-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VyJoksGj2FZaJjBb9pOb4eG6HtTTNMu6lGYYkprgmz8NqwX24MNHU3YoweTGEUTo MSvCMM/jYaYvbVNForVixw== 0000950131-96-001103.txt : 19960318 0000950131-96-001103.hdr.sgml : 19960318 ACCESSION NUMBER: 0000950131-96-001103 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960315 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FMC CORP CENTRAL INDEX KEY: 0000037785 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 940479804 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02376 FILM NUMBER: 96535514 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-K 1 FORM 10-K ============================================================================== 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, 1995 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 Midwest Stock Exchange Pacific Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None INDICATE BY CHECK MARK 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 29, 1996, WAS $2,681,798,883. THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK, $0.10 PAR VALUE, OUTSTANDING AS OF THAT DATE WAS 36,841,410. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENT FOR 10-K REFERENCE - -------- ------------------ Portions of Annual Report Part II; and Part IV, to Stockholders for 1995 Item 14. (a)(1) and (2) Portions of Proxy Part III Statement for 1996 Annual Meeting of Stockholders _____________________________________________________________________ PART I ITEM 1. BUSINESS. A. GENERAL DEVELOPMENT OF BUSINESS. 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. Restructuring and other charges. The Company recorded 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. Other charges of $17 million ($10 million after tax, or $0.27 per share) related primarily to asset write-downs, and the Company increased its environmental reserves by $82.5 million ($50.7 million after tax, or $1.34 per share), as part of its ongoing assessment of sites with known environmental issues. In 1993, FMC recorded restructuring and other charges of $172.3 million, net of minority interest ($123.3 million after tax, or $3.34 per share). These charges primarily related to restructuring costs associated with the Machinery and Equipment and Industrial Chemical segments, expenses to restructure companywide functional support staffs and a write-down of the investment in the Beartrack property in the Precious Metals segment. The restructuring program was designated to reduce costs and improve operating efficiencies. During 1995 and 1994, approximately 1,100 employee positions were eliminated. Additionally, 500 positions were eliminated at United Defense, L.P. that were not covered by the 1993 restructuring program. FMC's programs to reorganize functional support staffs throughout the company to align their activities more closely with the company's growth initiatives, as well as severance programs within the Industrial Chemical and Machinery and Equipment segments designed to improve operating performance, resulted in the majority of the eliminated positions. Cash payments related to these separations were approximately $16 million and $32 million in 1995 and 1994, respectively. Approximately $34 million and $40 million of spending in 1995 and 1994, respectively, related to the consolidation of manufacturing facilities, the exiting of unprofitable product lines and other restructuring activities was charged to the restructuring reserve. The aggregate restructuring reserve remaining at December 31, 1995 of $18.7 million is expected to cover residual manufacturing consolidation and remaining lithium exit liabilities. Acquisitions. 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 ($0.41 per share) of acquired in-process research and development, with no associated tax benefit, 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. FR Manufacturing Corporation 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. The Company also completed two smaller acquisitions during the year ended December 31, 1995. B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (DOLLARS IN MILLIONS): A description of the principal products and services and the major markets served by each industry segment is included under "Narrative description of business."
(in millions) Year ended December 31 ------------------------------- 1995 1994 1993 --------- --------- --------- SALES Performance Chemicals $1,176.5 $1,060.5 $ 973.5 Industrial Chemicals 976.8 866.8 866.7 Machinery and Equipment 1,351.0 972.7 870.9 Defense Systems 968.2 1,080.5 950.2 Precious Metals 59.0 60.9 125.0 Eliminations (21.7) (30.6) (32.4) -------- -------- -------- Total $4,509.8 $4,010.8 $3,753.9 ======== ======== ========
INCOME (LOSS) BEFORE INCOME TAXES 1995 1994 1993 -------- -------- -------- Performance Chemicals $ 161.6 $ 154.0 $ 139.1 Industrial Chemicals(1) 161.9 119.3 58.3 Machinery and Equipment 49.8 33.3 6.7 Defense Systems(1) 160.8 159.5 161.7 Precious Metals(1) (5.7) (9.0) 9.7 -------- ------- ------- Operating profit 528.4 457.1 375.5 Restructuring and other charges(2) (150.0) -- (172.3) Gain on sale of FMC Wyoming stock(3) 99.7 -- -- Net interest expense (72.5) (59.1) (62.6) Corporate and other (96.2) (101.9) (110.5) Minority interests(1) (59.1) (61.4) (2.5) Other income and (expense), net(4) (3.4) 17.6 10.2 -------- -------- -------- Total $ 246.9 $ 252.3 $ 37.8 ======== ======== ======== IDENTIFIABLE ASSETS Performance Chemicals $ 904.6 $ 754.6 $ 696.9 Industrial Chemicals 1,048.8 883.6 824.7 Machinery and Equipment 1,166.5 619.3 522.9 Defense Systems 547.3 492.0 269.0 Precious Metals 139.1 108.9 64.8 -------- -------- -------- Subtotal 3,806.3 2,858.4 2,378.3 Corporate and other 494.8 493.1 466.8 -------- -------- -------- Total $4,301.1 $3,351.5 $2,845.1 ======== ======== ======== - -----------------------------------------------------------------------
- ------------------------------------- (1) Defense Systems' segment data includes 100 percent of United Defense, L.P. in 1994 and 1995. Industrial Chemicals' segment data includes 100% of FMC Wyoming Corporation in 1995. Precious Metals' segment data includes 100 percent of FMC Gold Company in 1993 through 1995. Minority shareholder interests are included in Minority interests, except the portion related to 1993 restructuring and other charges. (2) Restructuring and other charges related to 1995, including the $15.5 million write-off of acquired in-process research and development, 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 related to 1993 are related to Machinery and Equipment ($66.0 million). Precious Metals ($47.9 million, net of minority interest), Industrial Chemicals ($29.7 million), Performance Chemicals ($3.2 million), and Corporate ($25.5 million). (3) Gain on sale of FMC Wyoming stock is attributable to the Industrial Chemicals segment. (4) Other income and (expense), net primarily includes LIFO inventory adjustments and pension-related income and (expense). C. NARRATIVE DESCRIPTION OF BUSINESS. Principal Products - ------------------ FMC manufactures and sells a broad range of machinery and chemical products. FMC's machinery products are marketed principally to industrial, agricultural and defense users. Its chemical products are mainly industrial and agricultural chemicals. The Company conducts its business within the five industry segments identified in b. above. Generally, in all of the segments, FMC competes on the basis of price and product performance. Information regarding principal products produced and sold by each industry segment and principal markets served by each segment is presented in the columns so designated in the segment table presented below. These products are sold directly to customers from plants and warehouses, as well as being sold in some cases (particularly in markets outside the United States) to and through distributors.
Business Principal Products Markets Served -------- ------------------ -------------- PERFORMANCE CHEMICALS - --------------------- AGRICULTURAL Produces crop protection Food growers, pest PRODUCTS and pest control control markets. chemicals for worldwide markets FOOD Worldwide producer of Processed food industry, INGREDIENTS carrageenan and Avicel personal care products. cellulose gel. PHARMACEUTICAL Worldwide producer of Pharmaceutical industry. binders and disintegrants as well as other specialty chemicals for pharmaceutical markets.
Business Principal Products Markets Served -------- ------------------ -------------- LITHIUM World's largest Aluminum, ceramics and producer of glass, lubricating lithium-based products. greases, swimming pools, textiles, aluminum alloys, batteries, rubber and plastic, air conditioning, pharmaceuticals. PROCESS A leading world Plastics, hydraulic ADDITIVES producer of phosphate fluids, lubricant ester flame retardants. additives, industrial Leading supplier of water treatment and specialty water desalination. treatment chemicals. BIOPRODUCTS Worldwide producer of Life science research; agarose and other DNA and protein analysis products for life science markets. INDUSTRIAL CHEMICALS - -------------------- ALKALI World's largest Glass-making, CHEMICALS producer of natural detergents, food soda ash. Downstream products, animal feed products include sodium additives, mining, bicarbonate, sodium air/water treatment, cyanide, sodium pulp and paper. sesquicarbonate and caustic soda. PEROXYGEN A leading worldwide Pulp and paper, CHEMICALS producer of hydrogen textiles, chemical and peroxide, persulfates polymer synthesis, and other peroxygen environmental clean-up, chemicals. electronics, mining, detergents.
Business Principal Products Markets Served -------- ------------------ -------------- PHOSPHORUS A worldwide supplier Detergents, cleaning CHEMICALS and North American compounds, metal producer of phosphorus treatment, food and its derivatives, products, textiles, phosphates and pesticide intermediates, phosphoric acid. additives, pharmaceuticals, water treatment. FMC FORET, S.A. A European chemical Detergents, pulp and producer. Products paper, textiles, include hydrogen chemicals, tanning, peroxide, perborates, animal feed, mining, phosphates, zeolites, rubber, pharmaceuticals, silicates, sulfur ceramics, paint, food, derivatives. photography, agriculture, water treatment. MACHINERY AND EQUIPMENT - ----------------------- ENERGY AND Oil and gas wellhead Oil and gas drilling, TRANSPORTATION completion equipment; production refining, EQUIPMENT subsea engineering, transportation and power procurement, generation companies. construction and equipment; metering products and systems; loading systems; marine terminals and floating production systems; pressure-relief valves. Airline equipment, Industrial material handling manufacturing, airlines, systems. airports, mining, warehouses, newsprint, publishing, chemicals, electrical utilities. FOOD Systems and equipment Food and beverage MACHINERY to process food and processors; food beverages, including canners; fruit and harvesters, vegetable growers. sterilizers, extractors, fillers, closers, evaporators and aseptic systems and food handling equipment.
Business Principal Products Markets Served -------- ------------------ -------------- DEFENSE SYSTEMS - --------------- UNITED DEFENSE, L.P. GROUND SYSTEMS Develops technology; U.S. Army, Marine Corps including hardware and and National Guard; software, and allied governments. integrates into the manufacture of tracked vehicles for the U.S. armed forces and allied governments. Sole source on major programs. ARMAMENT SYSTEMS Leads development team U.S. Navy, Army and for artillery weapon Marine Corps and allied systems for the U.S. governments. Army, designs and builds guns and launching systems and provides support services for the U.S. Navy and international customers. INTERNATIONAL Markets, manufactures Allied governments. and oversees joint Cooperative arrangements ventures for military with major international products outside the companies. United States. STEEL PRODUCTS Produces steel and Military, nickel alloy ingots, transportation, heavy castings, forgings and equipment, industrial military track. and oil field. Upgrades and overhauls tracked vehicles. PRECIOUS METALS - --------------- FMC GOLD Focusing on exploration Precious metal of precious metals in refineries. Chile. Current production at Beartrack in Idaho and Jerritt Canyon in Nevada.
SOURCE AND AVAILABILITY OF RAW MATERIALS FMC's natural resource requirements are primarily mineral-oriented rather than oil or natural gas-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 $706.5 million, $618.3 million and $768.4 million in 1995, 1994 and 1993, 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 business. ORDER BACKLOG
December 31 ---------------------------- (in millions) 1995 1994 1993 -------- -------- -------- Machinery and Equipment $ 545.0 $ 480.0 $ 333.1 Defense Systems 1,495.0 1,412.3 1,105.0 -------- -------- -------- Total $2,040.0 $1,892.3 $1,438.1 ======== ======== ========
The order backlog of the Defense Systems segment increased to $1.5 billion at December 31, 1995 from $1.4 billion at the end of 1994. The backlog increase results primarily from new orders for upgrading Bradley Fighting Vehicles, cannisters for the U.S. Navy, M113 vehicles for Thailand and Amphibious Assault Vehicle kits for Korea. U.S. government budgetary pressures are likely to result in reduced defense spending in the coming years, and Defense Systems results may decline as a consequence. The increase in Machinery & Equipment backlog primarily reflects the acquisition of Moorco in the Machinery and Equipment segment. Backlogs are not reported for Industrial Chemicals, Performance Chemicals and Precious Metals due to the nature of these 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 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
Year ended December 31 ----------------------- in millions 1995 1994 1993 - -------------------------------------------------- Performance Chemicals $109.3 $ 94.7 $ 83.0 Industrial Chemicals 16.3 17.3 15.3 Machinery and Equipment 49.1 30.8 26.1 Defense Systems 13.1 23.6 24.0 Precious Metals -- -- 0.1 Corporate -- 0.4 0.7 - -------------------------------------------------- Total $187.8 $166.8 $149.2 ==================================================
Expenditures for research and development increased in Performance Chemicals primarily due to continued development of herbicides and insecticides. Expenditures also increased in Machinery & Equipment primarily related to acquisitions in 1995 and included a $15.5 million write-off of acquired in- process research and development related to the Moorco acquisition. The decrease in expenditures for Defense Systems from 1994 reflects minor reductions across most product lines. Not included in these amounts are $150.4 million, $104.9 million and $208.8 million in 1995, 1994 and 1993, respectively for research and development projects contracted directly with the U.S. government and commercial sponsors, primarily related to Defense Systems programs. ENVIRONMENTAL The Company 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 the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances and on current and previous owners and operators of a facility for the clean up of hazardous substances released from the facility into the environment. 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 which 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 Potentially Responsible Party ("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 27 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, Remedial Investigations/Feasibility Studies ("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, 1995 and 1994, 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 $302 million and $229 million, before recoveries, have been provided at December 31, 1995 and December 31, 1994, respectively, of which $132 million and $142 million are included in the reserve for discontinued operations at December 31, 1995 and December 31, 1994, respectively. The Company's total environmental reserves include approximately $270 million and $183 million for remediation activities and $32 million and $46 million for RI/FS costs at December 31, 1995 and December 31, 1994, respectively. In addition, the Company has estimated reasonably possible environmental loss contingencies may exceed amounts accrued by as much as $150 million. 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. 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 $140 million of recoveries ($56 million as other assets and $84 million as an offset to the reserve for discontinued operations) and approximately $123 million of recoveries ($44 million as other assets and $79 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, 1995 and 1994, respectively. The substantial 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, $20 million and $16 million for the years 1995, 1994 and 1993, respectively, on capital projects relating to environmental control facilities, and expects to spend additional capital of approximately $16 million and $21 million in 1996 and 1997, respectively. Additionally, in 1995, 1994, and 1993, FMC spent approximately $58 million, $55 million and $63 million, respectively, for environmental compliance costs. Regarding current operating, previously operated and other sites for the years 1995, 1994 and 1993, FMC charged approximately $14 million, $18 million and $17 million, respectively, against established reserves for remediation spending, and charged approximately $12 million, $13 million and $10 million, respectively, against reserves for spending on RI/FS. Recoveries from third parties of approximately $5 million, $5 million and $7 million, respectively, were received in 1995, 1994 and 1993. FMC anticipates that the expenditures for current operating, previously operated and other sites will continue to be significant for the foreseeable future. EMPLOYEES. FMC has 22,164 employees in its domestic and foreign operations. At most of its plants in the United States and Canada, the majority of these employees are members of labor unions, primarily unions which are affiliated with national labor organizations. Contracts covering about 18% of these hourly employees expire during 1996 and certain of these contracts are under negotiation at the present time. Occasionally, FMC experiences strikes at one or more of its plants which adversely affect sales and earnings to varying degrees, none of which have been material. FMC considers its employee relations to be good; however, it cannot predict the outcome of contract negotiations. D. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
GEOGRAPHIC SEGMENT INFORMATION - ---------------------------------------------------------- SALES Year ended December 31 - ---------------------------------------------------------- (in millions) 1995 1994 1993 - ---------------------------------------------------------- Third party sales - ---------------------------------------------------------- United States $3,270.0 $3,084.8 $2,866.7 Latin America and Canada 179.8 159.6 140.4 Europe 947.3 693.5 697.5 Asia, Africa & others 112.7 72.9 49.3 - ---------------------------------------------------------- 4,509.8 4,010.8 3,753.9 Intersegment sales - ---------------------------------------------------------- United States 151.2 110.7 102.5 Latin America and Canada 10.1 10.9 10.9 Europe 92.2 92.3 83.2 Asia, Africa & others 22.1 11.4 23.2 Eliminations (275.6) (225.3) (219.8) - ---------------------------------------------------------- Total Sales $4,509.8 $4,010.8 $3,753.9 ==========================================================
- ---------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES Year ended December 31 - ---------------------------------------------------------- (in millions) 1995 1994 1993 - ---------------------------------------------------------- United States $ 390.7 $ 341.5 $ 323.8 Latin America and Canada 12.7 13.7 4.4 Europe 120.5 100.2 48.1 Asia, Africa & others 4.5 1.7 (0.8) - ---------------------------------------------------------- Operating profit 528.4 457.1 375.5 Net interest expense (72.5) (59.1) (62.6) Corporate & other (96.2) (101.9) (110.5) Minority interest (59.1) (61.4) (2.5) Gain on sale of FMC Wyoming stock 99.7 - - Other income and (expense), net (3.4) 17.6 10.2 Restructuring and other charges (1) (150.0) - (172.3) - ---------------------------------------------------------- Total $ 246.9 $ 252.3 $ 37.8 ==========================================================
- ------------------ (1) See Item 1(a). Includes pretax restructuring and other charges of $134.5 million and $172.3 million in 1995 and 1994, respectively, and a write-off of acquired in-process research and development of $15.5 million in 1995.
