(NOTIFY) 72731,347
(CONTACT-NAME) David A. Kain
(CONTACT-PHONE) (312) 861-6050
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION 10-K
DOCUMENT TYPE 1
COUNT 6
PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period
from__________________to____________________
Commission file number 1-2376
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes * No
FMC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0479804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Randolph Drive, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 861-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange
on which registered
Common Stock, $0.10 par value New York Stock Exchange
Midwest Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the act: None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-
affiliates of the Registrant as of February 25, 1994, was
$1,767,907,135. The number of shares of Registrant's Common
Stock, $0.10 par value, outstanding as of that date was
36,263,679.
Documents Incorporated by Reference
Document Form 10-K Reference
Portion of Annual Report to Part I and II; Part III, Item 10
Stockholders for 1993 ; and Part IV, Item(a)(1) and (2)
Part III
Portions of Proxy Statement for
1994 Annual Meeting of Stockholders
PAGE 2
CROSS-REFERENCE TABLE OF CONTENTS
The 1993 Annual Report to Stockholders and the 1994 Proxy
Statement include all information required in Parts I, II and
III of Form 10-K except for the list of executive officers of
Registrant which appears at the end of Part I. The Cross-
Reference Table of Contents set forth below identifies the
source of incorporated material for each of the 10-K items
included in Parts I, II, III and IV (Items (a)(1) and (2)).
Only those sections of the Annual Report to Stockholders and
the Proxy Statement cited in the Cross-Reference Table are
part of the 10-K and filed with the Securities and Exchange
Commission.
10-K item No. Incorporated by Reference From:
PART I.
Item 1. Business
(a) General Development of Business Annual Report to Stockholders
(Exhibit 13), pages 1-18,34,35
(b) Financial Information About
Industry Segments Annual Report to Stockholders,
(Exhibit 13) pages 5, 18-19, 33
(c) Narrative Description of Business Annual Report to Stockholders,
(Exhibit 13) pages 1-25,33,35,
45-46,50-52,54-55
(d) Financial Information About Annual Report to Stockholders,
Foreign and Domestic Operations (Exhibit 13) page 45-46
and Export Sales
Item 2. Properties Annual Report to Stockholders,
(Exhibit 13) pages 15-16,54-55
Item 3. Legal Proceedings Annual Report to Stockholders,
(Exhibit 13) pages 20-21,50-51
Item 4. Submission of Matters to
a Vote of Security Holders (Not Applicable)
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of FMC Corporation, together with the
offices in FMC Corporation presently held by them, their
business experience since January 1, 1989, and their ages,
are as follows:
Age Office; year of election;
Name 3/15/94 and other information for past 5 years
Robert N. Burt 56 Chairman of the Board and Chief
Executive Officer (91);President
(90-93); Executive Vice President
(88); Vice President (78);
General Manager-Defense Systems Group
(83); General Manager-Agricultural
Chemical Group (77)
Larry D. Brady 51 President (93) and a Director (89);
Executive Vice President (89-93) Vice
President-Corporate Development (88);
Vice President and General Manager-
Agricultural Chemical Group (83);
Manager, Citrus Machinery Division
(81-83)
PAGE 3
William F. Beck 55 Vice President (86) and General
Manager-Chemical Products Group (86);
President of FMC Europe (91); Director
of Business Planning (84-86)
Jerome D. Brady 50 Vice President (92) and General
Manager-Food Machinery Group (92);
Vice President, Harsco Corporation
(78-92)
Cheryl A. Francis 40 Treasurer (93); Adjunct Professor,
University of Chicago Graduate School
of Business (91-93); various financial
positions with FMC (79-91); Vice
President-Finance, FMC Gold Company
(87-89)
W. Reginald Hall 58 Vice President (91) and General
Manager-Specialty Chemicals Group (92)
General Manager-Food Machinery Group
(90); General Manager-Food Processing
Systems (86-90)
Robert I. Harries 50 Vice President (92) and Deputy General
Manager-Chemical Products Group (92)
Patrick J. Head 61 Vice President and General Counsel
(81)
Robert B. Hoffman 57 Vice President (90); International
Consultant (88-90); Executive Vice
President, Staley Continental (85-88);
Executive Vice President, Castle &
Cooke, Inc. (84-85); Vice President
and Chief Financial Officer, FMC (75-
84)
Lawrence P. Holleran 63 Vice President-Human Resources (88);
Director, Human Resources (85-88);
Director, Employee Relations and
Management Development (77-85)
Dan W. Irwin 53 Vice President-Technology, Manufacturing
and Information Services (87); Director-
Information resources (84-87); Director-
Business Planning (80-84)
William J. Kirby 56 Vice President-Administration (85);
Vice President- Personnel (76-85)
Arthur D. Lyon 57 Vice President-Finance (87); Vice
President (82) and Controller (77)
James A. McClung 56 Vice President (91); Vice President-
International (81-91)
Earl M. Morgan 63 Vice President (91); General Manager-
Agricultural Chemical Group (90);
General Manager-International
Department of Agricultural Chemical
Group (76-90)
Joseph Netherland 47 Vice President (87) and General
Manager-Petroleum Equipment Group
(86), Specialized Machinery Group
(89); Manager- Wellhead Equipment
Division (84); Manager-Fluid Control
Division (83)
PAGE 4
Thomas W. Rabaut 45 Vice President (94), President and
Chief Executive Officer, United
Defense, L.P. (94); General Manager,
Defense Systems Group (93); Manager,
Ground Systems Division (90-93) and
Director of Operations for that
Division (89-90)
Frank A. Riddick, III 37 Controller (93); Treasurer (90-93);
previously with Merrill Lynch (87-90)
most recently as Vice President,
Mergers and Acquisitions; various
finance-related positions with General
Motors Corporation (84-87)
William J. Wheeler 51 Vice President (91); President, FMC
Asia-Pacific (91); General Manager,
Phosphorus Chemical Division (86-91)
Scott H. Williamson 42 Vice President-Corporate Development
(93); Vice President, Acquisitions and
Development, Itel Corporation (85-93)
Each of the Company's executive officers has been employed
by the Company in a managerial capacity for the past five
years except for Messrs. J. Brady, Hoffman, Riddick and
Williamson and Ms. Francis. No family relationships exist
between any of the above-listed officers and there are no
arrangements or understandings between any of them and any
other person pursuant to which they were selected as an
officer. All officers are elected to hold office for one
year and until their successors are elected and qualify.
10-K Item No. Incorporated by Reference From:
Part II.
Item 5. Market for Registrant's Annual Report to Common Equity
and Related Stockholders, (Exhibit 13) Stockholder Matters
pages 23,25, 43-45, 59-60
Item 6. Selected Financial Data Annual Report to Stockholders,
Exhibit 13) pages 34-35, 48-51, 59
Item 7. Management's Discussion Annual Report to Stockholders,
and Analysis of Financial (Exhibit 13) pages 1-25, 28-29, 31-52,
Condition and Results of 54-55
Operations
Item 8. Financial Statements and Annual Report to Stockholders,
Supplementary Data (including (Exhibit 13) pages 26-53
all Schedules required under
Item 14 of Part IV)
Item 9 Changes in and disagree-
ments with Accountants on Account-
ing and Financial Disclosure (Not Applicable)
PART III.
Item 10 Directors and Executive Part 1; Proxy Statement for
Officers of the Registrant 1994 Annual Meeting of
Stockholders pages 2-8,21;
PAGE 5
Item 11 Executive Compensation Proxy Statement for 1994
Annual Meeting of Stockholders
pages 9-10, 13-20
Item 12. Security Ownership of Proxy Statement for 1994 Annual
Certain Beneficial Owners Meeting of Stockholders, pages 11-12
and Management
Item 13. Certain Relationships Proxy Statement for 1994 Annual
and Related Transactions Meeting of Stockholders, page 10
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Documents filed with this Report
1. Consolidated financial statements of FMC Corporation and
its subsidiaries are incorporated under Item 8 of this Form
10-K.
2. All required financial statement schedules are included
in the consolidated financial statements or notes thereto as
incorporated under Item 8 of this Form 10-K.
3. Exhibits: See attached exhibit index, page 6.
(b) Reports on Form 8-K
1. Report filed on December 10, 1993, regarding
restructuring and other charges including writedown of
carrying value of certain assets.
(c) Exhibits
See Index of Exhibits.
PAGE 6
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)
Arthur D. Lyons
By_________________
Arthur D. Lyons
Vice President-Finance
Date: March 28, 1994
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the date indicated.
Signature Title
Arthur D. Lyons Vice President-Finance and
Principal Financial Officer Arthur D. Lyons
Frank A. Riddick Controller and Principal
Accounting Officer
Robert N. Burt Chairman of the Board
and Chief Executive Officer
William W. Boeschenstein Director
Larry D. Brady Director
B. A. Bridgewater, Jr. Director
Paul L. Davies, Jr. Director
Jean A. Francois-Poncet Director
Robert H. Malott Director
Edward C. Meyer Director
James R. Thompson Director
Clayton Yeutter Director
By: Robert L. Day
Robert L. Day
Attorney-in-fact
March 28, 1994
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION EXHIBIT INDEX
DOCUMENT TYPE 2
COUNT 3
PAGE 1
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO
FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description Page No.
This 10-K This 10-K
3.1 Restated Certificate of Incorporation, as filed
on July 1, 1986 (incorporated by reference from
Exhibit 3.1 to the Form SE filed on March 25, 1993). N/A
3.2 Amendment to Restated Certificate of Incorporation
filed on April 30, 1987 (incorporated by reference
from Exhibit 3.2 to the Form SE filed on March 25,
1993). N/A
3.3 By-Laws of the Company, as amended (incorporated
by reference from Exhibit 3.1 to the Form SE
filed on March 28, 1990). N/A
4.1 Amended and Restated Rights Agreement, dated as
of February 19, 1988, between Registrant and
Harris Trust and Savings Bank (incorporated by
reference from Exhibit 4 to the Form SE filed
on March 25, 1993). N/A
4(iii)(A) Registrant undertakes to furnish to the Commission
upon request, a copy of any instrument defining the
rights of holders of long-term debt of the Registrant
and all of its subsidiaries for which consolidated or
unconsolidated financial statements are required to
be filed. N/A
4.2 Participation Agreement, dated as of January 1, 1994,
by and among FMC Corporation, Harsco Corporation,
Harsco Defense Holding, Inc. and United Defense, L.P.*
(incorporated by reference from Exhibit 4.1 to the
Form 8-K filed on February 14, 1994). N/A
4.3 Partnership Agreement, dated as of January 1, 1994,
by and among FMC Corporation, Harsco Defense Holding,
Inc. and United Defense, L.P.* (incorporated by
reference from Exhibit 4.2 to the Form 8-K filed on
February 14, 1994). N/A
4.4 Annex A-Definitions Relating to the Partnership
Agreement and the Participation Agreement (incorporated
by reference from Exhibit 4.3 to the Form 8-K filed
on February 14, 1994) N/A
4.5 Registration Rights Agreement, dated as of January 1,
1994, by and among FMC Corporation, Harsco Defense
Holding, Inc. and United Defense, L.P. (incorporated
by reference from Exhibit 4.4 to the Form 8-K filed
on February 14, 1994). N/A
4.6 Management Services Agreement, dated as of January 1,
1994, by and between FMC Corporation and United
Defense, L.P.* (incorporated by reference from
Exhibit 4.5 to the Form 8-K filed on February 14, 1994). N/A
*The Registrant has omitted the schedules and certain
exhibits to the Participation Agreement, the Partnership
Agreement and the Management Services Agreement and agrees
to furnish supplementally a copy of such schedules and
exhibits to the Commission upon request.
PAGE 2
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO
FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description Page No.
This 10-K This 10-K
4.7 Form of Senior Promissory Note Agreement by and
between Harsco Defense Holding, Inc. and United
Defense, L.P. (incorporated by reference from
Exhibit 4.6 to the Form 8-K filed on
February 14, 1994). N/A
10.1 Directors' Retirement Plan (incorporated by
reference from Exhibit 10.1 to the Form SE filed
on March 27, 1992). N/A
10.2 FMC 1981 Incentive Share Plan, as amended,
effective May 28, 1986 (incorporated by reference
from Exhibit 10.1 to the Form SE filed on
March 25, 1993). N/A
10.3 FMC 1990 Incentive Share Plan (incorporated by
reference from Exhibit 10.1 to the Form SE filed
on March 26, 1991). N/A
10.4 FMC Corporation Salaried Employees' Retirement
Plan, as revised on January 1, 1985 (incorporated by
reference from Exhibit 10.2 to the Form SE filed
on March 27, 1992). N/A
10.5 FMC Employees' Thrift and Stock Purchase Plan,
as revised and restated as of April 1, 1991
(incorporated by reference from Exhibit 10.3
to the Form SE filed on March 27, 1992). N/A
10.6 FMC Salaried Employees' Equivalent Retirement
Plan (incorporated by reference from Exhibit
10.4 to the Form SE filed on March 27, 1992). N/A
10.7 FMC Deferred Compensation Equivalent Retirement
and Thrift Plan (incorporated by reference from
Exhibit 10.5 to the Form SE filed on March 27, 1992). N/A
10.8 FMC Management Bonus Plan (incorporated by
reference from Exhibit 10.6 to the Form SE filed
on March 27, 1992). N/A
10.9 FMC Corporation Amended and Restated Executive
Severance Plan, (incorporated by reference from
Exhibit 10.1 to the Form SE filed on March 28, 1990). N/A
10.10 FMC Employees' Thrift and Stock Purchase Trust
dated April 1, 1982 (incorporated by reference
from Exhibit 10.7 to the Form SE filed on March 27,
1992). N/A
10.11 Amendment to FMC Employees' Thrift and Stock
Purchase Trust dated April 1, 1988 (incorporated
by reference from Exhibit 10.8 to the Form SE filed
on March 27, 1992). N/A
PAGE 3
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO
FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description Page No.
This 10-K This 10-K
10.12 FMC Master Trust Agreement between FMC and
Bankers Trust Company (incorporated by reference
from Exhibit 10.9 to the Form SE filed on March 27,
1992). N/A
10.13 Credit Agreement dated as of August 21, 1992,
among the Company, the Lenders listed therein and
Morgan Guaranty Trust Company of New York as Agent
(incorporated by reference from Exhibit 10.1 to
the Form SE filed on March 25, 1993). N/A
10.14 Fiscal Agency Agreement between FMC Corporation
and Union Bank of Switzerland, Fiscal Agent,
dated as of January 16, 1990 (incorporated by
reference from Exhibit 10.4 to the Form SE filed
on March 28, 1990). N/A
10.15 Amended and Restated FMC Deferred Stock Plan for
Non-Employee Directors (incorporated by reference
from Exhibit 10.2 to the Form SE filed on
March 25, 1993). N/A
10.16 Consulting Agreement dated as of September 1, 1990
between the Company and Edward C. Meyer. -
13 Annual Report of FMC Corporation for the year
ended December 31, 1993. 1
22 List of Significant Subsidiaries of Registrant. 56
24 Consent of Auditors. 57
25 Powers of Attorney. 58-59
PAGE 0
DOCUMENT HEADER
DOCUMENT DESCRIPTION EXHIBITS
DOCUMENT TYPE 2
COUNT 59
PAGE 1
EXHIBIT 13
MESSAGE TO SHAREHOLDERS
FMC's financial results for 1993 were disappointing.
Overcapacity in key chemical markets and poor economic
conditions reduced operating income to $203 million from
$244 million. In addition, we took a $123 million charge to
cover restructuring costs and asset write-downs. Cash flow,
however, remained strong as we reduced debt to $832 million
by year-end 1993 from $907 million at year-end 1992. This
performance, coupled with the decline of the defense market,
continued weak economic conditions in Europe, and
overcapacity in our key industrial chemical markets, prompts
questions about how FMC will increase long-term value for
our shareholders. That's what our shareholders should be
and are asking me. I personally am confident that we can
and will continue our tradition of providing superior
shareholder returns. Even more important, the FMC management
team is equally confident. Our conviction is based on the
fundamental strengths and future strategies of our company,
specifically:(1) The majority of our businesses have strong
positions in attractive markets and are run by a superior
management team with a solid track record of running our
businesses well.(2) We have earned high returns and
generated excellent cash flow through the economic cycles of
the markets in which we operate.(3) We have a long-term
strategy to increase FMC's historic growth rates by making
investments that will increase growth in our major markets
at returns above the cost of capital. And it's this
combination of management strength, ability to earn high
returns and generate strong cash flow, and commitment to our
long-term growth strategy that will allow us to continue and
strengthen FMC s tradition of consistently increasing
shareholder value. Our management strength and our
dedication to long-term strategies based on growing the
company were seriously tested by business conditions we
faced in 1993 and will face again in 1994. Two of our
highest return businesses, defense and gold, are shrinking.
Our Performance Chemicals businesses continue to perform
well, with solid growth prospects, but the Industrial
Chemical businesses while fundamentally strong have been hit
by industry overcapacity and a weak worldwide economy. Our
Energy and Transportation Equipment businesses are growing
worldwide, despite the dip in petroleum prices, but the
continuing slump in Europe, together with the collapse of
our markets in the former Soviet Union, has hurt our food
machinery businesses. To address these challenges, we must
first and foremost remain dedicated to running our
businesses superbly. Our approach is two-pronged paring
costs and investing in solid growth opportunities. Given
difficult business conditions, our lack of sales growth in
constant dollars, and the need to de-layer our organization
and streamline our systems to support our growth
initiatives, we have initiated a thorough review of our
processes that will significantly reduce overhead throughout
the company. A significant portion of our $123 million write-
off will cover reductions in functional staffs throughout
the company, as well as downsizing and consolidating
facilities. We realize that cost-cutting and lean management
alone won't deliver maximum value to our shareholders, but
these approaches remain an important part of running our
businesses superbly. Yet even as we reduce spending at some
operations, we are determined to maintain and in some cases
increase the spending needed to achieve our long-term growth
goals. As we pursue these dual objectives of paring costs
and growing the company, we are focusing on five key
strategies. These strategies are outlined briefly below and
will be reviewed in more detail throughout this
report.STRATEGY: CONTINUING TO RUN OUR BUSINESSES
SUPERBLY.We are determined to preserve the strengths that
have brought us to where we are: demanding strong operating
performance, running our businesses for cash flow,
rigorously analyzing investment decisions and accurately
measuring our performance. And as we implement our growth
strategy, we will make investments that generate returns
above our cost of capital. Meeting these standards, we
believe, is the way to increase shareholder value. Our new
partnership with Harsco's BMY division, for example, will
combine FMC's research and engineering expertise with
Harsco's low-cost, flexible manufacturing capabilities,
positioning us to emerge as a profitable survivor in the
defense marketplace making good returns in the lean years
that lie ahead for the defense industry. STRATEGY:
DEVELOPING NEW PRODUCTS AND MARKETS. FMC's growth
initiatives will build on a strong technological base. Our
agricultural chemical researchers, for example, are
aggressively developing several exciting
PAGE 2
new compounds, and we are looking for ways to expand our
profitable food ingredients and bioscience businesses. Even
as we restructure our food machinery businesses, we are
investing more aggressively in research and development. Our
subsea petroleum equipment continues to win technical kudos
and new customers. STRATEGY: GLOBALIZING OUR BUSINESSES.
Globalization means thinking globally about strategy,
markets, competitors, product sourcing, components yet
operating locally with a strong awareness of individual
customer and market needs. That's nothing new. It's the
standard definition of globalization, which is not so much
an operating strategy as a state of mind. Last year I
described the regional organizations we had created to
achieve critical mass in key markets, identify more global
growth opportunities and promote this global state of mind
throughout the company. While these organizations are still
moving up the steep part of the learning curve, they've
already helped us generate new opportunities and run our
businesses better. STRATEGY: ACQUIRING BUSINESSES AND
TECHNOLOGIES IN MARKETS WE UNDERSTAND.
