to refinance our existing obligations when financing is available
on attractive terms. If, however, we do not generate sufficient cash or
complete such financings on a timely basis, we may be required to seek
additional financing or sell equity on terms which may not be as favorable as
we could have otherwise obtained. No assurance can be given that any
refinancing, additional borrowing or sale of equity will be possible when
needed or that we will be able to negotiate acceptable terms. In addition, our
access to capital is affected by prevailing conditions in the financial and
equity capital markets, as well as our own financial condition.
Cash Flow Analysis
Cash and cash equivalents at December 31, 2001 and December 31, 2000 were
$23.4 million and $7.3 million, respectively. We had total borrowings of $923.5
million and $1,007.5 million as of December 31, 2001 and 2000, respectively.
Operating working capital, which includes trade receivables (net),
inventories, other current assets, accounts payable, accrued payroll, other
current liabilities and the current portion of accrued pension and other
postretirement benefits, increased $67.0 million to $24.8 million at December
31, 2001, from an unfavorable $42.2 million at December 31, 2000. Factors
contributing to the increase in operating working capital at year-end 2001 when
compared with 2000 include increased accounts receivable and inventory amounts.
Cash required by operating activities of $90.0 million for the year ended
December 31, 2001 decreased from $298.3 million of cash provided by operations
in 2000 primarily as a result of increased restructuring spending accompanied
by higher inventory and accounts receivable balances. Also contributing to the
variance was a decrease in our accounts receivable financing balance in 2001
compared to the prior year.
Cash required by investing activities of $154.9 million in 2001 increased
from the 2000 requirement of $97.4 million, reflecting the impact of a prior
year distribution from Astaris, which was not repeated in the current year.
Capital spending (excluding acquisitions) of $145.6 million for the year ended
December 31, 2001 decreased when compared with 2000. Lower spending on
significant capital projects was due to lower Consent Decree spending at
Pocatello.
Cash provided by financing activities in 2001 of $376.5 million was higher
than the 2000 requirement of $162.0 million, primarily due to the contribution
related to the distribution of Technologies assets and an increase in long-term
debt offset by long-term debt paydowns of $128.3 million.
Projected 2002 spending also includes approximately $10.3 million for
environmental compliance at current operating sites, which is an operating
expense of the company, plus approximately $35.5 million of remediation
spending and $11.2 million for environmental study costs at current operating,
previously operated and other sites, which have been accrued in prior periods.
Dividends
On November 29, 2001, our Board of Directors approved the spin-off of the
remaining 83 percent of Technologies making it an independent publicly traded
company. The spin-off qualified as a tax-free distribution to U.S.
stockholders. Stockholders of record as of December 31, 2001 received
approximately 1.72 shares of common stock of the new company for every 1.0
share of our stock. Fractional shares were paid in cash to stockholders in lieu
of fractional shares on December 31, 2001.
No cash dividends were paid in 2001 other than amounts paid in lieu of
fractional shares as discussed above. No cash dividends were paid in 2000. No
cash dividends are expected to be paid in 2002.
25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 SFAS No. 133 (see "New Accounting Standards Adopted" and Note 1
to our consolidated financial statements). We do not use derivative financial
instruments for trading purposes. At December 31, 2001, our derivative holdings
consisted primarily of foreign currency forward contracts and natural gas
forward contracts.
When we or one of our subsidiaries sells or purchases 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 2001, 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.
Additionally, we initiate hedging activities by entering into foreign
exchange forward or option contracts with third parties when natural hedges do
not exist. The maturity dates of the currency exchange agreements that provide
hedge coverage are consistent with those of the underlying purchase or sales
commitments.
To monitor our currency exchange rate risks, we use a sensitivity analysis,
which measures the impact on earnings of an immediate 10 percent devaluation of
the foreign currencies to which it has exposure. Based on a sensitivity
analysis at December 31, 2001, fluctuations in currency exchange rates in the
near term would not materially affect our consolidated operating results,
financial position or cash flows. We believe that our hedging activities have
been effective in reducing our risks related to currency exchange rate
fluctuations.
We are exposed to changes in interest rates because of our financing and
cash management activities, which include long- 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 2001 or 2000.
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.
For more information on derivative financial instruments and related
accounting policies, see Notes 1 and 17 to our consolidated financial
statements.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following are included herein:
1) Consolidated Statements of Income for the years ended December 31, 2001,
2000 and 1999
2) Consolidated Balance Sheets as of December 31, 2001 and 2000
3) Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
4) Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 2001, 2000 and 1999
5) Notes to Consolidated Financial Statements
6) Five-Year Summary of Selected Financial Data
Supplementary selected financial data is incorporated herein under Note 21
"Quarterly Financial Information" on page 68 of this report.
7) Independent Auditors' Report
8) Management's Report on Financial Statements
27
FMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
-----------------------------------
2001 2000 1999
-------- -------- --------
(In Millions, Except Per Share Data
Revenue..................................................... $1,943.0 $2,050.3 $2,320.5
Costs and expenses
Cost of sales or services................................... 1,408.7 1,450.9 1,691.6
Selling, general and administrative expenses................ 243.3 231.3 273.0
Research and development expenses........................... 99.8 97.8 100.6
Gains on divestitures of businesses (Note 5)................ -- -- (55.5)
Asset impairments (Note 6).................................. 323.1 10.1 23.1
Restructuring and other charges (Note 7).................... 280.4 35.2 11.1
-------- -------- --------
Total costs and expenses.................................... 2,355.3 1,825.3 2,043.9
-------- -------- --------
Income (loss) from continuing operations before
minority interests, interest income and expense,
income taxes and cumulative effect of change
in accounting principle.................................. (412.3) 225.0 276.6
Minority interests.......................................... 2.3 4.6 5.1
Interest income............................................. 4.7 4.5 7.4
Interest expense............................................ 63.0 66.3 83.8
-------- -------- --------
Income (loss) from continuing operations before
income taxes and cumulative effect of change
in accounting principle.................................. (472.9) 158.6 195.1
Provision (benefit) for income taxes (Note 10).............. (166.6) 33.0 36.4
-------- -------- --------
Income (loss) from continuing operations before.............
cumulative effect of change in accounting principle...... (306.3) 125.6 158.7
Discontinued operations, net of income taxes (Note 3)....... (30.5) (15.0) 53.9
-------- -------- --------
Income (loss) before cumulative effect of change
in accounting principle.................................. (336.8) 110.6 212.6
Cumulative effect of change in accounting principle,
net of income taxes (Note 1)............................. (0.9) -- --
-------- -------- --------
Net income (loss)........................................... $ (337.7) $ 110.6 $ 212.6
======== ======== ========
Basic earnings (loss) per common share (Note 1)
Continuing operations....................................... $ (9.85) $ 4.13 $ 5.04
Discontinued operations (Note 3)............................ (0.98) (0.49) 1.71
Cumulative effect of change in accounting principle (Note 1) (0.03) -- --
-------- -------- --------
Net income (loss)........................................... $ (10.86) $ 3.64 $ 6.75
======== ======== ========
Diluted earnings (loss) per common share (Note 1)
Continuing operations....................................... $ (9.85) $ 3.97 $ 4.90
Discontinued operations (Note 3)............................ (0.98) (0.47) 1.67
Cumulative effect of change in accounting principle (Note 1) (0.03) -- --
-------- -------- --------
Net income (loss)........................................... $ (10.86) $ 3.50 $ 6.57
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
28
FMC CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31
-------------------------
2001 2000
-------- --------
(In Millions, Except Share
and Par Value Data)
ASSETS
Current assets
Cash and cash equivalents........................................................ $ 23.4 $ 7.3
Trade receivables, net of allowance of $8.4 in 2001 and $6.2 in 2000 (Note 1).... 441.7 358.6
Inventories (Notes 1 and 8)...................................................... 207.2 171.4
Other current assets............................................................. 99.6 90.2
Deferred income taxes (Note 10).................................................. 48.4 60.8
Net assets of Technologies (Note 2).............................................. -- 637.7
-------- --------
Total current assets............................................................. 820.3 1,326.0
Investments...................................................................... 25.2 73.0
Property, plant and equipment, net (Note 9)...................................... 1,087.8 1,358.8
Goodwill and intangible assets, net.............................................. 116.3 121.5
Other assets..................................................................... 132.8 100.3
Deferred income taxes (Note 10).................................................. 294.8 82.1
-------- --------
Total assets..................................................................... $2,477.2 $3,061.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt (Note 11)........................................................ $ 136.5 $ 113.0
Accounts payable, trade and other................................................ 327.7 329.1
Amounts owed to Technologies (Note 18)........................................... 4.7 --
Accrued and other liabilities.................................................... 319.7 257.0
Accrued payroll.................................................................. 53.4 52.0
Guarantees of vendor financing (Note 19)......................................... 56.0 51.8
Current portion of long-term debt (Note 11)...................................... 135.2 22.7
Current portion of accrued pensions and other postretirement benefits (Note 12).. 18.2 24.3
Income taxes payable (Note 10)................................................... 27.8 32.3
-------- --------
Total current liabilities........................................................ 1,079.2 882.2
Long-term debt, less current portion (Note 11)................................... 651.8 871.8
Accrued pension and other postretirement benefits, less current portion (Note 12) 109.2 130.7
Reserve for discontinued operations and other liabilities (Notes 3 and 13)....... 296.3 261.3
Other liabilities................................................................ 77.1 68.8
Minority interests in consolidated companies..................................... 44.8 46.5
Commitments and contingent liabilities (Notes 13, 17 and 19).....................
-------- --------
Stockholders' equity (Notes 14 and 15)
Preferred stock, no par value, authorized 5,000,000 shares;
no shares issued in 2001 or 2000............................................... -- --
Common stock, $0.10 par value, authorized 130,000,000 shares in 2001 and 2000;
issued 39,234,578 shares in 2001 and 38,662,349 shares in 2000.................. 3.9 3.9
Capital in excess of par value of common stock................................... 217.5 181.6
Retained earnings................................................................ 691.8 1,398.9
Accumulated other comprehensive loss............................................. (186.8) (272.6)
Treasury stock, common, at cost; 7,929,281 shares in 2001
and 7,977,709 shares in 2000.................................................... (507.6) (511.4)
-------- --------
Total stockholders' equity....................................................... 218.8 800.4
-------- --------
Total liabilities and stockholders' equity....................................... $2,477.2 $3,061.7
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
29
FMC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-------------------------
2001 2000 1999
------- ------- -------
(In Millions)
Cash provided (required) by operating activities
of continuing operations:
Income from continuing operations before cumulative
effect of change in accounting principle......................... $(306.3) $ 125.6 $ 158.7
Adjustments to reconcile income from continuing operations
before cumulative effect of change in accounting principle to
cash provided by operating activities of continuing operations:
Depreciation and amortization.................................. 131.6 129.8 128.5
Gains on divestitures of businesses (Note 5)................... -- -- (55.5)
Asset impairments (Note 6)..................................... 323.1 10.1 23.1
Restructuring and other charges (Note 7)....................... 280.4 35.2 11.1
Deferred income taxes (Note 10)................................ (200.3) (19.0) 3.9
Minority interests............................................. 2.3 4.6 5.1
Other.......................................................... 2.3 (21.4) 1.9
Changes in operating assets and liabilities,
excluding the effect of acquisitions and divestitures
of businesses and formation of a joint venture:
Accounts receivable sold (Note 1).............................. (34.0) (8.9) 120.1
Trade receivables, net......................................... (48.7) 70.9 (6.9)
Inventories.................................................... (40.9) (0.2) 24.9
Other current assets and other assets.......................... (54.8) 15.9 0.6
Accounts payable, accrued payroll,
other current liabilities and other liabilities............... (108.6) (31.1) 24.5
Income taxes payable........................................... (4.5) (7.5) (4.7)
Accrued pension and other postretirement benefits, net......... (31.6) (5.7) (10.7)
------- ------- -------
Cash provided (required) by operating activities.................. (90.0) 298.3 424.6
======= ======= =======
Cash provided (required) by discontinued operations (Note 3)...... (119.3) (56.0) 17.4
======= ======= =======
Cash provided (required) by investing activities:
Acquisitions and joint venture investments (Note 4)............. (0.3) -- (236.9)
Capital expenditures............................................ (145.6) (197.3) (195.4)
Proceeds from divestitures of businesses (Note 5)............... -- -- 199.3
Distribution from Astaris (Note 4).............................. -- 88.8 --
Proceeds from disposal of property, plant and equipment......... 11.3 5.5 2.6
(Increase) decrease in investments.............................. (20.3) 5.6 (18.3)
------- ------- -------
Cash required by investing activities............................. (154.9) (97.4) (248.7)
======= ======= =======
Cash provided (required) by financing activities:
Net proceeds from issuance (repayment) of commercial paper...... 44.6 (191.5) 23.9
Net increase (decrease) under uncommitted credit facilities..... (18.6) (37.9) 39.7
Net increase (decrease) in other short-term debt................ (8.5) (11.2) (72.3)
Increase in long-term debt...................................... 20.0 -- 84.6
Contribution from Technologies, net (Note 2).................... 430.7 117.9 122.8
Repayment of long-term debt..................................... (128.3) (51.7) (270.1)
Distributions to minority partners.............................. (3.2) (2.8) (5.9)
Issuances of common stock....................................... 39.8 15.8 7.4
Repurchase of capital stock, net (Note 15)...................... -- (0.6) (136.4)
------- ------- -------
Cash provided (required) by financing activities.................. 376.5 (162.0) (206.3)
------- ------- -------
Effect of exchange rate changes on cash and cash equivalents...... 3.8 0.5 0.6
======= ======= =======
Increase (decrease) in cash and cash equivalents.................. 16.1 (16.6) (12.4)
Cash and cash equivalents, beginning of year...................... 7.3 23.9 36.3
======= ======= =======
Cash and cash equivalents, end of year............................ $ 23.4 $ 7.3 $ 23.9
======= ======= =======
- --------
Supplemental cash flow information: Cash paid for interest was $79.1
million, $101.6 million and $118.7 million and cash paid for income taxes, net
of refunds, was $18.0 million, $33.3 million and $27.0 million for 2001, 2000
and 1999, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
30
FMC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Accumulated
Stock, Capital Other
$0.10 in Excess Retained Comprehensive Treasury Comprehensive
Par Value of Par Earnings Income (loss) Stock Income (loss)
--------- --------- -------- ------------- -------- -------------
(In Millions, Except Par Value)
Balance December 31, 1998.............. $ 3.8 $158.4 $1,075.7 $(134.1) $(374.4) $ 108.1
=======
Net income............................. 212.6 $ 212.6
Stock options and awards exercised
(Note 14)............................ 7.4
Purchases of treasury shares
(Note 15)............................ (135.9)
Net purchases of shares for benefit
plan trust (Note 15)................. (0.5)
Foreign currency translation
adjustments (Note 16)................ (61.9) (61.9)
Minimum pension liability
adjustment (Note 12)................. (7.5) (7.5)
----- ------ -------- ------- ------- -------
Balance December 31, 1999.............. 3.8 165.8 1,288.3 (203.5) (510.8) $ 143.2
=======
Net income............................. 110.6 $ 110.6
Stock options and awards exercised
(Note 14)............................ 0.1 15.8
Net purchases of shares for benefit
plan trust (Note 15)................. (0.6)
Foreign currency translation
adjustments (Note 16)................ (69.8) (69.8)
Minimum pension liability
adjustment (Note 12)................. 0.7 0.7
----- ------ -------- ------- ------- -------
Balance December 31, 2000.............. 3.9 181.6 1,398.9 (272.6) (511.4) $ 41.5
=======
Net income (loss)...................... (337.7) $(337.7)
Stock options and awards exercised
(Note 14)............................ 35.9
Net purchases of shares for benefit
plan trust (Note 15)................. 3.8
Gain from sale of Technologies
stock................................ 140.1
Equity distribution related to spin-off
of Technologies (Note 2)............. (509.5) 115.0
Net deferred loss on derivative
contracts (Notes 1 and 17)........... (16.6) (16.6)
Foreign currency translation
adjustments (Note 16)................ (12.5) (12.5)
Minimum pension liability
adjustment (Note 12)................. (0.1) (0.1)
----- ------ -------- ------- ------- -------
Balance December 31, 2001.............. $ 3.9 $217.5 $ 691.8 $(186.8) $(507.6) $(366.9)
===== ====== ======== ======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
31
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 PRINCIPAL ACCOUNTING POLICIES
Nature of operations. FMC Corporation ("FMC" or "the company") is a
diversified chemical company serving agricultural, industrial and consumer
markets globally with innovative solutions, applications and quality products.
FMC increased its focus on the chemical industry in 2001 by spinning off its
non-chemical business segments, Energy Systems and Food and Transportation
Systems, into a separately owned public company, FMC Technologies, Inc.
