2016 ANNUAL REPORT
FMC CORPORATION
//
A MESSAGE TO
OUR SHAREHOLDERS
A LETTER FROM PIERRE R. BRONDEAU
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
FMC CORPORATION
In last year’s annual report, I discussed our
journey to unlock FMC’s growth potential by
transforming our enterprise into a highly focused
specialty chemicals company with leading
positions in agriculture, health and nutrition, and
lithium technologies. We made strong progress
on this important journey in 2016 by executing
our strategy across the organization.
BUILT FOR PERFORMANCE
FMC Agricultural Solutions
Our Agricultural Solutions business operates a unique, variable-
cost manufacturing and supply chain model that provides
significant operating flexibility, lower costs and strong operating
margins. We have expanded and refined this model for nearly
15 years.
The Cheminova integration, largely completed in 2016, has
delivered new direct-market access channels, broadened our
product lines and technologies, and strengthened operating
performance in key regions around the world.
The sustainable growth of FMC Agricultural Solutions, and our
ability to address farmers’ ongoing challenges to safely and
efficiently protect their crops, depend on a continuing stream of
innovative, differentiated products. Despite a challenging market
over the last few years, we continued to invest in our technology
pipeline. FMC today has a strong and broad agchem innovation
pipeline that will fuel our growth over the next decade.
DURING THE LAST FIVE YEARS,
WE HAVE INVESTED IN A ROBUST PLANT
HEALTH PLATFORM THAT INCLUDES
BIOLOGICALS, MICRONUTRIENTS AND
SEED TREATMENT APPLICATIONS.
Our R&D organization is working on nine synthetic active
ingredients, many of which are in mid- to late-stage development.
They will feed our formulation and new product platforms in the
coming years, including our newest fungicide active ingredient
(AI), bixafen, which began the registration process in the U.S. and
Canada in the fourth quarter 2016.
FMC innovations extend well beyond traditional crop protection
solutions. During the last five years, we have invested in a robust
plant health platform that includes biologicals, micronutrients
and seed treatment applications. These new products offer an
improved environmental profile and give farmers more tools to
combat pests that destroy crops and reduce yields. In 2016, we
launched a new biological seed treatment, received “fast track”
regulatory review for two new biopesticide products in Brazil that
we expect to launch in 2017, submitted registrations for two new
biological products and expanded the geographic reach of our
micronutrients business with 30 new registrations and more than
60 additional registrations initiated.
FMC Health and Nutrition
Demand for healthy and convenient foods, dietary supplements and
effective pharmaceuticals continues to grow throughout the world.
This trend is especially evident in Asia and other emerging markets
where consumers’ standard of living and increased health awareness
are accelerating the demand for protein, better food ingredients
and more effective medicines and personal care products.
We are the world’s premier innovator and producer of natural
ingredients and excipients derived from seaweed, cellulose and
other renewable resources. FMC products are used in leading
food, supplement and pharmaceutical brands around the world.
Our formulation expertise is unsurpassed in the marketplace.
FMC's reputation is rooted in exceptional quality and reliability,
strong relationships with leading food and pharmaceutical
customers, deep experience in regulated end-markets and a
network of efficient manufacturing and formulation laboratories in
every region.
In 2016, FMC Health and Nutrition started a new microcrystalline
cellulose (MCC) manufacturing plant in Rayong, Thailand, to
meet growing demand for colloidal MCC used in high protein
beverages and foods throughout Asia. The site will produce a
variety of MCC and blended MCC commercial grade products
starting in early 2017.
FMC Lithium
The energy storage market is growing at double-digit rates,
powered by the continuing adoption of hybrid and electric
vehicles (EV) and their use of higher performance lithium ion
batteries. Manufacturers are extending the EV market to a
broader audience by designing and producing next generation
EVs with longer driving ranges and more attractive price points.
Total EV sales are expected to grow at a compounded annual
growth rate of over 30 percent through 2020.
During the last several years, FMC developed a specialty
lithium strategy that addressed market trends while taking
full advantage of our technology. Today, we are a leading
producer of lithium hydroxide for high performance EV batteries.
Our manufacturing expertise, technology, product quality and
collaborative relationships with battery and EV manufacturers are
unmatched. Furthermore, we continue to lead in other specialty
lithium products, such as butyllithium used in the production of
polymers, pharmaceuticals and agricultural products.
FMC took several actions in 2016 to meet the growing demand
for these lithium products. We invested in a new lithium
hydroxide unit near Shanghai, China, which will increase our
capacity by 80 percent. Also in 2016, we pursued important
projects to bolster our supply of lithium carbonate, the feedstock
for downstream lithium products. These actions included a
new long-term carbonate supply agreement and production
debottlenecking at our Argentina facility.
DELIVERING PERFORMANCE SAFELY AND SUSTAINABLY
The safety of our people and the responsible development, production
and use of our products are central to our corporate values.
FMC’s 2016 injury rate of 0.22 is less than half of the previous
two years and is considerably less than the previous record low
of 0.41 in 2013. In fact, 0.22 is the lowest full-year injury rate
since the company began keeping records. Additionally, FMC
achieved an injury-free fourth quarter in 2016, a perfect capstone
to a year of safety milestones.
In 2016, FMC was recognized with the American Chemistry
Council’s (ACC) “Initiative of the Year” Award for our new
approach to identifying, analyzing and managing process safety
risks. This is the second consecutive “Initiative of the Year” Award
for FMC, following ACC’s 2015 recognition for our TH!NK. SAFE.®
global safety awareness and education program.
TOTAL RECORDABLE INCIDENT RATE // 2011 - 2016
.74
.63
.51
.51
.41
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
%
0
0
2
1
.22
6
1
0
2
SAFETY // A Core Value
Leadership
Accountability
Focus
Learning
Investing in supervisor training
across the organization;
engaging safety leadership
at all levels of the company.
Ensuring that safety is first in
everything we do; encouraging
individual accountability for
taking actions, controlling
hazards and stopping work
when hazards are encountered.
Introducing targeted safety
improvement programs, such as
hand safety, manual handling
improvements and greater
hazard recognition.
Expanding the sharing of
lessons learned from injuries
and incidents across businesses
and regions; improving training
and implementation of safety
critical standards.
2016 Annual Report 1
We continued to advance our sustainability commitments by
focusing on three pillars: People, Products and Responsibility.
Throughout 2016 the company achieved significant milestones
by fulfilling its top sustainability commitments, including:
• Receiving an A- from the CDP climate change program,
placing the company in the “Leadership” scoring category
after its first time reporting.
• Publishing 2020 (Innovation and Business Practices) and
2025 (Operations) sustainability metrics and goals, which
include targets for Innovation, Safety and Community
Engagement; and reductions in Water, Waste, Energy and
Greenhouse Gas intensities.
• Publishing FMC’s first “Communication on Progress” for
the United Nations Global Compact that addresses the 10
Human Rights Principles.
• Earning LEED Gold certification for energy and water
efficiency, superior indoor air quality and use of sustainable
materials in the interior space of our new headquarters
in Philadelphia.
FMC IS BUILT FOR PERFORMANCE—
TODAY AND WELL INTO THE FUTURE.
$3.3
ANNUAL
SALES
(BILLIONS)
$2.82*
ADJUSTED
EARNINGS
PER SHARE
$1.56
GAAP
EARNINGS
PER SHARE
$578*
ADJUSTED
OPERATING
PROFIT
(MILLIONS)
11.3%*
RETURN ON
INVESTED
CAPITAL
$212
GAAP NET
INCOME
(MILLIONS)
2016 FINANCIAL PERFORMANCE HIGHLIGHTS
For the year ending December 31, 2016, FMC Corporation
posted the following results:
*See Non-GAAP Reconciliations on page 8.
EXECUTING OUR STRATEGY
FMC Agricultural Solutions
• Full-year segment revenue: $2.27 billion
• Full-year segment earnings: $400 million
FMC Health and Nutrition
• Full-year segment revenue: $744 million
• Full-year segment earnings: $191 million
FMC Lithium
• Full-year segment revenue: $264 million
• Full-year segment earnings: $70 million
2
FMC Corporation
2016 was a strong year for FMC. We continued to manage
our Agricultural Solutions business with discipline in the face
of ongoing market challenges. We began operations at a new
Health and Nutrition plant in Thailand to meet growing demand
for our market-leading MCC products. We increased investments
in FMC Lithium to ensure the business can meet the short- and
long-term demands for high-purity lithium products in an exciting,
growing market. We aggressively managed working capital and
paid down $240 million in Cheminova acquistion-related debt.
And we made great progress toward accomplishing our ultimate
goal of zero injuries. FMC is built for performance—today and
well into the future. Our 6,000 employees in every region of
the world are intensively focused on executing our strategy to
become the leading specialty chemicals company in agriculture,
health and nutrition, and lithium technologies.
Pierre R. Brondeau
President, Chief Executive Officer
and Chairman of the Board
FMC Corporation
OUR
LEADERSHIP TEAM
FMC’s executive leadership includes (left to right):
Mark A. Douglas, president, FMC Agricultural Solutions; Tom Schneberger, vice president, global business director,
FMC Lithium; Kyle Matthews, vice president, human resources; Paul Graves, executive vice president and chief financial officer;
Kenneth A. Gedaka, vice president, communications and public affairs; Andrea E. Utecht, executive vice president, general
counsel and secretary; Barry J. Crawford, vice president, operations; Pierre R. Brondeau, president, chief executive officer
and chairman of the board; Karen M. Totland, vice president, global procurement, global facilities & corporate sustainability; and
Eric W. Norris, president, FMC Health and Nutrition.
2016 Annual Report 3
2016
SUMMARY + HIGHLIGHTS
REVENUE // BY SEGMENT
(in millions)
OPERATING PROFIT // BY SEGMENT
(in millions)
FMC LITHIUM
$264
FMC LITHIUM
$70
FMC HEALTH
AND NUTRITION
$744
$2,274
FMC AGRICULTURAL
SOLUTIONS
FMC HEALTH
AND NUTRITION
$191
$400
FMC AGRICULTURAL
SOLUTIONS
2014
2015
2016
TOTAL SHAREHOLDER RETURN
RETURN ON INVESTED CAPITAL*
-30
-25
-20
-15
-10
-5 0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
-23.6%
-30.2%
4 FMC Corporation
1.4%
13.5%
11.8%
-4.1%
10.6%
10.0%
C
M
F
N
O
I
T
A
R
O
P
R
O
C
46.2%
0
0
5
P
&
S
S
L
A
C
I
M
E
H
C
0
0
5
P
&
S
14.2%
11.0%
11.3%
*ROIC numerator (Non-GAAP), see page 8.
ADJUSTED EARNINGS // PER SHARE*
0
1
2
3
4
$3.18
$2.47
$2.82
*Diluted adjusted after-tax earnings
from continuing operations per share,
attributable to FMC stockholders
(Non-GAAP), see page 8.
FMC
AGRICULTURAL SOLUTIONS
FOR FMC AGRICULTURAL SOLUTIONS, 2 016 WAS
A YEAR DEFINED BY OUR DISCIPLINED OPERATING
APPROACH, OUR PROGRESS TO INTEGRATE
CHEMINOVA AND OUR CONTINUED INVESTMENTS
IN A GROWING TECHNOLOGY PIPELINE. DESPITE
CHALLENGING MARKET CONDITIONS, AGRICULTURAL
SOLUTIONS GREW SEGMENT EARNINGS BY MORE
THAN 4 PERCENT AND REMAINED ON TRACK TO
ACHIEVE CHEMINOVA INTEGRATION COST SYNERGIES
OF MORE THAN $150 MILLION.
The commercial integration of Cheminova delivered important
benefits in 2016. We continued to expand our direct market
access in Europe with our own direct operations now in Poland,
the Czech Republic and Slovakia, where we delivered sales
synergies and higher volumes. Our leadership team maintained
a disciplined approach in operating the business, especially in
Brazil where we delivered pricing recovery of approximately 8
percent. Furthermore, commercial teams doubled their efforts to
work with customers to reduce accounts receivables, especially in
Brazil. This and other initiatives helped FMC Agricultural Solutions
return $586 million of cash to FMC.
We completed the rationalization of our product portfolio in
2016. While market conditions impacted volumes, over 51
percent of the decline was due to our deliberate elimination of
low-margin, third-party products. This action increased margins by
310 basis points. Prior to the Cheminova acquisition, Agricultural
Solutions consistently delivered margins between 20 and 25
percent. Our business today is well on its way to returning to
those strong levels.
Investments in our technology portfolio continued to deliver
promising results. We began the registration process in the U.S.
and Canada for bixafen fungicide, one of nine active ingredients
in our R&D pipeline. We grew our plant health platform with
new biologicals, micronutrients and seed treatments. In the U.S.,
we further expanded our patented LFR® liquid fertilizer ready
products and patent-pending 3RIVE 3D™ in-furrow application
technologies. Our high-return R&D model and strong regional
formulation capabilities have positioned us well to deliver the
right technologies and solutions to growers around the world.
FMC's robust, growing technology pipeline, agile supply
chain and new commercial opportunities from the Cheminova
acquisition have contributed to an exceptionally strong business
that is well positioned to grow in the coming years.
R&D INVESTMENTS // Percent of Total Revenue
7
6
5
4
3
2
1
0
5.9%
5.8%
5.1%
4.7%
2013
2014
2015
2016
2016 Annual Report 5
FMC
HEALTH AND NUTRITION
FROM INNOVATIVE NEW PRODUCTS TO EXPANSION OF
OUR MANUFACTURING FOOTPRINT, FMC HEALTH AND
NUTRITION LEVERAGED ITS CORE BUSINESS IN 2016 TO
MEET CURRENT AND FUTURE MARKET NEEDS.
help us anticipate changing consumer interests and guide FMC’s
product, marketing and innovation strategies.
In late 2016, FMC launched Aquateric™ N100 enteric coating,
the first-ever clean-label option in the nutraceutical market. A
seaweed-derived, non-GMO solution, Aquateric enteric coating
offers a simplified manufacturing process for customers and an
improved sensory experience when consumers ingest capsules.
To meet demand for our market-leading Avicel® microcrystalline
cellulose, which has both pharmaceutical and food applications,
we began operations at our plant in Rayong, Thailand, which will
increase capacity and make FMC more competitive in Asia.
Enabling customer success has always been our operating principle.
Health and Nutrition was proud to be awarded “Supplier of the
Year” by Nestlé, one of our largest customers. And in line with
our commitment to continuously improve, we transformed our
business structure to place greater decision making in the regions,
increasing customer intimacy and accelerating commercial and
technology execution. The business also continued to invest in
manufacturing excellence programs to ensure optimal operations
throughout its network.
During the year, Health and Nutrition performed well in its core
business lines, but also made great strides in thinking beyond
existing strengths and technical expertise. In 2016, we invested
in a social intelligence platform to collect and assess public
sentiment across traditional and online media channels. This
information provides FMC with valuable intelligence that can
Health and Nutrition will continue to strengthen its core business
lines while also looking to extend beyond its historical roots. As
we better enhance our ability to meet new and emerging trends
that influence consumers’ buying decisions, we are in
a strong position to help our customers deliver
healthful solutions around the world.
RENEWABLE HARVEST // Seaweed by the Numbers
10,000
SEAWEED
SPECIES
IN THE WORLD
15
350
FMC
PRODUCTS
DERIVED FROM SEAWEED
6
FMC Corporation
FAMILIES
5,000
POSITIVELY IMPACTED
FROM SEAWEED FARMING
SEAWEED
SPECIES
SUSTAINABLY USED BY FMC
IN 2016, FMC LAUNCHED
1ST CLEAN LABEL
SEAWEED-BASED ENTERIC COATING
FMC
LITHIUM
FMC LITHIUM’S 2016 PERFORMANCE REFLECTS THE
CONTINUED SUCCESSFUL EXECUTION OF OUR STRATEGY
TO FOCUS ON SPECIALTY LITHIUM PRODUCTS: LITHIUM
HYDROXIDE, BUTYLLITHIUM AND HIGH-PURITY METAL.
THROUGHOUT THE YEAR, WE STRENGTHENED OUR
POSITION IN KEY MARKET SEGMENTS SERVING ELECTRIC
VEHICLES (EV), POLYMERS AND SPECIALTY LITHIUM
ALLOYS. WE HAVE INVESTED IN OPERATIONAL AND
TECHNICAL CAPABILITIES NOT ONLY TO SERVE TODAY’S
CUSTOMERS, BUT TO MEET THE SIGNIFICANT GROWING
DEMAND FOR SPECIALTY PRODUCTS.
During 2016, we entered a new long-term supply partnership with
Nemaska Lithium and began multiple projects to increase lithium
carbonate production at our Argentina facility. Combined, these
initiatives diversify our lithium carbonate sources and feed our
high-value downstream specialty platforms.
In 2016, FMC constructed a new lithium hydroxide production
facility near Shanghai, China. By mid-2017, our hydroxide
production capacity will increase from 10,000 metric tons per
year to 18,000 metric tons, on our way to a total of 30,000
metric tons per year by 2019. These and other investments
position us well to meet the rapidly growing demand for lithium
hydroxide used in high-performance EV batteries.
FMC Lithium has made significant progress in building and
strengthening its collaborative relationship with customers. Today,
we develop and supply specialty lithium products for leading
global and regional customers in the EV, polymer and specialty
alloy metals markets. We have entered into long-term contracts
with many of these companies to ensure they have the volume
they need, as well as access to our technical and safety support.
FMC also remains the number-one supplier of butyllithium
products globally. Our network of manufacturing facilities,
combined with our strong safety and technical support, position
us well to grow with our customers.
FMC has benefited from stronger pricing throughout 2016 as
customers realized the value of reliable, high-quality lithium supply.
Through continued execution of our downstream specialty lithium
strategy, FMC delivered solid 2016 results and strengthened its
leading position in key segments.
GLOBAL LITHIUM // Focused on Specialty Markets
INDUSTRIAL
SPECIALTY
2016
VOLUME
2016
REVENUE
68%
32%
INDUSTRY-WIDE
44%
56%
34%
66%
FMC LITHIUM
24%
76%
2016 Annual Report 7
NON-GAAP
RECONCILIATIONS
For those not already presented in the Form 10-K, the following charts reconcile
Non-GAAP terms used in this report to the closest GAAP term. All tables are
unaudited and presented in millions, except for per share amounts.
Return on invested capital (ROIC), adjusted after-tax earnings per share and adjusted earnings from continuing operations before interest
and income taxes (i.e., adjusted operating profit) are not measures of financial performance under U.S. generally accepted accounting
principles (GAAP) and should not be considered in isolation from, or as substitutes for, income from continuing operations, net income, or
earnings per share determined in accordance with GAAP, nor as substitutes for measures of profitability, performance or liquidity reported
in accordance with GAAP.
Income from continuing operations attributable to FMC
stockholders, net of tax (GAAP):
Interest expense, net, net of income tax
Corporate special charges (income)
Tax effect of corporate special charges (income)
Tax adjustments
ROIC numerator (Non-GAAP)
2-point average denominator
Debt
Total FMC Stockholder equity
ROIC denominator (2 pt. avg) (GAAP)
ROIC (using Non-GAAP numerator)
2014
2015
2016
$
298.2
$
(187.4) $
242.8
37.8
226.5
(84.1)
(13.8)
62.4
569.6
(144.9)
95.3
63.8
155.8
(48.5)
29.7
$
464.6
$
395.0
$
443.6
Dec-13
Dec-14
Dec-15
Dec-16
$ 1,841.3
$
1,664.1 $
2,148.9
$
1,893.0
1,519.8
1,530.5
$ 3,361.1
$ 3,194.6
$ 3,277.9
14.2%
$
$
1,865.7
4,014.6
3,604.6
11.0%
$
$
1,957.7
3,850.7
3,932.7
11.3%
Reconciliation of diluted earnings per common share attributable to FMC stockholders (GAAP) to diluted adjusted after-tax earnings from
continuing operations per share, attributable to FMC stockholders (Non-GAAP)
Diluted earnings per common share (GAAP)
Diluted earnings per common share, from discontinued operations (GAAP)
Diluted corporate special charges (income) per share
Diluted adjusted after-tax earnings from continuing operations per share, attributable to FMC
stockholders (Non-GAAP)
2014
2015
2016
$
2.29
$
3.66
$
(0.07)
0.96
(5.06)
3.87
1.56
0.25
1.01
$
3.18
$
2.47
$
2.82
Reconciliation of net income (loss) (GAAP) to adjusted earnings from continuing operations, before interest, income taxes and noncontrolling
interests (i.e., adjusted operating profit) (Non-GAAP)
Net income (loss) (GAAP)
Discontinued operations, net of income taxes
Corporate special charges (income)
Interest expense, net
Provision for income taxes
Adjusted earnings from continuing operations, before interest, income taxes and
noncontrolling interests (Non-GAAP)1
1Referred to as Adjusted Operating Profit.
8 FMC Corporation
2014
2015
2016
$ 322.1
$
498.5
$
211.7
(14.5)
226.5
51.2
56.2
(676.4)
569.6
80.1
47.4
33.7
155.8
82.7
93.9
$
641.5
$
519.2
$
577.8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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
(State or other jurisdiction of incorporation or organization)
2929 Walnut Street Philadelphia, Pennsylvania
(Address of principal executive offices)
94-0479804
(I.R.S. Employer Identification No.)
19104
(Zip Code)
215-299-6668
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class
Common Stock, $0.10 par value
Name of each exchange on which registered
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark
YES
NO
• if the registrant is a well-known seasoned issuer, as defined in rule 405 of the securities act.
• if the registrant is not required to file reports pursuant to Section 13 and Section 15(d) of the Act.
• 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.
• whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive
data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files)
• 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
• whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2016, the last day of the registrant’s second
fiscal quarter was $6,151,803,443. The market value of voting stock held by non-affiliates excludes the value of those shares held by
executive officers and directors of the registrant.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date
CLASS
Common Stock, par value $0.10 per share
DECEMBER 31, 2016
133,690,106
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT
Portions of Proxy Statement for 2017 Annual Meeting of Stockholders
FORM 10-K REFERENCE
Part III
Table of Contents
PART I
1
ITEM 1
Business ...........................................................................................................................................................................................................................................................................................................................................1
ITEM 1A
Risk Factors ..............................................................................................................................................................................................................................................................................................................................8
ITEM 1B Unresolved Staff Comments ..................................................................................................................................................................................................................................................................11
ITEM 2
Properties ................................................................................................................................................................................................................................................................................................................................12
ITEM 3
Legal Proceedings ......................................................................................................................................................................................................................................................................................................12
ITEM 4
Mine Safety Disclosures .................................................................................................................................................................................................................................................................................13
ITEM 4A
Executive Officers of the Registrant ..........................................................................................................................................................................................................................................13
PART II
14
ITEM 5
Market for the Registrant’s Common Equity, Related Stockholders Matters
and Issuer Purchases of Equity Securities .........................................................................................................................................................................................................................14
ITEM 6
Selected Financial Data ...................................................................................................................................................................................................................................................................................16
ITEM 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................................................17
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk ....................................................................................................................................................34
ITEM 8
Financial Statements and Supplementary Data .....................................................................................................................................................................................................35
ITEM 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................87
ITEM 9A Controls and Procedures ..............................................................................................................................................................................................................................................................................87
ITEM 9B Other Information ..................................................................................................................................................................................................................................................................................................87
PART III
88
ITEM 10 Directors, Executive Officers and Corporate Governance ..................................................................................................................................................................88
ITEM 11
Executive Compensation .............................................................................................................................................................................................................................................................................88
ITEM 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ..........88
ITEM 13
Certain Relationships and Related Transactions, and Director Independence ................................................................................................89
ITEM 14
Principal Accountant Fees and Services ..............................................................................................................................................................................................................................89
PART IV
90
ITEM 15
Exhibits and Financial Statement Schedules ..............................................................................................................................................................................................................90
ITEM 16
Form 10-K Summary .........................................................................................................................................................................................................................................................................................92
SIGNATURES ..............................................................................................................................................................................................................................................................................................................................................................93
INDEX OF EXHIBITS ...................................................................................................................................................................................................................................................................................................................................94
PART I
FMC Corporation (FMC) was incorporated in 1928 under Delaware
law and has its principal executive offices at 2929 Walnut Street,
Philadelphia, Pennsylvania 19104. Throughout this Annual Report
on Form 10-K, except where otherwise stated or indicated by the
context, “FMC”, “We,” “Us,” or “Our” means FMC Corporation
and its consolidated subsidiaries and their predecessors. Copies of the
annual, quarterly and current reports we file with the Securities and
Exchange Commission (“SEC”), and any amendments to those reports,
are available on our website at www.FMC.com as soon as practicable
after we furnish such materials to the SEC.
ITEM 1 Business
General
We are a diversified chemical company serving agricultural, consumer
and industrial markets globally with innovative solutions, applications
and market-leading products. We operate in three distinct business
segments: FMC Agricultural Solutions, FMC Health and Nutrition
and FMC Lithium. Our FMC Agricultural Solutions segment develops,
markets and sells all three major classes of crop protection chemicals:
insecticides, herbicides and fungicides. These products are used in
agriculture to enhance crop yield and quality by controlling a broad
spectrum of insects, weeds and disease, as well as in non-agricultural
markets for pest control. The FMC Health and Nutrition segment focuses
on nutritional ingredients, health excipients, and functional health
ingredients. Nutritional ingredients are used to enhance texture, color,
structure and physical stability. Health excipients are used for binding,
encapsulation and disintegrant applications. Functional health ingredients
are used as active ingredients in nutraceutical and pharmaceutical markets.
Our FMC Lithium segment manufactures lithium for use in a wide
range of lithium products, which are used primarily in energy storage,
specialty polymers and chemical synthesis application.
Cheminova A/S
On April 21, 2015, pursuant to the terms and conditions set forth in
the Purchase Agreement, we completed the acquisition of 100 percent
of the outstanding equity of Cheminova A/S, a Denmark Aktieselskab
(“Cheminova”) from Auriga Industries A/S, a Denmark Aktieselskab for
an aggregate purchase price of $1.2 billion, excluding assumed net debt
and hedged-related costs of approximately $0.6 billion (the “Acquisition”).
At December 31, 2016, we had substantially completed the integration
of Cheminova into our FMC Agricultural Solutions segment.
FMC Strategy
FMC has streamlined its portfolio over the past six years to focus on
technology-driven end markets with attractive long-term demand trends.
The actions we have taken over the past year have better positioned
each of our businesses to capitalize on future growth opportunities.
2016 was a critical year for Agricultural Solutions, as we took proactive
steps during a challenging year in agriculture markets to better position
the company for an eventual recovery of that market. We facilitated
channel destocking and continued our product rationalization, removing
approximately $175 million in sales of low-margin products around the
world. This has allowed us to sell proprietary products at better prices
and terms, even in a challenging year for crop chemicals. We continue
to benefit from the greater regional balance and direct market access in
key markets that came with our 2015 acquisition of Cheminova. FMC’s
technology pipeline of nine new active ingredients is well-funded and
set to begin major product launches starting in 2018. We began the
registration process in North America for the first one, our bixafen
fungicide. We also launched about 60 new product formulations, which
is key to life cycle management of our products. FMC has the scale to
operate with greater resources and global reach to address changing
market conditions.
In Health and Nutrition, we have a portfolio of naturally-derived,
functional ingredients that serve health, nutrition and nutraceutical
end markets. We provide innovative solutions to our customers by
leveraging our application know-how as well as differentiating the
manufacture and delivery of our market leading products through best
in class Quality, Service, Reliability (QSR). We continue to optimize our
organizational and manufacturing footprints to increase our competitive
positioning. As a technology-focused company, we continue to pursue
process technology improvements and develop innovative application
solutions to drive the highest value for customers.
FMC CORPORATION - Form 10-K 1
PART I
ITEM 1 Business
In Lithium, FMC remains one of the leading global producers of
specialty lithium products, and in May 2016 we announced plans to
triple our manufacturing capacity for lithium hydroxide by 2019. The
first phase of this modular expansion is set to begin selling product in
mid-2017 to serve the rapidly expanding market for lithium batteries
in electric vehicles. We will continue to invest in lithium hydroxide and
similar higher growth, higher value segments of the market, including
butyllithium for use in chemical synthesis and high purity lithium
metal for aerospace applications.
We maintain our commitment to enterprise sustainability, including
responsible stewardship. As we grow, we will do so in a responsible
way. Safety and business ethics will remain of utmost importance.
Meeting and exceeding our customers’ expectations will continue to
be a primary focus.
Financial Information About Our Business Segments
(Financial Information (in Millions))
See Note 19 “Segment Information” to our consolidated financial statements included in this Form 10-K. Also see below for selected financial
information related to our segments.
The following table shows the principal products produced by our three business segments, their raw materials and uses:
Segment
FMC Agricultural Solutions Insecticides
Product
Herbicides
Fungicides
Raw Materials
Synthetic chemical
intermediates
Synthetic chemical
intermediates
Synthetic and biological
chemical intermediates
Uses
Protection of crops, including soybean, corn, fruits and vegetables, cotton,
sugarcane, rice, and cereals, from insects and for non-agricultural applications
including pest control for home, garden and other specialty markets
Protection of crops, including cotton, sugarcane, rice, corn, soybeans,
cereals, fruits and vegetables from weed growth and for non-agricultural
applications including turf and roadsides
Protection of crops, including fruits and vegetables from fungal disease
FMC Health and Nutrition Microcrystalline Cellulose Specialty pulp
Carrageenan
Refined seaweed
Alginates
Natural Colorants
Omega-3 EPA/DHA
Lithium
Refined seaweed
Plant sources, select
insect species
Fish oils
Various lithium
products
FMC Lithium
Drug dry tablet binder and disintegrant, food ingredient
Food ingredient for thickening and stabilizing, pharmaceutical and
nutraceutical encapsulates
Food ingredient, pharmaceutical excipient, healthcare and industrial uses
Food, pharmaceutical and cosmetics
Nutraceutical and pharmaceutical uses
Batteries, polymers, pharmaceuticals, greases and lubricants, glass and
ceramics and other industrial uses
With a worldwide manufacturing and distribution infrastructure, we are better able to respond rapidly to global customer needs, offset downward
economic trends in one region with positive trends in another and match local revenues to local costs to reduce the impact of currency volatility.
The charts below detail our sales and long-lived assets by major geographic region.
REVENUE BY REGION 2016
REVENUE: $3,282.4 MILLION
LONGLIVED ASSETS BY REGION 2016
LONGLIVED ASSETS: $3,045.3 MILLION
25%
Latin America
52%
Europe,
Middle East
& Africa
24%
Asia Pacific
13%
Latin America
15%
Asia Pacific
20%
North America
24%
Europe,
Middle East
& Africa
27%
North America
2
FMC CORPORATION - Form 10-K
PART I
ITEM 1 Business
FMC Agricultural Solutions
AGRICULTURAL SOLUTIONS:
REVENUE AND OPERATING MARGIN 2014-2016
AGRICULTURAL SOLUTIONS:
CAPITAL EXPENDITURES AND DEPRECIATION
AND AMORTIZATION 2014-2016
$2,400
$2,200
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
2,174
2,253
2,275
23%
16%
18%
2014
Revenue
2015
2016
Operating Margin
60%
50%
40%
30%
20%
10%
0%
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
81
61
31
25
29
23
2014
2015
2016
Capital Expenditures
Depreciation and Amortization
Overview
39%
Insecticides
AGRICULTURAL SOLUTIONS:
2016 SALES MIX
AGRICULTURAL SOLUTIONS:
2016 REVENUE BY REGION
12%
Fungicides
5%
Other
44%
Herbicides
33%
Latin America
19%
Asia Pacific
25%
North America
23%
Europe,
Middle East
& Africa
Our FMC Agricultural Solutions segment, which represents approximately 69 percent of our 2016 consolidated revenues, operates in the
agrochemicals industry. This segment develops, manufactures and sells a portfolio of crop protection, professional pest control and lawn and
garden products.
Products and Markets
FMC Agricultural Solutions’ portfolio is comprised of three major
pesticide categories: insecticides, herbicides and fungicides. The majority
of our product lines consist of insecticides and herbicides, and we have a
small but fast-growing portfolio of fungicides mainly used in high value
crop segments. Our insecticides are used to control a wide spectrum
of pests, while our herbicide portfolio primarily targets a large variety
of difficult-to-control weeds. We are also investing substantially in a
plant health program that includes biological crop protection products,
seed treatments and micronutrients.
In the Latin American region, which includes the large agricultural market
of Brazil, we sell directly to large growers through our own sales and
marketing organization, and we access the market through independent
distributors. In North America, we access the market through several
major national and regional distributors and have our own sales and
marketing organization in Canada. With the Cheminova acquisition,
we now access a majority of the European markets through our own
sales and marketing organizations. We access key Asian markets either
through local independent distributors or our own sales and marketing
organizations. Through these and other alliances, along with our
own targeted marketing efforts, access to novel technologies and our
innovation initiatives, we expect to maintain and enhance our access
in key agricultural and non-crop markets and develop new products
that will help us continue to compete effectively.
FMC CORPORATION - Form 10-K 3
PART I
ITEM 1 Business
Industry Overview
The three principal categories of agricultural and non-crop chemicals
are: herbicides, insecticides and fungicides, representing approximately
42 percent, 28 percent and 27 percent of global industry revenue,
respectively.
The agrochemicals industry is relatively consolidated but further
consolidation is likely as several of the leading crop protection companies
are actively pursuing merger opportunities. Leading crop protection
companies FMC, Syngenta AG, Bayer AG, Monsanto Company,
BASF AG, The Dow Chemical Company, E. I. du Pont de Nemours
and Company (DuPont), and Adama currently represent approximately
74 percent of the industry’s global sales. The next tier of agrochemical
producers include Sumitomo Chemical Company Ltd., Nufarm Ltd.,
Platform Specialty Products Corporation, and United Phosphorous
Ltd. FMC employs various differentiated strategies and competes with
unique technologies focusing on certain crops, markets and geographies,
while also being supported by a low-cost manufacturing model.
Growth
The acquisition of Cheminova positions FMC among leading
agrochemical producers in the world. Our complementary technologies
will lead to improved formulation capabilities and a broader innovation
pipeline, resulting in new and differentiated products. We will take
advantage of enhanced market access positions and an expanded
portfolio to deliver near-term growth.
We will continue to grow by obtaining new and approved uses for
existing product lines and acquiring, accessing, developing, marketing,
distributing and/or selling complementary chemistries and related
technologies in order to strengthen our product portfolio and our
capabilities to effectively service our target markets and customers.
Our growth efforts focus on developing environmentally compatible
and sustainable solutions that can effectively increase farmers’ yields and
provide cost-effective alternatives to chemistries which may be prone to
resistance. We are committed to providing unique, differentiated products
to our customers by acquiring and further developing technologies
as well as investing in innovation to extend product life cycles. Our
external growth efforts include product acquisitions, in-licensing of
chemistries and technologies and alliances that bolster our market
access, complement our existing product portfolio or provide entry
into adjacent spaces. We have entered into a range of development and
distribution agreements with other companies that provide access to new
technologies and products which we can subsequently commercialize.
FMC Health and Nutrition
HEALTH AND NUTRITION:
REVENUE AND OPERATING MARGIN 20142016
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
828
23%
785
25%
744
26%
2014
Revenue
2015
2016
Operating Margin
40%
30%
20%
10%
0%
Overview
Our FMC Health and Nutrition segment, which represents 23 percent
of our 2016 consolidated revenues, is focused on high-performance food
ingredients, pharmaceutical excipients and Omega-3 oils. The majority
of FMC Health and Nutrition sales are to customers in non-cyclical end
markets. We believe our future growth in this segment will continue
to be based on the value-added performance of these products and our
research and development capabilities, as well as on the alliances and
close working relationships we have developed with key global customers.
4
FMC CORPORATION - Form 10-K
PART I
ITEM 1 Business
Products and Markets
HEALTH AND NUTRITION:
2016 REVENUE BY REGION
8%
Latin America
27%
Asia Pacific
HEALTH AND NUTRITION:
CAPITAL EXPENDITURES AND DEPRECIATION
AND AMORTIZATION 20142016
$120
$100
$80
$60
$40
$20
$0
34%
North America
30%
Europe,
Middle East
& Africa
97
45
51
39
36
37
2014
2015
2016
Capital Expenditures
Depreciation and Amortization
Our product offerings into nutrition markets principally provide
texture, structure and physical stability (“TSPS”) solutions to thicken
and stabilize certain food products. Our formulation ingredients serve
the health excipient industry functioning as binders, disintegrants,
suspending agents, and control-release compounds for the production
of both solid and liquid pharmaceutical products. The majority of
our functional ingredient product offerings are high purity Omega-3
products as well as certain alginate products which are considered to
be active pharmaceutical ingredients.
FMC Health and Nutrition is a supplier of microcrystalline cellulose
(“MCC”), carrageenan, alginates, natural colorants, and omega-3, all
naturally derived ingredients that have high value-added applications
in the production of processed and convenience foods, oral dose
form pharmaceuticals and nutraceuticals. MCC, processed from
specialty grades of renewable hardwood and softwood pulp, provides
binding and disintegrant properties for dry tablets and capsules and has
unique functionality that improves the texture and stability of many
nutrition products. Carrageenan and alginates, both processed from
natural seaweeds, are used in a wide variety of food, pharmaceutical
and oral care applications. Natural colorants are utilized in specialty
products used in the food, beverage, personal care, nutrition and health
excipient markets. Omega-3 is sourced from fish oils and used in other
pharmaceutical and nutraceutical applications.
Industry Overview
Nutritional Ingredients
The industry is dispersed geographically, with sales predominantly in
Europe, North America and Asia. The nutritional ingredients market
is comprised of a large number of suppliers due to the broad spectrum
of chemistries employed. Segment leadership, global position and
investment in technology are key factors to sustaining profitability. The
top suppliers of TSPS ingredients include FMC, DuPont, J.M. Huber
Corporation, Kerry Group plc and Cargill Incorporated.
Health Excipients and Functional Health Ingredients
Competitors tend to be grouped by chemistry. Our principal MCC
competitors include J. Rettenmaier & Sôhne GmbH, Ming Tai Chemical
Co., Ltd., Asahi Kasei Corporation and Blanver Farmoquimica Ltda.
While pricing pressure from low-cost producers is a common competitive
dynamic, companies look to offset that pressure by providing the most
reliable and broadest range of products and services. Our customers are
pharmaceutical firms who depend upon reliable therapeutic performance
of their drug products. In Omega-3, our competitors include DSM,
BASF, Croda and other smaller producers. Competition has intensified
in this market over the past several years as many smaller producers
attempt to enter in what is considered by many as an attractive growth
market. Differentiation among higher end producers such as FMC is
achieved through know-how to produce high concentration oils at
high levels of purity.
FMC CORPORATION - Form 10-K 5
PART I
ITEM 1 Business
FMC Lithium
LITHIUM:
REVENUE AND OPERATING MARGIN 20142016
$300
$250
$200
$150
$100
$50
$0
257
238
264
27%
11%
10%
2014
Revenue
2015
2016
Operating Margin
35%
30%
25%
20%
15%
10%
5%
0%
Overview
Our FMC Lithium segment represents eight percent of our 2016
consolidated revenues.
While lithium is sold into a variety of end markets, we have focused our
strategy on specialty products that require a high level of manufacturing
and technical know-how to meet customer requirements.
The electrochemical properties of lithium make it an ideal material
for portable energy storage, including smart phones, tablets, laptop
computers, military devices and other energy storage technologies.
Lithium is a critical element in advanced batteries for use in hybrid
electric, plug-in hybrids and all-electric vehicles.
Organolithium products are highly valued in the polymer market
as initiators in the production of synthetic rubbers and elastomers.
Organolithiums are also sold to fine chemical and pharmaceutical
customers who use lithium’s unique chemical properties to synthesize
high value-added products.
Industry Overview
LITHIUM:
2016 REVENUE BY REGION
1%
Latin America
58%
Asia Pacific
LITHIUM:
CAPITAL EXPENDITURES AND DEPRECIATION
AND AMORTIZATION 20142016
25%
North America
16%
Europe,
Middle East
& Africa
$50
$40
$30
$20
$10
$0
45
14
17
12
24
15
2014
2015
2016
Capital Expenditures
Depreciation and Amortization
FMC Lithium serves a diverse group of markets. Our product offerings
are primarily inorganic and generally have few cost-effective substitutes.
A major growth driver for lithium in the future will be the rate of
adoption of electric vehicles.
Most markets for lithium chemicals are global with significant growth
occurring both in Asia and North America, primarily driven by the
development and manufacture of lithium ion batteries. There are three
key producers of lithium compounds: FMC, Albemarle Corporation
(previously Rockwood Holdings, Inc.) and Sociedad Química y Minera
de Chile S.A. In addition to these producers, Orocobre is ramping up
production from its brine source in Argentina and several Chinese
producers convert lithium containing hard rock concentrates sourced
from Australia into lithium compounds.We expect additional capacity
to be added by new and existing producers within the next 24 months.
FMC and Albemarle Corporation are the primary producers of specialty
lithium products.
6
FMC CORPORATION - Form 10-K
PART I
ITEM 1 Business
oils that are all sourced on a global basis and purchased from selected
global producers/suppliers. We extract ores used in FMC Lithium’s
manufacturing processes from lithium brines in Argentina.
Source and Availability of Raw Materials
Raw materials used by FMC Agricultural Solutions, primarily processed
chemicals, are obtained from a variety of suppliers worldwide. Raw
materials used by FMC Health and Nutrition include various types
of seaweed, specialty pulps, natural colorant, raw materials and fish
Patents
We own a number of U.S. and foreign patents, trademarks and licenses
that are cumulatively important to our business. We do not believe
that the loss of any individual or combination of related patents,
trademarks or licenses would have a material adverse effect on the
overall business of FMC. The duration of our patents depends on
their respective jurisdictions.
Seasonality
The seasonal nature of the crop protection market and the geographic
spread of the FMC Agricultural Solutions business can result in significant
variations in quarterly earnings among geographic locations. FMC
Agricultural Solutions’ products sold in the northern hemisphere (North
America, Europe and parts of Asia) serve seasonal agricultural markets
from March through September, generally resulting in earnings in the
first, second and third quarters. Markets in the southern hemisphere
(Latin America and parts of the Asia Pacific region, including Australia)
are served from July through February, generally resulting in earnings
in the third, fourth and first quarters. The remainder of our business
is generally not subject to significant seasonal fluctuations.
Competition
We encounter substantial competition in each of our three business
segments. We market our products through our own sales organization
and through alliance partners, independent distributors and sales
representatives. The number of our principal competitors varies from
segment to segment. In general, we compete by providing advanced
technology, high product quality, reliability, quality customer and
technical service, and by operating in a cost-efficient manner.
Our FMC Agricultural Solutions segment competes primarily in the
global chemical crop protection market for insecticides, herbicides and
fungicides. Industry products include crop protection chemicals and, for
certain major competitors, genetically engineered (crop biotechnology)
products. Competition from generic agrochemical producers is significant
as a number of key product patents held industry-wide have expired in
the last decade. In general, we compete as an innovator by focusing on
product development, including novel formulations, proprietary mixes,
and advanced delivery systems and by acquiring or licensing (mostly)
proprietary chemistries or technologies that complement our product
and geographic focus. We also differentiate ourselves by our global
cost-competitiveness through our manufacturing strategies, establishing
effective product stewardship programs and developing strategic alliances
that strengthen market access in key countries and regions.
Our FMC Health and Nutrition segment has significant positions in
markets that include alginate, carrageenan, and microcrystalline cellulose.
We compete 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 microcrystalline cellulose,
competitors are typically smaller than FMC, while in seaweed extracts
(carrageenan and alginates) and Omega-3 fish oils, we compete with
other broad-based chemical companies.
FMC Lithium segment sells lithium-based products worldwide.
We and our two most significant competitors in lithium 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.
Research and Development Expense
We perform research and development in all of our segments with
the majority of our efforts focused in the FMC Agricultural Solutions
segment. The development efforts in the FMC Agricultural Solutions
segment focus on developing environmentally sound solutions and
new product formulations that cost-effectively increase farmers’ yields
and provide alternatives to existing and new chemistries. Our research
and development expenses in the last three years are set forth below:
(in Millions)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
TOTAL
Year Ended December 31,
2016
131.4 $
7.0
3.1
141.5 $
2015
132.4 $
7.8
3.5
143.7 $
2014
111.8
10.0
4.5
126.3
$
$
FMC CORPORATION - Form 10-K 7
PART I
ITEM 1A Risk Factors
Environmental Laws and Regulations
A discussion of environmental related factors can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and in Note 10 “Environmental Obligations” in the notes to our consolidated financial statements included in this Form 10-K.
