<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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
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:
Name of each exchange
Title of each class on which registered
- ------------------- -----------------------
Common Stock, $0.10 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of February 27, 1997, was $2,566,604,614. The number of shares of
Registrant's Common stock, $0.10 par value, outstanding as of that date was
37,232,506.
Documents Incorporated by Reference
<TABLE>
<CAPTION>
Document Form 10-K Reference
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<S> <C>
Portions of Annual Report to Part I, Item 1; Part II; and Part IV,
Stockholders for 1996 Items 14(a)(1) and (2)
Portions of Proxy Statement for 1997 Part III
Annual Meeting of Stockholders
</TABLE>
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<PAGE>
Part I
FMC Corporation was incorporated in 1928 under Delaware law and has its
principal executive offices at 200 East Randolph Drive, Chicago, Illinois 60601.
As used in this report, except where otherwise stated or indicated by the
context, "FMC", "the Company" or "the Registrant" means FMC Corporation and its
consolidated subsidiaries and their predecessors.
The Company, a producer of chemicals and machinery for industry, agriculture and
government, operates on a worldwide basis in selected segments of four broad
markets: Performance Chemicals, Industrial Chemicals, Machinery and Equipment
and Defense Systems. The Company operates 117 manufacturing facilities and mines
in 27 states and 28 countries. Performance Chemicals develops, manufactures and
markets proprietary specialty chemicals for the agricultural, food and
pharmaceutical industries. Industrial Chemicals businesses manufacture a wide
variety of chemicals including soda ash, phosphates and hydrogen peroxide. Major
customers include detergent, glass and paper producers, as well as other
chemical companies. Machinery and Equipment businesses provide specialized
machinery to the food, petroleum, transportation and material handling
industries. Defense Systems develops, manufactures and supplies ground combat
vehicles and naval weapons systems to the armed forces of the United States and
other governments. Effective January 1, 1994, the Company and Harsco Corporation
("Harsco") formed a joint venture, United Defense, L.P., which is a combination
of certain assets and liabilities of the Company's Defense Systems Group and
Harsco's BMY Combat Systems Division and pursuant to which the Company is the
Managing General Partner with a 60% equity interest.
Item 1. Business
Incorporated by Reference From:
------------------------------
(a) General Development of Business - Annual Report to Stockholders, Inside
back cover, pages 2-4, and Notes 2 and
3 to the consolidated financial
statements on pages 42-44
(b) Financial Information About - Annual Report to Stockholders, page 5
Industry Segments
(c) Narrative Description of Business - Annual Report to Stockholders, pages
6-9
<PAGE>
Source and availability of raw materials
- ----------------------------------------
FMC's natural resource requirements are primarily mineral-oriented. Substantial
portions of requirements for ores and other raw materials, especially trona and
phosphate rock, are produced from mines in the United States on property held by
FMC under long-term leases which are subject to periodic adjustments of royalty
rates. Machinery operations obtain raw materials, principally steel and
castings, from many foreign and domestic sources. No one source is considered
essential to any of the machinery operations. The Company uses oil, gas, coal,
coke, hydroelectric power and nuclear power to meet its energy needs.
Patents
- -------
Although FMC's patents, trademarks and licenses are cumulatively important to
its business, FMC does not believe that the loss of any one or group of related
patents, trademarks or licenses would have a material adverse effect on the
overall business of FMC or on any of its business segments.
Principal Customer
- ------------------
Sales to various agencies of the United States government aggregated $851.2
million, $706.5 million and $618.3 million in 1996, 1995 and 1994, respectively.
These sales were made primarily by the Defense Systems segment. Contracts with
various agencies of the United States government and subcontracts with other
prime contractors are subject to a profusion of procurement regulations, with
noncompliance found by any one agency possibly resulting in fines, penalties,
debarment or suspension from receiving additional government contracts.
Moreover, these contracts may be terminated at the government's convenience,
although contractors are normally protected by provisions covering reimbursement
for costs incurred as well as the payment of any applicable fees or profits.
Seasonality
- -----------
FMC's businesses are not generally considered to be seasonal, although there has
been a bias in the Performance Chemicals segment towards lower profitability in
the fourth quarter primarily due to seasonality in the markets served by the
agricultural products businesses.
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, a leading North American producer of hydrogen
peroxide, a leading North American producer of industrial phosphorus chemicals
and a world
<PAGE>
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. United Defense, L.P. 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.
Research and Development Expenditures
- -------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
In Millions 1996 1995 1994
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<S> <C> <C> <C>
Performance Chemicals $113.1 $109.2 $ 94.3
Industrial Chemicals 20.4 16.2 16.2
Machinery and Equipment 41.5 49.0 29.6
Defense Systems 12.9 12.4 16.3
Corporate 1.5 1.0 10.4
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Total $189.4 $187.8 $166.8
</TABLE>
Expenditures for research and development increased in Performance Chemicals
primarily due to continued development of herbicides. Expenditures also
increased in Industrial Chemicals primarily due to new product development and
process improvement efforts regarding the Company's peroxygen and phosphorus
products. Expenditures decreased in Machinery & Equipment primarily related to
the absence of the write-off of acquired in-process research and development
related to the Moorco acquisition ($15.5 million in 1995) offset partially by
increased research and development expenditures related to acquisitions and the
Company's airport products business.
Not included in these amounts are $320.3 million, $279.6 million and $148.0
million in 1996, 1995 and 1994, respectively, for research and development
projects contracted directly with the U.S. government and commercial sponsors,
primarily related to Defense Systems programs.
<PAGE>
Environmental
- -------------
Incorporated by Reference From:
-------------------------------
Compliance with environmental laws and - Annual Report to Stockholders,
regulations Note 14 to the consolidated
financial statements on
pages 52-53
Employees
- ---------
FMC employs 22,048 people in its domestic and foreign operations. Approximately
4,500 such employees are represented by collective bargaining agreements in the
United States and Canada. In 1997, seven of the Company's 26 contracts will
expire. Certain of those contracts are under negotiation at the present time.
FMC maintains good employee relations and has successfully concluded virtually
all of its recent negotiations without a work stoppage. In those rare instances
where a work stoppage has occurred, there has been no material effect on
consolidated sales and earnings. However, FMC cannot predict the outcome of
future contract negotiations.
Incorporated by Reference From:
------------------------------
(d) Financial Information About - Annual Report to Stockholders, page 38
Foreign and Domestic Operations
and Export Sales
Forward Looking Statements - Safe Harbor Provisions
- ---------------------------------------------------
The Company and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term objectives or expectations
of the Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders.
The words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "is predicted", "forecast", "estimate", "project", or similar
expressions identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby identifying
important factors that could affect the Company's financial
<PAGE>
performance and could cause the Company's actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
Among the factors that could have an impact on the Company's ability to achieve
its operating results and growth plan goals are:
. significant price competition, particularly among the Company's
competitors in industrial chemicals
. high ingredient or raw material prices compared to historical levels, or
shortages of ingredients or raw materials
. the inherent risks in the marketplace associated with new product
introductions and technologies, particularly in agricultural and specialty
chemicals
. the risks associated with developing new manufacturing processes,
particularly with respect to complex chemical products
. the impact of budgetary restrictions which may be imposed by the U.S.
and foreign governments with respect to spending on defense weaponry,
training and research
. the ability of the Company to integrate recent acquisitions into its
existing operations
. the impact of unforeseen economic and political changes in the
international markets where the Company competes including currency
exchange rates, inflation rates, recessions, foreign ownership
restrictions, and other external factors over which the Company has no
control
. the impact of significant changes in domestic interest rates or taxation
rates.
The Company cautions that the foregoing list of important factors may not be all
inclusive and it specifically declines to undertake any obligation to publicly
revise any forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Item 2. Properties
FMC leases executive offices in Chicago and administrative offices in
Philadelphia. The Company operates 117 manufacturing facilities and mines in 28
countries. Major research facilities are in Santa Clara, CA, and Princeton, NJ.
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, WY,
is mined primarily from property held under long-term lease. FMC also owns half
of a lithium mine located near Cherryville, NC, and has long-term lease
commitments for the remaining portion and in Argentina FMC owns the land and
mineral rights to the Salar del Hombre Muerto lithium reserves. Many of FMC's
chemical plants require the basic raw materials which are provided by these FMC-
owned or -leased mines, without which other sources would have to be obtained.
FMC's mining properties are operated under
<PAGE>
numerous long-term leases with no single lease or related group of leases
material to the businesses of the Company as a whole. United Defense, L.P.
leases its administrative offices in Arlington, Virginia.
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 and 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:
<TABLE>
<CAPTION>
Latin
America
United and Western
States Canada Europe Other Total
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Performance Chemicals 13 3 6 4 26
Industrial Chemicals 13 2 12 1 28
Machinery and Equipment 22 5 15 6 48
Defense Systems 13 - - 2 15
</TABLE>
Item 3. Legal Proceedings
Environmental Proceedings
- -------------------------
As initially reported in FMC's annual report on Form 10-K for the year ended
December 31, 1994, an environmental inspection was conducted in July 1993 at
FMC's Phosphorus Chemicals Division plant in Pocatello, Idaho. In August 1994,
the United States EPA (Region 10) (the "EPA") formally notified FMC of a number
of alleged violations of the Resource Conservation and Recovery Act and related
environmental regulations governing the management of hazardous waste generated
by the plant, including the operations of hazardous waste storage and treatment
units without interim status, the failure to submit timely closure plans, the
failure to implement an adequate groundwater monitoring program and to comply
with related reporting requirements and the existence of several other improper
treatment and disposal practices. Although there are no legal proceedings
pending at this time, FMC has been advised that the matter has been referred to
the United States Department of Justice for an evaluation of whether to file a
civil enforcement action. If such a civil action is filed, the government is
likely to demand both injunctive relief and civil penalties. FMC is seeking to
settle this matter in advance of litigation. Management believes that the
resolution of these matters will not likely have a material adverse effect on
FMC's liquidity, results of operations or financial condition.
<PAGE>
Other
- -----
See Note 14 to the 1996 consolidated financial statements (pages 52-53 of the
1996 Annual Report to Stockholders) for a discussion of legal proceedings
against other Potentially Responsible Parties and insurers for contribution
and/or coverage with respect to environmental remediation costs.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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,
1992, and their ages as of March 1, 1997, are as follows:
<TABLE>
<CAPTION>
Age Office, year of election and
Name 3/1/97 other information for past 5 years
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<S> <C> <C>
Robert N. Burt 59 Chairman of the Board and Chief Executive
Officer (91); President (90-93); Executive
Vice President (88)
Larry D. Brady 54 President (93) and Director (89);
Executive Vice President (89-93); Vice
President-Corporate Development (88)
</TABLE>
<PAGE>
William F. Beck 58 Executive Vice President (94); Vice
President (86) and General
Manager-Chemical Products Group (86);
President of FMC Europe (91)
Michael J. Callahan 58 Executive Vice President and Chief
Financial Officer (94); Executive Vice
President and Chief Financial Officer,
Whirlpool Corporation (91-94)
William J. Kirby 59 Senior Vice President (94); Vice
President-Administration (85)
J. Paul McGrath 55 Senior Vice President and General Counsel
(96); Associate General
Counsel-Litigation, Allied Signal Inc.
(92-96)
Charles H. Cannon 44 Vice President and General Manager-Food
Machinery Group (94); Manager, Food
Processing Systems Division (92-94);
Manager, Citrus Machinery Division (89-92)
W. Reginald Hall 60 Vice President (91) and General
Manager-Specialty Chemicals Group (92)
General Manager-Food Machinery Group (90)
Robert I. Harries 53 Vice President (92) and General
Manager-Chemical Products Group (94)
Patrick J. Head 64 Vice President (81); General Counsel
(81-96)
Henry Kahn 50 Vice President and Treasurer (96);
Assistant Treasurer (93) and Corporate
Finance Director (89), The Dow Chemical
Company
Ronald D. Mambu 47 Vice President and Controller (95);
Director, Financial Planning (94-95);
Director, Strategic Planning (93-94);
Director, Financial Control (87-93)
James A. McClung 59 Vice President (91); Vice
President-International (81-91)
<PAGE>
<TABLE>
<S> <C> <C>
Joseph H. Netherland 50 Vice President (87) and General
Manager-Petroleum Equipment Group (86),
Specialized Machinery Group (89); Energy
and Transportation Equipment Group (93)
Thomas W. Rabaut 48 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)
William H. Schumann 46 Vice President (95) and General
Manager-Agricultural Products Group (95);
Director, North American operations,
Agricultural Products Group (93-95);
Executive Director, Corporate Development
(91-93)
William J. Wheeler 54 Vice President (91); President, FMC
Asia-Pacific (91); General Manager,
Phosphorus Chemical Division (86-91)
</TABLE>
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. Callahan, McGrath
and Kahn. 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 are selected as an officer. All
officers are elected to hold office for one year and until their successors are
elected and qualify.
PART II
<TABLE>
<CAPTION>
Incorporated by Reference From:
-------------------------------
<S> <C>
Item 5. Market for Registrant's Annual Report to Stockholders,
Common Equity and Inside back cover, pages 33 and 39, and
Related Stockholder Notes 10 and 11 to the consolidated
Matters financial statements on pages 48-50
Item 6. Selected Financial Data Annual Report to Stockholders,
pages 56-57
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Item 7. Management's Discussion Annual Report to Stockholders,
and Analysis of Financial pages 16-17, 21, 28, and 31-33
Condition and Results of
Operations
Item 8. Financial Statements and Annual Report to Stockholders,
Supplementary Data pages 5 and 34-54
(including all Schedules
required under Item 14 of
Part IV)
Item 9. Changes in and None.
Disagreements with
Accountants on
Accounting and Financial
Disclosure
</TABLE>
PART III
<TABLE>
<CAPTION>
Incorporated by Reference From:
-------------------------------
<S> <C>
Item 10. Directors and Executive Part I; Proxy Statement for 1997
Officers of the Registrant Annual Meeting of Stockholders,
pages 1-11
Item 11. Executive Compensation Proxy Statement for 1997 Annual
Meeting of Stockholders, pages 14-
22
Item 12. Security Ownership of Proxy Statement for 1997 Annual
Certain Beneficial Owners Meeting of Stockholders, pages 11-
and Management 12
Item 13. Certain Relationships and Proxy Statement for 1997 Annual
Related Transactions Meeting of Stockholders, page 11
</TABLE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed with this Report
<PAGE>
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. Report of Independent Auditors from Ernst & Young LLP for United
Defense, L.P. (Exhibit 99).
4. Exhibits: See attached exhibit index, page 14
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, Registrant filed reports
on Form 8-K as follows:
Date Subject
---- -------
October 16, 1996 Announcement of third quarter earnings.
(c) Exhibits
See Index of Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FMC CORPORATION
(Registrant)
By: /s/ Michael J. Callahan
----------------------------
Michael J. Callahan
Executive Vice President and
Chief Financial Officer
Date: March 26, 1997
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title
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<S> <C> <C>
Michael J. Callahan Executive Vice President /s/ Michael J. Callahan
and Principal Financial ----------------------
Officer Michael J. Callahan
March 26, 1997
----------------------
Ronald D. Mambu Vice President, )
Controller and Principal )
Accounting Officer )
Robert N. Burt Chairman of the Board )
and Chief Executive )
Officer )
Larry D. Brady Director )
B.A. Bridgewater, Jr. Director ) By: /s/ Michael J. Callahan
Patricia A. Buffler Director ) -----------------------
Albert J. Costello Director ) Michael J. Callahan
Paul L. Davies, Jr. Director ) March 26, 1997
Jean A. Francois-Poncet Director ) -----------------------
Pehr G. Gyllenhammar Director )
Robert H. Malott Director )
Edward C. Meyer Director )
William F. Reilly Director )
James R. Thompson Director )
Clayton Yeutter Director )
</TABLE>
<PAGE>
PAGE 1
INDEX OF EXHIBITS FILED WITH OR
INCORPORATED BY REFERENCE INTO
FORM 10-K OF FMC CORPORATION
FOR YEAR ENDED DECEMBER 31, 1996
Exhibit
No.
This
10-K Exhibit Description
- ---- -------------------
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)
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)
3.3 Amended and Restated By-Laws of the Company, as amended (incorporated
by reference from Exhibit 4.3 to Form S-8 Registration Statement No.
333-18383 filed on December 18, 1996)
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)
4.2 Amendment to Amended and Restated Rights Agreement, dated February 9,
1996 (incorporated by reference from Exhibit 1 to the Form 8-K filed
on February 9, 1996)
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 its consolidated subsidiaries and for any
of its unconsolidated subsidiaries for which financial statements are
required to be filed
4.3 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)
<PAGE>
4.4 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)
4.5 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)
4.6 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)
4.7 Management Services Agreement, dated as of January 1, 1994, by and
between FMC Corporation and United Defense, L.P.* (incorporated by
reference from Exhibit 4.6 to the Form 8-K filed on February 14,
1994)
4.8 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)
10.1** FMC 1997 Compensation Plan for Non-Employee Directors
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)
10.3** FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit
10.1 to the Form SE filed on March 26, 1991)
10.4** FMC Corporation Salaried Employees' Retirement Plan, as amended and
restated effective January 1, 1995 (incorporated by reference from
Exhibit 10.4 to the Annual Report on Form 10-K for 1994)
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)
<PAGE>
10.6** Amendments to the FMC Employees' Thrift and Stock Purchase Plan
through December 31, 1994 (incorporated by reference from Exhibit 10.6
to the Annual Report on Form 10-K for 1994)
10.7** FMC Salaried Employees' Equivalent Retirement Plan (incorporated by
reference from Exhibit 10.4 to the Form SE filed on March 27, 1992)
10.8** FMC Deferred Compensation Equivalent Retirement and Thrift Plan
(incorporated by reference from Exhibit 10.5 to the Form SE filed on
March 27, 1992)
10.9** FMC 1995 Management Incentive Plan (incorporated by reference from
Exhibit 10.9 to the Form 10-K filed on March 15, 1996)
10.10** FMC 1995 Stock Option Plan as amended (incorporated by reference from
Exhibit 10.10 to the Form 10-K filed on March 15, 1996)
10.11** FMC Corporation Amended and Restated Executive Severance Plan
(incorporated by reference from Exhibit 10.1 to the Form SE filed on
March 28, 1990)
10.12** 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)
10.13** 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)
10.14** 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)
10.15 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)
<PAGE>
10.17** Consulting Agreement dated as of September 1, 1990 between the
Company and Edward C. Meyer (incorporated by reference from
Exhibit 10.16 to Form 10-K-A filed on April 5, 1994)
12 Statement re Computation of Ratios of Earnings to Fixed Charges
13 Annual Report to Stockholders for the year ended December 31,
1996, is included as an Exhibit to this report for the information
of the Securities and Exchange Commission and, except for those
portions thereof specifically incorporated by reference elsewhere
herein, such Annual Report should not be deemed filed as a part of
this report.
21 List of Significant Subsidiaries of Registrant
23 Consents of Auditors
24 Powers of Attorney
27 Financial Data Schedule
99 Report of Ernst & Young LLP, Independent Auditors
- -------------------------------
* The Registrant has omitted the schedule 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.
** Indicates a management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 10.1
FMC CORPORATION
1997 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
-------------------------------------------------
PART I. GENERAL PROVISIONS
---------------------------
1. Purpose. The purpose of the FMC Corporation 1997 Compensation Plan for
Non-Employee Directors is to provide a compensation program which will attract
and retain qualified individuals not employed by FMC Corporation or its
subsidiaries to serve on the Board of Directors of FMC Corporation and to
further align the interests of those directors with those of stockholders by
providing that a substantial portion of compensation will be linked directly to
increases in stockholder value.
2. Definitions. Except as otherwise defined herein, terms used herein in
capitalized form shall have the meanings attributed to them in Annex A to this
Plan.
3. Transition Rights. This Plan supersedes and replaces the Deferred Stock
Plan and the Retirement Plan. Participant rights and benefits accrued as of
December 31, 1996, under the Deferred Stock Plan and the Retirement Plan shall
remain in effect as provided in this Plan but no new rights or benefits shall
accrue pursuant to such plans.
4. Effective Date. This Plan shall be effective as of January 1, 1997.
PART II. CASH COMPENSATION
---------------------------
1. Annual Retainer. Each Participant shall be entitled to receive an Annual
Retainer in such amount as shall be determined from time to time by the Board of
Directors. Until changed by resolution of the Board of Directors, the Annual
Retainer shall be $40,000 of which the Deferred Amount shall be paid in the form
of Common Stock Units as set forth in Part III and the remainder, if any, shall
be paid in cash in quarterly installments at the end of each calendar year
quarter. For purposes of this Plan, the Deferred Amount shall mean, with
respect to each Participant, an amount equal to (i)
<PAGE>
$15,000, or such greater amount as the Participant may have elected, through
April 30, 1997 and (ii) $25,000, or such greater amount as the Participant shall
have elected in accordance with the following sentence, after April 30, 1997.
Not less than 60 days prior to the close of any Plan Year, a Participant may
elect to increase his or her Deferred Amount by providing written notice of such
election to the Corporate Secretary of the Company. Any such election shall be
deemed to be effective on the first day of the next succeeding Plan Year;
provided that if and to the extent Company, in its sole discretion, determines
that the approval of such election by the Board is necessary to assure that such
election conforms with Rule 16b-3, the effectiveness of such election shall be
deferred until such later date, if any, as such approval has been obtained.
2. Meeting Fees. Each Participant shall be entitled to receive a Meeting Fee,
in such amount as shall be determined from time to time by the Board of
Directors, for attending each meeting of the Board of Directors or a committee
of the Board of Directors, including extraordinary and/or special Board of
Directors and committee meetings. Until changed by resolution of the Board of
Directors the Meeting Fee shall be $1,000 per meeting, payable in cash at the
end of each calendar year quarter.
3. Committee Chairman Fees. Each Participant who serves as Chairman of a
committee of the Board of Directors shall be entitled to receive a Committee
Chairman Fee for the tenure of such service. Until changed by resolution of the
Board of Directors, the Committee Chairman Fee shall be paid in cash at an
annualized rate of $4,000 in equal installments at the end of each calendar year
quarter.
4. Retirement Benefits. Unless a Participant who was a non-employee director
on December 31, 1996, elects to convert his or her Accrued Retirement Benefits
to Common Stock Units pursuant to Section 1b. of Part III of this Plan, that
Participant shall be entitled to receive the following benefits upon the
termination of his or her service as a member of the Board of Directors:
a. Benefits. Benefits shall be paid to the Participant in quarterly
installments of $7,500 each. Payment of benefits will begin the quarter
following the Termination Date and will continue for the number of full years of
the Participant's service as a non-employee member of the Board of Directors
from the time of his or her first election as a director to and including April
30, 1997.
<PAGE>
b. Lump Sum Benefit. At the option of the Participant, which option
is exercisable by written notice to the Corporate Secretary of the Company, the
Participant may elect to receive in a lump sum the Actuarial Equivalent of
benefits otherwise payable. For purposes of this Plan, the term "Actuarial
Equivalent" means an amount equal to the amount expected to be received under
paragraph a., above, based on the following actuarial assumptions:
Interest - 6.5% or such other rate as
the Board may from time to
time prescribe
Mortality - Joint Mortality Group Annuity
Table 1983
c. Surviving Spouse Benefit. In the event of the death of a
Participant who is receiving benefits under this Plan, those benefits that would
otherwise have been payable to the Participant will be paid to the Participant's
surviving spouse. Such payments to a surviving spouse will terminate on the
earlier of the death of the surviving spouse or the date that benefit payments
to the Participant would have terminated had he/she not died.
PART III. STOCK COMPENSATION
--------- ------------------
1. Deferred Stock Awards.
a. Annual Grant. Effective as of the first day of May of each Plan
Year, each Participant's Common Stock Account shall be credited with a number of
Common Stock Units equal to the number obtained by dividing the Deferred Amount
for the Plan Year beginning on such first day of May by the Fair Market Value of
the Common Stock on such date.
b. Conversion of Retirement Plan Benefits. By election dated not
later than February 14, 1997, each person who was a non-employee director of the
Company on December 31, 1996, may choose to have his or her Accrued Retirement
Benefits under the Retirement Plan converted into Common Stock Units. Such
conversions shall be made by calculating as of April 30, 1997 the lump-sum
present value of $2,500 per month times the number of months of Board service as
of April 30, 1997, assuming benefits commence upon retirement from the Board at
age 70, and using a discount rate of 6.5%. The number of Common Stock Units
shall be determined by dividing the lump-sum present value by $71.275, the Fair
Market Value of the Common Stock on December 31, 1996.
<PAGE>
2. Non-Qualified Stock Options.
a. Grant of Options. On the first day of May of each year (the
"Date of Grant") beginning in 1997, each Participant shall be granted an option
(the "Option") to purchase 900 shares of Common Stock, the intention being that
such Option should have an approximate present value of $24,000. The number of
shares to be subject to a grant of an Option may be increased or decreased by
the Board of Directors if it determines by any reasonable option valuation
methodology that the present value of such proposed Option exceeds or is less
than $24,000 by more than ten percent (10%). All Options granted under the Plan
shall have the terms set forth in this Section 2 of Part III and be non-
statutory options not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended.
b. Option Exercise Price. The per share price to be paid by each
Participant at the time an Option is exercised shall be 100% of the Fair Market
Value of the Common Stock on the Date of Grant.
c. Term of Option. Each Option shall expire on the tenth anniversary
of its Date of Grant.
d. Exercise and Vesting of Option. Each Option will vest on the
date of the annual stockholder's meeting next following the date the Option is
granted. Except as provided in the next sentence, if, for any reason, a
Participant ceases to serve on the Board of Directors prior to the date an
Option vests, such Option shall be forfeited and all further rights of the
Participant to or with respect to such Option shall terminate. If a Participant
should die while serving as a director of the Company, any vested Option may be
exercised by the person designated in such participant's last will and testament
or, in the absence of such designation, by the Participant's estate, in either
case on or before the expiration of the Option, and any unvested Option shall
vest and become exercisable in a proportionate amount, based on the full months
of service completed during the vesting period of the Option from the date of
grant to the date of death.
e. Method of Exercise and Tax Obligations. An Option may be
exercised at any time after it vests and before it expires by written notice of
exercise to the Corporate Secretary of FMC. Each notice of exercise shall be
accompanied by the full purchase price of the shares being purchased. Such
payment may be made, at the election of the Participant, in cash, check or
<PAGE>
shares of Common Stock, or in Common Stock Units, valued using the Fair Market
Value as of the exercise date or a combination thereof. The Company may also
require payment of the amount of any applicable withholding tax attributable to
the exercise of an Option or the delivery of shares of Common Stock.
f. Nontransferability. An Option may be assignable and transferable
by a Participant by will or the laws of descent and distribution, and otherwise
only at the discretion of the Board of Directors.