("Technologies") (Note 2). The company operates in three distinct business
segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals.
Agricultural Products provides crop protection and pest control products for
worldwide markets. Specialty Chemicals includes food ingredients that are used
to enhance structure, texture and taste; pharmaceutical additives for binding
and disintegrant use; and lithium specialties for pharmaceutical synthesis and
energy storage. Industrial Chemicals encompasses a wide range of inorganic
materials in which FMC possesses market and technology leadership, including
soda ash, hydrogen peroxide, phosphorus and peroxygens in both North America
and in Europe through FMC's subsidiary, FMC Foret, S.A.
Consolidation. The consolidated financial statements include the accounts
of FMC and all significant majority-owned subsidiaries and ventures. All
material intercompany accounts and transactions are eliminated in consolidation.
Basis of presentation. In 2001 the company spun off a significant portion
of its business into FMC Technologies, a separately-owned public company (Note
2). The spin-off, which was completed through a tax-free dividend, was
accounted for in accordance with Accounting Principles Board Statement No. 30
("APB 30"). The Consolidated Statements of Income and Consolidated Statements
of Cash Flows for the periods ended December 31, 2000 and 1999 and all
corresponding footnotes, have been reclassified to reflect Technologies as a
discontinued operation. The Consolidated Balance Sheet for the year ended
December 31, 2000, along with the corresponding footnotes, have also been
reclassified with the net assets to be distributed to Technologies segregated
and shown as a current asset. The Consolidated Statements of Changes in
Stockholders' Equity has not been reclassified.
Interest expense. Net interest expense, for all periods presented, has been
allocated to discontinued operations based on net assets in accordance with APB
30 and later relevant accounting guidance. The amount of net interest expense
allocated to discontinued operations was $6.8 million (net of an income tax
benefit of $4.4 million), $18.8 million (net of an income tax benefit of $12.1
million) and $18.5 million (net of an income tax benefit of $11.8 million) for
2001, 2000 and 1999 respectively.
Use of estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results are likely to
differ from those estimates, but management does not believe such differences
will materially affect the company's financial position, results of operations
or cash flows.
Investments. Investments in companies in which FMC's ownership interest is
50.0 percent or less and in which FMC does not exercise significant influence
are accounted for using the equity method after eliminating the effects of any
material intercompany transactions. All other investments are carried at their
fair values or at cost, as appropriate.
Cash equivalents. The company considers investments in all liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
32
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accounts receivable. The company sells trade receivables without recourse
through its wholly owned bankruptcy-remote subsidiary, FMC Funding Corporation.
The 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 $79.0 million and $113.0
million at December 31, 2001 and 2000, respectively. Net discounts recognized
on sales of receivables are included in selling, general and administrative
expenses in the consolidated statements of income and amounted to $0.8 million,
$0.2 million and $1.6 million for the years ended December 31, 2001, 2000 and
1999, respectively. The agreement for the sale of accounts receivable provides
for continuation of the program on a revolving basis expiring in November 2002.
The company accounts for the sales of receivables in accordance with the
requirements of Statement of Financial Accounting Standards ("SFAS") No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which the company adopted in 2001.
Inventories. Inventories are stated at the lower of cost or market value.
Inventory costs include those costs directly attributable to products before
sale, including all manufacturing overhead but excluding costs to distribute.
All domestic inventories, excluding materials and supplies, are determined on a
last-in, first-out ("LIFO") basis (Note 8).
Property, plant and equipment. Property, plant and equipment, including
capitalized interest, are recorded at cost. Depreciation for financial
reporting purposes is provided principally on the straight-line basis over the
estimated useful lives of the assets (land improvements--20 years,
buildings--20 to 50 years, and machinery and equipment--3 to 18 years). Gains
and losses are reflected in income upon sale or retirement of assets.
Expenditures that extend the useful lives of property, plant and equipment or
increase productivity are capitalized. Ordinary repairs and maintenance are
charged to operating costs.
Asset impairments. The company reviews the recovery of the net book value
of property, plant and equipment in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," for impairment whenever events and circumstances indicate that
the net book value of an asset may not be recoverable from the estimated
undiscounted future cash flows expected to result from its use and eventual
disposition. In cases where undiscounted expected future cash flows are less
than the net book value, an impairment loss is recognized equal to an amount by
which the net book value exceeds the fair value of assets. The company will be
revising its impairment review process in 2002 in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
Restructuring and other charges. Management continually performs strategic
reviews and assesses the return on its business. This sometimes results in a
plan to restructure the operations of a business. When a plan is final, an
accrual for severance and other contractual obligations is recorded.
Capitalized interest. Interest costs of $9.4 million in 2001 ($9.0 million
in 2000 and $2.3 million in 1999) associated with the construction of certain
long-lived assets have been capitalized as part of the cost of those assets and
are being amortized over the assets' estimated useful lives.
Deferred costs and other assets. Unamortized capitalized software costs
totaling $35.7 million and $40.1 million at December 31, 2001 and 2000,
respectively, are components of other assets, which also include bond discounts
and other deferred charges. Capitalized software costs are amortized over
expected useful lives ranging from three to ten years. Recoverability of
deferred software costs is assessed on an ongoing basis, and write-downs to net
realizable value are recorded as necessary.
33
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Goodwill and intangible assets. Goodwill and identifiable intangible assets
(such as trademarks) are amortized on a straight-line basis over their
estimated useful or legal lives, not exceeding 40 years. The company
periodically evaluates the recoverability of the net book value of goodwill and
intangible assets based on expected future undiscounted cash flows for each
operation having a significant goodwill balance. In cases where undiscounted
expected future cash flows are less than the net book value, an impairment loss
is recognized equal to an amount by which the net book value exceeds the fair
value of assets. Goodwill and intangible amortization amounted to $19.4
million, $13.5 million and $12.0 million for the years ended December 31, 2001,
2000 and 1999, respectively. The company will be adopting SFAS 142, "Goodwill
and Other Intangible Assets," in 2002. (See "New Accounting Pronouncements.")
Revenue recognition. Revenue is recognized when the earnings process is
complete, which is generally upon transfer of title, which occurs upon shipment.
Income taxes. Current income taxes are provided on income reported for
financial statement purposes adjusted for transactions that do not enter into
the computation of income taxes payable. Deferred tax liabilities and assets
are recognized for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities. Income taxes are not provided for the equity in undistributed
earnings of foreign subsidiaries or affiliates when it is management's
intention that such earnings will remain invested in those companies, but are
provided in the year in which the decision is made to repatriate the earnings.
Foreign currency translation. Assets and liabilities of most foreign
operations are translated at exchange rates in effect at the balance sheet
date, and the foreign operations' income statements are translated at the
monthly exchange rates for the period. For operations in non-highly
inflationary countries, translation gains and losses are recorded as a
component of accumulated other comprehensive income (loss) in stockholders'
equity until the foreign entity is sold or liquidated. For operations in highly
inflationary countries and where the local currency is not the functional
currency, inventories, property, plant and equipment, and other non-current
assets are converted to U.S. dollars at historical exchange rates, and all
gains or losses from conversion are included in net income. Foreign currency
effects on cash and cash equivalents and debt in hyperinflationary economies
are included in interest income or expense.
Derivative financial instruments. FMC mitigates certain financial
exposures, including currency risk and energy purchase exposures, through a
controlled program of risk management that includes the use of derivative
financial instruments. The company enters into foreign exchange contracts,
including forward, option combination, and purchased option contracts, to
reduce the effects of fluctuating foreign currency exchange rates.
FMC adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS No. 133") and SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," an amendment of SFAS
No. 133, on January 1, 2001. These Statements establish accounting and
reporting standards that require every derivative instrument to be recorded on
the consolidated balance sheet as either an asset or a liability measured at
its fair value. SFAS No. 133 requires the transition adjustment resulting from
adopting these Statements to be reported in net income or accumulated other
comprehensive income, as appropriate, as the cumulative effect of a change in
accounting principle. Accordingly, on January 1, 2001, the company recorded the
fair value of all outstanding derivative instruments as assets or liabilities
on the consolidated balance sheet. The transition adjustment was a $0.9 million
after-tax loss to earnings and $16.4 million after-tax gain to accumulated
other comprehensive income. The loss was recorded as a cumulative effect of a
change in accounting principle.
In accordance with the provisions of SFAS No. 133, as amended, the company
recognizes all derivatives on the balance sheet at fair value. On the date the
derivative instrument is entered into, the company generally
34
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
designates the derivative as a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability (cash flow hedge). Changes in the fair value of a derivative that
is designated as and meets all the required criteria for a cash flow hedge are
recorded in accumulated other comprehensive income and reclassified into
earnings as the underlying hedged item affects earnings. Changes in the fair
value of a derivative that is not designated as a hedge are recorded
immediately in earnings.
For periods prior to 2001, gains and losses on foreign currency hedges of
existing assets and liabilities are included in the carrying amounts of those
assets or liabilites and are ultimately recognized in income when those
carrying amounts are converted. Gains and losses related to foreign currency
hedges of firm commitments also are deferred and included in the basis of the
transaction when it is complete. Gains and losses on unhedged foreign currency
transactions are included in income as part of cost of sales or services. Gains
and losses on derivative financial instruments that protect the company from
exposure in a particular currency, but do not currently have a designated
underlying transaction, are also included in income as part of cost of sales or
services. If a hedged item matures, is sold, extinguished, or terminated, or is
related to an anticipated transaction that is no longer likely to take place,
the derivative financial instrument related to the hedged item is closed out
and the related gain or loss is included in income as part of cost of sales or
services or interest expense as appropriate in relation to the hedged item.
Also, FMC purchased exchange-traded contracts to manage exposure to energy
purchases used in the company's manufacturing processes. Gains and losses on
these contracts are included as adjustments to cost of sales or service when
the contracts are settled.
FMC formally documents all relationships between hedging instruments and
hedged items, as well as its risk management objective and strategy for
undertaking various hedge transactions. This process includes relating all
derivatives that are designated cash flow hedges to specific forecasted
transactions. The company also formally assesses, both at the inception of the
hedge and on an ongoing basis, whether each derivative is highly effective in
offsetting changes in fair values or cash flows of the hedged item. If it is
determined that a derivative is not highly effective as a hedge, or if a
derivative ceases to be a highly effective hedge, the company will discontinue
hedge accounting with respect to that derivative prospectively. The gains and
losses reported for the ineffective portion of its cash flow hedges were
minimal for 2001.
Cash flows from hedging contract settlements are reported in the statements
of cash flows in the same categories as the cash flows from the transactions
being hedged.
Treasury stock. Shares of common stock repurchased under the company's
stock repurchase plans are recorded at cost as treasury stock and result in a
reduction of stockholders' equity in the consolidated balance sheets. When the
treasury shares are reissued under FMC's stock compensation plans, the company
uses a FIFO method for determining cost. The difference between the cost of the
shares and the reissuance price is added to or deducted from capital in excess
of par value of common stock.
Earnings (loss) per common share ("EPS"). Basic EPS has been computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted EPS has been computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the year plus the weighted average number of additional
common shares that would have been outstanding during the year if potentially
dilutive common shares had been issued under the company's stock
35
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
compensation plans. In periods such as 2001, when a net loss from continuing
operations has been recorded, basic shares outstanding are used to compute both
basic and diluted EPS, as the use of diluted shares would be anti-dilutive. The
weighted average numbers of shares outstanding used to calculate the company's
annual EPS were as follows:
December 31
2001 2000 1999
------ ------ ------
(In Thousands)
Basic.. 31,052 30,439 31,516
Diluted 31,052 31,576 32,377
Segment information. The company's determination of its reportable segments
based on its strategic business units and the commonalities among the products
and services within each segment corresponds to the manner in which the
company's management reviews and evaluates operating performance. FMC has
combined certain similar operating businesses that meet applicable criteria
established under SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information."
Agricultural Products, Specialty Chemicals and Industrial Chemicals have
been identified as the reportable segments of the company under SFAS No. 131.
Business segment data are included in Note 20. Segment operating profit is
defined as total revenue less operating expenses. The following items have been
excluded in computing segment operating profit: corporate staff expense,
interest income and expense associated with corporate debt facilities and
investments, income taxes, gains (or losses) on divestitures of businesses
(Note 5), restructuring and other charges (Note 7), asset impairments (Note 6),
LIFO inventory adjustments, and other income and expense items. Information
about how asset impairments, restructuring, and other charges relate to FMC's
businesses at the segment level is discussed in Notes 6 and 7.
Segment assets and liabilities are those assets and liabilities that are
recorded and reported by segment operations. Segment operating capital employed
represents segment assets less segment liabilities. Segment assets exclude
corporate and other assets, which are principally cash equivalents, LIFO
reserves, deferred income tax benefits, eliminations of intercompany
receivables, property and equipment not attributable to a specific segment, and
credits relating to the sale of receivables. Segment liabilities exclude
substantially all debt, income taxes, pension and other postretirement benefit
liabilities, environmental reserves, restructuring reserves, deferred gains on
sale and leaseback of equipment, fair value of currency contracts, intercompany
eliminations, and reserves for discontinued operations.
Geographic segment revenue represents sales by location of the company's
customers. Geographic segment long-lived assets include investments, net
property, plant and equipment, and other non-current assets. Geographic segment
data are included in Note 20.
Environmental obligations. The company provides for environmental-related
obligations when they are probable and amounts can be reasonably estimated.
Where the available information is sufficient to estimate the amount of
liability, that estimate has been used. Where the information is only
sufficient to establish a range of probable liability and no point within the
range is more likely than any other, the lower end of the range has been used.
Estimated obligations to remediate sites that involve oversight by the U.S.
Environmental Protection Agency ("EPA"), or similar government agencies, are
generally accrued no later than when a Record of Decision ("ROD"), or
equivalent, is issued, or upon completion of a Remedial
Investigation/Feasibility Study ("RI/FS") that is accepted by FMC and the
appropriate government agency or agencies. Estimates are reviewed quarterly by
36
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the company's environmental remediation management, as well as by financial and
legal management and, if necessary, adjusted as additional information becomes
available. The estimates can change substantially as additional information
becomes available regarding the nature or extent of site contamination,
required remediation methods, and other actions by or against governmental
agencies or private parties.
The company's environmental liabilities for continuing and discontinued
operations are principally for costs associated with the remediation and/or
study of sites at which the company is alleged to have disposed of hazardous
substances. Such costs principally include, among other items, RI/FS, site
remediation, costs of operation and maintenance of the remediation plan, fees
to outside law firms and consultants for work related to the environmental
effort, and future monitoring costs. Estimated site liabilities are determined
based upon existing remediation laws and technologies, specific site
consultants' engineering studies or by extrapolating experience with
environmental issues at comparable sites.
Provisions for environmental costs are reflected in income, net of probable
and estimable recoveries from named Potentially Responsible Parties ("PRPs") or
other third parties. Such provisions incorporate inflation and are not
discounted to their present values.
In calculating and evaluating the adequacy of its environmental reserves,
the company has taken into account the joint and several liability imposed by
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and the analogous state laws on all PRPs and has considered the
identity and financial condition of each of the other PRPs at each site to the
extent possible. The company has also considered the identity and financial
condition of other third parties from whom recovery is anticipated, as well as
the status of the company's claims against such parties. In general, the
company is aware of a degree of uncertainty in disputes regarding the financial
contribution by certain named PRPs, which is common to most multiparty sites.
Although the company is unable to forecast the ultimate contributions of PRPs
and other third parties with absolute certainty, the degree of uncertainty with
respect to each party is taken into account when determining the environmental
reserve by adjusting the reserve to reflect the facts and circumstances on a
site-by-site basis. The company believes that recorded recoveries related to
PRPs are realizable in all material respects. Recoveries are recorded in the
reserve for discontinued operations and other liabilities.
New accounting standards adopted. FMC adopted SFAS No. 133,"Accounting for
Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities," an
amendment of SFAS No. 133. These Statements establish accounting and reporting
standards for derivative instruments. See discussion of the effects of this
adoption under "Derivative Financial Instruments."
New accounting pronouncements. In June 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 141, "Business Combinations." SFAS No.
141 requires that all business combinations be accounted for by the purchase
method and adds disclosure requirements related to business combination
transactions. SFAS No. 141 also establishes criteria for the recognition of
intangible assets apart from goodwill. This Statement applies to all business
combinations for which the acquisition date was July 1, 2001 or later. The
company intends to implement the provisions of SFAS No. 141 in any of its
future business combinations.
