FMC Corporation Announces Fourth Quarter and Full Year 2016 Results

FMC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited, in millions, except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2016

2015

2016

2015

Revenue

$

865.6

$

899.3

$

3,282.4

$

3,276.5

Costs of sales and services

528.0

600.7

2,082.6

2,201.1

Gross margin

337.6

298.6

1,199.8

1,075.4

Selling, general and administrative expenses

156.1

147.0

529.5

737.9

Research and development expenses

38.2

40.9

141.5

143.7

Restructuring and other charges (income)

68.2

165.8

107.3

244.0

Total costs and expenses

790.5

954.4

2,860.9

3,326.7

Income (loss) from operations

75.1

(55.1)

421.5

(50.2)

Equity in (earnings) loss of affiliates

(0.1)

0.2

(0.5)

0.2

Interest expense, net

21.6

21.2

82.7

80.1

Income (loss) from continuing operations before income taxes

53.6

(76.5)

339.3

(130.5)

Provision (benefit) for income taxes

18.4

103.8

93.9

47.4

Income (loss) from continuing operations

35.2

(180.3)

245.4

(177.9)

Discontinued operations, net of income taxes

(18.8)

(22.4)

(33.7)

676.4

Net income (loss)

$

16.4

$

(202.7)

$

211.7

$

498.5

  Less: Net income attributable to noncontrolling interests

0.5

1.4

2.6

9.5

Net income (loss) attributable to FMC stockholders

$

15.9

$

(204.1)

$

209.1

$

489.0

Amounts attributable to FMC stockholders:

  Income (loss) from continuing operations, net of tax

$

34.7

$

(181.7)

$

242.8

$

(187.4)

  Discontinued operations, net of tax

(18.8)

(22.4)

(33.7)

676.4

  Net income (loss)

$

15.9

$

(204.1)

$

209.1

$

489.0

Basic earnings (loss) per common share attributable to FMC stockholders:

  Continuing operations

$

0.26

$

(1.36)

$

1.81

$

(1.40)

  Discontinued operations

(0.14)

(0.17)

(0.25)

5.06

  Basic earnings per common share

$

0.12

$

(1.53)

$

1.56

$

3.66

Average number of shares outstanding used in basic earnings per share computations

133.9

133.7

133.9

133.7

Diluted earnings (loss) per common share attributable to FMC stockholders:

Continuing operations

$

0.26

$

(1.36)

$

1.81

$

(1.40)

  Discontinued operations

(0.14)

(0.17)

(0.25)

5.06

  Diluted earnings per common share

$

0.12

$

(1.53)

$

1.56

$

3.66

Average number of shares outstanding used in diluted earnings per share computations

134.8

133.7

134.5

133.7

Other Data:

Capital additions

$

38.0

$

42.5

$

128.1

$

118.6

Depreciation and amortization expense

$

35.6

$

23.5

$

137.1

$

115.7

FMC CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO FMC STOCKHOLDERS (GAAP)

TO ADJUSTED AFTER-TAX EARNINGS FROM CONTINUING OPERATIONS,

ATTRIBUTABLE TO FMC STOCKHOLDERS (NON-GAAP)

(Unaudited, in millions, except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2016

2015

2016

2015

Net income (loss) attributable to FMC stockholders (GAAP)

$

15.9

$

(204.1)

$

209.1

$

489.0

Corporate special charges (income):

Restructuring and other charges (income) ^(a)

68.2

165.8

107.3

244.0

Non-operating pension and postretirement charges ^(b)

22.8

15.4

25.1

35.3

Acquisition-related charges ^(c)

6.6

16.3

23.4

290.3

Income tax expense (benefit) on Corporate special charges (income) ^(d)

(32.1)

(31.0)

(48.5)

(144.9)

Discontinued operations, net of income taxes ^(e)

18.8

22.4

33.7

(676.4)

Non-GAAP tax adjustments ^(f)

18.6

119.0

29.7

95.3

Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) ⁽¹⁾

$

118.8

$

103.8

$

379.8

$

332.6

Diluted earnings per common share (GAAP)