3. Dividend Equivalent Rights. Outstanding Common Stock Units shall be
credited with Dividend Equivalent Rights based upon dividends paid on
outstanding shares of Common Stock between the date such Common Stock Units are
granted and the date of payment in respect of such Common Stock Units. Such
Dividend Equivalent Rights, once credited, shall be converted into an equivalent
number of Common Stock Units (including fractional Common Stock Units). If a
dividend is paid in cash, each Participant's Common Stock Account shall be
credited, as of each dividend payment date, in accordance with the following
formula:
(A x B)/C
in which "A" equals the number of Common Stock Units held by the Director on the
dividend payment date, "B" equals the cash dividend per share and "C" equals the
Fair Market Value per share of Common Stock on the dividend payment date. If a
dividend is paid in property other than cash, Dividend Equivalent Rights shall
be credited, as of the dividend payment date, in accordance with the formula set
forth above, except that "B" shall equal the fair market value per share of the
property which the director would have received in respect of the number of
shares of Common Stock equal to the number of Common Stock Units held by the
director as of the dividend payment date, had such shares been owned as of the
record date for such dividend.
4. Form of Payment.
a. Except as described in subsection b., payment in respect of
Common Stock Units shall be made in shares of Common Stock.
b. Any payment made upon an occurrence of a Change in Control, shall
be made in a single lump sum cash payment. For purposes of the preceding, the
amount of cash delivered in full or partial payment of Common Stock Units shall
equal the Change in Control Price of the number of shares of Common Stock
relating to the
<PAGE>
Common Stock Units with respect to which such cash payment is being made.
c. Except as described in section 4b. and in Section 6 of Part IV,
payments with respect to Common Stock Units shall be paid in annual installments
over a specified period of time or in a lump sum, all as the Participant may
elect and subject to change from time to time; provided, however, that no such
election, change or revocation will be given effect if it is made less than one
year in advance of the Participant's Termination Date.
d. The Company shall not issue fractions of shares. Whenever, under
the terms of the Plan, a fractional share would otherwise be required to be
issued, the Director shall be paid in cash for such fractional share.
5. Change in Capital Structure. In the event of any change in the Common
Stock by reason of any stock dividend, split, combination of shares, exchange of
shares, warrants or rights offering to purchase Common Stock at a price below
its fair market value, reclassification, recapitalization, merger, consolidation
or other change in capitalization, appropriate adjustment shall be made by the
Board of Directors in the number and kind of shares subject to the Plan and any
other relevant provisions of the Plan, whose determination shall be binding and
conclusive on all persons.
6. Nontransferability. Common Stock Units may be transferable by a
Participant by will or the laws of descent and distribution and otherwise only
at the discretion of the Board of Directors.
7. Rights. Except to the extent otherwise set forth herein, Participants
shall not have any of the rights of a stockholder with respect to the Common
Stock Units.
8. Common Stock Subject to the Plan. Common Stock to be issued under this
Plan may be made available from shares of Common Stock held in the treasury,
from Common Stock purchased in the open market and, provided they have been
reserved for issuance and listed on the New York Stock Exchange and all other
exchanges on which the Common Stock are listed, as appropriate, from authorized
but unissued Common Stock.
<PAGE>
PART IV. ADDITIONAL PROVISIONS
-------------------------------
1. Administration. The Plan shall be administered by the Board of Directors.
A quorum of the Board of Directors for the purposes hereof shall consist of a
majority of its members who may act by vote of a majority of the members present
at a meeting at which a quorum is present or without a meeting by written
consent to the action taken. The Board of Directors shall have full power to
interpret the Plan, formulate additional details and regulations for carrying
out the Plan and amend or modify the Plan as from time to time it deems proper
and in the best interest of the Company, provided that after a Change in Control
no amendment, modification of or action to terminate the Plan may be made which
would affect compensation earned or accrued prior to such amendments,
modification or termination without the written consent of a majority of
Participants determined as of the day before a Change in Control. Any decision
or interpretation adopted by the Board of Directors shall be final and
conclusive.
2. Participation. All directors of the Company who are not employees of the
Company or any subsidiary or affiliate of the Company are Participants in the
Plan.
3. Statement of Account. Each Participant shall receive an annual statement
showing the number and status of and essential terms applicable to Common Stock
Units and Options that have been awarded to the Participant under the Plan.
4. Unsegregated Funds. The Company shall not segregate any funds or
securities during the Deferral Period and service as a non-employee director of
the Company shall constitute an acknowledgment and agreement by the Participant
that any interests of such Participant shall remain a part of the Company's
general funds and are subject to the claims of the Company's general creditors
during the Deferral Period. Nothing herein contained shall be construed as
creating any trust, express or implied, for the benefit of any Participant.
5. Payment of Certain Costs of the Participant. If a dispute arises regarding
the interpretation or enforcement of this Plan and the Participant (or in the
event of his or her death, his beneficiary) obtains a final judgment in his or
her favor from a court of competent jurisdiction from which no appeal may be
taken, whether because the time to do so has expired or otherwise, or his or her
claim is settled by the Company prior to the rendering of such a judgment, all
reasonable legal and other professional fees and
<PAGE>
expenses incurred by the Participant in contesting or disputing any such claim
or in seeking to obtain or enforce any right or benefit provided for in this
Plan or in otherwise pursuing his or her claim will be promptly paid by the
Company with interest thereon at the highest Illinois statutory rate for
interest on judgments against private parties from the date of payment thereof
by the Participant to the date of reimbursement by the Company.
6. Payments of Stock Upon Death. In the event of a Director's death, payments
with respect to any Common Stock Units shall be made in a single lump sum
payment in Common Stock to the beneficiary designated by the Director or, in the
absence of an executed beneficiary form, to the person legally entitled thereto,
as designated under his or her will, or to such heirs as determined under the
laws of intestacy for the jurisdiction of his or her domicile.
7. Reservation of Rights. Nothing in this Plan shall be construed to (a) give
any Participant any right to defer compensation received for services as a
director of the Company other than as expressly authorized and permitted in this
Plan or in any other plan or arrangement approved by the Board of Directors, (b)
create any obligation on the part of the Board of Directors to nominate any
Participant for reelection by the Company's stockholders or (c) limit in any way
the right of the Company's Board of Directors to remove a Participant as a
director of the Company.
8. Amendment or Termination. The Company's Board of Directors may, at any
time, terminate or amend this Plan provided that no such termination or
amendment shall adversely affect the rights of Participants or beneficiaries of
Participants, including rights with respect to Common Stock Units or shares of
Common Stock credited prior to such termination or amendment, without the
consent of the Participant or, if applicable, the Participant's beneficiaries.
9. Regulatory Compliance and Listing. The issuance or delivery of any shares
of Common Stock deliverable hereunder may be postponed by the Company for such
period as may be required to comply with any applicable requirements under the
federal securities laws, any applicable listing requirements of any national
securities exchange and requirements under any other law or regulation
applicable to the issuance or delivery of such shares, and the Company shall not
be obligated to issue or deliver any such shares if the issuance or delivery of
such shares shall constitute a violation of any provision of any law or of any
regulation of any
<PAGE>
governmental authority or any national securities exchange.
10. Withholding. The Company shall have the right to deduct or withhold from
all payments of compensation any taxes required by law to be withheld with
respect to such payments.
11. Pooling of Interests. Notwithstanding any other provision of the Plan to
the contrary, in the event that the consummation of a Change in Control is
contingent on using pooling of interests accounting methodology, the Board may
take any action necessary to preserve the use of pooling of interest accounting.
12. Change in Law. If, for any reason, the anticipated benefits of the
deferral of any Deferred Compensation pursuant to this Plan or any provision
hereof are frustrated by reason of any interpretation of or change in law,
policy or regulation, the Board of Directors may, at its discretion, terminate
the deferral arrangement or delete or suspend the operation of such provision.
13. Governing Law. This Plan shall be governed by the laws of the State of
Delaware without regard to its choice of law or conflict of law provisions.
<PAGE>
ANNEX A
TO
1997 COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
--------------------------
The following terms when used in the FMC Corporation 1997 Compensation Plan for
Non-Employee Directors shall have the meaning set forth opposite the term:
a. "Accrued Retirement Benefits" means the payment or payments to which a
Participant would be entitled at his or her Termination Date under the
Retirement Plan for service as a director through April 30, 1997.
b. "Annual Retainer" means the retainer fee established by the Board of
Directors, and paid to a director for services on the Board of Directors for a
Plan Year.
c. "Board of Directors" or "Board" means the Board of Directors of FMC
Corporation as it may be constituted from time to time.
d. A "Change in Control" means:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "1934 Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of voting
securities of the Company where such acquisition causes such Person to own
20% or more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this subsection (1), the following acquisitions shall
not be deemed to result in a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of subsection (3) below; and
provided, further, that if any Person's beneficial ownership of the
Outstanding Company Voting Securities reaches or
<PAGE>
exceeds 20% as a result of a transaction described in clause (i) or (ii)
above, and such Person subsequently acquires beneficial ownership of
additional voting securities of the Company, such subsequent acquisition
shall be treated as an acquisition that causes such Person to own 20% or
more of the Outstanding Company Voting Securities; or
(2) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(3) The approval by the stockholders of the Company of a
reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Company ("Business Combination") or,
if consummation of such Business Combination is subject, at the time of
such approval by stockholders, to the consent of any government or
governmental agency, the obtaining of such consent (either explicitly or
implicitly by consummation); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in
<PAGE>
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Voting Securities,
(ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board of Directors, providing for such Business Combination;
or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
e. "Change in Control Price" means the higher of (i) if applicable, the
price paid for the Common Stock in the transaction constituting Change in
Control and (ii) the reported closing price of the Common Stock on the New York
Stock Exchange on the last trading day preceding the date of the Change in
Control.
f. "Committee Chairman Fee" means the fee established by the Board of
Directors and paid to a director for service as Chairman of any committee of the
Board of Directors.
g. "Common Stock" means (i) the common stock of the Company, par value
$.10 per share, adjusted as provided in Section 6 of Part III or (ii) if there
is a merger or consolidation and the Company is not the surviving corporation,
the capital stock of the surviving corporation given in exchange for such common
stock of the Company.
h. "Common Stock Account" means the account to which a Participant's
Common Stock Units are credited from time to time.
i. "Common Stock Unit" means a right to receive one share of Common
Stock.
j. "Company" means FMC Corporation.
<PAGE>
k. "Deferred Compensation" means the portion of the Annual Retainer
payable to a Participant in the form of Common Stock Units as determined in
accordance with Section 1 of Part II of the Plan.
l. "Deferral Period" means the time during which a person is a non-
employee director of the Company.
m. "Deferred Amount" has the meaning given it in Section 1 of Part II of
the Plan.
n. "Deferred Stock Plan" means the FMC Deferred Stock Plan for Non-
Employee Directors as amended and restated as of December 6, 1996.
o. "Dividend Equivalent Rights" shall mean a right, described in Section
3 of Part III hereof, of a holder of Common Stock Units with respect to
dividends paid on outstanding shares of Common Stock.
p. "Fair Market Value" means the average closing price for a share of
Common Stock as reported in the New York Stock Exchange Composite Transactions
on the last ten trading days immediately preceding the date on which the Fair
Market Value is to be determined.
q. "Meeting Fees" shall mean the fees, established by the Board of
Directors, paid to a director for attending a meeting of the Board of Directors
or a committee of the Board of Directors including extraordinary or special
Board of Directors and/or committee meetings.
r. "Participant" or "Participants" means all members of the Board of
Directors who are not employees of the Company or any subsidiary or affiliates
of the Company.
s. "Plan" means the FMC 1997 Compensation Plan for Non-Employee
Directors.
t. "Plan Year" means May 1 to April 30.
u. "Retirement Plan" means the FMC Directors' Retirement Plan, as
amended.
v. "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended and any successor statutes or regulations of
similar purpose or effect.
<PAGE>
w. "Termination Date" shall mean the date the Participant's service on
the Board of Directors terminates for any reason.
<PAGE>
FMC CORPORATION EXHIBIT 12
--------------- ----------
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
---------------------------------------------------
(Amounts in Millions)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
- ---------
Income from continuing operations
before income taxes and
extraordinary items $322.6 $253.2 $261.7 $80.5 $246.8
Minority interests 56.9 58.7 61.3 0.5 0.6
Undistributed (earnings) losses of
affiliates (10.5) 2.0 4.1 (0.4) (6.8)
Interest expense and amortization
of debt discount, fees and
expenses 103.1 84.0 64.1 70.4 92.2
Amortization of capitalized interest 7.5 7.7 7.5 7.4 7.3
Interest included in rental expense 19.5 21.0 20.8 19.5 19.4
------ ------ ------ ----- ------
Total earnings $499.1 $426.6 $419.5 $177.9 $359.5
------ ------ ------ ------ ------
Fixed charges:
- --------------
Interest expense and amortization
of debt discount, fees and
expenses $103.1 $ 84.0 $ 64.1 $70.4 $ 92.2
Interest capitalized as part of
fixed assets 15.5 10.2 2.7 0.6 2.1
Interest included in rental expense 19.5 21.0 20.8 19.5 19.4
------ ------ ------ ----- ------
Total fixed charges $138.1 $115.2 $ 87.6 $90.5 $113.7
------ ------ ------ ----- ------
Ratio of earnings to fixed charges 3.6 3.7 4.8 2.0 3.2
====== ====== ====== ===== ======
(A) (B)
</TABLE>
(A) The ratio of earnings to fixed charges for the year ended December 31, 1995
before the gain on sale of FMC Wyoming stock, restructuring and other
charges and write-off of acquired in-process research and development was
4.1x.
(B) The ratio of earnings to fixed charges for the year ended December 31, 1993
before restructuring and other charges was 3.3x.
<PAGE>
EXHIBIT 13
[FMC LOGO]
FMC
1996
Annual
Report
<PAGE>
[FMC LOGO]
As one of the world's leading producers of chemicals and machinery for
industry, agriculture and government, FMC participates on a worldwide basis
in four broad markets: PERFORMANCE CHEMICALS, INDUSTRIAL CHEMICALS,
MACHINERY AND EQUIPMENT, AND DEFENSE SYSTEMS. FMC operates 117
manufacturing facilities and mines in 28 countries.
ABOUT THE COVER: FMC is building our commitment to shareholders by running
our operations superbly, through targeted growth and by enlisting the best
people to do the job.
<PAGE>
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
(In millions, except per share, common stock,
employee and stockholder data) 1996 1995 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales
In the United States $2,579.1 $2,310.8 12%
Outside the United States, including exports 2,390.3 2,140.0 12%
- ----------------------------------------------------------------------------------------------------
Total Sales $4,969.4 $4,450.8 12%
====================================================================================================
Income (after tax)
Income from continuing operations $ 218.1 $ 217.5 --
- ----------------------------------------------------------------------------------------------------
Income from continuing operations before
special income and expense items(1) $ 218.1 $ 214.0 2%
- ----------------------------------------------------------------------------------------------------
Income per share from
continuing operations $ 5.73 $ 5.77 (1)%
- ----------------------------------------------------------------------------------------------------
Income per share from
continuing operations before
special income and expense items(1) $ 5.73 $ 5.68 1%
====================================================================================================
Financial data
Common stock price range $77 3/4-62 1/4 $79 1/2-57 3/8
- ----------------------------------------------------------------------------------------------------
Capital expenditures excluding acquisitions $ 506.0 $ 452.8
- ----------------------------------------------------------------------------------------------------
Research and development expenditures(2) $ 189.4 $ 172.3
- ----------------------------------------------------------------------------------------------------
At December 31 Working capital $ 171.7 $ 8.7
Number of employees 22,048 21,961
Number of stockholders 11,339 11,844
- ----------------------------------------------------------------------------------------------------
</TABLE>
As described further in Note 3 to the consolidated financial statements,
the operations constituting FMC's Precious Metals segment have been
reclassified as a discontinued operation and results of prior years have
been restated for comparative purposes.
(1) Supplemental financial information. Income from continuing
operations before special income and expense items and income per
share from continuing operations before special income and expense
items should not be considered in isolation nor as an alternative
for net income determined in accordance with generally accepted
accounting principles, or as the sole measure of the company's
profitability. Special income and expense items in 1995 include (i)
restructuring and other charges consisting of increased
environmental reserves ($82.5 million), charges related to the shift
of lithium-based production to Argentina ($35 million), asset
write-downs and other charges ($17 million) and write-off of
acquired in-process research and development related to the Moorco
International Inc. acquisition ($15.5 million), net of income taxes
($53.8 million) (Note 3 to the consolidated financial statements)
and (ii) the non-taxable gain on sale of FMC Wyoming stock of $99.7
million (Note 2 to the consolidated financial statements).
(2) Excludes 1995 write-off of acquired in-process research and
development of $15.5 million (Note 2 to the consolidated financial
statements).
FMC Annual Report Financial Summary 1
<PAGE>
[PHOTO OF ROBERT N. BURT] [PHOTO OF LARRY D. BRADY]
MESSAGE TO SHAREHOLDERS
Although we achieved record sales and operating earnings in 1996, the
year had mixed results that fell below our financial expectations.
Double-digit sales increases and record operating earnings for the
second straight year illustrate the fundamental strength of our company
and are positive signs that our growth efforts are taking hold. The
challenges and the costs of bringing our investments on line,
integrating our acquisitions and dealing with market issues in our
hydrogen peroxide and food ingredients businesses depressed earnings. In
1997, we will be concentrating on running our businesses superbly and
continuing to build on our strengths to ensure we get the payoff from
the major investments and acquisitions we have made over the past
several years.
Sales were up 12 percent to $5 billion. Income from continuing
operations was $218 million -- up from $214 million (before special
income and expense items) in 1995. Earnings from continuing operations
were $5.73 per share compared with $5.68 per share from continuing
operations (before special income and expense items) in 1995.
Results in 1996 graphically illustrate FMC's fundamental strength.
Between 1992 and 1996, FMC's earnings from our defense operations
dropped $73 million, or more than 43 percent. Despite that drop in
defense results, the strength of FMC's portfolio, plus our dedication to
superb execution, resulted in a 23 percent overall increase -- or $97
million -- in operating earnings. That means operating earnings from
other businesses increased $170 million, or 69 percent. In spite of the
defense slowdown, the expected high costs of start-ups and acquisitions,
and unanticipated market issues, we have achieved record earnings in the
past two years and are well positioned for growth during the rest of
this decade.
2 Message to Shareholders
<PAGE>
TRACKING GROWTH AND SUPERB EXECUTION
A review of our strategic approach over the last five years tells our
story. We've spent $3.3 billion on capital expenditures, research and
development, and acquisitions. That spending was based on a decision
made five years ago when our management team looked at FMC's goals and
strategies. We recognized that to continue to provide long-term superior
shareholder value, we could no longer rely on a primary strategy of
cutting costs from our operations for increased operating improvements,
i.e., we could not cost-cut our way to prosperity. We believed that to
continue to maximize future shareholder value, we needed to add growth
to our tradition of running our businesses well.
We created growth by taking advantage of more international
opportunities, by fostering more internal development through capital
expenditures and research and development, and by making targeted
acquisitions. Our growth strategy increased our need for more managers -
a top priority for us.
To implement this strategy, over the last five years we have
invested $1.7 billion in capital expenditures -- an increase of 24
percent from the previous five years, increased research and development
expense 14 percent to more than $800 million, and invested more than
$800 million in acquisitions.
We also continue to look at our portfolio to maximize its value. We
have divested FMC Gold Company, the automotive services division, and
five product lines in our food machinery business. We sold 20 percent of
our soda ash business -- creating a partnership with key Japanese soda
ash consumers, thereby significantly improving our strategic position in
the Asian market. We also sold our minority interest in a Japanese
hydrogen peroxide joint venture. In total, these transactions generated
almost $450 million.
We have identified and pursued opportunities and made aggressive
investments. These investments are still in their early stages and are
depressing our earnings through higher interest expense, front-end
development costs and initial expenses.
Our capital investments, acquisitions and market development
efforts are, on average, on schedule. We're on the right track. The
operating highlights and management's discussion and analysis later in
this report provide details on our businesses.
As we implement our long-term growth plan, the priority for the
next two years is to bring our investments on line and ensure we get the
payoffs from these investments. We will continue to look for growth
investments in targeted areas.
MAINTAINING OUR FOCUS ON FINANCIALS, PEOPLE
As we pursue the growth strategies of our company, it's important to
highlight the continuing strength of our financial strategy and the
importance of our people development efforts.
In terms of our capital structure, our objective is to maintain an
investment grade rating in the BBB range of debt ratings -- an optimal
spot on the cost of capital curve. The reason we can support this
position is our strong and stable operating cash flow, which
historically is one of the key benefits of being a diversified company.
Second, we have been investing all earnings in opportunities that exceed
the cost of capital -- an effort expected to generate a significant
amount of shareholder value. Finally, cash flow is our principal
measure, and we analyze all investment decisions on this basis.
Ultimately, we're in business to generate profits and returns, and
we need superior, motivated people across the company to generate
superior shareholder returns. For FMC, our most important objective is
to attract, develop, motivate and retain more than our fair share of the
best people. Achieving this objective leads to a high priority on people
development to ensure we remain a successful company and, at the same
time, have the management talent to successfully integrate our expanding
internal development efforts and acquisitions and support superb
execution.
MANAGEMENT CHANGES
In 1996, we elected J. Paul McGrath as senior vice president and general
counsel and Henry Kahn as vice president and treasurer.
With Paul as part of our senior management team, we are adding an
executive with proven legal expertise and wide-ranging experience. Paul
will help us ensure that we continue to maintain high ethical standards
within the global marketplace and in a way that supports business
strategies.
Paul is succeeding Pat Head, who is retiring mid-year. For the past
15 years, Pat has been a valued member of our top management team while
providing strong leadership on corporate governance and legal issues.
His tenure here has been defined by his sharp mind and by solid
experience that has served us well.
Henry brings us extensive experience in domestic and international
finance, having served in management positions based in the United
States, South America, Europe and Asia. His diversified background will
help us maintain the financial strength for which our company is known.
We also are bidding farewell to a leader who for more than 45 years
has made enormous contributions to FMC. At our 1997 annual meeting, Bob
Malott, former chairman and CEO and currently chairman of our executive
committee, will retire from our board of directors. From his unrelenting
focus on shareholder returns, to his broad view of world issues, to his
commitment to corporate citizenship, Bob has had an incredibly positive
influence on our company. We wish him well.
FMC Annual Report Message to Shareholders 3
<PAGE>
OUTLOOK
We are confident that we have significant earnings leverage between now
and the turn of the century.
- Our acquisitions are on track and will contribute significant
earnings.
- We have made major chemical investments, totaling more than
$300 million, in our hydrogen peroxide, soda ash and lithium
businesses. Short term, all three markets are facing cyclical
but significant price deterioration since capacity additions
have outpaced market demand. However, two of these investments
-- soda ash and lithium -- use state-of-the-art, proprietary
technology that gives us a competitive long-term advantage in
the marketplace.
- We have two herbicides being introduced in 1997 and 1998.
These products combined should sell between $250 million and
$300 million at good gross margins by the turn of the century.
- Our machinery and equipment businesses are now focused in
areas where we are the market and technology leader. And with
our acquisition of Frigoscandia Equipment, we have the
critical mass to strengthen our leadership position in the
food machinery market.
Most important, we have 22,000 employees around the world whose skills
and dedication have produced our past successes and will help ensure our
future growth. We have never worked with a group of people in whom we
have more confidence in placing our trust -- and yours -- to accomplish
our objectives and achieve our goals.
/s/ Robert N. Burt /s/ Larry D. Brady
Robert N. Burt Larry D. Brady
Chairman of the Board and President
Chief Executive Officer
February 28, 1997
4 Message to Shareholders
<PAGE>
INDUSTRY SEGMENT DATA
<TABLE>
<CAPTION>
(In millions) Year ended December 31
------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Sales
Performance Chemicals $1,251.8 $1,176.5 $1,060.5 $ 973.5 $ 912.3
Industrial Chemicals 1,041.3 976.8 866.8 866.7 925.9
Machinery and Equipment 1,684.9 1,351.0 972.7 870.9 876.7
Defense Systems 1,018.8 968.2 1,080.5 950.2 1,111.8
Eliminations (27.4) (21.7) (30.6) (32.4) (23.6)
- -------------------------------------------------------------------------------------------------
Total $4,969.4 $4,450.8 $3,949.9 $3,628.9 $3,803.1
=================================================================================================
Income from continuing operations
before income taxes(1)
Performance Chemicals $ 159.2 $ 163.7 $ 154.2 $ 139.4 $ 132.4
Industrial Chemicals 181.8 153.1 115.2 52.2 82.0
Machinery and Equipment 75.9 49.4 31.6 5.5 32.2
Defense Systems 98.7 104.7 114.0 153.7 171.7
- -------------------------------------------------------------------------------------------------
Operating profit from continuing operations 515.6 470.9 415.0 350.8 418.3
Restructuring and other charges(2) -- (150.0) -- (122.5) --
Gain on sale of FMC Wyoming stock(2) -- 99.7 -- -- --
Net interest expense (93.0) (74.6) (57.1) (62.1) (82.9)
Corporate (91.3) (99.0) (105.9) (117.0) (102.4)
Other income and (expense), net (8.7) 6.2 9.7 31.3 13.8
- -------------------------------------------------------------------------------------------------
Total $ 322.6 $ 253.2 $ 261.7 $ 80.5 $ 246.8
=================================================================================================
December 31
------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
Identifiable assets
Performance Chemicals $1,366.7 $1,040.9 $ 870.1 $ 806.8 $ 757.2
Industrial Chemicals 1,185.3 1,106.6 932.4 873.0 934.4
Machinery and Equipment 1,596.0 1,221.8 669.4 564.8 514.6
Defense Systems 649.9 561.8 499.3 265.9 281.7
- -------------------------------------------------------------------------------------------------
Subtotal 4,797.9 3,931.1 2,971.2 2,510.5 2,487.9
Corporate and other 191.9 215.4 258.9 260.3 227.0
- -------------------------------------------------------------------------------------------------
FMC continuing operations 4,989.8 4,146.5 3,230.1 2,770.8 2,714.9
Net assets of discontinued operation(3) -- 86.0 41.9 -- 55.2
- -------------------------------------------------------------------------------------------------
Total $4,989.8 $4,232.5 $3,272.0 $2,770.8 $2,770.1
=================================================================================================
</TABLE>
FMC has modified its presentation of segment results, effective January 1, 1996,
to better align presentation with management's evaluation of segment
performance. Accordingly, business segment results are presented net of minority
interest, reflecting only FMC's share of earnings. The corporate line primarily
includes staff expenses, and other income and expense consists of all other
corporate items, including LIFO inventory adjustments and certain other amounts
previously allocated to business segments. Segment results for 1995-1992 have
been restated to be consistent with the presentation for 1996. As described in
Note 3 to the consolidated financial statements, the operations constituting
FMC's Precious Metals segment have been reclassified as a discontinued operation
and results of prior years have been restated for comparative purposes.