Our empirical analyses of successful industrial products
companies and we define success as generating share]
holder returns in the top quartile of the Standard &
Poor's 400 showed that almost all these companies
increased value by generating both strong returns and
growth. There was only one surprise only about one-
quarter of them grew without acquisitions and for at least
half of these premier companies, acquisitions were the
primary engine of growth. We followed up on this finding
and reconfirmed that most acquisitions did not earn an
adequate return on investment. But we also learned that
the odds of success were dramatically improved when
companies pursued acquisitions of less than 10 percent of
their capital employed that were related to their core
businesses. As a result, we are primarily looking for
smaller acquisitions investments up to $200 million that
are natural extensions of our businesses in markets that
we already serve and technologies that we understand. We
will systematically pursue these acquisitions
aggressively, but within our culture of rigorously
analyzing opportunities to determine if they meet our
return standards. The three acquisitions that we have
made in the past two years fit our criteria. Ciba-Geigy's
global flame retardant business, combined with our
domestic operations, gave us a 40 percent market share
world wide. Our two energy industry-related acquisitions
better position us to serve the oilfield of the future.
Kongsberg's subsea control and engineering systems gave us
the capability to provide our worldwide petroleum
customers with a total subsea engineering system. SOFEC's
single-point mooring system brought us a promising oil
field technology that we have the resources, expertise and
market presence to turn into a major business. STRATEGY:
GETTING, DEVELOPING AND KEEPING MORE THAN OUR FAIR SHARE
OF THE BEST PEOPLE. If we achieve this goal, the rest
will be relatively easy because it is the people of FMC
who will spark innovation, identify growth opportunities
and generate exciting new products. We are especially
committed to valuing, and leveraging, the diversity of our
worldwide work force. A global growth strategy demands
that we generate new ideas and deepen our understanding of
different cultures. We also need to create a workplace
where people can develop their capabilities and know they
have contributed to achieving our goals. 1993 RESULTS.
Now to the specifics of 1993. Income from continuing
operations was $164 million before restructuring and other
charges, or $4.45 per share, compared with $193 million,
or $5.23 per share, in 1992. Sales slipped 6 percent to
$3.8 billion for the year. Performance Chemicals posted
another year of record sales and profits, and Defense
Systems profits remained strong due primarily to favorable
cost performance. Weak worldwide economic conditions and
overcapacity in some key markets affected our Industrial
Chemicals businesses, while significantly weakened markets
for several food machinery businesses depressed Machinery
and Equipment results. Operating results are fully
described in the operating review section. In December
1993, we recorded an after-tax special charge of $123
million, or $3.34 per share, related to restructuring
costs and asset write-downs. After the effects of the
restructuring and other charges, income from continuing
operations was $41 million, or $1.11 per share, in 1993.
After extraordinary charges in 1993 and 1992 related to
debt refinancing, a
PAGE 3
$73 million after-tax charge in 1992 related to previously
discontinued operations, as well as a $184 million charge
in 1992 for adopting Statement of Financial Accounting
Standards No. 106 (Postretirement Benefits Other than
Pensions), net income in 1993 was $36 million, or $0.98
per share, compared with a net loss in 1992 of $76
million, or $2.06 per share. Strong cash flow in 1993
enabled us to fund the acquisitions of Kongsberg Offshore
and SOFEC, invest in capital assets of $215 million,
invest $149 million in research and development projects,
and reduce debt by $75 million.
MANAGEMENT CHANGES In 1993, our board elected Larry Brady
president of the corporation. (I had previously held both
this position and the chairmanship, with Larry serving as
executive vice president.) This promotion confirmed
Larry's leadership role in the company for the past two
years. Larry's experience, enthusiasm, creativity and
proven ability to get the job done are a big part of why I
think we will perform as well in the 1990s as we did in
the preceding decade. We were also delighted to welcome
Cheryl Francis back to FMC from the University of Chicago
Business School, where she had been an adjunct professor.
Cheryl was elected treasurer, while former treasurer Frank
Riddick was named controller. Scott Williamson, our new
vice president corporate development, joined FMC from Itel
Corporation, where he had been vice president acquisition
and development, since 1986. We are extremely pleased to
welcome Dr. Patricia Buffler to our board of directors. As
the dean of the School of Public Health, University of
California at Berkeley, and professor of public health and
epidemiology, Pat brings us expertise that will be
particularly helpful in our Agricultural Chemical and
other chemical businesses, as well as in ongoing efforts
in our environment, health and safety programs. Bill
Boyd is retiring from our board at our 1994 annual
meeting. Bill has been an enormous help in providing
practical insights and direction to our strategic and
global development efforts. We will miss his operations
know-how and his wise counsel. OUTLOOK I don't want to
underestimate the short-term challenges or the difficulty
of keeping the balance between cutting costs and investing
in future growth. But I believe and our management team
believes that we have charted a solid course for FMC's
future. We are building on our strengths, and
supplementing those strengths with more growth initiatives
in each of our businesses. These new initiatives will
demand new resources and some trade-offs are inevitable.
On the other hand, I think FMC's management team is
especially well-equipped to make these decisions. We know
how to make decisions that are rooted in careful financial
analysis, not wishful thinking. We know how to run our
businesses for solid cash flow. We have strong positions
in attractive markets. We also remain committed to
protecting our environment, being good citizens in our
plant communities and becoming our customers' most valued
supplier. And most important, we have a company full of
terrific, dedicated people who are committed to achieving
our ambitious goal of becoming the company we want to be
by the year 2000: a growing, high- performing company that
has substantially increased sales while continuing to earn
returns above the cost of capital.
Robert N. Burt Chairman of the Board and Chief Executive
Officer February 25, 1994
REVIEW OF OPERATIONS Last year, the weak economy in
certain key markets caught up to FMC. After performing
well during the U.S. business downturn from 1990 to 1992,
our sales and earnings declined in 1993 as market
conditions worsened across a number of our industrial
chemical and machinery lines. Furthermore, our Defense
Systems business began to feel the effects of diminishing
defense budgets, as anticipated, and we have not yet found
the reserves to replace the sliding production for our
Precious Metals business. In 1993, FMC's sales were down
6 percent to $3.8 billion, and income from continuing
operations before taxes and restructuring and other
charges decreased to $210.1 million. We recorded
restructuring and other charges of $172.3 million after
minority interest to cover costs
PAGE 4
related to restructuring our Machinery and Equipment and
Chemicals operations and support staffs companywide, as
well as the write-down of assets in our Precious Metals
segment. This restructuring program will reduce expense
levels in those operations where we continue to face
difficult market conditions without sacrificing critical
expenditures necessary for our long-term growth. The
high point of our business last year was our Performance
Chemicals segment, which contributed higher sales and
profits. Our Agricultural Chemical business produced
another year of record results. Markets for our Food
Ingredients, Pharmaceutical and BioProducts businesses
continue to expand, and our performance was strong. With a
full year of operations, our new Process Additives
business made a solid contribution to sales and earnings.
Our Industrial Chemicals businesses did not fare well in
1993. Weak economic conditions and overcapacity in soda
ash, phosphorus and hydrogen peroxide markets depressed
demand and kept prices low. The cycle shows no signs of
reversing until 1995, and in the interim, we are stepping
up our efforts to reduce operating costs. The worldwide
economic slump also depressed results for our Machinery
and Equipment businesses. Continued weak markets in Europe
and the United States, as well as political and economic
instability in the former Soviet republics led to
significantly decreased sales and earnings for our Food
Machinery lines. Energy Equipment posted higher sales, but
falling oil prices pressured margins. We continued to
downsize our Defense Systems business in line with
shrinking defense budgets in this post-Cold War world.
Segment sales did decline in 1993, but better cost
performance resulted in earnings that remained nearly even
with the previous years. Finally, lower sales and earnings
for Precious Metals reflected the closing of our Paradise
Peak gold and silver mine in Nevada. Our challenge is to
replace depleted reserves. To meet that challenge, we are
refocusing our exploration on higher potential areas
around the globe. Last year, we continued to make
strategic moves necessary for a healthy future.
Anticipating our global energy customers' needs, we made
two acquisitions that will allow us to provide high-tech,
turnkey services. And to secure our role in the changing
defense industry, we concluded the combination of our
defense business with Harsco Corporation's BMY Combat
Systems Division. Our newly formed company, United
Defense, L.P., will be a stronger, more diversified
contender in the shrinking defense industry. In the
midst of major changes in our markets and our operations,
we stayed on course with one of our basic principles:
assuring the health and safety of our employees and
customers, and protecting the environment in the areas
where we operate. Once again, in keeping with the chemical
industrys Responsible Care codes of management practice,
our safety and environmental programs spanned the range of
our operations from enhanced environmental controls in
manufacturing to comprehensive product stewardship
campaigns. In one of our most unique outreach efforts to
date, our agricultural chemicals business rolled out a
complete product safety program expressly for our
customers in developing countries in tandem with rolling
out a new product. As we plan for the future, we are
working hard to develop the people who will be leading our
efforts. We are encouraging the development of a talented
and diverse work force, and we are broadening our global
perspective. Attracting and keeping the best people in
business today is a critical precursor to reach our goals
for the end of this decade and beyond.
LARRY D. BRADY PRESIDENT
PAGE 5
INDUSTRY SEGMENT DATA
(In millions) Year ended December 31
1993 1992 1991 1990 1989
SALES*
Industrial Chemicals $ 979.5 $1,045.2 $1,035.4 $1,029.6$ 975.9
Performance Chemicals 857.9 790.1 648.7 594.4 565.6
Precious Metals 125.0 170.6 157.5 187.7 190.2
Defense Systems 950.2 1,111.8 1,171.6 1,067.2 900.3
Machinery and Equipment 870.9 876.7 891.5 845.5 783.0
Eliminations (29.6) (20.7) (5.3) (2.2) (0.5)
Total $3,753.9 $3,973.7 $3,899.4 $3,722.2 $3,414.5
INCOME BEFORE INCOME TAXES
Industrial Chemicals $ 64.3 $ 91.9 $ 102.1 $ 106.9 $ 137.7
Performance Chemicals 132.9 121.3 101.1 84.8 88.0
Precious Metals(1) 9.7 36.4 28.7 81.3 100.9
Defense Systems 161.7 167.2 160.2 96.8 47.3
Machinery and Equipment 6.7 32.1 46.2 52.0 28.3
Operating profit 375.3 448.9 438.3 421.8 402.2
Restructuring and other
charges(2)(3) (172.3) - - - -
Net interest expense (62.6) (82.7) (107.4) (128.1) (133.7)
Corporate and other(3) (112.8) (115.9) (92.6) (101.8) (86.2)
Other income and
(expense), net(3) 10.2 29.3 17.6 19.5 36.0
Total $ 37.8 $ 279.6 $ 255.9 $ 211.4 $ 218.3
IDENTIFIABLE ASSETS
Industrial Chemicals $ 945.4 $ 988.0 $1,032.7 $1,048.3 $ 931.5
Performance Chemicals 576.2 546.4 421.8 420.9 397.4
Precious Metals 64.8 131.8 145.1 157.4 99.3
Defense Systems 269.0 277.7 367.6 444.7 502.9
Machinery and Equipment 522.9 473.0 503.3 495.2 459.3
Subtotal 2,378.3 2,416.9 2,470.5 2,566.5 2,390.4
Corporate and other 434.8 409.7 345.1 392.7 428.6
Total $2,813.1 $2,826.6 $2,815.6 $2,959.2 $2,819.0
(1) Includes 100 percent of FMC Gold company's income of
$9.0 million before income taxes and restructuring and other
charges in 1993, $16.2 million in 1992, $9.2 million in
1991, $49.0 million in 1990 and $60.7 million in 1989, and
the effects of the FMC Corporation hedging program. Minority
shareholder interests are included in Corporate and other,
except the portion related to 1993 restructuring and other
charges. See (2) below.
(2) Restructuring and other charges are described in Note 2
and are related to Machinery and Equipment ($66.0 million),
Precious Metals ($47.9 million, net of minority interest),
Industrial Chemicals ($29.7 million), Performance Chemicals
($3.2 million), and Corporate ($25.5 million).
(3) See Financial Review for discussion of these items.
* Certain 1992 amounts have been reclassified to conform
with the current year's presentation. Industry segment mix
has not changed between years.
PAGE 6
<TABLE>
<CAPTION>
PRODUCTS AND MARKETS
<S> <C> <C>
INDUSTRIAL CHEMICALS DESCRIPTION MARKETS SERVED
ALKALI CHEMICALS World's largest producer Glass-making, chemicals,
DIVISION of natural soda ash. detergents, food products,
Downstream products animal feed, additives,
include sodium mining, air/water
bicarbonate, sodium treatment, pulp and
cyanide and sodium paper.
sesquicarbonate.
PEROXYGEN
CHEMICALS
DIVISION Major worldwide producer Pulp and paper, textiles,
of hydrogen peroxide, chemical and polymer
persulfates and other synthesis, environmental
peroxygen chemicals. clean-up, electronics,
detergents.
PHOSPHORUS
CHEMICALS
DIVISION Major worldwide producer Detergents, cleaning compounds,
of phosphorus and its metal treatment, food
derivatives, phosphates products, textiles, pesticide
and phosphoric acid. intermediates, additives,
pharmaceuticals.
LITHIUM
DIVISION World's largest producer of Aluminum, ceramics and glass,
lithium-based products. lubricating greases, swimming
pools, textiles, aluminum
alloys,
batteries, rubber and
plastic, air
conditioning, pharmaceuticals.
FMC FORET, S.A. Major European chemical Chemicals, detergents, pulp
producer. Products include and paper, textiles, glass,
hydrogen peroxide, perborate, mining, rubber, metallurgy,
phosphates, zeolites, pharmaceuticals, tanning,
silicates, sulfur ceramics, paint, food,
derivatives. animal feed, photography,
agriculture, water treatment.
PERFORMANCE CHEMICALS
AGRICULTURAL
CHEMICAL GROUP Produces crop protection Food growers, pest control
and pest control chemicals markets.
for worldwide markets.
FOOD
INGREDIENTS
DIVISION Largest worldwide producer Processed food industry,
of carrageenan and Avicel personal care products.
cellulose gel.
PHARMACEUTICAL
DIVISION Largest worldwide producer Pharmaceutical industry
of microcrystalline cellulose.
Produces other specialty
chemicals for pharmaceutical
markets.
BIOPRODUCTS Largest worldwide producer Life science research.
of agarose and other
products for life science
markets.
</TABLE>
PAGE 7
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARKET POSITION FMC STRENGTHS GLOBAL DEVELOPMENT OUTLOOK
PROCESS
ADDITIVES
DIVISION World's largest producer Plastics, hydraulic fluids,
of phosphate ester flame industrial water treatment
retardants. Leading and desalination.
supplier of specialty
water treatment chemicals.
Leading North 100+ years raw Focusing on core Soda ash markets
American producer material supply. technologies, recovering as
of soda ash. Low production reducing costs. industry over-
One-quarter of costs. Largely Assessing new capacity is
business outside self-sufficient trona source in reduced and economy
United States. in energy. Turkey. improves. Continued
Excellent dis- pressure on worldwide
tribution system. prices.
Leading North Strong applica- Pursuing new High growth due
American producer tions research. markets in Asia to products'
of peroxide. Sole High level of and Latin environmental
North American service, reli- America. desirability
producer of ability, product and versatility.
persulfates. quality and safety. Improving North
American capacity
utilization.
Leading North Low production Reducing costs. Smaller home
American producer. costs. Diverse laundry detergent
products. High market for phosphates.
level of service Improved pricing and
and reliable steady growth in
delivery. Strong other phosphorus-
technical support based products.
to customers.
Leading worldwide Diverse, high Exploring promis- Growing specialty
applications.
producer. value-added ing opportunities Exploration and
development
products. Strong in South America of new lithium resource.
manufacturing to ensure low-cost
capabilities. lithium reserves.
Leading share Excellent cost Began construction Steady hydrogen
in Spanish positions.Strong of new hydrogen peroxide growth in
peroxygen and manufacturing peroxide plant in Europe. European
phosphate markets. capabilities. Delfzijl, economy expected to
Increased market Increasing Netherlands. remain weak.
presence, with technical support
exports to 38 to customers.
countries.
Strong global Strong insecti- Rapid expansion Growing markets for
position in both cide portfolio. of new and pesticides in
developing
developed and More than 50 existing products countries. Growing
portfolio
developing percent of sales to markets in of pest control
countries. Major outside of Latin America and products and
herbicides.
pyrethroid United States. Asia. Finalized
insecticide new joint venture
producer. in Indonesia.
Leading worldwide Advanced appli- Opened new R&D Growing demand for
fat
market share for cations technology. laboratories; replacers and
healthier
carrageenan and Worldwide manu- sales,marketing foods. Further
expansion
cellulose gel. facturing capabili push in Europe, in Europe, Asia and
Latin
-ties. Diverse Asia-Pacific. America.
products. Introduced
Novagel line of
fat replacer products.
PAGE 8
Leading world- Advanced applica- Introduced Strong
pharmaceutical
wide market tions technology. AviSphere for customer base.
Expanding
share for major Strong manufactur- time-release through value-added
product. ing capabilities. applications. technology.
Product quality and Launched new
versatility. Brand line of
recognition. specialty excipi-
ents. Won major
development agree-
ment with global
pharmaceutical
customer.
Leading world- Advanced applica- Introduced new Increasing demand
for
wide producer. tions technology. products for DNA and protein-
Product quality. mapping genes related research
and conducting reagents.
DNA separations.
Continuing R&D
investments. More
new products in
1994.
Leader in world- Diverse products. New sales, distri- Worldwide
marketing
wide phosphate Strong manufactur- bution networks in 64 capability in
place.
ester flame ing capabilities. countries. Introduced Improved profit-
retardants. Reoflam PB 460 flame ability. Steady
growth
retardant. Introduced in water
treatment
new products for and flame
retardants.
water desalination
in arid, developing
areas.
DEFENSE SYSTEMS
DESCRIPTION MARKETS SERVED
UNITED DEFENSE, Produces tracked U.S. Army, Marine Corps
L.P.COMBAT SYSTEMS/ military vehicles and National Guard;
GROUND SYSTEMS for U.S. Army, U.S. allied governments.
Marine Corps, National
Guard; allied govern-
ments.
ARMAMENT SYSTEMS Manufactures naval U.S. Navy, Army,
gun and launching Marine Corps and
systems for the U.S. allied governments.
and allied navies.
Armament development
for U.S. Army.
INTERNATIONAL Marketing and manufac- International governments.
turing arm for military
products outside the
United States.
PAGE 9
STEEL PRODUCTS Produces steel track, Military, transportation,
forgings and castings. energy and mining.
Overhauls and converts
tracked vehicles.
PRECIOUS METALS
FMC GOLD Produces gold from mines Precious metal refineries.
in the western United
States. Focusing on
exploration of precious
metals in Latin America
and western United States.
MACHINERY AND EQUIPMENT
ENERGY AND Oil and gas wellhead and Oil and gas drilling,
TRANSPORTATION completion equipment; production and service
EQUIPMENT GROUP subsea engineering, companies.
procurement, construction
and equipment; valves,
pumps and loading arms;
marine terminals and
floating production
systems, metering systems.
Airline and automotive Industrial manufacturing,
equipment material handling airlines,automotive repair
systems. facilities, mining,
warehouses, newsprint,
publishing, chemicals,
electrical utilities.
FOOD MACHINERY Systems and equipment to Food and juice processors;
GROUP process food and juices, fresh fruit packers; food
including harvesters, growers; supermarkets;
bakery,
sterilizers, extractors, confectionery,
Pharmaceutical
packaging and material and personal care markets.
MARKET POSITION FMC STRENGTHS GLOBAL DEVELOPMENT OUTLOOK
Sole source on Advanced applications Completed partner- Lower
production
major programs. technology. Strong, ship between FMC's of the
Bradley A2.
competitive manufac- Defense Systems and Prime
contractor
turing capabilities. Harsco's BMY Combat for the A3.
Proven products. Systems. Won con- Continuing
efforts
Innovative work-share tract to up-grade the to downsize.
partnership program Paladin self-pro- Expanded
product
with U.S. Army depot. pelled howitzer. mix, new
product
development
with
new partner-
ship.
Sole or dual Advanced systems Crucial role in Declining
demand
source on major applications technology. developing advanced from U.S.