On June 30, 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which establishes guidelines for the financial accounting
and reporting of acquired goodwill and other intangibles. With the adoption of
SFAS No. 142, goodwill is no longer subject to amortization; rather it will be
subject to at least an annual assessment for impairment by applying a fair
value based test. The company is required to adopt the provisions of this
pronouncement no later than the beginning of 2002; however, goodwill and other
intangible
37
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets acquired after June 30, 2001, are subject immediately to the
amortization provisions of this statement. FMC had no material acquisitions of
goodwill or other intangibles in the second half of 2001. The company will
adopt the amortization provisions of SFAS No. 142 beginning in the first
quarter of 2002. The company believes adopting SFAS No. 142 will result in
approximately a $4.0 million pre-tax benefit to earnings in 2002.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The company is required to adopt the
provisions of this pronouncement no later than the beginning of fiscal 2003 and
is evaluating the potential impact of adopting SFAS No. 143.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The Statement supersedes SFAS No. 121 and
the Statement also supersedes APB No. 30 provisions related to the accounting
and reporting for the disposal of a segment of a business. 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 in SFAS No. 121 related to the recognition of
impairment of long-lived assets to be held and used. The Statement is effective
for fiscal years beginning after December 15, 2001. The company is evaluating
the potential impact of adopting SFAS No. 144.
Reclassifications. Certain prior period amounts have been reclassified to
conform to the current period's presentation.
NOTE 2 FMC'S PLAN FOR 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 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 percent of its
equity through the issuance of common stock. FMC continued to own the remaining
83 percent 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 $140.1 million gain in
stockholders' equity on the sale of Technologies stock. FMC expects to make a
final payment in 2002 for the remaining shared expense amounts owed to
Technologies.
On November 29, 2001, FMC's Board of Directors approved the spin-off of the
company's remaining 83 percent 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
share of FMC common stock based on the number of FMC shares outstanding on the
record date, December 12, 2001. The distribution resulted in a reduction of
stockholders' equity of $509.5 million.
38
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The total after-tax costs related to the spin-off were $31.6 million through
December 31, 2001, of which $15.1 million has been classified as discontinued
operations.
NOTE 3 DISCONTINUED OPERATIONS
The company's results of discontinued operations comprised the following:
Year Ended December 31
----------------------
2001 2000 1999
------ ------ ------
(In Millions)
Earnings (losses) of discontinued operations of Energy Systems and Food and
Transportation Systems (net of income taxes of $19.1 million
in 2001; $12.3 million in 2000 and $21.9 million in 1999)(1)........................ $(19.6) $ 51.7 $ 57.3
Provision for liabilities related to previously discontinued operations (net of income
tax benefits of $7.1 million in 2001; $15.0 million in 2000 and $23.2 million in
1999)............................................................................... (10.9) (66.7) (36.2)
Gain on sale of Defense Systems properties (net of income taxes
of $20.9 million)................................................................... -- -- 32.8
------ ------ ------
Discontinued operations, net of income taxes.......................................... $(30.5) $(15.0) $ 53.9
====== ====== ======
- --------
(1) Results reported separately by Technologies are reported on a stand-alone
basis and differ from results of discontinued operations as reported here.
Effective December 31, 2001 the company completed the spin-off of its Energy
Systems and Food and Transportation Systems business segments to its
stockholders as an independent publicly-held company, FMC Technologies, Inc.
(Note 2). The company recorded a loss from discontinued operations of $42.5
million ($30.5 million after tax). Included in this amount are earnings of
Technologies, interest expense of $11.2 million, which was allocated to
discontinued operations in accordance with APB 30 and later relevant accounting
guidance, costs related to the spin-off and additional income tax provision
related to the reorganization of FMC's worldwide entities in anticipation of
the separation of Technologies from FMC. In addition, the company recorded a
charge of $18.0 million for updated estimates of environmental remediation
costs related to FMC's other discontinued businesses.
During 2000, the company recorded a net loss from discontinued operations of
$17.7 million ($15.0 million after tax). Of this amount, $64.0 million are the
earnings of the spun-off Technologies business including interest expense of
$30.9 million. Also included is a $80.0 million loss for a settlement of
litigation related to our discontinued Defense Systems business, and a charge
of $1.7 million for interest on postretirement benefit obligations.
FMC recorded net income from discontinued operations of $73.5 million ($53.9
million after tax) in 1999. Of this amount, $79.2 million related to the
earnings of the spun-off Technologies businesses, including allocated interest
expense of $30.3 million. Results of discontinued operations in 1999 included
gains of $53.7 million from the sale of properties in California that were
formerly used by our divested defense business (as discussed below). In
addition, in the fourth quarter of 1999, the company provided $59.4 million in
response to updated estimates of environmental remediation costs, primarily at
our former Defense Systems sites, and increased estimates of our liabilities
for general liability, workers' compensation, postretirement benefit
obligations, legal defense, property maintenance and other costs.
39
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the year ended December 31, 1999, FMC sold several real estate
properties formerly used by United Defense, L.P., and our Defense Systems
operations divested by our company in 1997. In the second quarter of 1999, the
company received $33.5 million in cash, recognizing a gain of $29.5 million,
and in the fourth quarter of 1999, we received $31.0 million in cash,
recognizing a gain of $24.2 million (net of income tax provision of $9.4
million), related to property sales.
Reserve for Discontinued Operations and Other Liabilities. With the
exception of certain real estate for which FMC has short-term or long-term
remediation obligations, disposals of the assets of discontinued operations
have been completed within one year of the date the discontinuation plan was
approved. In addition to the 1997 sale of the company's Defense Systems
operations, residual liabilities relate to operations discontinued between 1976
and 1984 - primarily the Film and Fiber, Chlor-Alkali, Power Transmission and
Construction Equipment businesses. Most residual liabilities are of a long-term
nature and will be settled over a number of years.
The reserve for discontinued operations and other liabilities consists of
obligations for discontinued operations and for the long-term portion of the
company's environmental remediation at continuing operations and at other
closed sites. See Note 13 for further information regarding the nature of FMC's
environmental liabilities. Liabilities totaled $296.3 million and $261.3
million at December 31, 2001 and 2000, respectively. The liability at December
31, 2001 comprised $203.5 million (net of recoveries) for environmental
remediation and study obligations, most of which relate to former chemical
plant sites; $38.0 million for product liability and other potential claims;
$52.1 million for retiree medical and life insurance benefits provided to
employees of former chemical businesses and the Construction Equipment
business; and $2.7 million related to the sale of the Defense Systems and
Chlor-Alkali operations.
The company's obligation related to the settlement of litigation for
discontinued operations amounted to $80.0 million and was included in other
current liabilities at December 31, 2000. See Note 19.
The company uses actuarial methods, to the extent practicable, to monitor
the adequacy of product liability and postretirement benefit reserves on an
ongoing basis. The environmental liabilities are subject to the accounting and
review practices described in Notes 1 and 13. While the amounts required to
settle the company's liabilities for discontinued operations could ultimately
differ materially from the estimates used as a basis for recording these
liabilities, management believes that changes in estimates or required
expenditures for any individual cost component will not have a material adverse
impact on the company's liquidity or financial condition in any single year and
that, in any event, such costs will be satisfied over many years.
Spending in 2001, 2000 and 1999, respectively, included $43.4 million, $53.5
million and $64.2 million for environmental obligations; $3.4 million, $7.9
million and $12.2 million for product liability and other claims; $3.3 million,
$5.5 million and $4.8 million for retiree benefits; and $4.3 million, $4.7
million and $5.2 million related to net settlements of Defense Systems
obligations. Environmental recoveries in 2001, 2000 and 1999 were $12.5
million, $14.2 million and $56.9 million, respectively.
NOTE 4 BUSINESS COMBINATIONS AND JOINT VENTURES
All acquisitions were accounted for using the purchase method and,
accordingly, the purchase prices have been allocated to the assets acquired and
liabilities assumed based on the estimated fair values of such assets and
liabilities at the dates of acquisition. The excess of the purchase prices over
the fair values of the net tangible assets acquired has been recorded as
intangible assets, primarily goodwill, which has been amortized over
40
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
periods ranging from 10 to 40 years. The company is currently reviewing the
impact of the adoption of SFAS No. 141 (Note 1). Had the below acquisitions
occurred at the beginning of the earliest period presented, the effect on FMC's
consolidated financial statements would not have been significantly different
from the amounts reported, and accordingly, pro forma financial information has
not been provided.
The purchase prices for all the below acquisitions were satisfied from cash
flows from operations and external financing. Results of operations of the
acquired companies have been included in the company's consolidated statements
of income from the respective dates of acquisition.
On June 30, 1999, the company completed the acquisition of the assets of
Pronova Biopolymer AS ("Pronova") from a wholly-owned subsidiary of Norsk Hydro
for approximately $184.0 million in cash. The company made an additional
payment of $3.3 million in January 2000 as final settlement of the transaction.
Pronova, headquartered in Drammen, Norway, is a leading producer of alginates
used in the pharmaceutical, food and industrial markets. The company recorded
goodwill and other intangible assets totaling approximately $135.0 million
related to the acquisition. Pronova's operations are included in the Specialty
Chemicals segment.
Also on June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. ("TgSA")
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 but could be
as much as $75.0 million. No goodwill was recorded as a result of this
transaction. TgSA's operations are included in the Industrial Chemicals segment.
Joint ventures. Effective April 1, 2000, FMC and Solutia Inc. ("Solutia")
formed a joint venture that includes the North American and Brazilian
phosphorus chemical operations of both companies. The joint venture, Astaris
LLC ("Astaris"), is a limited liability company owned equally by FMC and
Solutia.
Solutia's equity interest in the Fosbrasil joint venture, which is engaged
in the production of purified phosphoric acid ("PPA"), was also transferred and
became part of Astaris. Astaris has also assumed all FMC/NuWest agreements
relating to a PPA facility being built near Soda Springs, Idaho, and will
purchase all of the PPA output from that facility as part of those agreements.
The phosphate operations of FMC Foret were retained by FMC and were not
transferred to the joint venture. Following its formation, Astaris divested
certain operations in Lawrence, Kansas, and plant assets located in Augusta,
Georgia.
Effective April 1, 2000, FMC has accounted for its investment in Astaris
under the equity method. FMC's share of Astaris' earnings is included in the
Industrial Chemicals segment. FMC's sales of phosphorus chemicals were $327.0
million for the year ended December 31, 1999, and $79.2 million for the three
months ended March 31, 2000.
In the third quarter of 2000, FMC received a cash distribution from Astaris
of $110.3 million. This amount included $21.5 million in satisfaction of FMC's
receivable from the joint venture, resulting from FMC providing its share of
operating capital to the joint venture during the interim period between its
formation and the procurement of financing from an external source.
Assets and liabilities transferred by FMC to the joint venture (including
inventory, property and all other contributed accounts) have been
deconsolidated from FMC's balance sheet. Restructuring charges and asset
impairments (Notes 6 and 7) in 2001 resulted in FMC's equity investment in
Astaris being fully impaired. FMC's equity investment in Astaris totaled $24.0
million at December 31, 2000.
41
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company completed a number of smaller acquisitions and joint venture
investments during the years ended December 31, 2001, 2000 and 1999.
NOTE 5 BUSINESS DIVESTITURES
On July 9, 1999, the company completed the sale of its Bioproducts business
to Cambrex Corporation for $38.2 million in cash, resulting in a pre-tax gain
of $20.1 million ($12.2 million after tax). The Bioproducts business was
included in the Specialty Chemicals segment and had 1999 revenue of $13.3
million (through the date of divestiture).
On July 31, 1999, FMC completed the sale of its process additives business
to Great Lakes Chemical Corporation for $161.1 million in cash, resulting in a
gain of $35.4 million on both a pre-tax and after-tax basis. The process
additives business was included in the Specialty Chemicals segment and had 1999
revenue of $98.5 million (through the date of divestiture).
The company also completed a number of smaller divestitures during the years
ended December 31, 2001, 2000 and 1999.
NOTE 6 ASSET IMPAIRMENTS
The company periodically reviews the recorded value of its long-lived
assets, to determine if the future cash flows to be derived from these
properties will be sufficient to recover the remaining recorded asset values.
Asset impairments totaled $323.1 million ($233.8 million after tax) for 2001
compared to $10.1 million ($6.2 million after tax) in 2000. Based upon a
comprehensive review of FMC's long-lived assets the company recorded asset
impairment charges of $211.9 million related to our U.S. based phosphorus
business. The components of asset impairments related to this business include
a $171.0 million impairment of environmental assets built to comply with a RCRA
Consent Decree ("Consent Decree") at the Pocatello, Idaho facility and a $36.5
million impairment charge for the company's investment in Astaris. (See Note
4.) Driving these charges were a decline in market conditions, the loss of a
potential site on which to develop economically viable second purified
phosphoric acid ("PPA") plant and our agreement to pay into a fund for the
Shoshone-Bannock Tribes as a result of an agreement to support a proposal to
amend the Consent Decree to permit the earlier closure of the largest remaining
waste disposal pond at Pocatello. In addition, FMC recorded an impairment
charge of $98.9 million related to its Specialty Chemicals segment's lithium
operations in Argentina. The company established this operation, which includes
a lithium mine and processing facilities, approximately five years ago in a
remote area of the Andes Mountains. With the entry of a South American
manufacturer into this business, resulting in decreased revenues and following
the continuation of other unfavorable market conditions, the company's lithium
assets in Argentina became impaired as the total capital invested is not
expected to be recovered. An additional $12.3 million of charges related to the
impairment of assets in our cyanide operations.
During 2000 FMC recorded asset impairments of $10.1 million ($6.2 million
after tax). Impairments of $9.0 million were recognized because of the
formation of Astaris (Note 4), including the write down of certain phosphorus
assets retained by the company and the accrual of costs related to the
company's planned closure of two phosphorus facilities. Other impairments were
due to the impact of underlying changes within the Specialty Chemicals segment.
In the third quarter of 1999, FMC recorded asset impairments of $23.1
million ($14.1 million after tax). Asset impairments of $14.7 million were
required to write off the remaining net book values of two U.S. lithium
42
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
facilities. Both facilities were constructed to run pilot and development
quantities for new lithium-based products. During the third quarter of 1999,
management determined that it would not be feasible to use the facilities as
configured. Additionally, an impairment charge of $8.4 million was required to
write off the remaining net book value of a caustic soda facility in Green
River, Wyoming. Estimated future cash flows related to this facility indicated
that an impairment of the full value had occurred.
NOTE 7 RESTRUCTURING AND OTHER CHARGES
A change in market conditions and corporate strategy resulted in
restructuring and other charges of $280.4 million ($172.1 million after tax) in
2001, a charge of $35.2 million ($21.7 million after tax) in 2000, and a charge
$11.1 million ($6.8 million after tax) in 1999.
During the second quarter of 2001, the company recorded $175.0 million in
restructuring and other charges including $160.0 million related to its
Industrial Chemicals segment's U.S. based phosphorus business. The components
included in restructuring and other charges related to the phosphorus business
were as follows: a $68.7 million reserve for further required Consent Decree
spending at the Pocatello site; $42.7 million of financing obligations to the
Astaris joint venture and other related costs; and a $40.0 million reserve for
the payments to the Shoshone-Bannock Tribes and $8.6 million of other related
charges. In addition, restructuring charges for the quarter included $8.0
million related to FMC's corporate reorganization. The remaining charges of
$7.0 million were for the restructuring of two smaller chemical facilities. The
company reduced its workforce by approximately 135 people in connection with
these restructuring activities.
During the third quarter of the year, the company recorded restructuring
charges of $8.5 million. These charges were largely for reorganization costs
and corporate restructuring activities including severance and contract
commitment costs. (See Note 2.)
FMC recorded restructuring and other charges of $95.9 million in the fourth
quarter of 2001. Most of these charges related to the company's decision to
shut down operations at Pocatello. These charges include: $36.3 million for its
share of Astaris shutdown costs including plant demolition, environmental
cleanup, waste removal and other activities; also included are $44.6 million of
Pocatello costs related to plant shutdown, severance and other activities. In
addition, $12.5 million of severance and other costs related to the
Agricultural Products segment were recorded as a result of the company's
decision to restructure research and development and certain administrative
expenses. The remaining charges reflected restructuring initiatives in our
Specialty Chemicals segment and in corporate.
The following table shows a rollforward of restructuring and other reserves
for 2001 and the related spending and other changes:
Workforce-Related,
Facility Shutdown Financing
Costs and Other Consent Obligations
Reserves Tribal Fund(1) Decree(1) to Astaris(1) Reorganization Total
------------------ -------------- --------- ------------- -------------- -------
(In Millions)
Reserve at 12/31/2000 $ 4.8 $ -- $ -- $ -- $ -- $ 4.8
Increase in reserves. 97.3 40.0 68.7 42.7 31.7 280.4
Cash payments........ (23.7) (30.0) (34.2) (14.7) (8.0) (110.6)
Non-cash charges..... (5.8) -- (34.5)(2) -- (15.1)(3) (55.4)
------ ------ ------ ------ ------ -------
Reserve at 12/31/2001 $ 72.6 $ 10.0 $ -- $ 28.0 $ 8.6 $ 119.2
====== ====== ====== ====== ====== =======
- --------
(1) Phosphorus related.