(1) Results for all segments are net of minority interests in 1996,
1995 and 1994, of $56.9 million, $58.7 million and $61.3 million,
respectively, the majority of which, $47.2 million, $53.6 million
and $59.7 million, pertains to Defense Systems. Minority interests
in 1993 and 1992 were not significant.
(2) Restructuring and other charges in 1995 are described in Note 3 to
the consolidated financial statements and are related to Industrial
Chemicals ($77.5 million), Performance Chemicals ($45.0 million),
Machinery and Equipment ($15.5 million) and Defense Systems ($12.0
million). Restructuring and other charges in 1993 are related to
Machinery and Equipment ($66.0 million), Industrial Chemicals
($29.7 million), Performance Chemicals ($3.2 million), and
Corporate ($23.6 million). Gain on sale of FMC Wyoming stock (Note
2 to the consolidated financial statements) is attributable to the
Industrial Chemicals segment.
(3) Net assets of discontinued operation are comprised of the net
assets of FMC's Precious Metals segment. At December 31, 1993, the
discontinued operation had net liabilities of $4.8 million,
primarily as a result of asset write-downs recognized in
conjunction with a 1993 restructuring program.
FMC Annual Report Industry Segment Data 5
<PAGE>
PRODUCTS AND MARKETS
PERFORMANCE CHEMICALS MARKETS SERVED
AGRICULTURAL PRODUCTS
Produces crop Food and fiber
protection and pest growers, pest
control chemicals control markets.
for worldwide
markets. More than
50 percent of sales
derived outside the
United States.
FOOD INGREDIENTS
Leading worldwide Food processing
producer of industry, personal
carrageenan and care products.
Avicel cellulose
gel. Market leader
in fat replacement
products for food,
and specialist in
providing texture,
structure and
stability for food
systems.
PHARMACEUTICAL
World's leading Global
producer of Avicel pharmaceutical
binders and industry.
Ac-di-Sol
disintegrants, as
well as other
specialty excipients
used in
pharmaceutical
production.
LITHIUM
World's largest Pharmaceuticals,
producer of batteries, air
lithium-based conditioning, rubber
products. and plastic, primary
aluminum and
aluminum alloys,
ceramics and glass,
lubricating greases,
swimming pool
sanitation,
textiles, concrete
construction.
PROCESS ADDITIVES
World's largest Plastics, hydraulic
producer of fluids, lubricant
phosphate ester additives,
flame retardants. industrial water
Leading supplier of treatment and
specialty water desalination.
treatment chemicals.
BIOPRODUCTS
Largest worldwide Life science
producer of agarose. research; DNA and
Leading supplier of protein analysis.
proprietary products
for life science
markets.
INDUSTRIAL CHEMICALS
ALKALI CHEMICALS
World's largest Glass-making,
producer of natural chemicals,
soda ash and market detergents, food
leader in North products, animal
America. Downstream feed additives,
products include mining, air/water
sodium bicarbonate, treatment, pulp and
sodium cyanide, paper.
sodium
sesquicarbonate,
caustic soda.
ACTIVE OXIDANTS
Major worldwide Polymers, electronic
producer of circuit boards,
persulfates, process equipment
peracetic acid and sanitizers,
specialty industrial biocides.
peroxygens.
HYDROGEN PEROXIDE
Major worldwide Pulp and paper,
producer of hydrogen textiles,
peroxide. environmental
clean-up, mining,
detergents,
electronics.
PHOSPHORUS CHEMICALS
Major worldwide Detergents, cleaning
supplier and leading compounds, metal
North American treatment, food
producer of products, textiles,
phosphorus and its pesticide
derivatives, intermediates,
phosphates and additives,
phosphoric acid. pharmaceuticals,
water treatment.
FORET
Major European Detergents, pulp and
chemical producer. paper, textiles,
Products include chemicals, tanning,
hydrogen peroxide, animal feed, mining,
perborates, rubber,
phosphates, pharmaceuticals,
silicates, zeolites, ceramics, paint,
sulfur derivatives. food, photography,
Leading share in agriculture, water
Spanish peroxygen treatment.
and phosphate
markets.
6
<PAGE>
FMC COMPETITIVE ADVANTAGE GROWTH AND SUPERB EXECUTION OUTLOOK
Solid business Sulfentrazone Growing markets for
presence around the herbicide registered pesticides in
world. Direct for use as Authority developing
distribution in key (U.S.), Boral countries. Growing
markets. Strong (Brazil), Capaz portfolio of pest
insecticide (Argentina, control products and
portfolio. Paraguay). Continued herbicides, with
Introduction of a investment in R&D. substantial market
new class of Successfully share gains.
herbicides. introduced Command Bringing to market
Productive R&D 3ME new herbicides for
effort, generating (microencapsulation) use in U.S. and
high profitability. herbicide. New plant international
Leader in in Suzhou, China, on markets.
applications line. Completed
technology. Solid supply agreement
product stewardship with DuPont to
programs. market new soybean
herbicides.
Superior Developing new Solid position as
applications product applications industry leader.
knowledge and to meet customer Tightening focus on
product performance. needs, especially in effective,
Excellent customer water gel, dairy and market-driven
service capability meat applications. applications
around the world. International sales development.
now account for more Pursuing geographic
than 50 percent of diversification in
total worldwide sourcing raw
revenues. material.
Proprietary Broadening Continued global
technology, brand participation in market penetration,
recognition and growing Asian driven by
global market pharmaceutical pharmaceutical
presence. Strong market. Launched new company growth and
formulation support vitamin products, greater use of
capabilities. chewable tablet prescription drugs
excipient. as a result of
Leveraging superior managed healthcare
applications programs.
knowledge and
technology with key
customers worldwide.
Diverse, Development of new, Well-funded R&D
high-value-added low-cost lithium effort spurring
products. Strong reserve in South growth in specialty
manufacturing America on schedule, markets, such as
capabilities. New, using new batteries,
proprietary technology, pharmaceuticals and
extraction providing 75-plus polymers.
technology. years of reserves.
Global manufacturing Introduced new flame Competitive markets.
and technical sales retardant for the Profit growth
capabilities. plastics market. continuing, with new
Diverse products. Continuing R&D products,
Applications investments in flame applications, and
know-how. retardants, fire ongoing cost
resistant fluids and improvement efforts.
water treatment
chemicals. Continued
process improvements
driven by
technology.
Advanced Introduced new Increasing demand
applications application-specific for DNA and
technology. products for protein-related
Excellent product conducting DNA analysis in research
quality. Proprietary sequencing and and diagnostics.
technology. protein analysis.
Worldwide brand Continuing R&D
recognition. investments.
Improved market
position in DNA
sequencing.
Proprietary solution Continuing focus on Market weakness in
mining technology. new proprietary 1997. Worldwide
Excellent capacity mining technology, capacity utilization
share. improving costs. remains high. Export
Industry-leading, Capital-efficient growth expected to
low-cost position. capacity expansion rise. Continuing
Excellent performing well. cost improvement and
distribution and Growth in export industry leadership.
transportation sales. Introduced
systems. new products for
cleaning compounds,
feed additives, acid
waste
neutralization.
Strong North Continuing focus on Continued growth in
American market cost improvement, environmentally
position. Unique growth in export favorable
cost advantage at sales and product applications.
manufacturing site. registrations.
Highly Increased production Strong long-term
cost-effective capacity at Bayport, growth, driven by
manufacturing and Texas, plant. pulp and paper
distribution. High Introduced new manufacturers'
level of service, high-purity peroxide conversion to
reliability, product for semiconductor environmentally
quality and safety. industry. friendly hydrogen
Major capacity peroxide.
share. Downstream
share of specialty
market niches.
World's lowest-cost Growing diversity of Low-cost
elemental phosphorus product uses. manufacturing and
production. Introduced new improved product mix
Significant U.S. high-performance will drive steady
capacity share. product for cleaning growth.
Lowest-cost U.S. compounds industry.
production of sodium Elemental phosphorus
tripolyphosphate - supply agreements
our largest driving volume
downstream product, growth.
used in automatic
dish detergents.
High level of
service and reliable
delivery.
Excellent cost New hydrogen Continued cost
positions. Strong peroxide plant in improvements.
manufacturing and Delfzijl, European and
distribution Netherlands, Mediterranean
capabilities. operational. Strong economies and
Growing export export growth. increased exports
business. driving future
growth.
7
<PAGE>
PRODUCTS AND MARKETS
MACHINERY
& EQUIPMENT MARKETS SERVED
ENERGY AND
TRANSPORTATION EQUIPMENT
Oil and gas wellhead Oil and gas
completion drilling,
equipment; production,
engineering, refining,
procurement, transportation and
construction and power generation
equipment for subsea companies.
exploration;
metering products
and systems; loading
systems; marine
terminals and
floating production
systems;
pressure-relief
valves.
Airline equipment, Airlines, airports,
automated material industrial
handling systems. manufacturing,
mining, warehouses,
newsprint,
publishing,
chemicals,
utilities.
FOOD MACHINERY
Major worldwide food Food processors and
processing supplier. canners; fruit and
Global leader in vegetable growers;
thermal processing restaurants and fast
technology. Leading food industry.
market positions in
freezing systems,
sterilizers, citrus
and tomato
processing,
vegetable
harvesting, and in
processing, handling
and conveying
systems for fast
food frozen meal
production.
DEFENSE SYSTEMS
UNITED DEFENSE, L.P.
GROUND SYSTEMS
Develops hardware U.S. Army, Marine
and software for Corps and National
integration into the Guard; allied
manufacture of governments.
tracked vehicles for
U.S. armed forces
and allied
governments. Sole
source on many major
programs.
ARMAMENT SYSTEMS
Leads development U.S. Navy, Army,
team for artillery Marine Corps; allied
weapon systems for governments.
the U.S. Army,
designs and builds
guns and launching
systems and provides
support services for
the U.S. Navy and
international
customers.
INTERNATIONAL
Markets, U.S. allies.
manufactures and Cooperative
oversees joint agreements with
ventures for major international
military products companies.
outside the United
States.
STEEL PRODUCTS
Produces steel and Military,
nickel alloy ingots, transportation,
castings, forgings heavy equipment,
and military track. industrial and oil
field.
8
<PAGE>
FMC COMPETITIVE ADVANTAGE GROWTH AND SUPERB EXECUTION OUTLOOK
Only company to Excellent Strong global
provide complete performance and growth. Continuing
package of products integration of to exploit synergies
and services in recent acquisitions. from recent
subsea/floating Ongoing acquisitions.
production and technological
deepwater achievements,
technology. Double including HOST,
the number of subsea FMC's customized
contract awards vs. subsea system.
the competition. Continuing to set
Strategic alliances standards in
with key energy innovation,
customers. adaptability,
precision and
safety. Working with
Shell on Mensa
project, the deepest
subsea well in the
world. Member of
alliance awarded
Terra Nova project
from Petro-Canada.
Market leader in Strong growth in New products and
ground support cargo loaders and international market
equipment for the aircraft deicers. penetration driving
air transport Introduced new future growth.
industry and in modular deicer.
passenger boarding Positioned for
bridges worldwide. future growth
Sole source through leadership
alliances with in automated,
several key laser-guided vehicle
airlines. systems.
Proprietary
automated guided
vehicle technology.
Integrated provider Acquisition of Excellent strategic
of equipment for Frigoscandia position in all
every phase of the provides leading phases of food
food harvesting, presence in key harvesting,
preparation and freezer, preparation and
preservation refrigerator, potato preservation. New
process. Strong core processing and ability to
customer positions portioning system cross-sell product
and critical mass in markets. Sandei lines to customers.
all geographic acquisition creates Significant global
regions. global leadership in growth potential.
tomato harvesting.
Successful launch of
new, multi-crop
detachable harvester
line.
Focused on cost Upgrades of Bradley Absence of new major
reduction, advanced Fighting Vehicle, programs by U.S. and
system integration M88 recovery vehicle allies likely to
capabilities and and Paladin fueling limit future growth,
applications current growth. partially offset by
technology. Combat Continuing to growth in
Simulation and enhance technology electronics
Integration across product spending. Cost
laboratory is lines. control continuing.
high-technology
resource. Proven
products and
manufacturing
capabilities.
Superior cost
efficiencies,
broader product
lines, larger
installed base of
equipment worldwide.
Advanced systems Prime contractor for Focus on engineering
applications Crusader, a and technology
technology. Strong technically superior development for
manufacturing field artillery future U.S.
capabilities. Proven system. Navy/Army armament
products. Privatization of systems.
Louisville,
Kentucky, Naval
Ordnance station
expanding service
business and
providing new
product lines.
Pursuing
international
opportunities.
Strong product line, Joint venture Continued aggressive
flexibility and operational in Saudi pursuit of
creativity. Arabia. international
Co-production opportunities.
agreement in South Intense competition
Korea. Production in likely to continue.
Turkey continuing.
Development and Growth of Declining U.S. Army
commercialization of performance alloy demand. Increasing
engineering and components sales of track
materials, business. Increasing internationally.
competitive sales of track to Growing vehicle
manufacturing and allied governments. upgrade business.
vehicle upgrade Increased growth in
capabilities. high-performance
materials for
commercial
businesses.
9
<PAGE>
performance
chemicals
IN PERFORMANCE CHEMICALS, OUR STRATEGIC FOCUS IS ON RESEARCH AND
DEVELOPMENT. WE'RE SEEKING GREATER PRODUCT DIFFERENTIATION AND SERVICES
FOR OUR CUSTOMERS, AS WELL AS NEW PRODUCT INTRODUCTIONS ESSENTIAL TO OUR
CONTINUED SUCCESS.
Performance Chemicals sales of $1.3 billion increased 6 percent
from 1995, while profits were down slightly this year, reflecting higher
raw material costs in the food ingredients and pharmaceutical
businesses, and higher costs related to the launch of Authority
herbicide in North America.
In 1997, we see overall improvement in Performance Chemicals with
the introduction of our new Authority herbicide, along with continued
improvement in our specialty chemicals businesses. The improvement in
specialty chemicals is based on implementing a new food ingredients
product strategy, new products and global expansion in pharmaceuticals,
and continued manufacturing improvements at our process additives
business.
[PHOTO CAPTION]
WEEDING IT OUT Sulfentrazone, the first of our two new herbicides, made
its debut in 1996 in Brazil as Boral, used in soybeans and sugarcane to
control the growth of weeds, particularly the difficult-to-control
nutsedge.
10
<PAGE>
AGRICULTURAL PRODUCTS
THE KEY FACTOR FOR SUCCESS IN THE AGRICULTURAL PRODUCTS INDUSTRY IS
DEVELOPING NEW PRODUCTS THAT ARE MORE EFFECTIVE AND LESS EXPENSIVE THAN
EXISTING PRODUCTS. BASED ON THAT FACT, OUR STRATEGY FOR OUR AGRICULTURAL
PRODUCTS BUSINESS IS STRAIGHTFORWARD: FIRST, INVEST IN RESEARCH TO
DEVELOP NEW, PROPRIETARY PRODUCTS; AND SECOND, SELL THE PRODUCTS
GLOBALLY.
1996 HIGHLIGHTS Sales of our agricultural products increased in 1996
with label and market expansions, but earnings were lower due to
spending and plant start-up costs related to the introduction of
Authority herbicide in North America.
INTRODUCING NEW HERBICIDES In 1996, we rolled out the first of two new
herbicides slated for the market during the next two years. In
September, we produced the first shipment of sulfentrazone for Brazilian
markets, where the product is being sold as Boral. As this pre-emergent
herbicide is launched in the United States in 1997, it is being marketed
as Authority. Key crops are soybeans, sugarcane and tobacco. Due to
initial difficulties and delays in the complex start-up process at our
new herbicide plant, current production volumes are lower than we
expected for 1997.
Carfentrazone-ethyl, our second new herbicide, will be introduced in
Europe in 1997 and in the United States in 1999. Carfentrazone is a
post-emergent herbicide that will be sold under a family of names,
including Affinity. Key crops are cereals, including wheat, corn and
rice. Its unique mode of action also will make carfentrazone an
important tool in the industry's management of weed resistance to
chemicals.
[PHOTO CAPTION]
A VOTRE SANTE The grape producers of the French Beaujolais region are
producing higher yields with FMC's Talstar insecticide.
[PHOTO CAPTION]
FIBER CONTENT The success of Talstar insecticide in Spain and other
cotton-producing countries continues to strengthen our share in the
global cotton pyrethroid market.
[PHOTO CAPTION]
JOINT EFFORTS Producing insecticides for citrus, rice, cotton,
vegetable and soybean crops in China, our new joint-venture plant in
Suzhou is expanding our presence throughout China.
FMC Annual Report Performance Chemicals 11
<PAGE>
GROWING GLOBAL MARKETS The Asia-Pacific market continues its rapid
growth, with sales up 26 percent from 1995. We opened a new formulation
plant in Suzhou, China, in mid-1996, and our joint ventures in
Indonesia, China and Pakistan are doing well. Our insecticide business
is benefiting from our direct sales organizations in selected areas of
Latin America, Europe and Asia.
CONTINUING TO EMPHASIZE RESEARCH AND DEVELOPMENT Current spending is
at 12 percent of sales - higher than industry averages. While most of
our efforts are focused on our two new herbicides, we also are investing
in promising insecticide and herbicide pipeline products. Since 1992, we
have expanded our labels by 30 percent, adding more than 1,000 new uses
for existing products.
OUTLOOK Today, FMC's agricultural products business is largely an
insecticide business. By the year 2000, our product mix should be closer
to 60/40 percent insecticides to herbicides. Future annual sales of our
two new herbicides are expected to be about $150 million each - driving
the change in our product mix and nearly doubling our sales and profits
in this business. Our new herbicides will complement our existing
product lines to create new strength in distribution channels and
customer service, promising greater profitability from an already strong
base.
[PHOTO CAPTION]
CLOSED LOOP FMC is a leader in applications technology, pioneering the
closed-system container for insecticides that is now the industry
standard.
[PHOTO CAPTION]
A FIGHTING CHANCE Working with several prominent drug companies, FMC
has created complex organolithium reagents used in the new protease
inhibitors. These drugs are proving to be effective in fighting the
spread of the Human Immunodeficiency Virus, which leads to AIDS.
12 Performance Chemicals
<PAGE>
SPECIALTY CHEMICALS
THE SUCCESS OF OUR SPECIALTY CHEMICALS BUSINESSES REFLECTS OUR EXTENSIVE
KNOWLEDGE OF CUSTOMER APPLICATIONS AND OUR ABILITY TO FIND NEW,
PROPRIETARY SOLUTIONS TO CUSTOMERS' NEEDS. WE HAVE DEVELOPED SECURE,
LOW-COST SOURCES OF KEY PRODUCTS. WE COMPETE INCREASINGLY ACROSS THE
WORLD, DRIVEN IN LARGE PART BY OUR CUSTOMERS' GLOBAL AMBITIONS AND BY
THE GROWTH OF NEW LOCAL CUSTOMERS IN PLACES LIKE ASIA.
13
<PAGE>
1996 HIGHLIGHTS Sales of specialty chemicals improved in 1996 based on
increased global demand and new applications development, but earnings
declined due to increased raw material and manufacturing costs, and
ongoing competitive pressures in the flame retardants and water
treatment businesses.
DEVELOPING A NEW LITHIUM RESOURCE For the past two years, we have
focused on developing a new lithium resource in Argentina using new,
proprietary extraction technology. When our plant is completed in 1997,
FMC should have the lowest manufacturing costs in the industry and more
than 75 years of lithium reserves. In 1996, we completed a butyllithium
expansion at our joint venture in Japan, and we plan to expand our
facility in the United Kingdom. Strong growth markets for lithium
include use in air conditioning systems and rechargeable lithium ion
batteries. We also expect growth in the market for lithium-based
intermediates used in the synthesis of new drugs, including the new
class of AIDS-related protease inhibitors introduced in 1996.
ADDRESSING COMPETITIVE PRESSURES IN THE FOOD INGREDIENTS BUSINESS To
address the raw material costs and supply pressures of the past two
years, we are expanding our sourcing of warm-water seaweed used to
produce carrageenan. We have developed new technology to produce
proprietary carrageenan products that allow us to compete successfully
in more cost-competitive market segments. Also, an improved regulatory
climate in Europe should allow increased use of microcrystalline
cellulose-based applications in food.
[PHOTO CAPTION]
RISING TO THE TOP Throughout Europe, as at Maitre Paul bakers in
the Netherlands, FMC's carrageenan is used to bind and stabilize
ingredients and create the appropriate texture and "mouth-feel". Our
researchers work closely with customers to develop new applications for
our food ingredients products.
14 Performance Chemicals
<PAGE>
SUPPORTING PHARMACEUTICAL CUSTOMERS Our ongoing technical support and
formulations expertise allow us to provide our customers with customized
products to meet their formulation and development needs. In 1996, we
launched new vitamin products, expanded international markets -
particularly the high-potential Asian and Latin American regions - and
continued to invest in research and development to ensure future growth.
IMPROVING OUR PROCESS ADDITIVES BUSINESSES Process and technology
improvements at manufacturing operations led to improved performance in
1996. Recent new product introductions include Reofos RDP (resorcinol
diphenyl phosphate), a flame retardant used in high-end engineering
thermoplastics. The challenge we face is a highly competitive global
market for both flame retardant and water treatment products.
[PHOTO CAPTION]
STAY COOL Making plastics for electrical and electronic components, GE
Plastics in the Netherlands is working with our newly introduced
product, Reofos RDP (resorcinol diphenyl phosphate), a flame retardant
designed for use in producing engineering thermoplastics.
FMC Annual Report Performance Chemicals 15
<PAGE>
OUTLOOK The speed and strength of a recovery in our food ingredients
business will have a major impact on 1997 results. We see improving raw
materials costs based on our geographically diverse resources. We are
sharpening our focus on effective, market-driven applications
development. We are controlling costs. We developed new proprietary
carrageenan to compete successfully against semi-refined materials. Our
process additives business is improving, driven by lower-cost,
better-quality manufacturing. Our technical expertise in pharmaceutical
ingredients gives us a competitive advantage. And we should establish
the industry's low-cost position in lithium chloride, which promises
continued strong future growth.
PERFORMANCE CHEMICALS
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 COMPARED WITH 1995
Performance Chemicals sales of $1.3 billion increased 6 percent from
sales of $1.2 billion in 1995 as worldwide growth continued in these
businesses. Operating profits declined, however, to $159 million in 1996
from a record $164 million in the prior year, primarily as the result of
higher raw material costs in food ingredients and pharmaceuticals and
higher expenses related to the pending launch of a new herbicide.
Sales increased in 1996 for most insecticides, herbicides and
agricultural intermediates, as well as in most geographic regions, with
the largest gains in Asia-Pacific and Brazil. Sales improved to a lesser
extent in the North American, European and Middle Eastern markets.
Operating profits declined slightly from the record 1995 performance,
primarily due to higher selling and marketing expenses related to the
scheduled North American introduction in 1997 of Authority herbicide, as
well as increased spending on herbicide research and development
projects.
Sales of water additives and flame retardant products declined in 1996
due principally to the weak European economy. Operating profits
improved, however, as a result of favorable manufacturing performance,
lower selling and distribution costs, and reduced general and
administrative expenditures.
Food ingredients sales improved from 1995, although margins declined
primarily as the result of the higher cost of Philippine-harvested
seaweed. Lower selling and administrative costs, resulting from
personnel reductions and improved cost controls, partially offset lower
sales margins.
Sales of pharmaceutical products increased from the prior year, but
operating profits declined slightly due to increased pulp costs and a
higher investment in advertising, selling and research costs to support
the introduction of several new products.
Sales and operating profits of lithium products increased in 1996,
primarily as a result of continued worldwide sales growth of products
used in specialty applications. Profits from the increased sales were
partially reduced by increased spending on research and development
projects to support the specialty performance products and by spending
related to the Argentine production facility.
[PHOTO CAPTION]
BINDING RELATIONSHIPS FMC's pharmaceutical business entered the Chinese
market in 1996 with sales of Avicel microcrystalline cellulose to
Bristol-Myers Squibb's plant in Shanghai. Avicel acts to bind a
pharmaceutical's active ingredients.
16 Performance Chemicals
<PAGE>
1995 COMPARED WITH 1994
Performance Chemicals 1995 sales of $1.2 billion increased 11 percent
from sales of $1.1 billion in 1994, reflecting the continued worldwide
growth in these businesses. Operating profits in 1995 improved to $164
million from $154 million in 1994 as a result of increased volume and
pricing and a favorable mix of products, partially offset by unfavorable
raw material prices, higher distribution and marketing costs, and record
expenditures for research and development.
Gains across a range of products worldwide accounted for the increase in
sales of insecticides, herbicides and agricultural intermediates.
Operating profits also improved in 1995, but not in proportion to the
increase in sales. Profit margins were lower as a result of increased
expenditures for research and development and higher marketing expenses
associated with preparing for new herbicide introductions.
Sales of water additives and flame retardant products improved in 1995.
Nearly all of this improvement was achieved in the flame retardant line,
primarily from price increases and volume gains. Operating profits from
these products declined in 1995, however, due to operating difficulties
at the company's phosphate ester plant and price competition in the
Middle East desalination market.
Food ingredient and pharmaceutical sales increased in 1995 primarily as
the result of price increases for most products and increased
pharmaceutical sales in Europe. Operating profits were lower, however,
due to higher prices of key raw materials and increased marketing and
research and development costs associated with the launch of five new
pharmaceutical products.
