-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, evdS7buGXoWgdQxXlI8KU7OMHXccMGxG+HKHBgrz/UljDe9vE1PeDoF4bIjbUkW1 tt2qcAdlbNGxH4IuRpCfFA== 0000037785-94-000016.txt : 19940823 0000037785-94-000016.hdr.sgml : 19940823 ACCESSION NUMBER: 0000037785-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: 2800 IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02376 FILM NUMBER: 94543456 BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128616000 FORMER COMPANY: FORMER CONFORMED NAME: BEAN SPRAY PUMP CO DATE OF NAME CHANGE: 19670706 FORMER COMPANY: FORMER CONFORMED NAME: FOOD MACHINERY & CHEMICAL CORP DATE OF NAME CHANGE: 19670706 10-Q 1 [TYPE] 10-Q (NOTIFY) 72731,347 (CONTACT-NAME) David A. Kain (CONTACT-PHONE) (312) 861-6050 PAGE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1994 or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from-------- to--------- Commission File Number 1-2376 FMC Corporation -------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 94-0479804 ---------------------------------------------------- - - ---- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 East Randolph Drive, Chicago, Illinois 60601 ----------------------------------------------------- - - ----- (312) 861-6000 ------------------------------------ (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 30, 1994 - - --------------------------------------- ---------------------------- Common Stock, par value $0.10 per share 36,375,206 PAGE 2 PART I - FINANCIAL INFORMATION ITEM 1.FINANCIAL STATEMENTS FMC Corporation and Consolidated Subsidiaries Consolidated Statements of Income (Unaudited) (In thousands, except per share data) Three Months Six Months Ended June 30 Ended June 30 1994 1993 1994 1993 Revenue: Sales $1,053,764 $979,290 $1,962,064 $1,880,952 Equity in net earnings of affiliates 1,849 1,342 3,502 2,941 Other revenue 7,715 11,497 26,124 13,655 Total revenue 1,063,328 992,129 1,991,690 1,897,548 Costs and expenses: Cost of sales 748,772 727,219 1,403,689 1,393,348 Selling, general and administrative expenses 146,476 131,122 288,918 259,781 Research and development 38,860 36,038 77,042 69,613 Other (income) and expense, net (4,693) (3,851) (9,385) (5,131) Total costs and expenses 929,415 890,528 1,760,264 1,717,611 Earnings before interest, minority interests, and taxes 133,913 101,601 231,426 179,937 Minority interests 20,274 117 35,199 746 Interest income 2,080 3,006 3,674 5,479 Interest expense 16,723 19,675 33,130 38,095 Income before income taxes 98,996 84,815 166,771 146,575 Provision for income taxes 31,679 22,261 53,367 38,581 Income before extraordinary item 67,317 62,554 113,404 107,994 Extraordinary item related to debt refinancing, net of taxes (Note 3) - (4,683) - (4,683) Net Income $ 67,317 $ 57,871 $ 113,404 $ 103,311 Average number of shares: Primary 37,070 36,913 37,049 36,917 Fully diluted 37,101 39,782 37,074 39,790 Earnings per common share: Primary: Income before extraordinary item $ 1.82 $ 1.69 $ 3.06 $ 2.93 Extraordinary item - (0.13) - (0.13) Net income $ 1.82 $ 1.56 $ 3.06 $ 2.80 Fully diluted: Income before extraordinary item $ 1.81 $ 1.62 $ 3.06 $ 2.81 Extraordinary item - (0.12) - (0.12) Net income $ 1.81 $ 1.50 $ 3.06 $ 2.69 See accompanying notes to consolidated financial statements. PAGE 3 FMC Corporation and Consolidated Subsidiaries Consolidated Balance Sheets (In thousands, except per share data) June 30 1994 December 31 Assets: (Unaudited) 1993 Current assets: Cash $ 24,664 $ 20,450 Marketable securities 41,829 57,071 Trade receivables, net of allowance for doubtful accounts of $8,960 and $6,777 in 1994 and 1993, respectively 701,101 573,181 Inventories 447,029 268,107 Other current assets 182,456 143,439 Deferred income taxes 115,263 129,479 Total current assets 1,512,342 1,191,727 Investments and other 114,858 76,197 Property, plant and equipment 3,709,653 3,498,394 Less -- accumulated depreciation 2,258,547 2,108,145 Net property, plant and equipment 1,451,106 1,390,249 Patents, deferred charges, and intangibles of acquired companies 153,843 91,741 Deferred income taxes 82,876 95,199 Total assets $3,315,025 $2,845,113 Liabilities and Stockholders' Equity Current liabilities: Short-term debt $ 61,159 $ 66,904 Accounts payable, trade and other 627,178 501,163 Accrued and other liabilities 555,772 481,357 Current portion of long-term debt 17,819 15,029 Current portion of accrued pension and other postretirement benefits 35,000 37,119 Income taxes payable 89,025 86,432 Total current liabilities 1,385,953 1,188,004 Long-term debt, less current portion 869,119 749,855 Accrued pension and other postretirement benefits, less current portion 302,845 302,725 Reserve for discontinued operations and restructuring 307,524 344,267 Minority interests in consolidated companies 113,178 43,379 Stockholders' equity: Common stock, $0.10 par value, authorized 60,000,000 shares; issued 36,672,049 shares in 1994 and 36,472,641 shares in 1993 3,667 3,647 Capital in excess of par value of capital stock 85,800 79,582 Retained earnings 320,537 207,133 Foreign currency translation adjustment (64,630) (64,766) Treasury stock, common, at cost; 296,843 shares in 1994 and 292,018 shares