Navy.
programs. Strong manufacturing technology demonstra- Focus on
engineer-
capabilities. Proven tor for the future ing and
technology
products. Advanced Field development
for
Artillary System. future U.S.
Ongoing internat- Navy/Army
armament
ional sales. systems.
PAGE 10
A worldwide Leading technology. Operating major Aggressively
leader in Multi-system avail- co-production pursuing
product areas. ability. Proven deal facility in Turkey international
structuring. Formed FMC Arabia opportuni-
ties,
joint-venture enhanced by
company. Signed partnership.
cooperation Intense
competition
agreement with for new
contracts
Taiwan. will
continue.
Leading position Strong manufacturing Increasing sales Declining
demand
in the U.S. capabilities. of vehicle compon- from U.S.
Army.
military track ents to allied Focus on
increasing
market. governments. commercial
business.
Increasing Proven exploration Expanding promising Gold
production
efforts on and development exploration work in declining as
exploration. expertise. Mexico and Chile. Paradise Peak
Signed memoranda to mine opera-
explore known de- tion ends,
plan
deposits in Russia shutdown of
and China. Royal
Mountain
King.
Leading Worldwide manu- Acquired Kongsberg Acquisitions
positions for facturing and Offshore and SOFEC. position
major products. marketing Operating joint- business for
80 percent of capabilities. venture facility in future growth,
business out- World's largest Russia. Formed especially
side United subsea engineer alliances with interna-
tionally.
States. ing, procurement Brown and Root, Slow
improvement
and construction Halliburton. in the
domestic
firm. Won Amoco contract oil field
market.
for offshore China Weak oil
prices
project.
Leading Strong manufacturing Introduced Com
recovering
positions for capabilities. 30 cargo loader. as worldwide
major products. Proprietary technology. economy
improves.
A market leader in Emphasis on
margin
several key segments. improvement
and
interna-
tional
growth.
Leading Worldwide manufac- Installed processing Repositioning
worldwide turing capabilities. systems at U.S. business to
positions for Worldwide marketing Sugar Corporation's build on core
major products. organization. Advanced new citrus juice strengths.
50 percent of applications technology. facility. Sale of Continuing
market
business out- bean harvesters weakness and
side United to Taiwan. Gains customer
States. in Europe with consolida-
tions.
food preservation Emphasis on
technologies. improving
margins
and global
growth.
</TABLE>
PAGE 11
RETURN ON SALES RETURN ON ASSETS
24% 40%
18% 14.1 30%
10.4
12% 8.8 9.9 20% 10.8 15.5
9.8
6% 6.6 10% 9.1
6.7
0% 0%
93 92 91 90 89 93 92 91 90 89
INDUSTRIAL CHEMICALS FMC's Industrial Chemicals segment, producer
of soda ash, phosphates, hydrogen peroxide, lithium and related
chemicals, faced another difficult year. Prolonged poor global
markets for chemicals and overcapacity situations in some of our
major chemical lines continued to depress demand and prices. Our
sales declined 6 percent to $979 million, and our profits declined
to $64 million (before restructuring and other charges of $30
million).
Alkali Chemicals sales and profits were down in 1993 as
overcapacity persisted worldwide and prices remained under
pressure.
Increased production worldwide and reduced pricing of caustic
soda, a substitute product for soda ash, has caused some
customers to convert to caustic soda in the last half of the
year. In Europe, a strengthening U.S. dollar against European
currencies made it more difficult for U.S. producers to compete.
To combat market pressures, FMC concentrated on cost
improvements. We have streamlined our work force and operations,
and temporarily stopped production of caustic soda until pricing
improves. We'll continue to reduce our costs and focus on
manufacturing improvements as this down cycle continues in 1994.
Capacity utilization and industry pricing should increase in
1995. Our alkali lines remain a sound, attractive business for
the long term. Phosphorus Chemicals sales and profits were also
down last year as U.S. manufacturers of home laundry detergents
rapidly phased down their use of phosphates. In an effort to
reduce costs last year, we closed our phosphate production
facility in Newark, Calif., and idled one of four phosphorus
furnaces at our Pocatello, Idaho, facility for a portion of the
year. Sales were almost even, but earnings were down for
Peroxygen Chemicals. Overcapacity was an issue in the U.S.
market, contributing to soft prices in spite of double-digit
growth. In 1993 we worked closely with our customers on new
hydrogen peroxide applications, including recycling processes for
the pulp and paper industry and Caro's Acid for cyanide
detoxification in the mining industry. Volume growth is
projected to continue in North America and Europe for the coming
years. In anticipation of the expanding hydrogen peroxide market
in northern and central Europe, in 1993 we announced that FMC
Foret, our European industrial chemicals operation, will open a
new hydrogen peroxide facility in late 1995 in Delfzijl, an
industrial port city in the Netherlands. The Delfzijl plant will
augment FMC Foret's existing hydrogen peroxide plant in La Zaida,
Spain, where a new cogeneration facility started up to assure a
substantial reduction in energy costs. In addition to hydrogen
peroxide, FMC Foret is a producer of phosphates, perborates,
zeolites, silicates, sodium sulfate and sulphur derivatives for a
wide range of industries, including detergents, pulp and paper
and textiles. Overall, FMC Foret's sales were down in 1993 due to
the effects of currency translations and general weakness in
Europe, but profits were even with last year through significant
cost-control efforts. In a major cost-reduction effort for our
phosphate business, we closed the sulfuric acid plant at Palos,
Spain, based on a favorable supply contract with a neighboring
copper smelter. Meanwhile, our plant to produce zeolites, a
builder used in detergents, was in its first full year of
operation and met expectations for 1993. Sales and profits
declined for FMC's Lithium business, reflecting increased
spending on resource exploration as well as weak markets
worldwide, which had an adverse effect on the lithium industry
and FMC's position. Demand fell in one of lithium's key
markets, aluminum processing. North American and European
aluminum producers, experiencing keen competition from increased
exports by Russian producers,
PAGE 12
reduced output and cut purchases of our product. Our
specialized lithium products for pharmaceutical, agrochemical,
polymer synthesis and energy markets performed better in 1993. We
expanded our capability and flexibility to produce organolithium
for pharmaceutical applications and polymerization at our two
facilities in Bessemer City, N.C., and Bromborough, United
Kingdom. We also expanded our research and development
capabilities last year to develop new, customer-focused
applications for our lithium products. To assure a supply of
low-cost lithium reserves for future production, we have been
actively exploring potential opportunities in South America.
We're particularly encouraged by our work in Argentina, and we're
developing a proprietary technology that could cut our production
costs significantly. Prospects for FMC's Industrial Chemicals
segment remain unchanged for 1994. The ongoing recession in
Europe and continuing overcapacity in some of our product lines
will continue to depress sales. We have weathered similar down
cycles of the industrial chemicals industry in the past, and we
see our businesses as solid performers for the long term. We are
emphasizing cost reduction efforts to maintain profitability
until markets improve.
PERFORMANCE CHEMICALS Performance Chemicals continued to produce
strong results throughout 1993. Sales were up 9 percent to $858
million, and profits increased 10 percent to $133 million (before
restructuring and other charges of $3 million). A wide range of
products including agricultural chemicals, pest control
chemicals, food and pharmaceutical ingredients, flame retardants
and water treatment chemicals contributed to the positive
results. Agricultural Chemical posted another year of record
results. Sales increased in 1993, and profits remained strong
even as FMC substantially increased research and development
spending to focus on the next generation of herbicides to be
marketed later this decade. While the continued recession in
Europe created a difficult market for agricultural chemicals,
sales were strong in the United States and Latin America. In the
United States, sales were brisk for flowable Furadan
insecticide/nematicide, Command herbicide on cotton and new Fury
pyrethroid on cotton.
RETURN ON SALES RETURN ON ASSETS
24% 40%
18% 30%
15.5 15.4 15.6 15.6 23.7 25.0 24.0 20.7 22.3
12% 14.3 20%
6% 10%
0% 0%
93 92 91 90 89 93 92 91 90 89
Latin America showed major sales increases in 1993 as we expanded
the application of Command/Gamit herbicide to rice and sugarcane
in Brazil and the application of Rugby nematicide on bananas
throughout the Caribbean region. Meanwhile, our specialty, or
non-crop, chemical business continued to grow and produce
attractive returns. In 1993, we began an aggressive international
sales effort for our key specialty product, Dragnet termiticide.
In January 1994, our global reach expanded as we finalized a
joint venture in Indonesia, with FMC as the 51-percent owner, to
formulate and distribute agricultural chemicals.
Our research and development efforts in 1993 continued to focus
on herbicides and insecticides, and by 1997-1998, we're
anticipating the introduction of several promising new herbicide
products. Our research budget for 1994 will increase to reflect
the development investment needed to commercialize these
products.
Continuing a trend over several years, FMC's Food Ingredients,
Pharmaceutical and BioProducts businesses again posted strong
sales and profits in 1993. FMC's Avicel cellulose gel continues
to be one of the world's leading fat-replacement products, and we
remain the world's largest and most experienced producer of
carrageenan products. In the pharmaceutical arena, we are the
market leader in supplying tablet binders and other inactive
ingredients for pharmaceutical processing. Our BioProducts
business now a separate business
PAGE 13
unit is a leading supplier of specialty chemicals used in
life science research and development.
As consumer demand for low-fat and non-fat food products
continued to rise, our Food Ingredients business produced
higher sales and profits in 1993. Avicel sales were strong
throughout North America and, despite a highly competitive
market for carrageenan, sales improved in North America and
Asia-Pacific. Regional recessionary problems contributed to
slightly lower sales and earnings in Europe and Latin
America.
To enhance our ability to solve our customers' problems and
meet their applications needs, last year we opened a new
food ingredients lab at our Research and Development Center
in Princeton, N.J., and increased staffing in R&D and
technical sales support. In 1994, we anticipate opening new
technical applications labs in Latin America and the Asia-
Pacific region to concentrate on developing regional
applications for existing as well as new products.
In the pharmaceutical sector, FMC realigned its
Pharmaceutical and BioProducts businesses an action that
will help FMC move from its position as a leading worldwide
supplier of specialty excipients to a broader, more
strategic role as a provider of value-added technologies
and services to our pharmaceutical customers. As these
customers undergo profound changes in their industry and
markets, FMC will be focusing on providing them with
innovations for cost reduction, product design and rapid
commercialization.
In 1993, we further strengthened our leadership position in
core specialty excipients. Despite a major slowdown in
Europe, where a weak economy and health care reform
tempered sales to the pharmaceutical industry, FMC
continued to increase our market share and strengthen our
financial performance. Last year we introduced a new
product, AviSphere, for time-release applications, launched
a new line of specialty excipients and entered an agreement
to apply our advanced technologies to develop products for
a leading pharmaceutical maker. BioProducts also
contributed higher sales and profits in 1993. We succeeded
in extending our reach to key segments of the life science
market by improving the performance of our line of agarose
products seaweed-derived gelling polymers that are
indispensable in DNA research and protein analysis and
introducing several new products for mapping genes and
conducting DNA separations. The market for BioProducts is
growing rapidly. We plan to introduce new products in 1994,
and we will continue our R&D investments to meet the higher
demand for DNA research reagents. Finally, in a complete
year of combined operations, our new Process Additives
business contributed strong sales and earnings despite a
weak European economy and marketplace shifts in Eastern
Europe. Process Additives combines our original flame
retardants business with the flame retardants and water
treatment businesses we acquired from Ciba-Geigy in 1992.
The synergies of these operations have boosted FMC's market
position worldwide. Our capabilities include more extensive
customer sales efforts and technical service, expanded
product offerings, enhanced research and development, and
improved worldwide sourcing. Last year, we introduced a
unique flame retardant, Reoflam PB-460, the only product on
the market to combine bromine and phosphorus in the same
molecule for superior flame suppression. The product is
gaining acceptance worldwide and will have a positive
impact on 1994 sales. Our water additives business
performed extremely well in 1993, and we expect to see
significant future growth. Last year we introduced new
products for water desalination that will serve our
customers in arid regions and other areas that need quality
water. Performance Chemicals should continue at this peak
performance throughout 1994. For our agricultural chemical
business, we expect continued success in the United States
and Latin America, as well as increased sales throughout
Asia with the start-up of our Indonesian joint venture.
Even with the unstable economic conditions in the former
Soviet states, our opportunities for crop protection
product sales should continue to expand in that area.
Markets for specialty food ingredients and pharmaceutical
products continue to grow, and we're encouraged by the
increasing demand for our
PAGE 14
DNA research-related BioProducts. Our Process Additives
product lines will continue to see significant growth with
new product development and expanding market presence.
DEFENSE SYSTEMS
Despite shrinking defense budgets worldwide, FMC's Defense
Systems segment performed better than expected in 1993.
Sales decreased to $950 million and, given improved cost
performance, earnings of $162 million remained relatively
even with 1992 results.
We completed the transaction to combine our defense
business with Harsco Corporation's BMY Combat Systems
Division. The BMY operation, a producer of tracked
vehicles, is a strong strategic fit with FMC's business. By
broadening FMC's product line and adding resources and
capabilities, the new, jointly owned partnership, United
Defense, L.P., will create the most diversified, low-cost
company in the combat vehicle industry. FMC has a 60
percent interest and is responsible for managing the
operation.
Last year, sales and profits were down for our Ground
Systems business. The Bradley Fighting Vehicle continued as
the major product for this business, even as we reduced
production rates in line with lower demand to 1.4 vehicles
per day in the second quarter from 2.6 vehicles previously.
Last year, Ground Systems produced 293 Bradleys for the
U.S. Army and 88 Bradleys for Saudi Arabia. We also produce
Bradley-derived carriers for the Multiple Launch Rocket
System, and last year we delivered 68 to the U.S. Army and
five to Japan.
In the third quarter, the U.S. Army exercised an option to
purchase an additional 54 Bradleys. This $39 million
contract continues production through February 1995. FMC
won a two-year, $46 million contract from the Army to
provide technical support to its existing fleet of
Bradleys. FMC also will upgrade six older-model Bradleys,
setting the stage to upgrade as many as 100 vehicles later
in 1994.
RETURN ON SALES RETURN ON ASSETS
24% 60% 59.2
17.0 51.8
18% 15.0 45%
13.7 39.4
12% 9.1 30%
20.4
6% 5.3 15%
9.5
0% 0%
93 92 91 90 89 93 92 91 90 89
Meanwhile, Ground Systems is meeting the Army's aggressive
schedule for the Armored Gun System, a new, light,
deployable combat vehicle. Last year, Ground Systems
delivered the ballistic systems structure, autoloader and
armor test samples; in 1994 we will deliver the first six
prototype vehicles.
Last year, Ground Systems won a $317 million contract to
upgrade the Paladin self-propelled howitzer. United Defense
will produce 630 units of a technologically advanced model
over four years, and the Army could exercise another $70
million in options.
United Defense research in ground systems is focused on
enhancing mobility and survivability. Our work continues on
the next generation of the Bradley, the A3, which will
continue the Army's cap]ability to dominate the land
battle. We've also completed the first phase of work on the
Composite Armored Vehicle Program and won a $54 million
follow-on contract to test the viability of composite
material technology.
PAGE 15
FMC's Armament Systems business, formerly Naval Systems,
recorded higher sales and profits in 1993, and continued to
broaden its scope beyond its established customer base of
U.S. and international navies
providing value-added engineering work across a number of
defense systems lines and applying its expertise in
armament systems on several ground systems contracts.
Armament Systems had a busy production year in 1993. We
delivered 57 Vertical Launching Systems modules, 206 VLS
canisters and six Mk 45 gun systems to the U.S. Navy, as
well as two Mk13 Pointing Launching Systems to Taiwan, two
Mk 45 gun systems to Turkey and one Mk 45 gun system to
Australia.
Armament Systems also played a crucial role in the
development of the Advanced Technology Demonstrator, a
component of FMC's $67 million sole-source contract for the
Advanced Field Artillery System, a self-propelled howitzer.
Armament Systems will deliver the demonstrator in 1994, and
we believe we're well positioned to win a contract for the
next phase of the program.
Sales and profits were down for our Steel Products
business. Last year, the business won a $23 million
contract from the U.S. Army to overhaul and convert 471
M113A2 armored personnel carriers to the newer A3
configuration. This business continues to pursue commercial
opportunities outside the defense arena and is targeting
the mining equipment market, among others.
While international defense sales were down for 1993,
profits were up, and new international business looks
promising. We recently opened an office in Taipei, Taiwan,
where we have strong potential to develop new business.
With a new order from Kuwait, we're back in business with
the M113 line of armored personnel carriers. We will also
provide Singapore and Pakistan with kits to upgrade their
M113 fleet, and we will deliver an additional 36 MLRS
carriers to Japan over the next four years.
FMC's Defense Systems continued to downsize the business in
tandem with diminishing opportunities. At the end of 1993,
Ground Systems' work force totaled 2,500, down from 4,200
in 1990. Armament Systems' force was down to 1,800 by the
end of 1993, from 2,500 in 1990. At the end of 1993, FMC
employed a total of 4,900 employees in its Defense Systems
businesses.
Our defense operations will remain a profitable but
significantly smaller contributor to FMC in the coming
years. In 1994, we'll direct much of our attention to the
combination of FMC's and BMY's businesses. We're excited
about the enhanced capabilities, lower cost structure and
more competitive market position this partnership will
enable us to achieve. And we're confident that the advanced
research work we're currently conducting on several key
defense projects will enhance our ability to win follow-on
contracts.
PRECIOUS METALS As expected, performance declined for our
Precious Metals segment, which includes FMC Gold Company,
our 79-percent-owned precious metals subsidiary. Sales
diminished by nearly one-third to $125 million, and
earnings declined substantially to $10 million (before
writedowns and other charges of $61 million) due to
decreased production and continuing soft gold prices.
The closing of our 100-percent-owned Paradise Peak mine in
western Nevada last year had a significant impact on
production, sales and earnings. Reserves of mill-grade ore
were depleted by mid-year, and remaining reserves were
exhausted at the end of the year. In 1992, Paradise Peak
had accounted for 60 percent of FMC Gold's total
production.
In 1993, FMC Gold's total gold production was down 23
percent to 321,000 ounces. Total silver production, at
863,000 ounces, was less than half the previous year's
production.
PAGE 16
Production was up at Jerritt Canyon, also in Nevada, with
improving ore grades and recovery rates. Production was
down at our Royal Mountain King mine in California, and the
operation will close by mid-1994. We continued to delay
development of our Beartrack property in Idaho because of
low gold prices. We are also awaiting the results of
government environmental studies.
As several of our operations shut down, we are more
dependent on exploration for success. Given the declining
attractiveness of exploration in the United States, we are
increasingly investing in offshore exploration, but some
U.S. efforts continue in selected high-potential areas. In
early 1994 we also signed memoranda to participate in
investigating known deposits in Russia and China.
RETURN ON SALES RETURN ON ASSETS
100.0
60% 53.0 100%
43.3
45% 75% 63.3
30% 21.3 50%
18.2 26.3
15% 25% 19.0
7.8 9.9
0% 0%
93 92 91 90 89 93 92 91 90 89
MACHINERY AND EQUIPMENT FMC's Machinery and Equipment
results were disappointing in 1993. Sales were down
slightly to $871 million, but profits were down
substantially to $7 million (before restructuring and other
charges of $66 million). Food Machinery sales and earnings
decreased significantly with the prolonged European
recession and weakened European currencies, disruption of
major markets of the former Soviet states, and continuing
poor business cycles in the United States. Higher sales in
our energy equipment businesses helped offset depressed
Food Machinery sales, but falling oil prices pressured
margins.
Our best performers were a number of our Energy and
Transportation Equipment businesses. With an eye toward
providing the type of turnkey engineering and production
services that many of our large, global energy customers
now expect, FMC completed two strategic energy-related
acquisitions in 1993. In June, we purchased Norway-based
Kongsberg Offshore, a.s., an expert in subsea technology
and a leading supplier of control systems. FMC and
Kongsberg combined create the world's largest company for
engineering, procurement and production on subsea projects
a lucrative market that FMC has been targeting for several
years.
Also in June, FMC acquired SOFEC, Inc., a Houston-based
engineering and construction firm that designs, fabricates
and installs marine terminals and floating production
systems. This capability gives our customers an economical
alternative to underwater pipeline construction in remote,
harsh regions of the world. In the last six months of the
year, SOFEC posted nearly $45 million in inbound orders.