- -------------------------------------------------------------------- IDENTIFIABLE ASSETS December 31 - -------------------------------------------------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------- United States $2,609.2 $1,960.0 $1,544.3 Latin America and Canada 209.7 157.2 142.7 Europe 900.2 676.3 640.3 Asia, Africa & others 87.2 64.9 51.0 - -------------------------------------------------------------------- Subtotal 3,806.3 2,858.4 2,378.3 Corporate and other 494.8 493.1 466.8 - -------------------------------------------------------------------- Total $4,301.1 $3,351.5 $2,845.1 ==================================================================== - -------------------------------------------------------------------- U.S. EXPORT SALES TO UNAFFILIATED CUSTOMERS BY DESTINATION OF SALE - -------------------------------------------------------------------- Year ended December 31 - -------------------------------------------------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------- Latin America and Canada $ 212.9 $ 217.9 $ 176.8 Europe 155.9 153.3 192.2 Asia, Africa & others 588.2 668.6 415.3 - -------------------------------------------------------------------- Total $ 957.0 $1,039.8 $ 784.3 ====================================================================
ITEM 2 PROPERTIES FMC leases executive offices in Chicago and administrative offices in Philadelphia. The Company operates 115 manufacturing facilities and mines in 24 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. FMC Gold Company owns mineral rights to gold and silver ore bodies at its wholly-owned Beartrack property in Idaho, as well as the right to 30 percent of the gold ore reserves at the Jerritt Canyon mine in Elko, NV, operated by its joint-venture partner, Independence Mining Company Inc., a wholly-owned subsidiary of Minorco (USA) Inc. FMC Gold Company leases its administrative headquarters in Reno, Nevada. Mining operations provide basic raw materials to many of FMC's chemical plants, without which other sources would have to be obtained. FMC's mining properties are operated under numerous long-term leases with no single lease or related group of leases material to the businesses of the Company as a whole. 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. FMC believes that each of its significant manufacturing facilities is operating at a level consistent with the industry in which it operates. FMC's production properties for continuing operations are:
Latin America United and Western Total States Canada Europe Other - ----------------------------------------------------------------- Performance Chemicals 13 3 6 6 28 Industrial Chemicals 14 2 12 - 28 Machinery and Equipment 22 5 14 6 47 Defense Systems 11 - - - 11 Precious Metals 1 - - - 1
ITEM 3. LEGAL PROCEEDINGS Environmental Proceedings As 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 RCRA 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 required permits, 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. There are no legal proceedings pending at this time; however, the EPA has stated that the alleged violations may subject FMC to enforcement action under RCRA, including possible actions for monetary sanctions, injunctive relief or other available remedies. 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. In addition, in August 1994 EPA conducted an environmental inspection at FMC's Green River, Wyoming facility, where trona is mined and soda ash and a number of related chemicals are produced. In May 1995, EPA provided a copy of the inspection report, which alleged violations of RCRA and the Emergency Planning and Community Right to Know Act (EPCRA), and proposed to negotiate a pre- enforcement settlement. Ultimately, FMC and EPA entered into such a settlement, without the lodging of a formal complaint, by means of an administrative order on consent, effective November 1, 1995. Under the terms of this order, FMC has paid a civil penalty in the amount of $145,000 and is implementing a series of supplemental environmental projects (SEPs) involving waste management at an estimated cost of $298,000. Safety Following an emergency incident at FMC's Process Additives Division plant in Nitro, West Virginia on December 5, 1995, when a high pressure switch failed and phosphorus trichloride product was discharged into a containment area where water was present, resulting in a release of a cloud of hydrogen chloride and fumes, the U.S. Occupational Safety and Health Administration commenced an incident and process safety investigation. This investigation is currently in progress and no citations have issued. However, there is a potential for citations and assertion of penalties. Management believes that the resolution of this investigation will not likely have a material adverse effect on FMC's liquidity, results of operations or financial condition. Beartrack Gold Property During the third quarter of 1994, the Pacific Rivers Council and the Wilderness Society (collectively the "PRC"), in a lawsuit filed in Federal District Court in Idaho (Pacific Rivers Council v. Thomas), sought an injunction against all ongoing and future forest activities including mining, which may affect endangered salmon, within various national forests in Idaho including the Salmon National Forest in which the Beartrack property of FMC Gold Company (the "Gold Company") is located. In that lawsuit, the PRC sought to require the U.S. Forest Service to consult under the Endangered Species Act (the "Act") with the National Marine Fisheries Service ("NMFS") regarding existing land resource management plans for the subject forests and their potential impacts on endangered Snake River salmon. The government defendants and the plaintiffs have subsequently negotiated a stipulated dismissal of most of the lawsuit. Under the terms of the stipulation, the parties dismissed from this litigation all projects which have undergone site-specific consultation. The Gold Company's Beartrack mine was identified by the government defendants as a project for which consultation has been completed. The Court issued an Order on Pending Claims on December 11, 1995 regarding the remaining specified projects (not including the Beartrack mine) which have not yet completed consultation. Under the terms of that Order, the Court has retained jurisdiction in this lawsuit for further proceedings regarding those projects. The Beartrack mine is not subject to or a part of the Court's order. In October, 1994, the Sierra Club Legal Defense Fund, Inc., ("Sierra") on behalf of certain other organizations, filed a lawsuit in Federal District Court for the Western District of Washington at Seattle against NMFS and other federal agencies for violation of the Act alleging the NMFS' biological opinion failed to satisfy the requirements of the Act. Sierra, the federal agencies and the company, as intervenor, each filed a motion for summary judgment. In November, 1995, the Court ordered the federal agencies to reinitiate consultation under Section 7 of the Act on the potential environmental impacts of the Beartrack mine project on endangered salmon or the designated critical habitat for salmon. The plaintiffs did not seek, and the Court did not impose, any injunction or other restriction on the operation of the Beartrack mine pending completion of such consultation. If, upon remand, the Forest Service were to determine that an activity associated with Beartrack mine operations could preclude the development of reasonable and prudent alternatives to the project pending completion of the reinitiated consultation, such activities could be required to cease pending completion of consultation. Under the Act's regulations, consultation must be completed within 135 days of the date consultation is initiated. An extension of 60 days can be imposed by the agencies. Under the relevant statutory and regulatory authorities, the results of a consultation can range from no impact on the activities under review on the one hand to modest to significant impacts on the other. In an extreme situation, a consultation could result in the cessation of activities altogether, a potential result the company believes to be remote in the case of the Beartrack mine, which has been in operation and production since mid-1995. The company believes that the ongoing operation of the Beartrack mine will not jeopardize endangered salmon or adversely modify or destroy designated critical habitat, and that upon completion of consultation, the mine will be permitted to continue operation. The Beartrack property encompasses approximately 30 square miles of mining claims and contains approximately one million ounces of proven and probable reserves. At December 31, 1995, FMC Gold Company's net investment in Beartrack was approximately $80 million. Other See Note 14 to the consolidated financial statements 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 Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT The Executive Officers of FMC Corporation, together with the offices in FMC Corporation presently held by them, their business experience since January 1, 1991, and their ages, are as follows:
Name Age Office, year of election; and 3/14/96 other information for past 5 years ------- ---------------------------------- Robert N. Burt 58 Chairman of the Board and Chief Executive Officer (91); President (90-93); Executive Vice President (88) Larry D. Brady 53 President (93) and a Director (89); Executive Vice President (89-93) Vice President-Corporate Development (88) William F. Beck 57 Executive Vice President (94); Vice President (86) and General Manager-Chemical Products Group (86); President of FMC Europe (91) Michael J. Callahan 56 Executive Vice President and Chief Financial Officer (94); Executive Vice President and Chief Financial Officer, Whirlpool Corporation (91-94) William J. Kirby 58 Senior Vice President (94); Vice President-Administration (85) Charles H. Cannon 43 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 52 Vice President (92) and General Manager-Chemical Products Group (94) Patrick J. Head 63 Vice President and General Counsel (81)
Ronald D. Mambu 46 Vice President and Controller (95); Director, Financial Planning (94-95); Director, Strategic Planning (93-94); Director, Financial Control (87-93) James A. McClung 58 Vice President (91); Vice President-International (81-91) Joseph H. Netherland 49 Vice President (87) and General Manager-Petroleum Equipment Group (86), Specialized Machinery Group (89); Energy and Transportation Equipment Group (93) Thomas W. Rabaut 47 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 45 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 53 Vice President (91); President, FMC Asia-Pacific (91); General Manager, Phosphorus Chemical Division (86-91)
Each of the Company's executive officers has been employed by the Company in a managerial capacity for the past five years except for Mr. Callahan. 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.
10-K Item No. Incorporated by Reference From: - ------------- ------------------------------ PART II. Item 5. Market for Registrant's Annual Report to Stockholders, Inside back Common Equity and cover, pages 36, 42 and 51-52 Related Stockholder Matters Item 6. Selected Annual Report to Stockholders, pages 58-59 Financial Data Item 7. Management's Discussion Annual Report to Stockholders, and Analysis of Financial pages 18-19, 23, 29, 33, 34 and 35-36 Condition and Results of Operations Item 8. Financial Statements Annual Report to Stockholders, pages 5 and Supplementary Data and 37-56 (including all Schedules required under Item 14 of Part IV) Item 9. Changes in and (Not Applicable) Disagreements with Accountants on Accounting and Financial Disclosure PART III. Item 10. Directors and Executive Part I; Proxy Statement for 1996 Annual Officers of the Registrant Meeting of stockholders, pages 1-11 Item 11. Executive Compensation Proxy Statement for 1996 Annual Meeting of Stockholders, pages 14-22 Item 12. Security Ownership of Proxy Statement for 1996 Annual Meeting of Certain Beneficial Stockholders, pages 11-13 Owners and Management Item 13. Certain Relationships and Proxy Statement for 1996 Annual Meeting of Related Transactions Stockholders, pages 10-11
PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed with this Report 1. Consolidated financial statements of FMC Corporation and its subsidiaries are incorporated under Item 8 of this Form 10-K. 2. All required financial statement schedules are included in the consolidated financial statements or notes thereto as incorporated under Item 8 of this Form 10-K. 3. Report of Independent Auditors from Ernst & Young LLP for United Defense, L.P. (Exhibit 99). 4. Exhibits: See attached exhibit index, page 25 (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. (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 Michael J. Callahan ------------------- Michael J. Callahan Executive Vice President and Chief Financial Officer Date: March ___, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature Title - --------- ----- Michael J. Callahan Executive Vice President Michael J. Callahan and Principal Financial ---------------------- Officer Michael J. Callahan Ronald D. Mambu Vice President, Controller ) and Principal ) Accounting Officer ) Robert N. Burt Chairman of the Board ) and Chief Executive ) Officer ) William W. Boeschenstein Director ) Larry D. Brady Director ) B.A. Bridgewater, Jr. Director )By: Michael J. Callahan Patricia A. Buffler Director ) ------------------- Albert J. Costello Director ) Michael J. Callahan Paul L. Davies, Jr. Director ) 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 )
PAGE 1 INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1995
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) 3.3 By-Laws of the Company, as amended (incorporated by reference from Exhibit 3.1 to the Form SE filed on March 28, 1990) 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 all of its subsidiaries for which consolidated or consolidated 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)
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** Directors' Retirement Plan as amended on December 9, 1994 (incorporated by reference from Exhibit 10.1 to the Annual Report on Form 10-K for 1994) 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)
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 10.10** FMC 1995 Stock Option Plan as amended 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) 10.16** Amended and Restated FMC-Deferred Stock Plan for Non-Employee Directors (incorporated by reference from Exhibit 10.15 to the Annual Report on Form 10-K for 1994)
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 ratio of earnings to fixed charges 13 Annual Report of FMC Corporation for the year ended December 31, 1995, 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 scheduled and exhibits to the Commission upon request. ** Indicates a management contract or compensatory plan or arrangement. EX-10.9 2 MANAGEMENT INCENTIVE PLAN EXHIBIT 10.9 FMC 1995 MANAGEMENT INCENTIVE PLAN 1. PURPOSE OF THE PLAN The purpose of the FMC 1995 Management Incentive Plan is to promote the long- term performance of FMC by (i) providing long-term incentives in cash and common stock of FMC to key management employees of FMC and its subsidiaries, (ii) assisting in attracting and retaining as employees persons whose abilities, experience and judgment have contributed and will continue to contribute to the financial success and progress of FMC, and (iii) aligning the identity of interests of those employees and FMC's shareholders. 2. DEFINITIONS (a) "Award" means a Three Year Incentive Award or an Incentive Benefit. (b) "Board of Directors" means the Board of Directors of FMC as it may be constituted from time to time. (c) "CEO" means the Chief Executive Officer of FMC. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means the Compensation and Organization Committee of the Board of Directors. (f) "Common Stock" means the common stock of FMC. (g) "Date of Grant" means the date which is designated by the Committee as the date of grant of an Award. (h) "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed when such disability commenced. (i) "Disinterested Person" means any member of the Board of Directors who, at the time discretion under the Plan is exercised, has not at any time within one year prior thereto received grants or awards of equity securities under the Plan or any other plan of FMC or any of its affiliates (as that term is used in the Exchange Act) except as provided in Rule 16b-3(c)(2)(i), and is not selected as a person to whom equity securities may be allocated or granted pursuant to any other plan of FMC or any of its affiliates (as that term is used in the Exchange Act) entitling the participants therein to acquire equity securities of FMC or of any such affiliates except as provided in Rule 16b-3(c)(2)(i). (j) "Employee" means any person employed by the FMC Companies. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "Fair Market Value" means the closing price of a share of Common Stock on a specified date as reported in the New York Stock Exchange Composite Transactions for such date, or such other measurement of value as may be specified by the Committee from time to time. (m) "Financial Objective" means Net Contribution. (n) "FMC" means FMC Corporation. (o) "FMC Company" or "FMC Companies" means FMC and each Subsidiary Company. (p) "Incentive Benefit" means an Award granted pursuant to Section 8. (q) "Net Contribution" means for a business unit, operating profit after tax less the product of 11.5% (the capital charge) and the unit's Capital Employed (operating working capital plus net property, plant and equipment). (r) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (s) "Parent Corporation" means a corporation which, with respect to another corporation, is a parent corporation within the meaning of Section 424(e) of the Code. (t) "Participant" means an Employee who has received an Award which has not been exercised, paid cancelled or forfeited and which has not expired. (u) "Plan" means the FMC 1995 Management Incentive Plan. (v) "Plan Year" means each calendar year commencing on or after January 1, 1995. (w) "Restricted Stock" means Common Stock payable as part of an Award which is subject to a restriction period before it is paid to a Participant, and such other restrictions as may be specified by the Committee at the time the Award is granted. (x) "Subsidiary Company" means (i) any corporation the majority of the voting power of all classes of stock entitled to vote or the majority of the total value of shares of all classes of stock of which is owned, directly or indirectly, by FMC, or (ii) any trade or business other than a corporation the majority of the profits interest, capital interest or actuarial interest of which is owned, directly or indirectly, by FMC. (y) "Subsidiary Corporation" means a corporation or other entity that, with respect to another corporation, is a subsidiary corporation within the meaning of Section 424(f) of the Code. (z) "Three-Year Incentive Award" means an award payable in cash and either Common Stock or Restricted Stock based on achievement of a Participant's unit's Financial Objectives over a Three-Year Period. (aa) "Three-Year Incentive Target Bonus" means the target bonus established for each Participant which is the basis for the Participant's Three-Year Incentive Award. (ab) "Three-Year Period" means a period of three years commencing on January 1 of each Plan Year. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee, the composition of which shall consist of not less than two members of the Board of Directors who are Disinterested Persons, and otherwise satisfy the provisions of Rule 16b-3 of the General Rules and Regulations under the Exchange Act or any successor to such rule. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board of Directors, the Committee shall have the authority and discretion to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determinations by the Committee shall be final and binding on all persons. Notwithstanding anything to the contrary contained in the Plan, the Board of Directors shall also have all power and authority to perform any act granted to the Committee pursuant to the Plan. 4. PARTICIPATION Participants shall be determined by the Committee, in its sole discretion, from Employees who, in the Committee's judgment, have a significant opportunity to influence the growth of FMC or whose outstanding performance or potential merit further incentive and reward for continued employment and accomplishment. 5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN Subject to adjustment pursuant to Section 9, at no time may the sum of (a) the number of shares of Common Stock issued in payment of Awards and subject to outstanding Awards under this Plan and (b) the number of shares of Common Stock issued or subject to outstanding options under the FMC 1995 Stock Option Plan exceed 3.0 million. In the event that any outstanding Award for any reason expires, terminates, is cancelled or forfeited, without having been exercised or otherwise realized in full, the shares of Common Stock allocable to the expired, terminated, cancelled or forfeited portion of such Award shall (unless the Plan shall have been terminated) become available for subsequent grants of Awards. 6. THREE-YEAR INCENTIVE AWARDS (a) Financial Objectives. The Committee, after consultation with the CEO, shall establish the Financial Objective for each unit for each Three-Year Period. A Three Year Incentive Target Bonus shall be established by the CEO for each Participant. (b) Individual Awards. Following the close of each Three-Year Period, the Committee shall evaluate the performance of each unit against the unit's Financial Objective for the Three-Year Period, and certify a rating of zero to three for the unit. A Participant's Three-Year Incentive Award shall be the product of the rating for the Participant's unit and Three-Year Incentive Target Bonus. (c) Form and Time of Payment (i) Form. Each Three-Year Incentive Award will be paid partly in cash and partly in either Common Stock that is not Restricted Stock or Restricted Stock, as elected by the Participant; provided, however, that if a Participant is covered by FMC's Stock Ownership Policy and such Participant LOGO does not own a sufficient amount of Common Stock under the Stock Ownership Policy guidelines, such Participant shall receive the stock portion of the Three-Year Incentive Award in Restricted Stock. The number of shares of stock payable shall be equal to (A) the quotient of the stock portion of the Participant's Three-Year Incentive Award divided by the Fair Market Value on the last day of the Three-Year Period to which the award relates plus (B) 20 percent of the quotient in (A) provided that, if the Participant receives Common Stock that is not restricted, the number of shares payable shall be reduced by one-sixth. The portion of the Three-Year Incentive Award to be paid in cash and in stock shall be as determined by the Committee at the date of grant of the Award. (ii) Timing. Payment of the portion of each Three-Year Incentive Award payable in cash or Common Stock that is not Restricted Stock shall be made, without interest, as soon as practicable after the close of the Three-Year Period to which such award relates. Payment of any portion of a Three-Year Incentive Award payable in Restricted Stock will be made as soon as practicable following the close of three years after the end of the Three- Year Period to which such award relates. (d) Special Rules for Transition Period. Each Participant in the 1995 and/or 1996 Plan Years shall receive a draw against the Three-Year Incentive Award otherwise payable for the Three-Year Periods beginning January 1, 1995 and/or January 1, 1996. The amount of such draw shall be paid in cash and shall equal the target bonus amount under the BPF portion of the prior plan. Such Participant's Three-Year Incentive Award, if any, for the Three-Year Periods beginning in 1995 and/or in 1996 shall be reduced (but not below zero) by the amount of such draw. (e) Transfers Between Units. If a Participant transfers employment from one unit to another during a Three-Year Period, the Participant's Three-Year Incentive Award shall be prorated based on the proportion of time spent in each unit in which the Participant has spent at least six months. 7. TERMINATION OF EMPLOYMENT (a) During Award Period. Subject to meeting the performance goals, a Participant shall be entitled to receive payment of a Three-Year Incentive Award only if employment with the FMC Companies continues uninterrupted from the first day of participation in the Award to the earlier of (i) the last day of the applicable period, (ii) normal retirement under the FMC Salaried Employees' Retirement Plan or any successor plan, (iii) early retirement at the request of FMC, (iv) death, or (v) Disability. Subject to meeting the performance goals, earlier termination of employment will result in automatic cancellation and forfeiture of the Award, provided that the Committee may, if it believes circumstances warrant such action, authorize payment of all or a portion of any Award that would otherwise be forfeited pursuant to this section. (b) During Restriction Period For Restricted Stock. Notwithstanding paragraph (a) of this section, if a Participant receives Restricted Stock and employment with the FMC Companies is terminated for any reason other than the reasons contained in (ii), (iii), (iv) or (v) of paragraph (a) prior to the conclusion of the three-year restriction period for such Restricted Stock, the Participant shall receive a number of shares equal to the product of (i) five-sixths of the number of shares of Restricted Stock payable under Section 7(c)(i)(B) and (ii) a fraction the numerator of which is the number of days between the end of the applicable Three-Year Period and the termination of employment and the denominator of which is 1,095, and the balance of the stock portion of the Award shall be forfeited. 8. INCENTIVE BENEFITS In addition to Three-Year Incentive Awards, the Committee may, at its discretion, create and grant such Incentive Benefits as it believes are desirable (including by way of illustration and not by way of limitation, stock appreciation rights, stock bonus and restricted stock awards), provided that: (a) any Incentive Benefits shall be governed by the terms of the Plan as in effect on the Date of Grant of such Incentive Benefits, and for such purpose, notwithstanding the provisions of Section 15, the Committee may amend the Plan to create and describe Incentive Benefits and the governing terms thereof; (b) the creation of Incentive Benefits may not, without stockholder approval, (i) increase the total number of shares of Common Stock issuable under the Plan, or (ii) materially modify the requirements as to eligibility for participation in the Plan; (c) the Committee shall not have the power to create and grant Incentive Benefits that would result in the grant of a prohibited tandem stock option or other prohibited tandem arrangement, with respect to any Incentive Stock Options, as described in applicable regulations under Section 422 of the Code, and (d) with respect to grants and awards to persons subject to Section 16(b) of the Exchange Act, Incentive Benefits granted or awarded shall have such terms and conditions as will comply with Rule 16b-3 or other similar rules. 9. DILUTION AND OTHER ADJUSTMENTS In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spinoff, reorganization, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, as it in its sole discretion deems equitable (a) in the number of shares of Common Stock that may be issued under the Plan in payment of any Award, or (b) in the Financial Objectives during any Three Year Period from which the requisite performance levels are calculated, such adjustments to be conclusive and binding upon all parties concerned. The Committee may also make adjustments, to the extent it deems appropriate, in a unit's performance goals during and after any Three-Year Period to compensate for or reflect any significant changes that may have occurred during such Three-Year Period in accounting practices, tax laws or other laws or regulations which alter or affect the unit's performance, actual economic conditions, such as inflation, when contrasted with the assumptions underlying the unit's performance goals or changes resulting from corporate restructuring including without limitation, acquisitions and divestitures. 10. CHANGE OF CONTROL If, while any Awards remain outstanding under the Plan_ (a) the "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent of the combined voting power of FMC is acquired by a "person" as defined in Sections 13(d) and 14(d) of the Exchange Act (other than FMC, any trustee or other fiduciary holding securities under an employee benefit plan of FMC or an affiliate thereof, or any corporation owned, directly or indirectly, by the stockholders of FMC in substantially the same proportions as their ownership of stock of FMC), or (b) the stockholders of FMC approve a definitive agreement to merge or consolidate FMC with or into another company (other than a merger or consolidation which would result in the voting securities of FMC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80 percent of the combined voting power of the voting securities of FMC or such surviving entity outstanding immediately after such merger or consolidation), or to sell or otherwise dispose of all or substantially all of its assets, or adopt a plan of liquidation, or (c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors any new director (other than a director designated by a person who has entered into an agreement with FMC to effect a transaction described in paragraph (a) or (b) of this section) whose election by the Board of Directors or nomination for election by FMC's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, then from and after the date on which public announcement of the acquisition of such percentage shall have been made, or the date of any such stockholder approval or adoption, or the date on which the change in the composition of the Board of Directors set forth above shall have occurred, whichever is applicable, the full value of each outstanding Award shall become exercisable and/or fully vested and shall be paid in full to the Participant as soon as practicable following the date of such event. 