in 1993 (8,968) (8,713) Total stockholders' equity 336,406 216,883 Total liabilities and stockholders' equity $3,315,025 $2,845,113 See accompanying notes to consolidated financial statements. PAGE 4 FMC Corporation and Consolidated Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Six Months Ended June 30 1994 1993 Reconciliation from income before extraordinary item to cash provided by operating activities: Income before extraordinary item: $ 113,404 $ 107,994 Adjustments for non-cash components: Depreciation and amortization 109,515 112,791 Deferred income taxes 24,959 (1,309) Equity in net earnings of affiliates (3,502) (2,941) Amortization of accrued pension costs (5,763) (2,562) Interest on zero-coupon senior subordinated convertible debentures - 6,060 Minority interests 35,199 746 Other (29,575) (25,418) 244,237 195,361 Tax benefit of extraordinary item - 2,664 (Increase) in assets Trade receivables (121,411) (59,373) Inventories (92,107) (314,211) Other current assets (38,122) (14,551) (Decrease) increase in liabilities Accounts payable and accruals 89,238 288,516 Income taxes payable 2,512 3,363 Restructuring reserve (22,074) - Accrued pension and other postretirement benefits, net (5,378) (4,830) (187,342) (101,086) Cash provided by operating activities $ 56,895 $ 96,939 Supplemental disclosure of cash flow information Cash paid for interest was $35.2 million and $35.9 million, and cash paid for income taxes, net of refunds, was $22.8 million and $24.7 million for the six-month periods ended June 30, 1994 and 1993, respectively. See accompanying notes to consolidated financial statements. PAGE 5 FMC Corporation and Consolidated Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Six Months Ended June 30 1994 1993 Cash provided by operating activities $ 56,895 $ 96,939 Cash required by discontinued operations (13,089) (5,554) Cash provided (required) by investing activities: Capital spending (118,281) (93,010) Disposal of property, plant and equipment 6,009 5,151 (Increase) decrease in investments and other (35,159) 11,280 (147,431) (76,579) Cash provided (required) by financing activities: Increase (decrease) in short-term debt (5,745) (22,335) Net borrowings under credit facilities 154,000 210,000 Proceeds from issuance of other long-term debt 51,398 - Repayment of other long-term debt (83,344) (88,039) Distributions to limited partner (30,861) - Premium on early retirement of debt - (553) Issuance of capital stock, net 5,983 2,285 91,431 101,358 Effect of exchange rate changes on cash 1,166 (4,515) Increase (decrease) in cash and marketable securities (11,028) 111,649 Cash and marketable securities, beginning of year 77,521 24,278 Cash and marketable securities, end of period $ 66,493 $ 135,927 See accompanying notes to consolidated financial statements. PAGE 6 FMC Corporation and Consolidated Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 1: Financial information The consolidated balance sheet at June 30, 1994, and the related statements of income and cash flows for the interim periods ended June 30, 1994 and 1993 have been reviewed by FMC's independent auditors. The review is discussed more fully in their report included herein. In the opinion of management, such financial statements have been prepared in conformity with generally accepted accounting principles and reflect all adjustments necessary for a fair statement of the results of operations for the interim periods. All such adjustments are of a normal recurring nature. The results of operations for the three and six-month periods ended June 30, 1994 and 1993 are not necessarily indicative of the results of operations for the full year. At December 31, 1993, reserves for potential environmental obligations were recorded net of $54 million in recoveries, including recoveries from insurance companies, the federal government and other potentially responsible parties. Beginning in 1994, recoveries, excluding those relating to discontinued operations, are recorded as an asset and those relating to discontinued operations remain recorded in the reserve for discontinued operations and restructuring. At June 30, 1994, recoveries of $32 million and $18 million, are recorded as an asset and as an offset to the reserve for discontinued operations and restructuring, respectively. Recoveries will continue to be recorded when probable and reasonably estimable. Certain prior period balances have been reclassified to conform with the current period's presentation. The accounting policies followed by the company are set forth in Note 1 to the company's financial statements in the 1993 FMC Corporation Annual Report, which is incorporated by reference in Form 10-K. Note 2: Other income and expense, net Other income and expense, net in the three-month periods ended June 30, 1994 and 1993 includes pension-related income of $2.9 million and $1.4 million, respectively, and LIFO-related income of $1.8 million and $2.5 million ($0.03 and $0.04 per share), respectively. Other income and expense, net in the six-month periods ended June 30, 1994 and 1993 includes pension-related income of $5.8 million and $2.6 million, respectively, and LIFO-related income of $3.6 million and $2.6 million ($0.06 and $0.04 per share), respectively. Note 3: Long-term debt Advances under uncommitted credit facilities were $49 million at June 30, 1994. Committed credit available under the Revolving Credit Agreement provides management with the ability to refinance this debt, and certain subsidiary debt, on a long-term basis. Since it is management's intent to do so, advances under the uncommitted and committed facilities, and certain subsidiary debt, have been classified as long-term debt in the accompanying consolidated balance sheets. PAGE 7 On June 1, 1994, Sweetwater County, Wyoming issued $45 million of Solid Waste Disposal Revenue Bonds. The proceeds were loaned to the company pursuant to a Loan Agreement dated June 1, 1994 which includes an interest rate of 7 percent payable semi-annually through maturity, June 1, 2024. The Loan proceeds are recorded in investments and will be used to fund a soda ash business capital project which is more fully described in Management's Discussion and Analysis of Financial Condition and Results of Operations. During the first quarter of 1994, the company modified its Revolving Credit Agreement whereby the maximum credit limit was reduced from $700 million to $500 million. On April 25, 1994 FMC further modified its Revolving Credit Agreement whereby the maximum credit limit was reduced from $500 million to $250 million. Also on April 25, the company entered into a new 364 day Revolving Credit Agreement with a maximum credit limit of $250 million. Terms of the new agreement are virtually identical to those of the previous $700 million agreement. During the first half of 1993, the company repurchased $15 million, less unamortized discount of $11 million, of 7- 1/2% zero coupon senior subordinated convertible debentures with an original maturity date of 2011, $32 million of 7-1/2% sinking fund debentures, originally due 2001, and $19 million of industrial revenue bonds. In addition, the company called for the redemption, in August 1993, of all of its outstanding 20- year, zero coupon senior subordinated convertible debentures, due 2011. The outstanding principal balance was approximately $170 million at June 30, 1993. As a result of the write-off of unamortized debt issue costs, as well as other costs and expenses included, the company incurred an extraordinary charge of $4.7 million, net of tax benefits of $2.7 million. Note 4: Acquisitions On June 24, 1994, the company acquired the Fluid Control Systems product line from National-Oilwell, a Houston- based oil field equipment company. The Fluid Control 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. Fluid Control Systems will be part of the Fluid Control division within the Energy and Transportation Equipment Group. On May 27, 1994, the company acquired the Jetway Systems Division of Pneumo-Abex Inc. Jetway is a leader in design, production and installation of passenger boarding bridges and other aircraft support systems. Jetway Systems will be part of the Airline Equipment Division within the Energy and Transportation Equipment Group. On June 30, 1993, the company acquired the assets of Kongsberg Offshore a.s., a wholly owned subsidiary of Siemens a.s. Kongsberg Offshore a.s. provides subsea and metering systems on a worldwide basis as well as turnkey subsea systems, including systems integration, project management and FMC subsea products. PAGE 8 Also on June 30, 1993, the company acquired SOFEC, Inc., a Houston based engineering and construction company. SOFEC, Inc., is an engineering and construction company that designs, fabricates and installs offshore mooring systems for export and import terminals and for floating storage and production facilities for offshore oil and gas. In April 1993, FMC Gold Company purchased the remaining 50% interest in the Humboldt Gold joint venture from TRE Management Company, bringing FMC Gold's ownership interest in all gold and precious metal-bearing ores in the related property to 100%. As part of the transaction, FMC Gold also obtained certain water rights associated with the property. The purchase prices for the aforementioned acquisitions were satisfied from operations supplemented with cash, marketable securities, and long-term financing. The company has accounted for these acquisitions by the purchase method. Note 5: Accounting Standards Adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" was adopted by the company effective January 1, 1994. Statement No. 112 requires accrual of the expected cost of providing certain benefits to former or inactive employees after employment but before retirement. The effect of adoption was not material, and accordingly, has been included as part of costs and expenses. Note 6: Formation of United Defense, L.P. On January 28, 1994, FMC and Harsco Corporation ("Harsco") announced completion of a series of agreements, first announced in December 1992, to combine certain assets and liabilities of FMC's Defense Systems Group ("DSG") and Harsco's BMY Combat Systems Division ("BMY"). The effective date of the combination was January 1, 1994. The combined company, United Defense, L. P. ("UDLP"), will operate as a