Lithium product sales increased in 1995 from higher volumes of products
used in specialty applications, offset to some extent by declines in
sales of basic products. Operating profits also increased due to
favorable sales volumes and pricing, offset partially by increased
spending on research and development.
OUTLOOK FOR PERFORMANCE CHEMICALS
The strategic focus of the Performance Chemicals business is on the
development and marketing of specialty products for new applications.
These investments are expected to positively affect the business in 1997
and over the longer term.
Authority was successfully registered with the EPA in early 1997.
Continuing difficulties in the start-up process at the new herbicide
facility in Baltimore make it unlikely that volumes will meet expected
demand for this product in 1997. Sales increases in agricultural
products from 1996 should result from new applications for existing
products and continued sales growth in global markets.
Increased sales of new products should benefit the U.K.-based flame
retardant business in 1997, but overall revenues are likely to be
negatively affected by the currently strong British pound. Relatively
flat prices and higher raw material costs may lower sales margins in
these products, despite lower fixed costs resulting from a recent cost
containment program. Volume and operating profits in the water additives
business are expected to increase from growth in the U.S., Mexican and
Asian markets.
The outlook for food ingredients in 1997 remains positive. New process
technology and new product applications are expected to provide
considerable cost savings and opportunities for increased sales. These
factors, combined with continued growth in international markets, should
result in significant improvement from 1996 results.
The pharmaceutical industry has forecast to maintain its strong annual
growth, although consolidations within the industry could result in
pricing pressures in the generic and dietary supplement segments. FMC's
focus in 1997 will be on the commercialization and introduction of
additional high-potential products developed in 1996.
Specialty lithium applications should see continued growth in 1997 due
to increasing demand for specialty reagents, polymer initiators and
lithium batteries. The December 1996 decline in the market price of
lithium carbonate was driven by increased foreign competition and will
have an adverse impact on FMC's upstream business. FMC's new lithium
production plant in Argentina, scheduled to begin commercial deliveries
in the first half of 1997, should enhance the operating profitability of
the lithium business over the longer term by providing a low-cost source
for both lithium carbonate and lithium chloride. Due to start-up costs,
however, the new plant will have a minimal impact on 1997 earnings.
FMC Annual Report Performance Chemicals 17
<PAGE>
industrial chemicals
IN INDUSTRIAL CHEMICALS, WE CONTINUE TO FOCUS ON OPERATING IMPROVEMENTS
THAT GIVE US A SIGNIFICANT COST ADVANTAGE IN OUR CORE BUSINESSES.
Industrial Chemicals sales of $1 billion increased 7 percent in
1996, and profits (net of minority interest) also increased, primarily
reflecting improved soda ash pricing and volumes, and a gain on the sale
of our minority interest in a Japanese hydrogen peroxide venture.
Long term, our improved cost positions and competitive advantages
in soda ash, phosphorus and hydrogen peroxide will benefit returns of
Industrial Chemicals businesses.
[PHOTO CAPTION]
BOTTLED UP Proprietary solution mining technology gives FMC the
lowest-cost position in soda ash. Bottle makers, like Ball Foster in
Indiana, rely on our product in the glass-making process.
18
<PAGE>
[PHOTO CAPTION]
DOOR-TO-DOOR SERVICE At Rhone-Poulenc in Louisiana, FMC's highly
trained technicians unload hydrogen peroxide from one of the company's
dedicated fleet of trucks. Rhone-Poulenc uses the environmentally
compatible product to make agricultural chemical intermediates.
1996 HIGHLIGHTS
Demand for industrial chemicals generally is driven by overall economic
activity, as well as the dynamics of important end-use markets,
including solid detergents, pulp and paper, and glass. Our businesses
essentially are capital-intensive, and our strategy is to maintain our
low-cost positions, employ capital-effective capacity and protect market
niches.
GROWING MARKETS FOR SODA ASH Using our proprietary mining technology,
our new, low-cost capacity started up in the second quarter of 1996 -
ahead of schedule and under budget - adding 700,000 tons, or 25 percent,
to our total capacity. We will use this new capacity to meet the
continued growth in exports and new domestic applications. We also are
introducing new specialty soda ash products for the detergent industry
and developing the next generation of soda ash processing technology.
ADDING HYDROGEN PEROXIDE CAPACITY Our expansion in Bayport, Texas, is
complete and adds a capital-efficient 140 million pounds, or 45 percent,
to our total North American production capability. The Delfzijl plant in
the Netherlands completed its first full year of operation and continues
to run efficiently, benefiting from low-cost energy, available raw
materials and an advantageous geographic location. However, weak demand
resulting from the downturn in the pulp and paper industry and increased
industry capacity depressed earnings in 1996.
MAINTAINING STRENGTH IN PHOSPHORUS We are maintaining our strong market
position, building off our low-cost elemental phosphorus. We continue to
drive down costs through new technology at our phosphorus plant in
Pocatello, Idaho, and further repositioning of other plant operations.
The automatic dishwashing and industrial detergents markets in North
America are essentially stable and, in Europe, the use of phosphates in
solid home laundry and dishwashing detergents also has stabilized.
[PHOTO CAPTION]
COLOR-CODED Samples of production pigments are compared with standard
samples at Bayer Corporation in South Carolina. Bayer uses FMC's
polyphosphoric acid to produce a line of special paint pigments for the
automotive and plastics industry.
FMC Annual Report Industrial Chemicals 19
<PAGE>
OUTLOOK In SODA ASH, we see significant long-term volume growth for FMC,
driven by increased exports and new U.S. customers, the continued
overseas shutdown of our competitors' uneconomic synthetic soda ash
plants, and the cost benefits of our recent mine water expansion.
However, market weakness, driven by declining prices of caustic soda - a
substitute for certain uses of soda ash when caustic soda prices are low
- - and resulting industry overcapacity, will limit earnings growth in
1997.
Long-term demand for HYDROGEN PEROXIDE should grow in Western Europe,
driven by pulp and paper recycling markets, and by increased demand as
raw material for other chemicals and environmental applications. In
North America, our cost position will improve as we fill out our
expansion in Bayport, Texas. However, the cyclical downturn that began
in 1996 in the pulp and paper industry will reduce earnings in 1997. Our
PERSULFATES business will benefit from steady growth in polymers and
circuit board end-use markets worldwide.
In PHOSPHORUS CHEMICALS, we expect earnings growth on both sides of the
Atlantic, driven by stable volume, improved costs, elemental phosphorus
price increases, continued product mix upgrades and strong demand for
phosphorus-based herbicides.
[PHOTO CAPTION]
FLEX CIRCUIT Minnesota-based Sheldahl, Inc. uses FMC's sodium
persulfate to prepare flexible printed circuit boards manufactured for
industries worldwide.
[PHOTO CAPTION]
THE MARK OF QUALITY Customers like Spain-based Porcelanosa, one of
Europe's leading ceramic producers, use FMC Foret's sodium metasilicate
and sodium tripolyphosphate to manufacture its ceramic tiles. Foret is a
leading European producer of industrial chemicals.
20 Industrial Chemicals
<PAGE>
INDUSTRIAL CHEMICALS
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 COMPARED WITH 1995
Industrial Chemicals sales of $1 billion increased 7 percent, and
operating profits (net of minority interest) of $182 million increased
19 percent in 1996, primarily reflecting improved pricing and a gain on
the sale of the company's minority interest in a Japanese hydrogen
peroxide venture. Earnings comparisons were negatively affected by the
full-year minority interest expense in 1996 following the July 1995 sale
of a 20 percent interest in FMC's soda ash business.
Sales of alkali chemicals increased from 1995 levels primarily as a
result of higher prices and volumes for soda ash and sodium cyanide.
Strong soda ash volumes reflected increased export sales and the impact
of new product applications. Operating profit gains from higher soda ash
volumes and prices and a non-recurring gain on a property sale were
partially offset by an increase in minority interest expense related to
the soda ash joint venture.
Sales of peroxygen products were higher in 1996, primarily due to
increased sales by FMC's Mexican peroxygen operation. However, lower
sales of hydrogen peroxide to the North American pulp and paper market
reduced operating earnings compared with the prior year. During 1996,
the unit benefited from a $24 million gain ($6.5 million after tax) on
the sale of FMC's 27 percent investment in Tokai Denka Kogyo, a Japanese
hydrogen peroxide joint venture.
Phosphorus chemical sales and operating profits improved significantly
in 1996 as a result of higher pricing and volume for most products,
partially offset by reduced export sales.
Sales of FMC Foret were higher than 1995 levels due to significant
improvement in Spanish and export pricing, partially offset by reduced
sales volume within the Spanish market. The higher selling prices,
combined with lower raw material costs, more than offset the reduced
Spanish sales volume, resulting in improved operating profits.
1995 COMPARED WITH 1994
Industrial Chemicals 1995 sales of $977 million increased 13 percent
from $867 million in 1994, and operating profits of $153 million were up
33 percent, reflecting improved pricing, higher capacity utilization
across key product lines and the benefits of cost improvements
throughout manufacturing operations.
Alkali chemicals recorded an increase in sales from the prior year.
Increased volumes for all product lines, particularly soda ash and
sodium cyanide, as well as price increases for soda ash, were the
primary drivers of improved sales and profitability. Export sales
increased 22 percent, particularly to Latin American and Asian markets.
Sales increases, combined with cost improvement efforts, resulted in a
significant improvement in operating profit. In July 1995, FMC sold a 20
percent interest in its soda ash business to Nippon Sheet Glass Co. Ltd.
and Sumitomo Corporation for $150 million. The non-taxable gain of
approximately $100 million on this transaction is not reflected in 1995
segment earnings.
Sales of peroxygen products increased from 1994, and operating earnings
increased as well. Volume improvements in most products accounted for
the increases.
Sales of phosphorus chemicals increased in 1995, but operating profits
declined. The sales increase occurred despite a loss of export business
in Mexico. Profits were adversely affected by raw material price
increases and manufacturing issues in the 1995 fourth quarter.
FMC Foret reported a significant improvement in sales in 1995, and
profits increased correspondingly. Pricing improvements in most product
lines and favorable volumes were the primary drivers.
OUTLOOK FOR INDUSTRIAL CHEMICALS
In recent years, FMC has added significant capacity in soda ash and
hydrogen peroxide, which positions these businesses to benefit from
expected long-term increases in market demand.
In 1997, the alkali chemical business anticipates continued sales growth
in all of its products, although price erosion in soda ash, the largest
volume product, is expected to reduce margins. U.S. demand for soda ash
is predicted to remain flat, with growth expected in Asian and Latin
American markets.
Sales of hydrogen peroxide will continue to be affected in 1997 by the
weakness in the pulp and paper industry, which is expected to continue
through at least the first half of the year. Capacity additions coming
on stream in 1997 will result in reduced industry capacity utilization
and falling prices.
Based partly on the continued use of phosphates in automatic dishwashing
detergents, the phosphorus business forecasts full capacity utilization
in 1997. Profits should increase due to improved product mix and pricing
gains.
Strengthening demand for FMC Foret's primary products plus additional
volume from the company's new Delfzijl hydrogen peroxide facility are
expected to offset the negative impact of competitive pricing in the
sodium sulfate and hydrogen peroxide markets.
FMC Annual Report Industrial Chemicals 21
<PAGE>
ENERGY & TRANSPORTATION EQUIPMENT
IN THE ENERGY INDUSTRY, OUR CUSTOMERS - LARGE OIL AND GAS COMPANIES -
ARE DOWNSIZING AND CONSOLIDATING. THEY ARE ALSO EXPLORING AND PRODUCING
IN EVER-MORE REMOTE AREAS OF THE WORLD - PRODUCTION THAT REQUIRES
STATE-OF-THE-ART, DEEP-SEA TECHNOLOGY. TO MEET MARKETPLACE REQUIREMENTS,
WE HAVE FOCUSED ON INTERNAL DEVELOPMENT, ACQUISITIONS AND ALLIANCES TO
BUILD ON AND LEVERAGE OUR TECHNOLOGY, OUR CUSTOMER RELATIONSHIPS AND OUR
GLOBAL INFRASTRUCTURE. SIMILARLY, IN OUR TRANSPORTATION EQUIPMENT
BUSINESS, WE HAVE FOCUSED ON INTERNAL DEVELOPMENT AND ACQUISITIONS TO
CREATE SOLE-SOURCE ALLIANCES WITH KEY CUSTOMERS.
1996 HIGHLIGHTS Energy and transportation equipment sales and earnings
increased in 1996 with the addition of newly acquired businesses,
stronger markets, continued gains in the subsea market and improved
margins.
CEMENTING ALLIANCES IN OUR ENERGY BUSINESS FMC continued to benefit
from strategic alliances we formed in 1995 with Shell Oil and Statoil,
Norway's state oil company. In 1996, we worked closely with Shell to
provide subsea completion equipment for its Gulf of Mexico Mensa
project, the world's deepest installation at 5,300 feet below sea level.
Installation is slated for mid-1997. FMC also provided subsea completion
systems and surface wellhead systems for other Shell projects.
In 1996, we introduced the revolutionary Hinge-Over Subsea Template, or
HOST, for Statoil, for use in oil fields in the North Sea. The
building-block subsea system offers the flexibility of customization
with the cost savings of standardization. Since the product's
introduction in June, we've had more than 35 major orders for the
system. Our work with Mobil led to our appointment as subsea systems
supplier for Mobil's developments off the coast of West Africa. Through
our participation in the Grand Banks Alliance, FMC also will provide
subsea and floating production equipment for Petro-Canada's Terra Nova
oil field, located offshore Newfoundland in Canada.
[PHOTO CAPTION]
MEASURING UP Our Smith Meter operation, a world leader in metering
products and systems that measure the flow of oil and gas, built the
largest system to date for a floating storage unit for Norway-based
Norsk Hydro.
[PHOTO CAPTION]
GOING DEEP In alliance with Shell Offshore, FMC is providing subsea
equipment for the Mensa project in the Gulf of Mexico, which will
extract gas reserves from a world-record depth of 5,300 feet below sea
level. Our leading-edge equipment is being installed in mid-1997.
22 Machinery & Equipment
<PAGE>
machinery and equipment
IN MACHINERY AND EQUIPMENT, WE'VE ADDED VALUE THROUGH ACQUISITIONS IN OUR
EFFORT TO BROADEN OUR ENERGY EQUIPMENT, FOOD MACHINERY AND TRANSPORTATION
EQUIPMENT BUSINESSES. WE NOW OFFER EVEN STRONGER PRODUCTS, TECHNOLOGIES AND
SERVICES TO MEET THE GLOBAL NEEDS OF OUR CUSTOMERS.
Machinery and Equipment sales of $1.7 billion increased 25 percent,
and profits also increased in 1996 as a result of acquisitions and
strengthening market conditions in the energy equipment, food machinery and
airline equipment businesses.
We expect continued improvement in these businesses in 1997 as our
acquisitions in energy and food machinery and our enhanced position with
key customers in energy and airline equipment markets continue to add to
sales and profits.
23
<PAGE>
TAPPING SYNERGIES In their first full year as part of FMC, the Moorco
businesses boosted sales for our energy equipment business, and we are
benefiting from the synergies that resulted from the acquisition. In
1996, we shifted more than half of Crosby Valve's manufacturing from
Wrentham, Massachusetts, to FMC's lower-cost facility in Stephenville,
Texas, and we're realizing additional cost efficiencies throughout the
businesses.
BUILDING PARTNERSHIPS IN AIRLINE EQUIPMENT In our transportation
equipment business, our customers - major U.S. and international
airlines - are consolidating and aligning to achieve greater
efficiencies, lower costs and worldwide coverage. Through acquisitions
and internal development, we have established a package of products that
includes cargo loaders, deicers and passenger boarding bridges. We also
have established sole-source alliances with Federal Express, British
Airways, United Airlines, Iberia and other key airlines.
OUTLOOK Through dedicated internal development and acquisition efforts
in recent years, FMC remains the only supplier that can offer global
customers a package of integrated capabilities for the oil field,
especially in subsea, deepwater and floating production technologies.
These superior capabilities have allowed us to build long-term,
sole-source alliances with key customers, which, in turn, has increased
our market share, enabled ongoing technology development and increased
our profit margins. Because of the long-term nature of these alliances,
we expect sales and profits to remain strong in 1997 and beyond.
[PHOTO CAPTION]
ON THE MOVE From Phoenix to Chicago to London to Tokyo, United Airlines
relies on key supplier FMC to provide Commander cargo loaders, as well
as passenger boarding bridges and deicers, to move cargo and passengers
safely and efficiently.
[PHOTO CAPTION]
A PERFECT BLEND FMC's Waugh Controls is providing equipment and
services for the integrated lube oil blending facilities at Mobil Oil
Nigeria's Apapa Complex.
[PHOTO CAPTION]
DEEP FREEZE With the 1996 acquisition of Sweden-based Frigoscandia
Equipment, FMC's food machinery business is now the world's leading
producer of industrial food freezers, such as this GYRoCOMPACT spiral
freezer.
24 Machinery & Equipment
<PAGE>
FOOD MACHINERY
IN THE FOOD PROCESSING INDUSTRY, OUR CUSTOMERS ARE GROWING LARGER TO
IMPROVE THEIR COMPETITIVE POSITIONS AND GLOBALIZING TO SEIZE OPPORTUNITIES
IN DEVELOPING REGIONS. TO RESPOND TO THIS CHANGING INDUSTRY, WE'VE
COMPLETED KEY ACQUISITIONS THAT BROADEN OUR TECHNOLOGY AND APPLICATIONS
BASE, HEIGHTEN OUR GLOBAL PRESENCE AND OPERATING SCALE, AND SERVE AS A
PLATFORM FOR FUTURE GROWTH.
25
<PAGE>
1996 HIGHLIGHTS Food machinery sales were higher in 1996, reflecting
generally strong markets and the addition of newly acquired businesses,
including a full year of sales from the 1995 FranRica acquisition, as
well as contributions by the 1996 Frigoscandia acquisition.
GROWING THROUGH STRATEGIC ACQUISITIONS Following the acquisition of the
FranRica tomato processing and aseptic packaging business in the last
half of 1995, our food machinery business continued its quest for
targeted growth in 1996. In April, we acquired Italian-based Sandei SRL,
manufacturer of the world's leading small-scale tomato harvester
designed for European farms. With FMC's already strong position in
large-scale harvesters for the U.S. market, we're now the global leader
in tomato harvesters.
In June, we acquired Swedish-based Frigoscandia Equipment, a leader in
industrial freezers, fryers and ovens for food processing customers
throughout the world. With half of the world's industrial freezers,
Frigoscandia has captured three times the market share of its nearest
competitor. FMC now participates in the rapidly growing convenience food
equipment segment with Frigoscandia's Stein division, a leading producer
of fryers, ovens, and battering and breading equipment, and a key
supplier to the fast-food industry.
This acquisition provides FMC with enhanced capabilities: a broader
array of food processing equipment and systems, a higher level of sales
and service coverage, and more advanced food processing technologies.
[PHOTO CAPTION]
FRESH AND JUICY As one of the world's largest juice processing
companies, Sucocitrico Cutrale Ltda. operates plants in Brazil and
Florida. Here in Auburndale, Florida, FMC citrus extractors help Cutrale
process up to 30 million 90-pound boxes of fruit per year. FMC
extractors process 75 percent of the world's supply of orange juice.
[PHOTO CAPTION]
RIPE OPPORTUNITIES With the addition of Sandei's smaller tomato
harvester used in European fields, FMC is now the world leader in tomato
harvesters.
26 Machinery & Equipment
<PAGE>
[PHOTO CAPTION]
IN PROCESS Our FranRica operation, market leader in California's tomato
processing equipment market with its complete processing systems, also
is moving into the citrus processing field with aseptic filling
technology, an economical choice for customers.
POSITIONING OURSELVES IN THE GLOBAL MARKETPLACE The Frigoscandia
acquisition extends our global reach. With sales and service in place
around the world, our food machinery business is better positioned to
capitalize on the trend toward globalization in the food processing
industry. In the Asia-Pacific region, our fastest-growing market, we
doubled sales in 1996 and expect continued strong growth in 1997.
OUTLOOK Today, FMC is one of the largest global suppliers of food
processing equipment. As a larger but more focused operation, our food
machinery business is a more complete provider of technological
solutions to core customers in global markets and an operation capable
of sustaining long-term profit growth.
FMC Annual Report Machinery & Equipment 27
<PAGE>
MACHINERY AND EQUIPMENT
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 COMPARED WITH 1995
Machinery and Equipment segment sales of $1.7 billion increased 25
percent from 1995, and operating profits of $76 million in 1996 were 54
percent higher than the prior year. Increased sales resulted from
acquisitions and strengthening market conditions in the energy, food
machinery and transportation equipment businesses. Improved market
conditions and continuing cost improvements contributed to the increased
profitability.
Sales and operating profits of energy equipment were significantly
higher than in 1995 as the result of increased sales in most product
lines. Higher subsea equipment volume reflects sales to two major oil
companies and performance under the contract with Statoil, Norway's
state oil company. Partially offsetting these increases were lower sales
related to projects completed or nearing completion during the year.
SOFEC sales and profits in 1996 declined from 1995 levels as new
projects did not fully replace those completed during the year. Sales
and profits of energy equipment benefited from the inclusion of
full-year results for businesses acquired in the June 1995 purchase of
Moorco International Inc. and from growth in sales of loading systems to
the liquefied natural gas market.
Airline equipment sales and profits increased significantly in 1996,
reflecting a strong deicer season, increased shipments of Commander 15
main deck loaders, and improved sales of Jetway boarding bridges. Sales
of material handling systems declined slightly in 1996, but operating
profits improved due to higher international sales and margins for water
treatment equipment. The company's strategic divestiture of the
automotive service equipment business early in 1996 resulted in an
overall decrease in sales of transportation equipment for the year.
Sales of the food machinery businesses increased significantly in 1996,
primarily as the result of the inclusion of FranRica for a full year and
the acquisitions of Sandei in April 1996 and Frigoscandia Equipment on
June 30, 1996. Sales of citrus equipment and food processing systems
also improved. Operating profits declined slightly from 1995, however,
as a result of incremental costs related to the acquisitions.
1995 COMPARED WITH 1994
Sales of FMC's Machinery and Equipment segment increased to $1.4 billion
in 1995 from $973 million in 1994, and operating profits were up 56
percent to $49 million. These results reflect the performance of a
number of newly acquired businesses, market share gains in oil field
systems and ongoing cost improvements.
A significant increase in sales of energy equipment in 1995 resulted
from full-year sales of businesses acquired in 1994 and the inclusion of
sales of Moorco International Inc. since June 30, 1995. In addition to
the increased sales resulting from the acquired businesses, significant
gains occurred in petroleum equipment and systems, primarily from
continued growth in subsea business in the North Sea. SOFEC also
realized sales gains arising from additional volume in the floating
production and storage and offloading vessel markets. Operating profits
of energy equipment businesses increased slightly from 1994, reflecting
increasing price competition in certain markets and the amortization of
costs related to acquisitions.
Transportation equipment operations benefited from the inclusion of
full-year results of Jetway Systems, acquired in May 1994, as well as
increased shipments of the Commander 30 main deck loader. Operating
profits for transportation equipment improved from 1994 primarily due to
increased sales volumes.
Sales of food processing systems, packaging and material handling
equipment, and agricultural machinery decreased in 1995 due to the
divestiture of certain product lines in 1994. Operating profits of the
food machinery businesses improved from 1994 primarily as a result of
favorable mix and manufacturing cost savings.
OUTLOOK FOR MACHINERY AND EQUIPMENT
The order backlog for Machinery and Equipment was $923 million at
December 31, 1996, compared with $545 million at the end of the prior
year. A large portion of this higher backlog is based on an increase in
net orders from Statoil and from the order backlog of Frigoscandia,
which is included for the first time.
The Machinery and Equipment businesses expect the general economic and
industry trends of 1996 to continue into 1997 for most of its product
lines. Improvement in the oil field services industry is expected to
continue as oil companies restructure and increase spending on
outsourcing formerly internally provided services. The successful
formation of alliances to improve efficiency and raise profitability for
both contractors and customers is expected to benefit future
performance. FMC's energy equipment business is a partner in several of
these alliances and is pursuing further alliance opportunities.
The loading systems business also should grow in 1997 due to worldwide
growth in liquefied natural gas receiving and export terminals. The
market for transportation equipment is expected to remain strong due to
a positive outlook for the airline industry in 1997. The food machinery
operations see a continuation of their 1996 successes, as well as
benefits from a full year of Frigoscandia operations.
28 Machinery & Equipment
<PAGE>
DEFENSE SYSTEMS
IN DEFENSE SYSTEMS, OUR STRATEGIC FOCUS IS ON CONSOLIDATING OUR BUSINESS
AND MAINTAINING PROFITS.
Defense Systems sales of $1 billion increased 5 percent, and
profits (net of minority interest) decreased in 1996.
U.S. defense spending is at a 45-year low. Over the next several
years, we expect a stagnant or slowly declining market. To preserve our
future sales and profitability, our Defense Systems business continues
to effect cost efficiencies, enhance our technological capabilities,
work on promising programs and pursue international business
opportunities.
[PHOTO CAPTION]
NEXT-GENERATION BATTLEFIELD Work continues on our contract to develop the
Bradley A3, a fighting vehicle that introduces state-of-the-art computer
systems for pivotal command-and-control, lethality, survivability, mobility
and sustainability.
29
<PAGE>
DEFENSE SYSTEMS
GIVEN THE DECLINES IN SPENDING ON DEFENSE EQUIPMENT AND RESEARCH AND
DEVELOPMENT, WE HAVE CONSOLIDATED AND DOWNSIZED UNITED DEFENSE, L.P.,
OUR JOINT VENTURE WITH HARSCO THAT WE MANAGE. OUR MORE COST-COMPETITIVE
POSITION HAS ALLOWED US TO CREATE OPPORTUNITIES AND PENETRATE NEW,
PROFITABLE MARKETS THROUGH RE-MANUFACTURING, UPGRADES, PRIVATIZATION AND
TECHNOLOGY.
1996 HIGHLIGHTS
UPGRADING OPPORTUNITIES We are pursuing opportunities for
re-manufacturing and upgrading existing systems. By upgrading earlier
models of the Bradley Fighting Vehicle, in October 1996 we introduced
the latest state-of-the-art A3 configuration and fire support vehicle
with high-tech electronics and software. In 1996, we also rolled out the
Hercules, a rebuilt and upgraded tank recovery vehicle. And we're
upgrading the M113 armored personnel carrier and the M45 naval gun
system.