11. CANCELLATION OF AWARDS The Committee may cancel all or any part of an Award with the written consent of the Participant holding such Award. In the event of any cancellation, all rights of the former Participant in respect of such cancelled Award shall terminate. 12. MISCELLANEOUS PROVISIONS (a) Assignment and Transfer. Awards shall not be transferable other than by will or the laws of descent and distribution and Awards may be exercised or otherwise realized, during the lifetime of the grantee, only by the grantee or by his or her guardian or legal representative. (b) No Right to Awards or Employment. No Employee or other person shall have any claim or right to be granted an Award, nor shall any Participant have a right to receive payment of an Award in any form other than as the Committee shall approve. Neither the Plan nor any action taken hereunder shall be construed as giving any Employee or Participant any right to be retained in the employ of any FMC Company. (c) Taxes. The FMC Companies shall have the right to deduct from payment of an Award any taxes required by law to be withheld from an Employee with respect to such payment and, in the case of Awards paid in Common Stock the Employee or other person receiving such stock shall be required to pay to the FMC Companies the amount of any taxes required to be withheld from an Employee with respect to such stock. (d) Securities Laws. Each Award shall be subject to the condition that such Award may not be exercised or paid if the Committee determines that the sale of securities upon exercise or payment of such Award may violate the Securities Act of 1933 or any other law or requirement of any governmental authority. FMC shall not be deemed by any reason of the granting of any Award to have any obligation to register the shares subject to such Award under the Securities Act of 1933 or to maintain in effect any registration of such shares which may be made at any time under the Securities Act of 1933. (e) Premature Termination. FMC shall not be obligated to make any payment of cash or Common Stock (or have any other obligation or liability) under any Award if the Committee shall determine that (i) the employment of the holder of such Award with any FMC Company shall have been terminated for good cause, or (ii) the holder of such Award shall have engaged or may engage in employment or activities competitive with the FMC Companies or contrary, in the opinion of the Committee, to the best interests of the FMC Companies. After any such determination the holder of such Award shall have no right under any such Award (regardless of whether such holder shall have delivered a notice of exercise prior to the making of such determination) to receive any payment or purchase any shares at any time unless such determination shall be rescinded by the Committee. Any Award may be terminated entirely by the Committee at the time of or any time subsequent to a determination by the Committee under this section which has the effect of eliminating FMC's obligation to pay such Award or sell or deliver shares under such Option. (f) Severability. Whenever possible, each provision in the Plan and in every Award shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan or any Award shall be held to be prohibited by or invalid under applicable law then (i) such provision shall be deemed amended to, and to have contained from the outset such language shall be necessary to, accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (ii) all other provisions of the Plan and every Award shall remain in full force and effect. (g) No Strict Construction. No rule of strict construction shall be applied against FMC, the Committee or any other person in the interpretation of any of the terms of the Plan, any Award or any rule or procedure established by the Committee. (h) Stockholder Rights. A Participant shall not have any dividend, voting or other stockholder rights by reason of an Award prior to the issuance of any Common Stock pursuant to such Award. (i) Governing Law. The Plan shall be governed by and construed in accordance with the laws of the United States of America and, to the extent not inconsistent therewith, by the laws of the State of Illinois. 13. AMENDMENT AND TERMINATION (a) Amendment. The Board of Directors may at any time amend, suspend or terminate the Plan, provided that no such action shall adversely affect any rights under any Award theretofore granted or change the objectives or other measure of performance applicable to an Award in a manner adverse to Participants in accordance with Section 9. No amendment may, without stockholder approval in accordance with Section 14, increase the total number of shares of Common Stock issuable under the Plan. (b) Termination. The right to grant further Awards shall terminate automatically upon the granting of such Awards which, together with shares of Common Stock previously issued and/or subject to outstanding Awards, equals the maximum authorized under the Plan, subject to additional shares of Common Stock becoming available for Awards by reason of forfeitures or cancellations of earlier Awards. 14. EFFECTIVE DATE OF THE PLAN The Plan shall become effective as of January 1, 1995, subject to approval by the affirmative vote of the holders of a majority of the securities of FMC present, or represented, and entitled to vote at the next annual meeting of the stockholders of FMC. EX-10.10 3 STOCK OPTION PLAN EXHIBIT 10.10 FMC 1995 STOCK OPTION PLAN (AS AMENDED) 1. PURPOSE OF THE PLAN The purpose of the FMC 1995 Stock Option Plan is to promote the long-term performance of FMC by (i) providing long-term incentives in common stock of FMC to key management employees of FMC and its subsidiaries, (ii) assisting in attracting and retaining as employees persons whose abilities, experience and judgment have contributed and will continue to contribute to the financial success and progress of FMC, and (iii) aligning the identity of interests of those employees and FMC's shareholders. 2. DEFINITIONS (a) "Award" means an Option. (b) "Board of Directors" means the Board of Directors of FMC as it may be constituted from time to time. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means the Compensation and Organization Committee of the Board of Directors. (e) "Common Stock" means the common stock of FMC. (f) "Date of Grant" means the date which is designated by the Committee as the date of grant of an Option. (g) "Disability" means complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed when such disability commenced. (h) "Disinterested Person" means any member of the Board of Directors who, at the time discretion under the Plan is exercised, has not at any time within one year prior thereto received grants or awards of equity securities under the Plan or any other plan of FMC or any of its affiliates (as that term is used in the Exchange Act) except as provided in Rule 16b-3(c)(2)(i), and is not selected as a person to whom equity securities may be allocated or granted pursuant to any other plan of FMC or any of its affiliates (as that term is used in the Exchange Act) entitling the participants therein to acquire equity securities of FMC or of any such affiliates except as provided in Rule 16b-3(c)(2)(i). (i) "Employee" means any person employed by the FMC Companies. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) "Fair Market Value" means the closing price of a share of Common Stock on a specified date as reported in the New York Stock Exchange Composite Transactions for such date, or such other measurement of value as may be specified by the Committee from time to time. (l) "FMC" means FMC Corporation. (m) "FMC Company" or "FMC Companies" means FMC and its Subsidiaries. (n) "Incentive Stock Option" means a stock option granted by the Committee to a Participant which is an incentive stock option within the meaning of Section 422 of the Code and is designated by the Committee as an Incentive Stock Option. (o) "Nonqualified Stock Option" means a stock option granted by the Committee to a Participant which is not designated by the Committee as an Incentive Stock Option. (p) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (q) "Parent Corporation" means a corporation which, with respect to another corporation, is a parent corporation within the meaning of Section 424(e) of the Code. (r) "Participant" means an Employee who has received an Award which has not been exercised, cancelled or forfeited and which has not expired. (s) "Plan" means the FMC 1995 Stock Option Plan. (t) "Plan Year" means each calendar year commencing on or after January 1, 1995. (u) "Subsidiary Company" means (i) any corporation the majority of the voting power of all classes of stock entitled to vote or the majority of the total value of shares of all classes of stock of which is owned, directly or indirectly, by FMC, or (ii) any trade or business other than a corporation the majority of the profits interest, capital interest or actuarial interest of which is owned, directly or indirectly, by FMC. (v) "Subsidiary Corporation" means a corporation or other entity which, with respect to another corporation, is a subsidiary corporation within the meaning of Section 424(f) of the Code. (w) "10 Percent Shareholder" means an individual who on the Date of Grant owns directly or indirectly stock of the FMC Company employing such individual, or of a corporation which is a Parent Corporation or Subsidiary Corporation with respect to such FMC Company, possessing more than 10 percent of the total combined voting power of all classes of stock of such FMC Company, Parent Corporation, or Subsidiary Corporation. 3. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee, the composition of which shall consist of not less than two members of the Board of Directors who are Disinterested Persons, and otherwise satisfy the provisions of Rule 16b-3 of the General Rules and Regulations under the Exchange Act or any successor to such rule. Except as limited by the express provisions of the Plan or by resolutions adopted by the Board of Directors, the Committee shall have the authority and discretion to interpret the Plan, to establish and revise rules and regulations relating to the Plan, and to make any other determinations that it believes necessary or advisable for the administration of the Plan. Decisions and determinations by the Committee shall be final and binding on all persons. Notwithstanding anything to the contrary contained in the Plan, the Board of Directors shall also have all power and authority to perform any act granted to the Committee pursuant to the Plan. 4. PARTICIPATION Participants shall be determined by the Committee, in its sole discretion, from Employees who, in the Committee's judgment, have a significant opportunity to influence the growth of FMC or whose outstanding performance or potential merit further incentive and reward for continued employment and accomplishment. 5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN Subject to adjustment pursuant to Section 7, at no time may (i) the sum of (a) the number of shares of Common Stock issued upon exercise of Options, and (b) the number of shares of Common Stock subject to outstanding Options, together with all shares issued or subject to outstanding awards under the FMC 1995 Management Incentive Plan exceed 3.0 million or (ii) the number of shares of Common Stock for which Options may be granted during a Plan Year exceed 100,000 for any Participant. In the event that any outstanding Option for any reason expires, terminates, is cancelled or forfeited, without having been exercised, the shares of Common Stock allocable to the expired, terminated, cancelled or forfeited portion of such Option shall (unless the Plan shall have been terminated) become available for subsequent grants of Options. 6. OPTIONS (a) Grant of Options. The Committee may, in its sole discretion, at any time and from time to time grant Options to any Participant. Each Option shall be evidenced by a written instrument containing such terms and conditions, not inconsistent with the Plan, as the Committee shall approve. (b) Nonqualified Stock Options (i) Exercise Price. The purchase price per share of Common Stock under each Nonqualified Stock Option shall be as specified by the Committee in the Option, provided that such purchase price shall be not less than 100 percent of the Fair Market Value on the Date of Grant. (ii) Exercisability. Each Nonqualified Stock Option shall become fully exercisable by the grantee at the time designated by the Committee in the Option. (iii) Term. The term of each Nonqualified Stock Option shall be as specified by the Committee in the Option. In the event no term is so specified, the term for the Nonqualified Stock Option shall be 15 years from the Date of Grant. The Committee may, from time to time, extend the Option Expiration Date of any Nonqualified Stock Option upon such terms and conditions as the Committee shall determine. (iv) No Ordering. Nonqualified Stock Options may be exercised in any order, regardless of the Date of Grant or the existence of any outstanding Option. (c) Incentive Stock Options (i) Date of Grant. In no event shall any Incentive Stock Option be granted after ten years from the date the Plan is adopted or the date the Plan is approved by the stockholders of FMC pursuant to Section 16, whichever is earlier. (ii) Exercise Price. The purchase price per share of Common Stock under each Incentive Stock Option shall be not less than 100 percent of the Fair Market Value on the Date of Grant. Notwithstanding the foregoing, in the case of a Ten Percent Shareholder, the purchase price per share of Common Stock under each such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the Date of Grant. (iii) Exercisability. Each Incentive Stock Option shall become fully exercisable by the grantee at the time designated by the Committee in the Option. (iv) Term. At or prior to the time an Incentive Stock Option is granted, the Committee shall fix the term of such Option, which shall be not more than ten years from the Date of Grant, and such term shall be stated in the Option. In the event the Committee takes no action to fix the term, such Option shall contain a provision that it shall expire 10 years from the Date of Grant. Notwithstanding the foregoing, the terms of an Option granted to a 10 Percent Shareholder shall not be more than five years from the Date of Grant. (v) Maximum Amount. The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the shares of Common Stock with respect to which the Incentive Stock Options granted under the Plan and all other FMC plans become exercisable for the first time by a Participant during any calendar year shall not exceed $100,000. Options granted in excess of such limitation shall be Nonqualified Options. (vi) Notice of Disposition. A Participant or former Participant shall give prompt notice to FMC of any disposition of shares acquired upon exercise of an Incentive Stock Option if such disposition occurs within either two years after the Date of Grant or one year after the receipt of such shares by the Participant or former Participant. (d) Payment for Stock. Payment for Common Stock purchased upon the exercise (in whole or in part) of an Option shall be made in cash, in shares of Common Stock (valued at the then Fair Market Value), or by a combination of cash and Common Stock. The proceeds received by FMC from the sale or sales pursuant to the Plan will be used for general corporate purposes. (e) Termination of Employment. (i) Nonqualified Stock Options. If a Participant's employment is terminated for any reason whatsoever (including death), any Nonqualified Stock Option granted pursuant to the Plan outstanding at the time and all rights thereunder may, unless earlier terminated in accordance with its terms, be exercised by the Participant or other person who acquired the right to exercise such Option, until the following date: (A) The Option Expiration Date if termination is due to death, Disability or retirement under the terms of any formal retirement plan of any FMC Company; (B) three months after the date employment is terminated for any reason other than death, Disability, retirement or good cause as provided in Section 10(e); or (C) immediately upon the date employment is terminated for good cause as provided in Section 14(e). (ii) Incentive Stock Options. If a Participant's employment terminates for any reason (including death) such that the Participant is not employed by FMC or by any corporation which is a Parent Corporation or Subsidiary Corporation with respect to FMC, any Incentive Stock Option outstanding at the time and all rights thereunder may, unless earlier terminated in accordance with its terms, be exercised by the Participant or other person who acquired the right to exercise such option until the following date: (A) the Option Exercise Date if termination is due to death; (B) one year after the date employment terminates if such termination is by reason of permanent and total disability; (C) three months after the date employment terminates for any reason other than death or permanent and total disability or good cause as provided in Section 14(e), provided that if employment terminates due to retirement at the normal retirement date or to early retirement at the request of FMC, the Option shall terminate at the Option Expiration Date subject to its becoming a Nonqualified Stock Option if not exercised within three months of such termination of employment; (D) immediately upon the date employment is terminated for good cause as provided in Section 14(e), but in all events each Incentive Stock Option shall terminate not more than 10 years (five years in the case of an Incentive Stock Option granted to a 10 Percent Shareholder) from the Date of Grant. For purposes of this section, "permanent and total disability" means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. (iii) Whole or Partial Exercise. If an Option may be exercised by a Participant after his employment terminates, such Option may be exercised in whole or in part. (iv) Beneficiaries. In the event of the death of a Participant, the person or persons to whom any Option shall have been transferred by will or the laws of descent and distribution shall have the right (during the appropriate period determined under this section) to exercise such Option in whole or in part. (v) Committee Discretion. Notwithstanding the foregoing, the Committee may, if it believes circumstances warrant such action, authorize the exercise of an Option that would otherwise have terminated provided that the Committee may not exercise such discretion if it would cause the disallowance of FMC's tax deduction under Section 162(m) of the Code with respect to the Plan or an Award. 7. DILUTION AND OTHER ADJUSTMENTS In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spinoff, reorganization, combination or exchange of shares or other similar corporate change, the Committee shall make such adjustments, if any, as it in its sole discretion deems equitable in the number of shares of Common Stock subject to an Option held by any Participant and the exercise price thereof, such adjustments to be conclusive and binding upon all parties concerned. 8. CHANGE OF CONTROL If, while any Options remain outstanding under the Plan_ (a) the "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 20 percent of the combined voting power of FMC is acquired by a "person" as defined in Sections 13(d) and 14(d) of the Exchange Act (other than FMC, any trustee or other fiduciary holding securities under an employee benefit plan of FMC or an affiliate thereof, or any corporation owned, directly or indirectly, by the stockholders of FMC in substantially the same proportions as their ownership of stock of FMC), or (b) the stockholders of FMC approve a definitive agreement to merge or consolidate FMC with or into another company (other than a merger or consolidation which would result in the voting securities of FMC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80 percent of the combined voting power of the voting securities of FMC or such surviving entity outstanding immediately after such merger or consolidation), or to sell or otherwise dispose of all or substantially all of its assets, or adopt a plan of liquidation, or (c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors any new director (other than a director designated by a person who has entered into an agreement with FMC to effect a transaction described in paragraph (a) or (b) of this section) whose election by the Board of Directors or nomination for election by FMC's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, then from and after the date on which public announcement of the acquisition of such percentage shall have been made, or the date of any such stockholder approval or adoption, or the date on which the change in the composition of the Board of Directors set forth above shall have occurred, whichever is applicable, all Options shall become exercisable on the date of such event. 9. CANCELLATION OF AWARDS The Committee may cancel all or any part of an Option with the written consent of the Participant holding such Option. In the event of any cancellation, all rights of the former Participant in respect of such cancelled Option shall terminate. 10. MISCELLANEOUS PROVISIONS (a) Assignment and Transfer. Options shall not be transferable other than by will or the laws of descent and distribution and may be exercised or otherwise realized, during the lifetime of the grantee, only by the grantee or by his or her guardian or legal representative. (b) No Right to Options or Employment. No Employee or other person shall have any claim or right to be granted an Option. Neither the Plan nor any action taken hereunder shall be construed as giving any Employee or Participant any right to be retained in the employ of any FMC Company. (c) Taxes. The FMC Companies shall have the right to deduct from payment of an Award any taxes required by law to be withheld from an Employee with respect to such payment and, in the case of shares of Common Stock issued upon the exercise of an Option, the Employee or other person receiving such stock shall be required to pay to the FMC Companies the amount of any taxes required to be withheld from an Employee with respect to such stock. (d) Securities Laws. Each Option shall be subject to the condition that such Option may not be exercised if the Committee determines that the sale of securities upon exercise of such Option may violate the Securities Act of 1933 or any other law or requirement of any governmental authority. FMC shall not be deemed by any reason of the granting of any Option to have any obligation to register the shares subject to such Option under the Securities Act of 1933 or to maintain in effect any registration of such shares which may be made at any time under the Securities Act of 1933. (e) Premature Termination. FMC shall not be obligated to make any payment of cash or Common Stock (or have any other obligation or liability) under any Option if the Committee shall determine that (i) the employment of the holder of such Option with any FMC Company shall have been terminated for good cause, or (ii) the holder of such Option shall have engaged or may engage in employment or activities competitive with the FMC Companies or contrary, in the opinion of the Committee, to the best interests of the FMC Companies. After any such determination the holder of such Option shall have no right under any such Option (regardless of whether such holder shall have delivered a notice of exercise prior to the making of such determination) to receive any payment or purchase any shares at any time unless such determination shall be rescinded by the Committee. Any Option may be terminated entirely by the Committee at the time of or any time subsequent to a determination by the Committee under this section which has the effect of eliminating FMC's obligation to pay such Award or sell or deliver shares under such Option. (f) Severability. Whenever possible, each provision in the Plan and in every Option shall be interpreted in such manner as to be effective and valid under applicable law (including, in the case of an Incentive Stock Option, interpretation in such manner as to not prevent such Option from meeting the requirements of Section 422 of the Code and of other provisions applicable with respect to incentive stock options as defined in such Section 422 (collectively, the "ISO Requirements"), but if any provision of this Plan or any Option shall be held to be prohibited by or invalid under applicable law, or, where applicable, to fail to meet any ISO Requirements, then (i) such provision shall be deemed amended to, and to have contained from the outset such language shall be necessary to, accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (ii) all other provisions of the Plan and every Option shall remain in full force and effect. (g) No Strict Construction. No rule of strict construction shall be applied against FMC, the Committee or any other person in the interpretation of any of the terms of the Plan, any Option or any rule or procedure established by the Committee. (h) Stockholder Rights. A Participant shall not have any dividend, voting or other stockholder rights by reason of an Option prior to the issuance of any Common Stock pursuant to such Option. (i) Governing Law. The Plan shall be governed by and construed in accordance with the laws of the United States of America and, to the extent not inconsistent therewith, by the laws of the State of Illinois. 11. AMENDMENT AND TERMINATION (a) Amendment. The Board of Directors may at any time amend, suspend or terminate the Plan, provided that no such action shall adversely affect any rights under any Option theretofore granted or change the objectives or other measure of performance applicable to an Option in a manner adverse to Participants in accordance with Section 7. No amendment may, without stockholder approval in accordance with this Section, increase the total number of shares of Common Stock issuable under the Plan. (b) Termination. The right to grant further Options shall terminate automatically upon the granting of such Options which, together with shares of Common Stock previously issued and/or subject to outstanding Options, equals the maximum authorized under the Plan, subject to additional shares of Common Stock becoming available for Options by reason of forfeitures or cancellations of earlier Options or Awards under the Plan or the FMC 1995 Management Incentive Plan. 12. EFFECTIVE DATE OF THE PLAN The Plan shall become effective as of January 1, 1995, subject to approval by the affirmative vote of the holders of a majority of the securities of FMC present, or represented, and entitled to vote at the next annual meeting of the stockholders of FMC. EX-12 4 STATEMENT OF EARNINGS TO FIXED CHARGES EXHIBIT 12 FMC CORPORATION --------------- COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES -------------------------------------------------- (Amounts in Millions)
Years Ended December 31 --------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- EARNINGS: - -------- Income from continuing operations before income taxes and extraordinary items $246.9 $252.3 $ 37.8 $279.6 $255.9 Minority interests 59.1 61.4 2.5 3.6 3.0 Undistributed (earnings) losses of affiliates 2.0 4.1 (0.4) (6.8) (3.1) Interest expense and amortization of debt discount, fees and expenses 87.3 68.0 73.6 94.9 124.7 Amortization of capitalized interest 8.0 7.8 7.6 7.6 7.4 Interest included in rental expense 21.4 21.4 20.0 19.9 18.1 ------------------------------------------- Total earnings $424.7 $415.0 $141.1 $398.8 $406.0 ------------------------------------------- FIXED CHARGES: - ------------- Interest expense and amortization of debt discount, fees and expenses $ 87.3 $ 68.0 $ 73.6 $ 94.9 $124.7 Interest capitalized as part of fixed assets 14.5 4.6 0.7 2.1 3.5 Interest included in rental expense 21.4 21.4 20.0 19.9 18.1 ------------------------------------------- Total fixed charges $123.2 $ 94.0 $ 94.3 $116.9 $146.3 ------------------------------------------- Ration of earnings to fixed charges 3.4 4.4 1.5 3.4 2.8 =========================================== (A) (B)
(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 3.9x (B) The ratio of earnings to fixed charges for the year ended December 31, 1993 before restructuring and other charges was 3.3x. EX-13 5 ANNUAL REPORT [FMC LOGO] FMC Corporation 1995 Annual Report Increasing shareholder value through people, growth and superb execution As one of the world's leading producers of chemicals and machinery for industry, agriculture and government, FMC participates on a world- wide basis in five broad markets: Performance Chemicals, Industrial Chemicals, Machinery and Equipment, Defense Systems and Precious Metals. FMC operates 115 manufacturing facilities and mines in 24 countries. About the cover: FMC is building our commitment to shareholders by growing the company, executing superbly and enlisting the best people to do the job. [GRAPH APPEARS HERE] 91 92 93/2/ 94 95/3/ ---- ---- ----- ---- ----- Return on Investment/1/ 18.4 20.6 7.8 17.2 15.1 19.1 Earnings Per Share 4.77 5.23 1.11 4.66 5.63 4.45 (1) Return on investment = net income plus after-tax interest expense on debt divided by the average of stockholders' equity plus total debt. (2) 1993 ROI and earnings per share were 7.8 percent and $1.11, respectively. ROI and EPS, excluding after-tax restructuring and other charges of $123.3 million, or $3.34 per share, were 19.1 percent and $4.45, respectively. (3) 1995 ROI and EPS, which are not displayed, were 15.3 percent and $5.72, respectively. ROI of 15.1 percent and EPS of $5.63, as displayed, exclude after-tax restructuring and other charges and a gain on the sale of FMC Wyoming stock of $3.5 million, or $0.09 per share.