(2) Relates to a change in the reserve as a result of the company's decision to
shut down operations at Pocatello.
(3) Costs related to the spin-off of Technologies reclassified to discontinued
operations.
43
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FMC reduced its workforce by approximately 182 people in connection with the
third and fourth quarter restructuring activities.
During 2000, the company recorded restructuring and other charges of $35.2
million ($21.7 million after tax). Restructuring charges of $20.6 million were
attributable to the formation of Astaris and the concurrent reorganization of
our Industrial Chemicals sales, marketing and support organizations, the
reduction of office space requirements in our Philadelphia chemical
headquarters and pension expense related to the separation of phosphorus
personnel from the company. In addition, the company recorded environmental
accruals of $12.5 million because of increased cost estimates for ongoing
remediation of several phosphorus properties. Other restructuring charges
included $2.1 million for other projects. Of the approximately 350 employee
severances that were expected to occur through the completion of these programs
in 2000, 281 occurred at December 31, 2000 while the remainder occurred in
2001. Spending related to this reserve was $14.9 million in 2000 and $0.5
million in 2001. Non-cash charges were $2.5 million in 2000.
In the third quarter of 1999, we recorded restructuring and other charges of
$11.1 million ($6.8 million after tax). Restructuring and other charges of $9.2
million resulted primarily from strategic decisions to divest or restructure a
number of businesses and support departments, including certain Agricultural
Products and certain corporate and shared service support departments. The
remaining charge related to actions, including headcount reductions, required
to achieve planned synergies from acquisitions of businesses in Specialty
Chemicals.
NOTE 8 INVENTORIES
The current replacement cost of inventories exceeded their recorded values
by $194.9 million at December 31, 2001 and $190.6 million at December 31, 2000.
The effect of reducing certain LIFO quantities carried at lower than prevailing
costs was not material to LIFO expense in 2001 and 2000. Approximately 60
percent of inventories in 2001 and 59 percent in 2000 are recorded on the LIFO
basis.
Inventories consisted of the following:
December 31
-------------
2001 2000
------ ------
(In Millions)
Finished goods and work in process $141.7 $119.8
Raw materials..................... 65.5 51.6
------ ------
Net inventory..................... $207.2 $171.4
====== ======
44
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 9 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
December 31
-----------------
2001 2000
-------- --------
(In Millions)
Land and land improvements....... $ 156.0 $ 155.1
-------- --------
Buildings........................ 375.7 363.9
Machinery and equipment.......... 1,929.4 2,172.8
Construction in progress......... 77.1 130.3
-------- --------
Total cost....................... 2,538.2 2,822.1
Accumulated depreciation......... 1,450.4 1,463.3
-------- --------
Net property, plant and equipment $1,087.8 $1,358.8
======== ========
Depreciation expense was $112.2 million, $116.3 million and $116.5 million
in 2001, 2000 and 1999, respectively.
NOTE 10 INCOME TAXES
Domestic and foreign components of income from continuing operations before
income taxes and the cumulative effect of a change in accounting principle are
shown below:
Year Ended December 31
----------------------
2001 2000 1999
------- ------ ------
(In Millions)
Domestic $(537.3) $ 64.1 $ 41.3
Foreign. 64.4 94.5 153.8
------- ------ ------
Total... $(472.9) $158.6 $195.1
======= ====== ======
The provision (benefit) for income taxes attributable to income (loss) from
continuing operations before a cumulative effect of a change in accounting
principle consisted of:
Year Ended December 31
----------------------
2001 2000 1999
------- ------ -----
(In Millions)
Current:
Federal... $ 10.5 $ 17.3 $12.0
Foreign... 22.0 32.1 21.1
State..... 1.2 2.6 (0.6)
------- ------ -----
Total current 33.7 52.0 32.5
Deferred..... (200.3) (19.0) 3.9
------- ------ -----
Total........ $(166.6) $ 33.0 $36.4
======= ====== =====
45
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Total income tax provisions (benefits) were allocated as follows:
Year Ended December 31
---------------------
2001 2000 1999
------- ----- -----
(In Millions)
Continuing operations before the cumulative effect of a change in accounting
principle................................................................. $(166.6) $33.0 $36.4
Discontinued operations..................................................... 12.0 (2.7) 19.6
Cumulative effect of a change in accounting principle....................... (0.9) -- --
Items charged directly to stockholders' equity.............................. (7.1) (3.0) (1.1)
------- ----- -----
Total....................................................................... $(162.6) $27.3 $54.9
======= ===== =====
Significant components of the deferred income tax provision (benefit)
attributable to income (loss) from continuing operations before income taxes
and the cumulative effect of a change in accounting principle are as follows:
Year Ended December 31
----------------------
2001 2000 1999
------- ------ -----
(In Millions)
Deferred tax (exclusive of the valuation allowance)................... $(204.3) $(19.0) $ 5.0
Increase (decrease) in the valuation allowance for deferred tax assets 4.0 -- (1.1)
------- ------ -----
Deferred income tax provision (benefit)............................... $(200.3) $(19.0) $ 3.9
======= ====== =====
Significant components of the company's deferred tax assets and liabilities
were attributable to:
December 31
--------------
2001 2000
------ ------
(In Millions)
Reserves for discontinued operations, environmental and restructuring $347.4 $109.0
Accrued pension and other postretirement benefits.................... 32.4 49.1
Other reserves....................................................... 56.2 75.2
Alternative minimum and foreign tax credit carryforwards............. 72.8 52.4
Net operating loss carryforwards..................................... 5.3 1.2
Other................................................................ 21.8 1.5
------ ------
Deferred tax assets.................................................. 535.9 288.4
Valuation allowance.................................................. (18.0) (14.0)
------ ------
Deferred tax assets, net of valuation allowance...................... $517.9 $274.4
------ ------
Property, plant and equipment........................................ $166.7 $110.2
Other................................................................ 8.0 21.3
------ ------
Deferred tax liabilities............................................. $174.7 $131.5
====== ======
------ ------
Net deferred tax assets.............................................. $343.2 $142.9
====== ======
46
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company has recognized that it is more likely than not that certain
future tax benefits may not be realized as a result of current and future
income. Accordingly, the valuation allowance has been increased in the current
year to reflect lower than anticipated net deferred tax asset utilization.
The effective income tax rate applicable to income from continuing
operations before income taxes and the cumulative effect of a change in
accounting principle were different from the statutory U.S. Federal income tax
rate due to the factors listed in the following table:
(Percent of income from continuing operations before income taxes and the
cumulative effect of a change in accounting principle)
Year Ended December 31
---------------------
2001 2000 1999
---- ---- ----
Statutory U.S. tax rate........................................... (35%) 35% 35%
--- --- ---
Net difference:
U.S export sales benefit.......................................... (2) (4) (3)
Percentage depletion.............................................. (1) (4) (4)
State and local income taxes, less federal income tax benefit..... (5) 1 0
Foreign earnings subject to different tax rates................... (2) (10) (11)
Impact of Argentina asset impairment.............................. 8 0 0
Non-taxable portion of gain on sale of business................... 0 0 (6)
Tax on intercompany dividends and deemed dividend for tax purposes 1 1 1
Nondeductible expenses............................................ 1 1 1
Minority interests................................................ 1 1 1
Equity in earnings of affiliates not taxed........................ (1) (1) 0
Change in valuation allowance..................................... 0 0 6
Other............................................................. 0 1 (1)
--- --- ---
Total difference.................................................. 0 (14) (16)
--- --- ---
Effective tax rate................................................ (35%) 21% 19%
=== === ===
FMC's federal income tax returns for years through 1997 have been examined
by the Internal Revenue Service ("IRS") and substantially all issues have been
settled. Management believes that adequate provision for income taxes has been
made for the open years 1998 and after and for any unsettled issues prior to
1998. U.S. income taxes have not been provided for the equity in undistributed
earnings of foreign consolidated subsidiaries ($297.4 million and $371.3
million at December 31, 2001 and 2000, respectively) or foreign unconsolidated
subsidiaries and affiliates ($14.5 million and $15.8 million at December 31,
2001 and 2000, respectively). Restrictions on the distribution of these
earnings are not significant. Foreign earnings taxable to the company as
dividends were $94.3 million, $51.5 million and $126.2 million in 2001, 2000
and 1999, respectively.
47
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 11 DEBT
Long-term Debt
Long-term debt consists of the following:
December 31
-------------
2001 2000
------ ------
(In Millions)
Pollution control and industrial revenue bonds, 3.2% to 7.1%, due 2001 to 2032.............. $221.8 $204.0
Debentures, 6.375%, due 2003, less unamortized discount (2001 - $0.2; 2000 - $0.3),
effective rate 6.4%....................................................................... 160.3 199.7
Debentures, 7.75%, due 2011, less unamortized discount (2001 - $0.3; 2000 - $0.6), effective
rate 7.8%................................................................................. 45.2 82.4
Medium-term notes, 6.38% to 7.32%, due 2002 to 2008, less unamortized discounts (2001 -
$0.7, 2000 - $1.1) effective rates 6.4% to 7.4%........................................... 330.9 368.4
Exchangeable senior subordinated debentures, 6.75%, due 2005................................ 28.8 39.9
Other....................................................................................... -- 0.1
------ ------
Total....................................................................................... 787.0 894.5
Less: current portion....................................................................... 135.2 22.7
------ ------
Long-term portion........................................................................... $651.8 $871.8
====== ======
FMC maintains a universal shelf registration under which, at December 31,
2001, $345.0 million of debt or equity securities could be issued. During 2001
and 2000, the company did not issue new long-term debt. During 1999 the company
borrowed $50.0 million at 6.45 percent interest with a maturity of 2032 from
the proceeds of Power County, Idaho's Solid Waste Disposal Revenue Bonds.
Undrawn bond proceeds of $8.4 million and $9.8 million at December 31, 2001 and
2000, respectively, are included in investments on the consolidated balance
sheets and are being used to fund capital projects related to solid waste
disposal.
At December 31, 2001, long-term debt included $28.8 million in exchangeable
senior subordinated debentures bearing interest at 6.75 percent, maturing in
2005 and exchangeable by the holders at any time into common stock of Meridian
Gold, Inc. (NYSE: MDG), the successor of a former subsidiary of FMC, at an
exchange price of $15.125 per share, subject to adjustment. The company no
longer holds any shares of Meridian Gold and under the terms of the agreement
may pay the holders in cash an amount equal to the market price of Meridian
Gold common stock in lieu of delivery of the shares. The debentures are
subordinated in right of payment to all existing and future indebtedness of the
company. The debentures are currently redeemable at the option of FMC at par
plus accrued interest upon at least thirty days prior written notice. The
company redeemed $11.1 million of these debentures during 2001 and $8.5 million
during 2000.
The company redeemed $117.2 million, $42.5 million and $250.0 million in
debentures and medium-term notes in 2001, 2000 and 1999, respectively. These
debentures and notes had maturity dates ranging from 2001 through 2011, with
interest rates at 6.375 percent to 7.75 percent.
Short-term Debt
Short-term debt of $136.5 million at December 31, 2001 and $113.0 million at
December 31, 2000 consisted of commercial paper, borrowings under credit
facilities, and foreign borrowings.
48
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company elected not to renew an unused 364-day committed credit facility
for $350.0 million that expired in July 2000. In July 2001, the company elected
to reduce the availability of the committed $450.0 million non-amortizing
revolving credit agreement to $300.0 million. In December 2001, the company
replaced the $300.0 million credit agreement with a committed $240.0 million
non-amortizing revolving credit agreement due in December 2002. The total
amount outstanding under this facility at December 31, 2001 was $68.0 million.
No amounts were outstanding under the former credit facility at December 31,
2000. Among other restrictions, the credit agreement contains financial
covenants related to leverage (measured as the ratio of debt to adjusted
earnings), interest coverage (measured as the ratio of interest expense to
adjusted earnings), and consolidated net worth. FMC was in compliance with all
debt covenants at December 31, 2001. In January 2002 the company arranged a
supplemental $50.0 million committed credit facility to meet short-term
seasonal financing needs. This credit facility expires on August 31, 2002.
The company's short-term commercial paper program is supported by committed
credit facilities and provides for the issuance of up to $300.0 million in
aggregate maturity value of commercial paper at any given time. Commercial
paper of $33.0 million was outstanding at December 31, 2001 and $16.8 million
was outstanding at December 31, 2000. Effective rates on commercial paper were
3.2 percent at December 31, 2001 and 6.6 percent at December 31, 2000.
Outstanding foreign and other short-term borrowings totaled $35.5 million at
December 31, 2001 and $46.2 million at December 31, 2000.
The company had advances under uncommitted credit facilities of $50.0
million at December 31, 2000. There were no outstanding uncommitted credit
facilities balances at December 31, 2001.
Compensating Balance Agreements
FMC maintains informal credit arrangements in many foreign countries.
Foreign lines of credit, which include overdraft facilities, typically do not
require the maintenance of compensating balances, as credit extension is not
guaranteed but is subject to the availability of funds.
49
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 12 PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The funded status of the company's domestic qualified and non-qualified
pension plans, the United Kingdom pension plan, the defined benefit portion of
the company's Canadian retirement plan and the company's domestic
postretirement healthcare and life insurance benefit plans for continuing
operations, together with the associated balances recognized in the company's
consolidated financial statements as of December 31, were as follows:
Pensions Other Benefits
------------------ ---------------
December 31
-----------------------------------
2001 2000 2001 2000
-------- -------- ------ -------
(In Millions)
Accumulated benefit obligation:
Plans with unfunded accumulated benefit obligation....... $ 26.9 $ 43.6 $ -- $ --
-------- -------- ------ -------
Change in benefit obligation:
Benefit obligation at January 1.......................... $1,001.8 $1,029.5 $105.0 $ 108.9
Spin-off of Technologies (Note 2)....................... (361.3) -- (35.1) --
Service cost............................................ 12.0 24.9 1.0 2.2
Interest cost........................................... 46.8 72.1 5.6 7.9
Actuarial (gain) or loss................................ 44.6 (19.9) 16.5 (5.4)
Amendments.............................................. (3.2) 0.8 1.0 --
Divestitures............................................ (8.3) (47.6) -- --
Foreign currency exchange rate changes.................. (0.5) (13.1) -- --
Curtailments and settlements............................ (6.9) (1.1) -- --
Plan conversion......................................... -- 5.7 -- --
Plan participants' contributions........................ 0.2 1.1 5.2 5.6
Special termination benefits............................ -- 3.2 -- --
Benefits paid........................................... (38.1) (53.8) (11.8) (14.2)
-------- -------- ------ -------
Benefit obligation at December 31........................ 687.1 1,001.8 87.4 105.0
-------- -------- ------ -------
Change in fair value of plan assets:
Fair value of plan assets at January 1................... 953.9 909.4 -- --
Spin-off of Technologies (Note 2)....................... (328.9) -- -- --
Actual return on plan assets............................ 33.8 140.8 -- --
Divestitures............................................ (8.7) (47.6) -- --
Curtailments and settlements............................ (8.1) (1.3) -- --
Foreign currency exchange rate changes.................. (0.6) (14.2) -- --
Company contributions................................... 28.0 11.4 6.6 8.6
Plan conversion......................................... -- 8.1 -- --
Plan participants' contributions........................ 0.2 1.1 5.2 5.6
Benefits paid........................................... (38.1) (53.8) (11.8) (14.2)
-------- -------- ------ -------
Fair value of plan assets at December 31................. 631.5 953.9 -- --
-------- -------- ------ -------
Funded status of the plan (liability).................... (55.6) (47.9) (87.4) (105.0)
Unrecognized actuarial loss (gain)....................... 20.6 (31.7) 12.3 (6.7)
Unrecognized prior service cost (income)................. 7.5 20.0 (13.2) (30.3)
Unrecognized transition asset............................ (0.9) (13.4) -- --
Net amount recognized in the balance sheet
for discontinued operations at December 31............. -- 24.9 -- 47.4
-------- -------- ------ -------
Net amount recognized in the balance sheet at December 31 $ (28.4) $ (48.1) $(88.3) $ (94.6)
======== ======== ====== =======
Prepaid benefit cost..................................... $ 1.2 $ 12.6 $ -- $ --
Accrued benefit liability................................ (40.3) (97.9) (88.3) (142.0)
Intangible asset......................................... 2.4 5.5 -- --
Accumulated other comprehensive income................... 8.3 6.8 -- --
Net amount recognized in the balance sheet
for discontinued operations at December 31............. -- 24.9 -- 47.4
-------- -------- ------ -------
Net amount recognized in the balance sheet at December 31 $ (28.4) $ (48.1) $(88.3) $ (94.6)
======== ======== ====== =======
50
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the assumptions used and the components of
net annual benefit cost (income) for the years ended December 31:
Year Ended December 31
-------------------------------------------
Pensions Other Benefits
---------------------- -------------------
2001 2000 1999 2001 2000 1999
------ ------ ------ ----- ----- -----
Assumptions as of September 30:
Discount rate............................ 7.00% 7.50% 7.50% 7.00% 7.50% 7.50%
Expected return on assets................ 9.25% 9.25% 9.25% -- -- --
Rate of compensation increase............ 4.25% 4.25% 5.00% -- -- --
Components of net annual benefit cost (in
millions):
Service cost............................ $ 12.0 $ 12.3 $ 17.9 $ 0.9 $ 1.2 $ 1.4
Interest cost........................... 46.8 48.0 45.8 5.6 5.3 5.0
Expected return on plan assets.......... (55.1) (56.4) (55.2) -- -- --
Amortization of transition asset........ (4.9) (16.0) (15.8) -- -- --
Amortization of prior service cost...... 2.0 2.9 3.0 (6.0) (6.1) (6.1)
Recognized net actuarial (gain) loss.... (1.2) (1.4) (0.6) (0.3) (0.3) --
Curtailment and settlement.............. 4.2 0.2 -- -- -- --
------ ------ ------ ----- ----- -----
Net annual benefit cost (income) from
continuing operations.................. $ 3.8 $(10.4) $ (4.9) $ 0.2 $ 0.1 $ 0.3
Net annual benefit cost from discontinued
operations............................. -- 5.0 8.0 -- 0.2 0.7
------ ------ ------ ----- ----- -----
Net annual benefit cost (income)......... $ 3.8 $ (5.4) $ 3.1 $ 0.2 $ 0.3 $ 1.0
====== ====== ====== ===== ===== =====
The change in the discount rate used in determining domestic pension and
other postretirement benefit obligations from 7.50 percent to 7.00 percent
increased the projected pension and other postretirement benefit obligations by
$39.6 million and $4.4 million, respectively, at December 31, 2001.