PROCEEDING WITH PROMISING PROGRAMS United Defense is participating in
several promising programs. The Bradley family of vehicles continues as
the workhorse of the U.S. Army. The Crusader, the howitzer and resupply
vehicle of the future, could become a $15 billion program for the Army.
ENHANCING TECHNOLOGY For the future, technology will be the driver of
new business opportunities, and we're participating in several
government-funded research projects that will keep us at the forefront.
We're working on a range of technologies, including composite armored
vehicles, survivability systems, electric drive, electromagnetic guns
and information processing.
PURSUING GLOBAL MARKETS Our international business is growing. We are
delivering armored personnel carriers to Thailand and Kuwait and
artillery systems to Austria; we're working with Samsung on a variety of
vehicles in Korea; we're providing logistics support and will be
rebuilding armored personnel carriers in Saudi Arabia through our joint
venture, FMC Arabia; and our Turkish joint-venture company continues to
build infantry fighting vehicles. The Armored Gun System offers
potential sales to international customers.
OUTLOOK Our Defense Systems business will continue to anticipate
changing market needs. To maintain profits, we'll continue to reduce
costs, perform on current contracts and seek new opportunities. Our
recent consolidation efforts and our tradition of leading-edge
technology will position us as a capable, cost-efficient supplier for
the limited defense programs into the next century.
[PHOTO CAPTION]
PRIVATE ISSUE In 1996, in concert with Hughes Missiles Systems, United
Defense assumed operations of the naval repair and rebuild center that
the U.S. Navy had operated in Louisville, Kentucky.
[PHOTO CAPTION]
ON A CRUSADE The engineering expertise and technology demonstrators we
are producing today should give us an edge in winning full-scale
production contracts for the Crusader at the turn of the century.
30 Defense Systems
<PAGE>
DEFENSE SYSTEMS
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 COMPARED WITH 1995
Defense Systems sales of $1 billion in 1996 increased 5 percent from
sales of $968 million in 1995. Operating profits, after deducting
minority interest, declined to $99 million from $105 million in the
prior year. Operating profits in 1995 included a gain of $12 million
from the expected resolution of a legal dispute with a subcontractor,
while 1996 earnings included a $7 million gain from the final
determination of the related award. In March 1996, a fire destroyed the
warehouse at FNSS, FMC's Turkish joint venture for the production of
armored vehicles for the Turkish government. While FNSS returned to full
production by year-end 1996, the lower level of production reduced
royalty payments to UDLP. Dividend income from FNSS in 1996 was in line
with prior-year performance.
Armament systems recorded net sales and profit gains in 1996 as the
result of the shipment of 20 launcher modules, a shipment of a major
component for the Seawolf submarine, higher revenue on the Crusader
contract, and delivery of 328 vertical canisters for launching systems,
compared with 159 in 1995. Partially offsetting these gains were
reductions in naval gun sales and higher administrative and research
costs.
Sales and profits were lower in 1996 for the ground systems division,
largely resulting from changes in sales mix. Vehicle deliveries for the
Bradley multi-year contract and the M9 vehicle program for the Marine
Corps were completed in 1995, and howitzer shipments to Korea were
reduced. The termination of the Armored Gun System program by the U.S.
Army and reduced shipments of other armored vehicles contributed to
decreased sales in 1996. Partially offsetting these reductions were
revenues from the start-up of a tank recovery program early in the year
and additional revenue from Bradley upgrades and development contracts
and Bradley AO/A2 production.
The Paladin operation achieved full-rate production in August 1996 and
delivered 85 more vehicles than in 1995. A total of 302 M109A6 howitzers
have been delivered to date under the multi-year contract awarded in
April 1993 for 713 vehicles, including the exercised option for 83
additional vehicles. The increased volume resulted in improved operating
profits.
1995 COMPARED WITH 1994
Sales of the Defense Systems segment declined to $968 million in 1995
from $1.1 billion in 1994, and operating profits, after deducting
minority interest, declined to $105 million from $114 million in 1994.
The sales and related operating profit declines resulted primarily from
lower volumes of Bradley Fighting Vehicles and naval weapon systems,
partially offset by $84 million of increased revenue from the Crusader
development contract and increases of $53 million in deliveries of
Paladin self-propelled howitzers.
OUTLOOK FOR DEFENSE SYSTEMS
The order backlog of the Defense Systems segment increased to $1.6
billion at December 31, 1996, from $1.5 billion at the end of 1995. The
backlog increase resulted primarily from additional options awarded for
tank recovery vehicles and Bradley upgrade contracts, plus new orders
for a variety of vehicles to be produced during 1997 and 1998. Funding
for Paladin production also increased the 1996 backlog. Partially
offsetting these new orders is a decline due to timing of Crusader
funding.
Production and financial performance of FMC's Turkish joint venture are
expected to fully recover in 1997 following the 1996 fire. FMC expects
dividends from FNSS to be considerably lower in 1997 due to the
disruption caused by the fire. Some risk for this business continues due
to ongoing economic and political uncertainties that may affect the FNSS
customer base.
Future U.S. government defense funding is expected to decline further
and, combined with defense industry consolidations, will intensify
competition for available defense funds. This competition will result in
further pressure on margins as the operations work to satisfy customer
needs. FMC will pursue continued initiatives aimed at improving cost
performance in 1998 and beyond.
FMC Annual Report Defense Systems 31
<PAGE>
GENERAL
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES,
SEGMENT DATA AND OTHER SUPPLEMENTAL INFORMATION. ADDITIONAL BACKGROUND
INFORMATION ON THE COMPANY'S OPERATIONS IS PROVIDED IN THE SEGMENT
DISCUSSIONS ON PAGES 10 THROUGH 31.
1996 COMPARED WITH 1995
Sales from continuing operations in 1996 were $5 billion, an increase of
12 percent from $4.5 billion in 1995. Sales both in and outside of the
United States increased by a like percentage from the 1995 sales levels.
Income from continuing operations increased to $218.1 million in
1996 from $214.0 million before special income and expense items in 1995
(restructuring and other charges of $81 million after tax, a $100
million non-taxable gain on the sale of FMC Wyoming stock and a $15.5
million write-off of acquired in-process research and development
costs). Earnings from continuing operations were $5.73 per share
compared with $5.68 per share in 1995 before special income and expense
items. Net income per share in 1996, including discontinued operations
and special income and expense items, was $5.54 compared with $5.72 in
1995.
The net loss of $7.4 million from discontinued operations in 1996
resulted primarily from an increase in general and product liability
reserves for previously divested operations, partially offset by a net
gain from the sale of FMC's 80 percent interest in FMC Gold Company on
July 31, 1996 (Note 3 to the consolidated financial statements).
1995 COMPARED WITH 1994
Sales in 1995 were $4.5 billion, an increase of 13 percent from 1994.
Sales in the United States increased 11 percent during the year, while
sales outside the United States increased 14 percent from 1994.
Before special income and expense items, consolidated income from
continuing operations in 1995 of $214.0 million, or $5.68 per share,
increased 20 percent. Including these items, income from continuing
operations totaled $217.5 million, or $5.77 per share.
Net income, including special charges and discontinued operations,
increased 24 percent to $215.6 million from $173.4 million in 1994.
Earnings per share increased to $5.72 from $4.66.
INDUSTRY SEGMENTS
Results on a segment basis for the five years ended December 31, 1996
are presented on page 5. Segment operating profits exclude certain
elements of revenue and expense as described in Note 1 to the
consolidated financial statements. Management's Discussion and Analysis
of segment operating performance appears on these pages following the
operating highlights for each segment: Performance Chemicals on pages 16
and 17; Industrial Chemicals on page 21; Machinery and Equipment on page
28; and Defense Systems on page 31.
OTHER INFORMATION
TAXES
The effective tax rate in 1996 was 32 percent, which includes taxes
provided on the sale of the company's investment in Tokai Denka Kogyo
(Notes 1 and 9 to the consolidated financial statements). The effective
tax rate, excluding this event, was 29 percent. For 1995, the effective
tax rate was 14 percent. The company's 1995 effective tax rate,
excluding the impact of restructuring and other charges (Note 3 to the
consolidated financial statements) and the non-taxable gain on the sale
of FMC Wyoming stock (Note 2 to the consolidated financial statements),
was 29 percent. In 1994, the effective tax rate was 33 percent. The
effective tax rates in 1996, 1995 and 1994 were lower than the U.S.
statutory rate primarily as a result of depletion, foreign sales
corporation benefits and income from foreign operations taxed at rates
lower than the U.S. statutory rate.
RESTRUCTURING AND OTHER CHARGES
FMC recorded restructuring and other charges of $35 million ($20 million
after tax) in the third quarter of 1995 covering asset writedowns and
related exit liabilities for the expected shift in 1997 of its
lithium-based production from North Carolina to its new lower-cost,
higher quality mineral resource in Argentina. Other charges of $17
million ($10 million after tax) related primarily to asset impairments.
In addition, the company increased its environmental reserves by $82.5
million, or $51 million after tax, as part of its ongoing assessment of
sites with known environmental issues. See Notes 3 and 14 to the
consolidated financial statements for further discussions of the
restructuring and environmental reserves.
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 issues arise, including notices from the Environmental
Protection Agency, or other government agencies, identifying FMC as a
Potentially Responsible Party, the company uses multifunctional advisory
teams comprising environmental, legal, financial and communications
management to ensure that the company's actions are consistent with its
responsibilities to the environment and public health, as well as to
employees and shareholders.
Additional information regarding the company's environmental
accounting policies and potential environmental liability (including
additional amounts recorded in 1995) is included in Note 1 and Note 14,
respectively, to the company's consolidated financial statements.
Information regarding environmental obligations associated with the
company's discontinued operations is included in Note 3 to the
consolidated financial statements. Estimates of 1997 environmental
spending are included under Liquidity and Capital Resources.
32 Management's Discussion and Analysis
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents at December 31, 1996 and 1995 were $74.8
million and $70.9 million, respectively. At December 31, 1996, the
company had total borrowings of $1.8 billion, up from $1.4 billion at
December 31, 1995. The increase in debt reflects cash required for
capital expenditures and acquisitions, as well as working capital
requirements related to increased sales. Advances under uncommitted
facilities of $360 million, up from $201 million at December 31, 1995,
senior debentures of $100 million issued in July 1996, and commercial
paper borrowings represent the primary sources of the additional debt.
Commercial paper with an aggregate maturity value of $391 million was
outstanding at December 31, 1996, compared with $275 million in 1995.
The company also has $750 million in committed credit facilities
consisting of a $300 million, 364-day non-amortizing revolving credit
agreement due in December 1997, and a $450 million, five-year
non-amortizing revolving credit agreement due in December 2001. At
December 31, 1996, no amounts were outstanding under these credit
facilities. See Note 8 to the consolidated financial statements for a
further discussion of debt.
In 1995, the company filed a universal shelf registration under
which $500 million of debt and/or equity securities may be publicly
offered. In July 1996, the company issued $100 million of 7.75% senior
debentures for net proceeds of $98.2 million. In January 1997, the
company registered $400 million of medium-term debt securities under the
1995 universal shelf registration. On January 29, 1997 the company
issued $45 million of medium-term notes due February 2007, for net
proceeds of $44.7 million, which were used to retire short-term
borrowings.
Cash generated from operations in 1997 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 1997 include
approximately $300 million to $400 million for planned capital
expenditures and acquisitions, including approximately $34 million for
capital projects related to environmental control facilities. Projected
1997 spending also includes approximately $50 million for environmental
compliance at current operating sites, plus approximately $30 million of
remediation spending and $15 million for study costs at current
operating, previously operated and other sites.
Total working capital of $172 million at December 31, 1996
increased by $163 million compared with 1995. The increase is primarily
due to higher trade receivables and inventories as a result of increased
sales volumes and acquisitions, partially offset by higher short-term
debt levels. Working capital decreased to $9 million at December 31,
1995 from $125 million at December 31, 1994, primarily as a result of
higher short-term debt levels, which more than offset increased current
assets.
An increase in other non-current assets from $145 million at
December 31, 1995 to $204 million at December 31, 1996 resulted
primarily from the capitalization of certain manufacturing start-up
costs and certain costs related to the development of internal-use
software in 1996 and 1995. See Note 1 to the consolidated financial
statements.
DIVIDENDS
No dividends were paid in 1996, 1995 and 1994, and no dividends are
expected to be paid in 1997.
FMC Annual Report Management's Discussion and Analysis 33
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In millions, except per share data) Year ended December 31
----------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Sales $4,969.4 $4,450.8 $3,949.9
Other revenue 111.2 56.9 39.4
- ----------------------------------------------------------------------------------
Total revenue 5,080.6 4,507.7 3,989.3
- ----------------------------------------------------------------------------------
Costs and expenses
Cost of sales 3,726.0 3,267.3 2,874.0
Selling, general and administrative expenses 692.7 631.3 568.4
Research and development 189.4 187.8 166.8
Restructuring and other charges (Note 3) -- 134.5 --
- ----------------------------------------------------------------------------------
Total costs and expenses 4,608.1 4,220.9 3,609.2
- ----------------------------------------------------------------------------------
Income from continuing operations before minority
interests, net interest expense, gain on sale of
FMC Wyoming stock and income taxes 472.5 286.8 380.1
- ----------------------------------------------------------------------------------
Minority interests 56.9 58.7 61.3
Interest income 10.1 9.4 7.0
Interest expense 103.1 84.0 64.1
Gain on sale of FMC Wyoming stock (Note 2) -- 99.7 --
- ----------------------------------------------------------------------------------
Income from continuing operations before income taxes 322.6 253.2 261.7
Provision for income taxes (Note 9) 104.5 35.7 85.5
- ----------------------------------------------------------------------------------
Income from continuing operations 218.1 217.5 176.2
Discontinued operations, net of income taxes (Note 3) (7.4) (1.9) (2.8)
- ----------------------------------------------------------------------------------
Net income $ 210.7 $ 215.6 $ 173.4
==================================================================================
Earnings (loss) per common share (Note 1)
Continuing operations $ 5.73 $ 5.77 $ 4.73
Discontinued operations (Note 3) (0.19) (0.05) (0.07)
- ----------------------------------------------------------------------------------
Net income $ 5.54 $ 5.72 $ 4.66
==================================================================================
</TABLE>
See notes to consolidated financial statements.
34 Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In millions, except share and per share data) December 31
------------------
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 74.8 $ 70.9
Trade receivables, net of allowances of $10.9 in
1996 and $11.3 in 1995 1,001.9 832.9
Inventories (Note 4) 835.3 600.2
Other current assets 194.3 178.3
Deferred income taxes (Note 9) 86.8 98.5
- ----------------------------------------------------------------------
Total current assets 2,193.1 1,780.8
Investments 59.4 98.4
Net assets of discontinued operation (Note 3) -- 86.0
Property, plant and equipment, net (Note 7) 1,959.3 1,705.7
Goodwill and intangible assets (Note 2) 498.8 345.6
Other assets 204.0 144.9
Deferred income taxes (Note 9) 75.2 71.1
- ----------------------------------------------------------------------
Total assets $4,989.8 $4,232.5
======================================================================
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt (Note 8) $ 555.6 $ 420.8
Accounts payable, trade and other 886.0 835.6
Accrued payroll 140.6 109.4
Other current liabilities 359.9 302.4
Current portion of long-term debt (Note 8) 10.4 29.8
Current portion of accrued pension and other
postretirement benefits (Notes 12 and 13) 17.9 36.4
Income taxes payable (Note 9) 51.0 37.7
- ----------------------------------------------------------------------
Total current liabilities 2,021.4 1,772.1
Long-term debt, less current portion (Note 8) 1,268.4 974.4
Accrued pension and other postretirement benefits,
less current portion (Notes 12 and 13) 276.5 284.6
Reserve for discontinued operations (Note 3) 191.4 168.3
Other liabilities 236.9 261.2
Minority interests in consolidated companies 139.4 118.4
Commitments and contingent liabilities
(Notes 14 and 15)
- ----------------------------------------------------------------------
Stockholders' equity (Note 11)
Preferred stock, no par value, authorized
5,000,000 shares; no shares issued in 1996 or 1995 -- --
Common stock, $0.10 par value, authorized 60,000,000
shares; issued 37,480,854 shares in 1996 and
37,024,187 shares in 1995 3.7 3.7
Capital in excess of par value of capital stock 120.1 99.7
Retained earnings 806.8 596.1
Foreign currency translation adjustment (Note 5) (65.5) (36.8)
Treasury stock, common, at cost; 300,427 shares in
1996 and 300,447 shares in 1995 (9.3) (9.2)
- ----------------------------------------------------------------------
Total stockholders' equity 855.8 653.5
- ----------------------------------------------------------------------
Total liabilities and stockholders' equity $4,989.8 $4,232.5
======================================================================
</TABLE>
See notes to consolidated financial statements.
FMC Annual Report Consolidated Financial Statements 35
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In millions) Year ended December 31
---------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation from income from continuing operations to cash
provided (required) by operating activities of continuing operations
Income from continuing operations $ 218.1 $ 217.5 $ 176.2
Adjustments to reconcile income from continuing operations to cash provided
(required) by operating activities of continuing operations:
Restructuring and other charges (Note 3) -- 134.5 --
Gain on sale of FMC Wyoming stock (Note 2) -- (99.7) --
Depreciation and amortization 254.2 227.0 213.4
Deferred income taxes 52.0 (3.7) 30.3
Minority interests 56.9 58.7 61.3
Other (4.8) (2.9) (4.8)
Changes in operating assets and liabilities:
Trade receivables (167.9) (186.8) (62.9)
Inventories (234.3) (208.8) (44.4)
Other current assets and other assets (248.5) (343.0) (28.9)
Accounts payable, accrued payroll, other current liabilities and
other liabilities 129.7 199.9 94.1
Income taxes payable (3.3) (15.2) (31.4)
Restructuring reserve (14.7) (48.5) (72.2)
Accrued pension and other postretirement benefits, net (34.2) (9.9) (13.5)
- ---------------------------------------------------------------------------------------------------------
Cash provided (required) by operating activities of continuing operations 3.2 (80.9) 317.2
- ---------------------------------------------------------------------------------------------------------
Cash provided (required) by discontinued operations 77.8 (62.0) (69.6)
- ---------------------------------------------------------------------------------------------------------
Cash provided (required) by investing activities:
Capital spending (533.0) (525.0) (297.9)
Disposal of property, plant and equipment 61.1 29.5 18.7
Decrease (increase) in investments 35.4 49.5 (55.8)
- ---------------------------------------------------------------------------------------------------------
Cash required by investing activities (436.5) (446.0) (335.0)
- ---------------------------------------------------------------------------------------------------------
Cash provided (required) by financing activities:
Net increase (decrease) in short-term debt 127.0 79.5 (1.9)
Net proceeds from issuance of commercial paper 94.7 272.3 --
Net increase under credit facilities 84.2 89.0 161.0
Increase in other long-term debt 112.4 18.5 142.6
Repayment of other long-term debt (37.5) (49.4) (130.0)
Proceeds from sale of FMC Wyoming stock (Note 2) -- 171.8 --
Distributions to minority partners (44.9) (37.8) (70.0)
Issuance of capital stock, net 20.3 9.2 10.5
- ---------------------------------------------------------------------------------------------------------
Cash provided by financing activities 356.2 553.1 112.2
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 3.2 8.5 (4.0)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 3.9 (27.3) 20.8
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 70.9 98.2 77.4
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 74.8 $ 70.9 $ 98.2
=========================================================================================================
</TABLE>
Supplemental cash flow information:
The company considers investments in all highly liquid debt instruments
with original maturities of three months or less to be 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 $47.1 million,
$29.4 million and $63.1 million for 1996, 1995 and 1994, respectively.
Interest payments, excluding amounts capitalized (Note 1), for 1996,
1995 and 1994 were $94.9 million, $76.3 million and $68.3 million,
respectively.
See notes to consolidated financial statements.
36 Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In millions) Common Capital Foreign
stock, $0.10 in excess Retained currency Treasury
par value of par earnings translation stock
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $3.6 $ 79.6 $207.1 $(64.7) $(8.7)
Net income 173.4
Stock options exercised (Note 10) 0.1 10.8
Purchase of treasury shares (0.4)
Translation adjustment (Note 5) 15.8
- ---------------------------------------------------------------------------------------------------
Balance December 31, 1994 3.7 90.4 380.5 (48.9) (9.1)
Net income 215.6
Stock options exercised (Note 10) 9.3
Purchase of treasury shares (0.1)
Translation adjustment (Note 5) 12.1
- ---------------------------------------------------------------------------------------------------
Balance December 31, 1995 3.7 99.7 596.1 (36.8) (9.2)
Net income 210.7
Stock options exercised (Note 10) 20.4
Purchase of treasury shares (0.1)
Translation adjustment (Note 5) (28.7)
- ---------------------------------------------------------------------------------------------------
Balance December 31, 1996 $3.7 $120.1 $806.8 $(65.5) $(9.3)
===================================================================================================
</TABLE>
See notes to consolidated financial statements.
FMC Annual Report Consolidated Financial Statements 37
<PAGE>
GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
Sales Year ended December 31
- ------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Third party sales (from origination of sale)
- ------------------------------------------------------------------------------
United States $3,523.7 $3,211.0 $3,023.9
Latin America and Canada 203.8 179.8 159.6
Europe 1,084.9 947.3 693.5
Asia, Africa & others 157.0 112.7 72.9
- ------------------------------------------------------------------------------
4,969.4 4,450.8 3,949.9
- ------------------------------------------------------------------------------
Intersegment sales
- ------------------------------------------------------------------------------
United States 193.7 151.2 111.5
Latin America and Canada 12.6 10.1 10.9
Europe 113.3 92.2 92.3
Asia, Africa & others 27.3 22.1 11.4
Eliminations (346.9) (275.6) (226.1)
- ------------------------------------------------------------------------------
Total sales $4,969.4 $4,450.8 $3,949.9
==============================================================================
Income from continuing operations before
income taxes Year ended December 31
- ------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
United States $364.6 $323.9 $300.8
Latin America and Canada 19.7 21.3 13.7
Europe 119.1 121.5 99.1
Asia, Africa & others 12.2 4.2 1.4
- ------------------------------------------------------------------------------
Operating profit from continuing operations 515.6 470.9 415.0
Restructuring and other charges (Note 3) -- (150.0) --
Gain on sale of FMC Wyoming stock (Note 2) -- 99.7 --
Net interest expense (93.0) (74.6) (57.1)
Corporate and other (91.3) (99.0) (105.9)
Other income and (expense), net (8.7) 6.2 9.7
- ------------------------------------------------------------------------------
Total $322.6 $253.2 $261.7
==============================================================================
Identifiable assets December 31
- ------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
United States $3,189.9 $2,735.7 $2,074.2
Latin America and Canada 329.9 208.1 156.2
Europe 1,153.0 900.2 676.0
Asia, Africa and others 125.1 87.1 64.8
- ------------------------------------------------------------------------------
Subtotal 4,797.9 3,931.1 2,971.2
Corporate and other 191.9 215.4 258.9
- ------------------------------------------------------------------------------
Continuing operations 4,989.8 4,146.5 3,230.1
Net assets of discontinued operation -- 86.0 41.9
- ------------------------------------------------------------------------------
Total $4,989.8 $4,232.5 $3,272.0
==============================================================================
U.S. Export Sales to Unaffiliated Customers by
Destination of Sale Year ended December 31
- ------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Latin America and Canada $271.1 $211.8 $192.7
Europe 108.8 100.2 115.7
Asia, Africa and others 564.7 588.2 668.6
- ------------------------------------------------------------------------------
Total $944.6 $900.2 $977.0
==============================================================================
</TABLE>
38 Consolidated Financial Statements
<PAGE>
OTHER SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
(In millions, except per share and common stock data) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $1,094.3 $1,250.7 $1,261.6 $1,362.8 $1,006.6 $1,118.6 $1,141.2 $1,184.4
Income (loss) from continuing operations
before minority interests, net interest
expense, gain on sale of FMC Wyoming
stock and income taxes $ 126.1 $ 114.0 $ 120.8 $ 111.6 $ 112.8 $ 138.7 $ (33.8) $ 69.1
Income (loss) from discontinued operations,
net of income taxes $ (1.6) $ (1.1) $ (4.7) $ -- $ (3.4) $ (1.3) $ (0.5) $ 3.3
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 55.2 $ 56.3 $ 54.6 $ 44.6 $ 52.4 $ 77.7 $ 57.1 $ 28.4
Net income per share $ 1.45 $ 1.48 $ 1.44 $ 1.17 $ 1.40 $ 2.06 $ 1.51 $ 0.75
- ---------------------------------------------------------------------------------------------------------------------------
Common stock prices:
High $ 76 1/4 $ 76 $ 67 7/8 $ 77 3/4 $ 60 5/8 $ 67 1/4 $ 79 1/2 $ 75 3/8
Low $ 67 1/4 $ 62 1/4 $ 62 3/4 $ 64 1/2 $ 57 3/8 $ 59 $ 67 $ 67 1/4
===========================================================================================================================
</TABLE>
Quarterly earnings per common share may differ from full-year amounts
due to changes in the number of shares outstanding during the year.
OTHER INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Depreciation Research and
Capital expenditures and amortization development expenditures
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31 Year ended December 31 Year ended December 31
- ----------------------------------------------------------------------------------------------------------------
(In millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance Chemicals $219.0 $143.3 $ 65.7 $ 59.3 $ 59.4 $ 55.5 $113.1 $109.2 $ 94.3
Industrial Chemicals 167.5 205.1 128.6 91.6 75.2 71.3 20.4 16.2 16.2
Machinery and Equipment 87.5 132.2 76.3 57.9 45.6 34.2 41.5 49.0 29.6
Defense Systems 20.9 24.2 18.2 30.8 31.4 33.9 12.9 12.4 16.3
Corporate 38.1 20.2 9.1 14.6 15.4 18.5 1.5 1.0 10.4
- ----------------------------------------------------------------------------------------------------------------
Total $533.0 $525.0 $297.9 $254.2 $227.0 $213.4 $189.4 $187.8 $166.8
================================================================================================================
</TABLE>
Descriptions of the company's industry segments are on pages 10 through
31 of this annual report. Sales, income from continuing operations
before income taxes and identifiable assets by industry segment are on
page 5.