FINANCIAL SUMMARY - ----------------------------------------------------------------------------- (In millions, except common stock, 1995 1994 Change employee and stockholder data) - ----------------------------------------------------------------------------- SALES In the United States $ 2,313.0 $2,045.0 13% Outside the United States 2,196.8 1,965.8 12% - ----------------------------------------------------------------------------- TOTAL SALES $ 4,509.8 $4,010.8 12% ============================================================================= INCOME (AFTER TAX) Income before restructuring and other charges and gain on sale of FMC Wyoming stock/(1)(2)/ $ 212.1 $ 173.4 22% - ----------------------------------------------------------------------------- Net income $ 215.6 $ 173.4 24% - ----------------------------------------------------------------------------- FINANCIAL DATA Common stock price range $79 1/2-57 3/8 $65-45 1/2 - ----------------------------------------------------------------------------- Capital expenditures excluding acquisitions $ 494.1 $ 314.6 - ----------------------------------------------------------------------------- Research and development expenditures/(3)/ $ 172.3 $ 166.8 - ----------------------------------------------------------------------------- At December 31 Operating working capital $ 184.9 $ (36.1) Number of employees 22,164 21,344 Number of stockholders 11,844 12,438 - -----------------------------------------------------------------------------
(1)Supplemental financial information. Income before restructuring and other charges and gain on sale of FMC Wyoming stock should not be considered in isolation nor as an alternative for net income or as the sole measure of the company's profitability. (2)Restructuring and other charges consist 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 consolidated financial statements). The non- taxable gain on sale of FMC Wyoming stock was $99.7 million (Note 2 to consolidated financial statements). (3)Excludes 1995 write-off of acquired in-process research and development of $15.5 million (Note 2 to consolidated financial statements). - ------------------------------------------------------------------------------ 1 FMC Investor Highlights . Our cash flow from operations* is more than $760 million. . In 1995, we significantly increased capital spending to close to $500 million, made acquisitions of more than $360 million and spent $172 million on research and development - all investments to fuel future growth at returns above our cost of capital. . We continue to have a strong return on investment at 15.1 percent (before special income and expense items), even as we significantly step up investment spending. Robert N. Burt Larry D. Brady Our performance in 1995 added another positive milestone to our plan to create shareholder value. We achieved that milestone through our successful efforts to add growth to our tradition of superb execution. . Sales were up 12 percent to $4.5 billion - the first significant top-line growth we've seen in five years. . Net income before special income and expense items was $212 million - up 22 percent from last year, which means we increased margins even as we were increasing sales. . Earnings per share were $5.63 (before special income and expense items) - up 21 percent from 1994. In the past four years, we've identified opportunities and made investments that will allow us to continue these trends. . Between 1992 and 1996, we expect to invest more than $1.7 billion in capital - up 45 percent, or $110 million a year over the previous five years. . In the last four years, we have acquired more than $650 million worth of businesses - $360 million in 1995. . We've also maintained our focus on research and development, and accelerated our introduction of new products and new technologies. . We continue to optimize our portfolio of businesses. We're in a process to extract the highest value from our precious metals business. We sold 20 percent equity interest in our soda ash busi- ness for $150 million and divested non-core machinery businesses. . And we've maintained our strong financial structure and investment-grade rating on outstanding debt. The strategies timeline later in this report highlights our progress. * Segment profits before tax plus depreciation 2 Driving this best year in FMC's history were improving markets and cost improvements in Industrial Chemicals; market share gains, restructuring efforts, and the benefits of acquisitions in Machinery and Equipment; and continued growth in Performance Chemicals. This strong operating performance - combined with the cultural changes we're implementing - demonstrates that our strategy of adding growth to our tradition of superb execution is taking hold. We are strengthening the base of our existing businesses, expanding our markets and increasing revenues. The operating review and management's discussion and analysis later in this report provide greater detail on the state of our businesses. Maximizing Shareholder Returns Our top priority is maximizing shareholder value. Accordingly, in 1995, we did an in-depth study to determine if maintaining our mix of chemical, machinery and defense businesses was likely to result in continuing our historical record of generating superior shareholder returns. Our study showed that over the past 15 years, diversified companies have produced returns above those of non- diversified companies - by 2 percent a year. Based on this study, we are convinced that our strategy of increasing our growth rate while maintaining our commitment to superb execution, continuous improvement and a rigorous, analytical approach to decision-making will result in superior shareholder returns between now and the turn of the century. Changing Our Culture As we are more deeply involved in implementing our strategies, it becomes clearer that our most important task is to get, develop and keep more than our fair share of the best people. Achieving that goal involves a change in culture by: . refocusing our working relationships, with more dialogue and more exchange of new ideas; . emphasizing stretch objectives for our businesses, reinforced by our new incentive plan; . creating a work environment where we value diversity, encourage people development, develop teamwork, and build trust and effective communications; . streamlining decision-making, with more emphasis on line-to-line communications; . putting in place new operating systems, including our balanced scorecard approach that focuses on the key success factors, such as customer satisfaction, productivity and innovation, in addition to financial measures; . integrating more external focus into operations, with senior managers and operating managers spending more time with customers. These changes in culture supplement our traditional values of maintaining the highest ethical standards; protecting health, safety and the environment; and acting as a responsible corporate citizen. 3 . We are focused on optimizing the mix of FMC's businesses, including the sale of 20 percent equity interest in our soda ash business for $150 million cash and the divestiture of non-core businesses. . We have a strong financial structure and investment-grade ratings on outstanding debt. . We are focused on diversified global growth, with international sales totaling 48 percent** of sales. . FMC managers and employees are focused on increasing shareholder returns given our significant internal ownership - 24 percent of FMC's outstanding stock. Management Changes We elected three new vice presidents in 1995 - all of whom earned their promotions based on outstanding performance in their previous jobs with the company. . Bill Schumann was elected vice president and head of our Agricultural Products business, succeeding Earl Morgan, who retired in 1995, leaving the legacy of an organization committed to excellence. . Ron Mambu also was elected vice president and continues as controller. . Pat Brozowski was elected vice president of communications. There are other changes in management and in our board of directors. . For more than 20 years, Larry Holleran, former vice president, human resources, has provided outstanding service to FMC. His insights and contributions have positively influenced countless FMC employees and the fortunes of our company. As he retires in February, we thank him for a super job and wish him well in meeting the challenges of his well-earned retirement. . We are pleased to welcome Pehr Gyllenhammar to our board of directors. Perhaps best known as the former head of AB Volvo, Pehr brings us broad- ranging experience in international business and finance. Pehr currently is a senior adviser to Lazard Freres. . Bill Boeschenstein is retiring from our board at our 1995 annual meeting. Personally and professionally, we all will miss his sage counsel, his business acumen and his willingness to offer his perspective. Outlook We believe the 1996 outlook for our Industrial Chemicals, Performance Chemicals and Machinery and Equipment segments is positive. These businesses will have to overcome a downturn in defense and higher interest expense driven by our significant capital investments and acquisitions. However, at this point, we believe that we can achieve another record performance in sales and earnings. Robert N. Burt Larry D. Brady Chairman of the Board and President Chief Executive Officer February 29, 1996 ** Excludes sales of Precious Metals 4
Industry Segment Data - ------------------------------------------------------------------------------------------- (In millions) Year ended December 31 ---------------------------------------------------- 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------- Sales Performance Chemicals $1,176.5 $1,060.5 $ 973.5 $ 912.3 $ 764.1 Industrial Chemicals 976.8 866.8 866.7 925.9 933.3 Machinery and Equipment 1,351.0 972.7 870.9 876.7 891.5 Defense Systems 968.2 1,080.5 950.2 1,111.8 1,171.6 Precious Metals 59.0 60.9 125.0 170.6 157.5 Eliminations (21.7) (30.6) (32.4) (23.6) (18.6) - ------------------------------------------------------------------------------------------- Total $4,509.8 $4,010.8 $3,753.9 $3,973.7 $3,899.4 =========================================================================================== Income (loss) before income taxes Performance Chemicals $ 161.6 $ 154.0 $ 139.1 $ 133.4 $ 116.4 Industrial Chemicals(1) 161.9 119.3 58.3 79.8 86.8 Machinery and Equipment 49.8 33.3 6.7 32.1 46.2 Defense Systems(1) 160.8 159.5 161.7 167.2 160.2 Precious Metals(1) (5.7) (9.0) 9.7 36.4 28.7 - ------------------------------------------------------------------------------------------- Operating profit 528.4 457.1 375.5 448.9 438.3 Restructuring and other charges(2) (150.0) - (172.3) - - Gain on sale of FMCWyoming stock(3) 99.7 - - - - Net interest expense (72.5) (59.1) (62.6) (82.7) (107.4) Corporate and other (96.2) (101.9) (110.5) (112.3) (89.6) Minority interests(1) (59.1) (61.4) (2.5) (3.6) (3.0) Other income and (expense), net(4) (3.4) 17.6 10.2 29.3 17.6 - ------------------------------------------------------------------------------------------- Total $ 246.9 $ 252.3 $ 37.8 $ 279.6 $ 255.9 =========================================================================================== Identifiable assets Performance Chemicals $ 904.6 $ 754.6 $ 696.9 $ 662.2 $ 546.1 Industrial Chemicals 1,048.8 883.6 824.7 872.2 908.4 Machinery and Equipment 1,166.5 619.3 522.9 473.0 503.3 Defense Systems 547.3 492.0 269.0 277.7 367.6 Precious Metals 139.1 108.9 64.8 131.8 145.1 - ------------------------------------------------------------------------------------------- Subtotal 3,806.3 2,858.4 2,378.3 2,416.9 2,470.5 Corporate and other 494.8 493.1 466.8 439.7 303.7 - ------------------------------------------------------------------------------------------- Total $4,301.1 $3,351.5 $2,845.1 $2,856.6 $2,774.2 ===========================================================================================
(1) Defense Systems' segment data includes 100 percent of United Defense, L.P. in 1994 and 1995. Industrial Chemicals' segment data includes 100 percent of FMC Wyoming Corporation in 1995. Precious Metals' segment data includes 100 percent of FMC Gold Company in 1991 through 1995. Minority shareholder interests are included in Minority interests, except the portion related to 1993 restructuring and other charges. (2) Restructuring and other charges related to 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 related to 1993 are described in Note 3 to the consolidated financial statements and are related to Machinery and Equipment ($66.0 million), Precious Metals ($47.9 million, net of minority interest), Industrial Chemicals ($29.7 million), Performance Chemicals ($3.2 million), and Corporate ($25.5 million). (3) Gain on sale of FMC Wyoming stock (Note 2 to the consolidated financial statements) is attributable to the Industrial Chemicals segment. (4) Other income and (expense), net primarily includes LIFO inventory adjustments and pension-related income and (expense). - -------------------------------------------------------------------------------- 5 Products and Markets Performance Chemicals Description ................................................................................ Agricultural Produces crop protection and pest control chemicals for Products worldwide markets. More than 50 percent of sales outside of United States. ________________________________________________________________________________ Food Ingredients Largest worldwide producer of carrageenan and Avicel cellulose gel. Leading specialist in providing texture, structure and physical stability for food systems. ________________________________________________________________________________ Pharmaceutical Largest worldwide producer of binders and disintegrants, as well as other specialty chemicals for pharmaceutical markets. ________________________________________________________________________________ Lithium World's largest producer of lithium-based products. ________________________________________________________________________________ Process World's largest producer of phosphate ester flame Additives retardants. Leading supplier of specialty water treatment chemicals. ________________________________________________________________________________ BioProducts Largest worldwide producer of agarose. Leading supplier of proprietary products for life science markets. Industrial Chemicals Description ................................................................................ Alkali World's largest producer of natural soda ash and market Chemicals leader in North America. Downstream products include sodium bicarbonate, sodium cyanide, sodium sesquicarbonate, caustic soda. ________________________________________________________________________________ Peroxygen Major worldwide producer of hydrogen peroxide, Chemicals persulfates and other peroxygen chemicals. ________________________________________________________________________________ Phosphorus Major worldwide supplier and leading North American pro- Chemicals ducer of phosphorus and its derivatives, phosphates and phosphoric acid. ________________________________________________________________________________ FMC Foret, S.A. Major European chemical producer. Products include hydrogen peroxide, perborates, phosphates, silicates, zeolites, sulfur derivatives. Leading share in Spanish peroxygen and phosphate markets. 6 Markets Served ................................................................................ Food growers, pest control markets. - -------------------------------------------------------------------------------- Processed food industry, personal care products. - -------------------------------------------------------------------------------- Pharmaceutical industry. - -------------------------------------------------------------------------------- Aluminum, ceramics and glass, lubricating greases, swimming pools, textiles, aluminum alloys, batteries, rubber and plastic,air conditioning, pharmaceuticals. - -------------------------------------------------------------------------------- Plastics, hydraulic fluids, lubricant additives, industrial water treatment and desalination. - -------------------------------------------------------------------------------- Life science research; DNA and protein analysis. FMC Market Strengths ................................................................................ Strong global position in both developed and developing countries. Strong insecticide portfolio. Successful efforts in developing a new class of herbicides. - -------------------------------------------------------------------------------- Proprietary products. Advanced applications technology. Worldwide manufacturing capabilities. - -------------------------------------------------------------------------------- Brand recognition. Proprietary technology. Advanced applications technology. Strong manufacturing capabilities. Product quality and versatility. - -------------------------------------------------------------------------------- Diverse, high value-added products. Strong manufacturing capabilities. - -------------------------------------------------------------------------------- Global manufacturing and technical sales capabilities. Diverse products. Applications know-how. - -------------------------------------------------------------------------------- Advanced applications technology. Product quality. Proprietary technology. Worldwide brand recognition. Growth and Global Development ................................................................................ Rapid expansion of new and existing products to markets in Latin America, Europe and Asia. Building new manufacturing plant to produce new family of herbicides. - -------------------------------------------------------------------------------- Opened new R&D laboratories; sales, marketing push in Europe, Asia-Pacific and Latin America. Dedicated teams in place for developing meat, seafood, poultry applications. - -------------------------------------------------------------------------------- Working with customers to tailor FMC's AviSphere time-release technology. Launched new line of vitamin specialty excipients and a new chewable tablet excipient. Opened new technical service laboratory in Brussels and signed new agreement to sell excipients to multinational customers in Asia. - -------------------------------------------------------------------------------- Developing new, low-cost lithium reserves in South America using new proprietary lithium extraction technology. Accelerated research efforts in pharmaceutical reagents, polymer initiators and battery materials. - -------------------------------------------------------------------------------- Opened new R&D laboratory in Princeton, New Jersey, increasing capabilities to serve the plastics market. Continuing R&D investments. Increasing technology focus on process improvement. Increasing growth in Asia-Pacific region. - -------------------------------------------------------------------------------- Introduced new products for conducting DNA separations, sequencing and detection. Continuing R&D investments. Acquired AT Biochem to expand into DNA sequencing and mutation detection markets. Outlook ................................................................................ Growing markets for pesticides in developing countries. Growing portfolio of pest control products and herbicides, with substantial market share gains. Expect to bring to market new herbicides for use in U.S. and international markets. - -------------------------------------------------------------------------------- Continued growth in global food ingredients markets. Increasing output from regional food labs and field organizations around the world. - -------------------------------------------------------------------------------- Strong pharmaceutical customer base. Expanding through value-added technology. - -------------------------------------------------------------------------------- Growing specialty applications. New products introduced for lithium ion batteries, specialty polymers and synthetic intermediates for polymers. - -------------------------------------------------------------------------------- Increased profitability from improved manufacturing performance and gains from process technology. Continuing gains from new, state-of-the-art process control equipment. - -------------------------------------------------------------------------------- Increasing demand for DNA and protein-related analysis in research and diagnostics. Markets Served ................................................................................ Glass-making, chemicals, detergents, food products, animal feed additives, mining, air/water treatment, pulp and paper. - -------------------------------------------------------------------------------- Pulp and paper, textiles, chemical and polymer synthesis, environmental clean- up, electronics, mining, detergents. - -------------------------------------------------------------------------------- Detergents, cleaning compounds, metal treatment, food products, textiles, pesticide intermediates, additives, pharmaceuticals, water treatment. - -------------------------------------------------------------------------------- Detergents, pulp and paper, textiles, chemicals, tanning, animal feed, mining, rubber, pharmaceuticals, ceramics, paint, food, photography, agriculture, water treatment. FMC Market Strengths ................................................................................ Proprietary solution mining technology. 100+ years raw material supply. Low production costs. Largely self-sufficient in energy. Excellent distribution system. - -------------------------------------------------------------------------------- Strong applications research. High level of service, reliability, product quality and safety. - -------------------------------------------------------------------------------- Low production costs. Diverse products. High level of service and reliable delivery. Strong technical support to customers. - -------------------------------------------------------------------------------- Excellent cost positions. Strong manufacturing capabilities. Strong technical support to customers. Worldwide market knowledge. Growth and Global Development ................................................................................ Focusing on new proprietary mining technology, reducing costs. Expansion under way. Multi-year cost improvement programs. Assessing potential trona source in Turkey. Strong export growth opportunities. - -------------------------------------------------------------------------------- Pursuing new markets and new applications in Asia and North America. - -------------------------------------------------------------------------------- With FMC Foret, servicing customers on a worldwide basis. - -------------------------------------------------------------------------------- New hydrogen peroxide plant in Delfzijl, Netherlands. Exports to more than 30 countries. Outlook ................................................................................ High capacity utilization. Improving pricing. Strong export growth. Continued cost improvement. - -------------------------------------------------------------------------------- Continued high capacity utilization in North America. Improving pricing. Continued high growth due to products' environmental desirability and versatility. - -------------------------------------------------------------------------------- Market position diversified to reduce dependence on laundry products. Worldwide anti-phosphate sentiment diminishing, with stable growth expected. - -------------------------------------------------------------------------------- Access to new markets from the Netherlands. 7 Products and Markets Machinery and Equipment Description ................................................................................ Energy and Transportation Equipment Oil and gas wellhead completion equipment; subsea engineering, procurement, construction and equipment; metering products and systems; loading systems; marine terminals and floating production systems; pressure-relief valves. - -------------------------------------------------------------------------------- Airline equipment, material handling systems. - -------------------------------------------------------------------------------- Food Machinery Systems and equipment to process food and beverages, including harvesters, sterilizers, extractors, fillers, closers, evaporators and aseptic systems, and food handling equipment. Defense Systems United Defense, L.P. Description ................................................................................ Ground Systems Develops technology, including hardware and software, and integrates into the manufacture of tracked vehicles for the U.S. armed forces and allied governments. Sole source on major programs. - -------------------------------------------------------------------------------- Armament Systems Leads development team for artillery weapon systems for 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, manufactures and over-sees joint ventures for military products outside the United States. - -------------------------------------------------------------------------------- Steel Products Produces steel and nickel alloy ingots, castings, forgings and military track. Upgrades and overhauls tracked vehicles. Precious Metals Description ................................................................................ FMC Gold Focusing on exploration of precious metals in Chile. Current production at Beartrack in Idaho and Jerritt Canyon in Nevada. 8 Markets Served ................................................................................ Oil and gas drilling, production, refining, transportation and power generation companies. - -------------------------------------------------------------------------------- Industrial manufacturing, airlines, airports, mining, warehouses, newsprint, publishing, chemicals, electrical utilities. - -------------------------------------------------------------------------------- Food and beverage processors; food canners; fruit and vegetable growers. FMC Market Strengths ................................................................................ Total-capabilities source for supplying global customers with an integrated package for the life of their subsea oil fields. Leading positions for major products. 80 percent of business outside United States. - -------------------------------------------------------------------------------- Proprietary technology. Strong manufacturing capabilities. A market leader in several key segments. Leading positions for major products. - -------------------------------------------------------------------------------- Advanced applications technology and process knowledge. Global manufacturing, service and marketing capabilities. Leading worldwide positions for major products. Growth and Global Development ................................................................................ Acquired Smith Meter, Inc., manufacturer of state-of-the-art metering products and systems, and Crosby Valve, manufacturer of world-class Crosby pressure- relief valves. Won key alliances for subsea systems in Gulf of Mexico and North Sea. - -------------------------------------------------------------------------------- Jetway Systems focusing on key international contracts and global sourcing. - -------------------------------------------------------------------------------- Acquired FranRica, a leading supplier of tomato processing systems. Expanded sales of non-carbonated beverage processing systems in Asia-Pacific. Integrated Log-Tec process technology across the sterilizer line. Outlook ................................................................................ Acquisitions position business for future growth, especially internationally. Alliances with customers position us well around the world. - -------------------------------------------------------------------------------- Acquisitions position our businesses for future international growth. - -------------------------------------------------------------------------------- FranRica acquisition extends fruit and vegetable product offerings and better positions us to serve global customers. Continued rapid growth in Asia-Pacific, slow improvement in Europe. Markets Served ................................................................................ U.S. Army, Marine Corps and National Guard; allied governments. - -------------------------------------------------------------------------------- U.S. Navy, Army, Marine Corps and allied governments. - -------------------------------------------------------------------------------- Allied governments. Cooperative arrangements with major international companies. - -------------------------------------------------------------------------------- Military, transportation, heavy equipment, industrial and oil field. FMC Market Strengths ................................................................................ Advanced system integration capabilities and applications technology. Strong, competitive manufacturing capabilities. Proven products. Innovative work-share partnership program with U.S. Army depot. - -------------------------------------------------------------------------------- Advanced systems applications technology. Strong manufacturing capabilities. Proven products. - -------------------------------------------------------------------------------- Leading technology. Multi-system availability. Proven deal structuring. - -------------------------------------------------------------------------------- Development and commercialization of engineering materials, competitive manufacturing and vehicle upgrade capabilities. Growth and Global Development ................................................................................ Prime contractor for integrating high-tech systems into the Bradley Fighting Vehicle and across other U.S. Army programs. Won contracts to continue as major supplier of new and re-manufactured tracked combat vehicles. - -------------------------------------------------------------------------------- Prime contractor for Crusader, a technically superior field artillery system. Developing new products and services for the U.S. Navy. Ongoing international sales. - -------------------------------------------------------------------------------- Operating major co-production facility in Turkey. FMC Arabia obtained substantial funding for programs. Signed cooperation agreement with Taiwan. - -------------------------------------------------------------------------------- Growth of performance alloy and components business. Increasing sales of track to allied governments. Outlook ................................................................................ Business moving toward technology integration as production volumes decline. Flexible manufacturing and engineering contracts offer good position for the future. - -------------------------------------------------------------------------------- Focus on engineering and technology development for future U.S. Navy/Army armament systems. - -------------------------------------------------------------------------------- Aggressively pursuing international opportunities, enhanced by partnership. Intense competition for new contracts will continue. - -------------------------------------------------------------------------------- Declining demand from U.S. Army. Increasing international track sales. Growing vehicle up-grade business. Increased growth of commercial business in high- performance materials. Markets Served ................................................................................ Precious metal refineries. FMC Market Strengths ................................................................................ Proven exploration and development expertise. Growth and Global Development ................................................................................ Promising exploration work in Chile and Nevada. Outlook ................................................................................ Beartrack production began in mid-1995. Beartrack and Jerritt Canyon properties combined will produce approximately 200,000 gold equivalent ounces annually. Pursuing possible sale of the company or its assets. 9 1990 . Acquired remaining 51 percent of Electro Quimica Mexicana, a producer of hydrogen peroxide and persulfates . Spent $324 million on capital projects: . three new chemical plants for sodium bicarbonate, sodium cyanide and caustic soda in Green River, Wyoming . a new hydrogen peroxide plant in Prince George, British Columbia . new capacity for food ingredients and pharmaceutical products in Cork, Ireland . expanded hydrogen peroxide capacity at FMC Foret . Cash flow from operations (before tax payments) exceeded $600 million . R&D at $158 million . Reduced debt by $177 million . Sales: $3.7 billion; net income: $155 million; EPS: $4.30 1991 . Elected Bob Burt as chairman and CEO . Acquired industrial- and food-grade phosphorus business of Occidental Chemical . Won $67 million, sole-source advanced development contract for the Advanced Field Artillery System . Won $1.1 billion contract for production of the Bradley Fighting Vehicle . Created new regional organizations in Europe, Latin America, Asia . Spent $217 million on capital projects: . a new butyllithium plant in Texas . a new zeolite facility in Spain . upgraded, realigned chemical production facilities . R&D at $135 million . Reduced debt by $267 million . Sales: $3.9 billion; net income: $164 million; EPS: $4.52 1992 . Studied and defined growth strategies to increase shareholder returns . Acquired Ciba-Geigy flame retardant and water treatment businesses . FMC and Harsco announce combination of defense businesses . Won contract for the Armored Gun System . Rugby insecticide/nematicide registered for use on imported bananas . Fury pyrethroid insecticide registered for use on cotton . Completed $700 million revolving credit agreement . Spent $220 million on capital projects: . expanding Avicel capacity in Newark, Delaware . developing Dry Valley mine in Idaho for phosphorus shale . expanded capacity at lithium plant in Bessemer City, North Carolina . R&D at $145 million . Reduced debt by $76 million . Sales: $4 billion; income from continuing operations: $193 million; EPS from continuing operations: $5.23 10 1993 . Elected Larry Brady as president . Completed purchase of Kongsberg Offshore . Completed purchase of SOFEC, Inc. . Increased sodium bicarbonate capacity . Formed FMC Arabia joint-venture defense company . Began operating joint-venture energy equipment company in Russia . Formed energy alliances with Brown and Root, Halliburton . Won U.S. Army contract for the Paladin self-propelled howitzer . Won Amoco contract for offshore China petroleum project . Finalized Agricultural Products joint venture in Indonesia . Opened new food ingredients R&D labs in Brussels, Singapore and Princeton . Announced $123 million (after tax) restructuring charge to cover reductions in functional staffs and downsizing and consolidating facilities . Moody's raised debt rating; Senior to Baa3; FMC returns to investment-grade status . Issued $200 million of senior debt . Spent $215 in capital projects, including maintaining, upgrading chemical facilities . R&D at $149 million . Reduced debt by $65 million . Sales: $3.8 billion; net income: $164 million before restructuring and extraordinary charges; EPS: $4.32 before restructuring and extraordinary charges 1994 . United Defense, L.P., created by combining defense businesses of FMC and Harsco . Purchased Caterpillar Automated Systems Group . Acquired Jetway Systems . Acquired National-Oilwell's fluid control system . Licensed technology from TechniCal for food preservation . Invested in new soda ash technology . Announced lithium resource development in Argentina . Announced investment of $88 million in new herbicide plant . Agricultural Products formed new joint venture in China . Divested non-core Food Machinery businesses . Spent $315 million in capital projects, including soda ash cost reductions, initial spending on a new hydrogen peroxide plant in Delfzijl, Netherlands, and a cogeneration project at FMC Foret . R&D at $167 million . Sales: $4 billion; net income: $173 million; EPS: $4.66 1995 . Acquired Moorco International . Acquired FranRica . Acquired AT Biochem to expand into DNA sequencing and mutation detection markets . Expanding soda ash production based on new, low-cost, proprietary technology . Formed soda ash joint venture with Nippon Sheet Glass and Sumitomo . FMC and Shell Offshore, Inc. formed subsea alliance . FMC and Statoil signed $450 million agreement for subsea production systems in Norway . Expanded subsea capacity in Houston . Began expansion of hydrogen peroxide production in Bayport, Texas . Introduced new technology to speed development and cut costs at Argentine lithium resource . New hydrogen peroxide facility in Delfzijl, Netherlands, came on stream . Jetway Systems won contracts for Kuala Lumpur and Penang airports . Submitted U.S. registration package for Authority, new pre-emergent soybean herbicide; gained registrations in Brazil, Paraguay . Study of industrial companies reinforced benefit of diversification on shareholder returns . FMC Gold exploring possible sale . Moody's upgraded debt to Baa2 . Spent $494 million in capital projects . R&D at $172 million . Sales: $4.5 billion; and, before special income and expense items, net income: $212 million; EPS: $5.63 11 Performance Chemicals FMC's Performance Chemicals segment, producer of a wide variety of value-added products -- including agricultural chemicals, pharmaceutical products, food ingredients, water additives, flame retardants and lithium-based chemicals -- delivered another solid performance in 1995. Sales increased 11 percent to $1.2 billion, and profits edged up 5 percent to $162 million, even with significantly higher investments in research and development and marketing. Taking Command: U.S. cotton farmers who used FMC's Command herbicide enjoyed better weed control, lower weed control costs and better crop quality. Safety First: With the introduction of Rugby insecticide/nematicide for Latin American banana crops, FMC provided comprehensive product stewardship measures - -- such as reusable product containers, more precise applicators, safety apparel and extensive training -- to minimize exposure to workers and the environment. 12 Agricultural Products' dedicated internal development efforts of recent years spell global opportunities for the future. With the introduction of two new herbicides, sulfentrazone in late 1996 and carfentrazone-ethyl in 1998, FMC will emerge as a strong player in the worldwide herbicide market. Sulfentrazone, used to prevent weeds like nutsedge and morning glory from inhibiting soybean, sugarcane and tobacco crops, will increase FMC's presence in North and South America. Carfentrazone-ethyl, particularly effective at controlling Galium, the bedstraw weed, will enhance our presence in Europe, the world's largest small grains market, and play an important role in controlling velvetleaf on corn and soybeans in the United States. Record results for our Agricultural Products business in 1995 represent the fifth consecutive year of sales and earnings growth--even with the highest level of research and development spending to date. We had gains across a range of product lines worldwide. In North America, we gained share in the cotton pyrethroid market with Ammo and Fury insecticides and in the corn rootworm market with Furadan 4F insecticide/nematicide. We had record sales in the Asia-Pacific region, where we achieved a label registration for Biflex termiticide in Australia and saw increased use of Talstar insecticide/miticide on cotton in Pakistan. We had continued success with Rugby insecticide/nematicide on banana crops in Latin America. On Familiar Turf: FMC continues to make strong gains in providing specialty products for pest control and turf and ornamental markets. Sales of Command herbicide continued to grow worldwide: The product now claims the number-one market position for pre-emergence use on oil seed rape in Poland, the Czech Republic, Belgium and France. In Brazil, where the herbicide is known as Gamit, heightened use on sugarcane helped increase volumes by 25 percent. Our Indonesian joint venture, started up in 1994, turned in a strong performance. Construction began on a production facility for our new Chinese joint venture, and that operation should be on stream and producing positive results in 1996. In the United States, we continued to make strong gains in products for pest control and turf and ornamental markets. We'll expand our presence in the professional horticultural market in 1996 with a new distribution alliance with the Scotts Company, the world's leading producer of turf and horticultural products for home use. Our strategic focus on internal development will result in several new herbicide products coming to market over the next three years. A microencapsulation formulation of Command, to debut in the United States in 1996, will extend application while controlling the potential for product drift. Awaiting sulfentrazone in Brazil. 13 Two new herbicides, sulfentrazone and carfentrazone-ethyl, will dramatically enhance our business over the next few years. Sulfentrazone, which inhibits weed growth in soybean, sugarcane and tobacco crops, received registration in Brazil and Paraguay in 1995, and we expect to receive registration in the United States in 1996. Our new production facility in Baltimore is scheduled to be on stream by the end of the third quarter. This pre-emergent herbicide will be marketed as Authority in the United States, Boral in Brazil and Capaz in Argentina and Paraguay. In 1998, carfentrazone-ethyl, a post-emergent herbicide, will be introduced to combat weeds in the small-grains market of Europe, the second largest herbicide market and the largest small-grains cereal market in the world. Our increased focus on herbicides, a strategic step toward growth, will strengthen FMC's participation in the $13 billion worldwide herbicide market. New herbicide sales are expected to help our Agricultural Products business grow significantly by the turn of the century. Taking Flight: Given its new technology and low-cost production in Argentina, FMC is the leading, vertically integrated producer of lithium and derivative products. Here at a Reynolds Metals plant, lithium is used to produce an advanced aluminum alloy plate for the aerospace industry. The alloy was developed jointly by Martin Marietta Corporation (a Lockheed Martin company) and Reynolds Metals Company. Health Conscious: FMC is the market leader in supplying binders and disintegrants and other specialty chemicals to the pharmaceutical industry. 14 Globalization efforts are producing better-than-expected results for our Lithium business. The remote, FMC-owned lithium salar in the Argentine Andes holds even greater concentrations of lithium at higher quality levels than we had expected. And superb execution at "Project Fenix" will result in lower-cost, more immediate production. FMC engineers have devised an advanced, proprietary technology for extracting lithium from the salty brines of the Argentine salar - -- technology that will yield 45 million pounds of lithium carbonate equivalent annually. Because the new purification technology streamlines processing and is engineered in modular units that are transported to the site, construction of the on-site processing facility is proceeding quickly. Project Fenix will begin production in early 1997. Good Medicine: Pharmaceutical customers like Glaxo Wellcome are relying on suppliers like FMC for technical expertise, product quality and customer support around the world. Sales were up for our Pharmaceutical business, stemming from several new pharmaceutical product launches and a strengthened pharmaceutical world share position. The continuing consolidation of the pharmaceutical industry has had a positive impact on our business. As our customers continue to cut costs, they're looking to suppliers to provide value-added products, services and technical support around the world. And they're anxious to speed the introduction of new products. We're working closely with customers and expanding our internal development efforts. Late in 1994, our Pharmaceutical business introduced two faster-flowing versions of Avicel cellulose gel that work to speed our customers' tableting production process, and sales were strong throughout 1995. Last year, we continued to work closely with key customers to use our know-how to convert the traditional tableting process to a more streamlined, highly efficient operation. Several of our customers will launch the process in 1996, and we should realize sales gains as a result. In 1995, we introduced tablet binders Endurance and Endurance Plus and super- disintegrant Accelerate, which will strengthen our position in the vitamin category. Our new Avicel CE is the industry's breakthrough in chewable excipients targeted for pediatric and geriatric markets. And Celphere, licensed from our Asian partner Asahi Chemical for worldwide sales, will be introduced for controlled-release dosage forms. Early in 1996, we took steps to expand our presence in Asia by revising our agreement with Asahi to allow us to sell Avicel to our multinational customers in Asia, including the fast-growing China segment. We expect sales to continue to be strong in Europe, where we grew significantly in 1995. Today, more than half of our global customers have committed to long-term contracts for our products through 1997. New technology at work in Argentina. 15 Food Ingredients sales outside the United States grew substantially as our new field organizations, backed by new developmental applications and technical service laboratories around the world, gained new customers. Our research teams introduced a number of new applications for our products in 1995, and we anticipate expanded activity with these labs operating at full capacity in 1996. In North America, however, our food processing customers continued to trim the cost of their products, and sales slowed in 1995 as customers reduced inventory and reformulated their products. Our Princeton research and development center, meanwhile, made significant progress on new technology for fat replacement and stabilization of ingredients. With dramatically rising costs of Philippines-harvested seaweed, the key raw material in our product, carrageenan, we accelerated development of alternate sources of supply off the coasts of Indonesia, Malaysia and Tanzania. Our outlook for 1996 is positive. We're already seeing improvement in North America, and we expect significant growth to continue throughout the world. Cool, Clear Water: FMC's Belgard anti-scalants help this desalination plant in Curacao transform salt water into safe drinking water. A Strong Identity: FMC is the only U.S.-based company that produces the type of agarose used in DNA analysis for general scientific study and in crime analysis. 16 Food for Thought: In our new food ingredients developmental applications laboratory in Singapore, scientists are working to meet the needs of a region that encompasses China and Japan, Australia and New Zealand, and India and Pakistan. Our strategy for global growth for the Process Additives business, our United- Kingdom-based producer of flame retardants and water additives, showed signs of success in 1995. Price increases and higher volumes in Europe and Asia drove higher sales. Earnings declined, however, as operating difficulties limited production at a new facility for our flame retardant, Reofos RDP, and slowed production at our phosphate ester plant. We continued to focus on growing the business worldwide, reducing costs, and instituting a restructuring with personnel reductions and new operating programs and investments to improve manufacturing efficiencies. Our Lithium business posted strong gains in 1995. Sales were up, assisted by higher volumes and prices in Europe, and profits were strong. In the last quarter of 1995, we announced that we are increasing capital spending to $68 million to accelerate and expand development and production at our new lithium resource in Argentina. For at least the next 75 years, we will source our lithium from a salar - a dried salt lake - in Argentina's northern Andes region. New, high-yielding, proprietary extraction technology will enable us to begin low-cost production early in 1997. We will also close our existing lithium mine and shut down some processing operations in North Carolina. In the marketplace, we are experiencing continuing success in two key areas, polymer initiators and synthetic intermediates for pharmaceuticals. In the first quarter of 1996, we announced plans to build two small-scale production facilities to provide customers with specialty organometalics and synthetic intermediates for use in these specialty areas. And to expand our worldwide presence in another strategic area, lithium batteries, we formed Honjo-FMC Energy Systems to market our product in Japan. The outlook for Lithium in 1996 remains strong, with continuing gains expected in Europe and Asia. Performance Chemicals will be an even stronger contributor to FMC in the coming years. Our Agricultural Products business is expected to begin realizing the benefits of our strategic herbicide investments and our global expansions. Ongoing research in our Pharmaceutical and Food Ingredients businesses and the beginning of low-cost lithium production in Argentina will support strong positions for our specialty chemicals operations. 