Effective May 1, 2001, in connection with the IPO of Technologies, the
company transferred $251.5 million in qualified domestic pension plan assets to
Technologies' pension trust. As a result of the transfer, the company's
qualified pension plan obligation was reduced by $262.3 million. This initial
allocation of assets and obligations between the company's and Technologies'
plans and trusts was estimated. The final allocation of obligations following
agreements entered into by the company and Technologies pursuant to the
separation and in accordance with the Employee Retirement Income Security Act
of 1974 ("ERISA") guidelines will be determined during 2002. Also in connection
with the IPO of Technologies, the benefit obligation for the company's
nonqualified pension plans was reduced by approximately $21.0 million. The
company also transferred $77.4 million in foreign pension plan assets to
Technologies' foreign plans and trusts, which in turn reduced the company's
foreign pension plan obligation by approximately $78.0 million. In addition,
effective December 31, 2001, a portion of the company's domestic other
postretirement benefit obligations was assumed by Technologies.
In connection with the 1999 divestiture of the process additives business
(Note 5), the company transferred $8.7 million in qualified domestic pension
plan assets to the buyer's pension plan during 2001, and in turn reduced the
company's qualified pension plan obligation by $8.3 million.
The postretirement medical obligations shown reflect a change in the assumed
medical trend rate effective December 31, 2001. For measurement purposes, 10
percent and 12 percent increases in the per capita cost of
51
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
health care benefits for pre-65 and post-65 retirees, respectively, were
assumed for 2002, grading down to an ultimate rate of 6 percent in 2009 and
later years. The ultimate rate assumption used previously was 5 percent for
2001 and later years.
The change in the rate of compensation increase used in determining pension
plan obligations from 5.00 percent to 4.25 percent decreased the projected
benefit obligation by approximately $20.0 million at December 31, 2000.
Assumed health care cost trend rates have an effect on the amounts reported
for the health care plan. A one-percentage point change in the assumed health
care cost trend rates would have the following effects at December 31, 2001:
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
(In Millions)
Effect on total of service and interest cost components of net annual
benefit cost (income).............................................. $0.2 $(0.1)
Effect on postretirement benefit obligation.......................... $2.4 $(2.1)
The company has adopted SFAS No. 87, "Employer's Accounting for Pensions,"
for its defined benefit plans for substantially all employees in the United
Kingdom and Canada. The financial impact of compliance with SFAS No. 87 for
other non U.S. pension plans is not materially different from the locally
reported pension expense. The cost of providing pension benefits for foreign
employees, net of the cost associated with Technologies' foreign pension plans
in 2000 and 1999, was $1.6 million in 2001, $1.2 million in 2000 and $6.7
million in 1999.
As a result of the 1999 divestiture of the process additives business (Note
5), the FMC United Kingdom pension plan transferred $47.6 million of assets and
liabilities to the buyer's pension plan in September 2000.
In April 2000, the company formed Astaris, a joint venture (Note 4). As a
result, the former Phosphorus Chemical Division's active employees began
receiving benefits under Astaris plans and are not accruing further benefit in
the FMC plan, the effect of which was a reduction in annual service cost of
approximately $2.0 million. Under the joint venture agreement, Astaris agreed
to fund an equal portion of FMC's and Solutia's future postretirement benefit
payments. FMC's receivable from Astaris, representing the minimum amount of
cash to be received under this portion of the agreement, amounted to $17.4
million at December 31, 2001 and $18.9 million at December 31, 2000, and is
included as part of the company's recorded investment in the joint venture.
FMC Corporation Savings and Investment Plan. The FMC Corporation Savings
and Investment Plan (formerly known as the FMC Employees' Thrift and Stock
Purchase Plan) is a qualified salary-reduction plan under Section 401(k) of the
Internal Revenue Code in which substantially all domestic employees of the
company may participate by contributing a portion of their compensation. The
company matches contributions up to specified percentages of each employee's
compensation depending on how the employee allocates his or her contributions.
On September 28, 2001, in connection with the spin-off of Technologies, the
company transferred the 401(k) plan assets relating to Technologies' plan
participants to a separate trust established for the Technologies' Savings and
Investment Plan. Charges against income for the company's matching
contributions, net of forfeitures and net of matching contributions associated
with Technologies (for 2000 and 1999 only) were $7.3 million in 2001, $7.7
million in 2000, and $8.4 million in 1999.
52
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 13 ENVIRONMENTAL OBLIGATIONS
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 company is also
subject to liabilities arising under 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 RCRA
and analogous state laws that require owners and operators of facilities that
treat, store or dispose of hazardous waste to follow certain waste management
practices and to clean up releases of hazardous waste into the environment
associated with past or present practices.
FMC has been named a PRP at 27 sites on the government's National Priority
List. In addition, the company also has received notice from the EPA or other
regulatory agencies that the company may be a PRP, or PRP equivalent, at other
sites, including 55 sites at which the company has determined that it is
reasonably possible that it has an environmental liability. FMC, in cooperation
with appropriate government agencies, is currently participating in, or has
participated in, RI/FS or their equivalent at most of the identified sites,
with the status of each investigation varying from site to site. At certain
sites, RI/FS have just begun, providing limited information, if any, relating
to cost estimates, timing, or the involvement of other PRPs; whereas, at other
sites, the studies are complete, remedial action plans have been chosen, or
RODs have been issued.
Environmental liabilities consist of obligations relating to waste handling
and the remediation and/or study of sites at which the company is alleged to
have disposed of hazardous substances. These sites include current operations,
previously operated sites, and sites associated with discontinued operations.
The company has provided reserves for potential environmental obligations that
management considers probable and for which a reasonable estimate of the
obligation could be made. Accordingly, total reserves of $260.4 million and
$232.0 million, respectively, before recoveries, were recorded at December 31,
2001 and 2000. The long-term portion of these reserves is included in the
reserve for discontinued operations and other liabilities on the consolidated
balance sheets and amounted to $244.1 million and $222.0 million at December
31, 2001 and 2000, respectively. In addition, the company has estimated that
reasonably possible environmental loss contingencies may exceed amounts accrued
by as much as $70.0 million at December 31, 2001.
The company's total environmental reserves include $245.7 million and $218.3
million for remediation activities and $14.7 million and $13.7 million for
RI/FS costs at December 31, 2001 and 2000, respectively. For the years 2001,
2000 and 1999, FMC charged $31.3 million, $44.3 million and $20.9 million,
respectively, against established reserves for remediation spending, and $12.1
million, $9.2 million and $43.3 million, respectively, against reserves for
spending on RI/FS. FMC anticipates that the remediation and RI/FS expenditures
for current operating, previously operated and other sites will continue to be
significant for the foreseeable future.
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. FMC has recorded recoveries,
representing probable realization of claims against insurance companies, U.S.
government agencies and other third parties, of $41.3 million and $46.9
million, respectively, at December 31, 2001 and 2000 (all of which is recorded
as an offset to the reserve for discontinued operations and other liabilities).
Cash recoveries for the years 2001, 2000 and 1999 were $12.5 million, $14.2
million and $56.9 million, respectively. Recoveries in 1999 included a
settlement with a consortium of FMC's general liability insurance carriers.
During 2001 and 2000, the company recognized additional receivables for
recoveries of $6.9 million and $0.9 million, respectively.
53
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In October of 2001, the Astaris joint venture announced its plans to cease
production at the Pocatello, Idaho elemental phosphorus facility. FMC is
responsible for decommissioning of the plant and remediation of the site at an
estimated incremental after-tax cost (net of expected recoveries from Astaris)
of $46.7 million, which the company has reserved at December 31, 2001. The
estimated closure and remediation costs include the remaining costs of
compliance with a June 1999 Consent Decree settling outstanding violations
under RCRA at the Pocatello facility and costs to be incurred under a 1998 ROD
under CERCLA which addresses previously closed ponds on the Pocatello facility
portion of the Eastern Michaud Flats Superfund Site. FMC had previously signed
a Consent Decree under CERCLA to implement this ROD, which was lodged in court
on July 21, 1999. On August 3, 2000, the Department of Justice ("DOJ") withdrew
the CERCLA Consent Decree and announced that it needed to review the
administrative record supporting its remedy selection decision. FMC believes
its reserves for environmental costs adequately provide for the estimated costs
of the existing ROD for the site, the expenses previously described related to
the RCRA Consent Decree and the incremental costs associated with the
decommissioning and remediation of the facility associated with the cessation
of production. Management cannot predict the potential changes in the scope of
the ROD, if any, resulting from the EPA's remedy review, nor estimate the
potential incremental costs, if any, of such changes.
In October 2001, the company made a $30.0 million payment into a fund for
the Shoshone-Bannock Tribes as a result of a second quarter agreement to
support a proposal to amend the RCRA Consent Decree permitting the earlier
closure of the largest remaining waste disposal pond at Pocatello. The company
reserved $40.0 million in the second quarter of 2001 for this payment. The
remaining balance of the reserve will be paid in five equal annual installments
starting in 2002.
In the second quarter of 2000, FMC recorded a charge of $12.5 million (net
of $0.9 million of anticipated recoveries) to provide additional reserves for
ongoing remediation of several phosphorus properties. Although these properties
are part of the Astaris joint venture (Note 4), FMC retains certain remedial
liabilities associated with the properties. In the fourth quarter of 1999, FMC
provided $25.9 million (net of recoveries of $8.9 million), for environmental
costs of discontinued operations (Note 3). FMC also provided $1.6 million
related to environmental costs of continuing operations in 1999.
On October 21, 1999, the Federal District Court for the Western District of
Virginia approved a consent decree signed by the company, the EPA (Region III)
and the DOJ regarding past response costs and future clean- up work at the
discontinued fiber-manufacturing site in Front Royal, Virginia. As part of a
prior settlement, government agencies are expected to reimburse FMC for
approximately one third of the clean-up costs due to the government's role at
the site. FMC's $70 million portion of the settlement was charged to earnings
in 1998 and prior years.
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 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 or year's
results of operations in the future. Management, however, believes any
liability arising from 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.
Regarding current operating sites, the company spent $87.4 million, $79.4
million and $64.0 million for the years 2001, 2000 and 1999, respectively, on
capital projects relating to environmental control facilities, the majority of
which is associated with the RCRA Consent Decree discussed above. The company
expects to spend approximately $15.9 million and $12.1 million in 2002 and
2003, respectively. Additionally, in 2001, 2000 and
54
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1999, FMC spent $35.9 million, $44.0 million and $61.1 million, respectively,
for environmental compliance costs, which are an operating cost of the company
and are not covered by established reserves.
NOTE 14 INCENTIVE COMPENSATION PLANS
The FMC 1995 Management Incentive Plan and the FMC 1995 Stock Option Plan,
approved by the stockholders on April 21, 1995, provided certain incentives and
awards to key employees. In 2000, the Compensation and Organization Committee
of the Board of Directors (the "Committee") which, subject to the provisions of
the plans, reviews and approves financial targets, and the times and conditions
for payment, adopted the FMC Corporation Stock Appreciation Rights and Phantom
Stock Plan to provide equity-based cash compensation to foreign employees.
Effective February 16, 2001, the FMC 1995 Management Incentive Plans and the
FMC Corporation Stock Appreciation Rights and Phantom Stock Plans were merged
with, and into, the FMC 1995 Stock Option Plan. The merged plan was restated
and renamed the FMC Corporation Incentive Compensation and Stock Plan (the
"Plan") and was approved by the stockholders on April 20, 2001. The provisions
for incentives under the Plan provide for the grant of multi-year incentive
awards payable partly in cash and partly in common stock.
The provisions under the Plan and its predecessor plans for stock options
provide for regular grants of common stock options, which may be incentive
and/or nonqualified stock options. The exercise price for stock options is not
less than the fair market value of the stock at the date of grant. Options are
exercisable at the time designated by the Committee in the option (four years
for grants prior to 1995 and three years for grants during 1995 and
thereafter). Incentive and nonqualified options expire not later than 10 years
from the grant date (15 years for grants prior to 1996).
Under the plans adopted in 1995, three million shares became available for
awards and options granted in 1995 and later years. These shares are in
addition to the shares available from the predecessor plans. Cancellation
(through expiration, forfeiture or otherwise) of outstanding awards and options
granted after 1989 increases the shares available for future awards or grants.
On February 16, 2001, the Committee approved an additional 800,000 shares for
use under the Plan. At December 31, 2001, 2.3 million shares were available for
future use under these plans. On February 14, 2002, the Committee approved an
adjustment to the share allocation, increasing it to 4.4 million, based on a
conversion factor of approximately 1.9, to reflect the change in the value of
the stock options and restricted shares following the spin-off of Technologies.
The Plan was also amended to change the total number of shares under the Plan
from 3.8 million to 7.2 million.
The company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the Plan. Had compensation cost for options under the
Plan been determined based on the fair value at the grant date for awards in
2001, 2000 and 1999, consistent with the provisions of SFAS No. 123, the
company's net income and diluted earnings per share for the three years ended
December 31, 2001 would have been reduced to the pro forma amounts indicated
below:
2001 2000 1999
------- ------- -------
(Net Income (Loss) in Millions)
Net income (loss)--as reported................ $(337.7) $ 110.6 $ 212.6
Net income (loss)--pro forma.................. $(344.1) $ 109.8 $ 211.2
Diluted earnings (loss) per share--as reported $(10.86) $ 3.50 $ 6.57
Diluted earnings (loss) per share--pro forma.. $(11.07) $ 3.48 $ 6.52
55
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For 2000 and 1999, pro forma net income and pro forma diluted earnings per
share have been reclassified to reflect the changes in stock-based compensation
related to the distribution of net assets related to the spin-off of
Technologies (Note 2).
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively: dividend
yield of 0 percent for all years; expected volatility of 33.0 percent, 30.7
percent and 22.9 percent; risk-free interest rates of 4.8 percent, 6.7 percent
and 5.1 percent; and expected lives of 5 years for all grants. The weighted
average fair value of stock options, calculated using the Black-Scholes
option-pricing model, granted during the years ended December 31, 2001, 2000
and 1999 was $27.75, $19.94 and $15.07, respectively.
The tables and discussion below reflect revised share amounts and prices,
using a conversion factor of 1.9 established on December 31, 2001, based on a
ratio of FMC and Technologies closing stock prices on that date, following the
spin-off of Technologies (Note 2).