Research and development expenditures in 1995 for the Machinery and
Equipment segment include a $15.5 million write-off of acquired
in-process research and development related to the Moorco International
Inc. acquisition (Note 2).
Sales to various agencies of the U.S. government aggregated $851.2
million, $706.5 million and $618.3 million in 1996, 1995 and 1994,
respectively. These sales were made primarily by the Defense Systems
segment.
<TABLE>
<CAPTION>
ORDER BACKLOG (UNAUDITED) Year ended December 31
- ---------------------------------------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Machinery and Equipment $ 923.0 $ 545.0 $ 480.0
Defense Systems 1,565.1 1,495.0 1,412.3
- ---------------------------------------------------------------
Total $2,488.1 $2,040.0 $1,892.3
===============================================================
</TABLE>
Backlogs are not reported for Industrial Chemicals or Performance Chemicals
due to the nature of these businesses.
FMC Annual Report Consolidated Financial Statements 39
<PAGE>
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 PRINCIPAL ACCOUNTING POLICIES
Nature of operations. FMC Corporation ("FMC" or "the company") is a
diversified producer of chemicals, machinery and other products for
industry, government and agriculture. Further descriptions of FMC's
products, its principal markets and the relative significance of its
operations are included in this annual report in Products and Markets on
pages 6 through 9 and in the Industry Segment Data on page 5.
Use of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results are likely to differ from those estimates, but management does
not believe such differences will materially affect the company's
financial position, results of operations or cash flows.
Consolidation. The consolidated financial statements include the
accounts of FMC and all significant majority-owned subsidiaries and
partnerships except those excluded because control is restricted or
temporary in nature. All material intercompany accounts and transactions
are eliminated in consolidation.
Restatements and reclassifications. As described further in Note
3, during 1996 the company divested its interest in FMC Gold Company. In
connection with the divestiture, the operations constituting the
Precious Metals segment have been accounted for as a discontinued
operation, and all prior period financial statements and disclosures
presented herein have been restated for comparative purposes.
Certain prior period balances have been reclassified to conform
with the current period's presentation.
Investments. Investments in companies in which ownership interests
are 50 percent or less and FMC exercises significant influence over
operating and financial policies are accounted for using the equity
method after eliminating the effects of any material intercompany
transactions. All other investments are carried at their fair values or
at cost if appropriate.
During the fourth quarter of 1996, FMC sold its 27 percent interest
in Tokai Denka Kogyo, a Japanese hydrogen peroxide venture, resulting in
a gain of $24 million ($6.5 million after tax).
Dividends received from affiliates were $3.7 million in 1996 ($5.3
million in 1995 and $9.4 million in 1994). Dividends included in other
revenue from other investments were $28.3 million, $21.7 million and
$13.0 million in 1996, 1995 and 1994, respectively.
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 which 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 those directly attributable to products
prior to sale, as well as all manufacturing overhead.
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. Losses
are provided for contracts-in-progress in the period in which such
losses become probable.
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.
Expenditures that extend the useful life of property, plant and
equipment or increase its productivity are capitalized.
The company periodically evaluates the recoverability of property,
plant and equipment net book values, particularly in the case of a
change in business circumstances or other triggering events, based on
expectations of future undiscounted cash flows for the asset or group of
assets. The company believes that no material impairment of long-lived
assets existed at December 31, 1996 or 1995.
Capitalized interest. Interest costs of $15.5 million ($10.2
million in 1995 and $2.7 million in 1994) 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.
40 Notes to Consolidated Financial Statements
<PAGE>
Deferred costs. Pre-operating and start-up costs directly related
to and incurred in the start-up phase of major new manufacturing
facilities are deferred and amortized over a five-year period. The
company also capitalizes certain costs related to the development of
software for internal use. Such costs are amortized over periods not
exceeding the expected life of software technology (three to seven
years). Recoverability of deferred costs is assessed on an ongoing basis
and writedowns to net realizable value are recorded as necessary. The
deferred start-up costs and capitalized software costs are components
of other assets, which also includes anticipated environmental
recoveries, bond discounts and other deferred charges.
Goodwill and intangible assets. Goodwill and identifiable
intangible assets (such as trademarks) are amortized on a straight-line
basis over their estimated useful or legal lives, not exceeding 40
years. At each balance sheet date, the company evaluates the
recoverability of goodwill based on expectations of future undiscounted
cash flows for each operation having a significant goodwill balance.
Based on its analysis, the company believes that no material impairment
of recorded goodwill existed at December 31, 1996 or 1995.
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 ($344.1 million at December 31, 1996 and
$254.5 million at December 31, 1995).
Income taxes. Current income taxes are provided on income reported
for financial statement purposes adjusted for transactions that do not
enter into the computation of income taxes payable. Deferred tax
liabilities and assets are recognized for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax bases of assets and liabilities. Income taxes are not provided
for the equity in undistributed earnings of foreign subsidiaries or
affiliates when it is management's intention that such earnings will
remain invested in those companies. Taxes are provided in the year the
dividend payment is received or when the decision is made to repatriate
the earnings.
Foreign currency translation. Assets and liabilities of most
foreign operations are translated at exchange rates in effect at
year-end, and income statements are translated at the average monthly
exchange rates prevailing during 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 and where the local currency is not the
functional currency, 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 net income.
Derivative financial instruments and foreign currency transactions.
Gains and losses on hedges of existing assets and liabilities are
included in the carrying amounts of those assets or liabilities and are
ultimately recognized in income as part of those carrying amounts. Gains
or losses related to hedges of firm commitments are also deferred and
included in the basis of the transaction when it is completed. Gains
and losses on unhedged foreign currency transactions are included in
income.
Earnings per common share. Earnings per common share are computed
by dividing net income by the weighted average number of shares of
common stock outstanding during the year (38,058,000 in 1996, 37,721,000
in 1995 and 37,195,000 in 1994).
Segment information. Segment operating profit from continuing
operations is defined as total revenue less operating expenses. The
following items have been excluded in computing segment operating
profit: general corporate income and expense, non-operating interest
income and expense, income taxes, significant gains or losses on
abnormal retirements of assets, restructuring and other charges, the
1995 gain on the sale of FMC Wyoming stock (Note 2), LIFO inventory
adjustments and other income and expense items. Identifiable assets by
industry segment are those assets that are used by or attributable to
segment operations. Corporate assets are principally cash and cash
equivalents, LIFO reserves, deferred income tax benefits and property
and equipment.
Environmental. The company provides for environmental-related
obligations when they are probable and amounts can be reasonably
estimated. Where the available information is sufficient to estimate the
amount of liability, that estimate has been used; where the information
is only sufficient to establish a range of probable liability and no
point within the range is more likely than any other, the lower end of
the range has been used.
Estimated obligations to remediate sites that involve the
Environmental Protection Agency ("EPA"), or equivalent government
agencies, are generally accrued no later than when a Record of Decision,
or equivalent, is issued, or upon completion of a Remedial
Investigation/Feasibility Study ("RI/FS") that is accepted by FMC and
the appropriate government agency or agencies. Estimates are reviewed
quarterly by the company's Environment, Health, Safety and Toxicology
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 or against governmental
agencies or private parties.
FMC Annual Report Notes to Consolidated Financial Statements 41
<PAGE>
The company's continuing and discontinued operations' environmental
liability is principally for costs associated with the remediation
and/or study of sites at which the company is alleged to have disposed
of hazardous substances. Such costs include, among other items, remedial
investigations and feasibility studies, site remediation, costs of
operation and maintenance of the remediation plan, fees to outside law
firms and consultants for work related to the environmental effort, and
future monitoring costs. Estimated site liabilities are determined based
upon existing remediation technology, specific site
consultants/engineering studies or by extrapolating experience with
environmental issues at comparable sites.
Provisions for environmental costs are reflected in income, net of
probable and reasonably estimable recoveries from named Potentially
Responsible Parties ("PRPs") or other third parties. Such provisions
incorporate inflation and are not discounted to their present values.
In calculating and evaluating the adequacy of its environmental
reserves, the company has taken into account the joint and several
liability imposed by the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and the analogous state laws
on all PRPs and has considered the identity and financial condition of
each of the other PRPs at each site to the extent possible. The company
has also considered the identity and financial condition of other third
parties from whom recovery is anticipated, as well as the status of the
company's claims against such parties. In general, the company is aware
of a degree of uncertainty in disputes regarding the financial
contribution by certain named PRPs, which is common to most multiparty
sites. Although the company is unable to forecast the ultimate
contributions of PRPs and other third parties with absolute certainty,
the degree of uncertainty with respect to each party is taken into
account when determining the environmental reserve by adjusting the
reserve to reflect the facts and circumstances on a site-by-site basis.
The company believes that recorded recoveries related to PRPs are
realizable in all material respects. Recoveries, excluding those
relating to discontinued operations, are recorded in other assets and
those relating to discontinued operations are recorded in the reserve
for discontinued operations.
Accounting standards adopted. The company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," on January 1, 1996. The adoption of this standard, which
establishes criteria for recognizing, measuring and disclosing
impairments of long-lived assets, did not have a material impact on the
company's consolidated financial position or results of operations at
the date of adoption or during 1996.
The company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," on January 1, 1996. As permitted under SFAS No. 123, the
company is continuing its current accounting for employee stock-based
compensation plans in accordance with Accounting Principles Board
Opinion No. 25, and has provided disclosures required by SFAS No. 123 in
Note 10.
NOTE 2 BUSINESS COMBINATIONS
Acquisitions. In June 1996, FMC acquired all of the common shares of
Frigoscandia Equipment Holding AB ("Frigoscandia"), a wholly owned
subsidiary of ASG AB, for approximately $165 million plus acquisition
costs and debt assumed. Frigoscandia is a leading worldwide manufacturer
of industrial freezers, ovens, fryers and other equipment for the food
processing industry. Frigoscandia's operations are included in the
company's Machinery and Equipment segment.
In conjunction with the acquisition of Frigoscandia, goodwill and
other intangible assets of $164.4 million were recorded during 1996.
In June 1995, FMC acquired all of the common shares of Moorco
International Inc. ("Moorco") for $28 per share, or approximately $350
million (including acquisition costs and debt assumed). Moorco is the
leading worldwide manufacturer of meters for the petroleum industry and
a leading manufacturer of valves for the process and power generation
industries. Moorco's operations are included in the company's Machinery
and Equipment segment.
In conjunction with the acquisition of Moorco, goodwill and other
intangible assets of $218.4 million were recorded, and $15.5 million of
acquired in-process research and development was charged to research and
development expense during 1995.
On September 20, 1995, the company acquired the assets of FR
Manufacturing Corporation, a wholly owned subsidiary of Bridge Atlantic
Corporation, for $15.7 million in cash. The acquired business is a
full-line, global supplier of tomato processing equipment and aseptic
systems sold under the FranRica trade name. The operations are included
in the company's Machinery and Equipment segment.
During 1994, the company acquired the Fluid Controls Systems
product line from National-Oilwell and the Jetway Systems Division of
Pneumo-Abex Inc., both of which are included in the company's Machinery
and Equipment segment. The Fluid Controls Systems product line is a
leader in a variety of high-performance oil field applications,
including engineered production and injection manifolds, a family of
valves, and fittings used to control and distribute the flow of
production from oil and gas wells. Jetway Systems is a leader in the
design, production and installation of passenger boarding bridges and
other aircraft support systems.
The company also completed a number of other smaller acquisitions
and joint ventures during the years ended December 31, 1996, 1995 and
1994.
The purchase prices for all the aforementioned acquisitions were
satisfied from cash flow from operations and short-term and long-term
financing. The company's 1996 acquisitions did not have a material pro
forma impact on the company's consolidated results of operations.
42 Notes to Consolidated Financial Statements
<PAGE>
These acquisitions were accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to
the assets acquired and liabilities assumed based on the estimated fair
values of such assets and liabilities at the date of acquisition. The
excess of the purchase price over the fair value of the net tangible
assets acquired has been recorded as intangible assets, primarily
goodwill, which will be amortized over periods ranging from 15 to 40
years.
Results of operations of the acquired companies have been included
in the company's consolidated statements of income from the respective
dates of acquisition.
Joint venture. In July 1995, FMC completed a joint venture
agreement involving the sale of 20 percent of its soda ash business, FMC
Wyoming Corporation, to Sumitomo Corporation and Nippon Sheet Glass
Company, Ltd. for $150 million, resulting in a nontaxable gain of $99.7
million ($2.64 per share). The company retains management control of the
joint venture. In conjunction with the agreement, the company's joint
venture partners also contributed approximately $22 million,
representing their share of preformation funding of capital projects
intended to reduce costs and expand capacity at FMC Wyoming
Corporation's soda ash facilities.
NOTE 3 DISCONTINUED OPERATIONS AND RESTRUCTURING
Discontinued operations. On July 15, 1996, FMC's management approved a
plan to dispose of shares of FMC Gold Company through a secondary
offering of substantially all of FMC's interest following a
reincorporation of FMC Gold Company in Canada. In connection with the
approval of the plan of disposal, beginning in the second quarter of
1996, the operations constituting the Precious Metals segment have been
accounted for as a discontinued operation. Prior period consolidated
financial statements presented herein have been restated for comparative
purposes.
The reincorporation and an offering of a 72 percent interest in FMC
Gold Company, which was held by FMC, were completed on July 31, 1996. An
option on the part of the underwriters to purchase the remaining 8
percent interest held by FMC was executed on August 9, 1996. A small
number of shares not covered by the underwriting agreement were also
sold at the market. FMC received gross cash proceeds, including a
dividend of $0.02 per share, of $108.4 million, plus rights to receive
the second installment under installment receipts totaling $107.5
million due July 31, 1997. During August 1996, FMC collected $3.4
million of those rights and sold the balance of $104.1 million to Bank
of Nova Scotia for $98.9 million in cash. Cash proceeds were used to
repay intercompany loans, accrued interest and other amounts owing to
FMC Gold Company totaling $79.2 million at July 31, 1996. Transaction
and other related costs aggregating $23.3 million, including certain
taxes on behalf of FMC Gold Company's minority shareholders, were paid
from proceeds or accrued pending payment.
The sale is subject to recourse (not to exceed Cdn$42.7 million) to
the extent the final installment payments of Cdn$2.50 per share are not
paid to Bank of Nova Scotia by the purchasers thereof. Such installment
obligations are secured by stock of Meridian Gold Inc.
After deducting transaction costs and FMC's investment in FMC Gold
Company and establishing reserves for sale-related liabilities, FMC
recorded a pretax gain of $9.4 million on the disposal of FMC Gold
Company. A net tax benefit of $10.3 million on the gain includes the
reversal of previously recorded valuation allowances, which are no
longer required, related to certain deferred tax assets arising from the
Precious Metals business.
Sales of the Precious Metals segment for the seven-month period
ended July 31, 1996 and the years ended December 31, 1995 and 1994 were
$41.3 million, $59.0 million and $60.9 million, respectively.
In the third quarter of 1996, the company also recorded a
discontinued operations charge of $39.0 million ($23.4 million after
tax) to increase reserves related to operations discontinued by the
company between 1976 and 1984. These additional reserves resulted
primarily from an increase in the company's most recent
actuarially-determined estimate of product liability and in other
potential claims principally related to the discontinued Construction
Equipment and Chlor-Alkali businesses.
The company's results of discontinued operations for the year ended
December 31, 1996 are comprised of the following, in millions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
<S> <C>
(Loss) from operations of Precious Metals
segment through July 31, 1996 (net of income
tax benefit of $1.8) $ (3.7)
Gain on disposal of FMC Gold Company
(net of income tax benefit of $10.3) 19.7
Provision for liabilities related to previously
discontinued operations (net of income tax
benefit of $15.6) (23.4)
- -----------------------------------------------------------
Discontinued operations, net of income taxes $ (7.4)
===========================================================
</TABLE>
Disposal of all assets related to discontinued operations has been
completed in accordance with plans adopted within one year of the
measurement dates. In addition to the 1996 sale of FMC Gold Company,
residual liabilities relate to operations discontinued between 1976 and
1984--primarily Film, Fiber, Power Transmission and the Construction
Equipment businesses. Most residual liabilities are of a long-term
nature and will be settled over a number of years. Liabilities remaining
with FMC total approximately $191 million at December 31, 1996 ($168
million at December 31, 1995) and are comprised of: $47 million (net of
approximately $70 million in anticipated third party recoveries) for
environmental remediation and study obligations, most of which relate to
former chemical plant sites; $68 million for product liability and other
potential claims principally related to the discontinued Construction
Equipment group; $72 million for retiree benefits provided to employees
of former chemical businesses and the Construction Equipment group; and
$4 million related to the sale of FMC Gold Company.
FMC Annual Report Notes to Consolidated Financial Statements 43
<PAGE>
The company uses actuarial methods, to the extent practicable, to
monitor the adequacy of product liability and retiree benefit reserves
on an ongoing basis. The environmental liabilities are subject to the
environmental accounting and review practices described in Notes 1 and
14. While the amounts required to settle the company's liabilities for
discontinued operations could ultimately differ materially from the
estimates used as a basis for recording these liabilities, management
believes that changes in estimates or required expenditures for any
individual cost component will not have a material adverse impact on the
company's liquidity or financial condition in any single year and that,
in any event, such costs will be satisfied over many years. Spending in
1996, 1995 and 1994, respectively, included $9 million, $11 million and
$15 million for environmental, net of recoveries; $8 million, $5 million
and $14 million for product liability; and $3 million, $6 million and $6
million for retiree benefits.
Restructuring and other charges. FMC recorded pretax restructuring
and other charges of $35 million ($20 million after tax, or $0.53 per
share) in the third quarter of 1995 covering asset writedowns and
related exit liabilities for the expected shift in 1997 of lithium-based
production from North Carolina to a new lower-cost, higher-quality
mineral resource in Argentina. Charges of $17 million ($10 million after
tax, or $0.27 per share) related primarily to asset impairments, and the
company recorded $82.5 million ($50.7 million after tax, or $1.34 per
share) of additional environmental reserves (Note 14). In addition, FMC
wrote off $15.5 million ($0.41 per share) of acquired in-process
research and development costs with no associated tax benefit (Note 2),
which was charged to research and development expense. Except for
environmental reserves (Note 14), remaining accruals related to
restructuring and other charges are not significant at December 31,
1996.
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 $310.7 million at December 31, 1996 and $300.1 million
at December 31, 1995. Inventories at December 31, 1996 included
approximately $388.3 million ($218.8 million at December 31, 1995) of
inventoried costs relating to contracts-in-progress.
During 1996 and 1995, there were no reductions in LIFO inventories
that were carried at lower than prevailing costs. LIFO inventory
reductions increased pretax income from continuing operations by $3.7
million in 1994.
NOTE 5 FOREIGN CURRENCY
Net income for 1996, 1995 and 1994 included aggregate foreign currency
gains of $2.3 million and $0.2 million and losses of $11.1 million,
respectively. European currencies were mixed against the U.S. dollar in
1996. The Japanese yen and Mexican peso continued their 1995 weakening
trend during 1996. The primary component of the 1994 loss of $11.1
million relates to the devaluation of the Mexican peso.
The 1996 decrease in the foreign currency translation adjustment
component of stockholders' equity was largely due to the sale of the
company's minority interest in a Japanese hydrogen peroxide venture
(Note 1) as well as smaller amounts related to European currency
movements against the U.S. dollar. The 1995 and 1994 increases were
primarily attributable to a weaker U.S. dollar in relation to European
currencies, particularly the Spanish peseta.
The following table presents the foreign currency adjustments to
key balance sheet categories and the offsetting adjustment to the
foreign currency translation adjustment or to income. Interest earned on
foreign cash and cash equivalents and debt service costs is classified
as interest income and interest expense, respectively, and is not
included in the amounts shown below. In addition, foreign currency
impacts on cash and cash equivalents and debt in hyperinflationary
economies are netted against interest income and expense and are not
shown in the amounts below.
<TABLE>
<CAPTION>
Gains (Losses)
- -----------------------------------------------------------
(In millions) 1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------
Cash and cash equivalents $ 3.2 $ 8.5 $ (4.0)
Debt (7.3) (3.1) (5.9)
Other working capital 1.7 2.1 4.0
Property, plant & equipment, net (1.3) 15.1 12.7
Investments (17.8) (3.6) 4.4
Other (4.9) (6.7) (6.5)
- -----------------------------------------------------------
$(26.4) $12.3 $ 4.7
===========================================================
Foreign currency
translation adjustment $(28.7) $12.1 $ 15.8
Gain (loss) in income 2.3 0.2 (11.1)
- -----------------------------------------------------------
$(26.4) $12.3 $ 4.7
===========================================================
</TABLE>
44 Notes to Consolidated Financial Statements
<PAGE>
NOTE 6 FINANCIAL INSTRUMENTS
Fair value disclosures. The carrying amounts of cash and cash
equivalents, trade receivables, other current assets, accounts payable
and amounts included in investments and accruals meeting the definition
of a financial instrument approximate fair value. The carrying value and
related estimated fair values for the company's remaining financial
instruments are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
December 31, 1996
- --------------------------------------------------------
Carrying Estimated
(In millions) Amount Fair Value
- --------------------------------------------------------
Assets
- --------------------------------------------------------
<S> <C> <C>
Foreign exchange forward contracts $ -- $ 8.0
Interest rate swap agreement $ -- $ --
- --------------------------------------------------------
Liabilities
- --------------------------------------------------------
Total debt $1,834.4 $1,841.1
========================================================
</TABLE>
Fair values of debt have been determined through a combination of
management estimates and information obtained from independent third
parties using market data, such as bid/ask spreads, available on the
last business day of the year. Fair values relating to derivative
financial instruments reflect the estimated amounts that the company
would receive or pay to terminate the contracts at the reporting date
based on quoted market prices of comparable contracts as of December 31,
1996.
Derivative financial instruments. The company uses derivative
financial instruments selectively to offset exposure to market risks
arising from changes in foreign exchange rates and interest rates.
Derivative financial instruments currently utilized by the company
primarily include foreign currency forward contracts.
The company utilizes forward contracts to hedge receivables,
payables, intercompany transactions and other known transactional
exposures denominated in a currency other than the functional currency
of the business. The company also hedges anticipated exposures in
certain circumstances where there is substantial assurance that
anticipated exposures will materialize. Foreign currency hedging
contracts are not taken out to protect the U.S. dollar value of the
company's equity in foreign operations. Hedges are executed centrally to
minimize transaction costs on currency conversions, monitor consolidated
net exposures in all currencies and minimize losses due to adverse
changes in foreign currency markets.
The company has entered into an interest rate swap agreement under
which the company pays fixed-rate British pound amounts in exchange for
floating-rate British pound amounts. This swap agreement reduces the
company's risk to higher British pound interest rates on
sterling-denominated debt.
In addition, as of December 31, 1996 and 1995, the company had
approximately $411 million and $318 million, respectively, of
outstanding foreign exchange forward contracts in which foreign
currencies (primarily Belgium franc, British pound, Norwegian krone and
Spanish peseta in 1996 and Belgium franc, British pound and Singapore
dollar in 1995) were purchased, and approximately $496 million and $459
million, respectively, of outstanding foreign exchange forward
contracts and foreign currency swap contracts in which foreign
currencies (primarily British pound, Japanese yen, Spanish peseta and
Swedish krona in 1996 and Canadian dollar, German mark, French franc,
and Japanese yen in 1995) were sold.
Cross-currency contracts at December 31, 1996 and 1995 were not
significant. Such contracts provide for the exchange of certain European
currencies.
Foreign exchange contracts mature at the anticipated cash
requirement date of the hedged transaction, generally within one year,
except for the sale of $11 million of Japanese yen with various
maturities through 2003.
At December 31, 1996, the majority of outstanding hedges relate to
receivables, payables and intercompany transactions. Unrealized gains
and losses on hedges of anticipated transactions are included in net
income.
NOTE 7 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------
December 31
- -----------------------------------------------------
(In millions) 1996 1995
- -----------------------------------------------------
<S> <C> <C>
Land and land improvements $ 199.6 $ 225.2
Buildings 575.0 563.2
Machinery and equipment 3,154.9 2,841.1
Construction in progress 354.7 299.9
- -----------------------------------------------------
Total cost 4,284.2 3,929.4
Accumulated depreciation 2,324.9 2,223.7
- -----------------------------------------------------
Net property, plant and equipment $1,959.3 $1,705.7
=====================================================
</TABLE>
Depreciation expense was $234.0 million, $211.5 million and $205.2
million in 1996, 1995 and 1994, respectively.
FMC Annual Report Notes to Consolidated Financial Statements 45
<PAGE>
NOTE 8 DEBT
Long-term debt. Long-term debt consists of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
December 31
- ---------------------------------------------------------------
(In millions) 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Revolving credit facility, effective rate
(1996--6.2%; 1995--6.5%)(1) $ -- $ 95.0
Commercial paper, effective rate
(1996--5.5%; 1995--5.9%)(2) 390.6 155.0
Uncommitted facilities, effective rate
(1996--5.6%)(2) 59.4 --
Notes payable to banks, various rates,
due 1997 to 2042 28.4 49.6
Pollution control and industrial
revenue bonds, 3.7% to 7.1%,
due 1997 to 2024 175.7 178.9
Senior debt, 8-3/4%, due 1999,
less unamortized discount (1996--$0.4;
1995--$0.5), effective rate 8.8% 249.6 249.5
Senior debt, 6-3/8%, due 2003,
less unamortized discount (1996--$0.7;
1995--$0.9), effective rate 6.4% 199.3 199.1
Senior debt, 7-3/4%, due 2011,
less unamortized discount (1996--$1.0),
effective rate 7.8% 99.0 --
Exchangeable senior subordinated
debentures, 6-3/4%, due 2005 75.0 75.0
Other 1.8 2.1
- ---------------------------------------------------------------
Total 1,278.8 1,004.2
Less current portion 10.4 29.8
- ---------------------------------------------------------------
Long-term portion $1,268.4 $ 974.4
===============================================================
</TABLE>
(1) The effective rate for the revolving credit facility is based on
average balances outstanding during the year and includes facility
fees.
(2) The effective rates for commercial paper and uncommitted facilities
are based on average balances outstanding during the year.
In December 1996, the company entered into a $450 million,
five-year non-amortizing revolving credit agreement and a $300 million,
364-day non-amortizing revolving credit agreement. These agreements
provide the company with $750 million in committed credit facilities, an
increase of $250 million from the previously existing credit facilities.