$

0.12

$

(1.53)

$

1.56

$

3.66

Corporate special charges (income) per diluted share, before tax:

Restructuring and other charges (income)

0.51

1.24

0.80

1.82

Non-operating pension and postretirement charges

0.17

0.11

0.19

0.26

Acquisition-related charges

0.05

0.12

0.17

2.16

Income tax expense (benefit) on Corporate special charges (income), per diluted share

(0.24)

(0.23)

(0.36)

(1.08)

Discontinued operations per diluted share

0.14

0.17

0.25

(5.06)

Non-GAAP tax adjustments per diluted share

0.13

0.89

0.21

0.71

Diluted adjusted after-tax earnings from continuing operations per share, attributable to FMC stockholders (Non-GAAP)

$

0.88

$

0.77

$

2.82

$

2.47

Average number of shares outstanding used in diluted adjusted after-tax earnings from continuing operations per share computations ⁽²⁾

134.8

134.3

134.5

134.4

(1)

The Company believes that the Non-GAAP financial measure "Adjusted After-Tax Earnings from Continuing Operations, Attributable to FMC Stockholders", and its presentation on a per share basis, provides useful information about the Company's operating results to investors and securities analysts. Adjusted earnings excludes the effects of Corporate special charges, tax-related adjustments and the results of our discontinued operations.  The Company also believes that excluding the effects of these items from operating results allows management and investors to compare more easily the financial performance of its underlying businesses from period to period.

(2)

The average number of shares outstanding used in the three and twelve months ended December 31, 2015 diluted adjusted after-tax earnings from continuing operations per share computation (Non-GAAP) includes 0.5 million and 0.7 million diluted shares, respectively. The number of shares differs from the average number of shares outstanding used in diluted earnings per share computations (GAAP) as we had a net loss from continuing operations attributable to FMC stockholders.

(a) 

Three Months Ended December 31, 2016:

Restructuring and other charges (income) includes charges of $27.6 million representing final adjustments to severance, asset write-offs, and other costs associated with the integration of Cheminova within Agricultural Solutions. In the fourth quarter, we also entered into an agreement to obtain certain technology and intellectual property rights related to compounds still under development for our Agricultural Solutions businesses. The $13.2 million paid to acquire these rights was expensed as in-process research and development costs. Restructuring and other charges (income) also includes $19.4 million of charges for continuing environmental sites treated as a Corporate charge. Amounts also include miscellaneous restructuring charges totaling $7.1 million and other charges of $0.9 million.

Three Months Ended December 31, 2015:

Restructuring and other charges (income) includes a charge of $70.5 million as a result of the mothballing of our Seal Sands Omega-3 production facility within Health and Nutrition, as well as $61.8 million of charges representing severance and asset write-offs associated with the integration of Cheminova within Agricultural Solutions.  Amount also includes $10.7 million as a result of the Argentina government's action to devalue its currency effective December 17, 2015.  This loss relates to the impacts of the remeasurement of the local balance sheet at the date of the devaluation and impacted both our Agricultural Solutions and Lithium segments. Finally, the amount includes charges from continuing environmental sites treated as a Corporate charge of $13.4 million, a charge of $5.5 million associated with an agreement to obtain certain technology and intellectual property rights related to new compounds still under development within Agricultural Solutions and net miscellaneous charges of $3.9 million. 

Twelve Months Ended December 31, 2016:

Restructuring and other charges (income) includes charges of $42.3 million representing final adjustments to severance, asset write-offs, and other costs associated with the integration of Cheminova within Agricultural Solutions.  Integration-related costs associated with the integration of Cheminova were completed at the end of 2016. Amount also includes other miscellaneous restructuring costs of $11.1 million. Additionally, restructuring and other charges (income) includes $36.8 million of charges 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.