PAGE 17
RETURN ON SALES RETURN ON ASSETS
24% 40%
18% 30%
12% 6.2 20% 10.9
5.2 9.3
6% 3.7 3.6 10% 6.6
6.2
0.8 1.3
0% 0%
93 92 91 90 89 93 92 91 90 89
The Kongsberg acquisition boosted sales for our energy
equipment businesses in 1993. But with demand for oil
essentially flat, and excess OPEC production keeping oil
prices low and triggering lower energy equipment pricing,
our profits for this business were down.
The outlook for our Wellhead Equipment business is
encouraging. Following the addition of Kongsberg and SOFEC,
FMC succeeded in capturing a $55 million contract from
Amoco for turnkey engineering and production services on a
project off the coast of China. We recently renewed our
long-standing licensing agreement with Niigata Engineering
of Japan to manufacture and market marine loading systems
and fluid control products a relationship that continues
FMC's firm foothold in the growing Asia/Pacific market. Our
new joint venture to produce wellhead equipment in Russia,
FMC Tyumen Petroleum Equipment, is benefiting from
increased activity by Western oil companies in the Russian
federation. We already are furnishing equipment for Conoco,
BP/Statoil and Shell. And late last year we announced a new
strategic alliance with Rockwater, a Brown & Root company,
to provide turnkey subsea services.
Our Fluid Control business had an excellent year in 1993.
Our valves and connectors were in demand by energy service
companies, and our cost control efforts and manufacturing
efficiencies improved profitability. Last year we entered
into alliances with several major well service customers,
and in some cases, we will be the sole supplier. In 1994,
we'll bring to market an advanced plug valve that should
provide additional competitive advantage.
Sales and earnings for our transportation equipment
businesses were essentially flat. The downturn in the
airline industry had a slight impact on FMC's Airline
Equipment business. We were helped by our strong product
portfolio, including state-of-the-art loading and deicing
equipment, as well as our efforts in cost control and
efficient manufacturing. We continued to retool our
Automotive Service Equipment operations and succeeded in
reducing fixed assets. Our Material Handling Systems
operations, meanwhile, implemented a cost-control program
emphasizing gains in engineering productivity and
efficiencies in manufacturing.
FMC's Food Machinery businesses had a difficult year, with
sales and profits declining for the second consecutive
year. A combination of soft domestic markets, the
continuing recession in Europe, depressed agricultural
commodity markets and consolidations among food producers
have created uncertainty among our customers. Our citrus
business was a bright spot in 1993, contributing increased
sales and profits. Last year we installed processing
systems for U.S. Sugar Corporation's new citrus juice
facility the first new processing plant to open in Florida
in many years.
Europe's weak marketplace did not present opportunities for
the type of large-scale food processing projects we
completed in past years. Our agricultural machinery
business also suffered from the poor market conditions in
Europe and North America, but we believe we have reached
the bottom of the business cycle in our harvester
operations. Weak market conditions also depressed demand
for our packaging and material
PAGE 18
handling equipment businesses. The 1994 outlook for these
businesses should improve somewhat, but full recovery isn't
anticipated until 1995. This past year, FMC conducted a
major strategic review of our Food Machinery businesses. We
concluded that we should concentrate on those core areas
that allow growth opportunities, eliminate weak product
positions and restructure our operations with fewer
facilities and lower overhead. The coming year will
mirror the successes and the challenges of 1993. A major
challenge will be in managing the realignment of our
businesses to improve our profit picture for the coming
years. At the same time, we recognize that Food Machinery
markets will continue to be depressed, as the recession
continues in Europe, soft market conditions persist in the
United States, and unstable economies and hard-currency
shortages continue in the states of the former Soviet
Union. The outlook is brighter for our Energy and
Transportation Equipment business, strengthened in 1993 by
acquisitions and strategic alignments, and rebounding from
successful cost-control measures. Oil prices continue to be
an area of concern in 1994. But our capabilities and our
customer ties in these industries will provide a strong
competitive edge in winning major contracts and growing
profitably.
FINANCIAL REVIEW
Additional information highlighting FMC's operating
performance and financial position is presented below.
Sales and Earnings
Sales in 1993 were $3.8 billion, 6 percent lower than in
1992. Income from continuing operations was $41.0 million,
or $1.11 per share, compared with $192.6 million, or $5.23
per share, for 1992. Income from continuing operations for
1993 includes pretax restructuring and other charges of
$172.3 million, net of minority interest ($123.3 million on
an after-tax basis, or $3.34 per share). An after-tax
extraordinary charge of $4.7 million was also recorded in
1993 for additional debt restructuring. After this charge,
net income for 1993 was $36.3 million, or $0.98 per share.
After-tax special charges recorded in 1992 included $183.7
million resulting from the adoption of Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions," $73.2 million for previously discontinued
operations' additional environmental and product liability
requirements, and an extraordinary charge of $11.4 million
related to the restructuring of debt. After these charges,
the net loss for 1992 was $75.7 million, or $2.06 per
share. Declining operating earnings in the Industrial
Chemicals, Machinery and Equipment, and Precious Metals
segments contributed to the overall decrease in 1993
earnings per share. Corporate and other expenses decreased
slightly in 1993 primarily due to gains on sales of
Corporate assets. A breakdown of sales, income before
income taxes, and identifiable assets by industry segment
appears on page 17, followed by a review of operating
performance on pages 22 through 37. Segment operating
profits exclude 1993 restructuring and other charges (Note
2), net interest expense, and other income and expense
items. A discussion of other income and expense, order
backlog, and research and development expenditures follows.
OTHER INCOME AND (EXPENSE), NET Year ended December 31
(In millions) 1993 1992 1991
Industrial Chemicals $ 3.6 $ 0.6 $ 3.2
Performance Chemicals (2.8) (0.5) 0.1
Defense Systems 2.6 13.9 4.3
Machinery and Equipment (0.8) 11.5 14.8
Corporate and other 7.6 3.8 (4.8)
Total $10.2 $29.3 $17.6
Other income and expense for Industrial Chemicals,
Performance Chemicals, Defense Systems, and Machinery and
Equipment reflect the allocation of LIFO inventory
adjustments for all three years.
PAGE 19
Corporate and other includes items that are not allocated
to specific business segments, primarily pension-related
income. Pension-related income was $7.6 million in 1993,
$3.8 million in 1992 (net of a $4.6 million curtailment
charge), and $8.2 million in 1991. 1991 also included a
$12.0 million charge for general environmental clean-up.
ORDER BACKLOG December 31
(In millions) 1993 1992 1991
Defense Systems $1,105.0 $1,342.6 $1,939.5
Machinery and Equipment 333.1 340.9 342.9
Total $1,438.1 $1,683.5 $2,282.4
The decline in Defense Systems backlog reflects the
overall downsizing of the U.S. defense industry.
The slight decline in backlog for Machinery and
Equipment stems from weaker demand for food machinery
equipment, particularly in Europe, partially offset by
increases in energy equipment due to 1993 acquisitions
(Note 2).
Backlogs are not reported for Industrial Chemicals,
Performance Chemicals and Precious Metals due to the
nature of these businesses.
RESEARCH AND DEVELOPMENT EXPENDITURES
Year ended December 31
(In millions) 1993 1992 1991
Industrial Chemicals $19.3 $21.3 $18.6
Performance Chemicals 79.0 67.9 57.5
Precious Metals 0.1 0.1 0.2
Defense Systems 24.0 27.8 27.8
Machinery and Equipment 26.1 26.2 28.6
Corporate 0.7 1.7 1.9
Total $149.2 $145.0 $134.6
Expenditures for research and development increased in
Performance Chemicals primarily due to the development
of the next generation of herbicides and insecticides,
as well as product development in the Food Ingredients
and BioProducts businesses. Reduced defense spending
by the U.S. government on existing contracts resulted
in lower research and development expense for Defense
Systems in 1993.
Not included in these amounts are $208.8 million,
$139.2 million and $76.9 million in 1993, 1992 and
1991, respectively, for research and development
projects contracted directly with the U.S. government
and commercial sponsors. The increase in 1993 is
attributable to the armored gun and advanced field
artillery systems that are being developed by Defense
Systems.
EXPLORATION COSTS
Mineral exploration costs were $19.9 million, $16.6
million and $13.5 million in 1993, 1992 and 1991,
respectively. Approximately 85 percent of exploration
spending in 1993 relates to original exploration for
gold, silver, and lithium reserves, with the remainder
for development of reserves near existing mines.
TAXES
FMC's effective tax rate was an 8 percent tax benefit
on earnings compared with a 31 percent tax provision
on earnings in 1992. The effective tax rate in 1993
was affected by lower domestic earnings due to
restructuring and other charges (of which $61 million
relates to FMC Gold Company and was not tax effected),
a higher level of foreign earnings taxed as dividends
in 1993, and a change in the mix of foreign and
domestic earnings combined with favorable foreign
effective tax rates.
PAGE 20
RESTRUCTURING AND OTHER CHARGES
In 1993, FMC recorded pretax restructuring and other
charges of $172.3 million, net of minority interest
(after-tax $123.3 million, or $3.34 per share). These
charges primarily relate to restructuring costs
associated with the Machinery and Equipment segment
and Chemical businesses, expenses to restructure
companywide functional support staffs, as well as a
write-down of the book value of the Beartrack
development property in the Precious Metals segment.
The company will focus on growing profitable
businesses with strong market potential and intends to
exit several small, unprofitable product lines in the
Machinery and Equipment segment that are not projected
to meet established financial criteria. Machinery and
equipment operations will be streamlined by reducing
staffing levels and consolidating manufacturing
locations. Total pretax restructuring and other
charges for this segment approximate $66.0 million.
In the Chemical businesses, the company has initiated
a number of restructuring activities aimed at reducing
manufacturing costs and improving operating
efficiencies. In addition, reserves have been provided
for the shutdown of unprofitable or redundant
facilities. Total pretax restructuring and other
charges for the Chemical segments approximate $32.9
million.
Restructuring and other charges of $47.9 million, net
of minority interest, relate to the Precious Metals
segment. These charges include costs for the write-
down of the book value of the Beartrack development
property, as well as expenses to close the Royal
Mountain King and Paradise Peak mines. The long-term
outlook for gold prices has changed significantly
since the Beartrack property was acquired in 1990, and
consequently, the book value of the property has been
reduced.
The company is undertaking a review of functional
support staffs throughout the organization. The
objective is to align resources to support the
company's long-term growth initiatives and improve
operating efficiencies. Related severance, relocation
and other costs are expected to approximate $25.5
million on a pretax basis.
The restructuring activities will result in planned,
or already implemented, work force reductions of
approximately 2,500 positions 12 percent of the total
work force. These actions are expected to be
implemented largely during 1994 and 1995. The after-
tax cash outflow to fund related charges will be
approximately 40 percent of the $172.3 million charge.
Once completed, it is anticipated that they will
result in ongoing annual cost savings and better align
the company's business and support staff with its
growth strategy.
ENVIRONMENTAL
FMC, like other industrial manufacturers, is involved
with a variety of environmental matters, in the
ordinary course of conducting its business, that are
subject to federal, state and local environmental
laws. FMC feels strongly about its responsibility to
protect the environment, public health and employee
safety. This includes cooperating with other parties
to resolve issues created by past and present handling
of wastes. When such issues arise, including notices
from the Environmental Protection Agency (EPA), or
other government agencies, identifying FMC as a
Potentially Responsible Party (PRP), the company
utilizes multifunctional advisory teams comprised of
environmental, legal, financial and communications
management to ensure that the companies actions are
consistent with its responsibilities to the
environment and public health, as well as employees
and shareholders.
PAGE 21
To ensure FMC is held responsible only for its
equitable share of site redemption costs, FMC has
initiated, and will continue to initiate, legal
proceedings for contributions from other PRPs and for
a determination of coverage against insurance carriers
that provided insurance coverage for the cost of clean-
up at a number of waste sites. The Supreme Court of
California has determined that FMC's clean-up costs
are insured damages under its liability insurance
policies, subject to a determination of the
application of certain policy exclusions and
conditions. In July 1993, in the Supreme Court of
Santa Clara County, a jury verdict determined that
these exclusions do not apply to several of these
sites. The other sites will be the subject of future
litigation.
Regarding current operating sites, the company spent
approximately $16 million, $20 million and $28 million
for the years 1993, 1992 and 1991, respectively, on
capital projects relating to environmental control
facilities, and expects to spend additional capital of
approximately $26 million and $28 million in 1994 and
1995, respectively. Additionally, in 1993, 1992 and
1991, FMC spent approximately $63 million, $57 million
and $48 million, respectively, for environmental
compliance costs for these sites.
Regarding previously operated and other sites for the
years 1993, 1992 and 1991, FMC charged approximately
$17 million, $11 million and $5 million, respectively,
against established reserves for remediation spending,
and charged approximately $10 million, $11 million and
$10 million, respectively, against reserves for
spending on Remediation Investigation/Feasibility
Studies(RI/FS). Recoveries from third parties of
approximately $7 million and $3 million, respectively,
were received and credited to the reserves in 1993 and
1992. No recoveries were received in 1991. FMC
anticipates that the expenditures for current
operating, previously operated and other sites will
continue to be significant for the foreseeable future.
In accordance with the company's environmental
accounting policy, reserves at the end of 1993 were
$133 million, net of approximately $54 million of
recoveries, including recoveries from insurance
companies, the federal government and other PRPs. The
company cannot reasonably estimate any additional
amount of loss or range of loss in excess of the
recorded amounts. While the liability from potential
environmental obligations that have not been reserved
may or may not have a material effect on the results
of operations in any one year, based on information
currently available, management believes environmental-
related expenditures will not likely have a material
adverse effect on the company's liquidity or financial
condition and will be spent over many years in the
future. Additional information regarding the company's
environmental accounting policies and potential
environmental liability is included in Note 1 and Note
16, respectively, to the company's consolidated
financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities plus cash generated
from operations provided the resources to meet 1993
operating needs, fund capital expenditures and
acquisitions, and reduce debt levels. Debt levels and
interest costs were reduced by $75 million and $21.3
million, respectively, in 1993. Cash requirements for
capital expenditures and acquisitions approximated
$245 million.
During 1993, the company, with funds obtained through
its revolving credit agreement, repurchased $655
million, less unamortized discount of $481 million, of
7-1/2% zero coupon senior subordinated debentures, $32
million of 7-1/2% sinking fund debentures, and $19
million of industrial revenue bonds. In August 1993,
subsequent to the repurchases noted above, the company
issued $200 million of 6.375% senior notes due 2003.
The net proceeds of $198 million were used to repay
advances under
PAGE 22
the revolving credit agreement. As of December 31,
1993, there were no borrowings under the company's
revolving credit facility or uncommitted facilities.
In order to secure long-term financing in the United
Kingdom, the company also issued Sterling denominated
debt in December 1993 due 2042 with a yield to
maturity of 7.65% and a maturity value of $124
million.
Cash generated from operations in 1994 and available
credit facilities are expected to be sufficient to
meet operating needs, fund capital expenditures and
acquisitions, and meet debt service requirements for
the year. Expected cash requirements for 1994 include
approximately $275 million to $375 million for planned
capital expenditures and acquisitions, plus
approximately $40 million for net after-tax interest
payments.
Working capital December 31
(In millions) 1993 1992 1991
Operating working capital:
Trade receivables $573.2 $543.5 $529.7
Inventories 268.1 319.3 364.8
Accounts payable (501.2) (513.9) (600.4)
Accrued liabilities (449.3) (406.8) (403.9)
Total operating working capital (109.2) (57.9) (109.8)
Cash and marketable securities 77.5 24.3 44.2
Other current assets and
liabilities, net 35.4 32.5 52.4
Total working capital $ 3.7 $ (1.1) $(13.2)
Operating working capital decreased in 1993 compared with 1992.
Reduced inventory levels resulted from lower business
volume at Defense Systems, as well as continued inventory
management initiatives and translation effects.
Accrued liabilities increased due to acquisitions and
timing of expenditures at year end.
Operating working capital was affected by the partial
liquidation of lower-cost LIFO inventories, which
increased reported earnings per share by $0.04, $0.42 and
$0.32 in 1993, 1992 and 1991, respectively. FMC has
sustained lower inventories over the long term, producing
sufficient savings in inventory carrying costs tooffset
the negative cash flow effect of additional taxes paid on
the increased earnings from the liquidation of lower-cost
LIFO inventories.
CAPITAL EXPENDITURES Year ended December 31
(In millions) 1993 1992 1991
Industrial Chemicals $ 91.0 $ 91.5 $ 94.5
Performance Chemicals 40.7 144.9 30.0
Precious Metals 18.5 19.1 19.4
Defense Systems 19.2 20.5 25.1
Machinery and Equipment 70.7 30.5 42.7
Corporate 4.4 8.0 5.1
Total $244.5 $314.5 $216.8
Capital expenditures in 1993 decreased $70 million from 1992
levels.
Performance Chemicals reduced spending reflects the
impact of the acquisition of Ciba-Geigy fixed assets in
1992.
The increase in Machinery and Equipment spending is
attributable to the acquisitions of Kongsberg Offshore
a.s. (Kongsberg) and SOFEC, Inc. (SOFEC) assets in
1993.
PAGE 23
Depreciation Year ended December 31
(In millions) 1993 1992 1991
Industrial Chemicals $ 86.1 $ 96.5 $ 93.0
Performance Chemicals 41.8 40.3 31.2
Precious Metals 25.7 28.6 29.6
Defense Systems 26.0 30.4 33.1
Machinery and Equipment 28.6 26.9 26.2
Corporate 14.2 12.3 11.8
Total $222.4 $235.0 $224.9
Depreciation expense decreased $12.6 million in 1993.
The decrease for Industrial Chemicals resulted from
assets which became fully depreciated in 1992, and
translation effects related to a Spanish operation. The
decline at Defense is consistent with continued
downsizing efforts.
DIVIDENDS
No dividends were paid in 1993, 1992 and 1991, and no
dividends are expected to be paid in 1994.
1993 FOURTH QUARTER RESULTS COMPARED WITH 1992
For the fourth quarter of 1993, FMC reported sales of
$946 million, a 6 percent decrease compared with the
year-ago quarter. Income from continuing operations
(before restructuring and other charges) of $21 million,
or $0.57 per share, decreased compared with $31 million,
or $0.85 per share, in last year's quarter. In December
1993, the company recorded pretax restructuring and
other charges of $172.3 million, net of minority
interest (after-tax $123.3 million, or $3.34 per share)
related to restructuring activities and asset write-
downs. After the effects of the restructuring and other
charges, the company recorded a loss from continuing
operations of $102 million, or $2.77 per share, in the
quarter. Earnings of $33 million before interest,
taxes, and restructuring and other charges decreased
compared with the prior year's strong quarter.
Performance Chemicals improved profits in the quarter
were more than offset by decreased profits for Defense
Systems and Industrial Chemicals. Net interest expense
decreased 21 percent to $15 million in the quarter.
Industrial Chemicals. Sales decreased 12 percent to
$242.1 million from $274.1 million in 1992. Earnings for
the quarter declined due to weak worldwide economic
conditions and overcapacity in FMC's major product
lines. Alkali sales and earnings decreased due to weak
worldwide soda ash pricing and volumes, and the impact
of lower caustic soda prices. Lower phosphate sales also
negatively affected results of operations. Performance
Chemicals. Performance Chemicals sales for the fourth
quarter increased 16 percent in 1993 to $178.5 million
from $154.2 million in 1992, and earnings also
increased. Agricultural Chemicals sales increased
primarily due to higher sales in South America. Sales of
the Food Ingredients business also rose given increased
global research and marketing efforts. Precious
Metals. Sales declined 35 percent to $26 million in 1993
from $39.8 million in 1992, and profits also declined,
primarily due to the shutdown of the Paradise Peak mine
in the second quarter of 1993 and reduced gold
production. Defense Systems. Sales of $246.2 million in
1993 decreased 20 percent from $306.3 million in 1992,
and profits also decreased compared with fourth quarter
1992 results. Lower sales and profits primarily resulted
from reduced production of the Bradley Fighting Vehicle.