17 Performance Chemicals Management's Discussion and Analysis [CHART APPEARS HERE] 91 92 93 94 95 ---- ---- ---- ---- ---- Return on Sales 15.2% 14.6% 14.3% 14.5% 13.7% Return on Assets 21.1% 22.1% 20.5% 21.2% 19.5% 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 improved to $162 million from $154 million in the prior year 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. Sales of insecticides, herbicides and agricultural intermediates increased from 1994. Sales gains across a range of products worldwide accounted for the improvement. Insecticides were the principal contributor in North America and in Asia-Pacific. A variety of products accounted for the sales increases in the European, Middle Eastern and South American markets. Operating profits improved in 1995, but not in proportion to the increase in sales. Profit margins were lowered as a result of increased expenditures for research and development and higher marketing expenses associated with preparing for new herbicide introductions. The company continues to take actions to offset the effects of the continued weakening of the Mexican peso against the U.S. dollar, including tightening credit policies, implementing price increases for certain products and adjusting the Mexican company's borrowing structure. 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 esters 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, primarily wood pulp and Philippine-harvested seaweed, partially offset by manufacturing efficiencies. Higher marketing and research and development costs associated with the launch of five new pharmaceutical products late in 1995 also affected earnings. Lithium product sales increased in 1995 from higher volumes in 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. 18 1994 Compared with 1993 Sales of $1.1 billion in 1994 represented an increase of 9 percent over 1993 sales, and profits increased 11 percent to $154 million. Performance chemicals showed strong worldwide growth in all businesses. Sales of insecticides, herbicides and agricultural intermediates increased in 1994 as a result of improvements in both the domestic and export markets. The domestic increase was primarily due to sales of insecticides, while the export increase was due to greater sales of herbicides and insecticides in various foreign markets. Operating profits also increased from the improvement in sales. Sales of food ingredients and pharmaceutical products increased versus 1993 due to growth in demand for water dessert gel, confectionery, and low-fat cookie and cracker applications. Pharmaceutical volumes increased in emerging markets due to improved customer relations, and in the European and North American markets due to Europe's economic recovery and applications development. Higher volumes and a favorable sales mix in North America drove higher profits for the year. Sales of lithium products increased versus 1993 as the worldwide markets for the products rebounded. Operating profits increased due to the increased volume and lower manufacturing costs. These factors were partially offset by higher exploration spending associated with FMC's new lithium resource in Argentina. Although sales of water additives and flame retardant products were up from 1993, operating profits declined. Flame retardant volume and revenue increased due to strong sales, but water additives volume was down due to intensified competition in the Middle East desalination market. Increased raw material prices contributed to the reduced profitability. Outlook for Performance Chemicals FMC's focus on developing specialty products and herbicides will result in new applications and products over the next several years. A manufacturing facility to produce a new family of herbicides is scheduled to be completed in the third quarter of 1996. Registration of these products was completed in Paraguay and Brazil and is proceeding in the United States and other foreign markets. The water additives and flame retardant business is expected to benefit in 1996 from the restructuring effort that began in the fourth quarter of 1995 and from investments to improve manufacturing efficiencies. However, price competition in the desalination market in the Middle East is expected to continue as a challenge for the water additives business. The outlook for food ingredients and pharmaceutical products in 1996 is positive. A number of new food product applications were developed in 1995, and this process is expected to continue in 1996. Alternative sources for the supply of seaweed are being sought in order to reduce the high cost of this key raw material. Growth in sales of pharmaceutical products is expected to continue as the result of the introduction of five new products in 1995 and from long-term commitments from global customers. The outlook for lithium products in 1996 remains strong, with continuing sales gains expected in Europe and Asia. A new, low-cost source for lithium production is expected to be completed in early 1997 in Argentina. 19 Industrial Chemicals Our Industrial Chemicals segment delivered strong results in 1995. Sales of $977 million were up 13 percent, and profits of $162 million were up 36 percent. The segment, which includes our soda ash, hydrogen peroxide, phosphorus, sulfur derivatives and silicates operations, improved performance with particular attention to a key strategy: superb execution. In 1995, we achieved higher pricing, operated at higher capacity and realized the benefits of cost improvements. Our European industrial chemicals business, FMC Foret, recorded a year of strong sales and earnings. Demand remained high for FMC Foret products, which include phosphates, hydrogen peroxide, perborates, zeolites, silicates, sodium sulfate and sulfur derivatives. The trend to avoid using phosphates in home laundry detergents has abated. As European demand stabilized, the industry consolidated and exports continued to grow, we were able to improve pricing on most products. Our business also continued to benefit from cost reduction strategies. A Clean Sweep (top): Oakite Products in Houston, part of the Chemetall Group, relies on FMC phosphoric acid as a key ingredient in its phosphate coatings and cleaning compounds. The Paper Chase (bottom): Pulp and paper mills like MacMillan Bloedel in British Columbia, Canada, continue to choose hydrogen peroxide as an environmentally sound product to brighten paper pulp. 20 Serving soda ash customers. Through superb execution, Alkali Chemicals is reducing costs and enhancing manufacturing efficiencies at our soda ash facility in Green River, Wyoming. Reaffirming FMC's position as the technology leader in the soda ash industry, FMC engineers devised a method of injecting a solution into mined-out portions of our mine to retrieve previously unrecoverable deposits of trona ore. At our new processing facility completed in 1995, the trona-saturated water is converted to sodium carbonate and then processed into high-quality soda ash. In addition to recovering ore from abandoned sections of the mine, this solution mining technique will be employed for our 1996 expansion, adding 700,000 tons of annual production -- and reducing manufacturing costs by more than 30 percent compared with traditional dry mining. Early in the fourth quarter of 1995, FMC Foret opened a new hydrogen peroxide facility in Delfzijl, Netherlands, to meet the growing needs of our Northern and Eastern European customers. This added capacity, at a strategically located site, has strengthened considerably our position in the European market. Our Phosphorus Chemicals business registered slightly higher sales, but profits were down in 1995 due to a major loss of profitable export business, higher raw material prices and manufacturing disruptions during the fourth quarter. We're diversifying our product portfolio to reduce dependence on the home laundry detergent market, and we expect to benefit from new, higher- performing grades of phosphates to meet our customers' changing requirements. In 1995, we entered into a long-term supply agreement to provide elemental phosphorus to Rhone-Poulenc. We began shipments of our product late in the year, and a full year of sales to Rhone-Poulenc in 1996 will significantly increase our volumes and profits. Sales and profits increased for our Peroxygen Chemicals business as demand continued to grow and supply was tight. The pulp and paper industry continues to choose hydrogen peroxide as an environmentally sound alternative to chlorine, the traditional brightening agent for pulp. Higher volumes and tight capacity resulted in price increases in 1995. We are expanding hydrogen peroxide production capacity at our Bayport, Texas, facility using a new, higher-efficiency technology. This $65 million investment will add 140 million pounds of capacity, raising FMC's total North American annual hydrogen peroxide capacity to 450 million pounds. Bayport's additional capacity is scheduled to come on stream late in 1996. We also signed a joint- venture agreement in China to manufacture a key raw material for the production of hydrogen peroxide. A Brighter World: FMC's new hydrogen peroxide plant in Delfzijl, Netherlands, meets the growing demand of European paper producers like Haindl in Duisburg, Germany, for high-quality product and faster, more efficient deliveries. 21 Our Alkali Chemicals business, producer of sodium-based chemicals, posted higher sales and profits in 1995 with improved volumes and pricing in all product lines. Volumes were higher for soda ash, used by glass, detergent, chemical and pulp and paper manufacturers, as demand grew in the U.S. flat glass and chemical markets and export sales increased. Tight market conditions enabled us to secure price increases. This business continued to benefit from long-term cost improvement programs that focused on improving process efficiencies and raising mining productivity at our Green River, Wyoming, site. A key project is using new proprietary technology to replace the conventional dry mining process with lower-cost solution mining. This new technology will allow us to recover ore from previously mined-out sections of the mine, thereby extending the life of the reserve. We completed a new surface processing facility for this project in 1995 -- ahead of schedule and below capital estimates. We are also in the final phase of a $45 million expansion of our Green River soda ash facility that will incorporate the new low-cost solution technology -- a move that will reduce our manufacturing costs by more than 30 percent on the expansion volume. The expansion will add 700,000 tons of production by mid-1996, raising our total annual soda ash capacity to 3.55 million tons. This additional capacity will be needed to supply a major new domestic application and meet the growing requirements of Asian and Latin American markets. To further expand our presence in Asia, we sold a 20 percent equity interest in the soda ash business to Tokyo-based Nippon Sheet Glass Co., Ltd., and Sumitomo Corporation. Their affiliation should bolster long-term sales of our product in Japan. The outlook for Industrial Chemicals remains positive. While certain chemical markets may be softening, we don't expect that any slowing in demand will have a significant impact on capacity utilization. Our major capital projects are ahead of schedule and under budget, price increases are holding, and our cost improvement programs will continue to have a favorable impact on earnings. . [GRAPH APPEARS HERE] 91 92 93 94 95 ---- ---- ---- ---- ---- Return on Sales 9.3% 8.6% 6.7% 13.8% 16.6% Return on Assets 9.5% 9.0% 6.9% 14.0% 16.8% 22 Industrial Chemicals Management's Discussion and Analysis 1995 Compared with 1994 Industrial Chemicals 1995 sales of $977 million increased 13 percent from $867 million in 1994, and operating profits of $162 million were up 36 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 cyanide, as well as price increases for soda ash, were the 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 in cash. The nontaxable gain of $100 million on this transaction is not reflected in 1995 segment earnings (Note 2 to consolidated financial statements). Sales of peroxygen products increased from 1994, and operating earnings increased as well. Volume improvements in most products accounted for the increases. The persulfates manufacturing process was interrupted by a fire in the company's Tonawanda, New York, warehouse in August 1995. The impact on 1995 earnings was not material. The continued decline in the peso did not have a significant impact on FMC's Mexican peroxygen operations, primarily due to actions taken to mitigate the exchange rate impact. These actions included tightening credit policies and adjusting the company's local borrowing structure. 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 fourth quarter of 1995. FMC Foret, FMC's European industrial chemicals subsidiary, reported a significant improvement in sales in 1995, and profits increased correspondingly. Pricing improvements in most product lines were driven by earlier restructuring of the European industry and overall market conditions. Volumes were favorably affected by strong demand for pulp and paper and for conventional solid detergents in Europe, North Africa and the Middle East. Revenue increases and a gain of $3 million from the sale of a sulfuric acid plant were partially offset by hydrogen peroxide plant start-up costs in Delfzijl, Netherlands, and a decrease in equity earnings from Foret's Venezuelan affiliate, largely due to the devaluation of the bolivar. 1994 Compared with 1993 Sales of $867 million were the same as in 1993. Operating profits, however, doubled to $119 million. This increase in profits was the result of significant cost improvement programs. Alkali sales declined from 1993 as the result of lower soda ash volume and prices in the domestic market, offset to some extent by increased export sales. Although sales declined, operating profits improved considerably in 1994 as a result of strong manufacturing performance. Sales of phosphorus chemicals were down slightly from 1993 as the result of lower domestic sales volume, partially offset by increased exports into the Mexican market. Favorable manufacturing performance resulted in improvements to operating profits during 1994. Peroxygen chemicals sales increased in 1994 and operating profits also improved. This was achieved by an increase of domestic sales, which was partially diminished by overall sales price decreases. The domestic hydrogen peroxide industry experienced growth and high capacity utilization as the pulp and paper industry continued to move toward hydrogen peroxide as a replacement for chlorine. FMC Foret sales decreased slightly in 1994 due to the effects of currency translations, although overall domestic and export volume increased. Outlook for Industrial Chemicals FMC continues to expand its industrial chemical capacity to meet expected strong demand in domestic and international markets. The company's soda ash investments are expected to result in a more than 30 percent reduction in soda ash cash manufacturing costs at operations that use the new lower-cost, proprietary solution mining technique, and to increase the company's soda ash capacity by 700,000 tons to 3.55 million tons. In addition, soda ash price increases announced in 1995 are expected to significantly increase 1996 revenues. In 1995, peroxygen sales and profits were favorably affected by the strength of the North American pulp and paper market. Any significant reduction in this market in 1996 could have a negative impact on peroxygen revenues. FMC's $65 million expansion at Bayport, Texas, is expected to begin production in late 1996 using higher-efficiency technology. Continued instability in the Mexican economy could affect future earnings from the company's Mexican peroxygen operation. In anticipation of additional demand, FMC Foret continues to expand its hydrogen peroxide manufacturing capacity. The Delfzijl plant came on stream in October 1995. Significant growth is expected in 1996 in the phosphorus business primarily as a result of FMC's efforts to diversify away from home laundry detergent applications plus the full year impact of the supply contract with Rhone- Poulenc. 23 Machinery & Equipment Welcoming HOST (top): FMC's Kongsberg Offshore unit is designing and engineering HOST -- Hinge-Over Subsea Template -- for Statoil, Norway's state-owned oil company, for use in oil fields in the North Sea. Measure for Measure (bottom): In 1995 FMC acquired Moorco International's Smith Meter, the metering standard-bearer for fluid measurement in the oil industry. Smith meters have a near-perfect -- 99-percent plus -- accuracy rate. FMC's Machinery and Equipment segment had a strong year in 1995, with sales up 39 percent to $1.4 billion and profits up 50 percent to $50 million. These results reflect the acquisition of Moorco International Inc., market share gains in the oil field business, strong airline equipment markets and the benefits of restructuring in our Food Machinery business. Our energy equipment operations contributed to improved segment performance. Several years ago, our energy equipment business set out to become the industry's total-capabilities supplier of integrated oil field services, from engineering to manufacturing to servicing. We focused on a strategy: acquiring key businesses that would expand FMC's capabilities. In 1995, our energy equipment business completed its fifth acquisition in two years. In the second quarter, FMC acquired Moorco International Inc., the world's leading manufacturer of meters for the petroleum industry and a leading manufacturer of valves for the process and power generation industries, for approximately $350 million, including the assumption of debt. 24 Pursuing opportunities for acquisition, our Energy and Transportation Equipment business continued its crusade for growth with the 1995 purchase of Moorco International, adding two key businesses, Smith Meter and Crosby Valve, to our diversifying energy portfolio. Smith is the oil industry's metering standard for accuracy to verify quantities of oil as it is transferred from platform to tanker to storage. Crosby is a leader in pressure-relief valves, serving customers in the oil and gas, petrochemical, refining, chemical and power industries. Smith and Crosby broaden our capabilities to global energy customers. Into the Deep: FMC has formed an exclusive subsea strategic alliance with Shell Offshore, Inc., to provide deep-water subsea drilling and completion equipment and services for such projects as the Auger platform in the Gulf of Mexico. Our Petroleum Equipment and Systems business, which encompasses our wellhead equipment and fluid control lines, had continuing success in subsea business and announced new alliances that will have a long-term impact on growth. Our Kongsberg, Norway, operation signed a five-year agreement worth up to $450 million with Statoil, Norway's state oil company, for the delivery of new- technology subsea systems we designed in concert with Statoil. We also achieved large share growth in the Gulf of Mexico subsea market, where we formed an exclusive strategic alliance with Shell Offshore, Inc., to provide a complete range of deep-water subsea drilling and completion services over the next five years. The alliance agreement, to supply all of Shell's Gulf of Mexico projects, is expected to represent approximately $100 million in subsea business to FMC. Performance of our fluid control line also improved with a full year of sales stemming from our 1994 acquisition of National-Oilwell's lightweight ball valves. Moorco's Smith Meter subsidiary boosted volumes for our new Energy Transportation and Measurement business. Moorco's Crosby Valve's inbound order rate increased late in 1995, and we expect that trend will continue in 1996. A Crosby pressure-relief valve. 25 SOFEC, our producer of marine terminals and turret moorings for floating production storage and offloading systems, also had a successful year. We completed the internal turret mooring for the floating production storage and offloading system for Amoco's Liuhua project in the South China Sea. Also in 1995, SOFEC was awarded a $35 million contract for the internal turret mooring system for the Petrobras Barracuda project off the coast of Brazil -- at nearly 3,000 feet, the deepest floating production storage and offloading system in the world. Early in 1996, we were awarded a $44 million contract from Petrobras to provide the internal turret mooring system for the Albacora field, with delivery scheduled for mid-1997. Aided by our 1994 acquisition of Jetway Systems, the world's leading producer of passenger boarding bridges, our Airline Equipment business posted market share gains. In 1995, Jetway won an important order to provide the Kuala Lumpur and Penang airports in Malaysia with 38 glass-walled passenger boarding bridges, expected to become the product choice of the future. United Airlines' order for 17 Commander cargo loaders secured our position as United's sole source for loaders. Jetway Propelled: Jetway Systems, the world's leading producer of passenger boarding bridges, will provide Malaysian airports with 38 glass-walled bridges, expected to be the product of choice in the future. Safe Harbor: Engineers at FMC's SOFEC are analyzing the configuration of an internal turret mooring system to be installed off the coast of Brazil for the Brazilian national oil company, Petrobras. This project -- the deepest system to date -- will safely and efficiently transfer petroleum to tankers from 11 subsea wells at 835 meters (nearly 3,000 feet) below the surface. 26 Sales for our Food Machinery business were down slightly, reflecting the 1994 divestiture of three low-margin product lines, and profits were up with continuing attention to cost improvements. We built on our strategy to grow the business by acquisition with the third-quarter purchase of FranRica, one of the world's leading manufacturers of equipment for tomato processing, bulk aseptic processing and citrus juice storage. This acquisition will allow our Food Processing Systems business to offer a more complete line of equipment and technologies capable of meeting the needs of our worldwide customers. Work in Process: In 1995 FMC acquired FranRica, a leading manufacturer of tomato processing equipment and bulk aseptic systems for the citrus industry -- businesses that expand our existing leadership positions in attractive markets. FranRica's aseptic system. In a move to expand capabilities via acquisition, in 1995 our Food Machinery business bought FranRica, the California-based global supplier of tomato processing equipment and aseptic systems. This acquisition strengthens FMC's position in the fruit and vegetable processing industry. With the addition of FranRica, FMC now offers a comprehensive line of tomato processing equipment, including evaporators, peelers, can fillers and closers, aseptic bulk fillers, sterilizers and aseptic processing systems. And FranRica's leadership in aseptic sterilization and tank-filling systems extends our leading capabilities in citrus processing equipment. 