Employees
We employ approximately 5,900 people with about 1,300 people in our
domestic operations and 4,600 people in our foreign operations.
Approximately seven percent of our U.S.-based and 35 percent of our
foreign-based employees, respectively, are represented by collective bargaining
agreements. We have successfully concluded most of our recent contract
negotiations without any material work stoppages. In those rare instances
where a work stoppage has occurred, there has been no material effect on
consolidated sales and earnings. We cannot predict, however, the outcome
of future contract negotiations. In 2017, 11 foreign collective-bargaining
agreements will be expiring. These contracts affect about 15 percent of
our foreign-based employees. There will be no U.S. collective-bargaining
agreements expiring in 2017.
Securities and Exchange Commission Filings
Securities and Exchange Commission (SEC) filings are available free of
charge on our website, www.fmc.com. Our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports are posted as soon as practicable after we
furnish such materials to the SEC.
In accordance with New York Stock Exchange (NYSE) rules, on May 23,
2016, we filed a certification signed by our Chief Executive Officer
(CEO) that, as of the date of the certification, he was unaware of any
violation by FMC of the NYSE’s corporate governance listing standards.
We also file with each Form 10-Q and our Form 10-K certifications
by the CEO and Chief Financial Officer under sections 302 and 906
of the Sarbanes-Oxley Act of 2002.
ITEM 1A Risk Factors
Below lists our risk factors updated for these events.
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 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 maintain or raise prices, successfully enter certain
markets or retain our market position. Competition for our FMC
Agricultural Solutions business, includes not only generic suppliers of
the same pesticidal active ingredients, but also alternative proprietary
pesticide chemistries, and crop protection technologies that are bred
into or applied onto seeds. Increased generic presence in agricultural
chemical markets has been driven by the number of significant
product patents and product data protections that have expired in
the last decade, and this trend is expected to continue. Also, there
are changing competitive dynamics in the agro-chemical industry as
some of our competitors are attempting to consolidate, resulting in
them having greater scale and diversity. These competitive differences
may not be overcome and erode our business.
• Changes in our customer base - Our customer base has the potential to
change, especially when long-term supply contracts are renegotiated.
Our FMC Lithium and FMC Health and Nutrition businesses are
most sensitive to this risk.
• Climatic conditions - Our FMC Agricultural Solutions markets are
affected by climatic conditions, which could adversely impact crop
pricing and pest infestations; for example, drought may reduce the
need for fungicides, which could result in fewer sales and greater unsold
inventories in the market, whereas excessive rain could lead to increased
plant disease or weed growth requiring growers to purchase and use
more pesticides. Adverse weather conditions can impact our ability
to extract lithium efficiently from our lithium reserves in Argentina.
Natural disasters can impact production at our facilities in various parts
of the world. The nature of these events makes them difficult to predict.
• Changing regulatory environment - Changes in the regulatory
environment, particularly in the United States, Brazil, China, Argentina
and the European Union, could adversely impact our ability to continue
producing and/or selling certain products in our domestic and foreign
markets or could increase the cost of doing so. Our FMC Agricultural
8
FMC CORPORATION - Form 10-K
PART I
ITEM 1A Risk Factors
• Climate change regulation - Changes in the regulation of greenhouse
gases, depending on their nature and scope, could subject our
manufacturing operations to significant additional costs or limits
on operations.
• Fluctuations in commodity prices - Our operating results could
be significantly affected by the cost of commodities, including raw
materials. We may not be able to raise prices or improve productivity
sufficiently to offset future increases in commodity pricing. Accordingly,
increases in commodity prices may negatively affect our financial
results. We also use hedging strategies to address material commodity
price risks, where hedge strategies are available on reasonable terms.
However, we are unable to avoid the risk of medium- and long-term
increases. Additionally, fluctuations in commodity prices could
negatively impact our customers’ ability to sell their products at
previously forecasted prices resulting in reduced customer liquidity.
Inadequate customer liquidity could affect our customers’ abilities to
pay for our products and, therefore, affect existing and future sales
or our ability to collect on customer receivables.
• Supply arrangements - Certain raw materials are critical to our
production process. While we have made supply arrangements to meet
planned operating requirements, an inability to obtain the critical
raw materials or operate under contract manufacturing arrangements
would adversely impact our ability to produce certain products. We
increasingly source critical intermediates and finished products from
a number of suppliers, largely outside of the U.S. and principally
in China. An inability to obtain these products or execute under
contract sourcing arrangements would adversely impact our ability
to sell products. In FMC Lithium, geological conditions can affect
production of raw materials.
• Economic and political change - Our business has been and could
continue be adversely affected by economic and political changes in
the markets where we compete including: inflation rates, recessions,
trade restrictions, foreign ownership restrictions and economic
embargoes imposed by the United States or any of the foreign countries
in which we do business; changes in laws, taxation, and regulations
and the interpretation and application of these laws, taxes, and
regulations; restrictions imposed by the United States government or
foreign governments through exchange controls or taxation policy;
nationalization or expropriation of property, undeveloped property
rights, and legal systems or political instability; other governmental
actions; and other external factors over which we have no control.
Economic and political conditions within the United States and
foreign jurisdictions or strained relations between countries can cause
fluctuations in demand, price volatility, supply disruptions, or loss of
property. In Argentina, continued inflation and tightening of foreign
exchange controls along with deteriorating economic and financial
conditions could adversely affect our business.
Solutions business is most sensitive to this general regulatory risk given
the need to obtain and maintain pesticide registrations in every country
in which we sell our products. Many countries require re-registration
of pesticides to meet new and more challenging requirements; while
we defend our products vigorously, these re-registration processes
may result in significant additional data costs, reduced number of
permitted product uses, or potential product cancellation.Compliance
with changing laws and regulations may involve significant costs
or capital expenditures or require changes in business practice that
could result in reduced profitability. In the European Union, the
regulatory risk specifically includes chemicals regulation known as
REACH (Registration, Evaluation, and Authorization of Chemicals),
which affects each of our business segments to varying degrees.
The fundamental principle behind the REACH regulation is that
manufacturers must verify through a special registration system that
their chemicals can be marketed safely.
• Geographic concentration - Although we have operations in most
regions, the majority of our FMC Agricultural Solutions sales outside
the United States have principally been to customers in Latin America,
including Brazil, Argentina and Mexico. With the acquisition of
Cheminova, we are expanding our international sales, particularly
in Europe and key Asian countries such as India. Accordingly,
developments in those parts of the world will generally have a more
significant effect on our operations. Our operations outside the United
States are subject to special risks and restrictions, including: fluctuations
in currency values; exchange control regulations; changes in local
political or economic conditions; governmental pricing directives;
import and trade restrictions; import or export licensing requirements
and trade policy; restrictions on the ability to repatriate funds; and
other potentially detrimental domestic and foreign governmental
practices or policies affecting U.S. companies doing business abroad.
• Food and pharmaceutical regulation - Some of our manufacturing
processes and facilities, as well as some of our customers, are subject to
regulation by the U.S. Food and Drug Administration (FDA) or similar
foreign agencies. Regulatory requirements of the FDA are complex, and
any failure to comply with them including as a result of contamination
due to acts of sabotage could subject us and/or our customers to fines,
injunctions, civil penalties, lawsuits, recall or seizure of products, total
or partial suspension of production, denial of government approvals,
withdrawal of marketing approvals and criminal prosecution. Any of
these actions could adversely impact our net sales, undermine goodwill
established with our customers, damage commercial prospects for
our products and materially adversely affect our results of operations.
• Consumer preferences - Changing consumer preferences is a risk
particularly within FMC Health and Nutrition. Any significant
changes in consumer preferences or any inability on our part to
anticipate or react to such changes could result in reduced demand
for our products and impact our results of operations.
Operational Risks
• Market access risk - Our results may be affected by changes in
distribution channels, which could impact our ability to access the
market.
• Business disruptions - Although more recently, FMC Agricultural
Solutions has engaged in pesticide active ingredient contract
manufacturing rather than owned and operated manufacturing
facilities, we now own and operate large-scale manufacturing facilities
in Denmark and India as a result of the Cheminova acquisition. This
presents us with additional operating risks as our operating results
will be dependent in part on the continued operation of the various
acquired production facilities and the ability to manufacture products
on schedule. Interruptions at these facilities may materially reduce the
productivity and profitability of a particular manufacturing facility, or
our business as a whole, during and after the period of such operational
FMC CORPORATION - Form 10-K 9
PART I
ITEM 1A Risk Factors
difficulties. Although we take precautions to enhance the safety of our
operations and minimize the risk of disruptions, our operations and
those of our contract manufacturers are subject to hazards inherent in
chemical manufacturing and the related storage and transportation of
raw materials, products and wastes. These potential hazards include
explosions, fires, severe weather and natural disasters, mechanical
failure, unscheduled downtimes, supplier disruptions, labor shortages
or other labor difficulties,information technology systems outages,
disruption in our supply chain or manufacturing and distribution
operations, transportation interruptions, chemical spills, discharges
or releases of toxic or hazardous substances or gases, shipment of
contaminated or off-specification product to customers, storage
tank leaks, other environmental risks, or other sudden disruption
in business operations beyond our control as a result of events such
as acts of sabotage, terrorism or war, civil or political unrest, natural
disasters, pandemic situations and large scale power outages. Some of
these hazards may cause severe damage to or destruction of property
and equipment or personal injury and loss of life and may result in
suspension of operations or the shutdown of affected facilities.
• Information technology security risks - As with all enterprise
information systems, our information technology systems could
be penetrated by outside parties’ intent on extracting information,
corrupting information, or disrupting business processes. Our systems
have in the past been, and likely will in the future be, subject to
unauthorized access attempts. Unauthorized access could disrupt
our business operations and could result in failures or interruptions
in our computer systems and in the loss of assets and could have a
material adverse effect on our business, financial condition or results
of operations. In addition, breaches of our security measures or the
accidental loss, inadvertent disclosure, or unapproved dissemination
of proprietary information or sensitive or confidential information
about the company, our employees, our vendors, or our customers,
could result in litigation, violations of various data privacy regulations
in some jurisdictions, and also potentially result in liability to us.
This could damage our reputation, or otherwise harm our business,
financial condition, or results of operations.
• Capital-intensive business - With the acquisition of Cheminova, our
business is more capital intensive than it has been historically. We rely
on cash generated from operations and external financing to fund our
growth and ongoing capital needs. Limitations on access to external
financing could adversely affect our operating results. Moreover,
interest payments, dividends and the expansion of our business
or other business opportunities may require significant amounts
of capital. We believe that our cash from operations and available
borrowings under our revolving credit facility will be sufficient to meet
these needs in the foreseeable future. However, if we need external
financing, our access to credit markets and pricing of our capital will
be dependent upon maintaining sufficient credit ratings from credit
rating agencies and the state of the capital markets generally. There
can be no assurances that we would be able to obtain equity or debt
Technology Risks
• Technological change - Our ability to compete successfully depends in
part upon our ability to maintain a superior technological capability
and to continue to identify, develop and commercialize new and
innovative, high value-added products for existing and future customers.
10
FMC CORPORATION - Form 10-K
financing on terms we deem acceptable, and it is possible that the cost
of any financings could increase significantly, thereby increasing our
expenses and decreasing our net income. If we are unable to generate
sufficient cash flow or raise adequate external financing, including
as a result of significant disruptions in the global credit markets, we
could be forced to restrict our operations and growth opportunities,
which could adversely affect our operating results.
• Credit default risks - We may use our existing revolving credit facility
to meet our cash needs, to the extent available. In the event of a
default in this credit facility or any of our senior notes, we could be
required to immediately repay all outstanding borrowings and make
cash deposits as collateral for all obligations the facility supports,
which we may not be able to do. Any default under any of our credit
arrangements could cause a default under many of our other credit
agreements and debt instruments. Without waivers from lenders party
to those agreements, any such default could have a material adverse
effect on our ability to continue to operate.
• Litigation and environmental risks - Current reserves relating to
our ongoing litigation and environmental liabilities may ultimately
prove to be inadequate.
• Hazardous materials - We manufacture and transport certain materials
that are inherently hazardous due to their toxic or volatile nature.
While we take precautions to handle and transport these materials in a
safe manner, if they are mishandled or released into the environment,
they could cause property damage or result in personal injury claims
against us.
• Environmental compliance - We are subject to extensive federal, state,
local, and foreign environmental and safety laws, regulations, directives,
rules and ordinances concerning, among other things, emissions in
the air, discharges to land and water, and the generation, handling,
treatment, disposal and remediation of hazardous waste and other
materials. We may face liability arising out of the normal course of
business, including alleged personal injury or property damage due
to exposure to chemicals or other hazardous substances at our current
or former facilities or chemicals that we manufacture, handle or own.
We take our environmental responsibilities very seriously, but there
is a risk of environmental impact inherent in our manufacturing
operations and transportation of chemicals. Any substantial liability
for environmental damage could have a material adverse effect on our
financial condition, results of operations and cash flows.
• Workforce - The inability to recruit and retain key personnel or the
unexpected loss of key personnel may adversely affect our operations. In
addition, our future success depends in part on our ability to identify
and develop talent to succeed senior management and other key
members of the organization. We operate in markets where business
ethics and local customs may differ from our standards, increasing
the potential for the misunderstanding or misapplication of those
standards.This may increase the risk of noncompliance.
• Failure to make process improvements - Failure to continue to make
process improvements to reduce costs could impede our competitive
position.
• Patents of competitors - Some of our competitors may secure patents
on production methods or uses of products that may limit our ability
to compete cost-effectively.
Portfolio Management and Integration Risks
• Portfolio management risks - We continuously review our portfolio
which includes the evaluation of potential business acquisitions that
may strategically fit our business and strategic growth initiatives. If
we are unable to successfully integrate and develop our acquired
businesses, we could fail to achieve anticipated synergies which
would include expected cost savings and revenue growth. Failure to
achieve these anticipated synergies, could materially and adversely
affect our financial results. In addition to strategic acquisitions we
evaluate the diversity of our portfolio in light of our objectives and
alignment with our growth strategy. In implementing this strategy we
may not be successful in separating underperforming or non-strategic
assets. The gains or losses on the divestiture of, or lost operating
Financial Risks
• Exposure to global economic conditions - Deterioration in the global
economy and worldwide credit and foreign exchange markets could
adversely affect our business. A worsening of global or regional
economic conditions or financial markets could adversely affect our
customers’ ability to meet the terms of sale or our suppliers’ ability
to perform all their commitments to us. A slowdown in economic
growth in our international markets, particularly Latin American
regions, or a deterioration of credit or foreign exchange markets could
adversely affect customers, suppliers and our overall business there.
Customers in weakened economies may be unable to purchase our
products, or it could become more expensive for them to purchase
imported products in their local currency, or sell their commodities
at prevailing international prices, and we may be unable to collect
receivables from such customers. The ongoing economic challenges
in Brazil has adversely impacted and could continue to adversely
impact our business there.
• Foreign exchange rate risks - We are an international company
and face foreign exchange rate risks in the normal course of our
business. We are particularly sensitive to the Brazilian real, the euro,
the Chinese yuan, the Mexican peso, and the Argentine peso. Our
acquisition of Cheminova has significantly expanded our operations
and sales in foreign countries and correspondingly increased our
PART I
ITEM 1B Unresolved Staff Comments
income from, such assets (e.g., divesting) may affect the company’s
earnings. Moreover, we may incur asset impairment charges related
to acquisitions or divestitures that reduce earnings.
• Continuing integration challenges - Failure to successfully integrate
the operating and financial systems of Cheminova into our systems
poses technology integration risks and could result in our inability
to achieve the synergies we have projected. This could thereby cause
our future results of operations to be materially and adversely worse
than expected. As we evaluate and adjust our supply chain as part
of integrating Cheminova to achieve synergies and efficiencies, we
face execution and sustainability risks if we are unable to modify and
timely execute the supply chain as planned.
exposure to foreign exchange risks. During 2015, adverse changes
in the Brazilian real exchange rate adversely impacted our financial
results and continued weakness in the real could continue to adversely
impact our financial results.
• Uncertain tax rates - Our future effective tax rates may be materially
impacted by numerous items including: a future change in the
composition of earnings from foreign and domestic tax jurisdictions,
as earnings in foreign jurisdictions are typically taxed at more favorable
rates than the United States federal statutory rate; accounting for
uncertain tax positions; business combinations; expiration of statute of
limitations or settlement of tax audits; changes in valuation allowance;
changes in tax law; and the potential decision to repatriate certain
future foreign earnings on which United States taxes have not been
previously accrued.
• Uncertain recoverability of investments in long-lived assets - We have
significant investments in long-lived assets and continually review the
carrying value of these assets for recoverability in light of changing
market conditions and alternative product sourcing opportunities.
• Pension and postretirement plans - Obligations related to our pension
and postretirement plans reflect certain assumptions. To the extent
our plans’ actual experience differs from these assumptions, our costs
and funding obligations could increase or decrease significantly.
ITEM 1B Unresolved Staff Comments
None.
FMC CORPORATION - Form 10-K 11
PART I
ITEM 2 Properties
ITEM 2 Properties
FMC leases executive offices in Philadelphia, Pennsylvania and operates
32 manufacturing facilities in 19 countries as well as one mine in
Argentina. Our major research and development facilities are in Ewing,
New Jersey, Shanghai, China and Copenhagen, Denmark.
We have long-term mineral rights to the Salar del Hombre Muerto
lithium reserves in Argentina. Our FMC Lithium division requires the
lithium brine that is mined from these reserves, without which other
sources of raw materials would have to be obtained.
We believe our facilities are in good operating conditions. The number and location of our owned or leased production properties for continuing
operations are:
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
TOTAL
United States
2
2
1
5
Latin America
& Canada
1
1
2
4
Western
Europe
4
7
1
12
Asia-Pacific
5
3
3
11
Total
12
13
7
32
ITEM 3 Legal Proceedings
Like hundreds of other industrial companies, we have been named as
one of many defendants in asbestos-related personal injury litigation.
Most of these cases allege personal injury or death resulting from
exposure to asbestos in premises of FMC or to asbestos-containing
components installed in machinery or equipment manufactured or
sold by discontinued operations. The machinery and equipment
businesses we owned or operated did not fabricate the asbestos-
containing component parts at issue in the litigation, and to this day,
neither the U.S. Occupational Safety and Health Administration nor
the Environmental Protection Agency has banned the use of these
components. Further, the asbestos-containing parts for this machinery
and equipment were accessible only at the time of infrequent repair
and maintenance. A few jurisdictions have permitted claims to proceed
against equipment manufacturers relating to insulation installed by
other companies on such machinery and equipment. We believe that,
overall, the claims against FMC are without merit.
As of December 31, 2016, there were approximately 8,000 premises and
product asbestos claims pending against FMC in several jurisdictions.
Since the 1980s, approximately 113,000 asbestos claims against FMC
have been discharged, the overwhelming majority of which have been
dismissed without any payment to the claimant. Since the 1980s,
settlements with claimants have totaled approximately $80 million.
We intend to continue managing these asbestos-related cases in
accordance with our historical experience. We have established a reserve
for this litigation within our discontinued operations and believe that
any exposure of a loss in excess of the established reserve cannot be
reasonably estimated. Our experience has been that the overall trends
in asbestos litigation have changed over time. Over the last several
years, we have seen changes in the jurisdictions where claims against
FMC are being filed and changes in the mix of products named in the
various claims. Because these claim trends have yet to form a predictable
pattern, we are presently unable to reasonably estimate our asbestos
liability with respect to claims that may be filed in the future.
See Note 1 “Principal Accounting Policies and Related Financial
Information—Environmental Obligations,” Note 10 “Environmental
Obligations” and Note 18 “Guarantees, Commitments and
Contingencies” in the notes to our consolidated financial statements
included in this Form 10-K, the content of which are incorporated
by reference to this Item 3.
In September 2015, EPA Region 3 filed an administrative complaint
against the Company, claiming that certain advertising and labeling
regarding one of our pesticide products did not comply with the
Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) and
has calculated a proposed penalty in the amount of $4,709,400.We
disagree with EPA on whether a violation occurred and, if a violation
did occur, the appropriate penalty calculation, and will defend ourselves
vigorously. We do not expect that any penalty associated with final
judgment or other resolution would be material.
12
FMC CORPORATION - Form 10-K
ITEM 4 Mine Safety Disclosures
Not Applicable.
PART I
ITEM 4A Executive Officers of the Registrant
ITEM 4A Executive Officers of the Registrant
The executive officers of FMC Corporation, the offices they currently hold, their business experience since at least January 1, 2010 and their ages
as of December 31, 2016, are as follows:
Name
Pierre R. Brondeau
Paul W. Graves
Andrea E. Utecht
Eric W. Norris
Mark A. Douglas
Age on
12/31/2016
59
45
68
50
54
Office, year of election and other information
President, Chief Executive Officer and Chairman of the Board (10-present); President and Chief Executive Officer
of Dow Advanced Materials, a specialty materials company (08-09); President and Chief Operating Officer of
Rohm and Haas Company, a predecessor of Dow Advanced Materials (07-08); Board Member, T.E. Connectivity
Electronics (07-present)
Executive Vice President and Chief Financial Officer (12-present); Managing Director, Goldman Sachs Group
(06-12)
Executive Vice President, General Counsel and Secretary (01-present)
President, FMC Health and Nutrition (15-present); Vice President, Global Business Director, FMC Lithium
(12-14); Global Commercial Director, FMC Lithium (09-12)
President, FMC Agricultural Solutions (12-present); President, Industrial Chemicals Group (11-12); Vice President,
Global Operations and International Development (10-11); Vice President, President Asia, Dow Advanced Materials
(09-10); Board Member, Quaker Chemical (13-present)
All officers are elected to hold office for one year or until their successors
are elected and qualified. 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. The above-listed officers have not
been involved in any legal proceedings during the past ten years of a
nature for which the SEC requires disclosure that are material to an
evaluation of the ability or integrity of any such officer.
FMC CORPORATION - Form 10-K 13
PART II
ITEM 5 Market for the Registrant’s Common Equity,
Related Stockholders Matters and Issuer Purchases
of Equity Securities
FMC common stock of $0.10 par value is traded on the New York Stock Exchange (Symbol: FMC). There were 2,869 registered common
stockholders as of December 31, 2016. Presented below are the 2016 and 2015 quarterly summaries of the high and low prices of the FMC
common stock.
Common
stock prices:
High
Low
$
$
2016
2015
First Quarter Second Quarter Third Quarter Fourth Quarter
60.00
45.77
50.57 $
36.72 $
49.19 $
43.26 $
42.03 $
32.24 $
First Quarter Second Quarter Third Quarter Fourth Quarter
43.37
33.29
61.11 $
51.18 $
64.72 $
55.41 $
52.74 $
32.58 $
$
$
Our Board of Directors has declared regular quarterly dividends since
2006; however, any future payment of dividends will depend on our
financial condition, results of operations, conditions in the financial
markets and such other factors as are deemed relevant by our Board
of Directors. Total cash dividends of $88.6 million, $86.4 million
and $78.1 million were paid in 2016, 2015 and 2014, respectively.
FMC’s annual meeting of stockholders will be held at 2:00 p.m. on
Tuesday, April 25, 2017, at FMC Tower, 2929 Walnut Street Philadelphia,
Pennsylvania. Notice of the meeting, together with proxy materials, will
be mailed approximately 30 days prior to the meeting to stockholders
of record as of February 28, 2017.
Transfer Agent and Registrar of Stock:
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
Phone: 1-800-468-9716
(651-450-4064 local and outside the U.S.)
www.wellsfargo.com/shareownerservices
or
P.O. Box 64854
St. Paul, MN 55164-0854
14
FMC CORPORATION - Form 10-K
PART II
ITEM 5 Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
Stockholder Return Performance Presentation
The graph that follows shall not be deemed to be incorporated by
reference into any filing made by FMC under the Securities Act of
1933 or the Securities Exchange Act of 1934.
The following Stockholder Performance Graph compares the five-year
cumulative total return on FMC’s Common Stock with the S&P 500
Index and the S&P 500 Chemicals Index. The comparison assumes
$100 was invested on December 31, 2011, in FMC’s Common Stock
and in both of the indices, and the reinvestment of all dividends.
FMC Corporation
S&P 500 Index
S&P 500 Chemicals Index
$
$
$
2011
100.00 $
100.00 $
100.00 $
2012
136.97 $
115.88 $
123.39 $
2013
177.88 $
153.01 $
162.18 $
2014
135.85 $
173.69 $
179.44 $
2015
94.79 $
176.07 $
172.04 $
2016
138.60
196.78
189.21
STOCK PERFORMANCE CHART
$300
$250
$200
$150
$100
$50
$0
2011
2012
2013
2014
2015
2016
FMC Corporation
S&P 500 Index
S&P 500 Chemicals Index
The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2016:
ISSUER PURCHASES OF EQUITY SECURITIES
Publicly Announced Program(1)
Period
Maximum Dollar Value
of Shares that May Yet
be Purchased
250,000,000
238,779,078
238,779,078
238,779,078
TOTAL
(1) This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open
Total Number of
Shares Purchased(2)
2,579
210,000
558
213,137
Average Price Paid
Per Share
46.64
53.43
52.76
53.35
Total Dollar
Amount Purchased
—
11,220,922
October 1-31, 2016
November 1-30, 2016
December 1-31, 2016
$
$
— $
$
Total Number of
Shares Purchased
— $
$
— $
$
11,220,922
210,000
210,000
$
$
$
$
market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors.
(2) We also reacquire shares from time to time from employees in connections with vesting, exercise, and forfeiture of awards under our equity compensation plans.
FMC CORPORATION - Form 10-K 15
PART II
ITEM 6 Selected Financial Data
ITEM 6 Selected Financial Data
Selected Consolidated Financial Data
The selected consolidated financial and other data presented below for, and as of the end of, each of the years in the five-year period ended
December 31, 2016, are derived from our consolidated financial statements. The selected consolidated financial data should be read in conjunction
with our consolidated financial statements for the year ended December 31, 2016.
Year Ended December 31,
2012
2013
2014
2016
2015
$
$
$
$
$
$
$
$
9.5
2.6
19.5
14.1
14.6
487.7
538.7
414.8
421.5
307.5
489.0
209.1
(50.2)
3,130.7
3,258.7
3,276.5
3,282.4
2,677.6
363.8
307.6
14.5
322.1
453.5
345.8
89.9
435.7
503.2
371.6
(63.6)
308.0
339.3
245.4
(33.7)
211.7
(130.5)
(177.9)
676.4
498.5
(in Millions, except per share data and ratios)
Income Statement Data:
Revenue
Income (loss) from continuing operations before
equity in (earnings) loss of affiliates, interest
income and expense and income taxes
Income (loss) from continuing operations
before income taxes
Income (loss) from continuing operations
Discontinued operations, net of income taxes(1)
NET INCOME
Less: Net income attributable to noncontrolling
interest
NET INCOME ATTRIBUTABLE TO FMC
STOCKHOLDERS
Amounts attributable to FMC stockholders:
Continuing operations, net of income taxes
Discontinued operations, net of income taxes
NET INCOME
Basic earnings (loss) per common share
attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME
Diluted earnings (loss) per common share
attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME
Balance Sheet Data:
Total assets
Long-term debt
Other Data:
Ratio of earnings (loss) to fixed charges(2)
Cash dividends declared per share
(1) Discontinued operations, net of income taxes includes, in periods up to their respective sales, our discontinued FMC Peroxygens and Alkali businesses. It also includes
other historical discontinued gains and losses related to adjustments to our estimates of our retained liabilities for environmental exposures, general liability, workers’
compensation, postretirement benefit obligations, legal defense, property maintenance and other costs, losses for the settlement of litigation and gains related to
property sales. Amounts in 2015 include the divestiture gain associated with the Alkali sale while 2014 and 2013 include charges associated with the sale of the
Peroxygens business.
(187.4)
676.4
489.0
242.8
(33.7)
209.1
365.1
(71.2)
293.9
(1.40)
5.06
3.66
2.68
(0.52)
2.16
2.69
(0.53)
2.16
(1.40)
5.06
3.66
1.81
(0.25)
1.56
1.81
(0.25)
1.56
298.2
9.3
307.5
341.3
74.9
416.2
5,224.6
1,178.2
5,326.0
1,140.9
6,325.9
2,037.8
6,139.3
1,801.2
4,366.2
906.8
2.46
0.54
3.00
2.22
0.07
2.29
2.47
0.54
3.01
2.23
0.07
2.30
4.5x
0.660
6.3x
0.600
11.2x
0.540
10.8x
0.405
416.2
293.9
(0.4)x
0.660
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(2) In calculating this ratio, earnings consist of income (loss) from continuing operations before income taxes plus interest expense, net of amortization expense related to
debt discounts, fees and expenses, amortization of capitalized interest, interest included in rental expenses (assumed to be one-third of rent) and equity in (earnings)
loss of affiliates. Fixed charges consist of interest expense, amortization of debt discounts, fees and expenses, interest capitalized as part of fixed assets and interest
included in rental expenses.
16
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
Statement under the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995: We and our 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 our other filings with
the SEC, or in reports to our stockholders.
In some cases, we have 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 our current views and
assumptions regarding future events, future business conditions and
the outlook for the company based on currently available information.
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 in Item 1A of this Form
10-K. We wish to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made.
ITEM 7 Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Overview
We are a diversified chemical company serving agricultural, consumer
and industrial markets globally with innovative solutions, applications
and market-leading products. We operate in three distinct business
segments: FMC Agricultural Solutions, FMC Health and Nutrition
and FMC Lithium. Our FMC Agricultural Solutions segment develops,
markets and sells all three major classes of crop protection chemicals:
insecticides, herbicides and fungicides. These products are used in
agriculture to enhance crop yield and quality by controlling a broad
spectrum of insects, weeds and disease, as well as in non-agricultural
markets for pest control. The FMC Health and Nutrition segment focuses
on nutritional ingredients, health excipients, and functional health
ingredients. Nutritional ingredients are used to enhance texture, color,
structure and physical stability. Health excipients are used for binding,
encapsulation and disintegrant applications. Functional health ingredients
are used as active ingredients in nutraceutical and pharmaceutical markets.
Our FMC Lithium segment manufactures lithium for use in a wide
range of lithium products, which are used primarily in energy storage,
specialty polymers and chemical synthesis application.
2016 Highlights
The following are the more significant developments in our businesses
during the year ended December 31, 2016:
• Revenue of $3,282.4 million in 2016 increased $5.9 million or
approximately one percent versus last year. A more detailed review of
revenues by segment is included under the section entitled “Results
of Operations”. On a regional basis, sales in Latin America decreased
by 18 percent, sales in North America decreased two percent, sales
in Asia increased five percent and sales in Europe, Middle East and
Africa (EMEA) increased by 26 percent.
• Our gross margin, excluding acquisition-related charges, of
$1,199.8 million increased approximately $66.6 million or
approximately six percent versus last year. Gross margin as a percent
of revenue is approximately 37 percent versus 35 percent in 2015.
The increase in gross margin was driven by improved pricing and
mix in both Brazil and North America in our FMC Agricultural
Solutions business.
• Selling, general and administrative expenses decreased 28 percent
from $737.9 million to $529.5 million. In 2015, we incurred
significant acquisition related charges that occurred to a much
lesser extent in 2016 accounting for the majority of the decrease.
Selling, general and administrative expenses, excluding non-operating
pension and postretirement charges and acquisition-related charges,
of $481.0 million increased $10.9 million or approximately two
percent. Non-operating pension and postretirement charges and
acquisition-related charges are presented in our Adjusted Earnings
Non-GAAP financial measurement below under the section titled
“Results of Operations”.
• Research and development expenses of $141.5 million decreased
$2.2 million or two percent. The decrease was due to registration and
regulatory timing within FMC Agricultural Solutions.
• Net income attributable to FMC stockholders of $209.1 million
decreased approximately $279.9 million from $489.0 million in
the prior year period. Adjusted after-tax earnings from continuing
operations attributable to FMC stockholders of $379.8 million increased
approximately $47.2 million or 14 percent due to higher results in
FMC Agricultural Solutions and FMC Lithium. See the disclosure
of our Adjusted Earnings Non-GAAP financial measurement below
under the section titled “Results of Operations”.
FMC CORPORATION - Form 10-K 17
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Other 2016 Highlights
In our FMC Agricultural Solutions business, we continue to see the
benefits of the Cheminova acquisition, which brought greater scale
and regional balance to our business, improved our market access and
expanded our product portfolio and technology pipeline. Challenging
market conditions specifically in the global crop protection market
persisted throughout the year. During the quarter, as discussed above,
our FMC Agricultural Solutions business had significantly improved
operating results primarily due to improved performance in Brazil which
last year was significantly impacted by unfavorable foreign currency.
In FMC Health and Nutrition, global demand for our naturally-derived
ingredient product lines continues to be strong and we remain focused
on protecting the business’s high margins through the implementation of
Manufacturing Excellence programs, process technology improvements
and product differentiation. However, the Omega-3 business is having
2017 Outlook
Despite continued challenging Agricultural market conditions, we
believe that our 2017 plan is very achievable. It relies on things we
control rather than on expectations of positive external events.
We expect to deliver segment earnings growth in each business and a
reduction in income tax expense in 2017 as a result of the integration of
Cheminova. The strategy of each business is aligned with its respective
market conditions. Therefore, we expect revenue and earnings growth
in our Lithium and Health and Nutrition businesses, and we will
continue a very disciplined approach in Ag Solutions to ensure earnings
growth while positioning the business strongly for the eventual upturn
in that market.
challenges due to the overcapacity in the industry. In the fourth quarter
of 2016, we commissioned our new MCC production facility in
Rayong, Thailand, which will facilitate our ability to serve a growing
nutrition market in Asia.
In FMC Lithium, we are seeing the benefits of our strategy to grow
our business in the technology-driven specialty end markets, where
demand continues to accelerate and pricing trends across our portfolio
remain favorable. In May, we announced plans to triple our production
capacity of lithium hydroxide to 30,000 metric tons by 2019 in order
to meet growing demand from our key customers. In late October,
we announced a supply agreement that will source 8,000 metric tons
per year of lithium carbonate, beginning in mid-2018. This agreement
will help to support our hydroxide expansion.
On a long term basis, we continue to remain a technology-driven
company with low-cost, asset light operations, a unique business
research and development model that balances short-and mid-term
developments with long-term innovations, and global scale with strong
regional expertise to support local customers.
Please see segment discussions under the section entitled “Results of
Operations” for 2017 outlook for each segment.
18
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations—2016, 2015 and 2014
Overview
The following presents a reconciliation of our segment operating profit to the net income attributable to FMC stockholders as seen through the
eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings
before interest and income taxes excluding corporate expenses, other income (expense), net and corporate special income (charges).
SEGMENT RESULTS RECONCILIATION
(in Millions)
Revenue
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
TOTAL
Income from continuing operations before income taxes
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Segment operating profit
Corporate and other
Operating profit before the items listed below
Interest expense, net
Corporate special (charges) income:
Restructuring and other (charges) income(1)
Non-operating pension and postretirement charges(2)
Business separation costs(3)
Acquisition-related charges(4)
Year Ended December 31,
2016
2015
2014
$
$
$
$
$
$
$
$
2,274.8
743.5
264.1
3,282.4
399.9
191.3
70.2
661.4
(83.6)
577.8
(82.7)
$
$
$
$
2,252.9
785.5
238.1
3,276.5
363.9
194.7
23.0
581.6
(62.4)
519.2
(80.1)
(107.3)
(25.1)
—
(23.4)
(93.9)
(33.7)
(2.6)
209.1
(244.0)
(35.3)
—
(290.3)
(47.4)
676.4
(9.5)
489.0
2,173.8
828.2
256.7
3,258.7
497.8
187.9
27.2
712.9
(71.4)
641.5
(51.2)
(56.4)
(10.5)
(23.6)
(136.0)
(56.2)
14.5
(14.6)
307.5
Provision for income taxes
Discontinued operations, net of income taxes
Net income attributable to noncontrolling interests
NET INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
(1) See Note 7 to the consolidated financial statements included within this Form 10-K for details of restructuring and other (charges) income by segment:
$
$
$
Year Ended December 31,
$
(in Millions)
RESTRUCTURING AND OTHER (CHARGES) INCOME
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Corporate
2014
4.5
(14.1)
—
(46.8)
(56.4)
(2) Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and
losses and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to
financial market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement
costs from our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased
transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and
amortization of prior service cost in our operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the
employment benefits provided to active employees. These expenses are included as a component of the line item “Selling, general and administrative expenses” on
the consolidated statements of income (loss).
2015
(123.7) $
(93.8)
(2.7)
(23.8)
(244.0) $
2016
(62.0) $
(10.0)
(0.6)
(34.7)
(107.3) $
$
(3) Charges are associated with the previously planned separation of our FMC Corporation into two independent public companies. On September 8, 2014, we
announced that we would no longer proceed with the planned separation. At that time we announced the acquisition of Cheminova. See Note 3 within these
consolidated financial statements included within this Form 10-K for more information. These charges are included within “Business separation costs” on our
consolidated income statement. These costs were primarily related to professional fees associated with separation activities within the finance and legal functions
through September 8, 2014.
FMC CORPORATION - Form 10-K 19
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
(4) Charges related to the expensing of the inventory fair value step-up resulting from the application of acquisition purchase accounting, legal and professional fees
and gains or losses on hedging purchase price associated with the planned or completed acquisitions. See Note 3 for details. Amounts represent the following:
(in Millions)
Acquisition-related charges - Cheminova(c)
Legal and professional fees(a)
Inventory fair value step-up amortization(b)
Unrealized loss/(gain) on hedging purchase price(a)
Acquisition-related charges - Epax
Inventory fair value step-up amortization(b)
Twelve Months Ended December 31,
2016
2015
$
$
23.4
—
—
$
60.4
57.8
172.1
2014
32.2
—
99.6
4.2
136.0
TOTAL ACQUISITION-RELATED CHARGES
(a) On the consolidated statements of income, these charges are included in “Selling, general and administrative expenses.”
(b) On the consolidated statements of income, these charges are included in “Costs of sales and services.”
(c) Acquisition-related charges associated with the integration of Cheminova with Agricultural Solutions were completed at the end of 2016.
$
$
$
—
23.4
—
290.3
ADJUSTED EARNINGS RECONCILIATION
The following chart, which is provided to assist the readers of our
financial statements, depicts certain after-tax charges (gains). These
items are excluded from the measures we use to evaluate business
performance and determine certain performance-based compensation.
These after-tax items are discussed in detail within the “Other results of
operations” section that follows. Additionally, the chart below discloses
our Non-GAAP financial measure “Adjusted after-tax earnings from
continuing operations attributable to FMC stockholders” reconciled from
the GAAP financial measure “Net income (loss) attributable to FMC
stockholders.” We believe that this measure provides useful information
about our operating results to investors. We also believe that excluding
the effect of restructuring and other income and charges, non-operating
pension and postretirement charges, certain Non-GAAP tax adjustments
from operating results and discontinued operations allows management
and investors to compare more easily the financial performance of our
underlying businesses from period to period. This measure should not
be considered as a substitute for net income (loss) or other measures of
performance or liquidity reported in accordance with GAAP.
Year Ended December 31,
(in Millions)
Net income attributable to FMC stockholders (GAAP)
Corporate special charges (income), pre-tax
Income tax expense (benefit) on Corporate special charges (income)(1)
$
2016
209.1
155.8
(48.5)
107.3
33.7
29.7
$
$
2015
489.0
569.6
(144.9)
424.7
(676.4)
95.3
2014
307.5
226.5
(84.1)
142.4
(9.3)
(13.8)
Corporate special charges (income), net of income taxes
Discontinued operations attributable to FMC Stockholders, net of income taxes
Non-GAAP tax adjustments(2)
ADJUSTED AFTER-TAX EARNINGS FROM CONTINUING OPERATIONS
ATTRIBUTABLE TO FMC STOCKHOLDERS (NON-GAAP)
(1) The income tax expense (benefit) on Corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the Corporate
special charge or income occurred and includes both current and deferred income tax expense (benefit) based on the nature of the non-GAAP performance measure.
(2) We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon
the annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits
that are not related to current year ongoing business operations; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign
operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets; and changes in tax law.
Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to
ongoing operations thereby providing investors with useful supplemental information about FMC’s operational performance.
379.8
332.6
426.8
$
$
$
In the discussion below, please refer to our chart titled “Segment Results Reconciliation” within the Results of Operations section. All comparisons
are between the periods unless otherwise noted.
Segment Results
For management purposes, segment operating profit is defined as segment
revenue less segment operating expenses (segment operating expenses
consist of costs of sales and services, selling, general and administrative
expenses (“SG&A”) and research and development expenses (“R&D”).
We have excluded the following items from 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, restructuring and other charges (income),
non-operating pension and postretirement charges, investment gains
and losses, loss on extinguishment of debt, asset impairments, Last-in,
First-out (“LIFO”) inventory adjustments, acquisition/divestiture related
charges, business separation costs and other income and expense items.
Information about how each of these items relates to our businesses at the
segment level and results by segment are discussed below and in Note 19
to our consolidated financial statements included in this Form 10-K.
20
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
FMC Agricultural Solutions
(in Millions)
Revenue
Operating Profit
Year Ended December 31,
2016
2,274.8
399.9
$
2015
2,252.9
363.9
$
$
2014
2,173.8
497.8
2016 vs. 2015
Revenue of $2,274.8 million increased approximately one percent
versus the prior year period.
Operating profit of $363.9 million decreased approximately 27 percent
compared to the year-ago period. This decline was primarily driven by
market conditions and currency movements in Brazil.
Operating profit of $399.9 million increased approximately 10 percent
compared to the year-ago period.
Refer to the FMC Agricultural Solutions Pro Forma Financial Results
with Cheminova section below for further discussion.
For 2017, full-year segment revenue is expected to be approximately
$2.2 billion to $2.4 billion and full-year segment earnings are expected
to be in the range of $410 million to $450 million. In Europe, we
expect our key markets to have increased demand compared to last year
which could be somewhat unfavorably impacted by foreign currency. In
North America, we expect challenging market conditions will continue
in 2017 given elevated channel inventory levels, lower commodity
prices, and cautious purchasing decisions by the growers. As a result,
we expect the market in North America to be down in 2017. Across
Asia, we expect market demand to increase slightly in 2017 assuming
more normal weather conditions. In Latin America, market conditions
across the region are expected to be favorable, resulting in somewhat
higher demand than 2016. However, foreign exchange headwinds
could impact the region negatively.
2015 vs. 2014
Revenue of $2,252.9 million increased approximately four percent
versus the prior year period due to revenue from the Cheminova
acquisition on April 20, 2015.
FMC Agricultural Solutions Pro Forma Financial Results
FMC Agricultural Solutions Pro Forma Financial
Results with Cheminova
In the second quarter of 2015, we began to present pro forma combined
results for the FMC Agricultural Solutions segment. We believe that
reviewing our operating results by combining actual and pro forma
results for the FMC Agricultural Solutions segment for 2015 is more
useful in identifying trends in, or reaching conclusions regarding, the
overall operating performance of this segment. Our pro forma segment
information includes adjustments as if the Cheminova transaction had
occurred on January 1, 2014. Our pro forma data have also been adjusted
for the effects of acquisition accounting but do not include adjustments
for costs related to integration activities, cost savings or synergies that
might have been achieved by the combined businesses. Pro forma
amounts presented are not necessarily indicative of what our results
would have been had we operated Cheminova since January 1, 2014,
nor our future results. We believe that reviewing our operating results
by combining actual and pro forma results for the FMC Agricultural
Solutions segment for the periods set forth below is more useful in
identifying trends in, or reaching conclusions regarding, the overall
operating performance of the segment.
Twelve Months Ended December 31,
2016
(in Millions)
Revenue
Revenue, FMC Agricultural Solutions, as reported(1)
Revenue, Cheminova, pro forma(2)
PRO FORMA COMBINED, REVENUE(3)
Operating Profit
Operating Profit, FMC Agricultural Solutions, as reported(1)
497.8
Operating Profit, Cheminova, pro forma(2)
38.2
PRO FORMA COMBINED, OPERATING PROFIT(3)
536.0
(1) As reported amounts are the results of operations of FMC Agricultural Solutions, including the results of the Cheminova acquisition from April 21, 2015 onward.