Machinery and Equipment. Machinery and Equipment sales
of $258.9 million in 1993 increased 11 percent from
$233.8 million in 1992, and profits were down between
years. Fourth quarter 1993 sales benefitted from the
acquisitions of Kongsberg and SOFEC.
1992 RESULTS OF OPERATIONS COMPARED WITH 1991.
Sales rose 2 percent in 1992 to $4 billion, due to higher
sales in the Performance Chemicals and Precious Metals
segments. Income from continuing operations of $192.6
million before special charges was 11 percent higher than
1991's $173.1 million. Primary earnings per
PAGE 24
share before special charges were $5.23 compared with
$4.77 for 1991. After-tax special charges recorded in
1992 included $183.7 million resulting from the adoption
of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," $73.2
million related to previously discontinued operations
for additional environmental and product liability
requirements, and an extraordinary charge of $11.4
million related to restructuring of debt. After special
charges, the net loss for 1992 was $75.7 million, or
$2.06 per share, compared with net income of $163.9
million, or $4.52 per share, in 1991. The 1991 results
included an after-tax extraordinary charge of $9.2
million related to the early retirement of high-coupon
subordinated debt. Income from continuing operations
before interest and taxes in 1992 was $362 million
compared with $363 million in 1991. Industrial
Chemicals. Sales were flat at $1 billion, but profits
decreased 10 percent to $92 million. Stronger phosphorus
chemical prices were offset by weaker European markets
and higher spending to develop new, low-cost lithium
reserves. Alkali sales and profits were flat in 1992,
primarily due to flat demand and weaker prices for soda
ash in the United States. Export sales, however,
remained strong. Phosphorus profits improved in 1992
due to firm prices and the departure of two U.S.
producers from this business in 1991. Peroxygen sales
and earnings were down modestly as prices declined
because of continued industry overcapacity.
FMC Foret sales were flat, and earnings decreased due to
price deterioration and manufacturing problems which
have subsequently been corrected.
Lithium sales improved in 1992 due to increased demand
for several lithium products, but profits declined as a
result of higher operating costs and spending associated
with efforts to develop new, low-cost lithium reserves.
Performance Chemicals. Sales rose 22 percent to $790
million, and profits increased 20 percent to $121
million. FMC's Agricultural Chemicals business posted
record sales and profits, resulting from an improved
product mix, cost reductions in operations and an
increasing international presence. The Food Ingredients,
Pharmaceuticals and BioProducts businesses showed strong
sales and earnings performance. The acquisition of Ciba-
Geigy's flame retardants and water treatment chemical
businesses in 1992 increased sales,but marginally
contributed to the profitability of the Performance
Chemicals segment.
Precious Metals. Sales increased 8 percent to $171
million, and profits rose 27 percent to $36 million in
1992 due to higher mill throughput and expanded heap-
leaching activities.
Defense Systems. Sales were down 5 percent to $1.1
billion due to slower international business, but
profits increased 4 percent to $167 million because of
favorable cost performance and lower discretionary
spending.
Machinery and Equipment. Sales decreased slightly to
$877 million, and profits declined 31 percent to $32
million due to the effects of a weak economy in some
markets. Food Machinery sales declined, and profits
decreased by more than 50 percent. Energy and
Transportation Equipment sales, however, increased due
to strong international presence, and effective cost
control increased earnings.
<TABLE>
PAGE 25
Quarterly financial information (unaudited)
<CAPTION>
(In millions, except per share data) 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
Sales $901.6 $979.3 $926.5 $ 946.5 $933.9 $1,061.1 $976.3 $1,002.4
Gross profit $235.5 $252.1 $222.2 $ 208.8 $245.9 $ 275.5 $232.0 $232.4
Income (loss) from
continuing operations
before interest
and taxes(1) $ 77.7 $101.5 $ 60.5 $(139.3) $ 96.2 $ 117.5 $ 73.9 $ 74.7
Income (loss) before
extraordinary items
and cumulative
effect of change in
accounting
principle(1) $ 45.4 $ 62.6 $ 35.3 $(102.3) $ 54.5 $ 64.6 $ 42.1 $(41.8)
Per share Primary $ 1.23 $ 1.69 $ 0.95 $ (2.77) $ 1.49 $ 1.75 $ 1.14 $ (1.14)
Fully diluted $ 1.19 $ 1.62 $ 0.94 $ (2.77) $ 1.42 $ 1.67 $ 1.11 *
Net income (loss) $ 45.4 $ 57.9 $ 35.3 $(102.3) $(138.4) $ 64.6 $ 39.9 $ (41.8)
Per share Primary $ 1.23 $ 1.56 $ 0.95 $ (2.77) $ (3.77) $ 1.75 $ 1.08 $ (1.14)
Fully diluted $ 1.19 $ 1.50 $ 0.94 $ (2.77) * $ 1.67 $ 1.05 *
Common stock prices:
High $53 $48-1/4 $49-3/4 $49-7/8 $53 $50-3/8 $ 50-1/8 $50-1/4
Low $45-5/8 $41-1/2 $44-1/8 $45-1/8 $45-3/4 $42-5/8 $ 43 $43
</TABLE>
*Per share amounts are antidilutive
Fourth-quarter 1993 results include after-tax
restructuring and other charges of $123.3 million (Note
2). The second quarter of 1993 reflects an after-tax
extraordinary charge of $4.7 million related to debt
restructuring.
Fourth-quarter 1992 includes an after-tax special charge
of $73.2 million related to previously discontinued
operations. First-quarter 1992 reflects the cumulative
effect of a change in accounting principleto January 1,
1992, for the change in accounting for retiree health and
life insurance benefits ($183.7 million, net of taxes).
The first and third quarters of 1992 also include after-
tax extraordinary charges of $9.2 million and $2.2
million, respectively, related to the restructuring of
debt.
Quarterly earnings per common share may differ from full-
year amounts due to changes in the number of shares
outstanding during the year.
PAGE 26
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Year ended December 31
1993 1992 1991
REVENUE
Sales $3,753,933$3,973,663$3,899,449
Equity in net earnings of
affiliates (Note 6) 6,435 11,069 6,549
Other revenue 28,585 18,727 17,531
Total revenue 3,788,953 4,003,4593,923,529
COSTS AND EXPENSES
Cost of sales 2,835,286 2,987,9082,943,717
Selling, general and
administrative expenses 539,432 533,931 496,393
Research and development 149,244 144,990 134,644
Minority interests 2,484 3,634 3,046
Restructuring and other
charges
(Note 2) 172,300 - -
Other (income) and
expense, net (10,241) (29,294) (17,552)
Total costs and expenses 3,688,505 3,641,1693,560,248
Income from continuing
operations
before interest and taxes 100,448 362,290 363,281
Interest income 11,015 12,275 17,334
Interest expense 73,649 94,930 124,683
Income from continuing
operations
before income taxes 37,814 279,635 255,932
Provision (benefit) for
income taxes (Note 10) (3,153) 87,034 82,849
Income from continuing
operations 40,967 192,601 173,083
Provision for discontinued
operations, net of taxes
(Note 2) - (73,200) -
Income before extraordinary
item and cumulative effect
of change in accounting
principle 40,967 119,401 173,083
Extraordinary items,
net of taxes (Note 9) (4,683) (11,417) (9,206)
Cumulative effect of
change in accounting
principle, net of
taxes (Note 14) - (183,730) -
Net income (loss) $36,284$ (75,746) $163,877
EARNINGS PER COMMON SHARE
(NOTE 1) Primary:
Income from continuing
operations $ 1.11 $ 5.23 $ 4.77
Provision for discontinued
operations - (1.99) -
Income before extraordinary
items and cumulative effect
of change in accounting
principle 1.11 3.24 4.77
Extraordinary items (0.13) (0.31) (0.25)
Cumulative effect of
change in
accounting principle - (4.99) -
Net income (loss) $ 0.98 $ (2.06) $ 4.52
Assuming full dilution:
Income from continuing
operations $ 1.11 $ 5.04 $ 4.68
Provision for discontinued
operations - (1.84) -
Income before extraordinary
items and cumulative effect
of change in accounting
principle $ 1.11 $ 3.20 $ 4.68
Extraordinary items (0.13) * (0.24)
Cumulative effect of change
in accounting principle - * -
Net income $ 0.98 $ * $ 4.44
See notes to consolidated financial statements.
*Per share amounts are antidilutive.
PAGE 27
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31
1993 1992
ASSETS
CURRENT ASSETS
Cash $20,450 $11,855
Marketable securities 57,071 12,423
Trade receivables, net (Note 3) 573,181 543,523
Inventories (Note 4) 268,107 319,280
Other current assets 111,439 100,524
Deferred income taxes (Note 10) 129,479 135,434
Total current assets 1,159,727 1,123,039
INVESTMENTS (NOTE 6) 76,197 85,819
PROPERTY, PLANT AND EQUIPMENT,
NET (NOTE 7) 1,390,249 1,502,122
PATENTS, DEFERRED CHARGES AND
INTANGIBLES OF ACQUIRED
COMPANIES 91,741 63,168
DEFERRED INCOME TAXES (NOTE 10) 95,199 52,493
TOTAL ASSETS $2,813,113 $2,826,641
LIABILITIES AND STOCKHOLDERS
' EQUITY
CURRENT LIABILITIES
Short-Term Debt (Note 8) $66,904 $54,759
Accounts payable, trade and other 501,163 513,948
Accrued payroll 84,663 85,248
Accrued and other liabilities 364,694 321,576
Current portion of long-term
debt (Note 9) 15,029 8,476
Current portion of accrued
pension and other postretirement
benefits (Notes 13 and 14) 37,119 37,302
Income taxes payable (Note 10) 86,432 102,837
Total current liabilities 1,156,004 1,124,146
LONG-TERM DEBT, LESS CURRENT
PORTION (NOTE 9) 749,855 843,625
ACCRUED PENSION AND OTHER
POSTRETIREMENT BENEFITS, LESS
CURRENT PORTION (NOTES 13
AND 14) 302,725 327,100
RESERVE FOR DISCONTINUED
OPERATIONS, RESTRUCTURING AND
OTHER RESERVES (NOTE 2) 344,267 256,909
COMMITMENTS AND CONTINGENT
LIABILITIES (NOTE 16)
MINORITY INTERESTS IN
CONSOLIDATED COMPANIES 43,379 55,860
STOCKHOLDERS' EQUITY (NOTE 11)
Common stock, $0.10 par value,
authorized 60,000,000 shares;
issued 36,472,641 shares
in 1993 and 36,158,866
shares in 1992 3,647 3,616
Capital in excess of par
value of capital stock 79,582 71,955
Retained earnings 207,133 170,849
Foreign currency translation
adjustment (Note 5) (64,766) (19,012)
Treasury stock, common,
at cost; 292,018 shares in
1993 and 285,959 shares in
1992 (8,713) (8,407)
Total stockholders' equity 216,883 219,001
Total liabilities and
stockholders' equity $2,813,113 $2,826,641
See notes to consolidated financial statements.
PAGE 28
CONSOLIDATED STATEMENTS OF CASH FLOWS RECONCILIATION FROM INCOME
FROM CONTINUING OPERATIONS TO CASH PROVIDED BY OPERATING
ACTIVITIES
(In thousands) Year ended December 31
1993 1992 1991
Income from continuing operations $40,967 $192,601 $173,083
After-tax net interest expense 38,878 51,626 67,240
Restructuring and other charges
(Note 2) 172,300 - -
Operating income 252,145 244,227 240,323
Adjustments for non-cash components
of income from continuing operations:
Depreciation and amortization 226,612 236,896 227,635
Interest on zero coupon senior
subordinated convertible debentures 7,419 11,852 4,500
Deferred income taxes (38,898) (3,046) (4,339)
Equity in net earnings of affiliates
(Note 6) (6,435) (11,069) (6,549)
Amortization of accrued
pension costs (Note 13) (7,631) (3,825) (8,216)
Other 2,500 4,019 (362)
435,712 479,054 452,992
Tax benefit of extraordinary items 2,664 6,663 5,407
438,376 485,717 458,399
(INCREASE) DECREASE IN ASSETS:
Trade receivables (40,073) (18,632) 3,866
Inventories 37,523 33,093 75,717
Other current assets (10,916) (6,589) (9,049)
(Decrease) increase in liabilities:
Accounts payable and accruals 24,748 (53,845) (68,056)
Income taxes payable (21,165) 9,028 9,950
Accrued pension and other
postretirement benefits, net (16,927) (22,009) (769)
(26,810) (58,954) 11,659
Cash provided by operating
activities before after-tax net
interest expense $411,566 $426,763 $470,058
See notes to consolidated financial statements.*
PAGE 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Year ended December 31
1993 1992 1991
Cash provided by operating activities
before after-tax net interest expense $411,566 $426,763 $470,058
After-tax net interest expense (38,878) (51,626) (67,240)
CASH PROVIDED BY OPERATING ACTIVITIES 372,688 375,137 402,818
CASH PROVIDED (REQUIRED) BY DISCONTINUED
OPERATIONS AND RESTRUCTURING (28,935) (29,964) 17,766
Cash provided (required) by investing
activities:
Capital spending (244,532) (314,480) (216,803)
Disposal of property, plant
and equipment 7,773 17,973 12,152
Decrease (increase) in investments 23,616 12,092 (1,501)
CASH REQUIRED BY INVESTING ACTIVITIES (213,143) (284,415) (206,152)
Cash provided (required) by financing
activities:
Net increase (decrease) in short-term debt 14,014 (4,339) (29,678)
Net repayments under credit facilities (10,000) (130,000) (195,000)
Increase in other long-term debt 206,363 413,214 157,815
Repayment of other long-term debt (285,138) (355,070) (200,167)
Premium on early retirement of debt (3,413) (14,304) (10,011)
Issuance of capital stock, net 7,352 14,725 9,568
Cash required by financing activities (70,822) (75,774) (267,473)
Effect of exchange rate changes on
cash and marketable securities (6,545) (4,939) 4,242
Increase (decrease) in cash and
marketable securities 53,243 (19,955) (48,799)
Cash and marketable securities,
beginning of year 24,278 44,233 93,032
Cash and marketable securities,
end of year $77,521 $24,278 $44,233
Supplemental cash flow information:
The company considers all highly liquid debt instruments
purchased with original maturities of three months or
less to be cash equivalents. Under this definition, cash
and marketable securities as shown on the balance sheet
are considered cash equivalents. Cash flows from hedging
contracts are reported in the statements of cash flows
in the same categories as the cash flows from the
transactions being hedged. Income taxes paid, net of
refunds, were $41.8 million, $67.7 million and $61.5
million for 1993, 1992 and 1991, respectively. Interest
payments, net of amounts capitalized, for 1993, 1992 and
1991 were $60.1 million, $99.9 million and $137.0
million, respectively.
See notes to consolidated financial statements.
PAGE 30
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Common Capital Retained Foreign
stock, $0.10 in excess earnings currency Treasury
par value of par (deficit) translation stock
Balance
December 31, 1990 $3,502 $46,603 $ 82,718 $23,983 $(7,234)
Net income 163,877
Stock options
exercised
(Note 11) 53 10,373
Purchase of treasury
shares (858)
Translation adjustment
(Note 5) (13,169)
Balance
December 31, 1991 3,555 56,976 246,595 10,814 (8,092)
Net loss (75,746)
Stock options exercised
(Note 11) 61 14,979
Purchase of treasury
shares (315)
Translation adjustment
(Note 5) (29,826)
Balance
December 31, 1992 3,616 71,955 170,849 (19,012) (8,407)
Net income 36,284
Stock options
exercised
(Note 11) 31 7,627
Purchase of
treasury shares (306)
Translation adjustment
(Note 5) (45,754)
Balance
December 31, 1993 $3,647 $79,582 $207,133 $(64,766) $ (8,713)
See notes to consolidated financial statements.
PAGE 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 PRINCIPAL ACCOUNTING POLICIES CONSOLIDATION.
The consolidated financial statements include the
accounts of the company and all significant majority-
owned subsidiaries, except those excluded because
control is restricted or temporary in nature. All
material intercompany accounts and transactions are
eliminated in consolidation.
Investments. Investments in unconsolidated majority-
owned subsidiaries, as well as companies in which
ownership interests are 50 percent or less and FMC has
significant influence over operating and financial
policies, are accounted for using the equity method. All
other investments are carried at their fair values or
cost if appropriate.
Equity in net earnings of affiliates. Equity in net
earnings of affiliates has been adjusted to eliminate
the effects of any material intercompany transactions.
Inventories. Inventories are stated at the lower of
cost or market value. Cost is determined on the last-in,
first-out (LIFO) basis for all domestic inventories,
except certain inventories relating to long-term
contracts. Inventoried costs relating to long-term
contracts not valued on the LIFO basis are stated at the
actual production cost incurred to date, reduced by
amounts identified with recognized revenue. The costs
attributed to units delivered under such contracts are
based on the estimated average cost of all units
expected to be produced. The first-in, first-out (FIFO)
method is used to determine the cost for all other
inventories.
Inventory costs include manufacturing overhead, except
that domestic inventories exclude depreciation, factory
administration, property taxes and certain other fixed
expenses.
Revenue recognition for contracts-in-progress. Sales
are recorded under most production contracts as
deliveries are made. Sales under cost reimbursement
contracts for research, engineering, prototypes, repair
and maintenance, and certain production contracts are
recorded as costs are incurred and include estimated
fees in the proportion that costs incurred to date bear
to total estimated costs. The fees under certain
government contracts may be increased or decreased in
accordance with cost or performance incentive
provisions. Such awards or penalties are recognized at
the time the amounts can be reasonably determined.
Property, plant and equipment. Property, plant and
equipment, including capitalized interest, is recorded
at cost. Depreciation for financial reporting purposes
is provided principally on the straight-line basis over
the estimated useful lives of the assets (land
improvements 20 years, buildings 20 to 50 years, and
machinery and equipment 3 to 18 years). Gains and losses
are reflected in income upon sale or retirement of
assets. Maintenance and repairs are charged to expense
in the year incurred ($189.8 million, $203.0 million and
$196.1 million in 1993, 1992 and 1991, respectively).
Expenditures that extend the useful life of property,
plant and equipment or increase its productivity are
capitalized.
Interest expense. Interest costs of $0.7 million ($2.1
million in 1992 and $3.5 million in 1991) associated
with the construction of certain capital assets have
been capitalized as part of the cost of those assets and
are being amortized over their estimated useful lives.
Interest expense for 1993 includes $0.3 million ($0.3
million in 1992 and $1.5 million in 1991) for
amortization of fees and expenses associated with the
revolving credit facility and
PAGE 32
subordinated debentures. Unamortized fees and expenses
of $4.0 million, $3.7 million and $2.7 million related
to debt restructuring were charged off as extraordinary
items in 1993, 1992, and 1991, respectively.
Patents, deferred charges and intangibles of acquired
companies. Patents are capitalized and amortized over
the lesser of their remaining useful or legal lives.
Debt issuance costs are amortized over the term of the
related debt. Intangibles represent the excess of the
consideration paid for companies acquired in purchase
transactions over the estimated fair value of the net
assets acquired. Intangibles acquired since October 31,
1970, are amortized on a straight-line basis over
periods normally not exceeding 15 years. Intangibles
acquired before that date ($8.6 million at December 31,
1993 and 1992) are not being amortized, as management
believes that their values have not diminished.
Accounts payable. Amounts advanced by customers as
deposits on orders not yet billed and progress payments
on contracts-in-progress are recorded as accounts
payable ($148.9 million at December 31, 1993 and $121.5
million at December 31, 1992).
Income taxes. Effective January 1, 1993, the company
adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." SFAS No.
109 requires an asset and liability approach, whereby
deferred tax liabilities and assets are recognized for
expected future tax consequences of temporary
differences between the carrying amounts and tax bases
of assets and liabilities. Income taxes are not provided
for the equity in undistributed earnings of foreign
subsidiaries or affiliates when it is management's
intention that such earnings remain invested in those
companies. Taxes are provided in the year the dividend
payment is received or when the decision is made to
repatriate the earnings. Prior to January 1, 1993,
income tax provisions were based on income reported for
financial statement purposes, adjusted for transactions
(permanent differences) that do not enter into the
computation of income taxes payable. The company
deferred the tax effects of timing differences between
financial reporting and taxable income.