limited partnership, with FMC as the Managing General Partner with a 60 percent equity interest and Harsco Defense Holding as the Limited Partner holding a 40 percent equity interest. Beginning in the first quarter 1994, all sales and earnings of UDLP are included in FMC's consolidated financial statements. The limited partner's share of the partnership's earnings are included in minority interest. Sales and profits for 1994 versus 1993 are affected by the formation of the venture. All of the assets and liabilities of UDLP are also consolidated in the balance sheet resulting in increases to trade receivables, inventories, deferred charges, accounts payable, and minority interests. PAGE 9 The following summary, prepared on a pro forma basis, combines the operating results of FMC and BMY as if the combination had occurred on January 1, 1993. The pro forma earnings include amortization of an intangible asset and a minority interest in UDLP for Harsco's equity interest. The pro forma operating results are not necessarily indicative of what would have occurred had the combination actually taken place on January 1, 1993. Three Months Six Months (Dollars in millions, Ended Ended except per share June 30, June 30, amounts) 1993 1993 Revenue 1,085 2,084 Net Income 62 102 Earnings per common share: Primary 1.68 2.76 Fully diluted 1.61 2.66 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION As of June 30, 1994, the company had advances under uncommitted facilities of $49 million. It is the company's practice to maintain unused credit availability under the Revolving Credit Agreements at least equal to the amount of advances under uncommitted facilities. As of June 30, 1994, the company's committed credit line under the Revolving Credit Agreements exceeded committed and uncommitted facility borrowings by $346 million. Certain balance sheet accounts including Trade Receivables, Inventories, Deferred Charges, and Accounts Payable at June 30, 1994 have increased compared to December 31, 1993 primarily due to the formation of United Defense, L.P., acquisitions, and the cyclical nature of certain businesses. On June 1, 1994, Sweetwater County, Wyoming issued $45 million of Solid Waste Disposal Revenue Bonds. The proceeds were loaned to the company pursuant to a Loan Agreement dated June 1, 1994 which includes an interest rate of 7 percent payable semi-annually through maturity, June 1, 2024. The Loan proceeds are recorded in investments and will be used to fund a soda ash business capital project which is more fully described below. PAGE 10 Spending charged to the restructuring reserve, primarily for severance, downsizing, consolidations, and product line rationalizations was $13 million in the second quarter and $22 million year-to-date. In the second quarter, the company initiated the planned program to reduce functional support staff across the company. The company is targeting to reduce functional staffing levels by approximately 1,000 positions and is expected to be largely completed by year-end 1994. The costs associated with this reduction were included in the $172.3 million restructuring reserve provided in 1993. In the second quarter, the company continued severance and downsizing activities in the industrial chemicals and machinery and equipment segments. Projected cash requirements for the remainder of 1994 are approximately $25-30 million for severance, downsizing and other restructuring related costs. Total spending is unchanged from prior estimates. The company estimates the restructuring efforts will reduce cost levels an average of $70 million per year in 1995 and 1996. On May 4, 1994 FMC Gold Company, an 80% owned subsidiary of FMC, announced plans to invest $57 million to develop the Beartrack property located near Salmon, Idaho. The decision to proceed with the development was based largely on improved project economics and issuance of a biological opinion by the National Marine Fisheries Service (NMFS) that the proposed Beartrack mine was "not likely to jeopardize" the continued existence of the Snake River salmon. By letter dated July 14, 1994, the Sierra Club Legal Defense Fund, Inc., ("Sierra"), on behalf of itself and certain other organizations, gave NMFS and other federal agencies a statutorily required sixty-day notice of intent to sue for violation of the Endangered Species Act (the "Act") alleging that NMFS' biological opinion failed to satisfy the requirements of the Act. The company believes that the biological opinion was carefully considered and fully supported by the record and intends to continue development of Beartrack. The Beartrack property encompasses approximately 30 square miles of mining claims and contains approximately one million ounces of proven and probable reserves. During the first half of 1994, FMC announced the first phase of a major investment in the soda ash business. The $90 million investment is expected to lower soda ash production costs at FMC's Green River facility through a new proprietary manufacturing technology, thereby providing the company with a competitive operating advantage. This investment also positions FMC for an economic capacity expansion when market