At December 31, 1996, no amounts were outstanding under these credit
facilities. Among other restrictions, the credit agreements contain
covenants relating to liens, consolidated net worth and cash flow
coverage (as defined in the agreements). The company is in compliance
with all financial debt covenants.
Committed credit available under the revolving credit facilities
provides management with the ability to refinance a portion of its debt
on a long-term basis and, as it is management's intent to do so, $390.6
million in outstanding commercial paper, which is supported by the
committed facilities, has been classified as long-term debt at December
31, 1996. In addition, $59.4 million of borrowings under short-term
uncommitted facilities has been classified as long-term debt at December
31, 1996.
In July 1996, the company issued $100 million of 7.75% Senior
Debentures due 2011 pursuant to a $500 million universal shelf
registration statement filed in 1995. The net proceeds from the issuance
totaled $98.2 million and were used to reduce variable rate short-term
debt. In addition, in January 1997, the company registered $400 million
of medium-term debt securities under the 1995 universal shelf
registration statement. On January 29, 1997 the company issued $45
million of 7.32% notes due February 2007. Proceeds of $44.7 million were
used to retire short-term borrowings.
The exchangeable senior subordinated debentures bearing interest at
6 3/4% and maturing in 2005 are exchangeable at any time into Meridian
Gold Inc. common stock at an exchange price of $15 1/8 per share, subject
to adjustment. The company may, at its option, pay an amount equal to
the market price of Meridian Gold Inc. common stock in lieu of delivery
of the shares. However, the market price at December 31, 1996 was
substantially below $15 1/8 per share. 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.
Aggregate maturities and sinking fund requirements over the next
five years are (in millions): 1997-$10.4, 1998-$15.8, 1999-$264.1,
2000-$0.8, 2001-$452.6, and thereafter-$535.1. The 2001 maturities
include commercial paper redemptions of $390.6 million.
Short-term debt and compensating balance agreements. At December
31, 1996, components of short-term debt were advances under uncommitted
facilities and foreign short-term borrowings.
In November 1995, the company commenced a short-term commercial
paper program, providing for the issuance of up to $500 million in
aggregate maturity value of commercial paper at any given time. Two-day
to 30-day commercial paper with an aggregate maturity value of $390.6
million was outstanding at December 31, 1996. As described above, the
outstanding balance at December 31, 1996 was classified as long-term
debt. At December 31, 1995, $155 million and $120 million of outstanding
commercial paper were classified as long-term debt and short-term debt,
respectively.
46 Notes to Consolidated Financial Statements
<PAGE>
Advances under uncommitted facilities were $360 million and $201
million in 1996 and 1995, respectively. As described above, $59 million
of the outstanding balance at December 31, 1996 was classified as
long-term debt.
FMC maintains informal credit arrangements in many foreign
countries. Foreign lines of credit, which include overdraft facilities,
typically do not require the maintenance of compensating balances, as
credit extension is not guaranteed but is subject to the availability of
funds. Outstanding foreign short-term borrowings totaled $255 million
and $100 million at December 31, 1996 and 1995, respectively. The
weighted average interest rates on outstanding foreign short-term
borrowings at December 31, 1996 and 1995 were 9.7% and 12.1%,
respectively. The average interest rates have been adjusted for currency
devaluation associated with borrowing in hyperinflationary countries.
NOTE 9 INCOME TAXES
Domestic and foreign components of income from continuing operations
before income taxes are shown below:
<TABLE>
<CAPTION>
- --------------------------------------------
Year ended December 31
- --------------------------------------------
(In millions) 1996 1995 1994
- --------------------------------------------
<S> <C> <C> <C>
Domestic $187.2 $143.5 $182.5
Foreign 135.4 109.7 79.2
- --------------------------------------------
Total $322.6 $253.2 $261.7
============================================
</TABLE>
The provision for income taxes attributable to continuing operations
consists of:
<TABLE>
<CAPTION>
- ----------------------------------------------
Year ended December 31
- ----------------------------------------------
(In millions) 1996 1995 1994
- ----------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 19.4 $ 23.9 $ 31.3
Foreign 28.6 14.4 21.6
State and local 4.5 1.1 2.3
- ----------------------------------------------
Total current 52.5 39.4 55.2
Deferred 52.0 (3.7) 30.3
- ----------------------------------------------
Total income taxes $104.5 $ 35.7 $ 85.5
==============================================
</TABLE>
Total income tax provisions (benefits) for the years ended December 31
were allocated as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Continuing operations $104.5 $ 35.7
Discontinued operations (27.7) (4.4)
Items charged directly to stockholders' equity (7.8) (3.7)
- ---------------------------------------------------------------------
Income tax expense $ 69.0 $ 27.6
=====================================================================
</TABLE>
Significant components of the deferred income tax provision (benefit)
attributable to income from continuing operations before income taxes
are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax (exclusive of the
valuation allowance) $ 57.3 $ (7.4)
Increase (decrease) in the valuation
allowance for deferred tax assets (5.3) 3.7
- ---------------------------------------------------------------------
Deferred income tax expense (benefit) $ 52.0 $ (3.7)
=====================================================================
</TABLE>
Significant components of the company's deferred tax assets and
liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Accrued pension and other postretirement
benefits $103.6 $109.9
Reserves for discontinued operations
and restructuring 98.6 105.4
Other reserves 110.6 107.2
Net operating loss carryforwards 22.7 33.0
Alternative minimum tax credit carryforwards 46.0 51.0
Other 14.0 15.9
- ---------------------------------------------------------------------
Deferred tax assets 395.5 422.4
Valuation allowance (13.3) (42.8)
- ---------------------------------------------------------------------
Deferred tax assets, net of valuation allowance $382.2 $379.6
- ---------------------------------------------------------------------
Property, plant and equipment $214.2 $204.4
Other 6.0 5.6
- ---------------------------------------------------------------------
Deferred tax liabilities $220.2 $210.0
=====================================================================
Net deferred tax assets $162.0 $169.6
=====================================================================
</TABLE>
FMC Annual Report Notes to Consolidated Financial Statements 47
<PAGE>
As of December 31, 1996, the company has prepaid $46.0 million of
alternative minimum tax. These prepayments represent credits that are
available in future years to offset regular taxes to the extent regular
taxes exceed alternative minimum tax.
In conjunction with the sale of FMC Gold Company during 1996, the
Company reversed $24.2 million of valuation allowance related to certain
deferred tax assets arising from the Precious Metals business.
The effective income tax rate applicable to income from continuing
operations before income taxes is less than the statutory U.S. federal
income tax rate due to the factors listed in the following table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(Percent of income from continuing
operations before income taxes) Year ended December 31
- ----------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. tax rate 35% 35% 35%
- ----------------------------------------------------------------
Net increase (decrease):
Foreign sales corporation income not
subject to U.S. tax (2) (2) (3)
Percentage depletion (4) (5) (5)
State and local income taxes, less
federal income tax benefit 3 1 4
Foreign earnings subject to different
tax rates (1) (2) (1)
Tax on intercompany dividends
and deemed dividends for
tax purposes 2 2 3
Sale of a minority interest
in FMC Wyoming not taxed -- (15) --
Additional taxes on sale
of investment 3 -- --
Equity in earnings of affiliates
not taxed (3) (2) (2)
Change in valuation allowance (1) -- (1)
Other -- 2 3
- ----------------------------------------------------------------
Total decrease (3) (21) (2)
- ----------------------------------------------------------------
Effective tax rate 32% 14% 33%
================================================================
</TABLE>
The effective tax rate of 32 percent in 1996 includes taxes
provided on the sale of the company's investment in Tokai Denka Kogyo
(Note 1). The effective tax rate excluding this event was 29 percent.
The effective tax rate for 1995 of 14 percent includes the impact of
restructuring and other charges (Note 3) and the nontaxable gain on the
sale of FMC Wyoming stock (Note 2). The effective rate excluding these
events was 29 percent.
FMC's federal income tax returns for years through 1989 have been
examined by the Internal Revenue Service and have been settled.
Management believes that adequate provision for income taxes has been
made for the open years 1990 and after. U.S. income taxes have not been
provided for the equity in undistributed earnings of foreign
consolidated subsidiaries ($430.4 million and $367.2 million at December
31, 1996 and 1995, respectively) or unconsolidated subsidiaries and
affiliates ($19.9 million and $49.5 million at December 31, 1996 and
1995, respectively). Restrictions on the distribution of these earnings
are not significant. Foreign earnings taxable to the company as
dividends were $45.5 million, $24.3 million and $66.2 million in 1996,
1995 and 1994, respectively.
NOTE 10 INCENTIVE COMPENSATION PLANS
The 1995 Management Incentive Plan (the Incentive Plan) and the 1995
Stock Option Plan (the Option Plan), approved by the stockholders on
April 21, 1995, provide certain incentives and awards to key employees.
The plans are administered by the Compensation and Organization
Committee of the Board of Directors (the Committee) which, subject to
the provisions of the plans, reviews and approves financial targets,
times and conditions for payment.
The Incentive Plan provides for the grant of multi-year incentive
awards payable partly in cash and partly in stock.
The Option Plan (and its predecessor plans) provide for regular
grants of stock options which may be incentive and/or nonqualified stock
options. The exercise price for options is not less than the fair market
value of the stock at the date of grant. Options are exercisable at the
time designated by the Committee in the option (four years for grants
prior to 1995 and three years for grants during 1995 and 1996).
Incentive options expire not later than 10 years from the grant date.
Nonqualified options expire not later than 15 years from the grant date
(10 years for grants prior to 1990), although the Committee may extend
the expiration date of any nonqualified stock option upon such terms and
conditions as the Committee shall determine.
Under the plans adopted in 1995, 3 million shares became available
for awards and options granted in 1995 and later years. These shares are
in addition to the shares available from the predecessor plans.
Cancellation (through expiration, forfeiture or otherwise) of
outstanding awards and options granted after 1989 increases the shares
available for future awards or grants. At December 31, 1996, 2,543,950
shares were available for future use under these plans.
The company has adopted the disclosure-only provisions of SFAS No.
123 "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the Option Plan. Had
compensation cost for the Option Plan been determined based on the fair
value at the grant date for awards in 1996 and 1995 consistent with the
provisions of SFAS No. 123, the
48 Notes to Consolidated Financial Statements
<PAGE>
resulting reduction in the company's net income and earnings per share
for the years ended December 31, 1996 and 1995 would not have been
significant.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995,
respectively: dividend yield of 0% for both years; expected volatility
of 17.8% and 22.5%; risk-free interest rates of 6% and 6.9%; and
expected lives of 5 years for both grants.
The following summary shows stock option activity for the three
years ended December 31, 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------
Number of Weighted-
Shares Average
(Number of shares Optioned But Exercise Price
in thousands) Not Exercised per Share
- -------------------------------------------------------
December 31, 1993
<S> <C> <C>
(777 shares exercisable) 2,466 $32.41
Granted 852 $46.25
Exercised (341) $23.16
Forfeited (89) $44.54
- -------------------------------------------------------
December 31, 1994
(1,141 shares exercisable) 2,888 $37.21
Granted 372 $58.71
Exercised (210) $25.62
Forfeited (66) $47.07
- -------------------------------------------------------
December 31, 1995
(1,092 shares exercisable) 2,984 $40.49
Granted 520 $70.93
Exercised (457) $27.67
Forfeited (121) $51.73
- -------------------------------------------------------
December 31, 1996
(1,200 shares exercisable) 2,926 $47.44
=======================================================
</TABLE>
The weighted-average fair value of stock options granted during the
years ended December 31, 1996 and 1995, calculated using the
Black-Scholes option-pricing model, was $21.51 and $21.00, respectively.
The following tables summarize information about fixed-priced stock
options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Options Outstanding
- --------------------------------------------------------------------
Weighted- Weighted-
Number Average Average
Range of Outstanding at Remaining Exercise
Exercise December 31, 1996 Contractual Life Price
Prices (in thousands) (in years) per Share
- --------------------------------------------------------------------
<S> <C> <C> <C>
$17.63-$31.13 764 6.4 $29.05
$45.00-$46.38 1,338 11.5 $46.15
$59.63-$65.00 334 13.1 $59.81
$71.13-$79.00 490 9.2 $71.26
- --------------------------------------------------------------------
Total 2,926 9.9 $47.44
====================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(Number of shares
in thousands) Options Exercisable
- ----------------------------------------------------------------
Number
Range of Exercisable at Weighted-Average
Exercise Prices December 31, 1996 Exercise Price per Share
- ----------------------------------------------------------------
<S> <C> <C>
$17.63-$31.13 764 $29.05
$46.38 436 $46.38
- ----------------------------------------------------------------
Total 1,200 $35.36
- ----------------------------------------------------------------
</TABLE>
On January 2, 1997 an additional 208,150 shares became exercisable
at prices of $45.00 and $46.25 with expiration dates of February 18,
2008 and March 31, 2009.
Under a plan adopted in 1995, discretionary awards of restricted
stock may be made to selected employees. The awards vest over a period
designated by the Committee, with payment conditional based on continued
employment. Compensation cost is recognized over the vesting period
based on the market value of the stock on the date of the award.
Compensation cost recognized in 1996 was approximately $1.6 million.
Under the FMC Deferred Stock Plan for Nonemployee Directors, a
portion of the annual retainer for these directors was deferred and paid
in the form of shares of the company's common stock upon retirement or
other termination of their directorships. At December 31, 1996, stock
units representing an aggregate of 17,045 shares of stock were credited
to the nonemployee directors' accounts. Effective January 1, 1997, the
Board approved a comprehensive
FMC Annual Report Notes to Consolidated Financial Statements 49
<PAGE>
compensation plan to terminate the retirement plan for directors and
increase the proportion of director compensation paid in common stock of
the company. Each current director has been given the opportunity to
receive the benefits provided for in the old plan limited to service
tenure through April 30, 1997, or convert those benefits into stock
units payable in shares of common stock of the company upon retirement
from the Board based on the fair market value of the common stock at the
end of 1996.
NOTE 11 STOCKHOLDERS' EQUITY
The following is a summary of FMC's capital stock activity over the past
three years:
<TABLE>
<CAPTION>
- ------------------------------------------------
Common Treasury
(In thousands) stock stock
- ------------------------------------------------
<S> <C> <C>
Balance December 31, 1993 36,473 292
Stock options exercised 341
Stock repurchases 6
- ------------------------------------------------
Balance December 31, 1994 36,814 298
Stock options exercised 210 2
- ------------------------------------------------
Balance December 31, 1995 37,024 300
Stock options exercised 457 (2)
Stock repurchases 2
- ------------------------------------------------
Balance December 31, 1996 37,481 300
================================================
</TABLE>
At December 31, 1996, 5,568,900 shares of unissued FMC common stock
were reserved for stock options and awards.
Covenants of the revolving credit facility agreement (Note 8)
contain minimum net worth and other requirements.
No dividends are expected to be paid on the company's common stock
in 1997.
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 related to a change in control
of the company, one one-hundredth of a share of Junior Participating
Preferred Stock, Series A, without par value, at a price of $300 per
share (subject to adjustment), subject to the terms and conditions of a
Rights Agreement dated February 22, 1986 as amended through February 9,
1996. The rights expire on March 7, 2006, unless redeemed by the company
at an earlier date. The redemption price of $.05 per right is subject to
adjustment to reflect stock splits, stock dividends or similar
transactions. The company has reserved 400,000 shares of Junior
Participating Preferred Stock for possible issuance under the agreement.
NOTE 12 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.
As a result of acquisitions (described in Note 2), the 1996 and
1995 net pension cost and plan funded amounts include salaried and
hourly retirement plans of Frigoscandia (1996 only), Moorco
International Inc. and Jetway Systems.
The following table summarizes the assumptions used and the
components of the domestic net pension cost (benefit):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Year ended December 31
- ------------------------------------------------------------
Assumptions: 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
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 9.4% 9.3% 9.3%
- ------------------------------------------------------------
Components (in millions):
- ------------------------------------------------------------
Service cost of benefits earned $ 27.1 $ 25.0 $ 25.5
Interest cost on projected benefit
obligation 67.0 60.2 55.5
Actual return on plan assets--
investment (gains) losses (134.8) (210.5) 2.6
Net amortization and deferral:
Net transition asset
amortization (23.7) (23.7) (23.7)
Prior service cost
amortization 4.9 5.0 5.2
Net loss (gain) amortization 0.9 3.1 (2.3)
Net asset gain (loss)
deferred 60.8 143.1 (72.8)
- ------------------------------------------------------------
Net pension cost (benefit) $ 2.2 $ 2.2 $(10.0)
============================================================
</TABLE>
50 Notes to Consolidated Financial Statements
<PAGE>
Net pension cost (benefit) for 1996, 1995 and 1994 includes charges
of $1.6 million, $4.7 million and $2.4 million, respectively, related to
a restructuring program initiated by FMC in 1993.
The funded status of the plans and accrued pension benefits
recognized in the company's consolidated financial statements as of
December 31 are as follows:
- ----------------------------------------------------------
(In millions) 1996 1995
- ----------------------------------------------------------
Actuarial present value of benefits for
service rendered to date:
Accumulated benefit obligation based
on salaries to date, including vested
benefits of $730.5 in 1996 and
$663.8 in 1995 $ (776.6) $(708.3)
Additional benefits based on
estimated future salary levels (131.6) (117.6)
- ----------------------------------------------------------
Projected benefit obligation (908.2) (825.9)
Plan assets at fair value(1) 1,027.5 920.4
- ----------------------------------------------------------
Projected benefit obligation
less than plan assets 119.3 94.5
Unrecognized net (gain) (127.8) (94.5)
Unrecognized prior service cost 22.8 20.7
Unrecognized net transition asset (102.3) (126.0)
- ----------------------------------------------------------
Accrued pension benefits $ (88.0) $(105.3)
==========================================================
(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 $9.5 million in 1996, $8.6 million in 1995 and
$6.3 million in 1994.
Employees' Thrift and Stock Purchase Plans. The FMC Employees'
Thrift and Stock Purchase Plan is a qualified salary-reduction plan
under Section 401(k) of the Internal Revenue Code in which all salaried
and non-union hourly employees of the company may participate by
contributing a portion of their compensation. The company matches
contributions up to specified percentages of each employee's
compensation depending on profits and fund elections. In addition, the
company also matched the contributions in the UDLP Salaried Employees'
Plan, the UDLP York Plan and the Moorco International Savings Plan,
which have provisions similar to the FMC plan. Charges against income
for FMC's matching contributions, net of forfeitures, were $22.5 million
in 1996, $20.3 million in 1995 and $18.8 million in 1994.
NOTE 13 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 conformity with Federal Cost Accounting
Standards.
During 1996, the company's medical contributions for certain hourly
employees were capped. The change, effective January 1, 1996, reduced
the company's benefit obligation by $9.0 million, amortizable over the
remaining years of service to full eligibility. As a result,
postretirement expense in 1996 was reduced by $2.0 million.
The effect of 1996, 1995 and 1994 business combinations on the
company's net periodic postretirement benefit or cost and on accrued
postretirement benefits was not significant.
For measurement purposes, the assumed rate of future increases in
per capita cost of health care benefits was 10 percent in 1996 and 1995,
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 $5.4 million and
would increase annual service and interest costs by $0.6 million.
FMC Annual Report Notes to Consolidated Financial Statements 51
<PAGE>
The following table summarizes the assumptions used and the components
of net periodic postretirement benefit cost (income):
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Year ended December 31
- -------------------------------------------------------------
Assumptions: 1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate 8.0% 8.0% 8.0%
Weighted average expected
long-term asset return 9.0% 9.0% 9.0%
- -------------------------------------------------------------
Components (in millions):
- -------------------------------------------------------------
Service cost of benefits earned $ 3.5 $ 4.2 $ 4.2
Interest cost on accumulated
postretirement benefit
obligation 13.4 13.5 13.3
Actual return on plan assets--
investment (gain) loss (4.9) (4.5) 0.4
Net amortization and deferral:
Plan amendment amortization (8.7) (15.2) (7.7)
Net loss (gain) amortization 0.1 (0.6) (0.6)
Net asset gain (loss) deferred 2.0 2.1 (2.5)
- -------------------------------------------------------------
Net periodic postretirement
benefit cost (income) $ 5.4 $ (0.5) $ 7.1
=============================================================
</TABLE>
The accrued postretirement benefits recognized in the company's
consolidated financial statements and the funded status of the plan as
of December 31 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(In millions) 1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees $(110.8) $ (98.4)
Fully eligible active participants (18.0) (24.0)
Other active participants (49.3) (59.1)
- -----------------------------------------------------------
APBO (178.1) (181.5)
Plan assets at fair value(1) 38.6 32.2
- -----------------------------------------------------------
APBO obligation in excess of plan assets (139.5) (149.3)
Unamortized plan amendments (58.7) (58.0)
Unrecognized net gain (8.2) (8.4)
- -----------------------------------------------------------
Accrued postretirement benefits $(206.4) $(215.7)
===========================================================
</TABLE>
(1) Primarily equities and fixed income securities
As part of restructuring and downsizing, the company recognized a
one-time curtailment gain of $7.6 million in 1995 which is included in
plan amendment amortization ($7.0 million) and in net gain amortization
($0.6 million).
NOTE 14 ENVIRONMENTAL
FMC is subject to various federal, state and local environmental laws
and regulations that govern emissions of air pollutants, discharges of
water pollutants, and the manufacture, storage, handling and disposal of
hazardous substances, hazardous wastes and other toxic materials. The
most significant environmental liabilities of the company consist of
obligations relating to the remediation and/or study of sites at which
the company is alleged to have disposed of hazardous substances. In
particular, the company is subject to liabilities arising under CERCLA
and similar state laws that impose responsibility on persons who
arranged for the disposal of hazardous substances and on current and
previous owners and operators of a facility for the cleanup of hazardous
substances released from the facility into the environment. In addition,
the company is subject to liabilities under the corrective action
provisions of the Resource, Conservation and Recovery Act ("RCRA") and
analogous state laws that require owners and operators of facilities
that treat, store or dispose of hazardous waste to clean up releases of
hazardous waste constituents into the environment associated with past
or present practices. The company has been named a PRP at 33 sites on
the government's National Priority List. In addition, the company also
has received notice from the EPA or other regulatory agencies that the
company may be a PRP, or PRP equivalent, at other sites, including 39
sites at which the company has determined that it has a reasonably
possible environmental liability. The company, in cooperation with
appropriate government agencies, is currently participating in, or has
participated in, RI/FS or their equivalent at most of the identified
sites, with the status of each investigation varying from site to site.
At certain sites, RI/FS have just begun, providing limited information,
if any, relating to cost estimates, timing, or the involvement of other
PRPs; whereas, at other sites, the studies are complete, remedial action
plans have been chosen, or Records of Decision have been issued.
At December 31, 1996 and 1995, reserves were provided for potential
environmental obligations which management considers probable and for
which a reasonable estimate of the obligation could be made.
Accordingly, reserves of $264 million and $302 million, before
recoveries, have been provided at December 31, 1996 and 1995,
respectively, of which $117 million and $132 million are included in the
reserve for discontinued operations at December 31, 1996 and 1995,
respectively. The company's total environmental reserves include
approximately $242 million and $270 million for remediation activities
and $22 million and $32 million for remedial investigation/feasibility
study costs at December 31, 1996 and 1995, respectively. In addition,
the company has estimated reasonably possible environmental loss
contingencies may exceed amounts accrued by as much as $150 million at
December 31, 1996.
An environmental inspection was conducted in July 1993 at FMC's
Phosphorus Chemicals Division plant in Pocatello, Idaho. In August 1994,
the United States EPA (Region 10) (the "EPA") formally notified FMC of a
number of alleged violations of the RCRA and related environmental
regulations governing
52 Notes to Consolidated Financial Statements
<PAGE>
the management of hazardous waste generated by the plant, including the
operations of hazardous waste storage and treatment units without
interim status, the failure to submit timely closure plans, the failure
to implement an adequate groundwater monitoring program and to comply
with related reporting requirements and the existence of several other
improper treatment and disposal practices. Although there are no legal
proceedings pending at this time, FMC has been advised that the matter
has been referred to the United States Department of Justice for an
evaluation of whether to file a civil enforcement action. If such a
civil action is filed, the government is likely to demand both
injunctive relief and civil penalties. FMC is seeking to settle this
matter in advance of litigation. Management believes that the ultimate
resolution of this matter will not likely have a material adverse effect
on FMC's liquidity, results of operations or financial condition.
In a separate matter, the EPA issued a draft risk assessment on
August 17, 1995 for the Eastern Michaud Flats Superfund site, which
includes FMC's Pocatello phosphorus facility, identifying potential
risks from contamination potentially associated with FMC. Release of the
Risk Assessment allowed FMC to complete a draft of the Remedial
Investigation documenting the nature and extent of contamination from
the site. The company submitted its draft Remedial Investigation to the
EPA on September 28, 1995. The EPA is expected to issue remediation
requirements in the latter half of 1997. FMC added $58 million in the
third quarter of 1995 to its existing reserves of approximately $22
million for future environmental remediation costs at the Eastern
Michaud Flats site. In addition, $25 million was provided during the
third quarter of 1995 related to other sites where additional
information became available which indicated the need for increased
accruals.
Although potential environmental remediation expenditures in excess
of the current reserves and estimated loss contingencies could be
significant, the impact on the company's future financial results is not
subject to reasonable estimation due to numerous uncertainties
concerning the nature and scope of contamination at many sites,
identification of remediation alternatives under constantly changing
requirements, selection of new and diverse clean-up technologies to meet
compliance standards, the timing of potential expenditures, and the
allocation of costs among PRPs as well as other third parties.
The liability arising from potential environmental obligations that
have not been reserved for at this time may be material to any one
quarter's or year's results of operations in the future. Management,
however, believes the liability arising from the potential environmental
obligations is not likely to have a material adverse effect on the
company's liquidity or financial condition and may be satisfied over the
next 20 years or longer.
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 its comprehensive general liability
insurance carriers. 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. Approximately $115 million of
recoveries ($45 million as other assets and $70 million as an offset to
the reserve for discontinued operations) and approximately $140 million
of recoveries ($56 million as other assets and $84 million as an offset
to the reserve for discontinued operations), have been recorded as
probable realization on claims against insurance companies and other
third parties at December 31, 1996 and 1995, respectively. The majority
of recorded assets related to recoveries from PRPs are associated with
existing contractual arrangements with U.S. government agencies.