(2) Cheminova pro forma amounts include the historical results of Cheminova, prior to April 21, 2015. These amounts also include adjustments as if the Cheminova
transaction had occurred on January 1, 2014, including the effects of acquisition accounting. The pro forma amounts do not include adjustments for expenses
related to integration activities, cost savings or synergies that may have been or may be achieved by the combined segment.
2,274.8 $
—
2,274.8 $
2,252.9 $
362.0
2,614.9 $
399.9 $
—
399.9 $
363.9 $
19.9
383.8 $
2,173.8
1,225.7
3,399.5
$
$
$
$
2015
2014
(3) The pro forma combined amounts are not necessarily indicative of what the results would have been had we acquired Cheminova on January 1, 2014 or
indicative of future results. For the twelve months ended December 31, 2016, pro forma results and actual results are the same.
FMC CORPORATION - Form 10-K 21
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
FMC Agricultural Solutions Pro Forma Combined Revenue by Region(1)
Twelve Months Ended December 31,
2014
(in Millions)
Europe, Middle East and Africa (EMEA)(2)
639.6
North America(3)
658.3
Latin America(4)
1,488.3
Asia(5)
613.3
TOTAL
3,399.5
(1) The pro forma combined revenue by region amounts are not necessarily indicative of what the results would have been had we acquired Cheminova on January 1,
2016
516.3 $
557.8
758.8
441.9
2,274.8 $
2015
585.7 $
595.2
965.3
468.7
2,614.9 $
$
$
2014 or indicative of future results. For the twelve months ended December 31, 2016, pro forma revenues and actual revenues are the same.
(2) Decrease in the twelve months ended December 31, 2016 was driven by unfavorable weather in both Central and Western Europe. Additionally, the shift in the
timing of sales as a result of our change to a direct market access model across Europe and product rationalization each contributed to the decline in revenue.
(3) Decrease in the twelve months ended December 31, 2016 was driven by elevated channel inventory levels and lower demand due to the deterioration in farm
incomes which resulted in more cautious purchasing decisions.
(4) Lower sales volumes in Brazil contributed to the reduction in revenue for the twelve months ended December 31, 2016. Continued product rationalization
resulted in lower revenues as well as the decision to allow the existing channel inventory to reduce. The volumes were also impacted by our disciplined approach
to reduce our credit exposure in Brazil. Additionally, foreign exchange headwinds from the Mexican Peso contributed to the revenue decrease. Decrease in the
twelve months ended December 31, 2015 was due lower volumes in Brazil including the deliberate action to reduce third party resales in Brazil, in part as the
result of the sale of our Consagro business in 2015.
(5) Decline in the twelve months ended December 31, 2016 was driven by softer demand in China as well as our actions to reduce channel inventories in India,
following two years of drought.
Actual Results for 2016 vs. Pro Forma Combined
Results for 2015
Revenue of $2,274.8 million decreased approximately 13 percent versus
pro forma combined revenue the prior year period. Volumes contributed
to 14 percent of the decline and unfavorable foreign currency contributed
another one percent to the decline . These declines were partially offset
by favorable pricing which contributed a two percent increase. The
lower volumes were partially due to actions we took to eliminate certain
product sales as previously described. These actions reduced revenue by
approximately $175 million compared to the pro forma revenue for
2015. See chart above for discussion on revenue by region.
Operating profit of $399.9 million increased approximately four
percent compared to the pro forma combined operating profit for the
prior period. Improved pricing and mix impacted pro forma operating
profit by ten percent which was predominantly experienced in both
Brazil and North America and favorable foreign currency impacted pro
forma results by four percent. Lower costs, primarily selling, general and
administrative in nature also favorably impacted results by 10 percent.
The lower volumes noted above had a negative impact on pro forma
operating profit of 20 percent.
Pro Forma Combined Results - 2015 vs. 2014
Pro forma combined revenue of $2,614.9 million decreased approximately
23 percent versus the prior year period. Favorable pricing impacted
revenue by five percent in 2015 compared to the same period in 2014;
however, the price increases only partially offset the unfavorable impact
of foreign currency movements and lower volumes. Unfavorable currency
negatively impacted revenue by 11 percent while volumes impacted
revenue by 16 percent. Most of this decline was experienced in Latin
America, primarily Brazil. Lower volume was also a result of the deliberate
action to reduce third party resales also in Brazil. These reduced third
party sales were partially the result of the sale of our Consagro business.
FMC Health and Nutrition
(in Millions)
Revenue
Operating Profit
22
FMC CORPORATION - Form 10-K
Pro forma combined operating profit of $383.8 million decreased
approximately 28 percent compared to the year-ago period. The
significant movement in foreign currency rates compared to the
prior year, particularly the real, was the main driver of the decline
in operating profit as price increases in local currencies were not
enough to offset the impact of foreign currency. During 2015, the
Brazilian real depreciated significantly versus the U.S. dollar. As a
result, foreign currency contributed 55 percent to the decline in
year over year pro forma combined operating profit while to a lesser
extent lower volumes contributed to a 16 percent impact. Higher
pricing and mix partially offset these declines by 23 percent while
lower costs primarily selling, general and administrative combined
with lower research and development costs improved profits year over
year by 19 percent. These lower costs were driven by cost savings
driven by synergies associated with the Cheminova acquisition as well
as reduced spending primarily in Brazil to address with near-term
market conditions.
In 2015, we announced several targeted measures to reduce operating
costs and reorganize our operations in Brazil to align the business with
near-term market conditions. These measures included:
• Enhancing our focus on proprietary technology platforms and
differentiated products, and rationalizing our product offerings to
eliminate low-margin sales. This portfolio rationalization program,
including the sale of our generic subsidiary, Consagro, reduced 2015
pro forma combined operating profit by $48 million compared to
2014. This will enable us to further reduce the region’s operating
costs and enhance our potential to deliver higher future earnings and
return on capital. At the completion of this reorganization, FMC’s
workforce in Brazil will be approximately half its size compared to
2014. Aside from the product rationalization, all of these actions
were substantially completed by December 31, 2015.
$
Year Ended December 31,
2016
743.5 $
191.3
2015
785.5 $
194.7
2014
828.2
187.9
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
2016 vs. 2015
Revenue was $743.5 million, a decrease of approximately five percent
versus the prior-year period. Lower volume was the main driver of
the decrease, contributing four percent, primarily due to Omega-3.
Unfavorable foreign currency impacts and unfavorable price and mix
decreased revenue by approximately one percent total.
primarily a weaker euro, decreased revenue by approximately five
percent with volume, price and mix flat in the aggregate compared to
prior year. Volume was slightly positive as lower volume in carrageenan
and alginates were offset by growth in the MCC family of products
in both pharmaceuticals and food end markets. Pricing for 2015 as
compared to 2014 was slightly positive and mix was slightly negative.
Segment operating profit of $191.3 million decreased approximately
two percent versus the year ago period driven by lower revenue partially
offset by lower manufacturing costs. The lower volumes discussed in
the preceding paragraph drove the lower earnings.
Segment revenue for the full year of 2017 is anticipated to be approximately
$750 million to $790 million, while full-year segment earnings are expected
to be between $190 million and $200 million. The anticipated revenue
increase is driven by increased volumes of MCC-based products associated
with our new MCC plant in Thailand. The relatively flat earnings will be
impacted by costs of bringing the new plant on-line which are expected to
offset by the benefits of other operational improvements across the business.
2015 vs. 2014
Revenue was $785.5 million, a decrease of approximately five percent
versus the prior-year period. Unfavorable foreign currency impacts,
Segment operating profit of $194.7 million increased approximately
four percent versus the year ago period driven by the higher volumes
discussed in the preceding paragraph, the operating profit impact
of improved price and mix and lower manufacturing costs as well
as lower selling, general and administrative costs, partially offset by
unfavorable currency. Volumes and price mix improved operating
profit by three percent and two percent, respectively while lower
manufacturing costs and lower selling, general and administrative
costs improved profits by two percent and three percent, respectively.
The reduction in these costs was driven by various manufacturing
initiatives to improve profitability as well as the benefits of restructuring
activities and cost control initiatives. Finally, unfavorable currency
negatively impacted results by six percent year over year.
FMC Lithium
(in Millions)
Revenue
Operating Profit
2016 vs. 2015
Revenue of $264.1 million increased by approximately 11 percent
versus the prior-year period driven by favorable pricing of Carbonate,
Chloride, and Hydroxide, which accounted for 14 percent of the
change. This was offset by lower volumes due to increased demand
from downstream products, which impacted revenues by three percent.
Segment operating profit of $70.2 million increased approximately
$47 million versus the year ago period. The favorable pricing noted
above impacted operating profit by approximately $33 million while
volume had a negative impact on operating profit of $3 million.
Favorable foreign currency impacts increased operating profit by
approximately $3 million. Additionally, lower raw material prices,
lower energy prices and increased manufacturing efficiencies improved
operating profit by approximately $14 million.
Demand for lithium remains strong and pricing trends continue to
be favorable. In 2016, we announced plans to triple our production
capacity of lithium hydroxide to 30,000 metric tons by 2019 in order
to meet growing demand from our key customers. This hydroxide
expansion will result in increased volumes in the second half of
2017. Full year segment revenue is expected to be approximately
$315 million to $355 million while segment operating profit is
expected to be between $90 million and $110 million for the full
year of 2017, an increase of approximately 42 percent over 2016 at
the mid-point of the range.
2015 vs. 2014
Revenue of $238.1 million decreased by approximately seven percent
versus the prior-year period driven by lower volumes of upstream
products and weaker foreign currencies. These impacted revenues by
seven percent and three percent, respectively. This was partially offset
by favorable pricing which impacted revenue by three percent.
$
Year Ended December 31,
2016
264.1 $
70.2
2015
238.1 $
23.0
2014
256.7
27.2
Segment operating profit of $23.0 million decreased approximately
15 percent versus the year ago period. Pricing impacted operating profit
favorably by approximately $7 million while volume had about an equal
negative impact on operating profit. Foreign currency, primarily the
Argentine peso and the euro, impacted operating profit by approximately
$9 million. This was partially offset by manufacturing cost savings and
other miscellaneous items.
Corporate and other
Corporate expenses are included as a component of the line item
“Selling, general and administrative expenses” except for last in, first-
out (LIFO) related charges that are included as a component of “Cost
of sales and other services” on our consolidated statements of income.
2016 vs. 2015
Corporate and other expenses of $83.6 million increased by $21.2 million
from $62.4 million in 2015. Approximately $10 million of the increase
is driven by the higher incentive compensation due to improved
business performance as well as costs associated with the relocation of
our Corporate headquarters which totaled approximately $2.2 million.
The remaining $9 million increase was primarily the result of other
project initiatives.
2015 vs. 2014
Corporate and other expenses of $62.4 million decreased by $9.0 million
from $71.4 million in the same period in 2014. The decrease was
driven primarily by reduced LIFO inventory expense of approximately
$7.0 million. The reduced LIFO expense was driven by lower inflation
rates applied to the inventory subject to LIFO calculations. Excluding
the LIFO reductions, corporate staff expenses and incentive payments
were flat year over year.
FMC CORPORATION - Form 10-K 23
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Interest expense, net
2016 vs. 2015
Interest expense, net of $82.7 million increased by approximately three
percent compared to $80.1 million in 2015. The slight increase was
primarily due to higher foreign debt balances, partially offset by lower
term balance and other minor factors.
2015 vs. 2014
Interest expense, net of $80.1 million increased approximately 56 percent
as compared to $51.2 million in 2014. The increase was primarily due
to our borrowings under our senior unsecured Term Loan facility. The
proceeds of these borrowings were used to finance the acquisition
of Cheminova as well as to pay costs, fees and expenses incurred in
connection with the acquisition and the term loan facility. See Note
12 to our consolidated financial statements included in this Form
10-K for more information.
Corporate special charges (income)
Restructuring and other charges (income)
Our restructuring and other charges (income) are comprised of restructuring, assets disposals and other charges (income) as described below:
(in Millions)
Restructuring Charges and Asset Disposals
Other Charges (Income), Net
TOTAL RESTRUCTURING AND OTHER CHARGES(1)
(1) See Note 7 within the consolidated financial statements included in this Form 10-K for more information.
$
$
Year Ended December 31,
2016
53.4 $
53.9
107.3 $
2015
217.7 $
26.3
244.0 $
2014
17.2
39.2
56.4
2016
Restructuring and asset disposal charges in 2016 totaled $53.4 million.
Included in this were final charges totaling $42.3 million associated
with the integration of Cheminova into our existing FMC Agricultural
Solutions segment. The amount includes final adjustments to severances,
long lived asset write offs, contract termination costs and other
miscellaneous items.
Additionally, other charges (income), net in 2016 consisted of
$36.8 million for continuing environmental sites treated as Corporate
charges, $13.2 million associated with a license agreement to obtain
certain technology and intellectual property rights for new compounds
still under development and $4.2 million as a result of the Argentina
government’s action to devalue its currency. These charges were offset
by other miscellaneous income of $0.3 million.
2015
Restructuring and asset disposal charges in 2015 totaled $244.0 million.
Included in this were significant charges totaling $118.3 million
associated with charges as part of the integration of Cheminova into
our existing FMC Agricultural Solutions segment. The Cheminova
charges included those associated with the sale of Consagro, which
amounted to $64.5 million. Restructuring and asset disposal charges
also include charges associated with various activities in Health and
Nutrition of $93.6 million. The majority of these charges are from the
loss on sale of our Pectin business of $12 million as well as asset write
downs associated with the mothballing of our Seal Sands plant equaling
$70.5 million. The Seal Sands plant, in the UK, was mothballed in 2015
due to a lack of demand for the Omega-3 pharmaceuticals products
that were manufactured at that facility.
Other charges (income), net in 2015 consisted of environmental charges
of $21.7 million, the impacts of the Argentina currency devaluation
in December of 2015 of $10.7 million, and $20.5 million of expenses
associated with acquired in-process research and development activity.
Partially offsetting these amounts was a gain of $26.6 million related to
the sale of our remaining ownership interest in a Belgian-based pesticide
distribution company, Belchim Crop Protection N.V. (“Belchim”).
2014
Restructuring and asset disposal charges in 2014 of $17.2 million were
primarily associated with our Health and Nutrition restructuring as well
as other miscellaneous exit costs. Other charges (income), net in 2014 of
$39.2 million were primarily related to corporate environmental charges
of $43.7 million and charges of $22.1 million associated with our FMC
Agricultural Solutions segment which entered into collaboration and
license agreements with various third-party companies for the purpose
of obtaining certain technology and intellectual property rights relating
to new compounds still under development. Offsetting these charges
is income from the sale of a portion of our ownership interest in a
pesticide distribution company which resulted in a gain on the sale of
approximately $26.6 million.
Non-operating pension and postretirement (charges)
income
Non-operating pension and postretirement (charges) income are included
in “Selling, general and administrative expenses” on our consolidated
statements of income (loss).
2016 vs. 2015
The charge for 2016 was $25.1 million compared to $35.3 million
in 2015. The decrease in charges was in part due to the estimation
method used in 2016 to calculate the interest cost components of our
net periodic benefit cost as described in the Critical Accounting Policies
section of Item 7 within this Form 10-K. The decrease was also the
result of $13.3 million of lower amortization of net actuarial losses.
These decreases were partially offset by an increase of $12.1 million
for recognized losses due to plan settlements. See Note 13 for more
information.
2015 vs. 2014
The charge for 2015 was $35.3 million compared to $10.5 million for
2014. The increase in charges was primarily the result of $24.1 million
of higher amortization of net actuarial losses. See Note 13 to the
consolidated financial statements included in this Form 10-K for
more information.
24
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Separation costs
On September 8, 2014, we announced that we would no longer proceed
with the planned separation as a result of the planned acquisition of
Cheminova and divestiture of FMC Alkali Chemicals division. As
a result there were no business separation charges in 2015 or 2016.
Business separation cost for the twelve months ended December 31,
2014 represent charges associated with the planned separation activities
through December 31, 2015.
Acquisition-related charges
A detailed description of the acquisition related charges is included in
Note 19 to the consolidated financial statements included within this
Form 10-K and in the Segment Results Reconciliation above within
the “Results of Operations” section of the Management’s Discussion
and Analysis.
Provision for income taxes
A significant amount of our earnings is generated by our foreign
subsidiaries (e.g. Denmark, Ireland and Hong Kong), which tax
earnings at lower rates than the United States federal statutory rate.
Our future effective tax rates may be materially impacted by numerous
items including: a future change in the composition of earnings
from foreign and domestic tax jurisdictions, as earnings in foreign
jurisdictions are typically taxed at more favorable rates than the United
States federal statutory rate; accounting for uncertain tax positions;
business combinations; expiration of statute of limitations or settlement
of tax audits; changes in valuation allowance; changes in tax law; and
the potential decision to repatriate certain future foreign earnings on
which United States taxes have not been previously accrued.
(in Millions)
GAAP - Continuing
operations
Corporate special charges
Tax adjustments(1)
Income
(Expense)
$
339.3
155.8
$
93.9
48.5
(29.7)
$ 112.7
2016
Tax
Provision
(Benefit)
Effective
Tax Rate
Twelve Months Ended December 31,
2015
Tax
Provision
(Benefit)
Income
(Expense)
Effective
Tax Rate
2014
Tax
Provision
(Benefit)
Income
(Expense)
27.7% $
(130.5) $
569.6
(36.3)% $
363.8
226.5
47.4
144.9
(95.3)
97.0
Effective
Tax Rate
15.4%
$
56.2
84.1
13.8
$ 154.1
26.1%
(1) Tax adjustments in 2016 were primarily associated with valuation allowance adjustments to U.S. state deferred tax balances. Tax adjustments in 2015 were
primarily associated with valuation allowance adjustments taken in our Brazil subsidiaries. Tax adjustments in 2014 were primarily associated with revisions
to our tax liabilities associated with prior year tax matters.
22.1% $ 590.3
$ 495.1
22.8% $
439.1
$
The primary drivers for the fluctuations in the effective tax rate from
2016 to 2015 and 2015 to 2014 are provided in the table above.
Excluding the items in the table above, the changes in the effective
tax rate were primarily due to shifts in earnings mix as it relates to
domestic versus foreign income. Foreign profits are generally taxed
at lower rates compared to domestic income. See Note 11 to the
Consolidated Financial Statements for additional details related to the
provisions for income taxes on continuing operations, as well as items
that significantly impact our effective tax rate.
Discontinued operations, net of income taxes
Our discontinued operations, in periods up to its sale, represent our
discontinued FMC Alkali Chemicals and Peroxygens business results
as well as adjustments to retained liabilities from other previously
discontinued operations. The primary liabilities retained include
environmental liabilities, other postretirement benefit liabilities,
self-insurance, long-term obligations related to legal proceedings and
historical restructuring activities. See Note 9 to the Consolidated Financial
Statements for additional details on our discontinued operations.
2016 vs. 2015
Discontinued operations, net of income taxes represented a loss
of $33.7 million in 2016 compared to a gain of $676.4 million in
2015. The change was driven by the divestiture of our discontinued
FMC Alkali Chemicals division which resulted in an after tax gain of
$702.1 million in 2015.
2015 vs. 2014
Discontinued operations, net of income taxes represented a gain
of $676.4 in 2015 compared to a gain of $14.5 million in 2014.
The change was driven by the divestiture of our discontinued FMC
Alkali Chemicals division which resulted in an after tax gain of
$702.1 million in 2015.
Net income attributable to FMC stockholders
2016 vs. 2015
Net income attributable to FMC stockholders decreased to
$209.1 million from $489.0 million. The decrease was primarily due
to the gain from the sale of our discontinued FMC Alkali Chemicals
division in 2015 which was partially offset by lower acquisition-related
costs in 2016.
2015 vs. 2014
Net income attributable to FMC stockholders increased to $489.0 million
from $307.5 million. The increase was primarily due to the gain from
the sale of our discontinued FMC Alkali Chemicals division offset by
reduced Agricultural Solutions results as well as higher interest expense
from higher debt levels needed to fund the Cheminova acquisition.
Also significantly impacting results was a higher tax rate in 2015
primarily due to the increases in certain foreign valuation allowances
against deferred tax assets.
FMC CORPORATION - Form 10-K 25
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2016 and 2015, were
$64.2 million and $78.6 million, respectively. Of the cash and cash
equivalents balance at December 31, 2016, $64.1 million was held
by our foreign subsidiaries. Our intent is to reinvest indefinitely the
earnings of our foreign subsidiaries and therefore we have not recorded
taxes that would be payable if we repatriated these earnings.
At December 31, 2016, we had total debt of $1,893.0 million as
compared to $2,148.9 million at December 31, 2015. Total debt
included $1,798.8 million and $2,036.3 million of long-term debt
(excluding current portions of $2.4 million and $1.5 million) at
December 31, 2016 and 2015, respectively. As of December 31, 2016,
we are in compliance with all of our debt covenants. During 2016, the
maximum leverage ratio stepped down in accordance with the provisions
of the Credit Facility and the Term Loan Facility. By the end of 2017,
the maximum leverage ratio will step down to 3.5 in accordance with
the provisions of the Credit Facility and the Term Loan Facility. We
will take a variety of steps, if necessary, to ensure compliance with the
maximum leverage ratio at the applicable measurement dates.
The decrease in long-term debt was due to the repayments of borrowing
under our term loan and redemption of certain outstanding industrial
revenue bonds. At December 31, 2016, $750.0 million remained
outstanding under the Term Loan Facility. The scheduled maturity
of the Term Loan Facility is on April 21, 2020. The borrowings
under the Term Loan Agreement will bear interest at a floating rate,
which will be a base rate or a Eurocurrency rate equal to the London
interbank offered rate for the relevant interest period, plus in each case
an applicable margin, as determined in accordance with the provisions
of the Term Loan Agreement.
Our short-term debt, consists of foreign borrowings and our commercial
paper program. Foreign borrowings decreased from $87.2 million at
December 31, 2015 to $85.5 million at December 31, 2016 while
outstanding commercial paper also decreased from $23.9 million to
$6.3 million at December 31, 2015 and 2016, respectively.
Our commercial paper program allows us to borrow at rates generally
more favorable than those available under our credit facility. At
December 31, 2016, the average effective interest rate on these borrowings
was 0.95 percent.
See Note 12 in the consolidated financial statements included in this
Form 10-K for further details.
26
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Statement of Cash Flows
Cash provided (required) by operating activities was $537.3 million, $(277.1) million and $284.9 million for 2016,
2015 and 2014, respectively.
The table below presents the components of net cash provided by operating activities.
(in Millions)
Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest
income and expense and income taxes
Corporate special charges and depreciation and amortization(1)
Operating income before depreciation and amortization (Non-GAAP)
Change in trade receivables, net(2)
Change in inventories(3)
Change in accounts payable(4)
Change in accrued customer rebates(5)
Change in advance payments from customers(6)
Change in all other operating assets and liabilities(7)
Cash basis operating income (Non-GAAP)
Restructuring and other spending(8)
Environmental spending, continuing, net of recoveries(9)
Pension and other postretirement benefit contributions(10)
Net interest payments(11)
Tax payments, net of refunds(12)
Excess tax benefits from share-based compensation(13)
Payments associated with the Cheminova purchase price hedges(14)
Acquisition legal and professional fees(15)
$
$
$
Twelve months ended December 31,
2016
2015
2014
$
$
$
421.5
293.4
714.9
(6.1)
72.5
(24.1)
(5.3)
(10.0)
86.4
828.3
(26.0)
(28.1)
(68.7)
(81.6)
(62.8)
(0.4)
—
(23.4)
537.3
$
(50.2) $
685.1
634.9
140.9
78.3
(292.5)
11.0
60.6
(22.9)
610.3
(34.9)
(32.2)
(78.7)
(74.7)
(340.3)
(1.4)
(264.8)
(60.4)
(277.1) $
$
414.8
320.2
735.0
(274.7)
36.2
(16.2)
34.3
11.3
61.2
587.1
(9.5)
(17.5)
(68.3)
(61.0)
(109.0)
(4.7)
—
(32.2)
284.9
Cash provided (required) by operating activities of continuing operations
(1) Represents the sum of corporate special charges and depreciation and amortization.
(2) The changes in cash flows related to trade receivables in 2016 and 2015 were primarily driven by timing of collections. Collection timing is more pronounced in
our FMC Agricultural Solutions business where sales, particularly in Brazil, have terms significantly longer than the rest of our businesses. Additionally, timing of
collection is impacted as amounts for both periods include carry-over balances remaining to be collected in Latin America, where collection periods are measured
in months rather than weeks. During 2016, we collected approximately $650 million of receivables in Brazil. A significant proportion of the collections in Brazil
are coming from those accounts that were past due at the start of the year, improving the quality of the remaining receivable balance.
$
$
(3) The changes in inventory are a result of inventory levels being adjusted to take into consideration the change in market conditions mostly in FMC Agricultural
Solutions.
(4) The change in accounts payable in 2015 was due to timing of payments including inventory reductions activities across the company, particularly as we integrated
Cheminova, as well as adjusting inventory levels in light of current market conditions. These events did not repeat in 2016.
(5) These rebates are associated with our FMC Agricultural Solutions segment in North America and Brazil and generally settle in the fourth quarter of each year. The
changes year over year are primarily associated with the mix in sales eligible for rebates and incentives in 2016 compared to 2015 and timing of rebate payments.
(6) The advance payments from customers represent advances from our FMC Agricultural Solutions segment customers. Customers did not participate in as many
pre-payment programs in 2016 as they did in 2015 due to market dynamics in North America.
(7) Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities, including guarantees issued to
vendors under our vendor finance program.
(8) See Note 7 in our consolidated financial statements included in this Form 10-K for further details.
(9) Included in our results for each of the years presented are environmental charges for environmental remediation at our operating sites of $36.8 million,
$21.7 million and $43.7 million, respectively. The amounts in 2016 will be spent in future years. The amounts represent environmental remediation spending
at our operating sites which were recorded against pre-existing reserves, net of recoveries. Environmental obligations for continuing operations primarily represent
obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
(10) Amounts include voluntary contributions to our U.S. qualified defined benefit plan of $35.0 million, $65.0 million and $50.0 million, respectively.
(11) Interest payments in all periods remained fairly constant.
(12) The significant increase in tax payments in 2015 is due the tax paid on the gain associated with the sale of the discontinued FMC Alkali Chemicals division.
(13) Amounts are presented as a financing activity in the statement of cash flows, from share-based compensation.
(14) Represents payments for the Cheminova purchase price hedges. See Note 3 to the consolidated financial statements for more information.
(15) Represents payments for legal and professional fees associated with the Cheminova acquisition. See Note 3 to the consolidated financial statements for more
information.
FMC CORPORATION - Form 10-K 27
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cash provided (required) by operating activities
of discontinued operations was $(39.5) million,
$(80.6) million and $88.8 million for 2016, 2015 and
2014, respectively.
Cash required by operating activities of discontinued operation is
directly related to environmental, other postretirement benefit liabilities,
self-insurance, long-term obligations related to legal proceedings and
historical restructuring activities. Amounts in 2015 included divestiture
costs associated with the sale of our FMC Alkali Chemicals business
as well as related operating activities.
The increase of cash required by operating activities of discontinued
operations in 2015 is due primarily to divestiture costs associated
with the sale of our discontinued FMC Alkali Chemicals business
on April 1, 2015. Additionally, 2014 includes a full year of positive
cash flows associated with FMC Alkali while 2015 only includes one
quarter’s worth due to sale date timing.
Cash required by investing activities of continuing
operations was $(139.2) million, $(1,285.5) million
and $(190.2) million for 2016, 2015 and 2014,
respectively.
The decrease of cash required by investing activities in 2016 is due
primarily due to the Cheminova acquisition on April 21, 2015 for an
aggregate purchase price of $1.2 billion, excluding assumed net debt
and hedged-related costs totaling $0.6 billion.
Cash provided by investing activities of discontinued
operations was $4.0 million, $1,634.3 million and
$154.9 million for 2016, 2015 and 2014, respectively.
Cash provided by investing activities of discontinued operations in 2016
decreased as a result of the sale of our FMC Alkali Chemicals business
which was completed on April 1, 2015 resulting in $1.64 billion in
proceeds in 2015 that did not recur in 2016.
Cash provided by investing activities of discontinued operations in
2015 is directly associated with the sale of our discontinued FMC
Alkali Chemicals business. Cash provided by investing activities of
discontinued operations in 2014 is directly associated with the sale of
our discontinued FMC Peroxygens business which was completed on
February 28, 2014. The proceeds from this sale were approximately
$200 million. Also included in these investing activities was capital
expenditures of these same discontinued operations for historical periods
up to the point of sale. The decrease in these capital expenditures in
2015 was due to only one quarter’s worth of Alkali capital expenditures
in 2015 compared to a full year’s in 2014.
Cash required by financing activities was
$(377.0) million, $(16.7) million and $(349.9) million
in 2016, 2015 and 2014, respectively.
2016 vs. 2015
The change period over period in financing activities is primarily due
to the repayments of borrowings under our term loan and redemption
of certain outstanding industrial revenue bonds.
2015 vs. 2014
The change period over period in financing activities is primarily due to
the $1.65 billion we borrowed under our previously announced senior
unsecured Term Loan facility. The proceeds of the borrowing were used
to finance the acquisition of Cheminova as well as to pay costs, fees and
expenses incurred in connection with the acquisition and the term loan
facility. Offsetting this borrowing in 2015 was repayments of long-term
debt totaling $1.1 billion primarily due to repayments associated with
acquired Cheminova long term debt. Additionally short term debt
decreased $547 million in 2015 as compared to $140 million in 2014.
Additionally in 2014 we paid $98.7 million to noncontrolling interests
(primarily to acquire the remaining ownership of our discontinued FMC
Alkali Chemicals division) as compared to zero such payments in 2015.
2017 Outlook
In 2017, we expect a continued improvement in cash generation. In
aggregate, we expect cash basis operating income to increase driven by
higher earnings within each segment partially offset by higher working
capital requirements in 2017. We also expect lower restructuring
spending and a reduction in spending from completing substantially
all acquisition-related integration activities in 2016. We anticipate
lower cash taxes in 2017 as compared to 2016.
Other potential liquidity needs
Our cash needs for 2017 include operating cash requirements, capital
expenditures, scheduled mandatory payments of long-term debt,
dividend payments, share repurchases, contributions to our pension
plans, environmental and asset retirement obligation spending and
restructuring. We plan to meet our liquidity needs through available
cash, cash generated from operations, commercial paper issuances
and borrowings under our committed revolving credit facility. At
December 31, 2016 our remaining borrowing capacity under our
credit facility was $1,376.1 million.
Projected 2017 capital expenditures and expenditures related to contract
manufacturers are expected to approximate 2016 levels.
Projected 2017 spending includes approximately $50 to $55 million
of net environmental remediation spending. This spending does not
include expected spending on capital projects relating to environmental
control facilities or expected spending for environmental compliance
costs, which we will include as a component of costs of sales and services
in our consolidated statements of income since these amounts are not
covered by established reserves. Capital spending to expand, maintain or
replace equipment at our production facilities may trigger requirements
for upgrading our environmental controls, which may increase our
spending for environmental controls over the foregoing projections.
Our U.S. Pension Plan assets decreased slightly from $1,204.6 million
at December 31, 2015 to $1,203.3 million at December 31, 2016.
Our U.S. Pension Plan assets comprise approximately 95 percent of
our total plan assets with the difference representing plan assets related
to foreign pension plans. See Note 13 to the consolidated financial
statements included within this Form 10-K for details on how we develop
our long-term rate of return assumptions. We made contributions of
$35.0 million and $65.0 million in 2016 and 2015, respectively, and
28
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
intend to contribute $40 million in 2017. Our contributions in 2015,
2016 and our intended contribution in 2017 are all in excess of the
minimum requirements. Our contributions in excess of minimums
are done with the objective of avoiding variable rate Pension Benefit
Guaranty Corporation (“PBGC”) premiums as well as potentially
reducing future funding volatility. We do not believe that the additional
contribution in 2017 will have a material impact on our current and
future liquidity needs. However, volatility of interest rates and equity
returns may require greater contributions in the future.
During the year ended December 31, 2016, 210,000 shares were
repurchased under the publicly announced repurchase program. At
December 31, 2016, $238.8 million remained unused under our
Board-authorized repurchase program. This repurchase program
does not include a specific timetable or price targets and may be
suspended or terminated at any time. Shares may be purchased through
open market or privately negotiated transactions at the discretion of
management based on its evaluation of market conditions and other
factors. We also reacquire shares from time to time from employees in
connections with vesting, exercise and forfeiture of awards under our
equity compensation plans.
Dividends
On January 19, 2017, we paid dividends aggregating $22.1 million to
our shareholders of record as of December 31, 2016. This amount is
included in “Accrued and other liabilities” on the consolidated balance
sheet as of December 31, 2016. For the years ended December 31,
2016, 2015 and 2014, we paid $88.6 million, $86.4 million and
$78.1 million in dividends, respectively.
Commitments
We provide guarantees to financial institutions on behalf of certain FMC
Agricultural Solutions customers, principally Brazilian customers, for their
seasonal borrowing. The total of these guarantees was $108.7 million at
December 31, 2016. These guarantees arise during the ordinary course
of business from relationships with customers and nonconsolidated
affiliates. Non-performance by the guaranteed party triggers the
obligation requiring us to make payments to the beneficiary of the
guarantee. Based on our experience these types of guarantees have
not had a material effect on our consolidated financial position or on
our liquidity. Our expectation is that future payment or performance
related to the non-performance of others is considered unlikely.
Short-term debt consisted of foreign credit lines and commercial paper at
December 31, 2016 and 2015. We provide parent-company guarantees
to lending institutions providing credit to our foreign subsidiaries.
We continually evaluate our options for divesting real estate holdings
and property, plant and equipment that are no longer integral to our
operating businesses. In connection with our property and asset sales
and divestitures, we have agreed to indemnify the buyer for certain
liabilities, including environmental contamination and taxes that
occurred prior to the date of sale. Our indemnification obligations
with respect to these liabilities may be indefinite as to duration and
may or may not be subject to a deductible, minimum claim amount
or cap. As such, it is not possible for us to predict the likelihood that a
claim will be made or to make a reasonable estimate of the maximum
potential loss or range of loss. If triggered, we may be able to recover
certain of the indemnity payments from third parties. We have not
recorded any specific liabilities for these guarantees.
Our total significant committed contracts that we believe will affect cash over the next four years and beyond are as follows:
Expected Cash Payments by Year
$
2018
Contractual Commitments
(in Millions)
Debt maturities(1)
Contractual interest(2)
Lease obligations(3)
Certain long-term liabilities(4)
Derivative contracts
Purchase obligations(5)
TOTAL(6)
(1) Excluding discounts.
(2) Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $1.7 million of long-term debt subject to variable interest
rates at December 31, 2016. The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31,
2016. Variable rates are determined by the market and will fluctuate over time.
753.6 $
100.8
146.6
35.1
—
—
1,036.1 $
2017
94.2 $
62.6
19.5
4.4
2.5
9.4
192.6 $
2019
557.3 $
56.6
22.9
4.6
—
—
641.4 $
2020
496.9 $
31.5
21.4
4.6
—
—
554.4 $
Total
1,904.3
314.0
232.9
53.1
2.5
13.2
2,520.0
2.3 $
62.5
22.5
4.4
—
3.8
95.5 $
2021
& beyond
$
(3) Before sub-lease rental income.
(4) Obligations associated with our Ewing, NJ and Shanghai, China research and technology centers.
(5) Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and specify all significant terms, including fixed
or minimum quantities to be purchased, price provisions and timing of the transaction. We have entered into a number of purchase obligations for the sourcing of
materials and energy where take-or-pay arrangements apply. Since the majority of the minimum obligations under these contracts are take-or-pay commitments
over the life of the contract and not a year by year take-or-pay, the obligations in the table related to these types of contacts are presented in the earliest period in
which the minimum obligation could be payable under these types of contracts.
(6) As of December 31, 2016, the liability for uncertain tax positions was $121.1 million. This liability is excluded from the table above. Additionally, accrued
pension and other postretirement benefits and our environmental liabilities as recorded on our consolidated balance sheets are excluded from the table above. Due
to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, we are unable to make a reasonably reliable
estimate of the amount and periods in which these liabilities might be paid.
FMC CORPORATION - Form 10-K 29
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Contingencies
See Note 18 to our consolidated financial statements included in this Form 10-K.
Climate Change
As a global corporate citizen, we are concerned about the consequences
of climate change and will take prudent and cost effective actions that
reduce greenhouse gas emissions to the atmosphere.
FMC is committed to doing its part to address climate change and
its impacts. We have set 2025 goals that we will reduce both energy
intensity and Green House Gas (GHG) intensity for our operations
by 15% from our 2013 baseline year. In 2016, FMC’s actions to
implement best practices in environmental stewardship and climate
change action were recognized by CDP (formerly Carbon Disclosure
Project). CDP is widely recognized as one of the top environmental
data reporting organizations in the world, and over 8,500 companies
responded to CDP in 2016. FMC submitted its first-ever response
to CDP’s climate change program and received an “A-” score, which
places FMC in CDP’s Leadership scoring category.
FMC detailed the business risks and opportunities we have due to
climate change and its impacts in our 2016 CDP climate change report.
Even as we take action to control the release of GHGs, additional
warming is anticipated. Long-term, higher average global temperatures
could result in induced charges in natural resources, growing seasons,
precipitation patterns, weather patterns, species distributions, water
availability, sea levels, and biodiversity. These impacts could cause
changes in supplies of raw materials used to maintain FMC’s production
capacity and could lead to possible increased sourcing costs. Depending
on how pervasive the climate impacts are in the different geographic
locations experiencing changes in natural resources, FMC’s customers
could be impacted. Demand for FMC’s products could increase if our
products meet our customers’ needs to adapt to climate change impacts
or decrease if our products do not meet their needs. Within our own
operations, we continually assess our manufacturing sites worldwide
for risks and opportunities to increase our preparedness for climate
change. We are evaluating sea level rise and storm surge at three of
our plants located within 4 meters of sea level to understand timing of
potential impacts and response actions that may need to be taken. To
lessen FMC’s overall environmental footprint, we have taken actions
to increase the energy efficiency in our manufacturing sites. We have
also committed to 2025 goals to reduce our water use in high-risk areas
by 20% and our waste intensities by 15%.
In our product portfolio, we see market opportunities for our products to
address climate change and its impacts. For example, FMC Agricultural
Solutions’ products can help customers increase yield, energy and water
efficiency, and decrease greenhouse gas emissions. Our products can
also help growers adapt to more unpredictable growing conditions
and the effects these types of threats have on crops. FMC Health and
Nutrition addresses consumers’ changing preferences and increased
environmental concerns with natural products and differentiated food
and health ingredients for healthier lifestyles. FMC Lithium’s products
can be used in energy storage applications, fuel-efficient and electric
vehicles, lighter-weight aluminum in the aircraft and aerospace industries.
We are improving existing products and developing new platforms and
technologies that help mitigate impacts of climate change. Agricultural
Solutions is developing products with a lighter environmental footprint in
its biologicals products. FMC Lithium is researching new applications of
30
FMC CORPORATION - Form 10-K
our lithium products in a range of industries. These business opportunities
could lead to new products and services for our existing and potential
customers. Beyond our products and operations, FMC recognizes that
energy consumption throughout our supply chain can impact climate
change and product costs. Therefore, we will actively work with our
entire value chain - suppliers, contractors, and customers - to improve
their energy efficiencies and to reduce their GHG emissions.
We continue to follow legislative and regulatory developments regarding
climate change because the regulation of greenhouse gases, depending
on their nature and scope, could subject some of our manufacturing
operations to additional costs or limits on operations. In December 2015,
195 countries at the United Nations Climate Change Conference in
Paris reached an agreement to reduce GHGs. It remains to be seen
how and when each of these countries will implement this agreement.
The United States Environmental Protection Agency’s Clean Power
Plan (Plan) is the U.S.’s centerpiece for meeting its Paris commitment.
Implementation of the Plan has been stayed by the U.S. Supreme
Court pending appeals and the legal challenges to the Plan have yet to
be resolved in the U.S. federal court of appeals. The Plan gives states
flexibility to craft their own programs, so the impact to FMC of the
Plan, if implemented, is not estimable at this time. At this point, our
U.S. facilities are not subject to any state or regional greenhouse gas
regulation that limits GHG emissions. Some of our foreign operations
are subject to national or local energy management or climate change
regulation, such as our plant in Denmark that is subject to the EU
Emissions Trading Scheme. At present, that plant’s emissions are below
its designated cap.
Future GHG regulatory requirements may result in increased costs of
energy, additional capital costs for emissions control or new equipment,
and/or costs associated with cap and trade or carbon taxes. We are
currently monitoring regulatory developments. The costs of complying
with possible future climate change requirements are difficult to
estimate at this time.
Recently Adopted and Issued Accounting
Pronouncements and Regulatory Items
See Note 2 “Recently Issued and Adopted Accounting Pronouncements
and Regulatory Items” to our consolidated financial statements included
in this Form 10-K.
Off-Balance Sheet Arrangements
See Note 18 to our consolidated financial statements included in this
Form 10-K and Part I, Item 3 - Legal Proceedings for further information
regarding any off-balance sheet arrangements.
Fair Value Measurements
See Note 17 to our consolidated financial statements included in
this Form 10-K for additional discussion surrounding our fair value
measurements.
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies
Our consolidated financial statements are prepared in conformity
with U.S. generally accepted accounting principles (U.S. GAAP) .
The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. We have described our accounting
policies in Note 1 “Principal Accounting Policies and related Financial
Information” to our consolidated financial statements included in this
Form 10-K. We have reviewed these accounting policies, identifying
those that we believe to be critical to the preparation and understanding
of our consolidated financial statements. We have reviewed these critical
accounting policies with the Audit Committee of the Board of Directors.
Critical accounting policies are central to our presentation of results
of operations and financial condition in accordance with U.S. GAAP
and require management to make estimates and judgments on certain
matters. We base our estimates and judgments on historical experience,
current conditions and other reasonable factors.
Revenue recognition and trade receivables
We recognize revenue when the earnings process is complete, which
is generally upon transfer of title. This transfer typically occurs either
upon shipment to the customer or upon receipt by the customer. In all
cases, we apply the following criteria in recognizing revenue: persuasive
evidence of an arrangement exists, delivery has occurred, the selling price
is fixed or determinable and collection is reasonably assured. Rebates
due to customers are accrued as a reduction of revenue in the same
period that the related sales are recorded based on the contract terms.
We periodically enter into prepayment arrangements with customers,
primarily in our FMC Agricultural Solutions segment, and receive
advance payments for product to be delivered in future periods. These
advance payments are recorded as deferred revenue and classified as
“Advance payments from customers” on the consolidated balance sheet.
Revenue associated with advance payments is recognized as shipments
are made and title, ownership and risk of loss pass to the customer.
We record amounts billed for shipping and handling fees as revenue.
Costs incurred for shipping and handling are recorded as costs of
sales and services. Amounts billed for sales and use taxes, value-added
taxes, and certain excise and other specific transactional taxes imposed
on revenue-producing transactions are presented on a net basis and
excluded from sales in the consolidated income statements. We record
a liability until remitted to the respective taxing authority.
Trade receivables consist of amounts owed from customer sales and
are recorded when revenue is recognized. The allowance for trade
receivables represents our best estimate of the probable losses associated
with potential customer defaults. In developing our allowance for trade
receivables, we use a two stage process which includes calculating a
general formula to develop an allowance to appropriately address the
uncertainty surrounding collection risk of our entire portfolio and
specific allowances for customers where the risk of collection has been
reasonably identified either due to liquidity constraints or disputes over
contractual terms and conditions.
Our method of calculating the general formula consists of estimating
the recoverability of trade receivables based on historical experience,
current collection trends, and external business factors such as economic
factors, including regional bankruptcy rates, and political factors. Our
analysis of trade receivable collection risk is performed quarterly, and
the allowance is adjusted accordingly.