conditions improve. During the first half of 1994, FMC announced a major investment to develop a lithium resource in Argentina, which will combine a high-quality brine resource with new extraction technologies. Development of this resource is expected to improve FMC's competitive position, particularly in the specialty lithium compound markets, where growth efforts are focused. PAGE 11 Expected cash requirements for the remainder of 1994 include approximately $150-225 million for planned capital expenditures and potential acquisitions, and net after-tax interest payments of approximately $20 million based on current debt levels. Cash to meet these requirements is expected to be provided by the company's operations supplemented, if necessary, with cash balances and available credit facilities. RESULTS OF OPERATIONS Second quarter 1994 compared to second quarter 1993 Industry Segment Data (Unaudited) (Dollars in millions) Three Months Ended June 30 1994 1993 Sales Industrial Chemicals (1) $ 220.5 $227.0 Performance Chemicals (1) 298.9 293.9 Precious Metals 16.9 32.9 Defense Systems 282.6 235.0 Machinery and Equipment 242.6 203.8 Eliminations (7.7) (13.3) $1,053.8 $979.3 Income before taxes Industrial Chemicals(1) $28.8 $ 19.4 Performance Chemicals(1) 66.3 66.4 Precious Metals (3.1) 1.9 Defense Systems 52.6 37.2 Machinery and Equipment 10.6 4.2 Operating profit 155.2 129.1 Corporate and other (26.0) (31.4) Net interest expense (14.6) (16.7) Other income and (expense), net 4.7 3.9 Minority interests (2) (20.3) (0.1) Total $ 99.0 $ 84.8 (1) Certain chemical products with high value-added content and specialty applications that formerly had been included in the Industrial Chemicals segment have been reclassified to the Performance Chemicals segment. Results for both Industrial and Performance Chemicals have been restated for comparative reporting purposes. (2) Minority interests relates primarily to Defense Systems (19.7) and Precious Metals (0.1) in 1994 and Precious Metals in 1993. PAGE 12 Sales of $1,054 million in the second quarter of 1994 increased 8 percent compared with the prior-year quarter, primarily due to increases in the Defense Systems, Energy and Transportation Equipment and Specialty Chemical businesses, partially offset by expected declines in Precious Metals. Earnings before interest and taxes increased 12 percent to $114 million compared with $102 million in the prior-year quarter. Strong results from Machinery and Equipment, improving European chemical operations and cost paring within Industrial Chemicals, combined with reduced corporate overhead, more than offset the expected declines in Defense and Precious Metals. Net interest expense of $15 million fell 12 percent in the quarter due to lower debt balances and successful refinancing in the second half of 1993. Income before extraordinary item of $67 million compared with $63 million in the second quarter of 1993. Primary earnings per share were $1.82 compared with $1.69 last year. After an extraordinary charge of $5 million related to debt refinancing, 1993 second quarter net income was $58 million, or $1.56 per share. Industrial Chemicals sales of $221 million decreased 3 percent compared with last year's quarter. FMC's European chemical operations results reflected stronger volumes and improved pricing across most product lines, partially offset by lower soda ash pricing and volumes and the expected continued decline of phosphorus volumes in the home laundry detergent market. Market conditions in Industrial Chemicals are improving. In particular, the continued strong demand for hydrogen peroxide and the recent increase in caustic soda prices may positively affect FMC's results beginning in 1995. Profits of $29 million for the segment were higher, reflecting the improved performance of the European chemical operations and cost-paring throughout the segment in 1994. Performance Chemicals record sales of $299 million increased 2 percent, compared with strong results of $294 million in last year's period. Results benefited from the continuing growth of fat substitutes in food applications, new formulations for the over-the-counter pharmaceutical market, and a recovery in the domestic market for lithium products. In addition, strong volumes of agricultural chemicals in the North American market compared well with record results in last year's quarter. Profits of $66 million were even with last year, despite significantly stepped-up research and development expenses to support the commercialization of a new class of herbicides, substantially higher sales and marketing expenses to expand the global market positions of the food ingredients and pharmaceutical businesses, and spending to develop a new, high-quality lithium brine resource in Argentina. As expected, Precious Metals sales of $17 million declined compared with last year's second quarter results of $33 million. The segment posted a loss of $3.1 million, reflecting the closing of the Paradise Peak mine in 1993, the higher costs of mining activity at Jerritt Canyon, and continued exploration spending. PAGE 13 Defense Systems sales of $283 million increased 20 percent from $235 million in