Twelve Months Ended December 31, 2015:

Restructuring and other charges (income) includes a charge of $70.5 million as a result of mothballing of our Seal Sands Omega-3 production facility within Health and Nutrition as well as $117.3 million representing severance and asset disposal charges associated with the integration of Cheminova with Agricultural Solutions.  Charges also include  $23.6 million due to a reorganization with our FMC Health and Nutrition segment, of which, $12.3 million was due to the sale of our pectin manufacturing business.  Total charges also include the $10.7 million due to the Argentina currency devaluation, $21.7 million from continuing environmental sites treated as a Corporate charge, and $20.5 million associated with two separate license agreements entered into for the purpose of obtaining certain technology and intellectual property rights relating to new compounds still under development within Agricultural Solutions.  Partially offsetting these charges was other income associated with the sale of our remaining ownership interest in a Belgian-based pesticide distribution company for $26.6 million. Remaining restructuring and other charges (income) includes net miscellaneous charges of $6.3 million.

(b)

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 Adjusted Earnings results noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

(c)

Charges related to the expensing of the inventory fair value step-up resulting from the application of acquisition accounting, legal and professional fees and gains or losses on hedging purchase price associated with the planned or completed acquisitions. Amounts represent the following:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(in Millions)

2016

2015

2016

2015

Acquisition related charges

Legal and professional fees ⁽¹⁾⁽²⁾

$

6.6

$

6.6

$

23.4

$

60.4

Inventory fair value amortization ⁽³⁾

—

9.7

—

57.8

Loss/(gain) on hedging purchase price ⁽²⁾

—

—

—

172.1

Total Acquisition-related charges ⁽⁴⁾

$

6.6

$

16.3

$

23.4

$

290.3

(1)

Represents transaction costs, costs for transitional employees, other acquired employee related costs and integration-related legal and professional third-party fees.

(2)

These charges are included in "Selling, general and administrative expenses" on the condensed consolidated statements of income (loss).

(3)

These charges are included in "Costs of sales and services" on the condensed consolidated statements of income (loss).

(4)

Acquisition-related charges associated with the integration of Cheminova with Agricultural Solutions were completed at the end of 2016.

(d)

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.

(e) 

Three and Twelve Months Ended December 31, 2016 and 2015:

Discontinued operations includes, in periods up to its sale, our FMC Alkali Chemicals division as well as provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations. The twelve months ended December 31, 2015 includes the divestiture gain of approximately $700 million associated with the sale of FMC Alkali Chemicals division which was completed on April 1, 2015.

(f)

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 are not limited to: income tax expenses or benefits that are not related to ongoing business operations in the current year; unusual or infrequently occurring items; 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.

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(in Millions)

2016

2015

2016

2015

Non-GAAP tax adjustments:

Revisions to our tax liabilities due to finalization of prior year tax returns

$

0.7

$

2.1

$

3.0

$

2.2

Revisions to valuation allowances of historical deferred tax assets

18.5

120.7

18.9

128.3

Foreign currency remeasurement and other discrete items

(0.6)

(3.8)

7.8

(35.2)

Non-GAAP tax adjustments

$

18.6

$

119.0

$

29.7

$

95.3

RECONCILIATION OF NET INCOME (LOSS) (GAAP) TO ADJUSTED EARNINGS FROM

CONTINUING OPERATIONS, BEFORE INTEREST AND INCOME TAXES (NON-GAAP)

(Unaudited, in millions)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2016

2015

2016

2015

Net income (loss) (GAAP)

$

16.4

$

(202.7)

$

211.7

$

498.5

Restructuring and other charges (income)

68.2

165.8

107.3

244.0

Non-operating pension and postretirement charges

22.8

15.4

25.1

35.3

Acquisition-related charges

6.6

16.3

23.4

290.3

Discontinued operations, net of income taxes

18.8

22.4

33.7

(676.4)

Interest expense, net

21.6

21.2

82.7

80.1

Provision (benefit) for income taxes

18.4

103.8

93.9

47.4

Adjusted earnings from continuing operations,
      before interest, income taxes and noncontrolling interests
      (Non-GAAP) ⁽¹⁾

$

172.8

$

142.2

$

577.8

$

519.2

(1)

Referred to as Adjusted Operating Profit.