We also hold long-term receivables that represent long-term customer
receivable balances related to past-due accounts which are not expected
to be collected within the current year. Our policy for the review of
the allowance for these receivables is consistent with the discussion
in the preceding paragraph above on trade receivables. Therefore on
an ongoing basis, we continue to evaluate the credit quality of our
long-term receivables utilizing aging of receivables, collection experience
and write-offs, as well as existing economic conditions, to determine
if an additional allowance is necessary.
Environmental obligations and related recoveries
We provide 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 United
States 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”), or equivalent, that is submitted
by us to the appropriate government agency or agencies. Estimates are
reviewed quarterly by our 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.
Our environmental liabilities for continuing and discontinued operations
are principally for costs associated with the remediation and/or study of
sites at which we are alleged to have released hazardous substances into the
environment. Such costs principally include, among other items, RI/FS,
site remediation, costs of operation and maintenance of the remediation
plan, management costs, 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.
Included in our environmental liabilities are costs for the operation,
maintenance and monitoring of site remediation plans (OM&M). Such
reserves are based on our best estimates for these OM&M plans. Over
time we may incur OM&M costs in excess of these reserves. However,
we are unable to reasonably estimate an amount in excess of our recorded
reserves because we cannot reasonably estimate the period for which
such OM&M plans will need to be in place or the future annual cost
of such remediation, as conditions at these environmental sites change
over time. Such additional OM&M costs could be significant in total
but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and
disclosure of reasonably possible loss contingencies are amounts from
third party insurance policies, which we believe are probable of recovery.
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.
FMC CORPORATION - Form 10-K 31
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
In calculating and evaluating the adequacy of our environmental reserves,
we have taken into account the joint and several liability imposed by
Comprehensive Environmental Response, Compensation and Liability
Act (“CERCLA”) and the analogous state laws on all PRPs and have
considered the identity and financial condition of the other PRPs at
each site to the extent possible. We have also considered the identity
and financial condition of other third parties from whom recovery
is anticipated, as well as the status of our claims against such parties.
Although we are 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. Our liability includes our
best estimate of the costs expected to be paid before the consideration
of any potential recoveries from third parties. We believe that any
recorded recoveries related to PRPs are realizable in all material respects.
Recoveries are recorded as either an offset in “Environmental liabilities,
continuing and discontinued” or as “Other assets” in our consolidated
balance sheets in accordance with U.S. accounting literature.
See Note 10 to our consolidated financial statements included in this
Form 10-K for changes in estimates associated with our environmental
obligations.
Impairments and valuation of long-lived and
indefinite-lived assets
Our long-lived assets primarily include property, plant and equipment,
goodwill and intangible assets. The assets and liabilities of acquired
businesses are measured at their estimated fair values at the dates of
acquisition. The excess of the purchase price over the estimated fair value
of the net assets acquired, including identified intangibles, is recorded
as goodwill. The determination and allocation of fair value to the assets
acquired and liabilities assumed is based on various assumptions and
valuation methodologies requiring considerable management judgment,
including estimates based on historical information, current market
data and future expectations. The principal assumptions utilized in
our valuation methodologies include revenue growth rates, operating
margin estimates and discount rates. Although the estimates were
deemed reasonable by management based on information available
at the dates of acquisition, those estimates are inherently uncertain.
We test for impairment whenever events or circumstances indicate
that the net book value of our property, plant and equipment may
not be recoverable from the estimated undiscounted expected future
cash flows expected to result from their use and eventual disposition.
In cases where the estimated undiscounted expected future cash flows
are less than net book value, an impairment loss is recognized equal
to the amount by which the net book value exceeds the estimated fair
value of assets, which is based on discounted cash flows at the lowest
level determinable. The estimated cash flows reflect our assumptions
about selling prices, volumes, costs and market conditions over a
reasonable period of time.
We perform an annual impairment test of goodwill and indefinite-lived
intangible assets in the third quarter of each year, or more frequently
whenever an event or change in circumstances occurs that would
require reassessment of the recoverability of those assets. In performing
our evaluation we assess qualitative factors such as overall financial
performance of our reporting units, anticipated changes in industry and
market structure, competitive environments, planned capacity and cost
factors such as raw material prices. Based on our assessment for 2016,
we determined that no goodwill impairment charge to our continuing
operations was required. The majority of the Brands intangible asset
relates to our proprietary brand portfolio for which the fair value was
substantially in excess of the carrying value. During the 3rd quarter of
2016, we recorded a $1 million impairment charge in our generic brand
portfolio which is part of the FMC Agricultural Solutions segment.
The carrying value of the generic portfolio subsequent to the charge
is approximately $6 million.
See Note 7 to our consolidated financial statements included in this
Form 10-K for charges associated with long-lived asset disposal costs
and the activity associated with the restructuring reserves.
Pension and other postretirement benefits
We provide qualified and nonqualified defined benefit and defined
contribution pension plans, as well as postretirement health care
and life insurance benefit plans to our employees and retirees. The
costs (benefits) and obligations related to these benefits reflect key
assumptions related to general economic conditions, including interest
(discount) rates, healthcare cost trend rates, expected rates of return
on plan assets and the rates of compensation increase for employees.
The costs (benefits) and obligations for these benefit programs are also
affected by other assumptions, such as average retirement age, mortality,
employee turnover, and plan participation. To the extent our plans’
actual experience, as influenced by changing economic and financial
market conditions or by changes to our own plans’ demographics,
differs from these assumptions, the costs and obligations for providing
these benefits, as well as the plans’ funding requirements, could increase
or decrease. When actual results differ from our assumptions, the
difference is typically recognized over future periods. In addition, the
unrealized gains and losses related to our pension and postretirement
benefit obligations may also affect periodic benefit costs (benefits) in
future periods.
Historically, we have amortized unrecognized gains and losses using
the corridor method over the average remaining service period of active
participants of approximately eight years. As of December 31, 2016,
approximately 95% of the participants in our U.S. qualified plan and
approximately 93% of the participants in our U.S. postretirement life
plan were inactive. Therefore, for fiscal 2017, we will amortize gains
and losses over the average remaining life expectancy of the inactive
population for these two plans. The gain/loss amortization period for
the U.S. qualified pension plan will increase from about eight years
to about nineteen years as a result of this change. We consider this a
change in estimate and, accordingly, will account for it prospectively in
2017. For fiscal 2017, the change in estimate from amortizing gains and
losses over the expected lifetime of the inactive population rather than
the average remaining service period of active participants is expected
to reduce US pension and postretirement net periodic benefit cost by
approximately $18 to $22 million when compared to the prior estimate.
In 2016, the Society of Actuaries released an updated mortality table
projection scale for measurement of retirement program obligations.
We adopted this update in measuring the December 31, 2016 U.S.
defined benefit and post retirement obligations. Adoption of this new
projection scale has decreased the benefit obligations at December 31,
2016 by approximately $17.7 million. The effect of this adoption will
be amortized into net periodic benefit cost beginning in 2017.
32
FMC CORPORATION - Form 10-K
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
We use several assumptions and statistical methods to determine
the asset values used to calculate both the expected rate of return on
assets component of pension cost and to calculate our plans’ funding
requirements. The expected rate of return on plan assets is based on
a market-related value of assets that recognizes investment gains and
losses over a five-year period. We use an actuarial value of assets to
determine our plans’ funding requirements. The actuarial value of
assets must be within a certain range, high or low, of the actual market
value of assets, and is adjusted accordingly.
We select the discount rate used to calculate pension and other
postretirement obligations based on a review of available yields on
high-quality corporate bonds as of the measurement date. In selecting a
discount rate as of December 31, 2016, we placed particular emphasis
on a discount rate yield-curve provided by our actuary. This yield-
curve, when populated with projected cash flows that represent the
expected timing and amount of our plans’ benefit payments, produced
an effective discount rate of 4.22 percent for our U.S. qualified plan,
3.55 percent for our U.S. nonqualified, and 3.77 percent for our U.S.
other postretirement benefit plans.
The discount rates used at our December 31, 2016 and 2015
measurement dates for the U.S. qualified plan were 4.22 percent and
4.50 percent, respectively. The effect of the change in the discount rate
from 4.50 percent to 4.22 percent at December 31, 2016 resulted in a
$39.1 million increase to our U.S. qualified pension benefit obligations.
The effect of the change in the discount rate from 4.15 percent at
December 31, 2014 to 4.50 percent at December 31, 2015 resulted
in a $5.4 million decrease to the 2016 U.S. qualified pension expense.
The change in discount rate from 4.50 percent at December 31, 2015
to 4.22 percent at December 31, 2016 was attributable to a decrease in
yields on high quality corporate bonds with cash flows matching the
timing and amount of our expected future benefit payments between
the 2015 and 2016 measurement dates. Using the December 31, 2016
and 2015 yield curves, our U.S. qualified plan cash flows produced a
single weighted-average discount rate of approximately 4.22 percent
and 4.50 percent, respectively.
On December 31, 2015, we changed the method we used to estimate
the service cost and interest cost components of our net periodic
benefit cost for our US defined benefit pension plans. We use a full
yield curve approach in the estimate of these components of benefit
cost by applying specific spot rates along the yield curve used in the
determination of the benefit obligation to the relevant projected cash
flows as we believe this provides a better estimate of service and interest
costs. For fiscal 2016, the change in estimate from a single weighted
average discount rate to a spot rate approach reduced US pension and
postretirement net periodic benefit cost by $12 million.
In developing the assumption for the long-term rate of return on assets
for our U.S. Plan, we take into consideration the technical analysis
performed by our outside actuaries, including historical market returns,
information on the assumption for long-term real returns by asset class,
inflation assumptions, and expectations for standard deviation related
to these best estimates. We also consider the historical performance
of our own plan’s trust, which has earned a compound annual rate of
return of approximately 8.4 percent over the last 20 years (which is
in excess of comparable market indices for the same period) as well
as other factors which are discussed in Note 13 to our consolidated
financial statements in this Form 10-K. Our long-term rate of return
for the fiscal year ended December 31, 2016, 2015 and 2014 was
7.00 percent, 7.25 percent and 7.75 percent, respectively.
For the sensitivity of our pension costs to incremental changes in
assumptions see our discussion below.
Sensitivity analysis related to key pension and
postretirement benefit assumptions
A one-half percent increase in the assumed discount rate would have
decreased pension and other postretirement benefit obligations by
$70.3 million and $76.8 million at December 31, 2016 and 2015,
respectively, and decreased pension and other postretirement benefit
costs by $5.2 million, $6.4 million and $6.9 million for 2016, 2015 and
2014, respectively. A one-half percent decrease in the assumed discount
rate would have increased pension and other postretirement benefit
obligations by $78.5 million and, $85.3 million at December 31, 2016
and 2015, respectively, and increased pension and other postretirement
benefit cost by $5.7 million, $6.5 million and $7.5 million for 2016,
2015 and 2014, respectively.
A one-half percent increase in the assumed expected long-term rate of
return on plan assets would have decreased pension costs by $6.0 million,
$5.8 million and $5.2 million for 2016, 2015 and 2014, respectively.
A one-half percent decrease in the assumed long-term rate of return
on plan assets would have increased pension costs by $6.0 million,
$5.8 million and $5.2 million for 2016, 2015 and 2014, respectively.
Further details on our pension and other postretirement benefit
obligations and net periodic benefit costs (benefits) are found in
Note 13 to our consolidated financial statements in this Form 10-K.
Income taxes
We have recorded a valuation allowance to reduce deferred tax assets
in certain jurisdictions to the amount that we believe is more likely
than not to be realized. In assessing the need for this allowance, we
have considered a number of factors including future taxable income,
the jurisdictions in which such income is earned and our ongoing tax
planning strategies. In the event that we determine that we would
not be able to realize all or part of our net deferred tax assets in the
future, an adjustment to the deferred tax assets would be charged to
income in the period such determination was made. Similarly, should
we conclude that we would be able to realize certain deferred tax assets
in the future in excess of the net recorded amount, an adjustment
to the deferred tax assets would increase income in the period such
determination was made.
Additionally, we file income tax returns in the U.S. federal jurisdiction
and various state and foreign jurisdictions. Certain income tax returns
for FMC entities taxable in the U.S. and significant foreign jurisdictions
are open for examination and adjustment. We assess our income tax
positions and record a liability for all years open to examination based
upon our evaluation of the facts, circumstances and information
available at the reporting date. For those tax positions where it is more
likely than not that a tax benefit will be sustained, we have recorded
the largest amount of tax benefit with a greater than 50% likelihood of
being realized upon ultimate settlement with a taxing authority that has
full knowledge of all relevant information. We adjust these liabilities,
if necessary, upon the completion of tax audits or changes in tax law.
See Note 11 to our consolidated financial statements included in this
Form 10-K for additional discussion surrounding income taxes.
FMC CORPORATION - Form 10-K 33
PART II
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A Quantitative and Qualitative Disclosures
About Market Risk
Our earnings, cash flows and financial position are exposed to market risks
relating to fluctuations in commodity prices, interest rates and foreign
currency exchange rates. Our policy is to minimize exposure to our cash
flow over time caused by changes in commodity, interest and currency
exchange rates. To accomplish this, we have implemented a controlled
program of risk management consisting of appropriate derivative contracts
entered into with major financial institutions.
The analysis below presents the sensitivity of the market value of our
financial instruments to selected changes in market rates and prices. The
range of changes chosen reflects our view of changes that are reasonably
possible over a one-year period. Market value estimates are based on the
present value of projected future cash flows considering the market rates
and prices chosen.
At December 31, 2016, our net financial instrument position was a net
liability of $2.5 million compared to a net liability of $13.4 million at
December 31, 2015. The change in the net financial instrument position
was primarily due to lower unrealized losses in our commodity and
foreign exchange portfolios.
Since our risk management programs are generally highly effective, the
potential loss in value for each risk management portfolio described below
would be largely offset by changes in the value of the underlying exposure.
Commodity Price Risk
Energy costs are diversified among coal, electricity and natural gas.
We attempt to mitigate our exposure to increasing energy costs by
hedging the cost of future deliveries of natural gas and by entering into
fixed-price contracts for the purchase of coal and fuel oil. To analyze
the effect of changing energy prices, we have performed a sensitivity
analysis in which we assume an instantaneous 10 percent change in
energy market prices from their levels at December 31, 2016 and
2015, with all other variables (including interest rates) held constant.
(in Millions)
Net asset/(liability) position at December 31, 2016
Net asset/(liability) position at December 31, 2015
Hedged energy exposure vs.
Energy market pricing
Net Asset /(Liability)
Position on Consolidated
Balance Sheets
2.0
(2.0)
$
$
Net Asset /(Liability)
Position with
10% Increase
3.3
(1.1)
$
$
Net Asset /(Liability)
Position with
10% Decrease
0.8
$
(2.9)
$
Foreign Currency Exchange Rate Risk
The primary currencies for which we have exchange rate exposure are
the U.S. dollar versus the euro, the Chinese yuan, the Brazilian real and
the Argentine peso. Foreign currency debt and foreign exchange forward
contracts are used in countries where we do business, thereby reducing
our net asset exposure. Foreign exchange forward contracts are also
used to hedge firm and highly anticipated foreign currency cash flows.
To analyze the effects of changing foreign currency rates, we have
performed a sensitivity analysis in which we assume an instantaneous
10 percent change in the foreign currency exchange rates from their levels
at December 31, 2016 and 2015, with all other variables (including
interest rates) held constant.
(in Millions)
Net asset/(liability) position at December 31, 2016
Net asset/(liability) position at December 31, 2015
Hedged Currency vs.
Functional Currency
Net Asset /(Liability)
Position on Consolidated
Balance Sheets
(4.5)
(11.4)
$
$
Net Asset /(Liability)
Position with
10% Strengthening
31.9
24.4
$
$
Net Asset /(Liability)
Position with
10% Weakening
(39.0)
(47.2)
$
$
34
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
Interest Rate Risk
One of the strategies that we can use to manage interest rate exposure
is to enter into interest rate swap agreements. In these agreements, we
agree to exchange, at specified intervals, the difference between fixed
and variable interest amounts calculated on an agreed-upon notional
principal amount. As of December 31, 2016 and 2015, we had no
interest rate swap agreements.
Our debt portfolio at December 31, 2016 is composed of 58.9 percent
fixed-rate debt and 41.1 percent variable-rate debt. The variable-rate
component of our debt portfolio principally consists of borrowings
under our Term Loan Facility, commercial paper program, Credit
Facility, variable-rate industrial and pollution control revenue bonds,
and amounts outstanding under foreign subsidiary credit lines. Changes
in interest rates affect different portions of our variable-rate debt
portfolio in different ways.
Based on the variable-rate debt in our debt portfolio at December 31,
2016, a one percentage point increase in interest rates would have
increased gross interest expense by 7.8 million and a one percentage
point decrease in interest rates would have decreased gross interest
expense by 6.1 million for the year ended December 31, 2016.
ITEM 8 Financial Statements and Supplementary Data
Item 8 Financial Statements and Supplemental Data
Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive income for the years ended December 31, 2016, 2015 and 2014
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2015 and 2014
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Management’s Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Schedule II- Valuation and Qualifying Accounts and Reserves for Years Ended December 31, 2016, 2015 and 2014
Page
35
36
37
38
39
41
42
84
85
86
87
FMC CORPORATION - Form 10-K 35
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Statements of Income (Loss)
(in Millions, Except Per Share Data)
Revenue
Costs and Expenses
Costs of sales and services
Gross Margin
Selling, general and administrative expenses
Research and development expenses
Restructuring and other charges (income)
Business separation costs
Total costs and expenses
Income (loss) from continuing operations before equity in (earnings) loss of affiliates,
interest income and expense and income taxes
Equity in (earnings) loss of affiliates
Interest income
Interest expense
Income (loss) from continuing operations before income taxes
Provision for income taxes
Income (loss) from continuing operations
Discontinued operations, net of income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to FMC stockholders
Amounts attributable to FMC stockholders:
Continuing operations, net of income taxes
Discontinued operations, net of income taxes
NET INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
Basic earnings (loss) per common share attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
Diluted earnings (loss) per common share attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
Year Ended December 31,
2016
3,282.4
$
2015
3,276.5
$
2,082.6
1,199.8
529.5
141.5
107.3
—
2,860.9
421.5
(0.5)
(0.6)
83.3
339.3
93.9
245.4
(33.7)
211.7
2.6
209.1
242.8
(33.7)
209.1
1.81
(0.25)
1.56
1.81
(0.25)
1.56
$
$
$
$
$
$
$
2,201.1
1,075.4
737.9
143.7
244.0
—
3,326.7
(50.2)
0.2
(1.3)
81.4
(130.5)
47.4
(177.9)
676.4
498.5
9.5
489.0
$
(187.4) $
676.4
489.0
$
(1.40) $
5.06
3.66
$
(1.40) $
5.06
3.66
$
2014
3,258.7
2,047.8
1,210.9
589.8
126.3
56.4
23.6
2,843.9
414.8
(0.2)
(0.2)
51.4
363.8
56.2
307.6
14.5
322.1
14.6
307.5
298.2
9.3
307.5
2.23
0.07
2.30
2.22
0.07
2.29
36
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Statements of Comprehensive Income (Loss)
(in Millions)
Net Income
Other comprehensive income (loss), net of tax:
Foreign currency adjustments:
Foreign currency translation gain (loss) arising during the period
Reclassification of foreign currency translations losses
Total foreign currency translation adjustments(1)
Derivative instruments:
Unrealized hedging gains (losses) and other, net of tax of ($0.2), $0.4 and ($0.8)
Reclassification of deferred hedging (gains) losses and other, included in net income,
net of tax of $3.3, ($2.7) and ($0.6)
Total derivative instruments, net of tax of $3.1, ($2.3) and ($1.4)
Pension and other postretirement benefits:
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of
($7.7), ($16.1) and $70.9(2)
Reclassification of net actuarial and other (gain) loss, amortization of prior service costs
and settlement charges, included in net income, net of tax of $20.6, $23.2 and $12.9(3)
Total pension and other postretirement benefits, net of tax of $12.9, $7.1 and $83.8
Other comprehensive income (loss), net of tax
Comprehensive income
Less: Comprehensive income attributable to the noncontrolling interest
$
Year Ended December 31,
$
2016
211.7
$
2015
498.5
$
2014
322.1
(48.7)
—
(48.7)
7.3
6.0
13.3
(97.3)
—
(97.3)
0.7
(3.0)
(2.3)
(76.5)
49.6
(26.9)
3.1
(0.9)
2.2
(26.9)
(26.4)
(173.3)
39.2
12.3
(23.1)
188.6
0.6
188.0
$
$
44.1
17.7
(81.9)
416.6
9.1
407.5
22.3
(151.0)
(175.7)
146.4
12.8
133.6
COMPREHENSIVE INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
(1) Income taxes are not provided on the equity in undistributed earnings of our foreign subsidiaries or affiliates since it is our intention that such earnings will
remain invested in those affiliates indefinitely. The amount for the twelve months ended December 31, 2014 includes the reclassification to net income due to the
divestiture of our FMC Peroxygens business. See Note 9 within these consolidated financial statements for more information.
$
$
$
(2) At December 31 of each year, we remeasure our pension and postretirement plan obligations at which time we record any actuarial gains (losses) and prior service
(costs) credits to other comprehensive income.
(3) For more detail on the components of these reclassifications and the affected line item in the Consolidated Statements of Income see Note 15 within these
consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION - Form 10-K 37
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Balance Sheets
(in Millions, Except Share and Par Value Data)
ASSETS
Current assets
Cash and cash equivalents
Trade receivables, net of allowance of $17.8 in 2016 and $13.9 in 2015
Inventories
Prepaid and other current assets
Total current assets
Investments
Property, plant and equipment, net
Goodwill
Other intangibles, net
Other assets including long-term receivables, net
Deferred income taxes
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Short-term debt and current portion of long-term debt
Accounts payable, trade and other
Advance payments from customers
Accrued and other liabilities
Accrued customer rebates
Guarantees of vendor financing
Accrued pension and other postretirement benefits, current
Income taxes
Total current liabilities
Long-term debt, less current portion
Accrued pension and other postretirement benefits, long-term
Environmental liabilities, continuing and discontinued
Deferred income taxes
Other long-term liabilities
Commitments and contingent liabilities (Note 18)
Equity
Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2016 or 2015
Common stock, $0.10 par value, authorized 260,000,000 shares in 2016 and 2015; 185,983,792
shares issued in 2016 and 2015
Capital in excess of par value of common stock
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, common, at cost - 2016: 52,293,686 shares, 2015: 52,328,015 shares
Total FMC stockholders’ equity
Noncontrolling interests
Total equity
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
38
FMC CORPORATION - Form 10-K
December 31
2016
2015
$
$
64.2
1,828.0
703.5
253.5
2,849.2
1.0
1,002.1
777.5
793.4
471.3
244.8
6,139.3
$
$
$
94.2
355.4
239.8
374.9
249.9
104.6
7.1
12.3
1,438.2
1,798.8
140.4
306.4
167.4
295.1
78.6
1,851.4
800.2
241.7
2,971.9
2.5
1,016.4
776.1
837.0
435.1
286.9
6,325.9
112.6
403.6
249.9
337.6
256.1
67.2
6.4
19.9
1,453.3
2,036.3
194.2
281.8
173.2
278.8
—
—
18.6
418.6
3,505.5
(478.4)
(1,506.6)
1,957.7
35.3
1,993.0
6,139.3
$
$
$
18.6
417.7
3,385.0
(457.3)
(1,498.3)
1,865.7
42.6
1,908.3
6,325.9
$
$
$
$
$
$
$
$
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Statements of Cash Flows
(in Millions)
Cash provided (required) by operating activities of continuing operations:
Net income
Discontinued operations
Income (loss) from continuing operations
Adjustments from income from continuing operations to cash provided (required)
by operating activities of continuing operations:
$
$
Depreciation and amortization
Equity in (earnings) loss of affiliates
Restructuring and other charges (income)
Deferred income taxes
Pension and other postretirement benefits
Share-based compensation
Excess tax benefits from share-based compensation
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Trade receivables, net
Guarantees of vendor financing
Inventories
Accounts payable
Advance payments from customers
Accrued customer rebates
Income taxes(2)
Pension and other postretirement benefit contributions
Environmental spending, continuing, net of recoveries
Restructuring and other spending
Change in other operating assets and liabilities, net(1)
Cash provided (required) by operating activities of continuing operations
Cash provided (required) by operating activities of discontinued operations:
Environmental spending, discontinued, net of recoveries
Other activities of discontinued operations held for sale
Payments of other discontinued reserves, net of recoveries
Year Ended December 31,
$
$
2016
211.7
33.7
245.4
137.1
(0.5)
107.3
58.1
34.6
20.2
(0.4)
(6.1)
55.0
72.5
(24.1)
(10.0)
(5.3)
(39.8)
(68.7)
(28.1)
(26.0)
16.1
537.3
$
$
2015
498.5
(676.4)
(177.9)
115.7
0.2
244.0
19.9
49.2
15.4
(1.4)
140.9
11.4
78.3
(292.5)
60.6
11.0
(285.9)
(78.7)
(32.2)
(34.9)
(120.2)
(277.1)
2014
322.1
(14.5)
307.6
93.5
(0.2)
56.4
(57.8)
29.6
14.8
(4.7)
(274.7)
22.3
36.2
(16.2)
11.3
34.3
12.7
(68.3)
(17.5)
(9.5)
115.1
284.9
(21.8)
—
(17.7)
(39.5)
(17.9)
(37.9)
(24.8)
(80.6)
(9.8)
132.8
(34.2)
88.8
Cash provided (required) by operating activities of discontinued operations
(1) Changes in all periods represent timing of payments associated with all other operating assets and liabilities. Additionally the 2015 change is impacted by a
$99.6 million reduction in the Cheminova acquisition hedge liability and the non-cash Cheminova inventory fair value amortization of $57.8 million during
the year ended December 31, 2015. Total cash payments during the year ended December 31, 2015 associated with the Cheminova acquisition hedges were
$264.8 million, which includes $165.2 million that were accrued and paid within the period.
(2) The twelve months ended December 31, 2015 includes approximately $340.3 million in income tax payments principally driven by the sale of our Alkali
Chemicals business.
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION - Form 10-K 39
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Statements of Cash Flows (Continued)
(in Millions)
Cash provided (required) by investing activities of continuing operations:
Capital expenditures
Proceeds from disposal of property, plant and equipment
Acquisitions, net of cash acquired
Proceeds from sale of investments
Other investing activities
Cash provided (required) by investing activities of continuing operations
Cash provided (required) by investing activities of discontinued operations:
Proceeds from divestiture
Other discontinued investing activities
Cash provided (required) by investing activities of discontinued operations
Cash provided (required) by financing activities of continuing operations:
Increase (decrease) in short-term debt
Proceeds from borrowing of long-term debt
Financing fees
Repayments of long-term debt
Acquisitions of noncontrolling interests
Distributions to noncontrolling interests
Dividends paid(3)
Issuances of common stock, net
Excess tax benefits from share-based compensation
Repurchases of common stock under publicly announced program
Other repurchases of common stock
Cash provided (required) by financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
CASH AND CASH EQUIVALENTS, END OF PERIOD
(3) See Note 15 regarding quarterly cash dividend.
Year Ended December 31,
2016
2015
(130.8) $
1.6
—
—
(10.0)
(139.2)
(108.5) $
1.9
(1,205.1)
66.4
(40.2)
(1,285.5)
—
4.0
4.0
(19.4)
2.8
(0.7)
(242.6)
(20.0)
—
(88.6)
4.1
0.4
(11.2)
(1.8)
(377.0)
—
(14.4)
78.6
64.2
$
1,649.8
(15.5)
1,634.3
(547.3)
1,650.0
—
(1,036.6)
—
—
(86.4)
5.9
1.4
—
(3.7)
(16.7)
(5.3)
(30.9)
109.5
78.6
$
$
$
2014
(182.2)
0.2
—
27.5
(35.7)
(190.2)
199.1
(44.2)
154.9
(139.6)
3.0
(10.5)
(34.6)
(95.7)
(3.0)
(78.1)
8.6
4.7
—
(4.7)
(349.9)
(2.2)
(13.7)
123.2
109.5
Cash paid for interest, net of capitalized interest was $81.6 million, $74.7 million and $61.0 million, and income taxes paid, net of refunds was
$62.8 million, $340.3 million and $109.0 million in December 31, 2016, 2015 and 2014, respectively. Accrued additions to property, plant and
equipment at December 31, 2016, 2015 and 2014 were $5.8 million, $23.3 million and $27.5 million respectively.
The accompanying notes are an integral part of these consolidated financial statements.
40
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Consolidated Statements of Changes in Equity
FMC Stockholders’
(in Millions, Except Per Share Data)
Balance December 31, 2013
Net income
Stock compensation plans
Excess tax benefits from share-based compensation
Shares for benefit plan trust
Net pension and other benefit actuarial gains/(losses)
and prior service costs, net of income tax
Net hedging gains (losses) and other, net of income tax
Foreign currency translation adjustments
Dividends ($0.60 per share)
Repurchases of common stock
Transactions with noncontrolling interests(1)
Distributions to noncontrolling interests
Balance December 31, 2014
Net income
Stock compensation plans
Excess tax benefits from share-based compensation
Shares for benefit plan trust
Net pension and other benefit actuarial gains/(losses)
and prior service costs, net of income tax
Net hedging gains (losses) and other, net of income tax
Foreign currency translation adjustments
Dividends ($0.66 per share)
Repurchases of common stock
Common
Stock,
$0.10 Par
Value
18.6
$
Capital
In Excess
of Par
$ 448.3
16.0
4.7
Retained
Earnings
$ 2,757.3
307.5
(80.3)
(67.1)
Accumulated
Other
Comprehensive
Income (Loss)
$
Treasury
Stock
(201.9) $ (1,502.5) $
Non-
controlling
Interest
52.3
14.6
7.6
0.9
(4.7)
(151.0)
2.2
(25.1)
$
18.6
$ 401.9
$ 2,984.5
489.0
$
(375.8) $ (1,498.7) $
14.4
1.4
17.7
(2.3)
(96.9)
(88.5)
6.3
(2.2)
(3.7)
Total
Equity
$ 1,572.1
322.1
23.6
4.7
0.9
(151.0)
2.2
(26.9)
(80.3)
(4.7)
(95.7)
(3.0)
$ 1,564.0
498.5
20.7
1.4
(2.2)
17.7
(2.3)
(97.3)
(88.5)
(3.7)
(1.8)
(28.6)
(3.0)
33.5
9.5
(0.4)
Balance December 31, 2015
$
18.6
$ 417.7
$ 3,385.0
$
(457.3) $ (1,498.3) $
42.6
$ 1,908.3
Net income
Stock compensation plans
Excess tax benefits from share-based compensation
Shares for benefit plan trust
Net pension and other benefit actuarial gains/(losses)
and prior service costs, net of income tax
Net hedging gains (losses) and other, net of
income tax
Foreign currency translation adjustments
Dividends ($0.66 per share)
Repurchases of common stock
Transactions with noncontrolling interests(1)
BALANCE DECEMBER 31, 2016
(1) See Note 15 for more detail.
209.1
2.6
211.7
19.9
(0.4)
12.3
13.3
(46.7)
(88.6)
4.3
0.4
(13.0)
$
18.6
(18.6)
$ 418.6
$ 3,505.5
$
(478.4) $ (1,506.6) $
24.2
(0.4)
0.4
12.3
13.3
(48.7)
(88.6)
(13.0)
(26.5)
$ 1,993.0
(2.0)
(7.9)
35.3
The accompanying notes are an integral part of these consolidated financial statements.
FMC CORPORATION - Form 10-K 41
PART II
ITEM 8 Financial Statements and Supplementary Data
FMC Corporation
Notes to Consolidated Financial Statements
Note 1
Principal Accounting Policies and Related Financial Information ............................................................................... 43
Note 2 Recently Issued and Adopted Accounting Pronouncements and Regulatory Items ...................................................... 47
Note 3
Acquisitions ................................................................................................................................................................ 48
Note 4 Goodwill and Intangible Assets .................................................................................................................................. 51
Inventories.................................................................................................................................................................. 52
Note 5
Note 6
Property, Plant and Equipment .................................................................................................................................. 52
Note 7 Restructuring and Other Charges (Income) ................................................................................................................ 52
Note 8 Receivables ................................................................................................................................................................. 55
Note 9 Discontinued Operations ........................................................................................................................................... 55
Note 10 Environmental Obligations ........................................................................................................................................ 56
Note 11
Income Taxes .............................................................................................................................................................. 60
Note 12 Debt ........................................................................................................................................................................... 62
Note 13 Pension and Other Postretirement Benefits ................................................................................................................ 63
Note 14 Share-based Compensation ......................................................................................................................................... 68
Note 15 Equity......................................................................................................................................................................... 71
Note 16 Earnings Per Share ...................................................................................................................................................... 73
Note 17 Financial Instruments, Risk Management and Fair Value Measurements .................................................................... 73
Note 18 Guarantees, Commitments and Contingencies ........................................................................................................... 78
Note 19 Segment Information ................................................................................................................................................. 80
Note 20 Supplemental Information .......................................................................................................................................... 82
Note 21 Quarterly Financial Information (Unaudited) ............................................................................................................. 83
42
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 1 Principal Accounting Policies and Related Financial Information
Nature of operations
We are a diversified chemical company serving agricultural, consumer
and industrial markets globally with innovative solutions, applications
and market-leading products. We operate in three distinct business
segments: FMC Agricultural Solutions, FMC Health and Nutrition
and FMC Lithium. Our FMC Agricultural Solutions segment develops,
markets and sells all three major classes of crop protection chemicals –
insecticides, herbicides, and fungicides. These products are used in
agriculture to enhance crop yield and quality by controlling a broad
spectrum of insects, weeds and disease, as well as pest control in
non-agricultural markets. The FMC Health and Nutrition segment
focuses on nutritional ingredients, health excipients, and functional
health ingredients. Nutritional ingredients are used to enhance texture,
color, structure and physical stability. Health excipients are used for
binding, encapsulation and disintegrant applications. Functional
health ingredients are used as active ingredients in nutraceutical and
pharmaceutical markets. Our FMC Lithium segment manufactures
lithium for use in a wide range of lithium products, which are used
primarily in energy storage, specialty polymer and chemical synthesis
application.
Basis of consolidation and basis of presentation
The accompanying consolidated financial statements of FMC Corporation
and its subsidiaries were prepared in accordance with accounting
principles generally accepted in the United States of America. Our
consolidated financial statements include the accounts of FMC and all
entities that we directly or indirectly control. All significant intercompany
accounts and transactions are eliminated in consolidation.
Estimates and assumptions
In preparing the financial statements in conformity with U.S. generally
accepted accounting principles (“GAAP”) we are required 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 we do not believe such differences will
materially affect our financial position, results of operations or cash flows.
Cash equivalents
We consider investments in all liquid debt instruments with original
maturities of 3 months or less to be cash equivalents.
Trade receivables, net of allowance
Trade receivables consist of amounts owed to us from customer sales
and are recorded when revenue is recognized. The allowance for trade
receivables represents our best estimate of the probable losses associated
with potential customer defaults. In developing our allowance for trade
receivables, we use a two stage process which includes calculating a
general formula to develop an allowance to appropriately address the
uncertainty surrounding collection risk of our entire portfolio and
specific allowances for customers where the risk of collection has been
reasonably identified either due to liquidity constraints or disputes over
contractual terms and conditions.
Our method of calculating the general formula consists of estimating
the recoverability of trade receivables based on historical experience,
current collection trends, and external business factors such as economic
factors, including regional bankruptcy rates, and political factors. Our
analysis of trade receivable collection risk is performed quarterly, and
the allowance is adjusted accordingly. The allowance for trade receivable
was $17.8 million and $13.9 million as of December 31, 2016 and
2015, respectively. The allowance for long-term financing receivables
was $49.1 million and $29.2 million at December 31, 2016 and 2015.
The provision to the allowance for receivables charged against operations
was $22.1 million, $5.9 million and $8.7 million for the years ended
December 31, 2016, 2015 and 2014, respectively.
Investments
Investments in companies in which our ownership interest is 50 percent
or less and in which we exercise significant influence over operating and
financial policies are accounted for using the equity method. Under the
equity method, original investments are recorded at cost and adjusted
by our share of undistributed earnings and losses of these investments.
Majority owned investments in which our control is restricted are also
accounted for using the equity method. All other investments are carried
at their fair values or at cost, as appropriate. We are party to several
joint venture investments throughout the world, which individually
and in the aggregate are not significant to our financial results.
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 distribution
costs. All domestic inventories, excluding materials and supplies, are
determined on a last-in, first-out (“LIFO”) basis and our remaining
inventories are recorded on a first-in, first-out (“FIFO”) basis. See
Note 5 for more information.
Property, plant and equipment
We record property, plant and equipment, including capitalized interest,
at cost. Depreciation is provided principally on the straight-line basis over
the estimated useful lives of the assets (land improvements—20 years,
buildings — 20 to 40 years, and machinery and equipment—three 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 expensed as incurred through operating expense.
FMC CORPORATION - Form 10-K 43
PART II
ITEM 8 Financial Statements and Supplementary Data
Capitalized interest
We capitalized interest costs of $5.9 million in 2016, $7.8 million in
2015 and $8.0 million in 2014. These costs were associated with the
construction of certain long-lived assets and have been capitalized as
part of the cost of those assets. We amortize capitalized interest over
the assets’ estimated useful lives.
of by sale are measured at the lower of carrying amount or estimated
net proceeds from the sale. Assets to be abandoned with no remaining
future service potential are written down to amounts expected to be
recovered. The useful life of assets to be abandoned that have a remaining
future service potential are adjusted and depreciation is recorded over
the adjusted useful life.
Impairments of long-lived assets
We review the recovery of the net book value of long-lived assets 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, we recognize an impairment loss equal to an amount by
which the net book value exceeds the fair value of the asset. Long-lived
assets to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell.
Asset retirement obligations
We record asset retirement obligations at fair value at the time the
liability is incurred if we can reasonably estimate the settlement date.
The associated asset retirement obligations (“AROs”) are capitalized
as part of the carrying amount of related long-lived assets. In future
periods, the liability is accreted to its present value and the capitalized
cost is depreciated over the useful life of the related asset. We also
adjust the liability for changes resulting from the passage of time and/or
revisions to the timing or the amount of the original estimate. Upon
retirement of the long-lived asset, we either settle the obligation for
its recorded amount or incur a gain or loss.
In our FMC Lithium segment, we have mining operations and legal
reclamation obligations related to these facilities upon closure of the
mines. Also, we have obligations at the majority of our manufacturing
facilities in the event of permanent plant shutdown. Certain of these
obligations are recorded in our environmental reserves described in
Note 10. For certain AROs not already accrued, we have calculated the
fair value of these AROs and concluded that the present value of these
obligations was immaterial at December 31, 2016 and 2015. We have
also determined that the liability for certain AROs cannot currently
be calculated as the settlement dates are not reasonably estimable. We
will recognize the liability for these AROs, when sufficient information
exists to estimate a range of potential settlement dates.
The carrying amounts for the AROs for the years ended December 31,
2016 and 2015 are $1.8 million and $1.7 million, respectively. These
amounts are included in “Other long-term liabilities” on the consolidated
balance sheet.
Restructuring and other charges
We continually perform strategic reviews and assess the return on our
businesses. This sometimes results in a plan to restructure the operations
of a business. We record an accrual for severance and other exit costs
under the provisions of the relevant accounting guidance.
Additionally, as part of these restructuring plans, write-downs of long-
lived assets may occur. Two types of assets are impacted: assets to be
disposed of by sale and assets to be abandoned. Assets to be disposed
Capitalized software
We capitalize the costs of internal use software in accordance with
accounting literature which generally requires the capitalization of certain
costs incurred to develop or obtain internal use software. We assess the
recoverability of capitalized software costs on an ongoing basis and
record write-downs to fair value as necessary. We amortize capitalized
software costs over expected useful lives ranging from three to 10 years.
See Note 20 for the net unamortized computer software balances.
Goodwill and intangible assets
Goodwill and other indefinite life intangible assets (“intangibles”) are
not subject to amortization. Instead, they are subject to at least an
annual assessment for impairment by applying a fair value-based test.
We test goodwill and indefinite life intangibles for impairment annually
using the criteria prescribed by U.S. GAAP accounting guidance
for goodwill and other intangible assets. Based upon our annual
impairment assessment conducted in 2016 we did not record any
goodwill impairments. See Note 4 for more information on indefinite life
intangibles. In 2015, we recorded indefinite life intangible impairments
of $19.6 million. These amounts were associated with our Seal Sands
facility in Health and Nutrition as well as events within Agricultural
Solutions related to Cheminova integration and restructuring activities.
These items are discussed further in Note 7. We did not record goodwill or
indefinite life intangible impairments to continuing operations in 2014.
Finite-lived intangible assets consist primarily of patents, access rights,
customer relationships, brands, registration rights, industry licenses,
developed formulations and other intangibles and are being amortized
over periods of five to 25 years. See Note 4 for additional information
on goodwill and intangible assets and Notes 4 and 7 for additional
information on the indefinite life intangible impairments.
Revenue recognition
We recognize revenue when the earnings process is complete, which
is generally upon transfer of title. This transfer typically occurs either
upon shipment to the customer or upon receipt by the customer. In all
cases, we apply the following criteria in recognizing revenue: persuasive
evidence of an arrangement exists, delivery has occurred, the selling price
is fixed or determinable and collection is reasonably assured. Rebates
due to customers are accrued as a reduction of revenue in the same
period that the related sales are recorded based on the contract terms.
We periodically enter into prepayment arrangements with customers,
primarily in our FMC Agricultural Solutions segment, and receive
advance payments for product to be delivered in future periods. These
advance payments are recorded as deferred revenue and classified as
“Advance payments from customers” on the consolidated balance sheet.
Revenue associated with advance payments is recognized as shipments
are made and title, ownership and risk of loss pass to the customer.
44
FMC CORPORATION - Form 10-K
We record amounts billed for shipping and handling fees as revenue.
Costs incurred for shipping and handling are recorded as costs of
sales and services. Amounts billed for sales and use taxes, value-added
taxes, and certain excise and other specific transactional taxes imposed
on revenue-producing transactions are presented on a net basis and
excluded from sales in the consolidated income statements. We record
a liability until remitted to the respective taxing authority.
Research and Development
Research and development costs are expensed as incurred. In-process
research and development acquired as part of asset acquisitions,
which include license and development agreements, are expensed as
incurred and included as a component of “Restructuring and other
charges (income).”
Income and other taxes
We provide current income taxes on income reported for financial
statement purposes adjusted for transactions that do not enter into
the computation of income taxes payable and recognize deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis
of assets and liabilities. We do not provide income taxes on the equity
in undistributed earnings of consolidated foreign subsidiaries as it is our
intention that such earnings will remain invested in those companies.
Foreign currency
We translate the assets and liabilities of our foreign operations at exchange
rates in effect at the balance sheet date. For foreign operations for which
the functional currency is not the U.S. dollar we record translation gains
and losses as a component of accumulated other comprehensive income
in equity. The foreign operations’ income statements are translated at
the monthly exchange rates for the period.
We record remeasurement gains and losses on monetary assets and
liabilities, such as accounts receivables and payables, which are not
in the functional currency of the operation. These remeasurement
gains and losses are recorded in the income statement as they occur.
We generally enter into foreign currency contracts to mitigate the
financial risk associated with these transactions. See “Derivative financial
instruments” below and Note 17.
Derivative financial instruments
We mitigate certain financial exposures, including currency risk,
interest rate risk and commodity price exposures, through a controlled
program of risk management that includes the use of derivative financial
instruments. We enter into foreign exchange contracts, including forward
and purchased option contracts, to reduce the effects of fluctuating
foreign currency exchange rates.
We recognize all derivatives on the balance sheet at fair value. On the
date the derivative instrument is entered into, we generally designate
the derivative as either a hedge of the variability of cash flows to be
received or paid related to a forecasted transaction (cash flow hedge)
or a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment (fair value hedge). We record in
accumulated other comprehensive income or loss changes in the fair
PART II
ITEM 8 Financial Statements and Supplementary Data
value of derivatives that are designated as, and meet all the required
criteria for, a cash flow hedge. We then reclassify these amounts into
earnings as the underlying hedged item affects earnings. We record
immediately in earnings changes in the fair value of derivatives that
are not designated as cash flow hedges.