last year's quarter. The 100 percent consolidation of United Defense, L.P. more than offset the expected production declines in Ground and Armament Systems. Profits (after the limited partner's share of United Defense earnings) totaled $33 million in the 1994 second quarter. The profits primarily reflect a more profitable mix of business and favorable cost performance. Defense backlog was at $1.3 billion at the end of the quarter, up from $1.1 billion at the beginning of the year, reflecting the formation of United Defense. The joint venture in Turkey to produce armored fighting vehicles for the Turkish army has encountered delays in the acceptance of vehicles. Negotiations with the customer involving contract disputes are continuing. This joint venture is accounted for as an investment and income is recognized as dividends, royalties, and technical fees are received. Machinery and Equipment sales of $243 million increased 19 percent, reflecting the successful integration and growth of recent oil field services acquisitions, as well as market share gains in the energy equipment business. The North American market for Food Machinery products, including packaging and material handling equipment, harvesters and food processing systems, has strengthened. However, Europe, a major market for FMC products, remains weak. Profits of $11 million were up significantly from $4 million last year on the strength of sales gains in the Energy and Transportation businesses and improved manufacturing efficiencies and cost structure in the Food Machinery businesses. Machinery and Equipment backlog was $499 million at the end of the quarter, up from $333 million from the beginning of the year due to recently completed acquisitions. On June 20, 1994, FMC completed the sale of its palletizer product line to Simplimatic Engineering Company, a Lynchburg, Va. based product handling and automation subsidiary of Paris-based CarnaudMetalbox. Certain corporate income and expense items are not allocated to specific business segments due to their nature. Such items resulted in lower net expense compared to the prior-year period due primarily to the company's cost saving efforts. The effective tax rates for the quarters ended June 30, 1994 and 1993 were 32 percent and 26 percent, respectively. The increase is primarily due to lower 1994 depletion benefits and higher taxes on repatriated earnings. PAGE 14 Six months 1994 compared to six months 1993 Industry Segment Data (Unaudited) (Dollars in millions) Six Months Ended June 30 1994 1993 Sales Industrial Chemicals (1) $ 418.2 $435.9 Performance Chemicals (1) 549.5 528.0 Precious Metals 38.7 72.6 Defense Systems 525.4 468.0 Machinery and Equipment 445.2 393.3 Eliminations (14.9) (16.8) $1,962.1 $1,881.0 Income before taxes Industrial Chemicals(1) $ 63.6 $ 36.7 Performance Chemicals(1) 104.2 105.6 Precious Metals (0.3) 8.2 Defense Systems 88.4 75.7 Machinery and Equipment 18.8 6.8 Operating profit 274.7 233.0 Corporate and other $ (52.6) (58.2) Net interest expense (29.5) (32.6) Other income and (expense), net 9.4 5.1 Minority interest (2) (35.2) (0.7) Total $ 166.8 $ 146.6 (1) Certain chemical products with high value-added content and specialty applications that formerly had been included in the Industrial Chemicals segment have been reclassified to the Performance Chemicals segment. Results for both Industrial and Performance Chemicals have been restated for comparative reporting purposes. (2) Minority interests relates primarily to Defense Systems (33.5) and Precious Metals (0.9) in 1994 and Precious Metals in 1993. Sales of $2.0 billion in the first half of 1994 increased 4 percent from $1.9 billion in the 1993 period. Earnings of $196 million before interest and taxes increased 10 percent compared with the first half of 1993. Strong growth at Performance Chemicals, improved manufacturing efficiencies and cost improvements at Industrial Chemicals, and the successful integration of acquisitions and growth at Machinery and Equipment more than offset the expected declines in Defense and Precious Metals. Corporate and other expenses of $53 million declined 9 percent, reflecting the company's cost-savings efforts. Net interest expense declined 9 percent to $30 million, reflecting lower debt balances and successful refinancing in 1993. For the first six months of 1994, income before extraordinary items increased 5 percent to $113 million. PAGE 15 Primary earnings per share were $3.06 compared with $2.93 per share last year. After extraordinary items related to debt refinancing, net income for the first half of 1993 was $103 million or $2.80 per share. Industrial Chemicals sales of $418 million declined 4 percent in the first half of 1994 as compared to the year ago period. Despite a decline in sales, profits of $64 million increased significantly compared with $37 million last year. Profits benefited from improved performance of the European chemical operations, strong growth at Peroxygen, improved manufacturing efficiencies, and cost-paring throughout the segment. These favorable impacts were partially offset by lower soda ash pricing and volumes and the expected continued decline of phosphorus