The following summary shows stock option activity for the three years ended
December 31, 2001:
Number of Shares Weighted-Average
Optioned But Not Exercised Exercise Price Per Share
-------------------------- ------------------------
(Number of Shares in Thousands)
December 31, 1998
(3,306 shares exercisable)............... 6,013 $28.77
Granted.................................. 667 $25.18
Exercised................................ (204) $21.68
Forfeited................................ (299) $32.68
------ ------
December 31, 1999
(3,857 shares exercisable)............... 6,177 $28.42
Granted.................................. 385 $26.69
Exercised................................ (505) $22.89
Forfeited................................ (197) $32.59
------ ------
December 31, 2000
(4,118 shares exercisable)............... 5,860 $28.65
Granted.................................. 793 $38.65
Exercised................................ (971) $24.69
Forfeited................................ (128) $31.38
Cancelled due to spin-off of Technologies (1,699) $38.85
------ ------
December 31, 2001
(2,716 shares exercisable)............... 3,855 $30.84
====== ======
56
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following tables summarize information about fixed-priced stock options
outstanding at December 31, 2001:
Options Outstanding
----------------------------------------------------------------
Number Outstanding Weighted-Average Remaining Weighted-Average
at December 31, 2001 Contractual Life Exercise Price
Range of Exercise Prices (in Thousands) (in Years) Per Share
- ------------------------ -------------------- -------------------------- ----------------
$ 15.47 - $ 23.60.... 344 3.7 $16.96
$ 24.26 - $ 31.28.... 1,423 7.1 $25.82
$ 32.13 - $ 37.31.... 1,386 5.2 $35.35
$ 38.42 - $ 43.28.... 702 9.1 $38.90
----- --- ------
Total................ 3,855 6.5 $30.84
===== === ======
Options Exercisable
-------------------------------------
Number Exercisable Weighted-Average
at December 31, 2001 Exercise Price
Range of Exercise Prices (in thousands) Per Share
------------------------ -------------------- ----------------
$ 15.47 - $ 23.60.... 344 $16.96
$ 24.26 - $ 32.13.... 1,462 $27.90
$ 34.36 - $ 43.28.... 910 $37.05
----- ------
Total................ 2,716 $29.58
===== ======
On January 2, 2002, an additional 155,380 shares became exercisable at
prices ranging from $25.18 to $25.31 with an expiration date of March 22, 2009.
Under the Plan, discretionary awards of restricted stock may be made to
selected employees. The awards vest over a period designated by the Committee,
with payment conditional upon continued employment. Compensation cost is
recognized over the vesting period based on the market value of the stock on
the date of the award. At December 31, 2001, 486,436 shares of restricted stock
were outstanding under the plan.
Under the FMC Deferred Stock Plan for Non-Employee Directors, a portion of
the annual retainer for these directors was deferred and paid in the form of
shares of the company's common stock upon retirement or other termination of
their directorships. Effective January 1, 1997, the Board of Directors approved
a comprehensive compensation plan that terminated the retirement plan for
directors and increased the proportion of director compensation paid in common
stock of the company. Benefits provided for and earned under the former plan
were converted into stock units payable in shares of common stock of the
company upon retirement from the Board based on the fair market value of the
common stock on December 31, 1996. At December 31, 2001, stock units
representing an aggregate of 37,718 shares of stock were credited to the
non-employee directors' accounts. In 1998 and 1999, non-employee directors were
also granted options to purchase shares of stock at the fair market value of
the stock at the date of grant. At December 31, 2001, options for 46,040 shares
were outstanding at prices ranging from $33.76 to $40.56. These grants vested
one year from the grant date and expire after ten years. Beginning in 2000,
non-employee directors were paid in restricted stock units in lieu of stock
options. The restriction on these shares lapsed on April 20, 2001. The shares,
however, will not be paid out until retirement from the Board. At December 31,
2001 and December 31, 2000 units representing 14,941 shares and 15,251 shares
of stock were outstanding, respectively.
57
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 15 STOCKHOLDERS' EQUITY
On December 31, 2001 the company distributed its remaining 83 percent
ownership in Technologies. The distribution was tax free. Each stockholder of
record as of December 12, 2001 received approximately 1.72 shares of
Technologies stock for every share of FMC stock. Total shares of Technologies'
stock distributed were 53,950,000. The company recorded the distribution
through a $509.5 million decrease in retained earnings and a $115.0 million
decrease in the cumulative translation loss.
The following is a summary of FMC's capital stock activity over the past
three years:
Common Treasury
Stock Stock
------ --------
(Number of Shares in
Thousands)
December 31, 1998.................... 38,189 5,486
Stock options and awards............. 143 --
Stock for employee benefit trust, net -- 12
Stock repurchases.................... -- 2,470
------ -----
December 31, 1999.................... 38,332 7,968
Stock options and awards............. 290 --
Stock for employee benefit trust, net -- 10
------ -----
December 31, 2000.................... 38,622 7,978
Stock options and awards............. 612 --
Stock for employee benefit trust, net -- (70)
Stock Repurchase..................... -- 21
------ -----
December 31, 2001.................... 39,234 7,929
====== =====
During 1999, approximately 2.5 million shares were acquired under the
company's stock repurchase plans at an aggregate cost and $135.9 million.
Shares of common stock repurchased and contributed to a trust for an employee
benefit program (net of shares resold as needed to administer the plan) were
9,470 shares in 2000 and 11,783 shares in 1999 at a cost of approximately $0.6
million and $0.5 million, respectively.
At December 31, 2001, 8.9 million shares of unissued FMC common stock were
reserved for stock options and awards.
At December 31, 2001 and 2000, accumulated other comprehensive loss
consisted of cumulative foreign currency translation losses of $158.6 million
and $234.4 million and minimum pension liability adjustments of $0.1 million
and $0.7 million, respectively. Also included in accumulated other
comprehensive loss was a $16.6 million loss, net of taxes of $10.2 million
related to the decrease in the fair value of currency and energy cash flow
hedges (Notes 1 and 17).
Covenants of the revolving credit facility agreement (Note 11) contain
minimum net worth and other requirements, with which FMC was in compliance as
of December 31, 2001.
On February 22, 1986, the Board of Directors of the company declared a
dividend distribution to each holder of record of common stock as of March 7,
1986, of one Preferred Share Purchase Right for each share of common stock
outstanding on that date. Each right entitles the holder to purchase, under
certain circumstances related to a change in control of the company, one
one-hundredth of a share of Junior Participating Preferred
58
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock, Series A, without par value, at a price of $300 per share (subject to
adjustment), subject to the terms and conditions of a Rights Agreement dated
February 22, 1986 as amended through February 9, 1996. The rights expire on
March 7, 2006, unless redeemed by the company at an earlier date. The
redemption price of $.05 per right is subject to adjustment to reflect stock
splits, stock dividends or similar transactions. The company has reserved
400,000 shares of Junior Participating Preferred Stock for possible issuance
under the agreement.
NOTE 16 FOREIGN CURRENCY
The value of the U.S. dollar and other currencies in which FMC operates
continually fluctuate. The company's results of operations and financial
positions for all the years presented have been affected by such fluctuations.
The company enters into certain foreign exchange contracts to mitigate the
financial risk associated with this fluctuation (Note 17). These contracts
typically qualify for hedge accounting under SFAS No. 133 (Notes 1 and 17). The
company does not hedge 100 percent of its currency transactions or monetary
assets and liabilities.
Net income (loss) for 2001, 2000 and 1999 included aggregate transactional
foreign currency gains. These gains of $0.1 million, $4.6 million and $2.2
million, respectively, excluded gains (losses) of the change in fair value
related to the settling and ineffectiveness of cash flow hedges and gains
(losses) related to the change in fair value of foreign currency contracts not
qualifying as hedges (Note 17). Other comprehensive income (loss) for 2001,
2000 and 1999 included a loss of $12.5 million, $69.8 million and $61.9
million, respectively.
NOTE 17 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The company's financial instruments include cash and cash equivalents, trade
receivables, other current assets, accounts payable, and amounts included in
investments and accruals meeting the definition of financial instruments. These
financial instruments are stated at their carrying value which is a reasonable
estimate of fair value.
The following table of the estimated fair value of financial instruments is
based on estimated fair-value amounts that have been determined using available
market information and appropriate valuation methods. Accordingly, the
estimates presented may not be indicative of the amounts that FMC would realize
in a current market exchange and do not represent potential gains or losses on
these agreements.
December 31, 2001
------------------
Carrying Estimated
Amount Fair Value
-------- ----------
(In Millions)
Assets (liabilities)
Foreign exchange forward contracts $ 3.2 $ 3.2
Energy forward contracts.......... $ (29.1) $ (29.1)
Debt.............................. $(923.5) $(919.8)
December 31, 2000
--------------------
Carrying Estimated
Amount Fair Value
--------- ----------
(In Millions)
Assets (liabilities)
Foreign exchange forward contracts $ 1.9 $ (2.4)
Energy forward contracts.......... $ -- $ 27.6
Debt.............................. $(1,007.5) $(972.5)
Fair values of debt have been determined through a combination of management
estimates and information obtained from independent third parties using market
data, such as bid/ask spreads on the last business day of the year.
59
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Derivative financial instruments. The company conducts its business in many
foreign countries, exposing earnings, cash flows, and the company's financial
position to a series of foreign currency risks. The majority of these risks
originate through foreign currency transactions. The company is also exposed to
risks in energy costs due to fluctuations in energy prices.
FMC's policy is to minimize its cash flow exposure to adverse changes in
currency, energy prices and exchange rates. This is accomplished through a
controlled program of risk management that includes the use of derivative
financial instruments. The company's objective is to maintain economically
balanced currency risk management strategies and energy risk management
strategies that provide adequate protection from significant fluctuations in
the currency and energy markets.
The company enters into foreign exchange contracts, including forwards,
options combination and purchased option contracts, to reduce the cash flow
exposure of foreign currency fluctuations associated with monetary assets and
liabilities and highly anticipated transactions. The company also enters into
such contracts in an effort to mitigate energy cost variances.
Hedge ineffectiveness and the portions of derivative gains and losses
excluded from assessments of hedge effectiveness related to the company's
outstanding cash flow hedges and which were recorded to earning for the year
ended December 31, 2001, were less than $0.1 million. Changes in fair value of
derivatives qualifying as cash flow hedges are recorded in accumulated other
comprehensive income. At December 31, 2001 the net deferred after-tax hedging
loss in accumulated other comprehensive income was $16.6 million, of which
approximately $11.7 million in losses is expected to be realized in earnings
over the next twelve months ending December 31, 2002, at the time the
underlying hedging transactions are realized. At various times subsequent to
December 31, 2002 the company expects losses from cash flow hedge transactions
to total, in the aggregate, approximately $4.9 million. The company recognized
its derivative gains and losses in the cost of sales line of the consolidated
statements of income.
The company continues to hold certain forward contracts that have not been
designated as hedging instruments. Contracts used to hedge the exposure to
foreign currency fluctuations associated with certain monetary assets and
liabilities are not designated as hedging instruments, and changes in the fair
value of these items are recorded in earnings. The net gain recorded in
earnings, in cost of goods sold, for contracts not designated as hedging
instruments through December 31, 2001 was $1.2 million.
Fair values relating to derivative financial instruments reflect the
estimated amounts that the company would receive or pay to terminate the
contracts at the reporting date based on quoted market prices of comparable
contracts as of December 31, 2001 and 2000. At December 31, 2001 and 2000,
derivative financial instruments consisted primarily of foreign exchange
forward contracts and energy forward contracts.
As of December 31, 2001 and 2000, the company held foreign exchange forward
contracts with notional amounts of $1,227.1 million and $187.5 million,
respectively, in which foreign currencies (primarily Norwegian krone, euro,
British pound sterling, Japanese yen and Singapore dollar in 2001 and Norwegian
krone, euro and British pound in 2000) were purchased, and approximately
$1,309.9 million and $314.7 million, respectively, in which foreign currencies
(primarily euro, Norwegian krone, Swedish krona, British pound sterling,
Brazilian real and Japanese yen in 2001 and euro, Swedish krona, British pound
sterling and Japanese yen in 2000) were sold. Notional amounts are used to
measure the volume of derivative financial instruments.
60
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial guarantees and letter of credit commitments. FMC is a party to
various financial instruments with off-balance-sheet risk as part of its normal
course of business, including financial guarantees and contractual commitments
to extend financial guarantees under letters of credit and other assistance to
its customers and the customers of its related parties (Notes 18 and 19).
Decisions to extend financial guarantees to its customers, and the amount of
collateral required under these guarantees, is based on management's evaluation
of creditworthiness on a case-by-case basis. These financial instruments
represent elements of credit risk, which are not recognized on FMC's
consolidated balance sheet.
FMC believes exposure to credit losses in the event of nonperformance by
other parties is remote; therefore, the notional amounts listed below are not
expected to represent future cash requirements.
The table below displays amounts related to FMC's financial guarantees and
contractual commitments to extend financial guarantees and other assistance as
of December 31, 2001.
December 31, 2001
------------------
Carrying Estimated
Amount Fair Value
-------- ----------
(In Millions)
Technologies performance guarantees $ -- $(289.0)
Brazilian customer guarantees...... $ -- $ (10.0)
Guarantees of vendor financing..... $(56.0) $ (56.0)
Astaris guarantee.................. $ -- $(111.9)
NOTE 18 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 discussion of FMC's
reorganization plan). Prior to Technologies' IPO, FMC and Technologies entered
into certain agreements, which are described below, for purposes of governing
the ongoing relationship between the two companies at and after the date of the
Technologies separation from FMC.
After the reorganization and spin-off activities described in Note 2, FMC
and Technologies continued to be related in several general and administrative
areas. The Separation and Distribution Agreement dated as of May 31, 2001 (the
"SDA") includes provisions intended to govern this ongoing relationship by
establishing indemnity responsibilities, allocating responsibility for costs of
the IPO and distribution, and establishing a process for the assignment of
certain operating costs both prior to and after the IPO. The Agreement also
identified the assets to be transferred and the liabilities to be assumed by
Technologies prior to the IPO.
According to the SDA, costs related to the IPO were the responsibility of
Technologies and costs related to the distribution of Technologies shares were
the responsibility of FMC. These distribution costs, which were borne by FMC,
were immaterial. The two companies also agreed to equally share most general
and administrative costs prior to the distribution, with FMC's share of these
expenses totaling $31.3 million in 2001.
The SDA provided for FMC and Technologies to enter into arrangements to
govern the various interim relationships between the two companies.
A transition service agreement between FMC and Technologies, the provisions
of which will largely terminate on December 31, 2002, governs the provisions
between the two companies of certain support services such as cash management,
accounting, tax, payroll, legal and other corporate, general and administrative
functions.
61
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FMC and Technologies entered into a tax sharing agreement wherein each
company is obligated for those taxes associated with their respective
businesses, determined as if each company filed its own consolidated, combined
or unitary tax returns for any period where Technologies is included in the
consolidated, combined or unitary tax return of FMC or its subsidiaries.
Additionally, responsibility for all taxes for periods prior to the spin-off
will be determined in the same manner. If, within thirty months following the
spin-off, Technologies breaches any representations in the tax sharing
agreement relating to the favorable ruling FMC received from the IRS regarding
the tax-free nature of the spin-off; takes or fails to take any action that
causes such representations to be untrue; engages in a sale of substantially
all of its assets; undergoes a change of control; or, discontinues the conduct
of its business, the spin-off may be taxable to FMC. In the event the spin-off
is determined to be taxable to FMC as a result of any of the foregoing,
Technologies will be required to indemnify FMC for any resulting taxes, which
would likely be material to FMC's liquidity, results of operations and
financial condition.
FMC and Technologies agreed that they would share insurance coverage under
FMC's comprehensive general liability and property policies during 2001 and
2002. FMC and Technologies will also share, on an equal basis, past insurance
policies, subject to reservation of disproportionate coverage in favor of FMC
for all prior policy periods up to 1985. This is to recognize certain legacy
liabilities retained by FMC. If either company uses more than its share of the
policy coverage, it must indemnify the other company to ensure that the
indemnified company's share of policy coverage is unaffected.
FMC agreed to guaranty the performance by Technologies of certain
obligations under a number of contracts, debt instruments, and reimbursement
agreements. The latter agreements are associated with certain letters of
credit. Prior to the spin-off, these obligations related to the businesses of
Technologies. As of December 31, 2001, these guaranteed obligations totaled
$289.0 million. Under the SDA, Technologies agreed to indemnify FMC for these
obligations.
As of the distribution on December 31, 2001, and as of the date of this
annual report, a portion of the previously identified shared costs and
transitional costs have not been finalized. A payable to Technologies for an
outstanding amount of $4.7 million is included in the December 31, 2001
consolidated balance sheet, but is subject to final approval by both parties.
In addition to these costs, FMC and Technologies paid certain earnings
distributions related to the reorganization of a number of subsidiaries that
had resulted from the spin-off.