We formally document all relationships between hedging instruments
and hedged items, as well as the risk management objective and strategy
for undertaking various hedge transactions. This process includes
relating derivatives that are designated as fair value or cash flow hedges
to specific assets and liabilities on the balance sheet or to specific firm
commitments or forecasted transactions. We also formally assess,
both at the inception of the hedge and throughout its term, whether
each derivative is highly effective in offsetting changes in fair value
or cash flows of the hedged item. If we determine that a derivative is
not highly effective as a hedge, or if a derivative ceases to be a highly
effective hedge, we discontinue hedge accounting with respect to that
derivative prospectively.
Treasury stock
We record shares of common stock repurchased at cost as treasury stock,
resulting in a reduction of stockholders’ equity in the Consolidated
Balance Sheets. When the treasury shares are contributed under our
employee benefit plans or issued for option exercises, we use a first-in,
first-out (“FIFO”) method for determining cost. The difference between
the cost of the shares and the market price at the time of contribution
to an employee benefit plan is added to or deducted from the related
capital in excess of par value of common stock.
Segment information
We determined our reportable segments based on our strategic business
units, the commonalities among the products and services within each
segment and the manner in which we review and evaluate operating
performance.
We have identified FMC Agricultural Solutions, FMC Health and
Nutrition and FMC Lithium as our reportable segments. Segment
disclosures are included in Note 19. Segment operating profit is
defined as segment revenue less segment operating expenses (segment
operating expenses consist of costs of sales and services, selling, general
and administrative expenses and research and development expenses).
We have excluded the following items from 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, restructuring and other charges
(income), investment gains and losses, loss on extinguishment of debt,
asset impairments, LIFO inventory adjustments, acquisition related
costs, non-operating pension and postretirement charges, and other
income and expense items. Information about how restructuring and
other charges (income) relate to our businesses at the segment level is
discussed in Note 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, the LIFO reserve on inventory, deferred income taxes,
eliminations of intercompany receivables and property and equipment
not attributable to a specific segment, such as capitalized interest.
FMC CORPORATION - Form 10-K 45
PART II
ITEM 8 Financial Statements and Supplementary Data
Segment liabilities exclude substantially all debt, income taxes, pension
and other postretirement benefit liabilities, environmental reserves and
related recoveries, restructuring reserves, fair value of currency contracts,
intercompany eliminations, and reserves for discontinued operations.
Geographic segment revenue is based on the location of our customers.
Geographic segment long-lived assets include investments, net property,
plant and equipment, and other non-current assets. Geographic segment
data is included in Note 19.
reserves because we cannot reasonably estimate the period for which
such OM&M plans will need to be in place or the future annual cost
of such remediation, as conditions at these environmental sites change
over time. Such additional OM&M costs could be significant in total
but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and
disclosure of reasonably possible loss contingencies are amounts from
third party insurance policies which we believe are probable of recovery.
Stock compensation plans
We recognize compensation expense in the financial statements for
all share options and other equity-based arrangements. Share-based
compensation cost is measured at the date of grant, based on the fair
value of the award, and is recognized over the employee’s requisite
service period. See Note 14 for further discussion on our share-based
compensation.
Environmental obligations
We provide 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
United States 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”), or equivalent,
that is submitted by us and the appropriate government agency or
agencies. Estimates are reviewed quarterly 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.
Our environmental liabilities for continuing and discontinued operations
are principally for costs associated with the remediation and/or study
of sites at which we are alleged to have released hazardous substances
into the environment. Such costs principally include, among other
items, RI/FS, site remediation, costs of operation and maintenance of
the remediation plan, management costs, 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.
Included in our environmental liabilities are costs for the operation,
maintenance and monitoring of site remediation plans (“OM&M”). Such
reserves are based on our best estimates for these OM&M plans. Over
time we may incur OM&M costs in excess of these reserves. However,
we are unable to reasonably estimate an amount in excess of our recorded
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 our environmental reserves,
we have taken into account the joint and several liability imposed by
Comprehensive Environmental Remediation, Compensation and
Liability Act (“CERCLA”) and the analogous state laws on all PRPs
and have considered the identity and financial condition of the other
PRPs at each site to the extent possible. We have also considered the
identity and financial condition of other third parties from whom
recovery is anticipated, as well as the status of our claims against such
parties. Although we are 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 on a site-by-site basis. Our
liability includes our best estimate of the costs expected to be paid
before the consideration of any potential recoveries from third parties.
We believe that any recorded recoveries related to PRPs are realizable
in all material respects. Recoveries are recorded as either an offset in
“Environmental liabilities, continuing and discontinued” or as “Other
assets” in our consolidated balance sheets in accordance with U.S.
accounting literature.
Pension and other postretirement benefits
We provide qualified and nonqualified defined benefit and defined
contribution pension plans, as well as postretirement health care
and life insurance benefit plans to our employees and retirees. The
costs (or benefits) and obligations related to these benefits reflect key
assumptions related to general economic conditions, including interest
(discount) rates, healthcare cost trend rates, expected rates of return on
plan assets and the rates of compensation increase for employees. The
costs (or benefits) and obligations for these benefit programs are also
affected by other assumptions, such as average retirement age, mortality,
employee turnover, and plan participation. To the extent our plans’
actual experience, as influenced by changing economic and financial
market conditions or by changes to our own plans’ demographics,
differs from these assumptions, the costs and obligations for providing
these benefits, as well as the plans’ funding requirements, could increase
or decrease. When actual results differ from our assumptions, the
difference is typically recognized over future periods. In addition, the
unrealized gains and losses related to our pension and postretirement
benefit obligations may also affect periodic benefit costs (or benefits)
in future periods. See Note 13 for additional information relating to
pension and other postretirement benefits.
46
FMC CORPORATION - Form 10-K
NOTE 2 Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
PART II
ITEM 8 Financial Statements and Supplementary Data
New Accounting guidance and regulatory items
In January 2017, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles -
Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment. This ASU changes the subsequent measurement of
goodwill impairment by eliminating Step 2 from the impairment test.
Under the new guidance, an entity will measure impairment using
the difference between the carrying amount and the fair value of the
reporting unit. The new standard is effective for fiscal years beginning
after December 15, 2019 (i.e. a January 1, 2020 effective date), with early
adoption permitted for goodwill impairment tests with measurement
dates after January 1, 2017. We believe the adoption will not have a
material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business
Combinations. This new ASU clarified the definition of a business
with the objective of adding guidance to assist entities with evaluating
whether transactions should be accounted for as acquisitions (or disposals)
of assets or businesses. The new standard is effective for fiscal years
beginning after December 15, 2017 (i.e. a January 1, 2018 effective
date) and will be applied prospectively. At this time we do not intend
on early adopting this ASU and will continue to assess the effects the
amendments will have on future transactions of acquisitions or disposals.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes
(Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. Under
the new guidance, an entity will recognize the income tax consequences
of an intra-entity transfer of an asset other than inventory when the
transfer occurs. The new standard is effective for fiscal years beginning
after December 15, 2018 (i.e. a January 1, 2019 effective date), with
early adoption permitted only in the first quarter of a fiscal year. Based
on an initial assessment, we believe the adoption will not have a material
impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statements of
Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash
Payments. This ASU addresses eight specific cash flow issues with the goal
of reducing the existing diversity in practice in how certain cash receipts
and cash payments are both presented and classified in the statement of
cash flows. The new standard is effective for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal years (i.e. a
January 1, 2018 effective date), with early adoption permitted. We have
reviewed the eight cash flow issues and do not believe there will be any
significant changes to FMC and our presentation of certain cash receipts
and payments with the consolidated cash flow statement.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments –
Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss
impairment methodology with a methodology that reflects expected
credit losses. The update is intended to provide financial statement users
with more decision-useful information about the expected credit losses
on financial instruments and other commitments to extend credit held
by a reporting entity at each reporting date. The new standard is effective
for fiscal years beginning after December 15, 2019 (i.e. a January 1,
2020 effective date), with early adoption permitted for fiscal years
beginning after December 15, 2018. We are evaluating the effect the
guidance will have on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock
Compensation (Topic 718) (“ASU 2016-09”). ASU 2016-09 identifies
areas for simplification involving several aspects of accounting for
share-based payment transactions, including income tax consequences,
classification of awards as equity or liabilities, an option to recognize
gross stock compensation expense with actual forfeitures recognized
as they occur, as well as certain classifications on the statement of cash
flows. The new standard is effective for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal
years (i.e. a January 1, 2017 effective date). ASU 2016-09 requires all
tax effects related to share-based payments to be recognized within the
provision for income taxes in the consolidated statements of income.
The standard does not permit retrospective adoption of this update
and as such, we will adopt this update on a prospective basis. The
ASU requires windfall excess tax benefit cash flows to be reported as
cash provided by operating activities in the consolidated statements of
cash flows. The standard allows for either retrospective or prospective
adoption of this area. We have elected to adopt this reclassification on
a prospective basis. We do not believe that the other areas of this ASU
will have a material impact on our consolidated financial statements
upon adoption.
In February 2016, the FASB issued its new lease accounting guidance
in ASU No. 2016-02, Leases (Topic 842). Under the new guidance,
lessees will be required to recognize for all leases (with the exception of
short-term leases) a lease liability, which is a lessee’s obligation to make
lease payments arising from a lease, measured on a discounted basis
and a right-of-use asset, which is an asset that represents the lessee’s
right to use, or control the use of, a specified asset for the lease term.
The new standard is effective for fiscal years beginning after December
15, 2018, including interim periods within those fiscal years (i.e. a
January 1, 2019 effective date). We are in the process of determining
the transition plan and evaluating the effect the guidance will have on
our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments–
Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities, which amends the guidance in U.S. GAAP on
the classification and measurement of financial instruments. Changes
to the current guidance primarily affect the accounting for equity
investments, financial liabilities under the fair value option, and the
presentation and disclosure requirements for financial instruments. The
new standard is effective for fiscal years and interim periods beginning
after December 15, 2017, and upon adoption, an entity should apply
the amendments by means of a cumulative-effect adjustment to the
balance sheet at the beginning of the first reporting period in which
the guidance is effective. Early adoption is not permitted except for the
provision to record fair value changes for financial liabilities under the
fair value option resulting from instrument-specific credit risk in other
comprehensive income. We are evaluating the effect the guidance will
have on our consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement
of Inventory. This new standard changes the criteria by which to measure
inventory. Prior to the issuance of this new standard, inventory was
measured at the lower of cost or market value. This required three separate
data points in order to measure inventory. The three data points were
FMC CORPORATION - Form 10-K 47
PART II
ITEM 8 Financial Statements and Supplementary Data
cost, market with a ceiling of net realizable value and market with a
floor of net realizable value less a normal profit margin. This amendment
eliminates the two data points defining “market” and replaces them with
one, net realizable value. Net realizable value is the estimated selling
prices in the ordinary course of business, less reasonably predictable
costs of completion, disposal, and transportation. This amendment
does not impact inventory measured using last-in, first-out. We have
adopted this standard as of January 1, 2017. There will be no impact
upon adoption to our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts
with Customers, which requires an entity to recognize the amount of
revenue to which it expects to be entitled for the transfer of promised
goods or services to customers. ASU 2014-09 supersedes most existing
revenue recognition guidance under U.S. GAAP. The new standard is
effective for fiscal years and interim periods beginning after December 15,
2017. The standard permits the use of either a full retrospective method
or modified retrospective adoption method. We expect to apply the
modified retrospective adoption method. While, we are still evaluating
the effect that ASU 2014-09 will have on our consolidated financial
statements and related disclosures, in the fourth quarter, we performed
an initial impact assessment by analyzing certain material revenue
transactions and arrangements, and do not expect material changes
to our current policies related to the timing of revenue recognition
and the accounting for costs; however the standard will impact our
disclosures by potentially requiring further disaggregation of revenue.
NOTE 3 Acquisitions
2015 Acquisitions
Cheminova A/S
On April 21, 2015, pursuant to the terms and conditions set forth in
the Purchase Agreement, we completed the acquisition of 100 percent
of the outstanding equity of Cheminova A/S, a Denmark Aktieselskab
(“Cheminova”) from Auriga Industries A/S, a Denmark Aktieselskab
for an aggregate purchase price of $1.2 billion, excluding assumed net
debt and hedged-related costs totaling $0.6 billion (the “Acquisition”).
The Acquisition was funded with the October 10, 2014 term loan
which was secured for the purposes of the Acquisition. See Note 12
for more information.
Cheminova is being integrated into our FMC Agricultural Solutions
segment and has been included within our results of operations since the
date of acquisition. The acquisition of Cheminova broadens our supply
capabilities and strengthen our geographic footprint, particularly in
Europe. Revenue and Income (Loss) from continuing operations before
income taxes attributable to Cheminova, since the date of acquisition,
for the twelve months ended December 31, 2015 was approximately
$462 million of revenues and $68 million of income, respectively.
Purchase Price Allocation
The acquisition of Cheminova has been accounted for under the
GAAP business combinations accounting guidance, and as such we
have applied acquisition accounting. Acquisition accounting requires,
48
FMC CORPORATION - Form 10-K
Recently adopted accounting guidance
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments
in Certain Entities That Calculate Net Asset Value per Share. This new
standard eliminates the requirement to categorize investments in the
fair value hierarchy if their fair value is measured at net asset value per
share (or its equivalent) using the practical expedient in the FASB’s
fair value measurement guidance. The new standard was effective
for annual reporting periods beginning after December 15, 2015,
and interim periods within those fiscal years. We have adopted this
standard beginning in 2016. The guidance impacted our disclosure of
the fair value hierarchy table as shown in Note 13, Pension and Other
Postretirement Benefits.
In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for
Fees Paid in Cloud Computing Arrangements, which provides guidance to
determine when a customer’s fees paid in a cloud computing arrangement
include a software license. If a cloud computing arrangement includes
a software license, the customer should account for the software license
element of the arrangement consistent with the acquisition of other
software licenses. If the arrangement does not include a software license,
the customer should account for a cloud computing arrangement as a
service contract. The new standard was effective for annual reporting
periods beginning after December 15, 2015 (i.e. January 1, 2016) and
entities may elect to adopt the ASU prospectively or retrospectively.
We have adopted the standard prospectively. There was no impact on
our financial condition, results of operations or cash flows as a result
of the adoption of this guidance.
among other things, that assets acquired and liabilities assumed be
recognized at their fair values as of the acquisition date. The aggregate
purchase price noted above was allocated to the major categories of
assets acquired and liabilities assumed based upon their estimated fair
values at the acquisition date using primarily Level 2 and Level 3 inputs
(see Note 17 for an explanation of Level 2 and 3 inputs). These Level
2 and Level 3 valuation inputs include an estimate of future cash flows
and discount rates. Additionally, estimated fair values are based, in
part, upon outside appraisals for certain assets, including specifically-
identified intangible assets.
The purchase price allocation was finalized as of March 31, 2016.
The allocation was subject to change within the measurement period
(up to one year from the acquisition date) as additional information
concerning final asset and liability valuations was obtained. Any
changes to the initial allocation are referred to as measurement-period
adjustments. Measurement-period adjustments since the filing of our
2015 Form 10-K were primarily related to decreases in the estimated
fair values of certain current assets, property, plant and equipment
and income taxes payable. These decreases were offset by increases in
current liabilities, intangible assets and deferred income taxes. The
effect of all measurement-period adjustments in the first quarter of
2016 resulted in an increase to recognized goodwill of approximately
$20 million.
The following table summarizes the consideration paid for Cheminova and the amounts of the assets acquired and liabilities assumed as of the
acquisition date.
PART II
ITEM 8 Financial Statements and Supplementary Data
PURCHASE PRICE ALLOCATION
(in Millions)
Trade receivables
Inventories(1)
Other current assets
Property, plant & equipment
Intangible assets(2)
$
488.1
362.4
53.6
186.4
Customer relationships
Brands
In-process research & development
294.1
362.8
1.4
Goodwill(3)
468.8
84.5
Other assets
2,302.1
Total fair value of assets acquired
140.5
Short-term debt
432.3
Other current liabilities
47.2
Environmental reserves
Long-term debt(4)
273.1
165.1
Deferred tax liabilities
38.8
Other liabilities
1,097.0
Total fair value of liabilities assumed
TOTAL CASH PAID, LESS CASH ACQUIRED
1,205.1
(1) Fair value of finished goods inventory acquired included a step-up in the value of approximately $57.8 million, all of which was expensed in 2015 and included
$
$
$
in “Cost of sales and services” on the consolidated income statement.
(2) The weighted average useful life of the acquired finite-lived intangibles, which primarily represents the customer relationships, is approximately 20 years.
(3) Goodwill largely consists of expected cost synergies and economies of scale resulting from the business combination. None of the acquired goodwill will be
deductible for income tax purposes.
(4) Long-term debt assumed primarily consisted of mortgage debt and borrowings under existing Cheminova credit facilities that were settled by FMC’s term loan
in the second quarter of 2015.
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations assume that the
Acquisition occurred at the beginning of the periods presented. The pro
forma amounts include certain adjustments, including interest expense
on the borrowings used to complete the acquisition, depreciation and
amortization expense and income taxes. The pro forma amounts for the
twelve month period below exclude acquisition-related charges. The
pro forma results do not include adjustments related to cost savings
or other synergies that are anticipated as a result of the Acquisition.
Accordingly, these unaudited pro forma results are presented for
informational purposes only and are not necessarily indicative of what
the actual results of operations would have been if the acquisition
had occurred as of January 1, 2014, nor are they indicative of future
results of operations.
(in Millions)
Pro forma Revenue(1)
Pro forma Diluted earnings per share(1)
(1) For the year ended December 31, 2016, pro forma results and actual results are the same.
$
$
Year Ended December 31,
2016
3,282.4
1.56
$
$
2015
3,638.5 $
4.99 $
2014
4,484.4
3.01
FMC CORPORATION - Form 10-K 49
PART II
ITEM 8 Financial Statements and Supplementary Data
Acquisition-related charges
Pursuant to U.S. GAAP, costs incurred to complete the Acquisition as well as costs incurred to integrate Cheminova into our operations are
expensed as incurred. The following table summarizes the costs incurred associated with these combined activities.
Year Ended December 31,
(in Millions)
Acquisition-related charges
Legal and professional fees(1)
Inventory fair value amortization(2)
(Gain)/loss on hedging purchase price(3)
TOTAL ACQUISITION-RELATED CHARGES(4)
Restructuring charges and asset disposals
Cheminova restructuring
TOTAL CHEMINOVA RESTRUCTURING CHARGES(4)(5)
(1) Represents transaction costs, costs for transitional employees, other acquired employee related costs and integration related legal and professional third-party fees.
32.2
—
99.6
131.8
60.4
57.8
172.1
290.3
23.4
—
—
23.4
118.3
118.3
42.3
42.3
—
—
$
$
$
$
$
$
$
$
$
2016
2015
2014
On the consolidated statements of income (loss), these charges are included in “Selling, general and administrative expense.”
(2) On the consolidated statements of income (loss), these charges are included in “Costs of sales and services.”
(3) See “Cheminova Acquisition Hedge Costs” below for more information on these charges. On the consolidated statements of income (loss), these charges are
included in “Selling, general and administrative expense.”
(4) Acquisition-related charges and restructuring charges to integrate Cheminova with Agricultural Solutions were completed at the end of 2016.
(5) See Note 7 for more information. These charges are recorded as a component of “Restructuring and other charges (income)” on the consolidated statements of
income (loss).
Cheminova Acquisition Hedge Costs
Pursuant to the terms and conditions set forth in the Purchase Agreement,
we agreed to acquire all of the outstanding equity of Cheminova from
Auriga for an aggregate purchase price of $8.5 billion Danish krone
(“DKK”). At the time we entered into the Purchase Agreement, the
U.S. dollar (“USD” or “$”) to DKK exchange rate was USD $1.00 to
DKK $5.77, resulting in a USD purchase price of $1.47 billion, excluding
assumed debt of approximately $0.3 billion. In order to minimize our
exposure to adverse changes in the USD to DKK exchange rate from
September 8, 2014 to April 21, 2015 (the acquisition close date), we
entered into a series of foreign currency forward contracts (“FX forward
contracts”). The FX forward contracts provided us the ability to fix
the USD to DKK exchange rate for most of the DKK $8.5 billion
purchase price, thereby limiting our exposure to foreign currency rate
fluctuations. Over the period from September 2014 to April 21, 2015
the USD strengthened against the DKK by approximately 21 percent
to an exchange rate of USD $1.00 to DKK $6.96. The strengthening
of the USD against the DKK results in a lower USD purchase price
for Cheminova. Partially offsetting this was a mark-to-market net loss
settlement on the FX forward contracts of $172.1 million in 2015 and
$99.6 million in 2014.
50
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 4 Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by business segment for the years ended December 31, 2016 and 2015, are presented in the table below:
(in Millions)
Balance, December 31, 2014
Acquisitions
Foreign currency adjustments
Balance, December 31, 2015
Purchase price allocation adjustments (See Note 3)
Foreign currency adjustments
BALANCE, DECEMBER 31, 2016
FMC Agricultural
Solutions
31.0
$
FMC Health and
Nutrition
321.5
$
$
448.5
—
479.5
20.4
(1.2)
498.7
$
$
—
(24.9)
296.6 $
—
(17.8)
278.8
$
$
$
FMC Lithium
— $
—
—
— $
—
—
— $
Total
352.5
448.5
(24.9)
776.1
20.4
(19.0)
777.5
Our fiscal year 2016 annual goodwill impairment test was performed during the third quarter ended September 30, 2016. We determined no
goodwill impairment existed and that the fair value was substantially in excess of the carrying value for each of our goodwill reporting units.
There were no events or circumstances indicating that goodwill might be impaired as of December 31, 2016.
Our intangible assets, other than goodwill, consist of the following:
(in Millions)
Intangible assets subject to amortization (finite-lived)
Weighted avg. useful life
at December 31, 2016
Customer relationships
Patents
Brands(1)
Purchased and licensed technologies
Other intangibles
18 years $
9 years
13 years
7 years
40 years
Intangible assets not subject to amortization (indefinite life)
Brands(1)(2)
In-process research & development
$
$
December 31, 2016
Accumulated
Amortization
Gross
December 31, 2015
Accumulated
Amortization
Gross
Net
364.8
1.8
9.0
37.8
0.8
414.2
$
$
435.5 $
2.2
14.2
71.0
3.5
526.4 $
$
377.8
1.4
$
379.2
793.4 $
384.7
1.4
386.1
912.5 $
(59.0) $
(0.4)
(5.6)
(34.0)
(2.3)
(101.3) $
$
$
(101.3) $
Net
394.7
1.9
11.5
41.5
1.3
450.9
384.7
1.4
386.1
837.0
(40.8) $
(0.3)
(2.7)
(29.5)
(2.2)
(75.5) $
$
$
(75.5) $
423.8 $
2.2
14.6
71.8
3.1
515.5 $
377.8
1.4
379.2
894.7 $
$
$
TOTAL INTANGIBLE ASSETS
(1) Represents trademarks, trade names and know-how.
(2) The majority of the Brands intangible asset in the table above relates to our proprietary brand portfolio for which the fair value was substantially in excess of
the carrying value. During the 3rd quarter of 2016, we recorded a $1 million impairment charge in our generic brand portfolio which is part of the FMC
Agricultural Solutions segment. The carrying value of the generic portfolio subsequent to the charge is approximately $6 million.
At December 31, 2016, the finite-lived and indefinite life intangibles were allocated among our business segments as follows:
(in Millions)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
TOTAL
(in Millions)
Amortization Expense
Finite-lived
354.1 $
59.1
1.0
414.2 $
Indefinite life
364.8
14.4
—
379.2
$
$
Year Ended December 31,
2016
28.3 $
2015
22.7 $
$
2014
11.0
The estimated pre-tax amortization expense for each of the five years ending December 31, 2017 to 2021 is $26.3 million, $26.1 million,
$25.9 million, $25.7 million and $25.6 million, respectively.
FMC CORPORATION - Form 10-K 51
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 5
Inventories
Inventories consisted of the following:
(in Millions)
Finished goods
Work in process
Raw materials, supplies and other
FIFO inventory
$
Less: Excess of FIFO cost over LIFO cost
NET INVENTORIES
Approximately 26% and 29% of our inventories in 2016 and 2015, respectively were recorded on the LIFO basis.
$
NOTE 6 Property, Plant and Equipment
Property, plant and equipment consisted of the following:
(in Millions)
Land and land improvements
Buildings
Machinery and equipment
Construction in progress
Total cost
Accumulated depreciation
PROPERTY, PLANT AND EQUIPMENT, NET
$
$
$
December 31,
2016
102.9
397.5
1,200.4
76.7
1,777.5
(775.4)
1,002.1
$
$
December 31,
2016
297.7
264.6
294.2
856.5
(153.0)
703.5
$
2015
350.0
275.4
335.6
961.0
(160.8)
800.2
2015
101.9
320.4
1,171.9
190.4
1,784.6
(768.2)
1,016.4
Depreciation expense was $86.4 million, $74.1 million, and $67.0 million in 2016, 2015 and 2014, respectively.
NOTE 7 Restructuring and Other Charges (Income)
The following table shows total restructuring and other charges included in the respective line items of the Consolidated Statements of Income:
(in Millions)
Restructuring charges and asset disposals
Other charges (income), net
TOTAL RESTRUCTURING AND OTHER CHARGES
RESTRUCTURING CHARGES AND ASSET DISPOSALS
Year Ended December 31,
2016
53.4 $
53.9
107.3 $
2015
217.7 $
26.3
244.0 $
$
$
2014
17.2
39.2
56.4
Restructuring Charges
Severance and
Employee Benefits(1)
Other Charges
(Income)(2)
Asset Disposal
Charges(3)
$
(in Millions)
Cheminova restructuring
Other items
Year ended December 31, 2016
Cheminova restructuring
Health and Nutrition restructuring
Other items
Year ended December 31, 2015
Health and Nutrition restructuring
Other items
Year ended December 31, 2014
(1) Represents severance and employee benefit charges.
(2) Primarily represents costs associated with lease payments, contract terminations, and other miscellaneous exit costs. Other Income primarily represents favorable
17.7 $
2.6
20.3 $
92.1
86.1
—
178.2 $
3.1
0.2
3.3 $
18.6 $
4.0
22.6
23.5
6.5
6.0
36.0
10.1
0.5
10.6
6.0 $
4.5
10.5
2.7
1.0
(0.2)
3.5
0.7
2.6
3.3
Total
42.3
11.1
53.4
118.3
93.6
5.8
217.7
13.9
3.3
17.2
$
$
$
$
$
$
$
$
$
developments on previously recorded exit costs and recoveries associated with restructuring.
(3) Primarily represents accelerated depreciation and impairment charges on long-lived assets, which were or are to be abandoned. To the extent incurred, the
acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations due to facility shutdowns, are also
included within the asset disposal charges.
52
FMC CORPORATION - Form 10-K
2016 Restructuring Activities
Cheminova Restructuring
In 2015, we completed the acquisition of Cheminova; see Note 3
for more details. As part of the integration of Cheminova into our
existing FMC Agricultural Solutions segment we engaged in various
restructuring activities. These restructuring activities included workforce
reductions, relocation of current operating locations, lease and other
2015 Restructuring Activities
Consagro Crop Protection Business
On September 10, 2015, we entered into a definitive agreement to sell
our generic crop protection business in Brazil, Consagro, to Atanor
do Brazil Ltda., the Brazilian subsidiary of Albaugh, LLC. The sale
of Consagro is part of our broad strategy to focus our portfolio of
valued-added products, especially with the addition of the Cheminova
product line in Brazil. This sale was completed in the fourth quarter
of 2015 and resulted in $31.9 million of cash proceeds. The proceeds
from the sale are included within “Proceeds from sale of investments”
on the consolidated statement of cash flows. As a result of the sale,
we recorded a loss of $64.5 million representing the carrying value of
the assets less the net proceeds and the costs of selling the business.
Health and Nutrition Restructuring
In 2014, our FMC Health and Nutrition segment implemented a plan to
restructure a portion of its operations. The objective of the restructuring
was to better align our business and costs to macroeconomic and market
realities. The restructuring decision resulted in workforce reductions
at several of our FMC Health and Nutrition facilities. In 2015, these
restructuring activities continued with the mothballing of our Seal Sands
UK facility as well as the sale of our pectin manufacturing business.
Seal Sands
Our Seal Sands facility was acquired as part of the EPAX acquisition
for the manufacture of specific pharmaceutical Omega-3-Active
Pharmaceutical Ingredients (API’s) which would compete as a generic
alternative to the prescription Lovaza drug. This facility started operations
in 2014, and during both 2014 and 2015 was used for productions
of these generic Lovaza alternatives. However, since the start of the
operations, the dynamics of the Lovaza market have changed dramatically
as several generic players have penetrated the market sooner than
originally expected, and growth overall has slowed as the category has
become mature. In the fourth quarter of 2015, given the lack of demand
for these Omega-3 products, we took action and mothballed the site.
PART II
ITEM 8 Financial Statements and Supplementary Data
contract termination costs and fixed asset accelerated depreciation as
well as other long-term asset disposal charges at several of our FMC
Agricultural Solutions’ facilities. In 2016, these restructuring activities
continued; however, the restructuring charges were completed at the
end of 2016. Included within these activities was the decision to exit
our generic crop protection business in Brazil, Consagro Agroquimica
Ltda. (Consagro), which occurred in 2015.
As a result of this decision, we accelerated the depreciation of the
remaining carrying value of the site to its salvage value over its remaining
expected use period. Since we believe the expected use period is limited,
these accelerated depreciation charges were all incurred in the fourth
quarter of 2015 and no further accelerated depreciation charges are
expected in 2016. These accelerated depreciation charges totaled
approximately $45.8 million. Additionally, we wrote off stranded
inventory at the site which totaled approximately $14.4 million. As a
result of the mothballing decision, this inventory had no other outlets
and cannot be able to be reworked elsewhere and therefore became
impaired as a result of these events.
Finally, the decisions noted above resulted in the need for us to re-test
for impairment the EPAX indefinite-lived intangible asset. As a result
of that test, an impairment charge of $10.3 million was recognized
associated with this indefinite lived asset.
Pectin
As part of our Health and Nutrition Restructuring we changed our
strategy for pectin shifting our focus from the manufacture of standard
grade pectin to concentrate on higher-value, more specialized solutions
for our customers. To accomplish our goals under this new strategy on
September 11, 2015, we completed the sale of our pectin manufacturing
business, located in Milazzo, Italy, to Cargill, Inc (Cargill). The sale
resulted in approximately $7.0 million in proceeds and a loss on sale of
$11.9 million in December 31, 2015. The proceeds from the sale are
included within “Proceeds from sale of investment/business” on the
Consolidated Statement of Cash Flows. The loss of $11.9 million was
comprised of net assets sold of $18.9 million which primarily included
property, plant and equipment and trade working capital (i.e., trade
receivables and payables as well as inventory). In connection with
the sale we entered into a customary transitional services agreement
with Cargill to provide for the orderly separation of the business. We
provided these services to Cargill for three months after closing. We
also entered into a supply agreement with Cargill, which provides us
with more efficient and flexible sourcing on a broad range of both
standard and specialty pectin grades.
FMC CORPORATION - Form 10-K 53
PART II
ITEM 8 Financial Statements and Supplementary Data
Roll forward of restructuring reserves
The following table shows a roll forward of restructuring reserves that will result in cash spending. These amounts exclude asset retirement obligations.
Balance at
12/31/14(4)
$
Change in
reserves(2)
Cash
payments
Other(3)
Balance at
12/31/15(4)
Change in
reserves(2)
Cash
payments
— $
26.2 $
(18.1) $
(in Millions)
Cheminova restructuring
Health and Nutrition
restructuring
Other workforce related and
facility shutdowns(1)
Restructuring activities related
to discontinued operations(5)
TOTAL
(1) Primarily severance costs related to workforce reductions and facility shutdowns described in the “Other Items” sections above.
(2) Primarily severance, exited lease, contract termination and other miscellaneous exit costs. The accelerated depreciation and impairment charges noted above
—
(26.0) $
(0.1)
(34.9) $
—
33.1 $
0.4
15.6 $
(2.2)
37.3 $
2.7
10.3 $
—
(5.1) $
—
2.9 $
0.4
17.6
(18.1) $
24.6 $
(4.1) $
0.6 $
8.7 $
(10.2)
(0.2)
(6.5)
(0.8)
(0.9)
(7.0)
3.1
3.6
1.2
7.3
5.8
7.5
3.0
4.6
1.3
2.9
1.0
3.0
$
Other(3)
Balance at
12/31/16(4)
11.1
impacted our property, plant and equipment or intangible balances and are not included in the above tables.
(3) Primarily foreign currency translation adjustments.
(4) Included in “Accrued and other liabilities” on the consolidated balance sheets.
(5) Cash spending associated with restructuring activities of discontinued operations is reported within “Payments of other discontinued reserves, net of recoveries” on
the consolidated statements of cash flows.
OTHER CHARGES (INCOME), NET
(in Millions)
Environmental charges, net
Argentina devaluation
Belchim crop protection sale
Other items, net
OTHER CHARGES (INCOME), NET
Environmental charges, net
Environmental charges represent the net charges associated with
environmental remediation at continuing operating sites, see Note
10 for additional details. Environmental obligations for continuing
operations primarily represent obligations at shut down or abandoned
facilities within businesses that do not meet the criteria for presentation
as discontinued operations.
Argentina Devaluation
On December 17, 2015, the Argentina government initiated actions
to significantly devalue its currency. These actions continued into a
portion of first quarter of 2016. These actions created an immediate
loss associated with the impacts of the remeasurement of our local
balance sheet. The loss was attributable to our Lithium and Agricultural
Solutions operations. Because of the severity of the event and its
immediate impact to our operations in the country, the charge associated
with the remeasurement was included within restructuring and other
charges in our condensed consolidated income statement during the
period. We believe these actions have ended and do not expect further
charges for remeasurement to be included within restructuring and
other charges.
Belchim Crop Protection Sale
During 2015 we sold our remaining ownership interest in a Belgian-
based pesticide distribution company, Belchim Crop Protection
N.V. (“Belchim”). Prior to and subsequent to the sale, Belchim was
accounted for as a cost method investment. The gain on the sale was
$26.6 million.
54
FMC CORPORATION - Form 10-K
Year Ended December 31,
2016
36.8
4.2
—
12.9
53.9
$
$
2015
21.7 $
10.7
(26.6)
20.5
26.3 $
2014
43.7
—
(26.6)
22.1
39.2
$
$
In 2014 we sold the first portion of our ownership interest in Belchim.
Belchim was previously accounted for as a cost method investment.
The gain on the sale from the first portion was also $26.6 million.
The cash proceeds from the sale in 2015 and 2014 of $27.5 million and
$27.5 million, respectively, are included within “Proceeds from sale of
investment/business” on the Consolidated Statement of Cash Flows.
Other items, net
In 2016, we sold our remaining ownership interest in several joint
ventures. The aggregate loss on the sale of the various interests of
$2.9 million was recorded as “Restructuring and other charges (income)”
on the consolidated statements of income. Additionally, we had a gain
of $2.1 million from the sale of certain Corporate fixed assets. The cash
proceeds from these sales of $6.8 million is included within “Other
investing activities” on the Consolidated Statement of Cash Flows.
During 2016, 2015 and 2014 our FMC Agricultural Solutions segment
entered into collaboration and license agreements with various third
parties for the purposes of obtaining certain technology and intellectual
property rights relating to compounds still under development. The
rights and technology obtained is referred to as in-process research
and development and in accordance with GAAP, the amounts paid
were expensed as incurred since they were acquired outside of a
business combination. The charges related to these arrangements were
$13.2 million, $20.5 million and $22.0 million in 2016, 2015 and
2014, respectively.
NOTE 8 Receivables
The following table displays a roll forward of the allowance for doubtful trade receivables for fiscal years 2015 and 2016.
PART II
ITEM 8 Financial Statements and Supplementary Data
(in Millions)
Balance, December 31, 2014
Additions — charged to expense
Transfer to allowance for credit losses (see below)
Balance, December 31, 2015
Additions — charged to expense
Transfer to allowance for credit losses (see below)
Net recoveries and write-offs
BALANCE, DECEMBER 31, 2016
$
$
37.2
5.9
(29.2)
13.9
10.0
(7.8)
1.7
17.8
The company has non-current receivables that represent long-term
customer receivable balances related to past due accounts which are
not expected to be collected within the current year. The net long-term
customer receivables were $123.5 million as of December 31, 2016.
These long-term customer receivable balances and the corresponding
allowance are included in “Other assets including long-term receivables,
net” on the consolidated balance sheet.
A portion of these long-term receivables have payment contracts. We
have no reason to believe payments will not be made based upon the
credit quality of these customers. Additionally, we also hold significant
collateral against these customers including rights to property or other
assets as a form of credit guarantee. If the customer does not pay or
gives indication that they will not pay, these guarantees allow us to
start legal action to block the sale of the customer’s harvest. On an
ongoing basis, we continue to evaluate the credit quality of our non-
current receivables using aging of receivables, collection experience
and write-offs, as well as evaluating existing economic conditions, to
determine if an additional allowance is necessary.
The following table displays a roll forward of the allowance for credit losses related to long-term customer receivables for fiscal years 2015 and 2016.
(in Millions)
Balance, December 31, 2014
Transfer from allowance for doubtful accounts (see above)
Net Recoveries and write- offs
Balance, December 31, 2015
Additions — charged to expense
Transfer from allowance for doubtful accounts (see above)
Net Recoveries and write-offs
BALANCE, DECEMBER 31, 2016
NOTE 9 Discontinued Operations
FMC Alkali
$
$
—
29.2
—
29.2
12.1
7.8
—
49.1
On April 1, 2015, we completed the sale of our FMC Alkali Chemicals division (“ACD”) for $1,649.8 million to a wholly owned subsidiary
of Tronox Limited (“Tronox”). The sale resulted in approximately $1,198.5 million in after-tax cash proceeds and in a pre-tax gain of $1,080.2
million ($702.1 million net of tax) for the year ended December 31, 2015.
The results of our discontinued FMC ACD operations are summarized below:
Year Ended December 31,
(in Millions)
Revenue
Costs of sales and services
Income (loss) from discontinued operations before income taxes(1)
Provision for income taxes
Total discontinued operations of FMC ACD, net of income taxes
Less: discontinued operations of FMC ACD attributable to noncontrolling interests
DISCONTINUED OPERATIONS OF FMC ACD, NET OF INCOME TAXES,
ATTRIBUTABLE TO FMC STOCKHOLDERS
(1) For the years ended December 31, 2015 and 2014, respectively, amounts include approximately zero and $5.9 million attributable to noncontrolling interests,
$2.2 million and $8.3 million of allocated interest expense, $15.0 million and $9.0 million of divestiture related charges, respectively as well as a $5.3 million
pension curtailment charge in 2015. Interest was allocated in accordance with relevant discontinued operations accounting guidance.
2015
194.0
149.2
1,096.1
379.0
717.1 $
— $
2014
779.0
614.9
121.2
17.3
103.9
5.2
— $
—
—
—
— $
— $
717.1 $
— $
2016
98.7
$
$
$
$
$
FMC CORPORATION - Form 10-K 55
PART II
ITEM 8 Financial Statements and Supplementary Data
In addition to our discontinued FMC Alkali Chemicals division, our discontinued operations in our financial statements includes adjustments to
retained liabilities from previous discontinued operations. The primary liabilities retained include environmental liabilities, other postretirement
benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Our discontinued operations comprised the following:
Year Ended December 31,
2016
(in Millions)
Adjustment for workers’ compensation, product liability, and other postretirement benefits
and other, net of income tax benefit (expense) of ($0.5), $1.0 and $0.6, respectively(1)
Provision for environmental liabilities, net of recoveries, net of income tax benefit of
$12.9, $16.7 and $16.4, respectively(2)
Provision for legal reserves and expenses, net of recoveries, net of income tax benefit of
$6.6, $6.3 and $8.4, respectively
Discontinued operations of FMC Peroxygens, net of income tax expense of zero, zero
and $23.7, respectively
Discontinued operations of FMC Alkali Chemicals, net of income tax benefit (expense)
of zero, ($379.0) and ($17.3), respectively
DISCONTINUED OPERATIONS, NET OF INCOME TAXES
(1) See roll forward of our restructuring reserves in Note 7.
(2) See a roll forward of our environmental reserves as well as discussion on significant environmental issues that occurred during the year in Note 10.
—
(33.7) $
717.1
676.4
(1.1) $
(24.0)
(28.8)
(12.2)
(10.8)
2.5
—
—
$
$
$
$
2015
2014
(4.0)
(36.7)
(14.3)
(34.4)
103.9
14.5
Reserves for Discontinued Operations at December 31, 2016 and 2015
(in Millions)
Workers’ compensation and product liability reserve
Postretirement medical and life insurance benefits reserve, net
Reserves for legal proceedings
RESERVE FOR DISCONTINUED OPERATIONS(1)
(1) Included in “Other long-term liabilities” on the consolidated balance sheets. Also refer to Note 7 for discontinued restructuring reserves and Note 10 for
6.8 $
7.8
34.0
48.6 $
2015
6.1
9.3
30.7
46.1
$
$
December 31,
2016
discontinued environmental reserves.
The discontinued postretirement medical and life insurance benefits liability
equals the accumulated postretirement benefit obligation. Associated
with this liability is a net pre-tax actuarial gain and prior service credit
of $6.5 million ($3.5 million after-tax) and $7.6 million ($4.1 million
after-tax) at December 31, 2016 and 2015, respectively. The estimated net
pre-tax actuarial gain and prior service credit that will be amortized from
accumulated other comprehensive income into discontinued operations
during 2017 are $1.4 million and zero, respectively.
NOTE 10 Environmental Obligations
We are subject to various federal, state, local and foreign 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 and remediation of contaminated sites. We are also subject to
liabilities arising under the Comprehensive Environmental Response,
Compensation and Liability Act (“CERCLA”) and similar state laws
that impose responsibility on persons who arranged for the disposal
of hazardous substances, and on current and previous owners and
operators of a facility for the clean-up of hazardous substances released
from the facility into the environment. We are also subject to liabilities
under the Resource Conservation and Recovery Act (“RCRA”) and
analogous state laws that require owners and operators of facilities
that have treated, stored or disposed of hazardous waste pursuant to
a RCRA permit to follow certain waste management practices and
to clean up releases of hazardous substances into the environment
56
FMC CORPORATION - Form 10-K
Net spending in 2016, 2015 and 2014 was $1.3 million, $0.8 million
and $0.8 million, respectively, for workers’ compensation, product
liability and other claims; $1.1 million, $1.1 million and $1.1 million,
respectively, for other postretirement benefits; and $15.3 million,
$22.9 million and $23.0 million, respectively, related to reserves for
legal proceedings associated with discontinued operations.
associated with past or present practices. In addition, when deemed
appropriate, we enter certain sites with potential liability into voluntary
remediation compliance programs, which are also subject to guidelines
that require owners and operators, current and previous, to clean up
releases of hazardous substances into the environment associated with
past or present practices.
Environmental liabilities consist of obligations relating to waste handling
and the remediation and/or study of sites at which we are alleged to
have released or disposed of hazardous substances. These sites include
current operations, previously operated sites, and sites associated with
discontinued operations. We have provided reserves for potential
environmental obligations that we consider probable and for which a
reasonable estimate of the obligation can be made. Accordingly, total
reserves of $378.1 million and $348.2 million, respectively, before
recoveries, existed at December 31, 2016 and 2015.
PART II
ITEM 8 Financial Statements and Supplementary Data
The estimated reasonably possible environmental loss contingencies,
net of expected recoveries, exceed amounts accrued by approximately
$240 million at December 31, 2016. This reasonably possible estimate
is based upon information available as of the date of the filing and the
actual future losses may be higher given the uncertainties regarding
the status of laws, regulations, enforcement policies, the impact of
potentially responsible parties, technology and information related
to individual sites.
Additionally, although potential environmental remediation expenditures
in excess of the reserves and estimated loss contingencies could be
significant, the impact on our future consolidated financial results is
not subject to reasonable estimation due to numerous uncertainties
concerning the nature and scope of possible contamination at many
sites, identification of remediation alternatives under constantly changing
requirements, selection of new and diverse clean-up technologies to
meet compliance standards, the timing of potential expenditures
and the allocation of costs among Potentially Responsible Parties
(“PRPs”) as well as other third parties. The liabilities arising from
potential environmental obligations that have not been reserved for
at this time may be material to any one quarter’s or year’s results of
operations in the future. However, we believe any liability arising
from such potential environmental obligations is not likely to have a
material adverse effect on our liquidity or financial condition as it may
be satisfied over many years.