volumes in the home laundry detergent market. Performance Chemicals sales of $549 million rose 4 percent compared with $528 million in last year's period. Results benefited from continued strong growth in existing and new applications for food ingredients products, a recovery in the domestic market for lithium products, higher volumes and new formulations for pharmaceutical ingredients used in over-the-counter medications and strong agricultural chemicals volumes throughout North America. Despite significantly higher research, marketing and sales spending to support the commercialization of two new herbicides and the future growth of the pharmaceutical and food ingredients businesses, profits of $104 million remained strong compared with $106 million in last year's quarter. Precious Metals sales of $39 million declined from sales of $73 million in last year's period and a loss of $0.3 million was recognized in contrast to profits of $8 million in last year's period. The closure of the Paradise Peak mine in 1993, higher costs of mining activity at Jerritt Canyon, and continued exploration spending contributed to the segment's reduced profitability. PAGE 16 Defense Systems sales were $525 million for the first half of 1994 compared to $468 million for the same period last year. The consolidation of United Defense, L.P. more than offset the expected production declines in Ground and Armament Systems. Profits (after the limited partner's share of United Defense earnings) totaled $55 million in the first half of 1994 as compared to profits of $76 million for the same period in 1993. The lower profits primarily reflect the reduced production rate of Bradley Fighting Vehicles and the shutdown of the Vertical Launching Systems production line in fourth quarter 1993, partially offset by a more profitable mix of business and improved cost performance. Defense backlog stood at $1.3 billion at the end of the quarter, up from $1.1 billion at the beginning of the year, reflecting the formation of United Defense. As announced during the first half of 1994, UDLP was designated by the Department of the Army to be the prime contractor and systems integrator for the Bradley Modernization Program. As prime contractor, UDLP is strategically positioned to lead the design and development of the electronic system to improve fire control and integrate communications hardware and software on the battlefield. Machinery and Equipment sales of $445 million rose 13 percent from $393 million, and profits increased to $19 million from $7 million. Results benefited from winning major international contracts that resulted in higher volumes of wellheads, trees and subsea equipment compared with last year's period. Results also benefited from the successful integration and growth of recent oil field services acquisitions, as well as market share gains in the energy equipment business and an improving North American market for Food Machinery products. During the first half of 1994, the Energy business established a joint venture in Oman, shipped its first product from a new joint venture in Russia, and with its Brazilian partner, completed construction of the world's deepest subsea well. Food Machinery sales remained flat during the first half of 1994 as several of our food machinery markets, particularly in Europe, showed no signs of recovery. However, profits increased in the first half of 1994 compared to 1993 due to continued cost-cutting and improved manufacturing efficiencies throughout the businesses. Machinery and Equipment backlog stood at $499 million at the end of the quarter, up from $333 million at the beginning of the year due to recently completed acquisitions. The effective tax rates for the six-month periods ended June 30, 1994 and 1993 were 32 percent and 26 percent, respectively. The increase is primarily due to lower 1994 depletion benefits and higher taxes on repatriated earnings. PAGE 17 OTHER FINANCIAL INFORMATION FMC's backlog of unfilled orders as of June 30, 1994 was $1.8 billion. Backlogs are not reported for Industrial Chemicals, Performance Chemicals, and Precious Metals due to the nature of these businesses. INDEPENDENT ACCOUNTANTS' REPORT A report by KPMG Peat Marwick, FMC's independent accountants, on the financial statements included in Form 10-Q for the quarter ended June 30, 1994 is included on page 18. A report by Ernst and Young, UDLP's independent accountants, on the financial statements referred to by KPMG Peat Marwick in its report noted above is included on page 19. PAGE 18 SIGNATURE Independent Accountants' Report The Board of Directors FMC Corporation: We have reviewed the accompanying consolidated balance sheet of FMC Corporation and consolidated subsidiaries as of June 30, 1994, and the related consolidated statements of income for the three-month and six-month periods ended June 30, 1994 and 1993, and the related consolidated statements of cash flows for the six-month periods ended June 30, 1994 and 1993. These financial statements are the responsibility of the company's management. We were funished with the report of other accountants on their review of the interim financial information of United Defense, L.P., whose total assets as of June 30, 1994, and whose revenues for the three-month and six- month periods ended June 30, 1994 constituted 15 percent, 27 percent, and 27 percent, respectively, of the related consolidated totals. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review and the report of other accountants, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with generally accepted accounting principles. KPMG Peat Marwick Chicago, Illinois July 19, 1994 PAGE 19 SIGNATURE Independent Accountants' Review Report Partners United Defense LP Arlington, Virginia We have reviewed the accompanying balance sheet of United Defense LP as of June 30, 1994, and the related statements of income for the three-month period ended June 30, 1994 and the six-month period from the effective date of the Partnership (January 1, 1994) through June 30, 1994 and the statements of partners' equity and cash flows for the six-month period from the effective date of the Partnership (January 1, 1994) through June 30, 1994. These financial statements are the responsibility of the Partnership's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with generally accepted accounting principles. Ernst & Young LLP Washington, D.C. July 15, 1994 PAGE 20 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Registrant's Annual Meeting of Stockholders was held on April 15, 1994. At the meeting, stockholders voted on (i) the election of four directors, and (ii) ratification of the appointment of KPMG Peat Marwick as Registrant's independent auditors for 1994. Voting on each such matter was as follows: Votes Votes Withheld/ Broker For Against Abstentions Non-Votes 1. Election of Directors: L. D. Brady 33,471,548 - 354,113 - P. A. Buffler 33,232,762 - 592,899 - R. H. Malott 33,436,076 - 389,585 - C. Yeutter 33,480,327 - 345,334 - 2. Ratification of Auditors 33,577,693 117,067 130,901 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Page Number in Number in Document Numbering Exhibit Table Description System 11 Statement re: computation Document type 2, page 2 of per share earnings assuming full dilution 15 Letters re: unaudited Document type 2, pages 3 interim financial and 4 information (b) Reports on Form 8-K Form 8-K dated May 9, 1994 announcing Arthur D. Lyon's departure from the company. PAGE 21 SIGNATURES Pursuant to the requirements 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) Date: August 12, 1994 Frank A. Riddick, III Controller and duly authorized officer PAGE 0 DOCUMENT HEADER DOCUMENT DESCRIPTION EXHIBIT INDEX DOCUMENT TYPE 2 COUNT 1 PAGE 1 EXHIBIT INDEX Page Number in Number in Document Numbering Exhibit Table Description System 11 Statement re: computation 2 of per share earnings assuming full dilution 15 Letter re: unaudited 3 interim financial information 15 Letter re: unaudited 4 interim financial information (Ernst & Young) PAGE 2 FMC Corporation Quarterly Report on Form 10-Q for June 30, 1994 Exhibit 11 Statement re: Computation of Per Share Earnings Assuming Full Dilution (Unaudited) (In thousands, except per share data) Three Months Six Months Ended June 30 Ended June 30 1994 1993 1994 1993 Earnings: Net income $67,317 $57,871 $113,404 $103,311 Pro forma earnings applicable to common stock $67,317 $57,871 $113,404 $103,311 After-tax interest on 7 1/2% zero-coupon debentures - 1,945 - 3,818 Pro forma earnings applicable to common stock $67,317 $59,816 $113,404 $107,129 Shares: Average number of shares of common stock and common stock equivalents outstanding 37,070 36,913 37,049 36,917 Additional shares assuming conversion of: Stock options 31 - 25 4 7 1/2% zero coupon debentures - 2,869 - 2,869 Pro forma shares 37,101 39,782 37,074 39,790 Earnings per common share assuming full dilution $ 1.81 $ 1.50 $ 3.06 $ 2.69 PAGE 3 FMC Corporation SIGNATURE Quarterly Report on Form 10-Q for June 30, 1994 Exhibit 15 Letter re: Unaudited Interim Financial Information FMC Corporation Chicago, Illinois Gentlemen: Re: Registration Statement No. 33-10661 and No. 33-7749 on Form S-8 and Registration Statement No. 33-45648 on Form S-3. With respect to the subject registration statements, we acknowledge our awareness of the incorporation by reference therein of our report dated July 19, 1994, related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. Very truly yours, Chicago, Illinois August 11, 1994 PAGE 4 FMC Corporation SIGNATURE Quarterly Report on Form 10-Q for June 30, 1994 Exhibit 15 Letter re: Unaudited Interim Financial Information August 8, 1994 Securities and Exchange Commission Washington, D.C., 20549 We are aware of the incorporation by reference in the Registration Statements (Form S-3 No. 33-45648, Form S- 8 No. 33-10661 and Form S-8 No. 33-7749) of FMC Corporation for the registration of its common stock of our report dated July 15, 1994 relating to the unaudited interim financial statements of United Defense LP which is included in the Form 10-Q of FMC Corporation for the quarter ended June 30, 1994. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part of the registration statements prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Ernst & Young LLP -----END PRIVACY-ENHANCED MESSAGE-----