Foreign currency translation. Assets and liabilities of
most foreign operations are translated at exchange rates
in effect at year-end, and income statements are
translated at the average exchange rates for the year.
These translation gains and losses are accumulated in a
separate component of stockholders' equity until the
foreign entity is sold or liquidated. For operations in
highly inflationary countries, inventories, property,
plant and equipment, and other noncurrent assets are
converted to U.S. dollars at historical exchange rates,
and all gains or losses from conversion to U.S. dollars
are included in income. Gains and losses resulting from
foreign currency transactions are generally included in
income.
Hedging. FMC enters into formal contracts designated as
hedges against interest rates related to floating rate
financing facilities, gold, silver and other commodity
prices, and certain foreign currency denominated
transactions. The gains or losses on these contracts are
included in the measurement of these transactions.
The company has entered into commodity swap transactions
to reduce the impact of changes in prices of commodities
used in the manufacture of products. These agreements
generally involve the cash settlement of the
differential between the contract price and the average
monthly spot price of the commodity. These contracts are
denoted in their nominal amounts, which indicate the
level of involvement the company has in these contracts
and do not indicate
PAGE 33
risk of loss. At December 31, 1993 and 1992, the company
had commodity swaps of $9.1 million and $11.0 million,
respectively, extending through 1995.
Earnings per common share. Primary earnings per common
share are computed by dividing net income (loss) by the
weighted average number of shares of common stock and
common stock equivalents (primarily stock options)
outstanding during the year (36,943,000 in 1993,
36,796,000 in 1992 and 36,267,000 in 1991). Fully
diluted earnings per common share reflect the maximum
dilution that would result from exercise of convertible
debentures and stock options, unless such amounts are
antidilutive. The average number of shares used in the
fully diluted computation was 36,943,000 in 1993,
39,694,000 in 1992 and 37,566,000 in 1991. The fully
diluted computation is based upon income from continuing
operations after adding back after-tax interest on
convertible debentures when dilutive ($7.6 million and
$2.8 million in 1992 and 1991, respectively).
Other income and expense items. Items not related to
operating results are classified as other income and
expense items in the income statements.
Segment information. Segment operating profit is
defined as total revenue less operating expenses. The
following items have been excluded in computing
operating profit: general corporate income and expenses,
interest income and expense, income taxes, equity in net
earnings of affiliates not directly associated with
asegment, minority interests, significant gains or
losses on abnormal retirements of assets, 1993
restructuring and other charges, and other income and
expense items as defined above. Identifiable assets by
industry segment are those assets that are used by
segment operations. Corporate assets are principally
cash and marketable securities, deferred income tax
benefits, investments and property and equipment.
Financial instruments. The fair values of financial
instruments approximated their carrying values at
December 31, 1993 and 1992. Fair values have been
determined through information obtained from market
sources and management estimates.
Environmental. The company provides for environmental-
related obligations, such as estimated contractor costs
and fees, site study costs, reimbursements of regulatory
agency costs, post-closure costs, litigation costs, and
other remediation costs, when they are probable and
amounts can be reasonably estimated. Estimated
obligations to remediate sites that involve the
Environmental Protection Agency (EPA), or equivalent
government agencies, are generally accrued no later than
when a Record of Decision (ROD), or equivalent, is
issued, or upon completion of a Remediation
Investigation/Feasibility Study (RI/FS) that is accepted
by FMC and the appropriate government agency or
agencies. As remediations and investigations proceed,
the estimates are reviewed quarterly by the company's
Environmental Health and Safety organization, as well as
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 governmental agencies or
private parties.
Provisions for environmental costs are reflected in
income, net of estimated recoveries from named
Potentially Responsible Parties (PRPs) or other third
parties, incorporate inflation and are not discounted to
their present values. Estimated recoveries from third
parties or other PRPs are recorded when probable and
reasonably estimable.
PAGE 34
Accounting standards not adopted. In November 1992, the
Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Post-employment
Benefits." Effective for fiscal year 1994, SFAS No. 112
establishes accounting standards for benefits provided
to former or inactive employees after employment but
before retirement. The company is continuing to evaluate
the new statement's provisions, although it does not
expect that implementation will have a material impact
on the company's results of operations and financial
position.
Reclassifications. Certain prior-year amounts have been
reclassified to conform with the current year's
presentation.
NOTE 2 RESTRUCTURING, ACQUISITIONS, DIVESTITURES AND
DISCONTINUED OPERATIONS
Restructuring and other charges. In the fourth quarter
of 1993, the company recorded a charge of $172.3 million
(after-tax $123.3 million, or $3.34 per share), net of
$12.7 million of minority interest, to cover primarily
restructuring costs in the Machinery and Equipment and
Chemical businesses, as well as the write-down of assets
in the Precious Metals operation. The restructuring
program is designed to reduce costs and improve
operating efficiencies in these businesses.
The Machinery and Equipment restructuring program
includes, among other items, costs for consolidating
facilities and exiting unprofitable product lines,
including relocation and severance costs.
The charges for the Chemical businesses are due primarily
to weak market conditions, and reflect costs for the
shutdown of unproductive facilities and associated
severance expenses.
The Precious Metals' charges include closure costs for
the shutdown of the Royal Mountain King and Paradise Peak
mines, as well as a $51 million asset write-down of the
Beartrack development property. This write-down was based
on the long-term outlook for gold prices.
The restructuring program also includes costs to
reorganize functional support staff and services
throughout the company to improve operating efficiencies
and align these activities more closely with the
company's growth initiatives.
The after-tax cash outflow required to fund these charges
will be approximately 40 percent of the $172.3 million
charge.
Acquisitions and divestitures. In April 1993, FMC Gold
Company purchased the remaining 50 percent interest in
the Humboldt Gold joint venture from TRE Management
Company, bringing FMC Gold's owner-ship interest in all
gold and precious metal-bearing ores in the related
property to 100 percent. The former Humboldt Gold venture
is targeting deep gold mineralization at the "Rossi
Property" on the Carlin Gold Trend in Nevada.
On June 30, 1993, the company acquired the assets of
Kongsberg Offshore a.s. (Kongsberg), a wholly owned
subsidiary of Siemens a.s. Kongsberg provides subsea and
metering systems on a worldwide basis as well as turnkey
subsea systems, including systems integration, project
management and FMC subsea products. The company also
acquired SOFEC, Inc. (SOFEC), a Houston based engineering
and construction company that designs, fabricates and
installs offshore mooring systems for export and import
terminals and for floating storage and production
facilities for offshore oil and gas. During 1993, these
acquisitions were successfully integrated without
significantly affecting consolidated results of
operations.
During 1992, the company acquired the worldwide flame
retardants and fluids, and water treatment chemicals
businesses of Ciba-Geigy
PAGE 35
Additives Division (Ciba-Geigy), with annual sales of
approximately $150 million. The company also sold the
street sweeper operation. These transactions did not
significantly affect the 1992 consolidated results of
operations of the company.
In 1991, the company acquired the airplane wing deicer
business of The Trump Companies, Inc. The 1991
consolidated results were not significantly affected by
this acquisition.
The aforementioned acquisitions were financed with cash,
marketable securities, and long-term financing. The
company has accounted for these acquisitions using the
purchase method of accounting.
Discontinued operations. In the fourth quarter of 1992,
FMC recorded a $73.2 million charge, net of applicable
tax benefits of $46.8 million, for increases in the
projected costs of liquidating liabilities associated
with discontinued operations. The provision included
pretax charges of $75 million for environmental clean-up,
and $45 million for higher projected product liability
claims. In addition, a one-time, pretax adjustment of
$92.5 million ($57.4 million net of tax) was recorded for
retiree benefits provided to former employees of
discontinued operations. The provision for retiree
benefits was recorded in conjunction with the company's
adoption of Statement of Financial Accounting Standards
No. 106 (Note 14).
The environmental provision increased reserves for
Remediation Investigation/Feasibility Study (RI/FS) and
remediation costs related to formerly discontinued
businesses. The additions to the product liability
reserve primarily represented higher-than-previously-
projected product liability claims relating to equipment
manufactured by the construction equipment group prior
to the sale of that business to Sumitomo Heavy
Industries, Ltd.
Management believes that the reserve for discontinued
operations of $223.5 million at December 31, 1993 is
adequate to provide for the estimable costs associated
with the liquidation and disposal of discontinued
operations, including the possible longer-term
requirements for potential product liability claims,
retiree medical costs and clean-up of former
manufacturing facilities and associated waste sites.
NOTE 3 TRADE RECEIVABLES
Trade receivables do not contain any material amounts
representing receivables collectible over a period in
excess of one year, receivables billed under retainage
provisions of contracts or similar items whose
determination or ultimate realization is uncertain.
Trade receivables included approximately $29 million of
unbilled receivables at December 31, 1993 for defense
equipment awaiting final acceptance by the U.S.
Government. There were no significant unbilled
receivables at December 31, 1992.
The company maintains an allowance for doubtful accounts
based upon the expected collectibility of all trade
receivables, including receivables discounted with
recourse. A summary of activity in the allowance for
doubtful accounts is shown below:
PAGE 36
(In thousands) 1993 1992 1991
Balance at beginning of year $7,358 $5,971 $6,284
Provision for doubtful accounts 2,954 7,211 3,438
Receivables written off as
uncollectible, net of recoveries (3,535) (5,824) (3,751)
Balance at end of year $6,777 $7,358 $5,971
NOTE 4 INVENTORIES
Inventories are recorded at the lower of cost or market
value. The current replacement cost of inventories
exceeded their recorded values by approximately $238.0
million at December 31, 1993 and $228.0 million at
December 31, 1992. During 1993, 1992 and 1991, the
company reduced LIFO inventories that were carried at
lower than prevailing costs. These reductions increased
pretax income by $2.6 million in 1993, $25.5 million in
1992 and $19.1 million in 1991.
Inventories at December 31, 1993 included approximately
$40.7 million ($55.2 million at December 31, 1992) of
inventoried costs relating to contracts-in-progress.
Costs normally associated with general and
administrative functions are expensed as incurred. There
were no material amounts in inventory at December 31,
1993 and 1992 relating to the excess of production cost
of delivered units over the estimated average cost of
all units expected to be produced under contracts-in-
progress, or other non-recurring costs for which
ultimate recovery may be uncertain.
Note 5 Foreign currency Net income for 1993, 1992 and
1991 included aggregate foreign currency losses of $1.0
million and $1.4 million and foreign currency gains of
$3.4 million, respectively. Translation gains or losses
for operations in highly inflationary economies are
included in income, while substantially all other
translation gains or losses are reported through a
separate account in stockholders' equity. The following
table presents the foreign currency adjustments to key
balance sheet categories and the offsetting adjustment
to stockholders' equity or income. The 1993 decrease in
stockholders' equity is primarily attributable to a
stronger U.S. dollar in relation to European currencies,
particularly the Spanish peseta. Interest earned on
foreign marketable securities and debt service costs are
classified as interest income and interest expense,
respectively, and are not offset in the amounts shown
below. In addition, foreign currency impacts on
marketable securities and debt in hyperinflationary
economies are netted against interest income and expense
and are not shown in the amounts below.
Gains (Losses)
(In thousands) 1993 1992 1991
Cash and marketable securities $ (6,545) $ (4,939) $ 4,242
Debt 7,730 20,951 3,582
Other working capital (24,065) (17,244) (8,969)
Property, plant & equipment, net (33,350) (36,153) (7,175)
Other 9,477 6,112 (1,482)
$(46,753) (31,273) $ (9,802)
Stockholders' equity $(45,754) $(29,826) $(13,169)
Gain (loss) in income (999) (1,447) 3,367
$(46,753) $(31,273) $ (9,802)
The company has entered into foreign currency contracts to
hedge certain foreign transactions. Foreign exchange
contracts mature at the anticipated cash requirement date
of the hedged transaction, generally within one year,
except for the sale of $104 million of foreign currencies
which mature annually through the year 2000. The contract
amounts reflect the extent of involvement the company has
in foreign exchange transactions. At December 31, 1993 and
1992, the company had forward contracts primarily for the
purchase and sale of European, Singapore and Canadian
currencies. U.S. dollar-denominated contracts to purchase
foreign currencies at December 31, 1993 were approximately
PAGE 37
$134 million ($192 million at December 31, 1992). U.S.
dollar-denominated contracts to sell foreign currencies
were approximately $277 million at December 31, 1993 ($160
million at December 31, 1992). Significant cross-currency
contracts at December 31, 1993 were the exchange of 2.5
million German marks for 1.0 million British pounds, and
13 million German marks for 983 million Spanish pesetas.
There were no significant cross-currency contracts
outstanding at December 31, 1992.
NOTE 6 INVESTMENTS
For the year ended December 31, 1993, FMC's equity in
net earnings of unconsolidated subsidiaries and
affiliates was $6.4 million ($11.1 million in 1992 and
$6.6 million in 1991).
Dividends received from affiliates were $6.0 million in
1993 ($4.3 million in 1992 and $3.4 million in 1991).
Dividends included in other revenue from other
investments were $9.7 million, $8.2 million and $0.4
million in 1993, 1992 and 1991, respectively.
Income taxes have not been provided for the company's
share of the cumulative undistributed earnings of
unconsolidated subsidiaries and affiliates ($50.6
million at December 31, 1993). Restrictions on the
payment of dividends by these affiliates are
insignificant.
December 31
(In thousands) 1993 1992
Investments in, and advances to,
unconsolidated subsidiaries and
affiliates $64,607 $57,615
Other investments, net 11,590 28,204
Total $76,197 $85,819
PAGE 38
NOTE 7 PROPERTY, PLANT AND EQUIPMENT
A summary of changes in property, plant and equipment and related
accumulated depreciation accounts follows:
(In thousands) Land Machinery Construction
and Buildings and in
improvements equipment progress Total
COST
Balance
December 31, 1990 $ 261,556 $ 404,268 $2,487,372 $ 126,590 $3,279,786
Additions 14,276 26,890 202,119 (26,482) 216,803
Disposals, retirements
and reclassifications (43,043) (5,413) (85,896) 43,569 (90,783)
Translation adjustment (117) (1,692) (14,025) (303) (16,137)
Balance
December 31, 1991 232,672 424,053 2,589,570 143,374 3,389,669
Additions 20,336 47,031 251,145 (4,032) 314,480
Disposals, retirements
and reclassifications 36,004 (3,841) (93,817) (40,972) (102,626)
Translation adjustment (1,210) (8,596) (48,666) (1,330) (59,802)
Balance December 31, 1992 287,802 458,647 2,698,232 97,040 3,541,721
Additions 17,723 25,979 173,666 (2,302) 215,066
Disposals, retirements
and reclassifications (51,748) (15,487) (103,035) (14,348) (184,618)
Translation adjustment (965) (7,858) (62,824) (2,128) (73,775)
BALANCE
DECEMBER 31, 1993 $252,812 $461,281 $2,706,039 $ 78,262 $3,498,394
ACCUMULATED DEPRECIATION
Balance
December 31, 1990 $ 91,076 $150,707 $1,530,860 $1,772,643
Depreciation 13,165 14,779 196,980 224,924
Disposals, retirements
and reclassifications (2,123) (3,410) (77,636) (83,169)
Translation adjustment (28) (725) (8,209) (8,962)
Balance
December 31, 1991 102,090 161,351 1,641,995 1,905,436
Depreciation 17,218 16,840 200,920 234,978
Disposals, retirements
and reclassifications (244) (2,425) (74,497) (77,166)
Translation adjustment (90) (1,401) (22,158) (23,649)
Balance
December 31, 1992 118,974 174,365 1,746,260 2,039,599
Depreciation 15,005 16,449 190,935 222,389
Disposals, retirements
and reclassifications (7,947) (741) (104,730) (113,418)
Translation adjustment (75) 1,084 (41,434) (40,425)
BALANCE
DECEMBER 31, 1993 $125,957 $191,157 $1,791,031 $2,108,145
PROPERTY, PLANT
AND EQUIPMENT, NET,
DECEMBER 31, 1993 $126,855 $270,124 $ 915,00 $78,262 $1,390,249
NOTE 8 SHORT-TERM DEBT AND COMPENSATING BALANCE AGREEMENTS
FMC maintains informal credit arrangements in many foreign
countries. Foreign lines of credit, which usually 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. At December 31, 1993,
$67 million was extended to FMC pursuant to the above foreign
credit arrangements.
PAGE 39
December 31
(In thousands) 1993 1992 1991
Balance at end of year $66,904 $54,759 $59,287
Weighted average interest
rate end of year(1) 7.4% 8.4% 9.3%
Maximum outstanding $66,904 $77,970 $94,899
Average outstanding $38,085 $61,580 $75,067
Weighted average interest rate
during the year(1), (2) 8.8% 12.7% 13.0%
(1) The average interest rates have been adjusted for currency
devaluation associated withborrowings in hyperinflationary
countries.(2) Weighted average interest rate is computed as
related interest expense divided by the average outstanding
balance during the year.
NOTE 9 LONG-TERM DEBT
LONG-TERM DEBT CONSISTS OF THE FOLLOWING:
December 31
(In thousands) 1993 1992
Revolving credit facility, effective rate
(1993 5.9%; 1992 6.9%)(1) $ - $ -
Uncommitted facilities, effective rate
(1993 4.2%; 1992 5.9%)(2) - 10,000
Notes payable to banks, various rates,
due 1994 to 1998 39,594 198,437
Sinking fund debentures, 7-1/2%, due 2001 - 32,258
Pollution control and industrial revenue
bonds, 2.9% to 7.1%, due 1995 to 2024 94,845 117,530
Senior debt, 8-3/4% due 1999,
less unamortized discount (1993 $885;
1992 $1,056), effective rate 8.8% 249,115 248,944
Senior debt, 6-3/8% due 2003,
less unamortized discount of
$1,057, effective rate 6.4% 198,943 -
Zero coupon senior subordinated convertible
debentures due 2011, less unamortized
discount of $488,430 in 1992, 7-1/2% yield
to maturity - 166,570
Sterling denominated debt, due 2042, less
unamortized discount of $18,901, 7.65%
yield to maturity 104,849 -
Exchangeable senior subordinated debentures,
6-3/4%, due 2005 75,000 75,000
Other 2,538 3,362
Total 764,884 852,101
Less current portion 15,029 8,476
Long-term portion $749,855 $843,625
(1) The effective rate on the revolving credit facility
is based on average balances outstanding during the year
and includes facility fees and expenses incurred due to
interest rate swaps.
(2) The effective rate on uncommitted facilities is based
on average balances outstandingduring the year and
includes expenses incurred due to interest rate swaps.
During 1993, the company, with funds obtained through its
revolving credit agreement, repurchased the remaining
$655 million, less unamortized discount of $481 million,
of 7-1/2% zero coupon senior subordinated convertible
debentures with an original maturity date of 2011, $32
million of 7-1/2% sinking fund debentures, originally due
2001, and $19 million of industrial revenue bonds. As a
result of the write-off of related unamortized debt issue
costs, as well as other costs and expenses incurred, the
company recognized an extraordinary charge of $4.7
million, net of tax benefits of $2.7 million.
PAGE 40
In August 1993, subsequent to the repurchases noted
above, the company issued $200 million of 6-3/8% senior
notes due 2003. The net proceeds of $198 million were
used to repay advances under the revolving credit
agreement. In order to secure long-term financing in the
United Kingdom, the company also issued Sterling
denominated debt in December 1993 due 2042 with a yield
to maturity of 7.65% and a maturity value of $124
million.
The company previously entered into an interest rate
collar agreement, with a notional amount of $50 million
at December 31, 1992, to reduce the impact of changes in
interest rates on floating rate long-term debt. The
agreement effectively capped interest rates by exchanging
floating rate for fixed rate interest payment
obligations. During 1993, the company terminated the
interest rate collar agreement.