The table below is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 2013 to December 31, 2016.
(in Millions)
Total environmental reserves, net of recoveries at December 31, 2013
2014
Provision
Spending, net of recoveries
Transfer from asset retirement obligations
Foreign currency translation adjustments
Net Change
Total environmental reserves, net of recoveries at December 31, 2014
2015
Provision
Spending, net of recoveries
Acquisitions (see Note 3)
Foreign currency translation adjustments
Net Change
Total environmental reserves, net of recoveries at December 31, 2015
2016
Provision
Spending, net of recoveries
Foreign currency translation adjustments
Net Change
TOTAL ENVIRONMENTAL RESERVES, NET OF RECOVERIES AT DECEMBER 31, 2016
Operating and
Discontinued Sites Total
204.7
$
106.2
(42.4)
16.9
(1.1)
79.6
284.3
66.9
(57.0)
47.2
(0.5)
56.6
340.9
81.0
(52.6)
(2.6)
25.8
366.7
$
$
$
To ensure we are held responsible only for our equitable share of site
remediation costs, we have initiated, and will continue to initiate, legal
proceedings for contributions from other PRPs. At December 31,
2016 and 2015, we have recorded recoveries representing probable
realization of claims against U.S. government agencies, insurance carriers
and other third parties. Recoveries are recorded as either an offset to
the “Environmental liabilities, continuing and discontinued” or as
“Other assets including long-term receivables, net” on the consolidated
balance sheets.
The table below is a roll forward of our total recorded recoveries from December 31, 2014 to December 31, 2016:
December 31,
2014
Increase
(Decrease)
in Recoveries
December 31,
2015
Increase
(Decrease)
in Recoveries
Cash
Received
December 31,
2016
(in Millions)
Environmental liabilities,
11.4
continuing and discontinued
Other assets(1)
27.2
TOTAL
38.6
(1) The amounts are included within “Prepaid and other current assets” and “Other assets including long-term receivables, net” on the consolidated balance sheets.
(4.1) $
(6.9)
(11.0) $
7.8 $
7.3
15.1 $
11.9 $
29.9
41.8 $
7.3 $
22.7
30.0 $
(0.5) $
(0.3)
(0.8) $
(3.7)
(2.8)
(6.5)
$
$
$
$
Cash Received
See Note 20 for more details.
FMC CORPORATION - Form 10-K 57
PART II
ITEM 8 Financial Statements and Supplementary Data
The table below provides detail of current and long-term environmental reserves, continuing and discontinued.
(in Millions)
Environmental reserves, current, net of recoveries(1)
Environmental reserves, long-term continuing and discontinued, net of recoveries(2)
TOTAL ENVIRONMENTAL RESERVES, NET OF RECOVERIES
(1) These amounts are included within “Accrued and other liabilities” on the consolidated balance sheets.
(2) These amounts are included in “Environmental liabilities, continuing and discontinued” on the consolidated balance sheets.
$
$
December 31,
2016
60.3 $
306.4
366.7 $
2015
59.1
281.8
340.9
Our net environmental provisions relate to costs for the continued remediation of both operating sites and for certain discontinued manufacturing
operations from previous years. The net provisions are comprised as follows:
(in Millions)
Continuing operations(1)
Discontinued operations(2)
NET ENVIRONMENTAL PROVISION
(1) Recorded as a component of “Restructuring and other charges (income)” on our consolidated statements of income. See Note 7. Environmental obligations for
continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as
discontinued operations.
2014
43.7
53.1
96.8
$
$
Year Ended December 31,
2016
36.8 $
36.9
73.7 $
2015
21.7 $
45.5
67.2 $
(2) Recorded as a component of “Discontinued operations, net of income taxes” on our consolidated statements of income. See Note 9.
On our consolidated balance sheets, the net environmental provisions affect assets and liabilities as follows:
Year Ended December 31,
(in Millions)
Environmental reserves(1)
Other assets(2)
NET ENVIRONMENTAL PROVISION
(1) See above roll forward of our total environmental reserves as presented on our consolidated balance sheets.
(2) Represents certain environmental recoveries. See Note 20 for details of “Other assets including long-term receivables, net” as presented on our consolidated balance sheets.
2014
106.2
(9.4)
96.8
2016
81.0
(7.3)
73.7
2015
66.9
0.3
67.2
$
$
$
$
$
$
Significant Environmental Sites
Pocatello
From 1949 until 2001, we operated the world’s largest elemental
phosphorus plant in Power County, Idaho, just outside the city of
Pocatello. Since the plant’s closure, FMC has worked with the EPA,
the State of Idaho, and the Shoshone-Bannock Tribes (“Tribes”) to
develop a proposed cleanup plan for the property. In September of
2012, the EPA issued an Interim Record of Decision (“IROD”) that
is environmentally protective and that ensures the health and safety of
both workers and the general public. Since the plant’s closure, we have
successfully decommissioned our Pocatello plant, completed closure of
the RCRA ponds and formally requested that the EPA acknowledge
completion of work under a June 1999 RCRA Consent Decree. Future
remediation costs include completion of the IROD that addresses
groundwater contamination and existing waste disposal areas on the
Pocatello plant portion of the Eastern Michaud Flats Superfund Site.
In June 2013, the EPA issued a Unilateral Administrative Order to us
under which we will implement the IROD remedy. Our current reserves
factor in the estimated costs associated with implementing the IROD.
In addition to implementing the IROD, we continue to conduct work
pursuant to CERCLA unilateral administrative orders to address air
emissions from beneath the cap of several of the closed RCRA ponds.
The amount of the reserve for this site was $44.3 million and
$44.9 million at December 31, 2016 and 2015, respectively.
Pocatello Tribal Litigation
For a number of years, we engaged in disputes with the Tribes concerning
their attempts to regulate our activities on the reservation. On March 6,
2006, a U.S. District Court Judge found that the Tribes were a third-
party beneficiary of a 1998 RCRA Consent Decree and ordered us to
apply for any applicable Tribal permits relating to the nearly-complete
RCRA Consent Decree work. The third-party beneficiary ruling was
later reversed by the Ninth Circuit Court of Appeals, but the permitting
process continued in the tribal legal system. We applied for the tribal
permits, but preserved objections to the Tribes’ jurisdiction.
In addition, in 1998, we entered into an agreement (“1998 Agreement”)
that required us to pay the Tribes $1.5 million per year for waste
generated from operating our Pocatello plant and stored on site.
We paid $1.5 million per year until December 2001 when the plant
closed. In our view the agreement was terminated, as the plant was no
longer generating waste. The Tribes claimed that the 1998 Agreement
has no end date.
On April 25, 2006, the Tribes’ Land Use Policy Commission issued
us a Special Use Permit for the “disposal and storage of waste” at the
Pocatello plant and imposed a $1.5 million per annum permit fee. The
permit and fee were affirmed by the Tribal Business Council on July
21, 2006. We sought review of the permit and fee in Tribal Court, in
which the Tribes also brought a claim for breach of the 1998 Agreement.
58
FMC CORPORATION - Form 10-K
On May 21, 2008, the Tribal Court reversed the permit and fee,
finding that they were not authorized under tribal law, and dismissed
the Tribes’ breach of contract claim. The Tribes appealed to the Tribal
Court of Appeals.
On May 8, 2012, the Tribal Court of Appeals reversed the May 21,
2008 Tribal Court decision and issued a decision finding the permit
and fee validly authorized and ordering us to pay waste permit fees
in the amount of $1.5 million per annum for the years 2002-2007
($9.0 million in total), the Tribes’ demand as set forth in the lawsuit.
It also reinstated the breach of contract claim. The Tribes have filed
additional litigation to recover the permit fees for the years since 2007,
but that litigation has been stayed pending the outcome of the appeal
in the Tribal Court of Appeals.
Following a trial on certain jurisdictional issues which occurred during
April 2014, the Shoshone-Bannock Tribal Appellate Court issued a
Statement of Decision finding in favor of the Tribes’ jurisdiction over
FMC and awarding costs on appeal to the Tribes. The Tribal Appellate
Court conducted further post-trial proceedings and on May 6, 2014
issued Finding and Conclusions and a Final Judgment consistent with
its earlier Statement of Decision.
The finding by the Shoshone-Bannock Tribal Appellate Court in May
2014 does not impact our reserves for the period ended December 31,
2016. Having now exhausted the Tribal administrative and judicial
process, in November 2014 we filed an action in the United States
District Court seeking declaratory and injunctive relief on the grounds
that the Tribes lacked jurisdiction.
We have estimated a reasonably possible loss for this matter and it has
been reflected in our total reasonably possible loss estimate previously
discussed within this note.
Middleport
Our Middleport, NY facility is currently an Agricultural Solutions
formulation and packaging plant that formerly manufactured arsenic-
based and other products. As a result of past manufacturing operations
and waste disposal practices at this facility, releases of hazardous substances
have occurred at the site that have affected soil, sediment, surface water
and groundwater at the facility’s property and also in adjacent off-site
areas. The impact of our discontinued operations was the subject of
an Administrative Order on Consent (“AOC”) entered into with the
EPA and New York State Department of Environmental Conservation
(the “Agencies”) in 1991. The AOC requires us to (1) define the nature
and extent of contamination caused by our historical plant operations,
(2) take interim corrective measures and (3) evaluate Corrective Action
Management Alternatives (“CMA”) for discrete contaminated areas.
We have defined the nature and extent of the contamination and have
constructed an engineered cover, closed the RCRA regulated surface
water impoundments and are collecting and treating both surface water
runoff and ground water, which has satisfied the first two requirements
of the AOC.
In 2013 we received from the New York State Department of
Environmental Conservation (“NYSDEC”), the Final Statement of
Basis (“FSOB”) for certain discrete off-site areas. The FSOB includes the
same CMA as the Preliminary Statement of Basis, which we continue
to believe is overly conservative and is not consistent with the 1991
AOC, which governs the remedy selection.
PART II
ITEM 8 Financial Statements and Supplementary Data
In order to negotiate with the NYSDEC with respect to the FSOB,
we entered into a tolling agreement with the NYSDEC. The tolling
agreement serves as a “standstill” agreement to the FSOB so that time
spent negotiating with the NYSDEC does not go against the statute of
limitations under the FSOB. The tolling agreement expired on April 30,
2014. We were not able to reach an agreement with the NYSDEC;
thus, on May 1, 2014, we submitted a Notice of Dispute to the EPA
seeking review of the remedy chosen by the NYSDEC. On May 30,
2014, 30 days after the tolling period expired, we filed an action in
the Supreme Court of New York formally challenging the NYSDEC’s
FSOB. In that lawsuit, we are contending that NYSDEC breached the
1991 AOC by not following the procedures set forth in the AOC for
remedy selection. On June 3, 2014, we received a letter from the EPA
(dated May 22, 2014) declining to review the Notice of Dispute. On
June 20, 2014, we filed an action in the United States District Court
for the Western District of New York seeking a declaratory judgment
that the EPA is obligated under the 1991 AOC to hear the dispute.
On January 31, 2017, the District Court dismissed FMC’s complaint,
ruling that EPA’s letter was not a final agency subject to review. We are
considering our options with respect to the District Court’s decision.
On August 20, 2015, the Supreme Court of New York dismissed our
state action on procedural grounds. We appealed that dismissal to the
New York Supreme Court Appellate Division, Third Department. On
October 20, 2016, the New York Supreme Court Appellate Division,
Third Department, issued a unanimous decision on our appeal of the
August 20, 2015 dismissal of our action challenging the NYSDEC’s
unilateral implementation of a remedy that is not consistent with the
1991 Administrative Order on Consent (“AOC”). The Third Department
found that NYSDEC does not have the authority to implement a remedy
unilaterally using state funds prior to issuing an order and remanded
the case to NYSDEC for further proceedings not inconsistent with
the Court’s decision. An order to us would have to be preceded by an
opportunity for an administrative hearing. On February 2, 2017, the
Third Department granted NYSDEC’s motion for leave to appeal the
decision to the New York Court of Appeals.
The amount of the reserve for this site is $46.7 million and $40.1 million
at December 31, 2016 and 2015, respectively. Our reserve continues
to include the estimated liability for clean-up to reflect the costs
associated with our recommended Corrective Action Management
Alternatives (“CMA”). Our estimated reasonably possible environmental
loss contingencies exposure reflects the additional cost of the CMA
proposed in the FSOB.
Other Potentially Responsible Party (“PRP”) Sites
We have been named a PRP at 33 sites on the federal government’s
National Priorities List (“NPL”), at which our potential liability has
not yet been settled. We have received notice from the EPA or other
regulatory agencies that we may be a PRP, or PRP equivalent, at other
sites, including 56 sites at which we have determined that it is probable
that we have an environmental liability for which we have recorded an
estimate of our potential liability in the consolidated financial statements.
In cooperation with appropriate government agencies, we are currently
participating in, or have participated in, a Remedial Investigation/
Feasibility Study (“RI/FS”), or equivalent, at most of the identified sites,
with the status of each investigation varying from site to site. At certain
sites, a RI/FS has only recently 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 a ROD has been issued.
FMC CORPORATION - Form 10-K 59
PART II
ITEM 8 Financial Statements and Supplementary Data
One site where FMC is listed as a PRP is the Portland Harbor Superfund
Site (“Portland Harbor”), that includes the river and sediments of a 12 mile
section of the lower reach of the Willamette River in Portland, Oregon
that runs through an industrialized area. Portland Harbor is listed on the
NPL. FMC formerly owned and operated a manufacturing site adjacent
to this section of the river and has since sold its interest in this business.
Currently, FMC and 70 other parties including the current owner of
the former FMC site are involved in a non-judicial allocation process to
determine each party’s respective share of the cleanup costs. FMC and
several other parties have been sued by the Confederated Bands and Tribes
of the Yakama Nation for reimbursement of cleanup costs and the costs
of performing a natural damage assessment. Based on the information
known to date, we are unable to develop a reasonable estimate of our
potential exposure of loss at this time. We intend to defend this matter.
On January 6, 2017, EPA issued its Record of Decision (“ROD”) for
the Portland Harbor Superfund Site. Any potential liability to FMC
will represent a portion of the costs of the remedy the EPA has selected
for Portland Harbor. Based on the current information available in the
ROD as well as the large number of responsible parties for the Superfund
Site, we are unable to develop a reasonable estimate of our potential
exposure for Portland Harbor at this time. We have no reason to believe
that the ultimate resolution of our potential obligations at Portland
Harbor will have a material adverse effect on our consolidated financial
position, liquidity or results of operations. However, adverse results
in the outcome of the EPA allocation could have a material adverse
effect on our consolidated financial position, results of operations in
any one reporting period, or liquidity.
NOTE 11 Income Taxes
Domestic and foreign components of income (loss) from continuing operations before income taxes are shown below:
(in Millions)
Domestic
Foreign
TOTAL
Year Ended December 31,
2016
34.3
305.0
339.3
$
$
2015
(186.7) $
56.2
(130.5) $
$
$
The provision (benefit) for income taxes attributable to income (loss) from continuing operations consisted of:
2014
27.4
336.4
363.8
2014
65.7
43.4
4.9
114.0
(37.5)
(21.1)
0.8
(57.8)
56.2
Year Ended December 31,
2016
2015
2.2
33.8
(0.2)
35.8
$
$
(52.6) $
78.5
1.6
27.5
$
$
$
29.1
11.3
17.7
58.1
93.9
23.0
(1.0)
(2.1)
19.9
47.4
(in Millions)
Current:
Federal(1)
Foreign
State
Total current
Deferred:
Federal
Foreign
State
Total deferred
TOTAL
(1) In 2015, the gain from the sale of our discontinued Alkali business created overall domestic taxable income. Exclusive of this gain, we incurred a loss from
$
$
$
$
$
$
domestic continuing operations that reduced current taxes payable in 2015 and as such is presented as a reduction to 2015 current tax expense.
Significant components of our deferred tax assets and liabilities were attributable to:
(in Millions)
Reserves for discontinued operations, environmental and restructuring
Accrued pension and other postretirement benefits
Capital loss, foreign tax and other credit carryforwards
Net operating loss carryforwards
Deferred expenditures capitalized for tax
Other
Deferred tax assets
Valuation allowance, net
Deferred tax assets, net of valuation allowance
Property, plant and equipment, net
Deferred tax liabilities
NET DEFERRED TAX ASSETS
60
FMC CORPORATION - Form 10-K
$
$
$
$
$
$
December 31,
2016
148.4
40.5
23.3
173.8
15.3
189.9
591.2
(292.1)
299.1
221.7
221.7
77.4
$
$
$
$
2015
132.8
64.3
25.8
161.1
24.2
190.8
599.0
(272.5)
326.5
212.8
212.8
113.7
PART II
ITEM 8 Financial Statements and Supplementary Data
We evaluate our deferred income taxes quarterly to determine if valuation
allowances are required or should be adjusted. GAAP accounting guidance
requires companies to assess whether valuation allowances should be
established against deferred tax assets based on all available evidence,
both positive and negative, using a “more likely than not” standard. In
assessing the need for a valuation allowance, appropriate consideration
is given to all positive and negative evidence related to the realization of
deferred tax assets. This assessment considers, among other matters, the
nature and severity of current and cumulative losses, forecasts of future
profitability, the duration of statutory carryforward periods, and tax
planning alternatives. We operate and derive income from multiple lines
of business across multiple jurisdictions. As each of the respective lines
of business experiences changes in operating results across its geographic
footprint, we may encounter losses in jurisdictions that have been
historically profitable, and as a result might require additional valuation
allowances to be recorded. We are committed to implementing tax planning
actions, when deemed appropriate, in jurisdictions that experience losses
in order to realize deferred tax assets prior to their expiration.
During 2016, due to forecasts of domestic state taxable earnings, we
concluded that there is insufficient positive evidence to realize certain
portions of the U.S. state net deferred tax assets and established an
additional valuation allowance in the amount of $17.7 million.
During 2015, our Agricultural Solutions business in Brazil experienced
significant current and cumulative losses driven by unfavorable market
conditions. As of December 31, 2016, sufficient positive evidence to
realize the net deferred tax assets in Brazil was not available and a full
valuation allowance against those assets remains established.
At December 31, 2016, we had net operating loss and tax credit
carryforwards as follows: U.S. state net operating loss carryforwards
of $20.6 million (tax-effected) expiring in future years through 2036,
foreign net operating loss carryforwards of $153.2 million (tax-effected)
expiring in various future years, $19.2 million of U.S. capital loss
carryforwards expiring in 2020 and other tax credit carryforwards of
$4.1 million expiring in various future years.
The effective income tax rate applicable to income from continuing operations before income taxes was different from the statutory U.S. federal
income tax rate due to the factors listed in the following table:
Year Ended December 31,
$
(in Millions)
U.S. Federal statutory rate
Foreign earnings subject to different tax rates
State and local income taxes, less federal income tax benefit
Manufacturer’s production deduction and miscellaneous tax credits
Tax on intercompany dividends and deemed dividends for tax purposes
Changes to unrecognized tax benefits
Nondeductible expenses
Change in valuation allowance
Exchange gains and losses(1)
Other
TOTAL TAX PROVISION
(1) Includes impact of transaction gains or losses on net monetary assets for which no corresponding tax expense or benefit is realized and the tax provision for statutory
2015
(45.7)
(81.7)
(1.0)
(9.0)
12.6
9.9
7.8
178.7
(20.2)
(4.0)
47.4
2014
127.3
(83.9)
4.2
(6.4)
10.7
5.5
6.3
1.0
(7.2)
(1.3)
56.2
2016
118.8
(65.3)
5.4
(0.2)
3.5
5.8
9.3
24.8
(15.1)
6.9
93.9
$
$
$
$
$
taxable gains or losses in foreign jurisdictions for which there is no corresponding amount in income before taxes.
The material factors contributing to the increase in income from
continuing operations in 2016 compared to 2015 were prior year
Cheminova acquisition related charges incurred by our domestic
operations, improved results in our Agricultural Solutions business,
primarily in Brazil, and significant prior year restructuring charges.
These increases did not significantly impact the tax benefit attributable
to foreign earnings subject to different tax rates as the statutory tax
rates in the jurisdictions to which these items relate are similar to the
U.S. Federal statutory rate. Reduced earnings from operations located
in jurisdictions with lower tax rates than the U.S. Federal statutory
rate resulted in a decreased tax benefit for foreign earnings subject to
different tax rates in 2016 as compared to 2015.
The material factors contributing to the reduction in income from
continuing operations in 2015 compared to 2014 were Cheminova
acquisition related charges incurred by our domestic operations,
reduced results in our Agricultural Solutions business, primarily in
Brazil, as well as significant restructuring charges. The statutory tax
rates in the jurisdictions where these charges were incurred are similar
to the U.S. Federal statutory rate; therefore, the reduction in income
from continuing operations did not significantly impact the tax benefit
disclosed above for foreign earnings subject to different tax rates.
Earnings from operations located in jurisdictions with lower tax rates
than the U.S. Federal statutory rate, such as Ireland and Hong Kong,
were generally consistent in 2015 compared to 2014.
Unremitted earnings of foreign subsidiaries for which we have not
provided taxes approximate $2,413.3 million. We have not provided
taxes for these earnings given that our intention, as of December 31,
2016, is to indefinitely reinvest such earnings in the respective existing
foreign operations. We have not provided deferred tax liabilities for
basis differences in investments in subsidiaries because the investments
are essentially permanent in duration or we have concluded that no
additional tax liability will arise upon disposal. A liability may arise in
the future if our intention to indefinitely reinvest such earnings were
to change, however it is not practicable to estimate the income tax
liability that may be incurred.
Uncertain Income Tax Positions
U.S. GAAP accounting guidance for uncertainty in income taxes
prescribes a model for the recognition and measurement of a tax
position taken or expected to be taken in a tax return, and provides
guidance on derecognition, classification, interest and penalties,
disclosure and transition.
FMC CORPORATION - Form 10-K 61
PART II
ITEM 8 Financial Statements and Supplementary Data
We file income tax returns in the U.S. federal jurisdiction, and various
states and foreign jurisdictions. The income tax returns for FMC
entities taxable in the U.S. and significant foreign jurisdictions are
open for examination and adjustment. As of December 31, 2016, the
U. S. federal and state income tax returns are open for examination and
adjustment for the years 2013 - 2016 and 1998 - 2016, respectively.
Our significant foreign jurisdictions, which total 17, are open for
examination and adjustment during varying periods from 2006 - 2016.
the effective tax rate if recognized. Interest and penalties related to
unrecognized tax benefits are reported as a component of income tax
expense. For the years ended December 31, 2016, 2015 and 2014, we
recognized interest and penalties of $4.4 million, $2.0 million, and
$1.0 million, respectively, in the consolidated statements of income.
As of December 31, 2016 and 2015, we have accrued interest and
penalties in the consolidated balance sheets of $9.6 million and
$5.2 million, respectively.
As of December 31, 2016, we had total unrecognized tax benefits
of $111.6 million, of which $34.9 million would favorably impact
the effective tax rate from continuing operations if recognized. As
of December 31, 2015, we had total unrecognized tax benefits of
$97.1 million, of which $31.5 million would favorably impact
Due to the potential for resolution of federal, state, or foreign
examinations, and the expiration of various jurisdictional statutes of
limitation, it is reasonably possible that our liability for unrecognized
tax benefits will decrease within the next 12 months by a range of
$5.4 million to $6.6 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in Millions)
Balance at beginning of year
Increases related to positions taken in the current year
Increases for tax positions on acquisitions
Increases and decreases related to positions taken in prior years
Decreases related to lapse of statutes of limitations
Settlements during the current year
$
2016
97.1
22.3
—
2.6
(10.2)
(0.2)
111.6
$
$
2015
45.9
21.4
25.1
7.4
(2.7)
—
97.1
2014
35.5
9.6
—
1.5
—
(0.7)
45.9
BALANCE AT END OF YEAR(1)
(1) At December 31, 2016, 2015, and 2014 we recognized an offsetting non-current deferred asset of $74.4 million, $65.5 million, and $34.8 million respectively,
$
$
$
relating to specific uncertain tax positions presented above.
NOTE 12 Debt
Debt maturing within one year
Debt maturing within one year consists of the following:
(in Millions)
Short-term foreign debt(1)
Commercial paper(2)
Total short-term debt
$
$
$
December 31,
2016
85.5
6.3
91.8
2.4
94.2
$
$
2015
87.2
23.9
111.1
1.5
112.6
Current portion of long-term debt
SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT
(1) At December 31, 2016, the average effective interest rate on the borrowings was 8.67%. We often provide parent-company guarantees to lending institutions that
extend credit to our foreign subsidiaries. Since these guarantees are provided to consolidated subsidiaries the consolidated financial position is not affected by the
issuance of these guarantees.
$
(2) At December 31, 2016, the average effective interest rate on the borrowings was 0.95%.
Long-term debt
Long-term debt consists of the following:
December 31, 2016
December 31,
Interest Rate
Percentage
Maturity
Date
(in Millions)
Pollution control and industrial revenue bonds (less unamortized discounts
of $0.2 and $0.2, respectively)
Senior notes (less unamortized discounts of $1.4 and $1.7, respectively)
Term Loan Facility
Credit Facility(1)
Foreign debt
Debt issuance cost
Total long-term debt
Less: debt maturing within one year
TOTAL LONG-TERM DEBT, LESS CURRENT PORTION
(1) Letters of credit outstanding under the Credit Facility totaled $117.6 million and available funds under this facility were $1,376.1 million at December 31, 2016.
51.6
998.6
750.0
—
10.7
(9.7)
1,801.2
2.4
1,798.8
141.5
998.3
900.0
—
9.9
(11.9)
2,037.8
1.5
2,036.3
2021-2032 $
2019-2024
2020
2019
2017-2024
0.9-6.5%
3.95-5.2%
2.0%
3.2%
0-8.7%
$
$
$
$
$
2016
2015
62
FMC CORPORATION - Form 10-K
Maturities of long-term debt
Maturities of long-term debt outstanding, excluding discounts, at
December 31, 2016, are $2.4 million in 2017, $2.3 million in 2018,
$557.3 million in 2019, $496.9 million in 2020, $2.4 million in 2021
and $751.2 million thereafter.
Covenants
Among other restrictions, the Credit Facility and Term Loan Facility
contains financial covenants applicable to FMC and its consolidated
subsidiaries related to leverage (measured as the ratio of debt to adjusted
earnings) and interest coverage (measured as the ratio of adjusted earnings
to interest expense). Our actual leverage for the four consecutive quarters
ended December 31, 2016 was 3.1 which is below the maximum
leverage of 4.25. By the end of 2017, the maximum leverage ratio
will step down to 3.5 in accordance with the provisions of the Credit
Facility and the Term Loan Facility. Our actual interest coverage for the
four consecutive quarters ended December 31, 2016 was 8.2 which is
above the minimum interest coverage of 3.5. We were in compliance
with all covenants at December 31, 2016.
Term Loan Facility
On April 21, 2015 we borrowed $1.65 billion under our previously
announced senior unsecured Term Loan Facility. The proceeds of the
borrowing were used to finance the acquisition of Cheminova and to
pay costs, fees and expenses incurred in connection with the acquisition
and the Term Loan Facility. During 2016, we used operating cash to pay
down $150 million on the Term Loan Facility. At December 31, 2016,
PART II
ITEM 8 Financial Statements and Supplementary Data
$750 million remained outstanding under the Term Loan facility, as a
portion of the net proceeds from the sale of our FMC Alkali division
(see Note 9) was used to pay down the initial borrowings.
The scheduled maturity of the Term Loan Facility is on April 21, 2020.
The borrowings under the Term Loan Agreement will bear interest at a
floating rate, which will be a base rate or a euro currency rate equal to
the London interbank offered rate for the relevant interest period, plus
in each case an applicable margin, as determined in accordance with
the provisions of the Term Loan Agreement. The base rate will be the
highest of: the rate of interest announced publicly by Citibank, N.A.
in New York, New York from time to time as its “base rate”; the federal
funds effective rate plus 1/2 of one percent; and the Eurocurrency rate
for a one-month period plus one percent.
The Term Loan Agreement also contains a cross-default provision whereby
a default under our other indebtedness in excess of $50.0 million,
after grace periods and absent a waiver from the lenders, would be an
event of default under the Term Loan Agreement and could result in
a demand for payment of all amounts outstanding under this facility.
Fees incurred to secure the Term Loan Facility have been deferred and
will be amortized over the term of the arrangement.
Compensating Balance Agreements
We maintain 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.
NOTE 13 Pension and Other Postretirement Benefits
The funded status of our U.S. qualified and nonqualified defined benefit
pension plans, our United Kingdom, Ireland, Belgium, and Norway
defined benefit pension plans, plus our U.S. other postretirement
healthcare and life insurance benefit plans for continuing operations,
together with the associated balances and net periodic benefit cost
recognized in our consolidated financial statements as of December 31,
are shown in the tables below.
We are required to recognize in our consolidated balance sheets the
overfunded and underfunded status of our defined benefit postretirement
plans. The overfunded or underfunded status is defined as the difference
between the fair value of plan assets and the projected benefit obligation.
We are also required to recognize as a component of other comprehensive
income the actuarial gains and losses and the prior service costs and
credits that arise during the period.
The following table summarizes the weighted-average assumptions used to determine the benefit obligations at December 31 for the U.S. Plans:
Discount rate qualified
Discount rate nonqualified plan
Discount rate other benefits
Rate of compensation increase
Pensions and Other Benefits
December 31,
2016
4.22%
3.55%
3.77%
3.60%
2015
4.50%
3.72%
3.97%
3.60%
FMC CORPORATION - Form 10-K 63
PART II
ITEM 8 Financial Statements and Supplementary Data
The following table summarizes the components of our defined benefit postretirement plans and reflect a measurement date of December 31:
(in Millions)
Change in projected benefit obligation
Projected benefit obligation at January 1
Service cost
Interest cost
Actuarial loss (gain)(3)
Amendments
New disability pension
Foreign currency exchange rate changes
Plan participants’ contributions
Settlements
Transfer of liabilities from continuing to discontinued operations
Curtailments
Benefits paid
Projected benefit obligation at December 31
Change in plan assets
Fair value of plan assets at January 1
Actual return on plan assets
Foreign currency exchange rate changes
Company contributions
Plan participants’ contributions
Settlements
Other
Benefits paid
Pensions
Other Benefits(1)
December 31,
2016
2015
2016
2015
$ 1,452.5
8.8
50.9
65.8
0.7
(1.0)
(8.7)
—
(77.8)
—
(2.4)
(83.3)
$ 1,405.5
$ 1,569.0
13.0
61.0
(81.7)
1.5
—
(8.9)
—
(16.3)
—
(5.4)
(79.7)
$ 1,452.5
$ 1,271.0
106.4
(3.4)
67.1
—
(77.8)
(2.7)
(83.3)
$ 1,277.3
$ 1,344.9
(40.5)
(8.2)
76.9
—
(22.4)
—
(79.7)
$ 1,271.0
$
$
$
20.0
—
0.8
—
—
—
—
0.7
—
—
—
(2.3)
19.2
$
$
— $
—
—
1.6
0.7
—
—
(2.3)
26.4
—
0.9
(2.5)
(2.0)
—
—
2.1
—
(1.0)
—
(3.9)
20.0
—
—
—
1.8
2.1
—
—
(3.9)
—
Fair value of plan assets at December 31
Funded Status
U.S. plans with assets
U.S. plans without assets
Non-U.S. plans with assets
All other plans
NET FUNDED STATUS OF THE PLAN (LIABILITY)
Amount recognized in the consolidated balance sheets:
Accrued benefit liability(2)
TOTAL
(1) Refer to Note 9 for information on our discontinued postretirement benefit plans.
(2) Recorded as “Accrued pension and other postretirement benefits, current and long-term” on the consolidated balance sheets.
(3) In 2016, the Society of Actuaries released an updated mortality table projection scale for measurement of retirement program obligations. Adoption of this new
(88.3)
(33.3)
(3.7)
(2.9)
(128.2)
(135.3)
(37.5)
(4.8)
(3.9)
(181.5)
(19.2)
—
—
(19.2)
—
(20.0)
—
—
(20.0)
(181.5)
(181.5)
(128.2)
(128.2)
(19.2)
(19.2)
(20.0)
(20.0)
— $
— $
$
$
$
$
$
$
$
$
$
$
$
$
projection scale has decreased the U.S. defined benefit obligations by approximately $18 million at December 31, 2016.
The amounts in accumulated other comprehensive income (loss) that have not yet been recognized as components of net periodic benefit cost
are as follows:
(in Millions)
Prior service (cost) credit
Net actuarial (loss) gain
Accumulated other comprehensive income (loss) – pretax
$
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) – NET OF TAX $
(1) Refer to Note 9 for information on our discontinued postretirement benefit plans.
$
Pensions
Other Benefits(1)
December 31,
2016
(3.5)
(468.1)
(471.6)
(300.6)
$
$
$
2015
(3.6)
(495.5)
(499.1)
(314.0)
$
$
$
2016
(0.5)
9.2
8.7
5.6
$
$
$
2015
(0.6)
10.4
9.8
6.1
The accumulated benefit obligation for all pension plans was $1,367.4 million and $1,404.9 million at December 31, 2016 and 2015, respectively.
(in Millions)
Information for pension plans with projected benefit obligation in excess of plan assets
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
$
December 31,
2016
1,405.5 $
1,367.4
1,277.3
2015
1,458.5
1,414.2
1,277.0
64
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
(in Millions)
Information for pension plans with accumulated benefit obligation in excess of plan assets
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
$
December 31,
2016
1,405.5 $
1,367.4
1,277.3
2015
1,441.4
1,399.4
1,261.2
Other changes in plan assets and benefit obligations for continuing operations recognized in other comprehensive loss (income) are as follows:
Pensions
Other Benefits(1)
Year Ended December 31,
2016
(in Millions)
Current year net actuarial loss (gain)
Current year prior service cost (credit)
Amortization of net actuarial (loss) gain
Amortization of prior service (cost) credit
Recognition of prior service cost due to curtailment
Transfer of actuarial (loss) gain from continuing to discontinued operations
Curtailment (loss)
Settlement (loss)
Foreign currency exchange rate changes on the above line items
Total recognized in other comprehensive (income) loss, before taxes
TOTAL RECOGNIZED IN OTHER COMPREHENSIVE (INCOME) LOSS,
AFTER TAXES
(1) Refer to Note 9 for information on our discontinued postretirement benefit plans.
2016
40.5
0.2
(39.8)
(0.7)
—
—
0.4
(21.0)
(7.1)
(27.5)
(13.4)
$
$
$
$
$
$
2015
58.8
1.5
(54.7)
(0.8)
(4.8)
—
(5.4)
(8.9)
(7.2)
(21.5)
(15.4)
$
$
$
— $
—
1.1
—
—
—
—
—
—
1.1
$
2015
(2.5)
(2.1)
1.2
(0.1)
(0.5)
1.3
—
—
—
(2.7)
0.5
$
(1.7)
The estimated net actuarial loss and prior service cost for our pension
plans that will be amortized from accumulated other comprehensive
income (loss) into our net annual benefit cost (income) during 2017 are
$16.2 million and $0.7 million, respectively. The estimated net actuarial
gain and prior service cost for our other benefits that will be amortized
from accumulated other comprehensive income (loss) into net annual
benefit cost (income) during 2017 will be $(1.0) million and zero.
The following table summarizes the weighted-average assumptions used for and the components of net annual benefit cost (income):
(in Millions, except for percentages)
Discount rate
Expected return on plan assets
Rate of compensation increase
Components of net annual benefit cost (in millions):
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial and other (gain) loss
Recognized (gain) loss due to curtailments(2)
Recognized (gain) loss due to settlement
$
Year Ended December 31,
2016
4.50%
7.00%
3.60%
Pensions
2015
4.15%
7.25%
3.60%
2014
4.95%
7.75%
3.60%
Other Benefits(1)
2016
3.97%
—
—
2015
4.15%
—
—
2014
4.95%
—
—
$
$
$
$
8.8
50.9
(87.3)
0.7
41.3
(0.4)
21.0
35.0
13.0
61.0
(88.9)
0.8
54.6
4.8
8.9
54.2
17.3
62.3
(86.3)
1.9
30.5
—
4.2
29.9
—
0.8
—
—
(1.2)
—
—
(0.4)
— $
0.9
—
0.1
(1.2)
0.5
—
0.3
0.1
1.0
—
0.2
(1.6)
—
—
(0.3)
NET ANNUAL BENEFIT COST
(1) Refer to Note 9 for information on our discontinued postretirement benefit plans.
(2) In 2015, the Curtailment loss is associated with the disposal of our FMC Alkali Chemicals division and was recorded to discontinued operations within the
$
$
$
$
$
$
consolidated statements of income (loss).
On December 31, 2015, we changed the method we used to estimate
the service cost and interest cost components of our net periodic
benefit cost for our US defined benefit pension plans. We use a full
yield curve approach in the estimate of these components of benefit
cost by applying specific spot rates along the yield curve used in the
determination of the benefit obligation to the relevant projected
cash flows as we believe this provides a better estimate of service and
interest costs. For fiscal 2016, the change in estimate from a single
weighted average discount rate to a spot rate approach reduced US
pension and postretirement net periodic benefit cost by $12 million.
FMC CORPORATION - Form 10-K 65
PART II
ITEM 8 Financial Statements and Supplementary Data
Historically, we have amortized unrecognized gains and losses using
the corridor method over the average remaining service period of active
participants of approximately eight years. As of December 31, 2016,
approximately 95% of the participants in our U.S. qualified plan and
approximately 93% of the participants in our U.S. postretirement
life plan were inactive. Therefore, for fiscal 2017, we will amortize
gains and losses over the average remaining life expectancy of the
inactive population for these two plans. The gain/loss amortization
period for the U.S. qualified pension plan will increase from about
eight years to about nineteen years as a result of this change. We
consider this a change in estimate and, accordingly, will account for
it prospectively in 2017. For fiscal 2017, the change in estimate from
amortizing gains and losses over the expected lifetime of the inactive
population rather than the average remaining service period of active
participants is expected to reduce US pension and postretirement net
periodic benefit cost by approximately $18 million to $22 million
when compared to the prior estimate.
Our U.S. qualified defined benefit pension plan (“U.S. Plan”) holds
the majority of our pension plan assets. The expected long-term
rate of return on these plan assets was 7.00% for the year ended
December 31, 2016, 7.25% for the year ended December 31, 2015
and 7.75% for the year ended December 31, 2014. In developing
the assumption for the long-term rate of return on assets for our U.S.
Plan, we take into consideration the technical analysis performed by
our outside actuaries, including historical market returns, information
on the assumption for long-term real returns by asset class, inflation
assumptions and expectations for standard deviation related to these
best estimates. We also consider the historical performance of our
own plan’s trust, which has earned a compound annual rate of return
of approximately 8.4 percent over the last 20 years (which is in
excess of comparable market indices for the same period) and other
factors. Given an actively managed investment portfolio, the expected
annual rates of return by asset class for our portfolio, assuming an
estimated inflation rate of approximately 2.1 percent, is between
8.4 percent and 9.6 percent for equities, and between 5.7 percent
and 7.7 percent for fixed-income investments, which generates a total
expected portfolio return that is in line with our assumption for the
rate of return on assets. The target asset allocation for 2016, by asset
category, is 80 percent to 90 percent equity securities, 10 percent to
20 percent fixed income investments and zero to five percent cash
and other short-term investments.
Our U.S. qualified pension plan’s investment strategy consists of a
total return investment management approach using a portfolio mix
of equities and fixed income investments to maximize the long-term
return of plan assets for an appropriate level of risk. The goal of this
strategy is to minimize plan expenses by matching asset growth to the
plan’s liabilities over the long run. Furthermore, equity investments are
weighted towards value equities and diversified across U.S. and non-U.S.
stocks. Derivatives and hedging instruments may be used effectively
to manage and balance risks associated with the plan’s investments.
Investment performance and related risks are measured and monitored
on an ongoing basis through annual liability measurements, periodic
asset and liability studies, and quarterly investment portfolio reviews.
66
FMC CORPORATION - Form 10-K
The following tables present our fair value hierarchy for our major categories of pension plan assets by asset class. See Note 17 for the definition
of fair value and the descriptions of Level 1, 2 and 3 in the fair value hierarchy.
PART II
ITEM 8 Financial Statements and Supplementary Data
(in Millions)
Cash and short-term investments
Equity securities:
Common stock
Preferred stock
Mutual funds and other investments
Fixed income investments:
Investment contracts
Mutual funds
Corporate debt instruments
Government debt
Other investments:
Real estate/property
Other
Investments measured at net asset value(1)
TOTAL ASSETS
(in Millions)
Cash and short-term investments
Equity securities:
Common stock
Preferred stock
Mutual funds and other investments
Fixed income investments:
Investment contracts
Mutual funds
Corporate debt instruments
Government debt
Other investments:
Real estate/property
Other
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
12/31/2016
$
118.6 $
118.6 $
— $
Significant
Unobservable
Inputs (Level 3)
—
692.0
—
154.6
220.0
11.2
—
—
2.6
(0.5)
78.8
1,277.3 $
692.0
—
154.6
21.2
11.2
—
—
2.6
(0.5)
—
—
—
153.2
—
—
—
—
—
—
—
—
45.6
—
—
—
—
—
999.7 $
153.2 $
45.6
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
12/31/2015
62.4 $
62.4 $
— $
Significant
Unobservable
Inputs (Level 3)
—
$
$
742.1
0.3
187.9
174.0
9.8
1.2
2.5
0.8
0.1
89.9
1,271.0 $
742.1
0.3
187.9
—
9.8
1.2
2.5
—
—
—
—
—
174.0
—
—
—
—
—
—
—
—
—
—
—
—
0.8
0.1
Investments measured at net asset value(1)
TOTAL ASSETS
0.9
$
(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the
fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented
in the statement of financial position. These investments are redeemable with the fund at net asset value under the original terms of the partnership agreements
and/or subscription agreements and operations of the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the
funds in the future in accordance with the underlying fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and
the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the interests in the funds. Furthermore,
changes to the liquidity provisions of the funds may significantly impact the fair value of the interest in the funds.
1,006.2 $
174.0 $
The following table summarizes the changes in fair value of the Level 3 investments as of December 31, 2015 and December 31, 2016:
Investment Contracts(1)
—
Balance, December 31, 2015
45.6
Purchases
45.6
Net transfers into Level 3
BALANCE, DECEMBER 31, 2016
45.6
(1) Investment contracts consist of insurance group annuity contracts purchased to match the pension benefit payment stream owed to certain selected plan participant
demographics within a few major U.K. defined benefit plans. Annuity contracts are valued using a discounted cash flow model utilizing assumptions such as
discount rate, mortality, and inflation.
$
$
FMC CORPORATION - Form 10-K 67
PART II
ITEM 8 Financial Statements and Supplementary Data
The changes in fair value for categories other than investment contracts was not considered material.
We made the following contributions to our pension and other postretirement benefit plans:
(in Millions)
U.S. qualified pension plan
U.S. nonqualified pension plan
Non-U.S. plans
Other postretirement benefits, net of participant contributions
TOTAL
Year Ended December 31,
2016
35.0 $
4.8
27.3
1.6
68.7 $
2015
65.0
7.8
4.1
1.8
78.7
$
$
In 2016, we made a $21 million payment into our U.K. pension plan
in order to annuitize our remaining pension obligation. This action
removed all future funding requirements for this plan. By the end of
2017, the plan termination will be complete and at that point, we
will no longer have a pension liability for the U.K plan. The assets of
approximately $45 million supporting the remaining pension obligation
were moved into an annuity at December 31, 2016 which qualified as
a Level 3 investment in the fair value hierarchy above table.
We expect our voluntary cash contributions to our U.S. qualified
pension plan to be $40 million in 2017.
The following table reflects the estimated future benefit payments for our pension and other postretirement benefit plans. These estimates take
into consideration expected future service, as appropriate:
ESTIMATED NET FUTURE BENEFIT PAYMENTS IN MILLIONS
(in Millions)
2017
2018
2019
2020
2021
2022-2026
Assumed health care cost trend rates have an effect on the other
postretirement benefit obligations and net periodic other postretirement
benefit costs reported for the health care portion of the other postretirement
plan. A one-percentage point change in the assumed health care cost
trend rates would be immaterial to our net periodic other postretirement
benefit costs for the year ended December 31, 2016, and our other
postretirement benefit obligation at December 31, 2016.