FMC and Technologies generally did not engage in any inter-company
commercial transactions; accordingly, there were no significant intercompany
purchases, sales, receivables or payables in 2001, 2000, or 1999 from
transactions of a commercial nature.
FMC's Board of Directors has several members who will serve on Technologies'
Board of Directors. They include: B.A. Bridgewater, Jr., Robert N. Burt, Edward
J. Mooney, William F. Reilly and James R. Thompson. Robert N. Burt is the
former Chief Executive Officer of FMC and will continue to serve as an FMC
director.
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 $79.0 million and $113.0 million at
December 31, 2001 and 2000, respectively. Net discounts recognized on sales of
receivables are included in selling, general and administrative expenses in the
consolidated statements of income and amounted to $0.8 million, $0.2 million
and $1.6 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The agreement for the sale of accounts receivable provides for
continuation of the program on a revolving basis expiring in November 2002.
62
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 19 COMMITMENTS AND CONTINGENT LIABILITIES
FMC leases office space, plants and facilities, and various types of
manufacturing, data processing and transportation equipment. Leases of real
estate generally provide for payment of property taxes, insurance and repairs
by FMC. Capital leases are not significant. Rent expense under operating leases
amounted to $13.0 million, $17.7 million and $20.5 million in 2001, 2000 and
1999, respectively. Rent expense is net of credits (received for the use of
leased transportation assets) of $20.6 million, $18.6 million and $20.4 million
in 2001, 2000 and 1999, respectively.
Minimum future rentals under noncancelable leases aggregated approximately
$199.9 million as of December 31, 2001 and are estimated to be payable as
follows: $25.8 million in 2002, $24.9 million in 2003, $23.3 million in 2004,
$22.7 million in 2005, $17.4 million in 2006 and $85.8 million thereafter.
Minimum future rentals for transportation assets included above aggregated
approximately $145.9 million, against which the company expects to continue to
receive credits to substantially defray its rental expense.
In connection with the finalization of Astaris' external financing agreement
during the third quarter of 2000, FMC 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 2001
and the company does not expect that such earnings will meet the levels agreed
for 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
at December 31, 2001 was $111.9 million.
In October 2000, the company announced an agreement to settle a lawsuit
related to its discontinued Defense Systems business. As a result, the company
recorded $65.7 million (net of income taxes of $14.3 million) in its results of
discontinued operations during the quarter ended September 30, 2000. After
receiving approval from the DOJ and the U.S. District Court, the company paid
approximately $80.0 million to settle the lawsuit in January 2001.
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 were $56.0 million recorded on the consolidated balance
sheets as "Guarantees of Vendor Financing" at December 31, 2001 and $51.8
million at December 31, 2000.
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 December 31, 2001 were $10.0 million.
The company also has certain other contingent liabilities arising from
litigation, claims, performance guarantees and other commitments incident to
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.
63
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 20 BUSINESS SEGMENT AND GEOGRAPHIC DATA
Year Ended December 31
------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(In millions)
Revenue
Agricultural Products................................... $ 653.1 $ 664.7 $ 632.4 $ 647.8 $ 637.6
Specialty Chemicals..................................... 472.0 488.8 564.5 598.2 604.8
Industrial Chemicals.................................... 822.0 905.6 1,141.3 1,138.4 1,012.0
Eliminations............................................ (4.1) (8.8) (17.7) (27.5) (27.0)
-------- -------- -------- -------- --------
Total................................................... $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4
======== ======== ======== ======== ========
Income (loss) from continuing operations before
income taxes and cumumlative effect of changes in
accounting principle
Agricultural Products................................... $ 72.8 $ 87.8 $ 64.3 $ 76.3 $ 35.1
Specialty Chemicals..................................... 87.5 92.4 73.5 77.9 77.2
Industrial Chemicals.................................... 72.6 114.5 144.4 117.5 135.7
-------- -------- -------- -------- --------
Segment operating profit(1)............................. 232.9 294.7 282.2 271.7 248.0
Corporate............................................... (36.3) (36.2) (41.3) (48.7) (46.3)
Other income and expense, net........................... (1.6) 9.6 9.3 7.1 2.6
-------- -------- -------- -------- --------
Operating profit before gains on divestitures of
businesses, asset impairments, restructuring and other
charges, and net interest expense..................... 195.0 268.1 250.2 230.1 204.3
Gains on divestitures of businesses(2).................. -- -- 55.5 -- --
Asset impairments(3).................................... (323.1) (10.1) (23.1) -- (197.0)
Restructuring and other charges(4)...................... (280.4) (35.2) (11.1) -- (13.0)
Net interest expense(5)................................. (64.4) (64.2) (76.4) (75.3) (71.6)
-------- -------- -------- -------- --------
Total................................................... $ (472.9) $ 158.6 $ 195.1 $ 154.8 $ (77.3)
======== ======== ======== ======== ========
Business segment results are presented net of minority interests, 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 LIFO inventory adjustments and pension income or expense.
- --------
(1) Results for all segments are net of minority interests in 2001, 2000, 1999,
1998 and 1997 of $2.3 million, $4.6 million, $5.1 million, $6.2 million and
$8.9 million, respectively, the majority of which pertain to Industrial
Chemicals.
(2) Gains on divestitures of businesses in 1999 (Note 5) relate to the process
additives ($35.4 million) and bioproducts ($20.1 million) operations, both
of which are attributable to Specialty Chemicals.
(3) Asset impairments in 2001 related to Industrial Chemicals ($224.2 million)
and Specialty Chemicals ($98.9 million). Asset impairments in 2000 are
related to Specialty Chemicals ($1.1 million) and Industrial Chemicals
($9.0 million). Asset impairments in 1999 are related to Specialty
Chemicals ($14.7 million) and Industrial Chemicals ($8.4 million). Asset
impairments in 1997 are related to Agricultural Products ($9.0 million),
Specialty Chemicals ($62.0 million) and Industrial Chemicals ($126.0
million). See Note 6.
64
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Restructuring and other charges in 2001 are related to Industrial Chemicals
($247.9 million), Corporate ($17.5 million), Agricultural Products ($12.5
million) and Specialty Chemicals ($2.5 million). Restructuring and other
charges in 2000 are related to Specialty Chemicals ($1.8 million),
Industrial Chemicals ($33.1 million) and Corporate ($0.3 million).
Restructuring and other charges in 1999 are related to Agricultural
Products ($5.1 million), Specialty Chemicals ($1.3 million), Industrial
Chemicals ($0.6 million) and Corporate ($4.1 million). Restructuring and
other charges in 1997 are related to Agricultural Products ($13.0 million).
See Note 7.
(5) Net interest expense in 2001 and 2000 includes the company's share of
interest expense related to the external financing of Astaris of $6.1
million and $2.4 million, respectively. The equity in earnings of Astaris,
excluding restructuring charges, is included in Industrial Chemicals.
December 31
----------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(In Millions)
Operating capital employed(1)
Agricultural Products.................................. $ 565.5 $ 490.3 $ 552.0 $ 567.3 $ 503.9
Specialty Chemicals.................................... 561.4 661.2 652.9 638.8 642.8
Industrial Chemicals................................... 477.9 715.2 818.0 740.8 731.7
-------- -------- -------- -------- --------
Total operating capital employed....................... 1,604.8 1,866.7 2,022.9 1,946.9 1,878.4
Segment liabilities included in total operating capital
employed............................................. 669.5 580.9 559.3 514.0 583.7
Corporate items........................................ 202.9 (23.6) (65.6) 40.4 87.3
-------- -------- -------- -------- --------
Assets of continuing operations........................ 2,477.2 2,424.0 2,516.6 2,501.3 2,549.4
Net assets of Technologies(2).......................... -- 637.7 722.2 818.1 789.4
-------- -------- -------- -------- --------
Total assets........................................... $2,477.2 $3,061.7 $3,238.8 $3,319.4 $3,338.8
======== ======== ======== ======== ========
Segment assets(3)
Agricultural Products.................................. $ 865.5 $ 738.9 $ 735.1 $ 702.3 $ 697.0
Specialty Chemicals.................................... 619.4 724.3 732.6 722.8 723.6
Industrial Chemicals................................... 789.4 984.4 1,114.5 1,035.8 1,041.5
-------- -------- -------- -------- --------
Total segment assets................................... 2,274.3 2,447.6 2,582.2 2,460.9 2,462.1
Corporate items........................................ 202.9 (23.6) (65.6) 40.4 87.3
-------- -------- -------- -------- --------
Assets of continuing operations........................ 2,477.2 2,424.0 2,516.6 2,501.3 2,549.4
Net assets of Technologies(2).......................... -- 637.7 722.2 818.1 789.4
-------- -------- -------- -------- --------
Total assets........................................... $2,477.2 $3,061.7 $3,238.8 $3,319.4 $3,338.8
======== ======== ======== ======== ========
- --------
(1) Company management views operating capital employed, which consists of
assets, net of liabilities, reported by the company's operations (and
excludes corporate items such as cash equivalents, debt, pension
liabilities, income taxes and LIFO reserves), as its primary measure of
segment capital.
(2) See Note 2.
(3) Segment assets are assets recorded and reported by the segments, and are
equal to segment operating capital employed plus segment liabilities. See
Note 1.
65
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended December 31
--------------------------------------------------------------
Depreciation Research &
Capital Expenditures & Amortization Development Expenses
-------------------- -------------------- --------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
------ ------ ------ ------ ------ ------ ----- ----- ------
(In Millions)
Agricultural Products $ 21.6 $ 21.8 $ 36.6 $ 28.0 $ 26.1 $ 23.1 $72.5 $66.7 $ 60.9
Specialty Chemicals.. 28.1 39.2 40.0 34.6 34.8 36.7 15.9 19.1 21.2
Industrial Chemicals. 87.3 126.0 115.5 60.5 62.9 63.4 11.4 12.0 18.5
Corporate............ 8.6 10.3 3.3 8.5 6.0 5.3 -- -- --
------ ------ ------ ------ ------ ------ ----- ----- ------
Total................ $145.6 $197.3 $195.4 $131.6 $129.8 $128.5 $99.8 $97.8 $100.6
====== ====== ====== ====== ====== ====== ===== ===== ======
Geographic Segment Information Revenue
Year Ended December 31
--------------------------
2001 2000 1999
-------- -------- --------
(In Millions)
Third party revenue (by location of customer):
United States................................. $ 882.1 $ 965.5 $1,167.3
All other countries........................... 1,060.9 1,084.8 1,153.2
-------- -------- --------
Total revenue................................. $1,943.0 $2,050.3 $2,320.5
======== ======== ========
Long-lived Assets
December 31
-----------------
2001 2000
-------- --------
(In Millions)
United States.......... $ 846.5 $1,095.1
All other countries.... 406.4 437.0
-------- --------
Total long-lived assets $1,252.9 $1,532.1
======== ========
66
FMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 21 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2001 2000
------------------------------------- ------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- -------- -------- -------- -------- --------
(In Millions, Except per Share Data and Common Stock Prices)
Revenue............................. $ 447.2 $ 523.2 $ 482.8 $ 489.8 $ 561.7 $ 515.7 $ 505.9 $ 467.0
Income (loss) from continuing
operations before minority
interests, net interest expense and
income taxes....................... 34.6 (428.3) 30.8 (49.4) 54.2 42.7 76.4 51.7
Income (loss) from continuing
operations......................... 14.4 (298.9) 13.9 (35.7) 28.0 24.5 43.6 29.5
Income (loss) from discontinued
operations, net of income taxes.... (40.0) (0.9) 7.4 3.0 4.8 13.5 (53.8) 20.5
Cumulative effect of change in
accounting principle, net of income
taxes.............................. (0.9) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)................... $ (26.5) $ (299.8) $ 21.3 $ (32.7) $ 32.8 $ 38.0 $ (10.2) $ 50.0
======== ======== ======== ======== ======== ======== ======== ========
Basic net income (loss) per common
share(1)........................... $ (0.86) $ (9.62) $ 0.68 $ (1.04) $ 1.08 $ 1.25 $ (0.34) $ 1.64
======== ======== ======== ======== ======== ======== ======== ========
Diluted net income (loss) per common
share(1)........................... $ (0.86) $ (9.62) $ 0.66 $ (1.04) $ 1.05 $ 1.20 $ (0.32) $ 1.57
======== ======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic........................... 30.8 31.2 31.2 31.3 30.4 30.4 30.4 30.6
Diluted......................... 30.8 31.2 32.0 31.3 31.3 31.5 31.6 31.8
======== ======== ======== ======== ======== ======== ======== ========
Common stock prices:
High............................ $43.8864 $41.3731 $36.6769 $31.3459 $34.6717 $38.3788 $41.5043 $44.4482
Low............................. $35.9751 $35.6328 $24.6612 $24.6244 $27.1486 $32.8909 $33.9267 $38.2334
======== ======== ======== ======== ======== ======== ======== ========
Significant transactions that affected quarterly results in 2001 and 2000 are
described in Notes 1, 3, 4, 6 and 7.
- --------
(1) The sum of quarterly earnings per common share may differ from the
full-year amount due to changes in the number of shares outstanding during
the year.
67
FMC CORPORATION
FIVE-YEAR FINANCIAL SUMMARY
Summary of Earnings
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(In Millions, Except per Share Amounts)
------------------------------------------------
Revenue....................... $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4
Costs and expenses:
Cost of sales and services... 1,408.7 1,450.9 1,691.6 1,738.7 1,585.7
Selling, general and
administrative............. 243.3 231.3 273.0 274.9 301.2
Research and development..... 99.8 97.8 100.6 107.0 127.3
Gains on divestitures of
businesses................. -- -- (55.5) -- --
Asset impairments............ 323.1 10.1 23.1 -- 197.0
Restructuring and other
charges.................... 280.4 35.2 11.1 -- 13.0
-------- -------- -------- -------- --------
Total costs and expenses..... 2,355.3 1,825.3 2,043.9 2,120.6 2,224.2
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before minority
interests, net interest
expense and income taxes..... $ (412.3) $ 225.0 $ 276.6 $ 236.3 $ 3.2
Minority interest............. 2.3 4.6 5.1 6.2 8.9
Net interest expense.......... 58.3 61.8 76.4 75.3 71.6
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes........................ $ (472.9) $ 158.6 $ 195.1 $ 154.8 $ (77.3)
Provision (benefit) for
income taxes................. (166.6) 33.0 36.4 37.7 (42.9)
-------- -------- -------- -------- --------
Income (loss) from continuing
operations................... $ (306.3) $ 125.6 $ 158.7 $ 117.1 $ (34.4)
Discontinued operations, net
of income taxes.............. (30.5) (15.0) 53.9 25.5 201.3
Cumulative effect of change
in accounting principle, net
of income taxes.............. (0.9) -- -- (36.1) (4.5)
-------- -------- -------- -------- --------
Net income (loss)............. $ (337.7) $ 110.6 $ 212.6 $ 106.5 $ 162.4
-------- -------- -------- -------- --------
After-tax income from
continuing operations
excluding special income and
expense items, and before
cumulative effect of change
in accounting principle(1)(2) $ 99.6 $ 153.5 $ 132.0 $ 117.1 $ 93.7
======== ======== ======== ======== ========
Share data
Average number of shares --
basic........................ 31.052 30.439 31.516 34.007 36.805
Average number of shares --
diluted...................... 31.052 31.576 32.377 34.939 36.805
-------- -------- -------- -------- --------
Basic earnings (loss) per
share
Continuing operations......... $ (9.85) $ 4.13 $ 5.04 $ 3.44 $ (0.94)
Discontinued operations....... (0.98) (0.49) 1.71 0.75 5.47
Cumulative effect of change
in accounting principles..... (0.03) -- -- (1.06) (0.12)
-------- -------- -------- -------- --------
$ (10.86) 3.64 6.75 3.13 4.41
======== ======== ======== ======== ========
Diluted earnings (loss) per
share
Continuing operations......... $ (9.85) $ 3.97 $ 4.90 $ 3.35 $ (0.94)
Discontinued operations....... (0.98) (0.47) 1.67 0.73 5.47
Cumulative effect of changes
in accounting principle...... (0.03) -- -- (1.03) (0.12)
-------- -------- -------- -------- --------
$ (10.86) $ 3.50 $ 6.57 $ 3.05 $ 4.41
======== ======== ======== ======== ========
Other information
After-tax income per share
from continuing operations
excluding special income and
expense items(1)(2)
Basic......................... $ 3.20 $ 5.05 $ 4.19 $ 3.44 $ 2.54
Diluted....................... 3.10 4.86 4.08 3.35 2.53
======== ======== ======== ======== ========
Capital expenditures.......... $ 145.6 $ 197.3 $ 195.4 $ 207.0 $ 250.4
Depreciation and amortization
expense...................... 131.6 129.8 128.5 148.9 176.1
======== ======== ======== ======== ========
- --------
(1) Income from continuing operations excluding special income and expense
items and income per share from continuing operations excluding special
income and expense items are not measures of financial performance under
generally accepted accounting principles and should not be considered in
isolation from, or as a substitute for, income from continuing operations,
net income or earnings per share determined in accordance with generally
accepted accounting principles, nor as the sole measure of the company's
profitability.