RECONCILIATION OF CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES (GAAP) TO

ADJUSTED CASH FROM OPERATIONS

(Unaudited, in millions)

Twelve Months Ended

December 31,

2016

2015

Cash provided (required) by operating activities (GAAP)

$

537.3

$

(277.1)

Transaction and integration costs related to acquisition of Cheminova

23.4

60.4

Hedge settlement of Cheminova

—

264.8

U.S. federal income tax payments, net of refunds related to M&A activities

—

316.7

Adjusted cash from operations (Non-GAAP) ⁽¹⁾

$

560.7

$

364.8

(1)

The Company believes that the Non-GAAP financial measure "Adjusted cash from operations" provides useful information about the Company's cash flows to investors and securities analysts. Adjusted cash from operations excludes the effects of acquisition-related cash flows.  The Company also believes that excluding the effects of these items from cash provided (required) by operating activities allows management and investors to compare more easily the cash flows from period to period.

FMC CORPORATION

INDUSTRY SEGMENT DATA

(Unaudited, in millions)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2016

2015

2016

2015

Revenue

FMC Agricultural Solutions

$

617.8

$

657.3

$

2,274.8

$

2,252.9

FMC Health and Nutrition

177.2

172.0

743.5

785.5

FMC Lithium

70.6

70.0

264.1

238.1

Total

$

865.6

$

899.3

$

3,282.4

$

3,276.5

Income from continuing operations before income taxes

FMC Agricultural Solutions

127.1

101.3

399.9

363.9

FMC Health and Nutrition

54.0

46.2

191.3

194.7

FMC Lithium

21.3

11.1

70.2

23.0

Segment operating profit ^(a)

202.4

158.6

661.4

581.6

Corporate and other

(29.6)

(16.4)

(83.6)

(62.4)

Adjusted earnings from continuing operations, before interest, income taxes and noncontrolling interests (Non-GAAP)

$

172.8

$

142.2

$

577.8

$

519.2

Interest expense, net

(21.6)

(21.2)

(82.7)

(80.1)

Corporate special (charges) income:

Restructuring and other (charges) income ^(b)

(68.2)

(165.8)

(107.3)

(244.0)

Non-operating pension and postretirement charges ^(c)

(22.8)

(15.4)

(25.1)

(35.3)

Acquisition-related charges ^(d)

(6.6)

(16.3)

(23.4)

(290.3)

(Provision) benefit for income taxes

(18.4)

(103.8)

(93.9)

(47.4)

Discontinued operations, net of income taxes ^(e)

(18.8)

(22.4)

(33.7)

676.4

Net income (loss) attributable to noncontrolling interests

(0.5)

(1.4)

(2.6)

(9.5)

Net income (loss) attributable to FMC stockholders

$

15.9

$

(204.1)

$

209.1

$

489.0

(a) 

Referred to as Segment Earnings.

(b) 

Below provides the details of restructuring and other (charges) income by segment.

Three Months Ended December 31,

Twelve Months Ended December 31,

2016

2015

2016

2015

FMC Agricultural Solutions

$

(40.8)

$

(76.5)

$

(62.0)

$

(123.7)

FMC Health and Nutrition

(6.0)

(73.2)

(10.0)

(93.8)

FMC Lithium

—

(2.2)

(0.6)

(2.7)

Corporate

(21.4)

(13.9)

(34.7)

(23.8)

Restructuring and other (charges) income

$

(68.2)

$

(165.8)

$

(107.3)

$

(244.0)

(c) 

See Note (b) to the schedule "Reconciliation of Net Income (Loss) Attributable to FMC Stockholders (GAAP) to Adjusted After-Tax Earnings from Continuing Operations, Attributable to FMC Stockholders (Non-GAAP)" for further details on the components that make up this line item.

(d) 

See Note (c) to the schedule "Reconciliation of Net Income (Loss) Attributable to FMC Stockholders (GAAP) to Adjusted After-Tax Earnings from Continuing Operations, Attributable to FMC Stockholders (Non-GAAP)" for further details on the components that make up this line item.