FMC Corporation Savings and Investment Plan
The FMC Corporation Savings and Investment Plan is a qualified
salary-reduction plan under Section 401(k) of the Internal Revenue
Code in which substantially all of our U.S. employees may participate
NOTE 14 Share-based Compensation
Stock Compensation Plans
We have a share-based compensation plan, which has been approved
by the stockholders, for certain employees, officers and directors. This
plan is described below.
FMC Corporation Incentive Compensation and
Stock Plan
The FMC Corporation Incentive Compensation and Stock Plan (the
“Plan”) provides for the grant of a variety of cash and equity awards
to officers, directors, employees and consultants, including stock
options, restricted stock, performance units (including restricted
stock units), stock appreciation rights, and multi-year management
incentive awards payable partly in cash and partly in common stock.
68
FMC CORPORATION - Form 10-K
Pension Benefits
$
$
$
$
$
$
86.1 $
85.2 $
86.1 $
85.8 $
85.5 $
427.8 $
Other Benefits
1.9
1.9
1.8
1.7
1.7
7.0
by contributing a portion of their compensation. For eligible employees
participating in the Plan, except for those employees covered by certain
collective bargaining agreements, the Company makes matching
contributions of 80 percent of the portion of those contributions up
to five percent of the employee’s compensation. Eligible employees
participating in the Plan that do not participate in the U.S. qualified
pension plan are entitled to receive an employer contribution of five
percent of the employee’s eligible compensation. Charges against
income for all contributions were $8.9 million in 2016, $8.9 million
in 2015, and $11.4 million in 2014.
The Compensation and Organization Committee of the Board of
Directors (the “Committee”), subject to the provisions of the Plan,
approves financial targets, award grants, and the times and conditions for
payment of awards to employees. The total number of shares of common
stock authorized for issuance under the Plan is 29.0 million of which
approximately 4.3 million shares of common stock are available for
future grants of share based awards under the Plan as of December 31,
2016. The FMC Corporation Non-Employee Directors’ Compensation
Policy, administered by the Nominating and Corporate Governance
Committee of the Board of Directors, sets forth the compensation to
be paid to the directors, including awards (currently restricted stock
units only) to be made to directors under the Plan.
PART II
ITEM 8 Financial Statements and Supplementary Data
Stock options granted under the Plan may be incentive or nonqualified
stock options. The exercise price for stock options may not be less than
the fair market value of the stock at the date of grant. Awards granted
under the Plan vest or become exercisable or payable at the time
designated by the Committee, which has generally been three years
from the date of grant. Incentive and nonqualified options granted
under the Plan expire not later than 10 years from the grant date.
Under the Plan, awards of restricted stock and restricted stock units
may be made to selected employees. The awards vest over periods
designated by the Committee, which has generally been three years,
with vesting conditional upon continued employment. Compensation
cost is recognized over the vesting periods based on the market value
of the stock on the date of the award. Restricted stock units granted
to directors under the Plan vest immediately if granted as part of, or
in lieu of, the annual retainer; other restricted stock units granted to
directors vest at the Annual Meeting of Shareholders in the calendar
year following the May 1 annual grant date (but are subject to forfeiture
on a pro rata basis if the director does not serve the full year except
under certain circumstances).
At December 31, 2016 and 2015, there were restricted stock units
representing an aggregate of 207,511 shares and 168,634 shares of
common stock, respectively, credited to the directors’ accounts.
Stock Compensation
We recognized the following stock compensation expense:
Year Ended December 31,
(in Millions)
Stock Option Expense, net of taxes of $2.6, $2.4 and $2.2(1)
Restricted Stock Expense, net of taxes of $3.8, $3.0 and $3.3(2)
Performance Based Expense, net of taxes of $1.1, $0.3 and zero
TOTAL STOCK COMPENSATION EXPENSE, NET OF TAXES OF $7.5, $5.7 AND $5.5(3)
(1) We applied an estimated forfeiture rate of four percent per stock option grant in the calculation of the expense.
(2) We applied an estimated forfeiture rate of two percent of outstanding grants in the calculation of the expense.
(3) This expense is classified as selling, general and administrative expense in our consolidated statements of income. Total stock compensation expense, net of tax,
of zero, $0.6 million, and $1.4 million for the years ended December 31, 2016, 2015 and 2014, respectively, is included in “Discontinued operations, net of
income taxes” in the Consolidated Statements of Income.
2015
4.1
5.1
0.5
9.7
2016
4.4
6.5
1.8
12.7
2014
3.8
5.5
—
9.3
$
$
$
$
$
$
We received $4.1 million, $5.9 million and $8.6 million in cash related
to stock option exercises for the years ended December 31, 2016, 2015
and 2014, respectively. The shares used for the exercise of stock options
occurring during the years ended December 31, 2016, 2015 and 2014
came from treasury shares.
For tax purposes, share-based compensation expense is deductible in
the year of exercise or vesting based on the intrinsic value of the award
on the date of exercise or vesting. For financial reporting purposes,
share-based compensation expense is based upon grant-date fair value
and amortized over the vesting period. Excess tax benefits represent the
difference between the share-based compensation expense for financial
reporting purposes and the deduction taken for tax purposes. The excess
tax benefits for the years ended December 31, 2016, 2015 and 2014
totaled $(0.4) million, $1.4 million and $4.7 million, respectively.
Stock Options
The grant-date fair values of the stock options we granted in the years
ended December 31, 2016, 2015 and 2014 were estimated using the
Black-Scholes option valuation model, the key assumptions for which
are listed in the table below. The expected volatility assumption is based
on the actual historical experience of our common stock. The expected
life represents the period of time that options granted are expected to
be outstanding. The risk-free interest rate is based on U.S. Treasury
securities with terms equal to the expected timing of stock option
exercises as of the grant date. The dividend yield assumption reflects
anticipated dividends on our common stock. Employee stock options
generally vest after a three year period and expire ten years from the
date of grant.
Black Scholes Valuation Assumptions for Stock Option Grants
Expected dividend yield
Expected volatility
Expected life (in years)
Risk-free interest rate
2016
1.77%
26.57%
6.5
1.39%
2015
0.95%
40.95%
6.5
1.74%
2014
0.74%
41.96%
6.5
2.01%
The weighted-average grant-date fair value of options granted during the years ended December 31, 2016, 2015 and 2014 was $8.54, $24.68
and $30.01 per share, respectively.
FMC CORPORATION - Form 10-K 69
PART II
ITEM 8 Financial Statements and Supplementary Data
The following summary shows stock option activity for employees under the Plan for the three years ended December 31, 2016:
December 31, 2013 (948 shares exercisable)
Granted
Exercised
Forfeited
December 31, 2014 (1,023 shares exercisable
and 1,903 shares expected to vest or be exercised)
Granted
Exercised
Forfeited
December 31, 2015 (1,200 shares exercisable
and 832 shares expected to vest or be exercised)
Granted
Exercised
Forfeited
DECEMBER 31, 2016 (1,292 SHARES
EXERCISABLE AND 1,373 SHARES EXPECTED
TO VEST OR BE EXERCISED)
Number of Options
Granted But Not
Exercised
(Shares in Thousands)
Weighted-Average
Remaining Contractual
Life (in Years)
Weighted-Average
Exercise Price Per
Share
2,058
253
(313)
(67)
1,931
408
(213)
(55)
2,071
933
(171)
(84)
5.9 years
$
5.5 years
$
5.6 years
$
36.76
72.66
27.76
51.15
42.46
63.37
27.77
62.38
47.52
37.39
25.59
51.17
Aggregate Intrinsic
Value
(In Millions)
79.6
$
14.0
32.7
6.6
8.7
$
$
2,749
6.1 YEARS
$
45.34
$
37.6
The number of stock options indicated in the above table as being
exercisable as of December 31, 2016, had an intrinsic value of
$20.8 million, a weighted-average remaining contractual term of
3.3 years, and a weighted-average exercise price of $41.22.
to expense on a straight-line basis over the vesting period during which
the employees perform related services, which is typically three years
except for those eligible for retirement prior to the stated vesting period
as well as non-employee directors.
As of December 31, 2016, we had total remaining unrecognized
compensation cost related to unvested stock options of $7.9 million
which will be amortized over the weighted-average remaining requisite
service period of approximately 1.69 years.
Restricted and Performance Based Equity Awards
The grant-date fair value of restricted stock awards and stock units under
the Plan is based on the market price per share of our common stock
on the date of grant, and the related compensation cost is amortized
Starting in 2014, we began granting performance based restricted stock
awards. The performance based share awards represent a number of
shares of common stock to be awarded upon settlement based on the
achievement of certain market-based performance criteria over a three
year period. These awards generally vest upon the completion of a
three year period from the date of grant; however certain performance
criteria is measured on an annual basis. The fair value of the equity
classified performance-based share awards is determined based on the
number of shares of common stock to be awarded and a Monte Carlo
valuation model.
The following table shows our employee restricted award activity for the three years ended December 31, 2016:
(Number of Awards in Thousands)
Nonvested at December 31, 2013
Granted
Vested
Forfeited
Nonvested at December 31, 2014
Granted
Vested
Forfeited
Nonvested at December 31, 2015
Granted
Vested
Forfeited
NONVESTED AT DECEMBER 31, 2016
Restricted Equity
Weighted-
Average
Grant Date
Fair Value
49.07
71.92
46.06
57.40
57.86
56.33
49.06
64.27
57.36
37.44
56.12
52.67
48.56
$
$
$
$
Number of
awards
523
129
(203)
(21)
428
163
(190)
(25)
376
271
(120)
(31)
496
Number of
awards
Performance Based Equity
Weighted-
Average
Grant Date
Fair Value
—
—
—
—
—
81.06
—
—
81.06
41.66
—
—
49.55
— $
—
—
—
— $
32
—
—
32
126
—
—
158
$
$
As of December 31, 2016, we had total remaining unrecognized compensation cost related to unvested restricted awards of $14.4 million which
will be amortized over the weighted-average remaining requisite service period of approximately 1.9 years.
70
FMC CORPORATION - Form 10-K
NOTE 15 Equity
The following is a summary of our capital stock activity over the past three years:
December 31, 2013
Stock options and awards
December 31, 2014
Stock options and awards
December 31, 2015
Stock options and awards
Repurchases of common stock, net
DECEMBER 31, 2016
PART II
ITEM 8 Financial Statements and Supplementary Data
Common
Stock Shares
185,983,792
—
185,983,792
—
185,983,792
—
—
185,983,792
Treasury
Stock Shares
53,098,103
(431,982)
52,666,121
(338,106)
52,328,015
(244,329)
210,000
52,293,686
Accumulated other comprehensive income (loss)
Summarized below is the roll forward of accumulated other comprehensive income (loss), net of tax.
(in Millions)
Accumulated other comprehensive income (loss), net of tax at December 31, 2013
2014 Activity
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (gain)
Accumulated other comprehensive income (loss), net of tax at December 31, 2014 $
2015 Activity
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (gain)
Accumulated other comprehensive income (loss), net of tax at December 31, 2015 $
2016 Activity
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive income (gain)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX AT DECEMBER 31, 2016
(1) See Note 17 for more information.
(2) See Note 13 for more information.
Foreign
currency
adjustments
Derivative
Instruments(1)
Pension
and other
postretirement
benefits(2)
$
(25.3) $
(6.1) $
(170.5) $
Total
(201.9)
(74.7)
49.6
(50.4) $
(96.9)
—
(147.3) $
(46.7)
—
3.1
(0.9)
(3.9) $
0.7
(3.0)
(6.2) $
7.3
6.0
(173.3) $
22.3
$
(321.5) $
(244.9)
71.0
(375.8)
(26.4) $
44.1
$
(303.8) $
(122.6)
41.1
(457.3)
(26.9) $
$
39.2
(66.3)
45.2
$
(194.0) $
7.1
$
(291.5) $
(478.4)
FMC CORPORATION - Form 10-K 71
PART II
ITEM 8 Financial Statements and Supplementary Data
Reclassifications of accumulated other comprehensive income (loss)
The table below provides details about the reclassifications from accumulated other comprehensive income (loss) and the affected line items in
the consolidated statements of income for each of the periods presented.
Details about Accumulated Other Comprehensive
Income Components
Amounts Reclassified from Accumulated Other
Comprehensive Income(1)
Year Ended December 31,
Affected Line Item in the Consolidated
Statements of Income
(in Millions)
Foreign currency translation adjustments:
Divestiture of FMC Peroxygens(3)
Derivative instruments:
Foreign currency contracts
Energy contracts
Foreign currency contracts
Total before tax
Amount included in net income
Pension and other postretirement benefits(2):
Amortization of prior service costs
Amortization of unrecognized net actuarial and
other gains (losses)
Recognized loss due to settlement
Total before tax
$
$
$
$
$
2016
—
(11.2) $
(2.3)
4.2
(9.3) $
3.3
(6.0) $
2015
—
43.0
(4.8)
(32.5)
5.7
(2.7)
3.0
$
$
$
2014
(49.6) Discontinued operations, net of income taxes
Selling, general and administrative expenses
3.0 Costs of sales and services
1.4 Costs of sales and services
(2.9)
1.5
(0.6) Provision for income taxes
0.9
(0.8) $
(0.9) $
(2.1)
Selling, general and administrative expenses
(38.4)
(20.6)
(59.8) $
20.6
(39.2) $
(52.2)
(14.2)
(67.3) $
23.2
(44.1) $
(28.9)
(4.2)
(35.2)
12.9
(22.3)
Selling, general and administrative expenses
Selling, general and administrative expenses
Provision for income taxes
Amount included in net income
TOTAL RECLASSIFICATIONS FOR
THE PERIOD
(1) Amounts in parentheses indicate charges to the consolidated statements of income.
(2) Pension and other postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations
(71.0) Amount included in net income
(45.2) $
(41.1) $
$
$
components of pension and other postretirement benefits, see Note 13.
(3) The reclassification of historical cumulative translation adjustments was the result of the divestiture of our FMC Peroxygens business. The loss recognized from this
reclassification is considered permanent for tax purposes and therefore no tax has been provided. See Note 9 for more information. In accordance with accounting
guidance, this amount was previously factored into the lower of cost or fair value test associated with the 2013 Peroxygens’ asset held for sale write-down charges.
Transactions with Noncontrolling Interest
In 2014 we purchased the remaining 6.25 percent ownership interest
from the last remaining non-controlling interest holder of a legal entity
within our discontinued FMC Alkali Chemicals division for $95.7
million. See Note 9 for subsequent disposal of this division in 2015.
During the third quarter 2016, we terminated a joint venture in
Argentina for which we had a controlling interest. See Note 7 for
more information. During the fourth quarter 2016, we also acquired
the remaining noncontrolling interest in a joint venture in China.
Dividends and Share Repurchases
On January 19, 2017, we paid dividends totaling $22.1 million to
our shareholders of record as of December 31, 2016. This amount is
included in “Accrued and other liabilities” on the consolidated balance
sheets as of December 31, 2016. For the years ended December 31,
2016, 2015 and 2014, we paid $88.6 million, $86.4 million and
$78.1 million in dividends, respectively.
In 2016, we repurchased $11.2 million of shares under the publicly
announced repurchase program. At December 31, 2016, $238.8 million
remained unused under our Board-authorized repurchase program.
This repurchase program does not include a specific timetable or price
targets and may be suspended or terminated at any time. Shares may
be purchased through open market or privately negotiated transactions
at the discretion of management based on its evaluation of market
conditions and other factors. We also reacquire shares from time to time
from employees in connection with the vesting, exercise and forfeiture
of awards under our equity compensation plans.
72
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 16 Earnings Per Share
Earnings per common share (“EPS”) is computed by dividing net
income by the weighted average number of common shares outstanding
during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares
related to our stock options, restricted stock and restricted stock units.
Diluted earnings per share (“Diluted EPS”) considers the impact of
potentially dilutive securities except in periods in which there is a loss
because the inclusion of the potential common shares would have
an antidilutive effect. Diluted EPS excludes the impact of potential
common shares related to our stock options in periods in which the
option exercise price is greater than the average market price of our
common stock for the period. For the year ended December 31, 2016,
there were 0.6 million potential common shares excluded from Diluted
EPS. For the year ended December 31, 2015, we had a net loss from
continuing operations attributable to FMC stockholders. As such,
all 1.7 million potential common shares were excluded from Diluted
EPS. For the year ended December 31, 2014 there were 0.4 million
of potential common shares excluded from Diluted EPS.
Our non-vested restricted stock awards contain rights to receive non-
forfeitable dividends, and thus, are participating securities requiring the
two-class method of computing EPS. The two-class method determines
EPS by dividing the sum of distributed earnings to common stockholders
and undistributed earnings allocated to common stockholders by the
weighted average number of shares of common stock outstanding for
the period. In calculating the two-class method, undistributed earnings
are allocated to both common shares and participating securities based
on the weighted average shares outstanding during the period.
Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
Year Ended December 31,
(in Millions, Except Share and Per Share Data)
Earnings (loss) attributable to FMC stockholders:
Continuing operations, net of income taxes
Discontinued operations, net of income taxes
Net income
Less: Distributed and undistributed earnings allocable to restricted award holders
NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS
Basic earnings (loss) per common share attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME
Diluted earnings (loss) per common share attributable to FMC stockholders:
Continuing operations
Discontinued operations
NET INCOME
Shares (in thousands):
Weighted average number of shares of common stock outstanding – Basic
Weighted average additional shares assuming conversion of potential common shares
SHARES – DILUTED BASIS
$
$
$
$
$
$
$
2016
242.8
(33.7)
209.1
(0.7)
208.4
1.81
(0.25)
1.56
1.81
(0.25)
1.56
$
$
$
$
$
$
$
2015
(187.4) $
676.4
489.0
—
489.0
$
$
(1.40) $
5.06
3.66
$
(1.40) $
5.06
3.66
$
2014
298.2
9.3
307.5
(0.9)
306.6
2.23
0.07
2.30
2.22
0.07
2.29
133,890
648
134,538
133,696
—
133,696
133,327
955
134,282
NOTE 17 Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term
assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value
of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument
Foreign exchange forward contracts
Commodity forward and option contracts
Debt
Valuation Method
Estimated amounts that would be received or paid to terminate the contracts at the reporting date
based on current market prices for applicable currencies.
Estimated amounts that would be received or paid to terminate the contracts at the reporting date
based on quoted market prices for applicable commodities.
Our estimates and information obtained from independent third parties using market data, such as
bid/ask spreads for the last business day of the reporting period.
FMC CORPORATION - Form 10-K 73
PART II
ITEM 8 Financial Statements and Supplementary Data
The estimated fair value of the financial instruments in the above table
have been determined using standard pricing models which take into
account the present value of expected future cash flows discounted to the
balance sheet date. These standard pricing models utilize inputs derived
from, or corroborated by, observable market data such as interest rate yield
curves and currency and commodity spot and forward rates. In addition,
we test a subset of our valuations against valuations received from the
transaction’s counterparty to validate the accuracy of our standard pricing
models. Accordingly, the estimates presented may not be indicative of the
amounts that we would realize in a market exchange at settlement date
and do not represent potential gains or losses on these agreements. The
estimated fair values of foreign exchange forward contracts and commodity
forward and option contracts are included in the tables within this Note.
The estimated fair value of debt is $1,964.9 million and $2,214.0 million
and the carrying amount is $1,893.0 million and $2,148.9 million as of
December 31, 2016 and December 31, 2015, respectively.
We enter into various financial instruments with off-balance-sheet
risk as part of the normal course of business. These off-balance sheet
instruments include financial guarantees and contractual commitments
to extend financial guarantees under letters of credit, and other assistance
to customers. See Note 18 for more information. Decisions to extend
financial guarantees to customers, and the amount of collateral required
under these guarantees is based on our evaluation of creditworthiness
on a case-by-case basis.
Use of Derivative Financial Instruments to
Manage Risk
We mitigate certain financial exposures, including currency risk,
commodity purchase exposures and interest rate risk through a program of
risk management that includes the use of derivative financial instruments.
We enter into foreign exchange contracts, including forward and
purchased option contracts, to reduce the effects of fluctuating foreign
currency exchange rates.
We formally document all relationships between hedging instruments
and hedged items, as well as the risk management objective and
strategy for undertaking various hedge transactions. This process
includes relating derivatives that are designated as fair value or cash
flow hedges to specific assets and liabilities on the balance sheet or to
specific firm commitments or forecasted transactions. We also assess
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 we determine that a derivative is
not highly effective as a hedge, or if a derivative ceases to be a highly
effective hedge, we discontinue hedge accounting with respect to that
derivative prospectively.
Foreign Currency Exchange Risk Management
We conduct business in many foreign countries, exposing earnings, cash
flows, and our financial position to foreign currency risks. The majority of
these risks arise as a result of foreign currency transactions. Our policy is
to minimize exposure to adverse changes in currency exchange rates. This
is accomplished through a controlled program of risk management that
includes the use of foreign currency debt and forward foreign exchange
contracts. We also use forward foreign exchange contracts to hedge firm
and highly anticipated foreign currency cash flows, with an objective of
balancing currency risk to provide adequate protection from significant
fluctuations in the currency markets.
74
FMC CORPORATION - Form 10-K
The primary currencies for which we have exchange rate exposure are
the U.S. dollar versus the Brazilian Real, the Euro, the Chinese yuan,
the Mexican peso and the Argentine peso.
Commodity Price Risk
We are exposed to risks in energy costs due to fluctuations in energy
prices, particularly natural gas. We attempt to mitigate our exposure to
increasing energy costs by hedging the cost of future deliveries of natural gas.
Interest Rate Risk
We use various strategies to manage our interest rate exposure, including
entering into interest rate swap agreements to achieve a targeted mix
of fixed and variable-rate debt. In the agreements we exchange, at
specified intervals, the difference between fixed and variable-interest
amounts calculated on an agreed-upon notional principal amount. As
of December 31, 2016 and December 31, 2015, we had no such swap
agreements in place.
Concentration of Credit Risk
Our counterparties to derivative contracts are primarily major financial
institutions. We limit the dollar amount of contracts entered into with any
one financial institution and monitor counterparties’ credit ratings. We
also enter into master netting agreements with each financial institution,
where possible, which helps mitigate the credit risk associated with our
financial instruments. While we may be exposed to credit losses due to
the nonperformance of counterparties, we consider this risk remote.
Financial Guarantees and Letter-of-Credit
Commitments
We enter into various financial instruments with off-balance-sheet
risk as part of the normal course of business. These off-balance-
sheet instruments include financial guarantees and contractual
commitments to extend financial guarantees under letters of credit
and other assistance to customers . See Notes 1 and 19 for more
information. Decisions to extend financial guarantees to customers,
and the amount of collateral required under these guarantees, is
based on our evaluation of creditworthiness on a case-by-case basis.
Accounting for Derivative Instruments and
Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the
date we enter into the derivative instrument, we generally designate
the derivative as a hedge of the variability of cash flows to be received
or paid related to a forecasted transaction (cash flow hedge). We record
in AOCI changes in the fair value of derivatives that are designated
as and meet all the required criteria for, a cash flow hedge. We then
reclassify these amounts into earnings as the underlying hedged
item affects earnings. In contrast we immediately record in earnings
changes in the fair value of derivatives that are not designated as
cash flow hedges.
As of December 31, 2016, we had open foreign currency forward
contracts in AOCI in a net after-tax gain position of $4.6 million
designated as cash flow hedges of underlying forecasted sales and
purchases. Current open contracts hedge forecasted transactions until
December 29, 2017. At December 31, 2016, we had open forward
contracts with various expiration dates to buy, sell or exchange foreign
currencies with a U.S. dollar equivalent of approximately $419.2 million.
As of December 31, 2016, we had current open commodity contracts
in AOCI in a net after-tax gain position of $1.4 million designated as
cash flow hedges of underlying forecasted purchases, primarily related
to natural gas. Current open commodity contracts hedge forecasted
transactions until December 31, 2017. At December 31, 2016, we
had 2.2 mmBTUs (millions of British Thermal Units) in aggregate
notional volume of outstanding natural gas commodity forward
contracts to hedge forecasted purchases.
Approximately all of the $6.0 million of net after-tax gains, representing
both open foreign currency exchange contracts and open commodity
contracts, will be realized in earnings during the twelve months ending
Fair Value of Derivative Instruments
PART II
ITEM 8 Financial Statements and Supplementary Data
December 31, 2017 if spot rates in the future are consistent with forward
rates as of December 31, 2016. The actual effect on earnings will be
dependent on the actual spot rates when the forecasted transactions
occur. We recognize derivative gains and losses in the “Costs of sales
and services” line in the consolidated statements of income.
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as
cash flow hedging instruments for accounting purposes. Contracts used
to hedge the exposure to foreign currency fluctuations associated with
certain monetary assets and liabilities are not designated as cash flow
hedging instruments, and changes in the fair value of these items are
recorded in earnings.
We had open forward contracts not designated as cash flow hedging
instruments for accounting purposes with various expiration dates to
buy, sell or exchange foreign currencies with a U.S. dollar equivalent of
approximately $1,466.8 million at December 31, 2016.
The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments as of December 31, 2016 and 2015.
(in Millions)
Derivatives
Foreign exchange contracts
Energy contracts
Total derivative assets(1)
Foreign exchange contracts
Energy contracts
Total derivative liabilities(2)
NET DERIVATIVE ASSETS/(LIABILITIES)
Gross Amount of Derivatives
December 31, 2016
Designated
as Cash Flow
Hedges
Not Designated
as Hedging
Instruments
Total Gross
Amounts
Gross Amounts
Offset in the
Consolidated
Balance Sheet(3)
Net Amounts
$
$
$
$
9.8
2.0
11.8
(5.5)
—
(5.5)
6.3
$
$
$
$
$
$
0.8
—
0.8
(9.6)
—
(9.6) $
(8.8) $
$
$
10.6
2.0
12.6
(15.1)
—
(15.1) $
(2.5) $
(6.2) $
—
(6.2) $
6.2
—
6.2 $
— $
4.4
2.0
6.4
(8.9)
—
(8.9)
(2.5)
Gross Amount of Derivatives
December 31, 2015
Designated
as Cash Flow
Hedges
Not Designated
as Hedging
Instruments
$
(in Millions)
Derivatives
Foreign exchange contracts
Energy contracts
Total derivative assets(1)
Foreign exchange contracts
Energy contracts
Total derivative liabilities(2)
NET DERIVATIVE ASSETS (LIABILITIES)
(1) Net balance is included in “Prepaid and other current assets” in the consolidated balance sheets.
(2) Net balance is included in “Accrued and other liabilities” in the consolidated balance sheets.
(3) Represents net derivatives positions subject to master netting arrangements.
6.1
—
6.1
(15.4)
(2.0)
(17.4)
(11.3)
$
$
$
$
$
$
$
$
$
5.2
—
5.2
(7.3)
—
(7.3) $
(2.1) $
Gross Amounts
Offset in the
Consolidated
Balance Sheet(3)
Total Gross
Amounts
Net Amounts
$
$
11.3
—
11.3
(22.7)
(2.0)
(24.7) $
(13.4) $
(11.3) $
—
(11.3) $
11.3
—
11.3
$
— $
—
—
—
(11.4)
(2.0)
(13.4)
(13.4)
FMC CORPORATION - Form 10-K 75
PART II
ITEM 8 Financial Statements and Supplementary Data
The following tables summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments.
Derivatives in Cash Flow Hedging Relationships
(in Millions)
Accumulated other comprehensive income (loss), net of tax at December 31, 2013
2014 Activity
Unrealized hedging gains (losses) and other, net of tax
Reclassification of deferred hedging (gains) losses, net of tax
Effective Portion(1)
Accumulated other comprehensive income (loss), net of tax at December 31, 2014
2015 Activity
Unrealized hedging gains (losses) and other, net of tax
Reclassification of deferred hedging (gains) losses, net of tax
Effective Portion(1)
Accumulated other comprehensive income (loss), net of tax at December 31, 2015
2016 Activity
Unrealized hedging gains (losses) and other, net of tax
Reclassification of deferred hedging (gains) losses, net of tax
$
$
Effective Portion(1)
Ineffective Portion(1)
Contracts
Foreign exchange
$
(7.5) $
Energy
0.1
$
Other
1.3
$
Total
(6.1)
6.9
(3.8)
—
—
6.9
(0.6) $
(0.9)
(4.7)
(4.6) $
—
—
1.3 $
0.4
0.4
(5.9)
(5.5)
(6.1) $
2.9
3.3
(1.3) $
6.1
5.1
(0.5)
10.7
1.2
1.5
—
2.7
$
(0.1)
—
(0.1)
1.2
—
(0.1)
—
(0.1)
3.1
(0.9)
2.2
(3.9)
0.7
(3.0)
(2.3)
(6.2)
7.3
6.5
(0.5)
13.3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
$
NET OF TAX AT DECEMBER 31, 2016
(1) Amounts are included in “Cost of sales and services” and “Interest expense” on the consolidated statements of income.
4.6
$
1.4
$
1.1
$
7.1
Derivatives Not Designated as Hedging Instruments
(in Millions)
Foreign Exchange contracts
Location of Gain or (Loss)
Recognized in Income on Derivatives
Cost of Sales and Services
Selling, general & administrative(2)
$
Amount of Pre-tax Gain or (Loss)
Recognized in Income on Derivatives(1)
Year Ended December 31,
$
2016
(42.7)
—
(42.7) $
2015
(47.9) $
(172.1)
(220.0) $
2014
(2.9)
(99.6)
(102.5)
TOTAL
(1) Amounts in the columns represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item.
(2) Charges represent loss on the Cheminova acquisition hedge. See Note 3 within these consolidated financial statements more information.
$
Fair-Value Measurements
Fair-Value Hierarchy
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date. Market participants are defined as buyers or
sellers in the principle or most advantageous market for the asset or
liability that are independent of the reporting entity, knowledgeable
and able and willing to transact for the asset or liability.
We have categorized our assets and liabilities that are recorded at fair
value, based on the priority of the inputs to the valuation technique,
into a three-level fair-value hierarchy. The fair-value hierarchy gives the
highest priority to quoted prices in active markets for identical assets
or liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). If the inputs used to measure the assets and liabilities fall
within different levels of the hierarchy, the categorization is based on
the lowest level input that is significant to the fair-value measurement
of the instrument.
76
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
Recurring Fair Value Measurements
The following tables present our fair-value hierarchy for those assets and liabilities measured at fair-value on a recurring basis in our consolidated
balance sheets.
(in Millions)
ASSETS
Derivatives – Commodities:(1)
Energy contracts
Derivatives – Foreign exchange(1)
Other(2)
TOTAL ASSETS
LIABILITIES
Derivatives – Commodities:(1)
Energy contracts
Derivatives – Foreign exchange(1)
Other(3)
December 31, 2016
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
$
$
$
2.0 $
4.4
25.3
31.7 $
— $
—
25.3
25.3 $
2.0 $
4.4
—
6.4 $
—
—
—
—
— $
8.9
31.1
40.0 $
— $
—
30.5
30.5 $
— $
8.9
0.6
9.5 $
—
—
—
—
TOTAL LIABILITIES
(1) See the Fair Value of Derivative Instruments table within this Note for classifications on our consolidated balance sheets.
(2) Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and
$
liability are recorded at fair value. Asset amounts included in “Other assets including long-term receivables, net” in the consolidated balance sheets.
(3) Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts
included in “Other long-term liabilities” in the consolidated balance sheets.
(in Millions)
ASSETS
Derivatives – Commodities:(1)
Energy contracts
Derivatives – Foreign exchange(1)
Other(2)
TOTAL ASSETS
LIABILITIES
Derivatives – Commodities:(1)
December 31, 2015
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
$
$
— $
—
25.4
25.4 $
— $
—
25.4
25.4 $
— $
—
—
— $
—
—
—
—
Energy contracts
Derivatives – Foreign exchange(1)
Other(3)
— $
—
29.1
TOTAL LIABILITIES
29.1 $
(1) See the Fair Value of Derivative Instruments table within this Note for classifications on our consolidated balance sheets.
(2) Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and
2.0 $
11.4
29.1
42.5 $
2.0 $
11.4
—
13.4 $
—
—
—
—
$
$
liability are recorded at fair value. Asset amounts included in “Other assets including long-term receivables, net” in the consolidated balance sheets.
(3) Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts
included in “Other long-term liabilities” in the consolidated balance sheets.
Nonrecurring Fair Value Measurements
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in our consolidated
balance sheets during the year ended December 31, 2016 and 2015. See Note 3 for the assets and liabilities measured on a non-recurring basis
at fair value associated with our acquisitions.
(in Millions)
ASSETS
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
Total Gains (Losses)
(Year Ended
December 31, 2016)
December 31, 2016
Impairment of intangibles(1)
(1.0)
TOTAL ASSETS
(1.0)
(1) We recorded an impairment charge, related to our FMC Agricultural Solutions segment, to write down the carrying value of the generic brand portfolio of
5.9 $
5.9 $
— $
— $
— $
— $
5.9
5.9
$
$
$
$
approximately $1 million to its fair value.
FMC CORPORATION - Form 10-K 77
PART II
ITEM 8 Financial Statements and Supplementary Data
(in Millions)
ASSETS
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
Total Gains (Losses)
(Year Ended
December 31, 2015)
December 31, 2015
Long-lived assets associated with Health and
Nutrition activities(1)
(70.5)
TOTAL ASSETS
(70.5)
(1) We recorded charges, within our FMC Health and Nutrition segment, to write down the value of certain long-lived assets of approximately to salvage value in the
case of fixed assets and fair value in the case of indefinite lived intangible assets. See Note 7 within these consolidated financial statements for more information.
35.4
35.4 $
—
— $
—
— $
35.4
35.4
$
$
NOTE 18 Guarantees, Commitments and Contingencies
Guarantees
We continue to monitor the conditions that are subject to guarantees
and indemnifications to identify whether a liability must be recognized
in our financial statements.
The following table provides the estimated undiscounted amount
of potential future payments for each major group of guarantees at
December 31, 2016. These guarantees arise during the ordinary course
of business from relationships with customers and nonconsolidated
affiliates. Non-performance by the guaranteed party triggers the
obligation requiring us to make payments to the beneficiary of the
guarantee. Based on our experience these types of guarantees have
not had a material effect on our consolidated financial position or on
our liquidity. Our expectation is that future payment or performance
related to the non-performance of others is considered unlikely.
(in Millions)
Guarantees:
Guarantees of vendor financing - short term(1)
Guarantees of vendor financing - long term(1)
Other debt guarantees(2)
104.6
1.9
2.2
108.7
TOTAL
(1) Represents guarantees to financial institutions on behalf of certain FMC Agricultural Solutions customers for their seasonal borrowing. The short-term amount
is recorded on the consolidated balance sheets as “Guarantees of vendor financing.” The long-term amount is recorded on the consolidated balance sheets within
“Other long-term liabilities.”
$
$
(2) These guarantees represent support provided to third-party banks for credit extended to various FMC Agricultural Solutions customers and nonconsolidated
affiliates. The liability for the guarantees is recorded at an amount that approximates fair-value (i.e. representing the stand-ready obligation) based on our
historical collection experience and a current assessment of credit exposure. We believe the fair-value of these guarantees is immaterial. The majority of these
guarantees have an expiration date of less than one year.
Excluded from the chart above, in connection with our property and
asset sales and divestitures, we have agreed to indemnify the buyers for
certain liabilities, including environmental contamination and taxes that
occurred prior to the date of sale or provided guarantees to third parties
relating to certain contracts assumed by the buyer. Our indemnification
or guarantee obligations with respect to these liabilities may be indefinite
as to duration and may or may not be subject to a deductible, minimum
claim amount or cap. As such, it is not possible for us to predict the
likelihood that a claim will be made or to make a reasonable estimate of
the maximum potential loss or range of loss. If triggered, we may be able
to recover some of the indemnity payments from third parties. We have
not recorded any specific liabilities for these guarantees.
(in Millions)
Operating leases rent expense
(in Millions)
2017
2018
2019
2020
2021
Thereafter
78
FMC CORPORATION - Form 10-K
Commitments
Leases
We lease office space, plants and facilities, and various types of manufacturing,
data processing and transportation equipment. Leases of real estate generally
provide for our payment of property taxes, insurance and repairs. Our
capital leases primarily relate to our two research and technology centers in
the U.S. and China. Our capital lease asset balances (net of accumulated
amortization of $2.6 million and $2.0 million), which are classified as
buildings within our property, plant and equipment on our consolidated
balance sheets, were $20.1 million and $28.1 million as of December 31,
2016 and 2015, respectively. Amortization of capital lease assets is included
within depreciation expense. See Note 20 within these consolidated financial
statements for obligations associated with our capital leases.
Year ended December 31,
2016
22.5 $
2015
18.4 $
$
2014
23.2
Future Minimum Lease Payments
Operating Leases
$
$
$
$
$
$
19.5 $
22.5 $
22.9 $
21.4 $
15.4 $
131.2 $
Capital Leases
4.4
4.4
4.6
4.6
4.7
30.4
Purchase Obligations
Our minimum commitments under our take-or-pay purchase obligations
associated with the sourcing of materials and energy total approximately
$13.2 million. Since the majority of our minimum obligations under
these contracts are over the life of the contract on a year-by-year basis,
we are unable to determine the periods in which these obligations
could be payable under these contracts. However, we intend to fulfill
the obligations associated with these contracts through our purchases
associated with the normal course of business.
Contingencies
Competition / antitrust litigation related to the discontinued FMC Peroxygens
segment. We are subject to actions brought by private plaintiffs relating
to alleged violations of European and Canadian competition and
antitrust laws, as further described below.
European competition action. Multiple European purchasers of hydrogen
peroxide who claim to have been harmed as a result of alleged violations
of European competition law by hydrogen peroxide producers assigned
their legal claims to a single entity formed by a law firm. The single
entity then filed a lawsuit in Germany in March 2009 against European
producers, including our wholly-owned Spanish subsidiary, Foret.
Initial defense briefs were filed in April 2010, and an initial hearing was
held during the first quarter of 2011, at which time case management
issues were discussed. At a subsequent hearing in October 2011,
the Court indicated that it was considering seeking guidance from
the European Court of Justice (“ECJ”) as to whether the German
courts have jurisdiction over these claims. After submission of written
comments on this issue by the parties, on March 1, 2012, the judge
announced that she would refer the jurisdictional issues to the ECJ,
which she did on April 29, 2013. On May 21, 2015, the ECJ issued
its decision, upholding the jurisdiction of the German court. The case
is now back before the German judge. We filed a motion to dismiss the
proceedings in September 2015. We do not anticipate a response by
the court until March 2017. Since the case is in the preliminary stages
and is based on a novel procedure - namely the attempt to create a
cross-border “class action” which is not a recognized proceeding under
EU or German law - we are unable to develop a reasonable estimate
of our potential exposure of loss at this time. We intend to vigorously
defend this matter.
Canadian antitrust actions. In 2005, after public disclosures of the
U.S. federal grand jury investigation into the hydrogen peroxide
industry (which resulted in no charges brought against us) and the filing
of various class actions in U.S. federal and state courts, which have
all been settled, putative class actions against us and five other major
hydrogen peroxide producers were filed in provincial courts in Ontario,
Quebec and British Columbia under the laws of Canada. The other
five defendants have settled these claims for a total of approximately
$20.6 million. On September 28, 2009, the Ontario Superior Court
of Justice certified a class of direct and indirect purchasers of hydrogen
peroxide from 1994 to 2005. Our motion for leave to appeal the
class certification decision was denied in June 2010. The case was
largely dormant while the Canadian Supreme Court considered, in
different litigation, whether indirect purchasers may recover overcharges
PART II
ITEM 8 Financial Statements and Supplementary Data
in antitrust actions. In October 2013 the Court ruled that such
recovery is permissible. Thereafter, the plaintiffs’ moved to dismiss
certain downstream purchasers (those who purchased products that
contain hydrogen peroxide or were made using hydrogen peroxide)
from the case and to reduce the class period to November 1, 1998
through December 31, 2003 - thereby eliminating six of the eleven
years of the originally certified class period. The Court has approved
this request. Since the proceedings are in the preliminary stages with
respect to the merits, we are unable to develop a reasonable estimate
of our potential exposure of loss at this time. We intend to vigorously
defend these matters.
Asbestos claims. Like hundreds of other industrial companies, we have
been named as one of many defendants in asbestos-related personal injury
litigation. Most of these cases allege personal injury or death resulting
from exposure to asbestos in premises of FMC or to asbestos-containing
components installed in machinery or equipment manufactured or
sold by discontinued operations.
We intend to continue managing these asbestos-related cases in accordance
with our historical experience. We have established a reserve for this
litigation within our discontinued operations and believe that any
exposure of a loss in excess of the established reserve cannot be reasonably
estimated. Our experience has been that the overall trends in asbestos
litigation have changed over time. Over the last several years, we have
seen changes in the jurisdictions where claims against FMC are being
filed and changes in the mix of products named in the various claims.
Because these claim trends have yet to form a predictable pattern, we
are presently unable to reasonably estimate our asbestos liability with
respect to claims that may be filed in the future.
Other contingent liabilities. In addition to the matters disclosed above,
we have certain other contingent liabilities arising from litigation,
claims, products we have sold, guarantees or warranties we have made,
contracts we have entered into, indemnities we have provided, and other
commitments incident to the ordinary course of business. Some of
these contingencies are known - for example pending product liability
litigation or claims - but are so preliminary that the merits cannot be
determined, or if more advanced, are not deemed material based on
current knowledge. Some contingencies are unknown - for example,
claims with respect to which we have no notice or claims which may
arise in the future, resulting from products we have sold, guarantees or
warranties we have made, or indemnities we have provided. Therefore,
we are unable to develop a reasonable estimate of our potential exposure
of loss for these contingencies, either individually or in the aggregate,
at this time. Based on information currently available and established
reserves, we have no reason to believe that the ultimate resolution of
our known contingencies, including the matters described in this Note,
will have a material adverse effect on our consolidated financial position,
liquidity or results of operations. However, there can be no assurance
that the outcome of these contingencies will be favorable, and adverse
results in certain of these contingencies could have a material adverse
effect on our consolidated financial position, results of operations in
any one reporting period, or liquidity.
See Note 10 for the Pocatello tribal litigation, Middleport litigation,
and Portland Harbor litigation for legal proceedings associated with
our environmental contingencies.
FMC CORPORATION - Form 10-K 79
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 19 Segment Information
Year Ended December 31,
2015
2016
2014
$
$
$
$
$
2,173.8
828.2
256.7
3,258.7
2,252.9
785.5
238.1
3,276.5
2,274.8
743.5
264.1
3,282.4
(in Millions)
Revenue(1)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
TOTAL
Income (loss) from continuing operations before income taxes
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Segment operating profit(2)
Corporate and other
Operating profit before the items listed below
Interest expense, net
Restructuring and other (charges) income(3)
Non-operating pension and postretirement (charges) income(4)
Business separation cost(5)
Acquisition related charges(6)
(Provision) benefit for income taxes
Discontinued operations, net of income taxes
Net income attributable to noncontrolling interests
NET INCOME ATTRIBUTABLE TO FMC STOCKHOLDERS
(1) Our FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium segments each have one product line group, and therefore net sales to external
399.9
191.3
70.2
661.4 $
(83.6)
577.8
(82.7)
(107.3)
(25.1)
—
(23.4)
(93.9)
(33.7)
(2.6)
209.1
363.9
194.7
23.0
581.6 $
(62.4)
519.2
(80.1)
(244.0)
(35.3)
—
(290.3)
(47.4)
676.4
(9.5)
489.0
497.8
187.9
27.2
712.9
(71.4)
641.5
(51.2)
(56.4)
(10.5)
(23.6)
(136.0)
(56.2)
14.5
(14.6)
307.5
$
$
$
$
$
$
$
$
customers within each of those segments are included in the table above.
(2) Referred to as Segment Earnings.
(3) See Note 7 for details of restructuring and other (charges) income. Below provides the detail the (charges) income by segment:
Year Ended December 31,
$
(in Millions)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Corporate
RESTRUCTURING AND OTHER (CHARGES) INCOME
(4) Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses
and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to financial
market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement costs from
our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased transparency
and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization
of prior service cost in our operating segments noted above. We believe these elements reflect the current year operating costs to our businesses for the employment
benefits provided to active employees. These expenses are included as a component of the line item “Selling, general and administrative expenses” on our consolidated
statements of income.