68
FMC CORPORATION
FIVE-YEAR FINANCIAL SUMMARY
(2) Summary of Special Income (Expense) Items
Year Ending December 31
--------------------------------
2001 2000 1999 1997
------- ------ ------ -------
(In Millions)
Pre-tax basis
Asset impairments......................................... $(323.1) $(10.1) $(23.1) $(197.0)
Restructuring and other charges........................... (280.4) (35.2) (11.1) (13.0)
Gains on divestitures of businesses....................... -- -- 55.5 --
------- ------ ------ -------
Total special income (expense) items, pre-tax............. (603.5) (45.3) 21.3 (210.0)
------- ------ ------ -------
After-tax basis
Total special income (expense) items, net of income taxes. $(405.9) $(27.9) $ 26.7 $(128.1)
======= ====== ====== =======
69
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders, FMC Corporation:
We have audited the accompanying consolidated balance sheets of FMC
Corporation and consolidated subsidiaries as of December 31, 2001 and 2000, and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for each of the years in the three-year period ended
December 31, 2001. In connection with our audits of the consolidated financial
statements, we also have audited the related financial statement schedule as
listed in the accompanying index in Item 14, Exhibit 11. These consolidated
financial statements and financial statement schedule are the responsibility of
the company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of FMC
Corporation and consolidated subsidiaries as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
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.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 14, 2002
70
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and related information have been
prepared by management, who are responsible for the integrity and objectivity
of that information. Where appropriate, they reflect estimates based on
judgments of management. The statements have been prepared in conformity with
accounting principles generally accepted in the United States. Financial
information included elsewhere in this annual report is consistent with that
contained in the consolidated financial statements.
FMC maintains a system of internal control over financial reporting and over
safeguarding of assets against unauthorized acquisition, use or disposition
which is designed to provide reasonable assurance as to the reliability of
financial records and the safeguarding of such assets. The system is maintained
by the selection and training of qualified personnel, by establishing and
communicating sound accounting and business policies, and by an internal
auditing program that constantly evaluates the adequacy and effectiveness of
such internal controls, policies and procedures.
The Audit Committee of the Board of Directors, composed of directors who are
not officers or employees of the company, meets regularly with management, with
the company's internal auditors, and with its independent auditors to discuss
their evaluation of internal accounting controls and the quality of financial
reporting. Both the independent auditors and the internal auditors have free
access to the Audit Committee to discuss the results of their audits.
The company's independent auditors have been engaged to render an opinion on
the consolidated financial statements. They review and make appropriate tests
of the data included in the financial statements.
W. Kim Foster Graham R. Wood
Senior Vice President Vice President
and Chief Financial Officer and Controller
Philadelphia, Pennsylvania
February 14, 2002
71
PART III
Incorporated by Reference From:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF -- Part I; Proxy Statement for 2002 Annual
THE REGISTRANT Meeting of Stockholders
ITEM 11. EXECUTIVE COMPENSATION -- Proxy Statement for 2002 Annual Meeting
of Stockholders
ITEM 12. SECURITY OWNERSHIP OF CERTAIN -- Proxy Statement for 2002 Annual Meeting
BENEFICIAL OWNERS AND MANAGEMENT of Stockholders
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED -- Proxy Statement for 2002 Annual Meeting
TRANSACTIONS of Stockholders and Note 18 included on
pages 61 and 62 of this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed with this Report
1. Consolidated financial statements of FMC Corporation and its
subsidiaries are incorporated under Item 8 of this Form 10-K.
2. All required financial statement schedules are included in the
consolidated financial statements or notes thereto as incorporated under
Item 8 of this Form 10-K.
3. Exhibits: See attached Index of Exhibits
(b) Reports on Form 8-K
During the quarter ended December 31, 2001, the Registrant filed reports on
Form 8-K or Form 8-K/A as follows:
The company filed a report on Form 8-K dated November 29, 2001 to report its
Board of Director's approval of the spin-off of FMC Technologies, Inc.
The company filed a report on Form 8-K dated December 14, 2001 to provide
and information statement about the spin-off of FMC Technologies, Inc.
(c) Exhibits
See Index of Exhibits beginning on page 74 of this document.
72
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: February 14, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ W. KIM FOSTER Senior Vice President and February 14, 2002
- ----------------------------- Chief Financial Officer
W. Kim Foster
/s/ GRAHAM R. WOOD Vice President, Controller February 14, 2002
- ----------------------------- and Principal Accounting
Graham R. Wood Officer
/s/ WILLIAM G. WALTER
- ----------------------------- Chairman of the Board and
William G. Walter Chief Executive Officer
/s/ ROBERT N. BURT
- -----------------------------
Robert N. Burt Director
/s/ B.A. BRIDGEWATER, JR.
- -----------------------------
B.A. Bridgewater, Jr. Director
/s/ PATRICIA A. BUFFLER
- -----------------------------
Patricia A. Buffler Director
/s/ ALBERT J. COSTELLO
- -----------------------------
Albert J. Costello Director
/s/ EDWARD J. MOONEY
- -----------------------------
Edward J. Mooney Director
/s/ WILLIAM F. REILLY
- -----------------------------
William F. Reilly Director
/s/ ENRIQUE J. SOSA
- -----------------------------
Enrique J. Sosa Director
/s/ JAMES R. THOMPSON
- -----------------------------
James R. Thompson Director
73
INDEX OF EXHIBITS FILED WITH OR
INCORPORATED BY REFERENCE INTO
FORM 10-K OF FMC CORPORATION
FOR THE YEAR ENDED DECEMBER 31, 2001
Exhibit No. Exhibit Description
- ----------- -------------------
3.1 Restated Certificate of Incorporation, as filed on June 23, 1998 (incorporated by reference from
Exhibit 4.1 to FMC Corporation's Form S-3 filed on July 21, 1998)
3.2 Restated By-Laws of FMC Corporation, as of January 1, 2002
4.1 Amended and Restated Rights Agreement, dated as of February 19, 1988, between FMC
Corporation and Harris Trust and Savings Bank (incorporated by reference from Exhibit 4 to FMC
Corporation's Registration Statement on Form SE (File No. 1-02376) filed on March 25, 1993)
4.2 Amendment to Amended and Restated Rights Agreement, dated February 9, 1996 (incorporated by
reference from Exhibit 1 to FMC Corporation's Current Report on Form 8-K filed on February 9,
1996)
4.3 Fiscal Agency Agreement between FMC Corporation and Union Bank of Switzerland, Fiscal Agent,
dated as of January 16, 1990 (incorporated by reference from Exhibit 10.4 to FMC Corporation's
Form SE (File No. 1-02376) filed on March 28, 1990)
4(iii) (A) FMC Corporation undertakes to furnish to the Commission upon request, a copy of any instrument
defining the rights of holders of long-term debt of FMC Corporation and its consolidated
subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are
required to be filed.
10.1* FMC Corporation Compensation Plan for Non-Employee Directors, as amended and restated May 1,
2000 (incorporated by reference from Exhibit 10.1 to the Annual Report on Form 10-K filed March
29, 2001)
10.2 $240,000,000 364-Day Credit Agreement, dated as of December 6, 2001, among FMC Corporation,
the Lenders party thereto, Citibank, N.A., Bank of America, N.A., and ABN AMRO Bank N.V. and
First Union National Bank (incorporated by reference from Exhibit 4.1 to FMC Corporation's
Current Report on Form 8-K filed on January 15, 2002)
10.3* FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1 to the Form SE (File
No. 1-02376) filed on March 26, 1991)
10.3.a* Amendment dated April 18, 1997 to FMC 1990 Incentive Share Plan (incorporated by reference
from Exhibit 10.3.a to FMC Corporation's Quarterly Report on Form 10-Q filed on May 15, 1997)
10.3.b* Amendment to the FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1.a
to FMC Corporation's Annual Report on Form 10-K filed March 29, 2000)
10.4* FMC Corporation Employees' Retirement Program, as amended and restated effective January 1,
1999 (incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K filed March
29, 2000)
10.4.a* First Amendment of FMC Corporation Employee's Retirement Program Part I Salaried and Non-
Union Hourly Employees' Plan (incorporated by reference from Exhibit 10.4.a to the Annual Report
on Form 10-K filed March 29, 2000)
74
Exhibit
No. Exhibit Description
- ------- -------------------
10.4.b* First Amendment of FMC Corporation Employees' Retirement Program Part II Union Employees'
Plan (dated September 16, 1999) (incorporated by reference from Exhibit 10.4.b to the Annual Report
on Form 10-K filed March 29, 2000)
10.4.c* Second Amendment of FMC Corporation Employee's Retirement Program Part I Salaried and Non-
Union Hourly Employees' Plan (incorporated by reference from Exhibit 10.4.a.1 to the Quarterly
Report on Form 10-Q filed on November 14, 2000)
10.4.d* Second Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly
Employees' Retirement Plan (incorporated by reference from Exhibit 10.4.b.1 to the Quarterly Report
on Form 10-Q filed on November 14, 2000)
10.4.e* Third Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non-
Union Hourly Employees' Plan effective as of May 1, 2001 (incorporated by reference from Exhibit
10.4.e to the Quarterly Report on Form 10-Q filed on August 14, 2001)
10.4.f* Third Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly
Employees' Plan, effective as of May 1, 2001 (incorporated by reference from Exhibit 10.4.f to the
Quarterly Report on Form 10-Q filed on August 14, 2001)
10.4.g* Fourth Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non-
Union Hourly Employees' Plan, effective as of January 1, 1999 (incorporated by reference from
Exhibit 10.4.g to the Quarterly Report on Form 10-Q filed on August 14, 2001)
10.4.h* Fourth Amendment of FMC Corporation Employees' Retirement Program--Part II Union Hourly
Employees' Plan, effective January 1, 1999 (incorporated by reference from Exhibit 10.4.h to the
Quarterly Report on Form 10-Q filed on August 14, 2001)
10.4.i* Fifth Amendment of FMC Corporation Employees' Retirement Program--Part I Salaried and Non-
Union Hourly Employees' Retirement Plan, as amended and restated effective January 1, 1999
(incorporated by reference from Exhibit 10.4.i to the Quarterly Report on Form 10-Q filed on August
14, 2001)
10.5* FMC Corporation Savings and Investment Plan, adopted effective as of September 28, 2001
(incorporated by reference from Exhibit 10.5 to FMC Corporation's Quarterly Report on Form 10-Q
filed on November 7, 2001)
10.5.a* FMC Corporation Savings and Investment Plan Trust Agreement, as amended and restated as of
September 28, 2001 (incorporated by reference from Exhibit 10.5.a to FMC Corporation's Quarterly
Report on Form 10-Q filed on November 7, 2001)
10.6* FMC Corporation Salaried Employees' Equivalent Retirement Plan, as amended and restated effective
as of May 1, 2001 (incorporated by reference from Exhibit 10.6 to FMC Corporation's Quarterly
Report on Form 10-Q filed on November 7, 2001)
10.6.a* FMC Corporation Salaried Employees' Equivalent Retirement Plan Grantor Trust, as amended and
restated effective as of July 31, 2001 (incorporated by reference from Exhibit 10.6.a to FMC
Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001)
10.7* FMC Corporation Non-Qualified Savings and Investment Plan, as amended and restated effective as of
September 28, 2001 (incorporated by reference from Exhibit 10.7 to FMC Corporation's Quarterly
Report on Form 10-Q filed on November 7, 2001)
75
Exhibit
No. Exhibit Description
- -------- -------------------
10.7.a* FMC Corporation Non-Qualified Savings and Investment Plan Trust, as amended and restated
effective as of September 28, 2001 (incorporated by reference from Exhibit 10.7.a to FMC
Corporation's Quarterly Report on Form 10-Q filed on November 7, 2001)
10.8* FMC Corporation Incentive Compensation and Stock Plan, effective as of February 16, 2001.
10.9 Purchase and Contribution Agreement, dated as of November 24, 1999 among FMC Corporation,
FMC Wyoming Corporation and FMC Funding Corporation.
10.10* FMC Corporation Executive Severance Plan, as amended and restated effective as of May 1, 2001
(incorporated by reference from Exhibit 10.10 to FMC Corporation's Quarterly Report on Form 10-Q
filed on November 7, 2001)
10.10.a* FMC Corporation Executive Severance Grantor Trust Agreement, dated July 31, 2001 (incorporated
by reference from Exhibit 10.10.a to FMC Corporation's Quarterly Report on Form 10-Q filed on
November 7, 2001)
10.11 Receivables Purchase Agreement, dated as of November 24, 1999, among FMC Funding Corporation,
FMC Corporation, CIESCO, L.P., Citibank, N.A. and Citicorp North America, Inc.
10.12* FMC Corporation Defined Benefit Retirement Trust, as amended and restated as of October 2, 2000
(incorporated by reference from Exhibit 10.4.c to the Quarterly Report on Form 10-Q filed November
14, 2000)
10.12.a* Amendment to the FMC Corporation Defined Benefit Retirement Trust, effective April 30, 2001
(incorporated by reference from Exhibit 10.12.a to the Quarterly Report on Form 10-Q filed August
14, 2001)
10.12.b* Second Amendment to the FMC Corporation Defined Benefit Retirement Trust effective November 1,
2001(incorporated by reference from Exhibit 10.12.b to the Quarterly Report on Form 10-Q filed
November 7, 2001)
10.13 Separation and Distribution Agreement by and between FMC Corporation and FMC Technologies,
Inc., dated as of May 31, 2001 (incorporated by reference from Exhibit 2.1 to Form S-1/A for FMC
Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001).
10.14 Tax Sharing Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of
May 31, 2001 (incorporated by reference from Exhibit 10.1 to Form S-1/A for FMC Technologies,
Inc.) (Registration No. 333-55920) filed June 6, 2001).
10.15* Employee Benefits Agreement by and between FMC Corporation and FMC Technologies, Inc., dated
as of May 31, 2001 (incorporated by reference from Exhibit 10.2 to Form S-1/A for FMC
Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001).
10.16 Transition Services Agreement by and between FMC Corporation and FMC Technologies, Inc., dated
as of May 31, 2001 (incorporated by reference from Exhibit 10.3 to Form S-1/A for FMC
Technologies, Inc.) (Registration No. 333-55920) filed June 6, 2001).
10.17 Joint Venture Agreement between Solutia Inc. and FMC Corporation, made as of April 29, 1999
(incorporated by reference from Exhibit 2.I to Solutia's Current Report on Form 8-K (File Number
001-13255) filed on April 27, 2000)
76
Exhibit
No. Exhibit Description
- ------- -------------------
10.17.a First Amendment to Joint Venture Agreement, effective as of December 29, 1999, by and among
Solutia Inc. and FMC Corporation (incorporated by reference from Exhibit 2.II to Solutia's Current
Report on Form 8-K (File Number 001-13255) filed on April 27, 2000)
10.17.b Second Amendment to Joint Venture Agreement, effective as of February 2, 2000, by and among
Solutia Inc. and FMC Corporation (incorporated by reference from Exhibit 2.III to Solutia's Current
Report on Form 8-K (File Number 001-13255) filed on April 27, 2000)
10.17.c Third Amendment to Joint Venture Agreement, effective as of March 31, 2000, by and among Solutia
Inc. and FMC Corporation (incorporated by reference from Exhibit 2.IV to Solutia's Current Report on
Form 8-K (File Number 001-13255) filed on April 27, 2000)
10.18* Consulting Agreement, dated October 31, 2001, by and between FMC Corporation and Robert N. Burt
10.19* Consulting Agreement, dated August 2, 2001, by and between FMC Corporation and Stephen F. Gates
10.20* Executive Severance Agreement, entered into as of October 1, 2001, by and between FMC Corporation
and William G. Walter
10.21* Executive Severance Agreement, entered into as of December 31, 2001, by and between FMC
Corporation and Robert I. Harries, with attached schedule
10.22* Executive Severance Agreement, entered into as of December 31, 2001, by and between FMC
Corporation and Graham R. Wood, with attached schedule
11 Computation of Per Share Earnings
12 Computation of Ratios of Earnings to Fixed Charges
21 FMC Corporation List of Significant Subsidiaries
23 Consent of KPMG LLP
- --------
* Indicates a management contract or compensation plan or arrangement
77