During 1992, the company issued $250 million of 8-3/4%
senior debt with a maturity date of April 1, 1999. The
net proceeds of $247 million were used to repurchase the
remaining $123 million of 12-1/4% senior subordinated
debentures, and to reduce debt incurred in February 1992
to repurchase the remaining $99 million of 12-1/2%
subordinated debentures. In October 1992, the company
also repurchased the remaining $45 million of the 9-1/2%
sinking fund debentures prior to their maturities. As a
result of the premium paid on the above repurchases, the
write-off of related unamortized debt issuance costs, and
other expenses, the company incurred an extraordinary
charge of $11.4 million, net of tax benefits of $6.7
million, in 1992.
Net proceeds from the 1991 issuance of $146.7 million of
zero coupon senior subordinated convertible debentures,
repurchased in 1993, were originally used to repurchase
$159 million of 12-1/2% subordinated debentures prior to
their scheduled maturities. As a result of the premium paid
on the repurchases, the write-off of related unamortized
debt issuance costs, and other expenses, the company
incurred an extraordinary charge of $9.2 million, net of
tax benefits of $5.4 million, in 1991.
The exchangeable senior subordinated debentures bearing
interest at 6-3/4% and maturing in 2005 are exchangeable
at any time into FMC Gold Company common stock held by
FMC Corporation at an exchange price of $15-1/8, subject
to change as defined in the offering circular. However,
the company may, at its option, pay an amount equal to
the market price of FMC Gold Company common stock in lieu
of delivery of the shares. The debentures are
subordinated in right of payment to all existing and
future senior indebtedness of the company. The debentures
are redeemable at the option of FMC at prices decreasing
from 103-3/8% of face amount on January 16, 1995, to par
on January 16, 2000.
In 1992, FMC entered into a $700 million, five-year, non-
amortizing revolving credit agreement that replaced the
company's previous credit agreement which had a maximum
credit limit of $583 million. At December 31, 1993, no
amounts were outstanding under the company's revolving
credit facility or uncommitted facilities. Among other
restrictions, the credit agreement contains covenants
relating to dividends, liens, consolidated net worth and
cash flow coverage and leverage ratios (as defined in the
agreement). The company is in compliance with all
financial debt covenants.
Aggregate maturities and sinking fund requirements over
the next five years are (in millions): 1994 $15.0, 1995
$42.0, 1996 $28.1, 1997 $24.3, 1998 $19.1, and thereafter
$636.4.
NOTE 10 INCOME TAXES
Effective January 1, 1993, the company adopted SFAS No.
109, "Accounting for Income Taxes," which changed the
company's method of accounting for income taxes from the
deferred method to an asset and
PAGE 41
liability approach. Previously, the company deferred the
tax effects of timing differences between financial
reporting and taxable income. The asset and liability
approach requires the recognition of deferred tax
liabilities and assets for the expected future tax
consequences of temporary differences between the
carrying amounts and tax bases of assets and liabilities.
The company has elected not to restate the financial
statements of prior years for this change in accounting.
The cumulative effect of the change on pretax income and
net income was not material.
Domestic and foreign components of pretax income (loss)
from continuing operations are shown below:
Year ended December 31
(In thousands) 1993 1992 1991
Domestic $(17,165) $226,471 $205,278
Foreign 54,979 53,164 50,654
Total $ 37,814 $279,635 $255,932
The provision (benefit) for
income taxes consists of:
Year ended December 31
(In thousands) 1993 1992 1991
Current:
Federal $23,733 $56,356 $56,353
Foreign 8,352 21,058 17,531
State and local 3,660 12,666 13,304
Total current 35,745 90,080 87,188
Deferred (38,898) (3,046) (4,339)
Total income taxes $(3,153) $87,034 $82,849
Total income tax benefit for the year ended December 31,
1993 was allocated as follows:
(In thousands) 1993
Income from continuing operations $(3,153)
Extraordinary item (2,664)
Stockholders' equity, for compensation
expense for tax purposes in excess of
amounts recognized for financial reporting
purposes (2,388)
Income tax benefit $(8,205)
Significant components of the deferred income tax benefit
attributable to income from continuing operations for the
year ended December 31, 1993 are as follows:
(In thousands) 1993
Deferred tax (exclusive of the effects
of other components listed below) $(50,653)
Adjustments to deferred tax assets and
liabilities for enacted changes in tax
laws and rates (5,083)
Increase in the valuation allowance for
deferred tax assets 16,838
Deferred income tax benefit $(38,898)
PAGE 42
Significant components of the company's deferred tax assets
and liabilities as of December 31, 1993 are as follows:
(In thousands) 1993
Accrued pension and other postretirement
benefits $107,218
Reserve for discontinued operations and
restructuring 149,208
Other reserves 108,561
Net operating loss carryforwards 22,737
Alternative minimum tax credit carryforwards 12,446
Capitalized research and development costs 14,660
Other 17,078
Deferred tax assets 431,908
Valuation allowance (37,281)
Deferred tax assets, net of valuation allowance $394,627
Property, plant and equipment $163,797
Other 6,152
Deferred tax liabilities $169,949
Net deferred tax assets $224,678
The valuation allowance for deferred tax assets as of
January 1, 1993 was $20.5 million. The total valuation
allowance increased $16.8 million, primarily due to an
increase in the valuation allowance for FMC Gold's
deferred tax assets as a result of the write-down of the
Beartrack property (Note 2), offset by a $6 million
decrease in the valuation allowance due to revised
estimates for realizing foreign tax net operating losses.
As of December 31, 1993, the company has prepaid $12.4
million of alternative minimum tax. These prepayments
represent credits that are available in future years to
offset regular taxes to the extent they exceed
alternative minimum tax.
The effective income tax rate applicable to pretax income
is less than the statutory U.S. federal income tax rate
for the following reasons:
Percent of pre-tax income
Year ended December 31
1993 1992 1991
Statutory U.S. tax rate 35% 34% 34%
Net increase (decrease):
Foreign sales corporation income not
subject to U.S. tax (30) (3) (3)
Percentage depletion (51) (7) (8)
State and local income taxes, less
federal income tax benefit (6) 3 4
Foreign earnings subject to different
tax rates (15) 1 (1)
Tax on intercompany dividends
and deemed dividends
for tax purposes 54 1 3
Adjustment to deferred tax
assets for enacted changes
in tax rates (13) - -
Equity in earnings of affiliates
not taxed (9) (1) (1)
Minority interest on FMC Gold
restructuring charge (11) - -
Change in valuation allowance 44 1 2
Other (6) 2 2
Total decrease (43) (3) (2)
Effective tax rate (8)% 31% 32%
PAGE 43
The 1992 net loss included pretax special charges of
$296.3 million for postretirement benefits and $120.0
million for discontinued operations. The tax benefits
attributable to these special charges are included in
deferred taxes and are expected to be realized over an
extended period of time as the charges become deductible
for tax purposes.
The source and tax effect of the deferred income tax
provision (benefit) were as follows:
Year ended December 31
(In thousands) 1992 1991
Tax depreciation less than book $(7,215) $(11,430)
Prepaid pension costs 9,040 10,390
Change in other reserves (10,475) (11,863)
Research, intangible drilling,
exploration and development 1,510 6,566
Tax on intercompany dividends - 4,900
Other timing differences 4,094 (2,902)
Continuing operations (3,046) (4,339)
Postretirement health care and
life insurance benefits (112,609) -
Discontinued operations (47,285) 8,013
Total deferred income tax provision
(benefit) $(162,940) $3,674
FMC Corporation's federal income tax returns for years
through 1986 have been examined by the Internal Revenue
Service and have been settled, except for a few issues
awaiting final resolution in the U.S. Tax Court for years
1978 through 1984. Management believes that adequate
provision for income taxes has been made for the open
issues in the U.S. Tax Court and for all other open years.
Income taxes have not been provided for the equity in
undistributed earnings of foreign consolidated subsidiaries
($244.9 million at December 31, 1993). Restrictions on the
distribution of these earnings are not significant. Foreign
earnings taxable to the company as dividends were $131.0
million, $22.2 million and $15.1 million in 1993, 1992, and
1991, respectively.
NOTE 11 STOCKHOLDERS' EQUITY The company is authorized to
issue 60,000,000 shares of common stock, par value $0.10
per share, and 5,000,000 shares of preferred stock, no par
value. None of the preferred stock is issued or
outstanding.
The 1990 Incentive Share Plan is a continuation of previous
plans providing certain incentives and rewards to key
employees. The plan is administered by the Compensation and
Organization Committee of the Board of Directors (the
Committee) which, subject to the provisions of the plan,
approves participants and awards, and times and conditions
for payment.
Awards may be made in the form of an unconditional stock
option and a conditional dollar amount. Unconditional stock
options are exercisable at the end of an award period,
usually four years from the date of the grant, while all,
part, or none of the conditional dollar amount may be paid
at the end of the award period if the stock option has
little or no value and, in the case of performance awards,
financial targets have been met and approved by the
Committee.
Stock options may be incentive stock options and/or
nonqualified stock options. The exercise price for options
is the fair market value of the stock at the date of grant.
Incentive stock options expire not more than 10 years after
the grant date. Nonqualified stock options expire not more
than 15 years after the grant date (10 years for grants
prior to 1990), although the Committee may extend the
expiration date of any nonqualified stock option.
PAGE 44
Under the plan, 2.8 million shares became available for
awards and options to be granted in 1990 and later years.
At December 31, 1993, awards covering approximately 1.7
million of these shares had been made in the form of stock
options.
The following summary shows stock option activity:
Shares optioned
but not Option
price
exercised per share
December 31, 1991 2,671,826 $6.53-$31.25
Granted 681,300 $46.375
Exercised (609,979) $6.53-$24.50
Cancelled (63,789) $24.50-$46.375
December 31, 1992 2,679,358 $7.39-$46.375
Granted 199,300 $45.00
Exercised (313,775) $7.39-$24.50
Cancelled (98,700) $29.50-$46.375
December 31, 1993 2,466,183 $10.43-$46.375
At December 31, 1993, 776,683 of the optioned shares are
exercisable at prices ranging from $10.43 to $31.25 per
share, with expiration dates from December 12, 1994 to
February 19, 1998. On January 3, 1994, an additional
704,800 shares became exercisable at prices ranging from
$29.875 to $31.125 with an expiration date of April 27,
2005. The excess of proceeds over the par value of optioned
shares issued is credited to capital in excess of par value
of capital stock. Cancellation (through expiration,
forfeiture or otherwise) of awards granted after 1989
increases the shares available for future awards.
In April 1987, the stockholders approved the FMC Deferred
Stock Plan for Nonemployee Directors. Under this plan, a
portion of the annual retainer for these directors will be
deferred and paid in the form of shares of common stock
upon retirement or other termination of their
directorships. At December 31, 1993, stock units
representing an aggregate of 12,437 shares of stock were
credited to the nonemployee directors' accounts.
The following is a summary of FMC's capital stock activity over
the past three years:
Common Treasury
(In thousands) stock stock
Balance December 31, 1990 35,021 258
Stock options exercised 528
Stock repurchases 21
Balance December 31, 1991 35,549 279
Stock options exercised 610
Stock repurchases 7
Balance December 31, 1992 36,159 286
Stock options exercised 314
Stock repurchases 6
Balance December 31, 1993 36,473 292
At December 31, 1993, 3,576,683 shares of FMC common
stock were reserved for stock options and awards.
Covenants of the revolving credit facility agreement
(Note 9) restrict aggregate payment of dividends on the
company's common stock to 50 percent of consolidated net
income (as defined) after December 31, 1991, plus $170
million. However, no dividends are expected to be paid
on the company's common stock in 1994. The covenants
also contain a minimum net worth requirement (as
defined) of $300 million plus 50 percent of consolidated
net income (as defined) after June 30, 1992.
PAGE 45
On February 22, 1986, the Board of Directors of the
company declared a dividend distribution to each
recordholder of common stock as of March 7, 1986, of one
Preferred Share Purchase Right for each share of common
stock outstanding on that date. Each right entitles the
holder to purchase, under certain circumstances, one one-
hundredth of a share of Junior Participating Preferred
Stock, Series A, without par value, at a price of $75
per share (subject to adjustment), subject to the terms
and conditions of a Rights Agreement dated February 22,
1986.
The rights are not exercisable or transferable apart
from the common stock until 10 days after a public
announcement that a person or group either (1) has
acquired, or has obtained the right to acquire,
beneficial ownership of 20 percent or more of the
company's outstanding shares of common stock, or (2) has
commenced, or announced an intention to commence, a
tender offer or exchange offer that would result in the
person or group beneficially owning 30 percent or more
of the outstanding shares of common stock. The rights
expire on March 7, 1996, unless redeemed by the company
at an earlier date. The redemption price of $.05 per
right is subject to adjustment to reflect stock splits,
stock dividends or similar transactions. The company has
reserved 400,000 shares of Junior Preferred Stock for
possible issuance under the plan.
In February 1988, the Rights Agreement was amended, such
that if an entity acquired more than 20 percent of FMC's
common stock, FMC stockholders, except the acquiring
stockholder, will have the right to purchase FMC common
stock at a substantial discount to market value. For a
period of 10 days after the date of the stock
acquisition, the FMC Board of Directors may redeem the
rights, permit the rights to be exercised or extend the
10-day redemption period.
NOTE 12 SEGMENT INFORMATION
A description and summary of the results of the
company's industry segments are on pages 17 through 37
of this annual report.
Sales to various agencies of the U.S. government
aggregated $768.4 million, $839.5 million and
$854.1million in 1993, 1992 and 1991, respectively.
These sales were made primarily by the Defense Systems
segment.
Summarized financial information for the geographic
areas in which the company operates (including export
sales) is shown in the following tables. Other income
and expense items are included in the profits below and
are summarized and discussed on page 38.
U. S. EXPORT SALES TO UNAFFILIATED CUSTOMERS BY DESTINATION OF
SALE
Year ended December31
(In thousands) 1993 1992 1991
Latin America and Canada $176,842 $172,171 $136,752
Europe 192,182 250,506 262,026
Asia, Africa and others 415,301 474,813 515,049
Total $784,325 $897,490 $913,827
PAGE 46
<TABLE>
OPERATIONS BY GEOGRAPHIC AREA
<CAPTION>
Income (loss)
before income Identifiable
Sales taxes assets
Year ended Year ended December 31
December 31 December 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
1993 1992 1991 1993 1992 1991 1993 1992 1991
United States $2,968,868 $3,165,751 $3,222,347 $323,298 $414,313 $415,230 $1,547,088 $1,599,314 $1,710,951
Latin America
and Canada 151,305 155,217 159,677 4,446 4,575 (2,385) 148,692 146,692 179,867
Europe 781,067 776,409 628,381 47,920 48,446 42,711 642,448 639,111 552,793
Asia, Africa
and others 72,451 64,565 57,214 (770) 4,328 6,353 51,564 45,139 40,956
Eliminations (219,758) (188,279) (168,170) (2,028) 2,768 (1,308) (11,453) (13,290) (14,131)
Subtotal 3,753,933 3,973,663 3,899,449 372,866 474,430 460,601 2,378,339 2,416,966 2,470,436
Net interest
expense - - - (62,634) (82,655) (107,349) - - -
Corporate
and other - - - (100,118) (112,140) (97,320) 434,774 409,675 345,145
Restructuring
and other
charges(1) - - - (172,300) - - - - -
Total $3,753,933 $3,973,663 $3,899,449 $37,814 $279,635 $255,932 $2,813,113 $2,826,641 $2,815,581
(1) See Note 2.
</TABLE>
PAGE 47
NOTE 13 RETIREMENT PLANS
FMC has retirement plans for substantially all domestic employees
and certain employees in other countries. Plans covering salaried
employees provide pension benefits based on years of service and
an average of the highest 60 consecutive months of compensation
during the last 120 months of consecutive employment. Plans
covering hourly employees generally provide benefits of stated
amounts for each year of service.
The company's funding policy is to make contributions based on
the projected unit credit actuarial cost method and to limit
contributions to amounts that are currently deductible for tax
reporting purposes.
The following table summarizes the assumptions used and the
components of the domestic net benefit:
Year ended December 31
Assumptions: 1993 1992 1991
Weighted average discount rate 8.0% 8.0% 8.0%
Rates of increase in future
compensation levels 5.0% 5.0% 5.0%
Weighted average expected
long-term asset return 9.3% 9.3% 9.8%
Components (in thousands):
Service cost-benefits earned $22,621 $22,650 $22,283
Interest cost on projected
benefit obligation 50,222 47,128 43,464
Actual return on plan assets
investment (gains) losses (105,917) (43,942) (126,360)
Net amortization and deferral:
Net transition asset amortization (22,970) (22,970) (22,970)
Prior service cost amortization 3,857 8,485 4,013
Net gain amortization (1,948) (2,270) (1,468)
Net asset gain (loss) deferred 46,504 (12,906) 72,822
Net pension benefit $(7,631) $ (3,825) $(8,216)
In 1992, the net pension benefit included a pension curtailment
charge of $4.6 million relating to the elimination of certain
employees in the company's hourly plans.
The funded status of the plans and accrued pension cost
recognized in the company's consolidated financial statements
as of December 31 are as follows:
PAGE 48
(In thousands) 1993 1992
Actuarial present value of benefits
for service rendered to date:
Accumulated benefit obligation based
on salaries to date, including vested
benefits of $541,096 in 1993 and
$492,874 in 1992 $(565,222) $(509,705)
Additional benefits based on estimated
future salary levels (117,110) (134,649)
Projected benefit obligation (682,332) (644,354)
Plan assets at fair value(1) 717,011 633,984
Projected benefit obligation
(in excess of) or less than
plan assets 34,679 (10,370)
Unrecognized net loss 413 49,295
Unrecognized prior service cost 24,553 24,066
Unrecognized net transition asset (167,791) (190,761)
Accrued pension cost $(108,146) $(127,770)
(1) Primarily equities, bonds and participating annuities.
The financial impact of compliance with SFAS No. 87 for non-
U.S. pension plans is not materially different from the
locally reported pension expense. The cost of providing
those pension benefits for foreign employees was $6.7
million in 1993, $5.9 million in 1992 and $3.8 million in
1991.
NOTE 14 POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
FMC provides retiree health care and life insurance
benefits for substantially all domestic employees. There
are no significant plans for international employees.
Employees generally become eligible for retiree benefits
when they meet minimum retirement age and service
requirements. The cost of providing most of these benefits
is shared with retirees. The company has reserved the right
to change or eliminate these benefit plans.
The company funds a trust for retiree health and life
benefits for the Defense Systems segment. Funding is based
on amounts in negotiated government defense contracts, in
conformance with Federal Cost Accounting Standards.
SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," was implemented by the
company effective January 1, 1992 using the immediate
recognition transition option. SFAS No. 106 requires
accrual of the expected cost of providing postretirement
benefits, other than pensions, during the years that the
employee renders the necessary service. This resulted in a
one-time, pretax adjustment of $296.3 million ($183.7
million, net of tax) in 1992, of which $92.5 million ($57.4
million, net of tax) was recorded for retiree benefits
provided to former employees of discontinued operations.
Prior to 1992, the company recognized postretirement health
care costs using the cash basis of accounting, while the
estimated costs of postretirement life insurance benefits
were generally accrued over the employees' active working
lives. These costs were $17.2 million in 1991.
PAGE 49
For measurement purposes, the assumed rate of future
increases in per capita cost of health care benefits was 13
percent in 1993 and 1992, decreasing gradually to 6 percent
by the year 2001 and assumed to remain at that level
thereafter. The health care cost trend rate assumption has
a significant effect on amounts recorded. Increasing the
health care cost trend rates by one percentage point would
increase the accumulated postretirement benefit obligation
by approximately $10 million and would increase annual
service and interest costs by $1 million.