2016
(62.0) $
(10.0)
(0.6)
(34.7)
(107.3) $
2015
(123.7) $
(93.8)
(2.7)
(23.8)
(244.0) $
2014
4.5
(14.1)
—
(46.8)
(56.4)
$
(5) Charges are associated with the previously planned separation of FMC Corporation into two independent public companies. On September 8, 2014, we announced
that we would no longer proceed with the planned separation of FMC into two distinct public entities. At that time we announced the acquisition of Cheminova;
see Note 3 within these consolidated financial statements for more information. These charges are included within “Business separation costs” on our consolidated
income statement. These costs were primarily related to professional fees associated with separation activities within the finance and legal functions through
September 8, 2014.
(6) Charges relate to the expensing of the inventory fair value step-up resulting from the application of purchase accounting, transaction costs, costs for transitional
employees, other acquired employee related costs, integration related legal and professional third-party fees and gains or losses on hedging purchase price associated
with the planned or completed acquisitions. Amounts represent the following:
80
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
Twelve Months Ended
December 31,
2016
2015
$
23.4 $
—
—
60.4 $
172.1
57.8
—
23.4 $
—
290.3 $
2014
32.2
99.6
—
4.2
136.0
2015
3,085.2
1,180.9
312.6
—
4,578.7
1,270.6
476.6
6,325.9
4,259.5
1,241.1
348.7
—
5,849.3
476.6
6,325.9
December 31,
2016
$
$
$
3,095.8
1,148.6
312.2
—
4,556.6
1,094.0
488.7
6,139.3
4,082.7
1,216.2
351.7
—
5,650.6
488.7
6,139.3
(in Millions)
Acquisition related charges - Cheminova
Legal and professional fees(1)
Unrealized loss/(gain) on hedging purchase price(1)
Inventory fair value step-up amortization(2)
Acquisition related charges - Epax
Inventory fair value step-up amortization(2)
TOTAL ACQUISITION-RELATED CHARGES(3)
(1) Included in “Selling, general and administrative expenses” on the consolidated statements of income.
(2) Included in “Costs of sales and services” on the consolidated statements of income.
(3) Acquisition-related charges and restructuring charges to integrate Cheminova with Agricultural Solutions were completed at the end of 2016.
$
(in Millions)
Operating capital employed(1)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Elimination
Total operating capital employed
Segment liabilities included in total operating capital employed
Corporate items
TOTAL ASSETS
Segment assets(2)
FMC Agricultural Solutions
FMC Health and Nutrition
FMC Lithium
Elimination
$
$
$
Total segment assets
Corporate items
TOTAL ASSETS
(1) We view operating capital employed, which consists of assets, net of liabilities, reported by our operations and excluding corporate items such as cash equivalents,
$
$
debt, pension liabilities, income taxes and LIFO reserves, as our primary measure of segment capital.
(2) Segment assets are assets recorded and reported by the segments and are equal to segment operating capital employed plus segment liabilities. See Note 1.
Year Ended December 31,
Depreciation and Amortization
Research and Development Expense
2014
(in Millions)
111.8
FMC Agricultural Solutions
10.0
FMC Health and Nutrition
4.5
FMC Lithium
—
Corporate
TOTAL
126.3
$
(1) Cash spending associated with contract manufacturers in our FMC Agricultural Solutions segment, which are not included in the table above was $10.4 million,
Capital Expenditures(1)
2016
23.1 $
36.2
24.4
47.1
130.8 $
2015
60.5 $
38.9
12.2
4.1
115.7 $
2015
132.4 $
7.8
3.5
—
143.7 $
2016
131.4 $
7.0
3.1
—
141.5 $
2016
80.8 $
36.5
14.8
5.0
137.1 $
2015
29.2 $
50.6
17.4
11.3
108.5 $
2014
25.4
96.8
45.0
15.0
182.2
2014
31.0
44.9
13.7
3.9
93.5
$
$
$
$
$
$14.2 million and $8.1 million for the years ended December 31, 2016. 2015 and 2014, respectively.
FMC CORPORATION - Form 10-K 81
PART II
ITEM 8 Financial Statements and Supplementary Data
Geographic Segment Information
(in Millions)
Revenue from continuing operations (by location of customer):
Year Ended December 31,
2016
2015
2014
North America(1)
Europe/Middle East/Africa
Latin America(1)
Asia Pacific
908.2
483.7
1,195.6
671.2
3,258.7
TOTAL
(1) In 2016, countries with sales in excess of 10 percent of consolidated revenue consisted of the U.S. and Brazil. Sales for the years ended December 31, 2016, 2015
and 2014 for the U.S. totaled $837.7 million, $853.0 million and $857.7 million and for Brazil totaled $509.4 million, $662.5 million and $926.5 million,
respectively.
911.1 $
623.9
981.8
759.7
3,276.5 $
879.1 $
783.4
821.4
798.5
3,282.4 $
$
$
(in Millions)
Long-lived assets(1):
North America(2)
Europe/Middle East/Africa(2)
Latin America
Asia Pacific
648.5
1,720.1
290.9
407.6
TOTAL
3,067.1
(1) Geographic segment long-lived assets exclude long-term deferred income taxes and assets of discontinued operations held for sale on the consolidated balance sheets.
(2) The countries with long-lived assets in excess of 10 percent of consolidated long-lived assets at December 31, 2016 are the U.S., which totaled $593.7 million, and
Denmark, which totaled $645.6 million, respectively. The long-lived assets over the threshold at December 31, 2015 are the U.S which totaled $646.9 million
and Denmark which totaled $689.1 million, respectively.
1,588.3
407.9
454.1
3,045.3 $
595.0 $
$
$
December 31,
2016
2015
NOTE 20 Supplemental Information
The following tables present details of prepaid and other current assets, other assets, accrued and other liabilities and other long-term liabilities
as presented on the consolidated balance sheets:
(in Millions)
Prepaid and other current assets
Prepaid insurance
Tax related items including value added tax receivables
Environmental obligation recoveries (Note 10)
Derivative assets (Note 17)
Argentina government receivable(1)
Other prepaid and current assets
TOTAL
December 31,
2016
8.0 $
124.6
8.4
6.4
5.1
101.0
253.5 $
2015
8.8
105.3
6.1
—
18.7
102.8
241.7
$
$
December 31,
2016
(in Millions)
Other Assets
Non-current receivables (Note 8)
90.6
Advance to contract manufacturers
69.0
Capitalized software, net
36.5
Environmental obligation recoveries (Note 10)
17.1
Argentina government receivable(1)
52.5
Income taxes deferred charges
65.6
Deferred compensation arrangements
25.4
Other long-term assets
78.4
435.1
TOTAL
(1) We have various subsidiaries that conduct business within Argentina, primarily in our FMC Agricultural Solutions and FMC Lithium segments. At December 31,
2016 and 2015, $39.1 million and $50.3 million of outstanding receivables due from the Argentina government, which primarily represent export tax and
export rebate receivables, were denominated in U.S. dollars. As with all outstanding receivable balances we continually review recoverability by analyzing
historical experience, current collection trends and regional business and political factors among other factors.
123.5 $
75.1
34.8
18.8
41.7
80.6
25.3
71.5
471.3 $
$
$
2015
82
FMC CORPORATION - Form 10-K
Accrued and other liabilities
(in Millions)
Restructuring reserves (Note 7)
Dividend payable (Note 15)
Accrued payroll
Environmental reserves, current, net of recoveries (Note 10)
Derivative liabilities (Note 17)
Other accrued and other liabilities
TOTAL
Other long-term liabilities
(in Millions)
Asset retirement obligations, long-term (Note 1)
Contingencies related to uncertain tax positions (Note 11)
Deferred compensation arrangements
Self insurance reserves (primarily workers’ compensation)
Lease obligations
Reserve for discontinued operations (Note 9)
Guarantees of vendor financing (Note 18)
Other long-term liabilities
TOTAL
PART II
ITEM 8 Financial Statements and Supplementary Data
December 31,
2016
17.6 $
22.1
60.2
60.3
8.9
205.8
374.9 $
December 31,
2016
1.8 $
121.1
30.5
9.9
28.0
48.6
1.9
53.3
295.1 $
2015
15.6
22.1
49.8
59.1
13.4
177.6
337.6
2015
1.7
97.1
29.1
11.2
34.3
46.1
25.7
33.6
278.8
$
$
$
$
NOTE 21 Quarterly Financial Information (Unaudited)
(in Millions, Except Share and Per Share Data)
Revenue
Gross margin
Income (loss) from continuing operations before
equity in (earnings) loss of affiliates, net interest
income and expense and income taxes
Income (loss) from continuing operations(1)
Discontinued operations, net of income taxes
Net income (loss)
Less: Net income (loss) attributable to
noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE
TO FMC STOCKHOLDERS
Amounts attributable to FMC stockholders:
Continuing operations, net of income taxes
Discontinued operations, net of income taxes
NET INCOME (LOSS)
Basic earnings (loss) per common share
attributable to FMC stockholders:
Continuing operations
Discontinued operations
BASIC NET INCOME (LOSS) PER
COMMON SHARE(1)
Diluted earnings (loss) per common share
attributable to FMC stockholders:
Continuing operations
Discontinued operations
DILUTED NET INCOME (LOSS)
PER COMMON SHARE(2)
Weighted average shares outstanding:
2016
2015
1Q
$ 798.8
281.4
$
2Q
810.3
301.3
$
3Q
807.7
279.5
$
4Q
865.6
337.6
1Q
$ 659.4
250.7
$
2Q
887.1
305.8
$
3Q
830.7
220.3
$
4Q
899.3
298.6
106.5
54.8
(6.1)
48.7
0.4
48.3
54.4
(6.1)
48.3
0.41
(0.05)
$
$
$
$
$
$
$
$
124.8
72.8
(5.8)
67.0
1.8
65.2
71.0
(5.8)
65.2
0.53
(0.04)
$
$
$
$
115.1
82.6
(3.0)
79.6
(0.1)
79.7
82.7
(3.0)
79.7
0.62
(0.03)
$
$
$
$
75.1
53.6
(18.8)
16.4
(96.1)
(61.1)
15.6
(45.5)
100.5
58.1
688.2
746.3
0.5
1.3
4.0
15.9
$ (46.8) $ 742.3
34.7
(18.8)
15.9
$ (62.4) $
15.6
54.1
688.2
$ (46.8) $ 742.3
0.26
(0.14)
$ (0.47) $
0.12
0.40
5.14
0.5
5.4
(5.0)
0.4
2.8
(55.1)
(180.3)
(22.4)
(202.7)
1.4
(2.4) $ (204.1)
$ (181.7)
2.6
(22.4)
(5.0)
(2.4) $ (204.1)
$
0.02
(0.04)
(1.36)
(0.17)
$
$
$
$
$
0.36
$
0.49
$
0.59
$
0.12
$ (0.35) $
5.54
$
(0.02) $
(1.53)
$
$
0.41
(0.05)
0.53
(0.04)
$
$
0.61
(0.02)
0.26
(0.14)
$ (0.47) $
0.12
$
0.40
5.12
$
0.02
(0.04)
(1.36)
(0.17)
$
0.36
$
0.49
$
0.59
$
0.12
$ (0.35) $
5.52
$
(0.02) $
(1.53)
Basic
Diluted
133.8
134.3
133.9
134.6
134.0
134.7
133.9
134.8
133.6
133.6
133.7
134.4
133.8
134.4
133.7
133.7
(1) In the fourth quarter of 2015, we recorded significant restructuring charges associated with both our Seal Sands facility and Cheminova. Both of these are described
in more detail in Note 7. Additionally, our results for the fourth quarter of 2015, were favorably impacted by $4.8 million after-tax or $0.03 per diluted share
related to a cost of sale adjustment for the elimination of inter-company profit in inventory. This adjustment related to third quarter of 2015.
(2) The sum of quarterly earnings per common share may differ from the full-year amount.
FMC CORPORATION - Form 10-K 83
PART II
ITEM 8 Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
FMC Corporation:
We have audited the accompanying consolidated balance sheets of
FMC Corporation and subsidiaries as of December 31, 2016 and 2015,
and the related consolidated statements of income, comprehensive
income, changes in equity, and cash flows for each of the years in the
three-year period ended December 31, 2016. In connection with our
audits of the consolidated financial statements, we also have audited
the related financial statement schedule. 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 the standards of the
Public Company Accounting Oversight Board (United States). 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 subsidiaries as of December 31, 2016 and 2015, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2016, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
FMC Corporation’s internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated February 28, 2017 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2017
84
FMC CORPORATION - Form 10-K
PART II
ITEM 8 Financial Statements and Supplementary Data
Management’s Annual Report on Internal Control
Over Financial Reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Exchange Act
Rule 13a-15(f ). FMC’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally accepted accounting
principles. Internal control over financial reporting includes those
written policies and procedures that:
• pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of FMC;
• provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
U.S. generally accepted accounting principles;
• provide reasonable assurance that receipts and expenditures of FMC
are being made only in accordance with authorization of management
and directors of FMC; and
• provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of assets that could
have a material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves,
monitoring and internal auditing practices and actions taken to correct
deficiencies as identified.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
We assessed the effectiveness of our internal control over financial
reporting as of December 31, 2016. We based this assessment on
criteria for effective internal control over financial reporting described
in “Internal Control—Integrated Framework (COSO 2013)” issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. Management’s assessment included an evaluation of
the design of our internal control over financial reporting and testing
of the operational effectiveness of our internal control over financial
reporting. We reviewed the results of our assessment with the Audit
Committee of our Board of Directors.
Based on this assessment, we determined that, as of December 31,
2016, FMC has effective internal control over financial reporting.
KPMG LLP, our independent registered public accounting firm, has
issued an attestation report on the effectiveness of internal control
over financial reporting as of December 31, 2016, which appears on
the following page.
FMC CORPORATION - Form 10-K 85
PART II
ITEM 8 Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
FMC Corporation:
We have audited FMC Corporation’s internal control over financial
reporting as of December 31, 2016, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
FMC Corporation’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in
the accompanying Management’s Annual Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, FMC Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31,
2016, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated
balance sheets of FMC Corporation and subsidiaries as of December 31,
2016 and 2015, and the related consolidated statements of income,
comprehensive income, changes in equity, and cash flows for each of
the years in the three-year period ended December 31, 2016, and our
report dated February 28, 2017 expressed an unqualified opinion on
those consolidated financial statements.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2017
86
FMC CORPORATION - Form 10-K
PART II
ITEM 9B Other Information
FMC Corporation
Schedule II - Valuation and Qualifying Accounts and Reserves
for Years Ended December 31, 2016, 2015 and 2014
(in Millions)
December 31, 2016
Reserve for doubtful accounts(2)
Deferred tax valuation allowance
December 31, 2015
Reserve for doubtful accounts(2)
Deferred tax valuation allowance
December 31, 2014
Reserve for doubtful accounts
Deferred tax valuation allowance
(1) Write-offs are net of recoveries.
(2) Includes short term and long-term portion.
Provision /(Benefit)
Charged to
Costs and
Expenses
Charged
to Other
Comprehensive
Income
Balance,
Beginning of Year
$
$
$
$
$
$
43.1
272.5
37.2
125.3
30.1
108.2
22.1
23.0
5.9
146.8
8.7
17.3
—
(3.4)
—
0.4
—
(0.2)
Write-offs(1)
Balance,
End of Year
$
1.7
— $
— $
— $
(1.6) $
— $
66.9
292.1
43.1
272.5
37.2
125.3
ITEM 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
ITEM 9A Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on
management’s evaluation (with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer), the Chief
Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this report, the
Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934) are effective to provide reasonable assurance that
information required to be disclosed by the Company in reports
filed or submitted under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and is accumulated
and communicated to management, including our principal
executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.
Management’s annual report on internal control over financial
reporting. Refer to Management’s Report on Internal Control
Over Financial Reporting which is included in Item 8 of Part II
of this Annual Report on Form 10-K and is incorporated by
reference to this Item 9A.
Audit report of the independent registered public accounting firm.
Refer to Report of Independent Registered Public Accounting
Firm which is included in Item 8 of Part II of this Annual Report
on Form 10-K and is incorporated by reference to this Item 9A.
(b) Change in Internal Controls. There have been no changes in
internal control over financial reporting that occurred during
the quarter ended December 31, 2016, that materially affected
or are reasonably likely to materially affect our internal control
over financial reporting.
ITEM 9B Other Information
None.
FMC CORPORATION - Form 10-K 87
PART III
ITEM 10 Directors, Executive Officers and Corporate Governance
PART III
ITEM 10 Directors, Executive Officers and Corporate
Governance
Information concerning directors, appearing under the caption “III.
Board of Directors” in our Proxy Statement to be filed with the SEC in
connection with the Annual Meeting of Stockholders scheduled to be
held on April 25, 2017 (the “Proxy Statement”), information concerning
executive officers, appearing under the caption “Item 4A. Executive
Officers of the Registrant” in Part I of this Form 10-K, information
concerning the Audit Committee, appearing under the caption “IV.
Information About the Board of Directors and Corporate Governance -
Committees and Independence of Directors - Audit Committee” in the
Proxy Statement, information concerning the Code of Ethics, appearing
under the caption “IV. Information About the Board of Directors and
Corporate Governance - Corporate Governance - Code of Ethics and
Business Conduct Policy” in the Proxy Statement, and information
about compliance with Section 16(a) of the Securities Exchange Act of
1934 appearing under the caption “VII. Other Matters - Section 16(a)
Beneficial Ownership Reporting Compliance” in the Proxy Statement,
is incorporate herein by reference in response to this Item 10.
ITEM 11 Executive Compensation
The information contained in the Proxy Statement in the section titled “VI. Executive Compensation” with respect to executive compensation,
in the section titled “IV. Information About the Board of Directors and Corporate Governance—Director Compensation” and “—Corporate
Governance—Compensation and Organization Committee Interlocks and Insider Participation” is incorporated herein by reference in response
to this Item 11.
ITEM 12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
The information contained in the section titled “V. Security Ownership of FMC Corporation” in the Proxy Statement, with respect to security
ownership of certain beneficial owners and management, and in the section of the Proxy Statement titled “Equity Compensation Plan Information”
under “Proposal 5 - Approval of Amendment and Restatement of the FMC Corporation Incentive Compensation and Stock Plan” relating to
securities authorized for issuance under equity compensation plans, is incorporated herein by reference in response to this Item 12.
88
FMC CORPORATION - Form 10-K
ITEM 14 Principal Accountant Fees and Services
PART III
ITEM 13 Certain Relationships and Related Transactions,
and Director Independence
The information contained in the Proxy Statement concerning our independent directors and related party transactions under the caption “IV.
Information About the Board of Directors and Corporate Governance- Committees and Independence of Directors,” and the information
contained in the Proxy Statement concerning our related party transactions policy, appearing under the caption “IV. Information About the
Board of Directors and Corporate Governance—Corporate Governance—Related Party Transactions Policy,” is incorporated herein by reference
in response to this Item 13.
ITEM 14 Principal Accountant Fees and Services
The information contained in the Proxy Statement in the section titled “II. The Proposals to be Voted On—Ratification of Appointment of
Independent Registered Public Accounting Firm” is incorporated herein by reference in response to this Item 14.
FMC CORPORATION - Form 10-K 89
PART IV
ITEM 15 Exhibits and Financial Statement Schedules
PART IV
ITEM 15 Exhibits and Financial Statement Schedules
(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. The following supplementary financial information is filed in this Form 10-K:
Financial Statements Schedule II – Valuation and qualifying accounts and reserves for the years ended December 31,
2016, 2015 and 2014
Page
87
The schedules not included herein are omitted because they are not applicable or the required information is presented in the financial statements
or related notes.
3. Exhibits: See attached Index of Exhibits
(b) Exhibits
Exhibit No. Exhibit Description
(2)
*2.1a
*2.1b
(3)
*3.1
3.2
(4)
*4.1
*4.2
*4.3
*4.4
(10)
*10.1
*10.1a
*10.1b
Plan of acquisition, reorganization, arrangement, liquidation or succession
Share Purchase Agreement, dated September 8, 2014, by and between FMC Corporation, Auriga Industries A/S and Cheminova A/S
(Exhibit 2.1 to the Current Report on Form 8-K/A filed on September 11, 2014)
Stock and Asset Purchase Agreement, dated as of February 3, 2015, by and among FMC Corporation, Tronox US Holdings Inc. and Tronox
Limited (Exhibit 2.1 to the Current Report on Form 8-K/A filed on February 4, 2015)
Articles of Incorporation and By-Laws
Restated Certificate of Incorporation, as amended through May 23, 2013 (Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on
July 30, 2013)
Restated By-Laws of FMC Corporation as of December 22, 2016
Instruments defining the rights of security holders, including indentures. FMC Corporation undertakes to furnish to the SEC 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.
Indenture, dated as of November 15, 2009, by and between FMC Corporation and U.S. Bank National Association, as trustee (Exhibit 4.1
to the Current Report on Form 8-K filed on November 30, 2009).
First Supplemental Indenture, dated as of November 30, 2009, by and between FMC Corporation and U.S. Bank National Association, as
trustee (including the form of the Note) (Exhibit 4.2 to the Current Report on Form 8-K filed on November 30, 2009).
Second Supplemental Indenture, dated as of November 17, 2011, by and between the Company and U.S. Bank National Association, as trustee
(including the form of the Note) (Exhibit 4.2 to the Current Report on Form 8-K filed on November 17, 2011).
Third Supplemental Indenture, dated as of November 15, 2013, by and between the Company and U.S. Bank National Association, as trustee
(including the form of the Note) (Exhibit 4.1 to the Current Report on Form 8-K filed on November 12, 2013).
Material contracts
Credit Agreement, dated as of August 5, 2011, among FMC Corporation and certain Foreign Subsidiaries, the Lenders and Issuing Banks
Parties Thereto, Citibank, N.A., as Administrative Agent, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Joint Lead Arrangers, Bank of America, N.A., as Syndication Agent, DNB NOR Bank ASA, The Bank of Tokyo-Mitsubishi
UFJ, Ltd., and Sumitomo Mitsui Banking Corp., as Co-Documentation Agents, and DNB NOR Bank ASA, The Bank of Tokyo-Mitsubishi
UFJ, Ltd., Sumitomo Mitsui Banking Corp., BNP Paribas, HSBC Bank USA, National Association, and U.S. Bank, National Association, as
Co-Senior Managing Agents (Exhibit 10.1 to the Current Report on Form 8-K filed on August 8, 2011)
Amendment and Consent No. 1, dated as of August 5, 2013, to the Credit Agreement, dated as of August 5, 2011, among FMC Corporation,
certain subsidiaries of FMC Corporation party thereto, the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative
Agent for such lenders (Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on October 29, 2013)
Amended and Restated Credit Agreement, dated as of October 10, 2014, among FMC Corporation, certain subsidiaries of FMC Corporation
party thereto, the lenders and issuing banks party thereto, and Citibank, N.A., as Administrative Agent for such lenders. (Exhibit 10.1 to the
Current Report on Form 8-K filed on October 14, 2014)
90
FMC CORPORATION - Form 10-K
PART IV
ITEM 15 Exhibits and Financial Statement Schedules
Exhibit No. Exhibit Description
*10.1c
Term Loan Agreement, dated as of October 10, 2014, among FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the
lenders party thereto, and Citibank, N.A., as Administrative Agent for such lenders. (Exhibit 10.1 to the Current Report on Form 8-K filed
on October 14, 2014)
Amendment No. 2, dated as of March 24, 2016, to the Amended and Restated Credit Agreement, dated as of October 10, 2014, among
FMC Corporation, certain subsidiaries of FMC Corporation party thereto, the lenders and issuing party thereto, and Citibank, N.A., as
Administrative Agent for such lenders (Exhibit 10.1 to the Current Report on Form 8-K filed on March 28, 2016)
Amendment No. 2, dated as of March 24, 2016, to the Term Loan Agreement, dated as of October 10, 2014, among FMC Corporation,
certain subsidiaries of FMC Corporation party thereto, the lenders and issuing party thereto, and Citibank, N.A., as Administrative Agent
for such lenders (Exhibit 10.2 to the Current Report on Form 8-K filed on March 28, 2016)
Asset Purchase Agreement among FMC Corporation, Solutia Inc., Astaris LLC, Israel Chemicals Limited and ICL Performance Products
Holding Inc., dated as of September 1, 2005 (Exhibit 10 to the Quarterly Report on Form 10-Q/A filed on November 8, 2005)
FMC Corporation Compensation Plan for Non-Employee Directors As Amended and Restated Effective February 20, 2009 (Exhibit 10.4 to
the Annual Report on Form 10-K filed on February 23, 2009)
Non-Employee Director Restricted Stock Unit Award Agreement - Annual Grant (Exhibit 10.4.a to the Annual Report on Form 10-K filed
on February 23, 2009)
Non-Employee Director Restricted Stock Unit Award Agreement - Annual Retainer (Exhibit 10.4.b to the Annual Report on Form 10-K
filed on February 23, 2009)
FMC Corporation Salaried Employees’ Equivalent Retirement Plan, as amended and restated effective as of January 1, 2009 (Exhibit 10.5 to
the Annual Report on Form 10-K filed on February 23, 2009)
FMC Corporation Salaried Employees’ Equivalent Retirement Plan Grantor Trust, as amended and restated effective as July 31, 2001
(Exhibit 10.6.a to the Quarterly Report on Form 10-Q filed on November 7, 2001)
FMC Corporation Non-Qualified Savings and Investment Plan, as adopted by the Company on December 17, 2008 (Exhibit 10.7 to the
Annual Report on Form 10-K filed on February 23, 2009)
FMC Corporation Non-Qualified Savings and Investment Plan Trust, as amended and restated effective as of September 28, 2001
(Exhibit 10.7.a to the Quarterly Report on Form 10-Q filed on November 7, 2001)
First Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of October 1, 2003 (Exhibit 10.15a to the Annual Report on Form 10-K filed on March 11, 2004)
Second Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust, effective as of January 1, 2004 (Exhibit 10.12b
to the Annual Report on Form 10-K filed on March 14, 2005)
*10.1d
*10.1e
*10.2
†*10.3
†*10.3.a
†*10.3.b
†*10.4
†*10.5
†*10.6
†*10.7
†* 10.7.a
†* 10.7.b
†10.7.f
†10.7.g
†*10.7.e
†*10.7.d
†10.8
†10.8a
†10.8b
†10.8c
*10.8d
†*10.7.c Third Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of February 14, 2005 (Exhibit 10.8.c to the Annual Report on Form 10-K filed on February 23, 2009)
Fourth Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of July 1, 2005 (Exhibit 10.8.d to the Annual Report on Form 10-K filed on February 23, 2009)
Fifth Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of April 23, 2008 (Exhibit 10.8.e to the Annual Report on Form 10-K filed on February 23, 2009)
Sixth Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of March 26, 2009
Seventh Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, dated January 24, 2017
FMC Corporation Incentive Compensation and Stock Plan as amended and restated through February 25, 2016
Form of Employee Restricted Stock Unit Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Form of Nonqualified Stock Option Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Form of Key Manager Restricted Stock Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Form of Performance-Based Restricted Stock Unit Award Agreement Pursuant to FMC Corporation Incentive Compensation and Stock Plan
(Exhibit 10.8d to the Quarterly Report on Form 10-Q filed on May 3, 2016)
FMC Corporation Executive Severance Plan, as amended and restated effective as of January 1, 2009 (Exhibit 10.10 to the Annual Report on
Form 10-K filed on February 23, 2009)
FMC Corporation Executive Severance Grantor Trust Agreement, dated July 31, 2001 (Exhibit 10.10.a to the Quarterly Report on Form 10-Q
filed on November 7, 2001)
Amended and Restated Executive Severance Agreement, dated November 6, 2012, between FMC Corporation and Pierre Brondeau.
(Exhibit 10.2 to FMC Corporation’s Current Report on Form 8-K filed on November 9, 2012) Pursuant to Instruction 2 to Item 601 of
Regulation S-K, an Amended and Restated Executive Severance Agreement that is substantially identical in all material respects, except as to
the parties thereto, between the Company and Mark A. Douglas was not filed.
Amended and Restated Executive Severance Agreement, dated November 6, 2012, between FMC Corporation and Andrea E. Utecht.
(Exhibit 10.12 to FMC Corporation’s Annual Report on Form 10-K filed on February 18, 2014)
Amended and Restated Executive Severance Agreement, entered into as of November 5, 2014, by and between FMC Corporation and Eric Norris
Joint Venture Agreement between FMC Corporation and Solutia Inc., made as of April 29, 1999 (Exhibit 2.I to Solutia’s Current Report on
Form 8-K filed on April 27, 2000)
First Amendment to Joint Venture Agreement between FMC Corporation and Solutia Inc., effective as of December 29, 1999 (Exhibit 2.II
to Solutia’s Current Report on Form 8-K filed on April 27, 2000)
Second Amendment to Joint Venture Agreement between FMC Corporation and Solutia Inc., effective as of February 2, 2000 (Exhibit 2.III
to Solutia’s Current Report on Form 8-K filed on April 27, 2000)
†10.13
*10.14
*10.14.b
*10.14.a
†*10.10
†*10.11
†*10.12
†*10.9
*10.14.c Third Amendment to Joint Venture Agreement between FMC Corporation and Solutia Inc., effective as of March 31, 2000 (Exhibit 2.IV to
Solutia’s Current Report on Form 8-K filed on April 27, 2000)
FMC CORPORATION - Form 10-K 91
PART IV
ITEM 16 Form 10-K Summary
Exhibit No. Exhibit Description
*10.14.d
Fourth Amendment to Joint Venture Agreement between FMC Corporation and Solutia Inc., dated November 4, 2005 (Exhibit 10 to FMC
Corporation’s Current Report on Form 8-K filed on November 9, 2005)
Separation and Distribution Agreement by and between FMC Corporation and FMC Technologies, Inc., dated as of May 31, 2001
(Exhibit 2.1 to Form S-1/A for FMC Technologies, Inc. (Registration No. 333-55920) filed on June 6, 2001)
Letter Agreement dated October 23, 2009 between FMC Corporation and Pierre Brondeau (Exhibit 10.18 to FMC Corporation’s Annual
Report on Form 10-K filed on February 22, 2010)
Amendment to October 23, 2009 Letter Agreement, dated November 6, 2012, between FMC Corporation and Pierre Brondeau. (Exhibit 10.1
to FMC Corporation’s Current Report on Form 8-K filed on November 9, 2012)
Executive Severance Agreement, dated November 6, 2012, between FMC Corporation and Paul W. Graves. (Exhibit 10.3 to FMC
Corporation’s Current Report on Form 8-K filed on November 9, 2012)
Computation of Ratios of Earnings to Fixed Charges
FMC Corporation List of Significant Subsidiaries
Consent of KPMG LLP
Chief Executive Officer Certification
Chief Financial Officer Certification
Chief Executive Officer Certification of Annual Report
Chief Financial Officer Certification of Annual Report
Interactive Data File
*10.15
†*10.16
†*10.16.a
†*10.17
12
21
23.1
31.1
31.2
32.1
32.2
101
* Incorporated by reference
† Management contract or compensatory plan or arrangement
ITEM 16 Form 10-K Summary
Optional disclosure, not included in this Report.
92
FMC CORPORATION - Form 10-K
PART IV
ITEM 16 Form 10-K Summary
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:
Date:
/S/ PAUL W. GRAVES
Paul W. Graves
Executive Vice President
and Chief Financial Officer
February 28, 2017
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
/S/ PAUL W. GRAVES
Paul W. Graves
/S/ NICHOLAS L. PFEIFFER
Nicholas L. Pfeiffer
/S/ PIERRE R. BRONDEAU
Pierre R. Brondeau
/S/ G. PETER D’ALOIA
G. Peter D’Aloia
/S/ EDUARDO E. CORDEIRO
Eduardo E. Cordeiro
/S/ C. SCOTT GREER
C. Scott Greer
/S/ DIRK A. KEMPTHORNE
Dirk A. Kempthorne
/S/ PAUL J. NORRIS
Paul J. Norris
/S/ ROBERT C. PALLASH
Robert C. Pallash
/S/ VINCENT R. VOLPE, JR.
Vincent R. Volpe, Jr.
/S/ WILLIAM H. POWELL
William H. Powell
/S/ MARGARETH OVRUM
Margareth Ovrum
/S/ K’LYNNE JOHNSON
K’Lynne Johnson
Title
Date
Executive Vice President and Chief Financial Officer
February 28, 2017
Vice President, Corporate Controller and Chief Accounting Officer
February 28, 2017
President, Chief Executive Officer and Chairman of the Board
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
FMC CORPORATION - Form 10-K 93
PART IV
ITEM 16 Form 10-K Summary
Index of Exhibits Filed with the Form 10-K of FMC
Corporation for the Year Ended December 31, 2016
Exhibit No.
3.2
10.7.f
10.7.g
10.8
10.8a
10.8b
10.8c
10.13
12
21
23.1
31.1
31.2
32.1
32.2
101
Exhibit Description
Restated By-Laws of FMC Corporation as of December 22, 2016
Sixth Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, effective as of March 26, 2009
Seventh Amendment to FMC Corporation Non-Qualified Savings and Investment Plan Trust between Fidelity Management Trust Company
and FMC Corporation, dated January 24, 2017
FMC Corporation Incentive Compensation and Stock Plan as amended and restated through February 25, 2016
Form of Employee Restricted Stock Unit Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Form of Nonqualified Stock Option Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Form of Key Manager Restricted Stock Agreement Pursuant to the FMC Corporation Incentive Compensation and Stock Plan
Amended and Restated Executive Severance Agreement, entered into as of November 5, 2014, by and between FMC Corporation and
Eric Norris
Computation of Ratios of Earnings to Fixed Charges
FMC Corporation List of Significant Subsidiaries
Consent of KPMG LLP
Chief Executive Officer Certification
Chief Financial Officer Certification
Chief Executive Officer Certification of Annual Report
Chief Financial Officer Certification of Annual Report
Interactive Data File
94
FMC CORPORATION - Form 10-K
EXHIBIT 12
Statements of Computation of Ratio of Earnings to Fixed Charges
Year ended December 31
PART IV
ITEM 16 Form 10-K Summary
2012
2013
2014
2016
2015
$
$
$
(in Millions, Except Ratios)
Earnings:
Income from continuing operations before income taxes
Equity in (earnings) loss of affiliates
Interest expense and amortization of debt discount, fees and expenses
Amortization of capitalized interest
Interest included in rental expense
TOTAL EARNINGS
Fixed charges:
Interest expense and amortization of debt discount, fees and expenses
Interest capitalized as part of fixed assets
Interest included in rental expense
TOTAL FIXED CHARGES
Ratio of earnings to fixed charges(1)
(1) In calculating this ratio, earnings consist of income (loss) from continuing operations before income taxes plus interest expense, net, amortization expense related to
debt discounts, fees and expenses, amortization of capitalized interest, interest included in rental expenses (assumed to be one-third of rent) and Equity in (earnings)
loss of affiliates. Fixed charges consist of interest expense, amortization of debt discounts, fees and expenses, interest capitalized as part of fixed assets and interest
included in rental expenses.
(130.5) $
0.2
81.4
3.1
8.6
(37.2) $
453.5
(0.8)
35.1
2.2
5.5
495.5
503.2
(0.8)
36.5
2.3
6.3
547.5
339.3
(0.5)
82.7
2.6
7.5
431.6
363.8
(0.2)
51.4
2.8
7.7
425.5
81.4
7.8
8.6
97.8
(0.4)
35.1
5.4
5.5
46.0
10.8
36.5
6.2
6.3
49.0
11.2
51.4
8.0
7.7
67.1
6.3
82.7
5.9
7.5
96.1
4.5
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
EXHIBIT 21
Significant Subsidiaries of the Registrant
The following is a list of the Company’s consolidating subsidiaries, as of December 31, 2016, except for certain subsidiaries of the Registrant which do not,
in the aggregate, constitute a significant subsidiary as that term is defined in Rule 12b-2 under the Securities Exchange Act of 1934. This list does not include
equity affiliate investments and cost investments.
Name of Subsidiary
FMC Corporation (the Registrant)
FMC Agricultural Products International AG
FMC Agroquímica de México S.R.L de C.V.
FMC BioPolymer AS
FMC Norway Holding AS
Epax Norway AS
Epax Pharma UK Ltd.
FMC BioPolymer UK Limited
FMC Chemicals Netherlands BV
FMC Chemical International, AG
FMC Chemicals Limited
FMC Chemical sprl
FMC Finance BV
FMC Foret SA
FMC India Private Limited
FMC International - Irish Partnership
FMC Philippines Inc.
FMC of Canada Limited
FMC Química do Brasil Ltda
FMC (Suzhou) Crop Care Co., Ltd
Minera del Altiplano SA
PT Bina Guna Kimia
Phytone Limited
Cheminova India Ltd
Cheminova A/S
FMC Chemicals (Thailand) Ltd
State or Country of Incorporation
Delaware
Switzerland
Mexico
Norway
Norway
Norway
United Kingdom
United Kingdom
Netherlands
Switzerland
United Kingdom
Belgium
Netherlands
Spain
India
Ireland
Philippines
Canada
Brazil
China
Argentina
Indonesia
United Kingdom
India
Denmark
Thailand
FMC CORPORATION - Form 10-K 95
PART IV
ITEM 16 Form 10-K Summary
EXHIBIT 23.1 Consent of Independent Registered Public Accounting Firm
The Board of Directors
FMC Corporation:
We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333-209746) and Form S-8 (Nos. 333-64702
333-62683, 333-36973, 333-24039, 333-18383, 333-69805, 333-69714, 333-111456, 333-172387, and 333-172388) of FMC Corporation of
our reports dated February 28, 2017, with respect to the consolidated balance sheets of FMC Corporation and subsidiaries as of December 31,
2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years
in the three-year period ended December 31, 2016, and the related financial statement schedule, and the effectiveness of internal control over
financial reporting as of December 31, 2016, which reports appear in the December 31, 2016 annual report on Form 10-K of FMC Corporation.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 28, 2017
EXHIBIT 31.1 Chief Executive Officer Certification
I, Pierre R. Brondeau, certify that:
1.
I have reviewed this Annual Report on Form 10-K of FMC Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f )
and 15d-15(f )) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ PIERRE R. BRONDEAU
Pierre R. Brondeau
President and Chief Executive Officer
February 28, 2017
96
FMC CORPORATION - Form 10-K
PART IV
ITEM 16 Form 10-K Summary
EXHIBIT 31.2 Chief Financial Officer Certification
I, Paul W. Graves, certify that:
1.
I have reviewed this Annual Report on Form 10-K of FMC Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f )
and 15d-15(f )) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ PAUL W. GRAVES
Paul W. Graves
Executive Vice President
and Chief Financial Officer
February 28, 2017
EXHIBIT 32.1 CEO Certification of Annual Report
I, Pierre R. Brondeau, President and Chief Executive Officer of FMC Corporation (“the Company”), certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, based on my knowledge that:
(1)
(2)
the Annual Report on Form 10-K of the Company for the year ended December 31, 2016 (the “Report”) fully complies with the requirements
of Section 13(a) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ PIERRE R. BRONDEAU
Pierre R. Brondeau
President and Chief Executive
Officer
February 28, 2017
FMC CORPORATION - Form 10-K 97
PART IV
ITEM 16 Form 10-K Summary
EXHIBIT 32.2 CFO Certification of Annual Report
I, Paul W. Graves, Executive Vice President and Chief Financial Officer of FMC Corporation (“the Company”), certify, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, based on my knowledge that:
(1)
(2)
the Annual Report on Form 10-K of the Company for the year ended December 31, 2016 (the “Report”) fully complies with the requirements
of Section 13(a) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ PAUL W. GRAVES
Paul W. Graves
Executive Vice President
and Chief Financial Officer
February 28, 2017
98
FMC CORPORATION - Form 10-K
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BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
OFFICERS
Pierre R. Brondeau
President, Chief Executive Officer
and Chairman of the Board
FMC Corporation
Eduardo E. Cordeiro
Executive Vice President and
Chief Financial Officer
Cabot Corporation
G. Peter D’Aloia
Managing Director and
Member of the Board of Directors
Ascend Performance Materials
Holdings, Inc.
C. Scott Greer
Principal
Greer and Associates
Pierre R. Brondeau
President, Chief Executive Officer
and Chairman of the Board
Paul Graves
Executive Vice President
and Chief Financial Officer
Andrea E. Utecht
Executive Vice President
General Counsel and Secretary
Mark A. Douglas
President
FMC Agricultural Solutions
Eric W. Norris
President
FMC Health and Nutrition
K’Lynne Johnson
Former Chief Executive Officer and President
Elevance Renewable Sciences
Tom Schneberger
Vice President, Global Business Director
FMC Lithium
Dirk A. Kempthorne
President and Chief Executive Officer
American Council of Life Insurers
Barry J. Crawford
Vice President
Operations
Kenneth A. Gedaka
Vice President
Communications and Public Affairs
Kyle Matthews
Vice President
Human Resources
Karen M. Totland
Vice President, Global Procurement,
Global Facilities & Corporate Sustainability
Paul J. Norris
Retired Chairman
and Chief Executive Officer
W. R. Grace & Co.
Margareth Øvrum
Executive Vice President of Technology
Projects & Drilling
Statoil Group
Robert C. Pallash
Retired President, Global Customer
Group and Senior Vice President
Visteon Corporation
William H. Powell
Retired Chairman
and Chief Executive Officer
National Starch and Chemical Company
Vincent R. Volpe, Jr.
Retired Chief Executive Officer and President
Dresser-Rand Group, Inc.
Brian P. Angeli
Vice President
Corporate Strategy and Investor Relations
Marc L. Hullebroeck
President, FMC Europe
Vice President and Business Director
FMC Agricultural Solutions, EMEA
David A. Kotch
Vice President, Chief Information Officer
Amy O’Shea
Vice President and Business Director
FMC Agricultural Solutions, North America Crop
Ronaldo Pereira
President, FMC Latin America
Vice President and Business Director
FMC Agricultural Solutions, Latin America
Nicholas L. Pfeiffer
Vice President, Corporate Controller
and Chief Accounting Officer
Michael F. Reilly
Vice President, Associate General Counsel
and Chief Compliance Officer
Andrew D. Sandifer
Vice President and Treasurer
Charles J. Thomas
Vice President, Finance
Bethwyn Todd
President, FMC Asia
Vice President and Business Director
FMC Agricultural Solutions, Asia
Shawn Whitman
Vice President, Government Affairs
STOCKHOLDER DATA
FMC Corporation’s Annual Meeting of Stockholders will be held on Tuesday, April 25, 2017, at
2:00 p.m. ET, FMC Tower at Cira Centre South, 2929 Walnut Street, 24th Floor, Philadelphia,
PA 19104. Notice of the meeting, together with proxy materials, will be mailed approximately
five weeks prior to the meeting, to stockholders of record as of Tuesday, February 28, 2017.
Transfer Agent and Registrar of Stock:
Wells Fargo Bank N.A.
Shareowner Services
1110 Centre Pointe Curve
Mendota Heights, MN 55120
Phone: 1.800.468.9716
(1.651.450.4064 local and outside the United States)
www.wellsfargo.com/shareownerservices
FMC was incorporated in Delaware in 1928.
Stock Exchange Listing:
New York Stock Exchange
Stock Exchange Symbol:
FMC
FMC Corporation is an active participant in the American Chemistry Council (ACC) and
we support the principles of the ACC’s Responsible Care® Program by working with
our employees, suppliers, customers, contractors and commercial partners to promote
responsible management of our products and processes through their entire life cycle,
and for their intended use, worldwide. FMC undergoes third-party review and certification
of our conformance with the Responsible Care Management System requirements at
our headquarters offices and all of our sites located in the United States. For additional
information on our Responsible Care Program, please go to www.FMC.com.
FMC, TH!NK. SAFE., LFR, 3RIVE 3D, Aquateric and Avicel are trademarks of FMC
Corporation or an affiliate.
FMC Corporation
FMC Tower at Cira Centre South
2929 Walnut Street
Philadelphia, PA 19104
USA
www.FMC.com
80
SGP
Portions of this publication are
printed on recycled paper.
Copyright © 2017, FMC Corporation. All rights reserved.