27 Automatic Response: Nestle worked with FMC's Food Machinery operations to develop this integrated, automated retort system for Nestle's Maggie plant in Singen, Germany. With the addition of fourth-quarter sales by FranRica, a full year of sales of LogTec process controls licensed from TechniCal in 1994 and strong performance in citrus processing lines, our Food Processing Systems business posted higher sales in 1995. Our citrus systems unit introduced a range of new products, including a premium pulp recovery system featuring a new citrus pulp pasteurizer. We made significant inroads into Asia's growing market for non- carbonated beverages, installing two beverage-filling lines in Korea and one in China. Despite lower sales due to 1994 divestitures, our Packaging and Food Handling business registered improved profitability in 1995. Our Agricultural Machinery business also reported higher sales and returned to profitability following several years of operating at a loss. We maintained our leadership position in pea and tomato harvesters with strong performance in Europe and the United States. Our restructuring efforts contributed to earnings. Our Machinery and Equipment businesses will continue to perform well in the coming years. We will benefit from our strategic acquisitions, growing worldwide presence and strong market positions across our product lines. . [GRAPH APPEARS HERE] 91 92 93 94 95 ---- ---- ---- ---- ---- Return on Sales 5.2% 3.7% 0.8% 3.4% 3.7% Return on Assets 9.3% 6.6% 1.3% 5.8% 5.6% 28 Machinery & Equipment Management's Discussion and Analysis 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 50 percent to $50 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 included full-year sales of businesses acquired in 1994 and 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 region. 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 only slightly from 1994, reflecting increasing price competition in certain markets and the amortization of costs related to the 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 of the transportation equipment operations 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 absence of sales of product lines divested in 1994. Operating profits of the food machinery operations improved from 1994 primarily as a result of favorable mix and manufacturing cost savings. 1994 Compared with 1993 Machinery and Equipment sales were up 12 percent in 1994 to $973 million, and operating profits also rose substantially to $33 million. Most of the improvement in sales resulted from the businesses acquired in 1993 and 1994 and from improved operating results for some product lines. Sales of airport products and systems increased significantly in 1994 due to the 1994 acquisition of Jetway Systems and the successful introduction of a new main-deck cargo loader. Sales of energy equipment increased from 1993 due to increased demand and the 1993 acquisition of Kongsberg Offshore, partially offset by declines in orders for fluid control products. Sales of food machinery operations improved slightly from 1993 despite the strategic divestiture in 1994 of three non-core product lines with annual sales of approximately $40 million. Operating profits were favorably affected by the Kongsberg acquisition, other sales growth and the benefits of restructuring and cost reduction programs. Partially offsetting these improvements were costs of acquisitions and new project development and higher research and development expenditures. Outlook for Machinery and Equipment The order backlog for Machinery and Equipment was $545 million at December 31, 1995 compared with $480 million at the end of the prior year. Most of the increase reflects the backlog for businesses acquired from Moorco International Inc. Significant increases were also recorded by SOFEC for floating production storage and offloading vessels and for boarding bridges in the airport products business. Not included in backlog at December 31, 1995, is a five-year agreement with Statoil for the delivery of up to $450 million of subsea systems. Increasing competition in many markets and resulting pricing pressures could affect future earnings. However, with lower product costs resulting from cost reduction and restructuring actions and from improvements in market positions as the result of strategic acquisitions, growth in the Machinery and Equipment segment is expected to continue. 29 Defense Systems High-tech Options: Despite pressures on the U.S. defense budget, FMC is confident that its technological expertise and manufacturing efficiencies will maintain its solid position in the defense industry. Peace-keepers: The Bradley Fighting Vehicle is a key element in the U.S. Army's efforts to keep peace in war-torn Bosnia. Our Defense Systems segment has operated for the past two years as United Defense, L.P., a joint venture managed by FMC, which holds a 60 percent interest. In 1995, sales declined 10 percent to $968 million on reduced production volumes. Profits (net of minority interest) increased 7 percent to $107 million, reflecting stronger international results and good cost performance. Ground Systems sales and earnings were lower in 1995, primarily due to reduced volumes on the Bradley Fighting Vehicle. In February 1995, we built the last new Bradley and furnished 24 units to the U.S. Army. Also that month, we delivered the first upgraded version of older models to the A2. We upgraded 107 vehicles to the A2 model and will continue this upgrade work through 1997. The Bradley A3, an upgrade with the systems integration of high-tech electronics and computers, is the focus of our current product development efforts, and our contract for engineering systems continues through September 1999. We also restarted the M113 armored personnel carrier line for sales to Thailand, and we re-opened the Armored Combat Earthmover line to serve the Marine Corps. 30 Several years ago, our Ground Systems business and our customer, the U.S. Army, began planning how best to upgrade the Bradley Fighting Vehicle to maintain its war-fighting capabilities. Our defense business embarked on an independent research and development initiative that is continuing to unfold as the Bradley A3 -- an upgrade harnessing next-generation electronic and software architecture to enhance command-and-control, lethality, survivability, mobility and sustainability features. With this version, operators will be able to visualize regional terrain, travel with greater visibility at night and in poor weather conditions, assess enemy and friendly locations, track two targets simultaneously, pinpoint targets more accurately and test the vehicle's own systems. Our independent internal development work resulted in a $280 million contract from the Army in 1994 for development work continuing through 1999. Initial, low-rate production may begin by the late 1990s. Have Gun, Will Travel: A trainload of United Defense-produced Paladin self- propelled howitzers leaves Chambersburg, Pennsylvania, for delivery to the U.S. Army. The Paladin offers increased performance and reliability. In 1995, Ground Systems continued the strategic drive for superb execution with the continuing consolidation of the business. We created "centers of excellence" for engineering and program management in San Jose, California, for manufacturing in York, Pennsylvania, and for components in Aiken, South Carolina. We moved final assembly and testing of the Bradley vehicles to York from San Jose -- and maintained quality production and delivery schedules in the process. With higher vehicle deliveries, our Paladin production operation contributed higher sales and earnings. We sold the initial seven Paladin self-propelled howitzers to the U.S. Army in the fourth quarter of 1994, and we delivered 105 units in 1995, ahead of schedule. We'll produce 180 vehicles during 1996 as we move forward on our four-year contract to produce a total of 650 howitzers. The Army may elect an option early in 1996 to purchase 48 additional vehicles, and our military customer is considering a follow-on, multi-year contract to modernize the National Guard. These contracts could extend production past the year 2000. Also during 1995, our Paladin production business received additional contracts for engineering support and to provide upgrade parts kits for an ammunition resupply vehicle. Sales and profits increased for our Armament Systems business, based largely on our work as prime contractor on the early-phase development of the Crusader, the Army's howitzer and resupply vehicle of the future. The engineering expertise and technology demonstrators we are providing today will give Armament Systems an edge in winning full-scale production contracts at the turn of the century. Enhancing the Bradley. 31 Meanwhile, demand for our Vertical Launching Systems and gun systems was down in 1995. We delivered 159 Vertical Launching System canisters in 1995, compared with 439 the previous year. We sold a total of seven Mk45 gun systems to the navies of the United States, Australia and Japan, down from a total of nine sales to the U.S. and international navies the previous year. We have begun production on 27 Mk41 Vertical Launching Systems to be delivered to the U.S. Navy over the next four years. We continue to pursue international opportunities. FMC-Nurol, our Turkish joint venture, increased deliveries to 474 armored vehicles to the Turkish government in 1995. Our production agreement extends through August 1999. FMC Arabia, our joint venture in Saudi Arabia, completed its second year of a four- year contract to train the Royal Land Forces of Saudi Arabia in military tactics. We reached co-production agreements with Nissan Aerospace of Japan for 80 Multiple Launch Rocket Systems and with Samsung Aerospace for amphibious assault vehicles. We added to our global presence with offices in Korea, Taiwan and Malaysia. The next few years will be difficult for the defense industry. Budgetary pressures in Washington are having a chilling effect on the U.S. defense budget, and there are few opportunities for new starts. There are indications that the Armored Gun System, a development program we had worked on since 1984 and considered by the U.S. Army to be a model development program, will be cancelled. International customers remain interested in the system. We continue as prime supplier for the engineering and pre-production work on the Army's Crusader program. There are opportunities for expanded uses of the Bradley as a battle command vehicle and command and control vehicle. While our segment results are likely to diminish somewhat in 1996, we're confident that our technological expertise, our diverse product line offerings and our manufacturing efficiencies will enable us to maintain a strong position in the global defense industry. Looking Brand New: In Anniston, Alabama, United Defense has launched an upgrade/overhaul program for personnel carriers for the U.S. Army and Saudi Arabia. 32 Defense Systems Management's Discussion and Analysis [GRAPH APPEARS HERE] 91 92 93 94 95 ---- ---- ---- ---- ---- Return on Sales 13.7% 15.0% 17.0% 14.8% 16.6% Return on Assets 39.4% 51.8% 59.2% 41.9% 30.9% 1995 Compared with 1994 Sales of the Defense Systems segment declined to $968 million in 1995 from $1.1 billion in 1994 while operating profits, after deducting minority interest, improved to $107 million from approximately $100 million in 1994. The sales decline resulted primarily from lower volumes of Bradley Fighting Vehicles and naval weapons 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 vehicles. The increase in operating profits primarily resulted from favorable cost performance throughout the business, strong international results, including an increase in royalty and dividend income from the Turkish joint venture, and the recognition in the second quarter of 1995 of a significant portion of a $17.8 million judgment against a subcontractor. 1994 Compared with 1993 Effective January 1, 1994, FMC completed the transaction to combine its defense business with Harsco Corporation's BMY Combat Systems Division (Note 2 to consolidated financial statements). The combined company, United Defense, L.P., operates as a limited partnership. FMC is the general partner with a 60 percent equity interest and responsibility for managing the operation. Sales in 1994 included sales of the former Harsco BMY Combat Division and sales of the Paladin self-propelled howitzer business. Sales of FMC businesses alone were $950 million in 1993. Segment profits, net of minority interest, were approximately $100 million in 1994. In 1993, profits of FMC's Defense Systems Group were $162 million. Sales of the businesses Harsco contributed to the partnership more than offset declines in Bradley Fighting Vehicle deliveries, Vertical Launching Systems and an engineering contract for the Armored Gun System in 1994. Other product sales were generally flat from 1993 to 1994, and segment profits were down in 1994 due to the lower volume, a favorable insurance settlement in 1993, and start-up costs relating to overhaul and conversion of armored personnel carriers. International defense sales and operating profits were up in 1994. The sales increase was driven largely by the deliveries of M113 upgrade kits to Singapore. An increase in international operating profits was largely the result of increased royalties and dividends from the Turkish joint venture. Outlook for Defense Systems The order backlog of the Defense Systems segment increased to $1.5 billion at December 31, 1995, from $1.4 billion at the end of 1994. The backlog increase results primarily from new orders for upgrading Bradley Fighting Vehicles, cannisters for the U.S. Navy, M113 vehicles for Thailand and Amphibious Assault Vehicle kits for Korea. U.S. government budgetary pressures are likely to result in reduced defense spending in the coming years, and lower-margin research programs are replacing some production. As a result, Defense Systems' earnings may decline. In early 1996, United Defense was notified that its contract with the U.S. Army for the Armored Gun System may be terminated. While Defense Systems would be affected by such a cancellation, no immediate material impact is likely to occur to FMC's financial position or results of operations. Because Defense Systems is the prime supplier for the early-phase developmental work on the U.S. Army's Crusader and Bradley A3 programs, the business is in a key position to benefit from follow-on production contract awards. Defense Systems also continues to pursue international opportunities and system upgrades. 33 Precious Metals Our Precious Metals segment operated at a loss for a second consecutive year. Segment sales of $59 million in 1995 remained even with the previous year, and a 1995 loss of $5.7 million shows an improvement over the previous year's $9 million loss. Total annual production was 151,000 gold equivalent ounces. The improved results reflect the beginning of production at our Beartrack mine near Salmon, Idaho, in the third quarter. The Beartrack deposit, containing approximately 1 million ounces of proven and probable gold reserves, will be processed by lower-cost, heap-leaching methods. We also benefited from the sale of our Paradise Peak mine and mill, shut down in 1994, to Arimetco, Inc. FMC Gold announced that it was beginning a process for the possible sale of the company or its assets. . [GRAPH APPEARS HERE] 91 92 93 94 95 ---- ---- ---- ----- ---- Return on Sales 18.2% 21.3% 7.8% -14.8% -9.7% Return on Assets 19.0% 26.3% 9.9% -10.4% -4.6% Management's Discussion and Analysis 1995 Compared with 1994 Precious Metals sales in 1995 were $59 million, approximately level with 1994. The operating loss declined to $5.7 million compared with a $9 million loss in the prior year. Lower cash production costs at the Jerritt Canyon operations and the start-up of the Beartrack mine were the primary contributors to the improvement. Gold production declined to 151,000 ounces from 163,000 ounces in 1994. Silver production, at 27,000 ounces, was only 15 percent of 1994's output. The increasing output from the Beartrack mine, which began production in the third quarter of 1995, did not offset elimination of production from the company's Royal Mountain King and Paradise Peak mines. In the fourth quarter of 1995, the company sold its 100 percent interest in Paradise Peak Corporation to Arimetco, Inc. for $4 million. In addition, Arimetco assumed all site reclamation liabilities. A pretax gain of $1.7 million was recognized on the sale, and $4.5 million of reclamation reserves were reversed to cost of sales. Net exploration expense of $11 million, approximately even with 1994, was focused primarily on development projects at the El Penon property in northern Chile and the Rossi property in Nevada. 1994 Compared with 1993 Due to decreased production, sales of the Precious Metals segment declined by more than 50 percent from 1993 to $61 million. Gold production declined to 163,000 ounces, approximately half of the gold production in 1993, and silver production declined to 154,000 ounces, about 18 percent of 1993's total. Decreased production resulted from the closure of the Paradise Peak mine in May 1993 and the Royal Mountain King mine in July 1994. This reduction in sales, as well as disappointing ore grades and recoveries at Jerritt Canyon, and spending on exploration, resulted in an operating loss of $9 million for the year. Beartrack Legal Proceedings See Note 15 to FMC's consolidated financial statements for a description of legal proceedings related to the Beartrack mine. Outlook for Precious Metals Continued operation of the Beartrack mine should increase gold production, further reduce cash costs and improve the segment's profitability in 1996. Exploration at both the Chilean and Rossi properties has been successful in delineating mineralization and is expected to continue in 1996. As discussed in Note 15 to the company's consolidated financial statements, FMC Gold Company is pursuing the possible sale of the company or its assets. 34 Management's Discussion and Analysis GENERAL 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 12 through 34. 1995 Compared with 1994 Sales in 1995 were $4.5 billion, an increase of 12 percent from 1994. Sales in the United States increased 13 percent during the year, while sales outside the United States increased 12 percent from 1994. Before restructuring and other charges of $80 million after tax (discussed further below), 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, consolidated net income of $212 million, or $5.63 per share, increased 22 percent. Including these items, the company earned $216 million, or $5.72 per share. Results for 1995 were the best in FMC's history. On an overall basis, improving markets and the benefits of the company's restructuring programs, as well as strategic acquisitions, more than offset significantly higher interest expense related to acquisition and expansion efforts. 1994 Compared with 1993 Sales increased 7 percent in 1994 to $4 billion, mainly due to increases in the Defense Systems, Machinery and Equipment, and Performance Chemicals segments. While sales in the United States remained flat in 1994, sales outside the United States grew 18 percent, driven by an increase in export sales of $256 million. Net income in 1994 was $173 million, or $4.66 per share. Net income in 1993 included after-tax restructuring and other charges, net of minority interest, of $123 million, or $3.34 per share. An after-tax extraordinary charge of about $5 million was also recorded in 1993 for debt restructuring. After these charges, net income for 1993 was $36 million, or $0.98 per share. INDUSTRY SEGMENTS Results on a segment basis for the five years ended December 31, 1995 are presented on page 5. Segment operating profits exclude 1995 and 1993 restructuring and other charges (Note 3 to consolidated financial statements), the 1995 gain on the sale of FMC Wyoming stock (Note 2 to consolidated financial statements), net interest expense, and other income and expense. Management's Discussion and Analysis of segment operating performance appears on these pages following the Operating Review Summary for each segment: Performance Chemicals on pages 18 and 19; Industrial Chemicals on page 23; Machinery and Equipment on page 29; Defense Systems on page 33; and Precious Metals on page 34. OTHER INFORMATION Taxes The effective tax rate in 1995 was 13 percent. This rate reflects the tax-free gain on sale of a minority interest in FMC's soda ash business as well as depletion and foreign sales corporation benefits. The company's effective tax rate, excluding the impact of restructuring and other charges (Note 3) and the gain on the sale of FMC Wyoming stock (Note 2), was 29 percent. The effective tax rate for 1994 was 31 percent, primarily reflecting depletion and foreign sales corporation benefits. Income from foreign operations taxed at rates lower than the U.S. statutory rate also contributed to lower effective rates in 1995, 1994 and 1993. In 1993, the company reported a credit for income taxes of $3 million on pretax income of $38 million. This unusually low rate was driven primarily by the low level of pretax income in 1993. 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 lithium-based production from North Carolina to a new lower-cost, higher quality mineral resource in Argentina. Other charges of $17 million ($10 million after tax) related primarily to asset write-downs. In addition, the company increased its environmental reserves by $83 million, or $51 million after tax, as part of its ongoing assessment of sites with known environmental issues. See Note 14 to the consolidated financial statements for a discussion of FMC's environmental reserves. In 1993, FMC recorded restructuring and other charges of $172 million, net of minority interest ($123 million after tax). These charges primarily related to restructuring costs associated with the Machinery and Equipment and Industrial Chemical segments, expenses to restructure companywide functional support staffs and a write-down of the investment in the Beartrack property in the Precious Metals segment. During 1995 and 1994, approximately 1,100 employee positions were eliminated. (Additionally, 500 positions were eliminated at United Defense, L.P., that were not covered 35 by the 1993 restructuring program.) FMC's programs to reorganize functional support staffs throughout the company to align their activities more closely with the company's growth initiatives, as well as severance programs within the Industrial Chemical and Machinery and Equipment segments designed to improve operating performance, resulted in the majority of the eliminated positions. Cash payments related to these separations were approximately $16 million and $32 million in 1995 and 1994, respectively. Approximately $34 million and $40 million of spending in 1995 and 1994, respectively, related to the consolidation of manufacturing facilities, the exiting of unprofitable product lines and other restructuring activities was charged to the restructuring reserve. 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 utilizes 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 its 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 1996 environmental spending are included under Liquidity and Capital Resources below. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operations and available credit facilities provided the resources to meet 1995 operating needs and fund capital expenditures and acquisitions. Debt levels increased by $416 million in 1995 as a result of higher capital and acquisition spending. Interest expense increased by $19 million in 1995, primarily due to higher debt levels. Capital expenditures excluding acquisitions approximated $494 million. At December 31, 1995, the company had borrowed $272 million (net of a $3 million discount) under a commercial paper program that began in November 1995. The company borrowed an additional $125 million under uncommitted bank facilities during 1995. In 1995, the company filed a universal shelf registration under which $500 million of debt and/or equity securities may be publicly offered. At December 31, 1995, no securities had been offered under this registration. Cash generated from operations in 1996 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 1996 include approximately $500 million to $600 million for planned capital expenditures and acquisitions, including approximately $16 million for capital projects related to environmental control facilities. Projected 1996 spending also includes approximately $50 million for environmental compliance at current operating sites, plus approximately $35 million of remediation spending and $10 million for study costs at current operating, previously operated and other sites.