The following table summarizes the assumptions used and the
components of net periodic postretirement benefit cost:
Year ended December 31
Assumptions: 1993 1992
Weighted average discount rate 8.0% 8.0%
Weighted average expected
long-term asset return 9.0% 9.0%
Components (in thousands):
Service cost of benefits earned $4,721 $6,938
Interest cost on accumulated
postretirement benefit obligation 14,300 18,299
Actual return on plan assets (1,246) (707)
Net amortization and deferral:
Plan amendment amortization (6,132) (258)
Net asset loss deferred (266) (361)
Net periodic postretirement
benefit cost $11,377 $23,911
The accrued postretirement benefit cost recognized in the
company's consolidated financial statements and the funded status
of the plan as of December 31 are as follows:
(In thousands) 1993 1992
Accumulated postretirement
benefit obligation (APBO):
Retirees $(85,180) $(90,882)
Fully eligible active
participants (30,764) (61,448)
Other active participants (61,395) (85,249)
APBO (177,339) (237,579)
Plan assets at fair value(1) 20,792 14,826
APBO obligation in excess of
plan assets (156,547) (222,753)
Unamortized plan amendments (70,426) (14,240)
Unrecognized net (gain) or loss (4,725) 361
Accrued postretirement
benefit cost $(231,698) (236,632)
(1) Primarily equities and fixed income securities
In 1993, the company announced plan changes to establish a
service-related premium and a fixed-dollar cap on the
company's medical plan contributions for its salaried and
non-union hourly retiree medical plans. These changes,
effective April 1, 1993, reduced the benefit obligation by
$62.4 million, amortizable over the remaining years of
service to full eligibility.
In the fourth quarter of 1992, the company announced plan
design changes to its salaried and non-union hourly
retiree medical plans. These changes, effective January 1,
1993, reduced the
PAGE 50
benefit obligation by $14.5 million, amortizable over the
remaining years of service to full eligibility.
NOTE 15 EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN
The FMC Employees' Thrift and Stock Purchase Plan (Thrift
Plan) is a qualified salary-reduction plan under Section
401(k) of the Internal Revenue Code in which all salaried
and non-union hourly employees of the company may
participate. Under the Thrift Plan, participants may elect
to have up to 15 percent of their compensation contributed
to the plan. An employee's contribution, up to five
percent of compensation, is matched by the company
anywhere from 15 percent to 100 percent (80 percent prior
to April 1, 1993), depending on profits and fund
elections. A participant's interest in the company's
contributions vests gradually during the first five years
of active service and is fully vested thereafter. The
employee-elected contributions may be invested in company
stock, a fixed income fund or an equity fund. All matching
contributions by the company are invested in the company's
stock. Charges against income for FMC's matching
contributions, net of forfeitures, were $17.1 million in
1993, $13.9 million in 1992 and $12.6 million in 1991.
NOTE 16 COMMITMENTS AND CONTINGENT LIABILITIES
FMC leases office space, plants and facilities, and
various types of manufacturing, data processing and
transportation equipment. Leases of a capital nature are
not significant. Total rent expense under all leases not
capitalized amounted to $60.0 million, $59.8 million and
$54.3 million in 1993, 1992 and 1991, respectively.
Minimum future rentals under noncancellable leases
aggregated approximately $321 million as of December 31,
1993 and are estimated to be payable $51 million in 1994,
$42 million in 1995, $32 million in 1996, $26 million in
1997, $25 million in 1998 and $145 million thereafter. The
real estate leases generally provide for payment of
property taxes, insurance and repairs by FMC.
The company may be obligated to recognize expenses
required to comply with federal, state, and local
environmental laws under which the company has been
identified as a PRP by the EPA or other government
agencies. The company has been named a PRP at 34 sites on
the government's National Priority List (NPL). Similarly,
the company also has received notice from the EPA or other
regulatory agencies that the company may be a PRP, or PRP
equivalent, at other sites. The company, in cooperation
with appropriate government agencies, is currently
participating in, or has participated in, Remediation
Investigation/Feasibility Studies (RI/FS) at the
identified sites, with the status of each investigation
varying from site to site. RI/FS at certain sites have
just begun whereby limited information, if any, is
available 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, and RODs have been issued.
Reserves at the end of 1993 were provided for potential
environmental obligations which management considers
probable and for which a reasonable estimate of the
obligation could be made. In accordance with the company's
environmental accounting policy, reserves of $133 million,
net of approximately $54 million of recoveries, including
recoveries from insurance
PAGE 51
companies, the federal government and other PRPs that
management considers probable, have been provided at the
end of 1993, primarily in discontinued operations and
other reserves. The liability arising from potential
environmental obligations that have not been reserved for
at this time because amounts cannot be reasonably
determined due to uncertainties associated with remedial-
related activities, relevant clean-up technologies and
methods, and amounts to be recovered from third parties
may or may not be material to any one year's results of
operations in the future. Management, however, believes
the liability arising from these potential environmental
obligations is not likely to have a material adverse
effect on the company's liquidity or financial condition
and will be satisfied over many years.
To ensure FMC is held responsible only for its equitable
share of site remediation costs, FMC has initiated, and
will continue to initiate, legal proceedings for
contributions from other PRPs, and for a determination of
coverage against insurance carriers that provided
insurance coverage for the cost of clean-up at a number of
waste sites. The Supreme Court of California has
determined that FMC's clean-up costs are insured damages
under its liability insurance policies, subject to a
determination of the application of certain policy
exclusions and conditions. In July 1993, in the Supreme
Court of Santa Clara County, a jury verdict determined
that these exclusions do not apply to several of these
sites. The other sites will be the subject of future
litigation.
Regarding current operating sites, the company spent
approximately $16 million, $20 million and $28 million for
the years 1993, 1992 and 1991, respectively, on capital
projects relating to environmental control facilities, and
expects to spend additional capital of approximately $26
million and $28 million in 1994 and 1995, respectively.
Additionally, in 1993, 1992, and 1991, FMC spent
approximately $63 million, $57 million and $48 million,
respectively, for environmental compliance costs for these
sites.
Regarding previously operated and other sites for the
years 1993, 1992 and 1991, FMC charged approximately $17
million, $11 million and $5 million, respectively, against
established reserves for remediation spending, and charged
approximately $10 million, $11 million and $10 million,
respectively, against reserves for spending on Remediation
Investigation/Feasibility Studies (RI/FS). Recoveries from
third parties of approximately $7 million and $3 million,
respectively, were received and credited to the reserves
in 1993 and 1992. No recoveries were received in 1991. FMC
anticipates that the expenditures for current operating,
previously operated and other sites will continue to be
significant for the foreseeable future.
The company also has certain other contingent liabilities
resulting from litigation, claims, performance guarantees,
and other commitments incident to the ordinary course of
business. Management believes that the probable resolution
of such contingencies will not materially affect the
financial position or results of operations of FMC.
NOTE 17 SUBSEQUENT EVENT
On January 28, 1994, FMC Corporation and Harsco
Corporation announced completion of the transaction, first
announced in December 1992, to combine FMC's Defense
Systems Group and
PAGE 52
Harsco's BMY Combat Systems Division. The new partnership,
United Defense, L.P., is jointly owned, with FMC holding a
controlling interest of 60 percent and Harsco holding 40
percent. FMC will also manage the business.
United Defense, L.P. product lines include armored combat
and combat support vehicles, weapons delivery systems,
track and components for military vehicles, system
overhaul and conversion, and logistics support services.
Annual sales of approximately $1 billion are expected.
The 1994 consolidated financial statements will include
the combined results as if the combination had occurred on
January 1, 1994. The consolidated results for the Defense
Systems segment are not expected to differ significantly
from those results expected prior to the combination.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders,
FMC Corporation:
We have audited the consolidated balance sheets of FMC
Corporation and consolidated subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements
of income, cash flows and changes in stockholders' equity
for each of the years in the three-year period ended
December 31, 1993. These consolidated financial statements
are the responsibility of the company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of FMC Corporation and
consolidated subsidiaries at December 31, 1993 and 1992,
and the results of their operations and their cash flows
for each of the years in the three-year period ended
December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 14 to the consolidated financial
statements, the company changed its method of accounting
for post retirement benefits other than pensions in 1992.
KPMG Peat Marwick
Chicago, Illinois
January 24, 1994
PAGE 53
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and related
information have been prepared by management, which is
responsible for the integrity and objectivity of that
information. Where appropriate, they reflect estimates
based on judgments of management. The statements have been
prepared in conformity with accounting principles
generally accepted in the United States and are generally
consistent with standards issued by the International
Accounting Standards Committee. Financial information
included elsewhere in this annual report is consistent
with that contained in the consolidated financial
statements.
The company's system of internal accounting controls
provides reasonable assurance as to the reliability of
financial records and the protection of assets. Internal
accounting control is maintained by the selection and
training of qualified personnel, by establishing and
communicating sound accounting and business policies, and
by an internal auditing program which constantly evaluates
the adequacy and effectiveness of such internal accounting
controls, policies and procedures.
The Audit Committee of the Board of Directors, composed of
directors who are not officers or employees of the
company, meets regularly with management, with the
company's internal auditors, and with its independent
auditors to discuss their evaluation of internal
accounting controls and the quality of financial
reporting. The independent auditors and the internal
auditors have free access to the Audit Committee to
discuss the results of their audits.
The company's independent auditors, KPMG Peat Marwick,
have been engaged to render an opinion on the consolidated
financial statements. They review and make appropriate
tests of the data included in the financial statements. As
independent auditors, they also provide an objective,
outside review of management's performance in reporting
operating results and financial condition.
Arthur D. Lyons Frank A. Riddick, III
Vice President-Finance Controller
Chicago, Illinois
January 24, 1994
PAGE 54
ADDITIONAL 10-K INFORMATION
Competitive conditions. FMC competes on the basis of
price and product performance and is among the market
leaders in most products it manufactures. FMC is the
world's largest producer of natural soda ash, the leading
North American producer of hydrogen peroxide, a leading
North American producer of industrial phosphorus chemicals
and a world leader in the mining and processing of lithium
products.
FMC manufactures Furadan, one of the largest selling
insecticides in the world. FMC is also the largest worldwide
producer of carrageenan, microcrystalline cellulose, and
phosphate ester flame retardants. FMC is a world leader in the
production of tracked, armored personnel carriers. FMC also
participates in many machinery businesses, including food
processing, material handling and energy equipment, where FMC
has a significant market share. Products are sold in highly
competitive markets worldwide.
Employees. The company had 20,696 employees at December 31,
1993. Contracts covering 11 percent of domestic hourly
employees will expire during 1994. Management believes that
these contracts will be renewed without a material effect on
the company's businesses.
Resources and raw materials. The company uses oil, gas, coal,
coke, hydro-electric power and nuclear power to meet its
energy needs.
Chemical operations' natural resource requirements are
purchased or provided from properties under long-term lease,
which are subject to periodic royalty adjustments. Raw
materials for the machinery businesses, principally steel and
related products, are obtained from many foreign and domestic
sources.
Patents. The company's patents, trademarks and licenses are
cumulatively important to its businesses. The loss of any one
or group of related patents, trademarks or licenses would not
have a material adverse effect on the overall businesses of
the company or on any of its industry segments.
Properties. FMC leases executive offices in Chicago and
administrative offices in Philadelphia. The company operates
99 manufacturing facilities and mines in 21 countries. Major
research facilities are in Santa Clara, Calif., and Princeton,
N.J. FMC holds mining leases on shale and ore deposits in
Idaho to supply its phosphorus plant in Pocatello, and owns
substantial phosphatic ore deposits in Rich County, Utah.
Trona ore, used for soda ash production in Green River, Wyo.,
is mined primarily from property held under long-term lease.
FMC also owns half of a lithium mine located near Cherryville,
N.C., and has long-term lease commitments for the remaining
portion. FMC Gold Company owns mineral rights to gold and
silver ore bodies at the Paradise Peak mine in Gabbs, Nev.,
the Royal Mountain King mine in Copperopolis, Calif., and 86
percent of the undeveloped Beartrack property in Idaho, as
well as the right to 30 percent of the gold ore reserves at
the Jerritt Canyon mine in Elko, Nev., operated by its joint-
venture partner, Independence Mining Company Inc., a wholly
owned subsidiary of Minorco (USA) Inc. Mining operations
provide basic raw materials to many of FMC's chemical plants,
without which other sources would have to be obtained. FMC's
mining properties are operated under numerous long-term leases
with no single lease or related group of leases material to
the businesses of the company as a whole. Generally, the
leases may be extended at FMC's option.
PAGE 55
Most of FMC's plant sites are owned, with an immaterial number
of them being leased. FMC believes its properties and
facilities meet present requirements and are in good operating
condition. FMC believes that each of its significant
manufacturing facilities is operating at a level consistent
with the industry in which it operates. FMC's production
properties for continuing operations are:
United Latin America Western
States and Canada Europe Other Total
Industrial Chemicals 18 2 8 - 28
Performance Chemicals 8 4 5 2 19
Precious Metals 5 - - - 5
Defense Systems 10 - - - 10
Machinery and Equipment 16 4 12 5 37
PAGE 59
FIVE YEAR FINANCIAL SUMMARY
(In millions, except per share, employee and stockholder data)
1993 1992 1991 1990 1989
Summary of earnings
Sales $3,753.9 3,973.7 3,899.4 3,722.2 3,414.5
Equity in earnings of
affiliates 6.4 11.1 6.6 7.0 3.8
Other revenue 28.6 18.7 20.8 40.5 18.8
Total revenue 3,788.9 4,003.5 3,926.8 3,769.7 3,437.1
Cost of sales 2,825.3 2,960.2 2,930.2 2,787.8 2,497.2
Selling, general and
administrative expenses 541.7 536.0 498.7 484.8 438.2
Research and development 149.2 145.0 134.6 157.6 149.7
Restructuring and other
charges 172.3 - - - -
Total costs and expenses 3,688.5 3,641.2 3,563.5 3,430.2 3,085.1
Income from continuing
operations before interest,
gain on FMC Gold Company
sale of stock and taxes 100.4 362.3 363.3 339.5 352.0
Interest income 11.0 12.2 17.3 22.5 28.2
Interest expense 73.6 94.9 124.7 150.6 161.9
Gain on FMC Gold Company
sale of stock - - - - -
Income from continuing
operations before income
taxes 37.8 279.6 255.9 211.4 218.3
Provision (benefit) for
income taxes (3.2) 87.0 82.8 56.1 61.5
Income from continuing
operations 41.0 192.6 173.1 155.3 156.8
Discontinued operations,
net of taxes - (73.2) - - -
Income before extraordinary
items and cumulative effect
of change in accounting
principle 41.0 119.4 173.1 155.3 156.8
Extraordinary items,
net of taxes (4.7) (11.4) (9.2) - (20.4)
Cumulative effect of
change in accounting
principle, net of taxes - (183.7) - - -
Net income (loss) $36.3 (75.7) 163.9 155.3 136.4
Total dividends $ - - - - -
Share data
Average number of shares
used in earnings per
share computations
(thousands):
Primary 36,943 36,796 36,267 36,075 36,006
Fully diluted 36,943 39,694 37,566 36,094 36,106
Primary earnings (loss)
per share:
Continuing operations $1.11 5.23 4.77 4.30 4.35
Discontinued operations - (1.99) - - -
Extraordinary items (0.13) (0.31) (0.25) - (0.56)
Cumulative effect of change
in accounting principle - (4.99) - - -
Net income (loss) $0.98 (2.06) 4.52 4.30 3.79
Earnings (loss) per share
assuming full dilution:
Continuing operations $1.11 5.04 4.68 4.30 4.34
Discontinued operations - * - - -
Extraordinary items (0.13) * (0.24) - (0.56)
Cumulative effect of change
in accounting principle - * - - -
Net income $0.98 * 4.44 4.30 3.78
FINANCIAL POSITION AT YEAR-END
Working capital $ 3.7 (1.1) (13.2) 40.6 117.6
Property, plant and equipment,
at cost 3,498.4 3,541.7 3,389.7 3,279.8 2908.0
Accumulated depreciation 2,108.1 2,039.6 1,905.4 1,772.6 1,573.1
Total assets 2,813.1 2,826.6 2,815.6 2,959.2 2,819.0
Long-term debt 749.9 843.6 929.0 1,158.6 1,325.6
Stockholders' equity (deficit) 216.9 219.0 309.8 149.6 (70.6)
OTHER DATA
Income from continuing
operations as a return
on investment 7.8% 20.6 18.4 17.9 19.1
Capital expenditures $244.5 314.5 216.8 324.4 280.8
Provision for depreciation $222.4 235.0 224.9 211.2 197.8
Employees at year-end 20,696 22,097 23,150 23,882 24,110
Stockholders of record at
year-end, common and preferred 13,180 14,487 14,959 17,451 18,151
*Per share amounts are antidilutive.
PAGE 56
FMC CORPORATION
Annual Report on
Form 10-K for 1993
Exhibit 22 LIST OF SIGNIFICANT SUBSIDIARIES
OF REGISTRANT 12/31/93
Organized Percent of
Under Laws Voting
of Securities
Owned (2)
FMC Corporation..................... Delaware Registrant
FMC of Canada Limited................... Canada 100
FMC Corporation (UK) Limited............ England 100
FMC Europe, S.A......................... France 100
FMC Gold Company........................ Delaware 79.8
FMC Paradise Peak Corporation........... Nevada 100
FMC Jerritt Canyon Corporation.......... Delaware 100
Meridian Gold Company................... Montana 100
FMC Wyoming Corporation................. Delaware 100
Food Machinery Holding Company B.V.... Netherlands 100
Foret, S.A.............................. Spain 100
Intermountain Research & Development
Corporation............................. Wyoming 100
FMC Do Brasil S.A....................... Brazil 100
FMC International, A.G.................. Switzerland 100
Kongsberg Offshore, A/S................. Norway 100
Litex A/S............................... Denmark 100
Mid-Atlantic Investments Limited.... Canada 100
Mid-Atlantic Acceptance Company Limited.. Bermuda 100
(1)The names of various active and inactive subsidiaries have
been omitted. Such subsidiaries, considered in the aggregate as
a single subsidiary, would not constitute a significant
subsidiary.
(2)With respect to certain companies, qualifying shares in names
of directors are included in these percentages. Percentages
shown for indirect subsidiaries reflect the percentage of voting
securities owned by the parent subsidiary.
Page 57
FMC CORPORATION
Annual Report on
Form 10-K for 1993
Exhibit 24 Consent of Auditors
The Board of Directors
FMC Corporation:
We consent to incorporation by reference in Registration
Statement No. 33-7749 and Registration Statement No. 33-10661
on Forms S-8 and Registration Statement No. 33-45648 on Form S-
3 of FMC Corporation and consolidated subsidiaries of our
report dated January 24, 1994, relating to the consolidated
balance sheets of FMC Corporation and consolidated
subsidiaries as of December 31,1993 and 1992, and the related
consolidated statements of income, cash flows and changes in
stockholder's equity for each of the years in the three-year
period ended December 31, 1993, which report appears in the
December 31,1993 annual report on Form 10-K of FMC Corporation
and consolidated subsidiaries.
Chicago, Illinois
March 28, 1994
PAGE 58
FMC CORPORATION
Annual Report on
Form 10-K for 1993
Exhibit 25 POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, FMC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), is a corporation with securities
registered pursuant to Section 12(b) of the Securities and
Exchange Act of 1934, as Amended, (the "Act"), and is subject to
the reporting requirements of the Act including the obligation to
file an annual report on Form 10-K; and
WHEREAS, the undersigned holds and may hereafter from time to
time hold one or more positions in the Corporation whether as an
Officer, a Director, or both, such that the undersigned may be
required or permitted in such capacity or capacities, or on
behalf of the Corporation, to sign one or more of such documents;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
A.D. Lyons, P.J. Head or R.L. Day, or any of them, his attorney
for him and in his name, place and stead, and in his office and
capacity in the Company, to sign and file the Company's Annual
Report on Form 10-K for the year ended December 31, 1993,
including all schedules, exhibits and amendments thereto, hereby
giving and granting to said attorneys full power and authority to
do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 11th day of February, 1994.
Signature Title
Arthur D. Lyons Vice President-Finance and
Principal Financial Officer Arthur D. Lyons
Frank A. Riddick Controller and Principal
Accounting Officer
Robert N. Burt Chairman of the Board
and Chief Executive Officer
William W. Boeschenstein Director
Larry D. Brady Director
B. A. Bridgewater, Jr. Director
Paul L. Davies, Jr. Director
Jean A. Francois-Poncet Director
Robert H. Malott Director
Edward C. Meyer Director
James R. Thompson Director
Clayton Yeutter Director
By: Robert L. Day
Robert L. Day
Attorney-in-fact