Regarding current operating sites, the company spent approximately
$22 million, $17 million and $17 million for the years 1996, 1995 and
1994, respectively, on capital projects relating to environmental
control facilities, and expects to spend additional capital of
approximately $34 million and $27 million in 1997 and 1998,
respectively. Additionally, in 1996, 1995, and 1994, FMC spent
approximately $60 million, $53 million and $54 million, respectively,
for environmental compliance costs.
Regarding current operating, previously operated (including
discontinued operations) and other sites for the years 1996, 1995 and
1994, FMC charged approximately $22 million, $14 million and $18
million, respectively, against established reserves for remediation
spending, and charged approximately $12 million, $12 million and $13
million, respectively, against reserves for spending on RI/FS.
Recoveries from third parties of approximately $13 million, $5 million
and $5 million, respectively, were received in 1996, 1995 and 1994. FMC
anticipates that the expenditures for current operating, previously
operated and other sites will continue to be significant for the
foreseeable future.
NOTE 15 COMMITMENTS AND CONTINGENT LIABILITIES
FMC leases office space, plants and facilities, and various types of
manufacturing, data processing and transportation equipment. Capital
leases are not significant. Total rent expense under operating leases
amounted to $58.5 million, $63.0 million and $62.3 million in 1996, 1995
and 1994, respectively. Minimum future rentals under noncancellable
leases aggregated approximately $315 million as of December 31, 1996 and
are estimated to be payable as follows: $51 million in 1997, $44 million
in 1998, $38 million in 1999, $32 million in 2000, $30 million in 2001
and $120 million thereafter. The real estate leases generally provide
for payment of property taxes, insurance and repairs by FMC.
Effective January 1, 1994, FMC and Harsco Corporation ("Harsco")
combined certain assets and liabilities of FMC's Defense Systems Group
and Harsco's BMY Combat Systems Division. The combined company, United
Defense, L.P. ("UDLP"), operates as a limited partnership, with FMC as
the managing general partner with a 60 percent equity interest and
Harsco as the limited partner holding a 40 percent equity interest.
The limited partnership agreement between the partners of UDLP
provides options under which FMC may purchase, or Harsco may require the
purchase of, Harsco's ownership interest based on an appraised value as
provided in the agreement. These options are exercisable at any time
after February 1, 1996.
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.
FMC Annual Report Notes to Consolidated Financial Statements 53
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders, FMC Corporation:
We have audited the accompanying consolidated balance sheets of FMC
Corporation and consolidated subsidiaries as of December 31, 1996 and
1995, 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, 1996. 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. With respect to information as of December 31, 1996
and 1995, and for each of the years in the three-year period ended
December 31, 1996, we did not audit the financial statements of United
Defense, L.P., which statements reflect total assets constituting 13% in
1996 and 1995 and total revenues constituting 21%, 22% and 27%, in 1996,
1995 and 1994, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for United Defense, L.P., is based solely on the report of the
other auditors.
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 and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of the other
auditors, the accompanying consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of FMC Corporation and consolidated subsidiaries as of December 31, 1996
and 1995, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
January 17, 1997
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.
FMC maintains a system of internal control over financial reporting
and over safeguarding of assets against unauthorized acquisition, use or
disposition which is designed to provide reasonable assurance as to the
reliability of financial records and the safeguarding of such assets.
The system is maintained by the selection and training of qualified
personnel, by establishing and communicating sound accounting and
business policies, and by an internal auditing program that constantly
evaluates the adequacy and effectiveness of such internal controls,
policies and procedures.
The Audit Committee of the Board of Directors, composed of
directors who are not officers or employees of the company, meets
regularly with management, with the company's internal auditors, and
with its independent auditors to discuss their evaluation of internal
accounting controls and the quality of financial reporting. Both
independent auditors and the internal auditors have free access to the
Audit Committee to discuss the results of their audits.
The company's independent auditors have been engaged to render an
opinion on the consolidated financial statements. They review and make
appropriate tests of the data included in the financial statements. As
independent auditors, they also provide an objective, outside review of
management's performance in reporting operating results and financial
condition.
/s/ Michael J. Callahan /s/ Ronald D. Mambu
Michael J. Callahan Ronald D. Mambu
Executive Vice President Vice President
and Chief Financial Officer and Controller
Chicago, Illinois
January 17, 1997
54 Reports on Financial Statements
<PAGE>
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
Robert N. Burt 1,5
Chairman of the Board and
Chief Executive Officer
Larry D. Brady 4
President
B. A. Bridgewater, Jr. 1,2,5
Chairman of the Board,
President and Chief Executive Officer,
Brown Group, Inc.
Patricia A. Buffler 3,4
Dean, Professor of Epidemiology,
School of Public Health,
University of California, Berkeley
Albert J. Costello 2
Chairman, President and
Chief Executive Officer,
W.R. Grace & Co.
Paul L. Davies, Jr. 1,2
President,
Lakeside Corporation, a private real estate
investment company
Jean A.Francois-Poncet 4
Member of the French Senate
Pehr G. Gyllenhammar 3
Senior Advisor,
Lazard Freres & Co., Inc.,
former Managing Director and
Chief Executive Officer,
AB Volvo
Robert H. Malott 1,5
Chairman of the Executive Committee;
Retired Chairman of the Board and
Chief Executive Officer, FMC Corporation
Edward C. Meyer 1,4,5
Chairman,
GRC International, Inc.,
former Chief of Staff,
United States Army
William F. Reilly 2,3
Chairman and Chief Executive Officer,
K-III Communications Corporation
James R. Thompson 4,5
Former Governor of Illinois;
Chairman, Chairman of the Executive Committee,
and Partner Law Firm of Winston & Strawn
Clayton Yeutter 3,4
Of Counsel, Hogan & Hartson,
former U.S. Trade Representative,
and former Secretary,
U.S. Department of Agriculture
- -------------------------------------------------
1 Executive Committee
2 Compensation and Organization Committee
3 Audit Committee
4 Public Policy Committee
5 Nominating and Board Procedures Committee
OFFICERS
Robert N. Burt *
Chairman of the Board and
Chief Executive Officer
Larry D. Brady *
President
William F. Beck *
Executive Vice President
Michael J. Callahan *
Executive Vice President and
Chief Financial Officer
William J. Kirby *
Senior Vice President
J. Paul McGrath *
Senior Vice President and General Counsel
Alfredo Bernad
Vice President;
President, FMC Europe
Patricia D. Brozowski
Vice President
Communications
Charles H. Cannon, Jr.*
Vice President;
General Manager
Food Machinery Group
Robert L. Day
Corporate Secretary and Assistant General Counsel
Robert J. Fields
Vice President
Environment, Health, Safety
and Toxicology
W. Reginald Hall *
Vice President;
General Manager
Specialty Chemicals Group
Robert I. Harries *
Vice President;
General Manager
Chemical Products Group
Patrick J. Head *
Vice President
Henry Kahn *
Vice President and
Treasurer
Ronald D. Mambu *
Vice President and
Controller
James A. McClung *
Vice President
Worldwide Marketing
Michael W. Murray
Vice President
Human Resources
Joseph H. Netherland *
Vice President;
General Manager
Energy and Transportation
Equipment Group
Thomas W. Rabaut *
Vice President;
President and
Chief Executive Officer
United Defense, L.P.
Harold S. Russell
Vice President
Government Affairs
William H. Schumann*
Vice President;
General Manager
Agricultural Products Group
Peter E. Weber
Vice President;
President
FMC Latin America/
Middle East/Africa
William J. Wheeler *
Vice President
Chemical Development
*Executive Officer
FMC Annual Report 55
<PAGE>
TEN-YEAR FINANCIAL SUMMARY
(In millions, except share, per share, employee and stockholder data)
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUMMARY OF EARNINGS
- ----------------------------------------------------------------------------------------
Total revenue $5,080.6 4,507.7 3,989.3
- ----------------------------------------------------------------------------------------
Restructuring and other charges(1) $ -- 150.0 --
- ----------------------------------------------------------------------------------------
Total costs and expenses(1) $4,608.1 4,220.9 3,609.2
- ----------------------------------------------------------------------------------------
Income from continuing operations before interest, minority
interest, gain on sale of FMC Wyoming stock and taxes(1) $ 472.5 286.8 380.1
- ----------------------------------------------------------------------------------------
Gain on sale of FMC Wyoming stock (2) $ -- 99.7 --
- ----------------------------------------------------------------------------------------
Income from continuing operations before income taxes(1)(2) $ 322.6 253.2 261.7
Provision (benefit) for income taxes 104.5 35.7 85.5
- ----------------------------------------------------------------------------------------
Income from continuing operations(3) 218.1 217.5 176.2
Discontinued operations, net of taxes (7.4) (1.9) (2.8)
- ----------------------------------------------------------------------------------------
Income before extraordinary items and cumulative
effect of change in accounting principle(3) 210.7 215.6 173.4
Extraordinary items, net of taxes -- -- --
Cumulative effect of change in accounting principle,
net of taxes -- -- --
- ----------------------------------------------------------------------------------------
Net income (loss)(3) $ 210.7 215.6 173.4
- ----------------------------------------------------------------------------------------
Total dividends $ -- -- --
- ----------------------------------------------------------------------------------------
SHARE DATA
Average number of shares used in earnings per share
computations (thousands) 38,058 37,721 37,195
Earnings (loss) per share:
Continuing operations(3) $ 5.73 5.77 4.73
Discontinued operations (0.19) (0.05) (0.07)
Extraordinary items -- -- --
Cumulative effect of change in accounting principle -- -- --
- ----------------------------------------------------------------------------------------
Net income (loss)(3) $ 5.54 5.72 4.66
- ----------------------------------------------------------------------------------------
After-tax income per share from continuing operations
before special income and expense items(4) $ 5.73 5.68 4.73
- ----------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR-END
Total assets $4,989.8 4,232.5 3,272.0
Long-term debt (less current portion) $1,268.4 974.4 901.2
Stockholders' equity (deficit) $ 855.8 653.5 416.5
OTHER DATA
Income from continuing operations as a return on investment 11.8% 15.4 17.5
Capital expenditures $ 533.0 525.0 297.9
Provision for depreciation $ 234.0 211.5 205.2
Employees at year-end 22,048 21,961 21,159
Stockholders of record at year-end 11,339 11,844 12,438
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Includes pretax restructuring and other charges of $134.5 million in
1995 and $122.5 million in 1993, and a write-off of acquired
in-process research and development of $15.5 million in 1995.
(2) Includes a nontaxable gain on the sale of FMC Wyoming stock of $99.7
million in 1995.
(3) Includes after-tax restructuring and other charges, a write-off of
acquired in-process research and development and a gain on the sale
of FMC Wyoming stock of $3.5 million, net, after tax in 1995 ($0.09
per share); and restructuring and other charges of $(73.5) million
after tax in 1993 ($(1.99) per share).
(4) Supplemental financial information. Should not be considered in
isolation nor as an alternative for net income determined in
accordance with generally accepted accounting principles, or as the
sole measure of the company's profitability. Excludes after-tax
restructuring and other charges, a write-off of acquired in-process
research and development and a gain on the sale of FMC Wyoming stock
of $3.5 million, net, after tax in 1995 ($0.09 per share); and
restructuring and other charges of $(73.5) million after tax in 1993
($(1.99) per share).
56 Ten Year Financial Summary
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue 3,663.2 3,832.9 3,769.1 3,581.7 3,257.1 3,152.2 3,035.1
- ----------------------------------------------------------------------------------------------------------------------------------
Restructuring and other charges(1) 122.5 -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses(1) 3,520.2 3,503.0 3,427.3 3,315.7 2,989.9 2,896.1 2,791.7
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before interest, minority
interest, gain on sale of FMC Wyoming stock and taxes(1) 143.0 329.9 341.8 266.0 267.2 256.1 243.4
- ----------------------------------------------------------------------------------------------------------------------------------
Gain on sale of FMC Wyoming stock (2) -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes(1)(2) 80.5 246.8 229.0 136.2 122.4 102.0 149.8
Provision (benefit) for income taxes (3.0) 78.2 73.1 33.7 33.6 34.9 (0.8)
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations(3) 83.5 168.6 155.9 102.5 88.8 67.1 150.6
Discontinued operations, net of taxes (42.5) (49.2) 17.2 52.8 68.0 62.1 40.6
- ----------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items and cumulative
effect of change in accounting principle(3) 41.0 119.4 173.1 155.3 156.8 129.2 191.2
Extraordinary items, net of taxes (4.7) (11.4) (9.2) -- (20.4) -- (10.7)
Cumulative effect of change in accounting principle,
net of taxes -- (183.7) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss)(3) 36.3 (75.7) 163.9 155.3 136.4 129.2 180.5
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
SHARE DATA
Average number of shares used in earnings per share
computations (thousands) 36,943 36,796 36,267 36,075 36,006 35,860 42,108
Earnings (loss) per share:
Continuing operations(3) 2.26 4.58 4.30 2.84 2.46 1.87 3.58
Discontinued operations (1.15) (1.34) 0.47 1.46 1.89 1.73 0.96
Extraordinary items (0.13) (0.31) (0.25) -- (0.56) -- (0.25)
Cumulative effect of change in accounting principle -- (4.99) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss)(3) 0.98 (2.06) 4.52 4.30 3.79 3.60 4.29
- ----------------------------------------------------------------------------------------------------------------------------------
After-tax income per share from continuing operations
before special income and expense items(4) 4.25 4.58 4.30 2.84 2.46 1.87 3.58
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT YEAR-END
Total assets 2,770.8 2,770.1 2,697.1 2,885.3 2,783.7 2,721.5 2,576.3
Long-term debt (less current portion) 749.8 843.4 928.6 1,158.6 1,325.6 1,468.0 1,380.2
Stockholders' equity (deficit) 216.9 219.0 309.8 149.6 (70.6) (223.6) (343.2)
OTHER DATA
Income from continuing operations as a return on investment 11.7 18.7 17.1 14.1 14.0 13.7 13.8
Capital expenditures 225.9 295.4 196.5 304.5 257.2 166.3 151.9
Provision for depreciation 196.7 206.4 195.3 191.0 181.9 184.7 187.7
Employees at year-end 20,458 21,655 22,677 23,382 23,822 24,070 24,526
Stockholders of record at year-end 13,180 14,487 14,959 17,451 18,151 19,155 20,231
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FMC Annual Report Ten Year Financial Summary 57
<PAGE>
MAJOR OPERATING UNITS
PERFORMANCE CHEMICALS
Agricultural Products
Specialty Chemicals
Food Ingredients
Lithium
Pharmaceutical
Process Additives
BioProducts
INDUSTRIAL CHEMICALS
Chemical Products
Active Oxidants
Alkali Chemicals
FMC Foret, S.A.
Peroxygen Chemicals
Phosphorus Chemicals
MACHINERY AND EQUIPMENT
Energy and Transportation Equipment
Crosby Valve
Energy Transportation and Measurement
Petroleum Equipment and Systems
Smith Meter
SOFEC
Thermal Products
Airport Products and Systems
Material Handling Systems
Food Machinery
Agricultural Machinery
Citrus Systems
Food Processing Systems
Food Systems and Handling
Freezer
DEFENSE SYSTEMS
United Defense, L.P.
Armament Systems
Ground Systems
International
Steel Products
EXECUTIVE OFFICES
FMC Corporation
200 E. Randolph Drive
Chicago, Illinois 60601
Internet: www.fmc.com
SUBSIDIARIES AND AFFILIATES IN OTHER NATIONS
Argentina
FMC Argentina, S.A.
Minera Del Altiplano, S.A.
Australia
FMC (Australia), Ltd.
Frigoscandia Equipment Pty. Ltd.
Austria
FMC Chemikalien
Handelsgesellschaft m.b.H.
Bangladesh
FMC International A.G.
Barbados
Moorco Foreign Sales Corp.
UD United Defense International Sales Corporation
Belgium
FMC Europe N.V.
Bermuda
UDLP Components, Limited
Brazil
CBV Industria Mecanica, S.A.
Crosby Valve & Gage Participacoes Ltda.
FMC do Brasil, Ltda.
Frigoscandia Equipment Ltda.
Jetway Systems Equipamentos
Aeroportuarios Ltda.
Canada
FMC of Canada, Ltd.
FMC Offshore Canada Inc.
Crosby Valve Ltd.
Chile
FMC Corporation, Inc. Chile Limitada
Minera FMC Limitada
China
FMC Asia Pacific Inc.
FMC Hong Kong Limited
Fu Mei-Shi Crop Care Company, Ltd.
Huzou FMC Chemical Company, Ltd.
Colombia
FMC Latino America, S.A.
Czech Republic
FMC Czechiasro
Denmark
FMC A/S
Frigoscandia Equipment A/S
Egypt
FMC International, A.G.
France
FMC Europe, S.A.
FMC Food Machinery
FMC France S.A.
FMC Overseas, S.A.
Frigoscandia Equipment S.A.
Gabon
FMC Gabon, S.A.R.L.
Germany
FMC G.m.b.H.
Frigoscandia Equipment G.m.b.H.
Jetway G.m.b.H.
F.A. Sening G.m.b.H.
Smith Meter G.m.b.H.
Greece
FMC Hellas, EPE
FMC International, A.G.
Guatemala
FMC Guatemala, S.A.
Hong Kong
FMC Asia Pacific, Inc.
FMC Hong Kong Ltd.
Friendship Minerals and Chemicals, Ltd.
India
FMC Sanmar Limited
FMC Asia Pacific, Inc.
Indonesia
FMC Hong Kong Limited
P.T. Bina Guna Kimia Indonesia
P.T. FMC Santana Petroleum
Equipment Indonesia
Ireland
FMC International, A.G.
Italy
FMC Food Machinery Italy, S.p.A.
FMC Packaging Machinery, S.p.A.
Frigoscandia Equipment S.r.l.
Sandei S.r.l.
Japan
Asia Lithium Corporation
FMC Asia Pacific, Inc.
Honjo-FMC Energy Systems, Inc.
L.H. Company, Ltd.
Frigoscandia, K.K.
Kenya
FMC International, A.G.
Korea
FMC Korea Limited
UDLP International, Inc.
Malaysia
FMC Wellhead Equipment, Bhd.
FMC Petroleum Equipment (Malaysia) Sdn.
Bhd.
UDLP International, Inc.
Mexico
Electro Quimica Mexicana, S.A. de C.V.
E.M.D., S.A. de C.V.
EPN Arval S.A. de C.V.
Fabricacion, Maquinaria y Ceras,
S.A. de C.V.
FMC Agroquimica de Mexico
S. de R.L. de C.V.
FMC Ingrediantes Alimenticios
Netherlands
FMC Fluid Control (Nederland) B.V.
FMC Industrial Chemicals (Netherlands), B.V.
Norway
Kongsberg Offshore, A/S
Oman
FMC ETEG & Partners LLC
Pakistan
FMC International, S.A.
FMC United (Private) Ltd.
Panama
FMC Latino America S.A.
Philippines
FMC International, S.A.
Marine Colloids (Philippines) Inc.
Poland
FMC Corporation Poland
Russia
A/O FMC Overseas
A/O FMC Siberia Petroleum Equipment
Saudi Arabia
FMC Arabia
Singapore
Crosby Valve Pte. Ltd.
FMC Singapore Pte. Ltd.
FMC Southeast Asia Pte., Ltd.
Frigoscandia Equipment Pte. Ltd
Slovak Republic
FMC Slovakia S.R.D
South Africa
FMC (South Africa)(Proprietary) Ltd.
Spain
FMC Airline Equipment Europe, S.A.
FMC Spain, S.A.
FMC Foret, S.A.
Forel S.L.
Forsean, S.A.
Frigoscandia Equipment Iberica S.A.
Peroxidos Organicos, S.A.
Sibelco Espanola, S.A.
Valentin Herraiz, S.A.
Sweden
Frigoscandia Equipment Holding AB
Frigoscandia Equipment AB
Frigoscandia Equipment International AB
Frigoscandia Equipment Norden AB
Frigoscandia Freezer AB
Potato Processing Machinery AB
Switzerland
FMC International, A.G.
Taiwan
UDLP International, Inc.
Thailand
FMC Thailand Ltd.
Thai Peroxide Company, Ltd.
Turkey
FMC-Nurol Savunma Sanayii A.S.
Ukraine
FMC Kiev
FMC International, A.G.
United Arab Emirates
FMC International, S.A. (Dubai)
United Kingdom
FMC Corporation (UK), Ltd.
Frigoscandia Equipment Ltd.
Lewis Freezing Systems Ltd.
Potato Processing Machinery Ltd.
SOFEC, Ltd. (UK)
Uruguay
Lanfor Investment, S.A.
Venezuela
Tripoliven, C.A.
FMC Wellhead de Venezuela, S.A.
Virgin Islands
FMC International Sales Corporation
58
<PAGE>
STOCKHOLDER DATA
ANNUAL MEETING
OF STOCKHOLDERS
FMC's annual meeting of
stockholders will be held at
2 p.m. on Friday, April 18,
1997, at 200 E. Randolph
Drive, Chicago.
Notice of the meeting, together
with proxy material, will be mailed
approximately 40 days prior to the
meeting to stockholders of record
as of February 27, 1997.
TRANSFER AGENT AND REGISTRAR
OF STOCK
Harris Trust and Savings Bank
P.O. Box 755
Chicago, Illinois 60690
Questions concerning FMC
common stock should be sent
to the above address.
STOCK EXCHANGE LISTING
New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
STOCK EXCHANGE SYMBOL
FMC
FORM 10-K
A copy of the company's
annual report to the Securities
and Exchange Commission
on Form 10-K for 1996 is
available upon written
request to:
FMC Corporation
Communications Department
200 E. Randolph Drive
Chicago, Illinois 60601
However, most information
required under Parts II and
III of Form 10-K has been
incorporated by reference to
the annual report to
stockholders or the proxy
statement.
FMC was incorporated in
Delaware in 1928.
Italicized brand names used throughout this report are trademarks of FMC
Corporation or its subsidiaries. (C) 1997 FMC Corporation.
FMC Annual Report 59
<PAGE>
FMC
FMC Corporation
200 East Randolph Drive
Chicago, Illinois 60601
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES OF REGISTRANT
December 31, 1996
<TABLE>
<CAPTION>
Percent of
Organized Voting
Under Securities
Company(1) Laws of Owned(2)
- ------- ------- -----
<S> <C> <C>
FMC Corporation Delaware Registrant
FMC Corporation (UK) Limited England 100
FMC Europe, S.A. France 100
FMC Wyoming Corporation Delaware 80
Food Machinery Holding Company B.V. Spain 100
Foret, S.A. Spain 100
Frigoscandia Equipment Holding AB Sweden 100
Intermountain Research & Development Wyoming 100
Corporation
FMC Do Brasil Ltda. Brazil 100
FMC International, A.G. Switzerland 100
Kongsberg Offshore, A/S Norway 100
Minera Del Altiplano S.A. Argentina 100
Moorco International Inc. Delaware 100
United Defense, L.P. Delaware 60
</TABLE>
- --------------------
(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>
Exhibit 23.1
Consent of KPMG Peat Marwick LLP
The Board of Directors
FMC Corporation:
We consent to incorporation by reference in Registration Statement Nos. 33-7749,
33-10661 and 333-18383 on Form S-8 and Registration Statement Nos. 33-45648 and
33-62415 on Form S-3 of FMC Corporation and consolidated subsidiaries of our
report dated January 17, 1997, relating to the consolidated balance sheets of
FMC Corporation and consolidated subsidiaries as of December 31, 1996 and 1995,
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, 1996 which report is incorporated by reference in the December 31,
1996 annual report on Form 10-K of FMC Corporation and consolidated
subsidiaries.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
March 24, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of FMC Corporation and in the related Prospectuses of our report
dated January 15, 1997 with respect to the financial statements of United
Defense, L.P. included in this Annual Report (Form 10-K) for the year ended
December 31, 1996:
Form S-3 Registration Statement (Registration No. 33-62415)
Form S-3 Registration Statement (Registration No. 33-45648)
Form S-8 Registration Statement (Registration No. 33-10661)
Form S-8 Registration Statement (Registration No. 33-7749)
Form S-8 Registration Statement (Registration No. 333-18383)
/s/ Ernst & Young LLP
----------------------------------------
ERNST & YOUNG LLP
Washington, D.C.
March 20, 1997
<PAGE>
Exhibit 24
FMC Corporation
Executive Offices
200 East Randolph Drive
Chicago, Illinois 60601
312 861 6000
[LOGO]
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, FMC CORPORATION, a Delaware corporation (hereinafter referred to
as the "Company"), proposes to file with the Securities and Exchange Commission
an Annual Report on Form 10-K for the year ended December 31, 1996 under the
Securities and Exchange Act of 1934, as amended; 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 M.J.
Callahan, J.P. McGrath, R.L. Day and C.M. Smith or any of them, his attorney for
him or her and in his or her name, place and stead, and in each of his or her
offices and capacities in the Company as may now or hereafter exist, to sign and
file said Form 10-K and any and all amendments, schedules and exhibits 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 or
she 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 or her hand as of
the 14th day of February, 1997.
-----------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
FMC Corporation Form 10-K for the year ended December 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 75
<SECURITIES> 0
<RECEIVABLES> 1013
<ALLOWANCES> 11
<INVENTORY> 835
<CURRENT-ASSETS> 2193
<PP&E> 4284
<DEPRECIATION> 2325
<TOTAL-ASSETS> 4990
<CURRENT-LIABILITIES> 2021
<BONDS> 1268
0
0
<COMMON> 4
<OTHER-SE> 852
<TOTAL-LIABILITY-AND-EQUITY> 4990
<SALES> 4970
<TOTAL-REVENUES> 5081
<CGS> 3726
<TOTAL-COSTS> 3726
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 323<F1>
<INCOME-TAX> 105
<INCOME-CONTINUING> 218
<DISCONTINUED> (7)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> 5.54
<EPS-DILUTED> 0
<FN>
<F1> Income from continuing operations before income taxes includes minority
interests of 57 for December 31, 1996. Minority interests are primarily
limited partner's share of partnership profits for which tax has not been
provided.
</FN>
</TABLE>
<PAGE>
Exhibit 99
Report of Ernst & Young LLP, Independent Auditors
Partners
United Defense, L.P.
We have audited the accompanying balance sheets of United Defense, L.P. as of
December 31, 1996 and 1995, and the related statements of income, partners'
capital, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly, in
all material respects, the financial position of United Defense, L.P. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Washington, DC
January 15, 1997