(e) 

See Note (e) to the schedule "Reconciliation of Net Income (Loss) Attributable to FMC Stockholders (GAAP) to Adjusted After-Tax Earnings from Continuing Operations, Attributable to FMC Stockholders (Non-GAAP)" for further details on the components that make up this line item.

FMC Agricultural Solutions Pro Forma Financial Results

Twelve Months Ended December 31,

(in Millions)

2016

2015

Revenue

Revenue, FMC Agricultural Solutions, as reported ⁽¹⁾

$

2,274.8

$

2,252.9

Revenue, Cheminova, pro forma ⁽²⁾

—

362.0

Pro Forma Combined, Revenue ⁽³⁾

$

2,274.8

$

2,614.9

Operating Profit

Operating Profit, FMC Agricultural Solutions, as reported ⁽¹⁾

$

399.9

$

363.9

Operating Profit, Cheminova, pro forma ⁽²⁾

—

19.9

Pro Forma Combined, Operating Profit ⁽³⁾

$

399.9

$

383.8

(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, 2015, 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. 

(3)

The pro forma combined amounts are not necessarily indicative of what the results would have been had we acquired Cheminova on January 1, 2015 or indicative of future results. For the three and twelve months ended December 31, 2016 and for the three months ended December 31, 2015, pro forma results and actual results are the same.

FMC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions)

December 31, 2016

December 31, 2015

Cash and cash equivalents

$

64.2

$

78.6

Trade receivables, net of allowance of $17.8 in 2016 and $13.9 in 2015

1,828.0

1,851.4

Inventories

703.5

800.2

Other current assets

253.5

241.7

Total current assets

2,849.2

2,971.9

Property, plant and equipment, net

1,002.1

1,016.4

Goodwill

777.5

776.1

Other intangibles, net

793.4

837.0

Deferred income taxes

244.8

286.9

Other long-term assets

472.3

437.6

Total assets

$

6,139.3

$

6,325.9

Short-term debt and current portion of long-term debt

$

94.2

$

112.6

Accounts payable, trade and other

355.4

403.6

Accrued customer rebates

249.9

256.1

Guarantees of vendor financing

104.6

67.2

Accrued pensions and other postretirement benefits, current

7.1

6.4

Other current liabilities

627.0

607.4

Total current liabilities

1,438.2

1,453.3

Long-term debt, less current portion

1,798.8

2,036.3

Long-term liabilities

909.3

928.0

Equity

1,993.0

1,908.3

Total liabilities and equity

$

6,139.3

$

6,325.9

FMC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

Twelve Months Ended December 31,

2016

2015

Cash provided (required) by operating activities of continuing operations ⁽¹⁾

$

537.3

$

(277.1)

Cash provided (required) by operating activities of discontinued operations

(39.5)

(80.6)

Cash provided (required) by investing activities of continuing operations

(139.2)

(1,285.5)

Cash provided (required) by investing activities of discontinued operations

4.0

1,634.3

Cash provided (required) by financing activities of continuing operations:

Increase (decrease) in short-term debt

(19.4)

(547.3)

Financing fees

(0.7)

—

Repayments of long-term debt

(242.6)

(1,036.6)

Proceeds from borrowings of long-term debt

2.8

1,650.0

Acquisition of noncontrolling interest

(20.0)

—

Dividends paid

(88.6)

(86.4)

Repurchases of common stock under publicly announced program

(11.2)

—

Other repurchases of common stock

(1.8)

(3.7)

Excess tax benefits from share-based compensation

0.4

1.4

Issuances of common stock, net

4.1

5.9

Cash provided (required) by financing activities

(377.0)

(16.7)

Effect of exchange rate changes on cash

—

(5.3)

Increase (decrease) in cash and cash equivalents

(14.4)

(30.9)

Cash and cash equivalents, beginning of year

78.6

109.5

Cash and cash equivalents, end of period

$

64.2

$

78.6

(1)

The twelve months ended December 31, 2015 includes $264.8 million in payments associated with the Cheminova acquisition purchase price hedges and approximately $340.3 million in income tax payments principally driven by the sale of our Alkali Chemicals business.