- ---------------------------------------------------------------- Working capital December 31 - ---------------------------------------------------------------- (In millions) 1995 1994 1993 - ---------------------------------------------------------------- Operating working capital: Trade receivables $ 837.8 $ 642.8 $ 573.2 Inventories 615.0 403.9 268.1 Accounts payable (848.5) (676.9) (501.2) Accrued payroll and other current liabilities (419.4) (405.9) (390.9) - ---------------------------------------------------------------- Total operating working capital 184.9 (36.1) (50.8) Cash and cash equivalents 70.9 98.4 77.5 Other (256.5) 45.1 12.9 - ---------------------------------------------------------------- Total working capital $ (0.7) $ 107.4 $ 39.6 ================================================================
Operating working capital increased by $221 million in 1995 compared with 1994. The increases in the components of operating working capital are primarily due to higher sales volumes and the acquisition of Moorco. The decrease in net other current assets and liabilities ("Other") of $302 million is primarily due to higher short-term debt levels. Dividends No dividends were paid in 1995, 1994 and 1993, and no dividends are expected to be paid in 1996. 36
Consolidated Statements of Income - -------------------------------------------------------------------------------------- (In millions, except per share data) Year ended December 31 ------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------------- Revenue Sales $4,509.8 $4,010.8 $3,753.9 Other revenue 56.8 40.5 35.0 - -------------------------------------------------------------------------------------- Total revenue 4,566.6 4,051.3 3,788.9 - -------------------------------------------------------------------------------------- Costs and expenses Cost of sales 3,332.1 2,941.6 2,835.3 Selling, general and administrative expenses 630.0 587.7 539.4 Research and development 187.8 166.8 149.2 Restructuring and other charges (Note 3) 134.5 - 172.3 Other (income) and expense, net 3.4 (17.6) (10.2) - -------------------------------------------------------------------------------------- Total costs and expenses 4,287.8 3,678.5 3,686.0 - -------------------------------------------------------------------------------------- Income from operations 278.8 372.8 102.9 - -------------------------------------------------------------------------------------- Minority interests 59.1 61.4 2.5 Interest income 14.8 8.9 11.0 Interest expense 87.3 68.0 73.6 Gain on sale of FMC Wyoming stock (Note 2) 99.7 - - - -------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 246.9 252.3 37.8 Provision (benefit) for income taxes (Note 9) 31.3 78.9 (3.2) - -------------------------------------------------------------------------------------- Income before extraordinary item 215.6 173.4 41.0 Extraordinary item, net of taxes (Note 8) - - (4.7) - -------------------------------------------------------------------------------------- Net income $ 215.6 $ 173.4 $ 36.3 ====================================================================================== Earnings per common share (Note 1) Income before extraordinary item $ 5.72 $ 4.66 $ 1.11 Extraordinary item - - (0.13) - -------------------------------------------------------------------------------------- Net income $ 5.72 $ 4.66 $ 0.98 ======================================================================================
See notes to consolidated financial statements. 37
Consolidated Balance Sheets - --------------------------------------------------------------------------------------------------------------- (In millions, except share and per share data) December 31 ---------------------- 1995 1994 - --------------------------------------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 70.9 $ 98.4 Trade receivables, net of allowances of $11.6 in 1995 and $11.0 in 1994 837.8 642.8 Inventories (Note 4) 615.0 403.9 Other current assets 182.6 137.6 Deferred income taxes (Note 9) 98.5 93.6 - --------------------------------------------------------------------------------------------------------------- Total current assets 1,804.8 1,376.3 Investments 99.1 141.7 Property, plant and equipment, net (Note 7) 1,829.6 1,537.4 Goodwill and intangible assets (Note 2) 345.6 121.6 Other assets 150.9 87.3 Deferred income taxes (Note 9) 71.1 87.2 - --------------------------------------------------------------------------------------------------------------- Total assets $4,301.1 $3,351.5 =============================================================================================================== Liabilities and Stockholders' Equity Current liabilities Short-term debt (Note 8) $ 420.8 $ 66.9 Accounts payable, trade and other 848.5 676.9 Accrued payroll 110.4 98.5 Other current liabilities 309.0 307.4 Current portion of long-term debt (Note 8) 29.8 41.3 Current portion of accrued pension and other postretirement benefits (Notes 12 and 13) 36.4 22.8 Income taxes payable (Note 9) 37.8 55.1 - --------------------------------------------------------------------------------------------------------------- Total current liabilities 1,792.7 1,268.9 Long-term debt, less current portion (Note 8) 974.4 901.2 Accrued pension and other postretirement benefits, less current portion (Notes 12 and 13) 284.6 306.5 Reserve for discontinued operations (Note 3) 168.3 189.9 Other liabilities 270.3 169.0 Minority interests in consolidated companies 157.4 99.5 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 1995 or 1994 - - Common stock, $0.10 par value, authorized 60,000,000 shares; issued 37,024,187 shares in 1995 and 36,813,530 shares in 1994 3.7 3.7 Capital in excess of par value of capital stock 99.7 90.4 Retained earnings 596.1 380.5 Foreign currency translation adjustment (Note 5) (36.9) (49.0) Treasury stock, common, at cost; 300,447 shares in 1995 and 298,226 shares in 1994 (9.2) (9.1) - --------------------------------------------------------------------------------------------------------------- Total stockholders' equity 653.4 416.5 - --------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $4,301.1 $3,351.5 ===============================================================================================================
See notes to consolidated financial statements. 38
Consolidated Statements Of Cash Flows - ------------------------------------------------------------------------------------------------------------ (In millions) Year ended December 31 -------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ Reconciliation from income before extraordinary item to cash provided by operating activities Income before extraordinary item $ 215.6 $ 173.4 $ 41.0 Adjustments to reconcile income from continuing operations to cash provided by operating activities: Restructuring and other charges (Note 3) 134.5 - 172.3 Gain on sale of FMC Wyoming stock (Note 2) (99.7) - - Depreciation and amortization 248.9 229.0 226.6 Deferred income taxes (3.7) 30.3 (38.9) Minority interests 59.1 61.4 2.5 Other (0.9) (14.1) 3.3 Changes in operating assets and liabilities excluding the effects of the formation of United Defense, L.P. (Note 2): Trade receivables (190.2) (61.9) (40.1) Inventories (217.9) (46.2) 37.5 Other current assets and other assets (348.4) (33.7) (18.1) Accounts payable, accrued payroll, other current liabilities and other liabilities 189.5 97.5 24.7 Income taxes payable (15.2) (31.4) (21.2) Restructuring reserve (48.5) (72.2) (2.4) Accrued pension and other postretirement benefits, net (10.5) (6.4) (16.9) - ------------------------------------------------------------------------------------------------------------ Cash provided (required) by operating activities (87.4) 325.7 370.3 - ------------------------------------------------------------------------------------------------------------ Cash required by discontinued operations (16.0) (20.2) (26.5) - ------------------------------------------------------------------------------------------------------------ Cash provided (required) by investing activities: Capital spending (566.3) (356.0) (244.5) Disposal of property, plant and equipment 31.2 19.0 7.7 Decrease (increase) in investments 49.5 (55.8) 23.6 - ------------------------------------------------------------------------------------------------------------ Cash required by investing activities (485.6) (392.8) (213.2) - ------------------------------------------------------------------------------------------------------------ Cash provided (required) by financing activities: Net increase (decrease) in short-term debt 79.5 (1.9) 14.0 Net proceeds from issuance of commercial paper 272.3 - - Net borrowings (repayments) under credit facilities 89.0 161.0 (10.0) Increase in other long-term debt 18.5 142.6 206.4 Proceeds from sale of FMC Wyoming stock (Note 2) 171.8 - - Repayment of other long-term debt (49.5) (130.0) (285.1) Distributions to limited partner (37.8) (70.0) - Premium on early retirement of debt - - (3.4) Issuance of capital stock, net 9.2 10.5 7.3 - ------------------------------------------------------------------------------------------------------------ Cash provided (required) by financing activities 553.0 112.2 (70.8) - ------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash and cash equivalents 8.5 (4.0) (6.6) - ------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (27.5) 20.9 53.2 - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, beginning of year 98.4 77.5 24.3 - ------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of year $ 70.9 $ 98.4 $ 77.5 ============================================================================================================
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 $29.4 million, $63.1 million and $41.8 million for 1995, 1994 and 1993, respectively. Interest payments, net of amounts capitalized, for 1995, 1994 and 1993 were $72.0 million, $66.4 million and $60.1 million, respectively. See notes to consolidated financial statements. 39
Consolidated Statements of Changes in Stockholders' Equity - ------------------------------------------------------------------------------------------------------ (In millions) Common Capital Foreign stock, $0.10 in excess Retained currency Treasury par value of par earnings translation stock - ------------------------------------------------------------------------------------------------------ Balance December 31, 1992 $3.6 $72.0 $170.8 $(19.0) $(8.4) Net income 36.3 Stock options exercised (Note 10) 7.6 Purchase of treasury shares (0.3) Translation adjustment (Note 5) (45.7) - ------------------------------------------------------------------------------------------------------ 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) 15.7 - ------------------------------------------------------------------------------------------------------ Balance December 31, 1994 3.7 90.4 380.5 (49.0) (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 $(36.9) $(9.2) ======================================================================================================
See notes to consolidated financial statements. 40
Geographic Segment Information - -------------------------------------------------------------------------------- Sales Year ended December 31 - -------------------------------------------------------------------------------- (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Third party sales - -------------------------------------------------------------------------------- United States $3,270.0 $3,084.8 $2,866.7 Latin America and Canada 179.8 159.6 140.4 Europe 947.3 693.5 697.5 Asia, Africa & others 112.7 72.9 49.3 - -------------------------------------------------------------------------------- 4,509.8 4,010.8 3,753.9 - -------------------------------------------------------------------------------- Intersegment sales - -------------------------------------------------------------------------------- United States 151.2 110.7 102.5 Latin America and Canada 10.1 10.9 10.9 Europe 92.2 92.3 83.2 Asia, Africa & others 22.1 11.4 23.2 Eliminations (275.6) (225.3) (219.8) - -------------------------------------------------------------------------------- Total sales $4,509.8 $4,010.8 $3,753.9 ================================================================================ Income (loss) before income taxes Year ended December 31 - -------------------------------------------------------------------------------- (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- United States $ 390.7 $ 341.5 $ 323.8 Latin America and Canada 12.7 13.7 4.4 Europe 120.5 100.2 48.1 Asia, Africa & others 4.5 1.7 (0.8) - -------------------------------------------------------------------------------- Operating profit 528.4 457.1 375.5 Restructuring and other charges (Note 3) (150.0) - (172.3) Gain on sale of FMC Wyoming stock (Note 2) 99.7 - - Net interest expense (72.5) (59.1) (62.6) Corporate and other (96.2) (101.9) (110.5) Minority interest (59.1) (61.4) (2.5) Other income and (expense), net (3.4) 17.6 10.2 - -------------------------------------------------------------------------------- Total $ 246.9 $ 252.3 $ 37.8 ================================================================================ Identifiable assets December 31 - -------------------------------------------------------------------------------- (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- United States $2,609.2 $1,960.0 $1,544.3 Latin America and Canada 209.7 157.2 142.7 Europe 900.2 676.3 640.3 Asia, Africa and others 87.2 64.9 51.0 - -------------------------------------------------------------------------------- Subtotal 3,806.3 2,858.4 2,378.3 Corporate and other 494.8 493.1 466.8 - -------------------------------------------------------------------------------- Total $4,301.1 $3,351.5 $2,845.1 ================================================================================ U.S. Export Sales to Unaffiliated Customers by Destination of Sale Year ended December 31 - -------------------------------------------------------------------------------- (In millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Latin America and Canada $ 212.9 $ 217.9 $ 176.8 Europe 155.9 153.3 192.2 Asia, Africa and others 588.2 668.6 415.3 - -------------------------------------------------------------------------------- Total $ 957.0 $1,039.8 $ 784.3 ================================================================================
41
Other Supplemental Information - -------------------------------------------------------------------------------------------------------------------- Quarterly financial information (unaudited) - -------------------------------------------------------------------------------------------------------------------- (In millions, except per share 1995 1994 and common stock data) - -------------------------------------------------------------------------------------------------------------------- 1st 2nd 3rd 4th 1st 2nd 3rd 4th Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. A-------------------------------------------------------------------------------------------------------------------- Sales $1,015.5 $1,128.4 $1,156.0 $1,209.9 $908.3 $1,053.8 $1,009.6 $1,039.1 Income (loss) from operations $ 107.1 $ 134.5 $ (37.5) $ 74.7 $ 97.5 $ 133.9 $ 79.8 $ 61.6 - -------------------------------------------------------------------------------------------------------------------- Net income $ 52.4 $ 77.7 $ 57.1 $ 28.4 $ 46.1 $ 67.3 $ 34.7 $ 25.3 Net income per share $ 1.40 $ 2.06 $ 1.51 $ 0.75 $ 1.24 $ 1.82 $ 0.93 $ 0.68 - -------------------------------------------------------------------------------------------------------------------- Common stock prices: High $ 60 5/8 $ 67 1/4 $ 79 1/2 $ 75 3/8 $ 50 $ 54 1/8 $ 62 1/4 $ 65 Low $ 57 3/8 $ 59 $ 67 $ 67 1/4 $ 47 $ 45 1/2 $ 54 1/4 $ 56 1/4 =====================================================================================================================
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 and Backlog - ---------------------------------------------------------------------------------------------------------------------------- Depreciation Research and Capital expenditures and amortization development expenditures - ---------------------------------------------------------------------------------------------------------------------------- Year ended December 31 Year ended December 31 Year ended December 31 - ---------------------------------------------------------------------------------------------------------------------------- (In millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------- Performance Chemicals $143.3 $ 66.1 $ 53.1 $ 59.4 $ 56.1 $ 52.9 $109.3 $ 94.7 $ 83.0 Industrial Chemicals 205.1 129.0 78.6 75.9 72.3 76.1 16.3 17.3 15.3 Machinery and Equipment 132.3 77.0 70.7 45.7 35.3 31.1 49.1 30.8 26.1 Defense Systems 24.5 19.3 19.2 32.0 35.4 26.0 13.1 23.6 24.0 Precious Metals 36.9 56.1 18.5 21.3 15.3 25.7 - - 0.1 Corporate 24.2 8.5 4.4 14.6 14.6 14.8 - 0.4 0.7 - ---------------------------------------------------------------------------------------------------------------------------- Total $566.3 $356.0 $244.5 $248.9 $229.0 $226.6 $187.8 $166.8 $149.2 ============================================================================================================================
Descriptions of the company's industry segments are on pages 12 through 34 of this annual report. Sales, income (loss) 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 $706.5 million, $618.3 million and $768.4 million in 1995, 1994 and 1993, respectively. These sales were made primarily by the Defense Systems segment.
Order backlog (unaudited) Year ended December 31 - ---------------------------------------------------------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------- Machinery and Equipment $ 545.0 $ 480.0 $ 333.1 Defense Systems 1,495.0 1,412.3 1,105.0 - ---------------------------------------------------------------------------------------------------------------------------- Total $2,040.0 $1,892.3 $1,438.1 ============================================================================================================================
Backlogs are not reported for Industrial Chemicals, Performance Chemicals and Precious Metals due to the nature of these businesses. 42 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. 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. Dividends received from affiliates were $5.3 million in 1995 ($9.4 million in 1994 and $6.0 million in 1993). Dividends included in other revenue from other investments were $21.7 million, $13.0 million and $9.7 million in 1995, 1994 and 1993, 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, as well as all manufacturing overhead. 43 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 production costs incurred for contracts-in- progress for which such losses are 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. Capitalized interest. Interest costs of $14.5 million ($4.6 million in 1994 and $0.7 million in 1993) 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. 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 upon expectations of undiscounted cash flows for each operation having a significant goodwill balance. Based upon its analyses, the company believes that no material impairment of recorded goodwill existed at December 31, 1995 or 1994. 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 ($254.5 million at December 31, 1995 and $236.6 million at December 31, 1994). 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 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 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 (37,721,000 in 1995, 37,195,000 in 1994 and 36,943,000 in 1993). Segment information. Segment operating profit is defined as total revenue less operating expenses. The following items have been excluded in computing operating profit: general corporate income and expenses, interest income and expense, income taxes, significant gains or losses on abnormal retirements of assets, restructuring and other charges, the 1995 gain on the sale of FMC Wyoming stock 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, 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. 44 Estimated obligations to remediate sites that involve the Environmental Protection Agency ("EPA"), or equivalent government agencies, are generally accrued no later than when a Record of Decision ("ROD"), or equivalent, is issued, or upon completion of a 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 and Safety organization, as well as financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties. 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 certain 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 as an asset and those relating to discontinued operations are recorded in the reserve for discontinued operations. Accounting standards not 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" was issued by the Financial Accounting Standards Board ("FASB") in March 1995. This standard, which establishes criteria for recognizing, measuring and disclosing impairments of long-lived assets, is effective for fiscal years beginning after December 15, 1995. The company plans to adopt the new standard on January 1, 1996 but does not expect a significant impact on its consolidated financial position or results of operations at the date of adoption. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," also effective for fiscal years beginning after December 15, 1995. Upon adoption of SFAS No. 123, the company plans to continue its current accounting for employee stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25, as permitted under SFAS No. 123, and, if material, to disclose the pro forma effect of the fair value accounting method in the notes to its consolidated financial statements. Accounting standards adopted. AICPA Statement of Position ("SOP") 94-6, "Disclosure of Certain Significant Risks and Uncertainties and Financial Flexibility" was adopted by the company for the 1995 annual report to shareholders. The disclosures required by this SOP focus primarily on the nature of an entity's operations, the use of estimates in preparation of financial statements and on risks and uncertainties that could significantly affect the amounts reported in the financial statements. The required disclosures are included in this note under the captions Nature of operations and Use of estimates, elsewhere in the Notes to Consolidated Financial Statements and in Management's Discussion and Analysis. Reclassifications. Certain prior-year amounts have been reclassified to conform with the current year's presentation. Note 2 Business Combinations Acquisitions. 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. 45 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. The following unaudited pro forma information is intended to show the results of FMC's operations as if the acquisition of Moorco had occurred on January 1, 1995 and 1994, respectively, after giving effect to certain adjustments, including the increased amortization of goodwill and other intangible assets, decreased depreciation, cost savings from certain synergies created under the combined operations, the exclusion of non-recurring acquisition related expenses ($17.8 million after tax), the exclusion of the non-recurring write-off of acquired in-process research and development, additional interest expense on incremental acquisition indebtedness, and the related income tax effects of these adjustments:
- -------------------------------------------------------------- (In millions, except per share data) Year ended December 31 - -------------------------------------------------------------- (unaudited) 1995 1994 - -------------------------------------------------------------- Sales $4,610 $4,207 Net income 228 174 Earnings per common share 6.05 4.68 ==============================================================
The unaudited pro forma results of operations are not necessarily indicative of the results that would have occurred had the acquisition actually been consummated on January 1, 1995 or 1994, respectively, and are not intended to be a projection of future results or trends. 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. FR Manufacturing Corporation 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. During 1993, the company acquired the assets of Kongsberg Offshore a.s., a wholly owned subsidiary of Siemens a.s., and the shares of SOFEC Inc., an engineering and construction company. Both operations are included in the company's Machinery and Equipment segment. The company also completed a number of other smaller acquisitions and joint ventures during the years ended December 31, 1995, 1994 and 1993. The purchase prices for all the aforementioned acquisitions were satisfied from cash flow from operations and short-term and long-term financing. Other than Moorco, the company's acquisitions did not have a material pro forma impact on the company's consolidated results of operations. 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. Formation of United Defense, L.P. 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 ("BMY"). 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. 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 is included in minority interest. All of the assets and liabilities of UDLP are also consolidated in the balance sheet at December 31, 1995 and 1994. 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. 46 Note 3 Restructuring and Discontinued Operations 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 write- downs, 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. In 1993, FMC recorded pretax restructuring and other charges of $172.3 million, net of $12.7 million of minority interest ($123.3 million after tax, or $3.34 per share). These charges primarily related to restructuring costs associated with the Machinery and Equipment and Industrial Chemical segments, expenses to restructure companywide functional support staffs, and a write-down of the investment in the Beartrack development property in the Precious Metals segment. The restructuring program was designed to reduce costs and improve operating efficiencies. During 1994, FMC carried out a number of actions consistent with the 1993 restructuring plan. Employee positions were eliminated, manufacturing facilities were consolidated and unprofitable product lines were exited. During 1995, FMC substantially completed the remaining workforce reductions and continued downsizing and other related activities in the business segments. The aggregate restructuring reserve remaining at December 31, 1995 of $18.7 million is expected to be adequate to cover residual manufacturing consolidation and the lithium exit liabilities. Discontinued operations. Disposal of all assets related to discontinued operations has been completed in accordance with plans adopted within one year of the measurement dates. Measurement dates and residual liabilities relate to operations discontinued between 1976 and 1984--primarily Film, Fiber, Power Transmission and the Construction Equipment businesses. Residual liabilities are of a long-term nature and will be settled over a number of years. Liabilities remaining with FMC total approximately $168 million at December 31, 1995 ($190 million at December 31, 1994) and are comprised of: $48 million (net of approximately $84 million in anticipated third party recoveries) for environmental remediation and investigation obligations, most of which relate to former chemical plant sites; $44 million for product liability and other potential claims principally related to the discontinued construction equipment group; and $76 million for retiree benefits provided to employees of former chemical businesses and the construction equipment group. Except for the environmental liabilities, the company uses actuarial methods, to the extent practicable, to monitor the adequacy of the 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 a period of approximately 15 years. Spending in 1995, 1994 and 1993, respectively, includes $11 million, $15 million and $22 million for environmental; $5 million, $14 million and $5 million for product liability; and approximately $6 million in each year for retiree benefits. 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 $300.1 million at December 31, 1995 and $249.3 million at December 31, 1994. Inventories at December 31, 1995 included approximately $221.9 million ($149.7 million at December 31, 1994) of inventoried costs relating to contracts-in- progress. During 1995, there was no reduction in LIFO inventories that were carried at lower than prevailing costs. LIFO inventory reductions increased pretax income by $3.7 million in 1994 and $2.6 million in 1993. Note 5 Foreign Currency Net income for 1995, 1994 and 1993 included aggregate foreign currency gains of $0.2 million and losses of $11.1 million and $1.0 million, respectively. The Mexican peso continued to weaken against the U.S. dollar throughout most of 1995. There were no other major trends in the exchange rates that impacted 1995 earnings. The primary component of the 1994 loss of $11.1 million relates to the devaluation of the Mexican peso. The 1995 and 1994 increases in the foreign currency translation adjustment component of stockholders' equity were primarily attributable to a weaker U.S. dollar in relation to the European currencies, particularly the Spanish peseta, and the 1993 decrease was primarily attributable to the stronger U.S. dollar in relation to the 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 47 adjustment or to income. Interest earned on foreign cash and cash equivalents and debt service costs are classified as interest income and interest expense, respectively, and are 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.
- ---------------------------------------------------------- Gains (Losses) (In millions) 1995 1994 1993 - ---------------------------------------------------------- Cash and cash equivalents $ 8.5 $(4.0) $ (6.6) Debt (3.1) (5.9) 7.7 Other working capital 2.1 4.0 (24.1) Property, plant & equipment, net 15.1 12.7 (33.3) Investments (3.6) 4.4 6.4 Other (6.7) (6.6) 3.2 - ---------------------------------------------------------- $12.3 $ 4.6 $(46.7) ========================================================== Foreign currency translation adjustment $12.1 $ 15.7 $(45.7) Gain (loss) in income 0.2 (11.1) (1.0) - ---------------------------------------------------------- $12.3 $ 4.6 $(46.7) ==========================================================
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:
- ---------------------------------------------------------- December 31, 1995 - ---------------------------------------------------------- (In millions) Carrying Estimated Amount Fair Value - ---------------------------------------------------------- Assets - ---------------------------------------------------------- Foreign exchange forward contracts $ - $ - Foreign currency swap agreements $ - $ (1.8) - ---------------------------------------------------------- Liabilities - ---------------------------------------------------------- Total debt $1,425.0 $1,447.6 ==========================================================
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, 1995. 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 and foreign currency swap 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 foreign currency swap agreements allowing the company to swap fixed-rate British pound denominated borrowings for floating rate dollar amounts. These swap agreements give the company access to additional sources of financing while limiting both foreign exchange risk and exposure to floating interest rates on U.S. borrowings. As of December 31, 1995 and 1994, the company had approximately $318 million and $149 million, respectively, of outstanding foreign exchange and foreign currency swap contracts in which foreign currencies (primarily Belgium franc, British pound and Singapore dollar) were purchased, and approximately $459 million and $312 million, respectively, of outstanding foreign exchange and foreign currency swap contracts in which foreign currencies (primarily Canadian dollar, German mark, French franc, and Japanese yen) were sold. Cross-currency contracts at December 31, 1995 and December 31, 1994 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 and purchase of $82 million of British pounds, which mature annually through 2001, and the sale of $13 million of Japanese yen with various maturities through 2003. At December 31, 1995, the company had not hedged any significant firm sales or purchase commitments that qualify for hedge accounting. 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. 48
Note 7 Property, Plant and Equipment Property, plant and equipment consists of the following: - ---------------------------------------------------------------- December 31 - ---------------------------------------------------------------- (In millions) 1995 1994 - ---------------------------------------------------------------- Land and land improvements $ 290.6 $ 275.7 Buildings 553.5 510.1 Machinery and equipment 2,953.7 2,894.6 Construction in progress 373.4 217.1 - ---------------------------------------------------------------- Total cost 4,171.2 3,897.5 Accumulated depreciation 2,341.6 2,360.1 - ---------------------------------------------------------------- Net property, plant and equipment $1,829.6 $1,537.4 ================================================================ Depreciation expense was $232.8 million, $220.5 million and $222.4 million in 1995, 1994 and 1993, respectively. Note 8 Debt Long-term debt. Long-term debt consists of the following: - ------------------------------------------------------------------- December 31 - ------------------------------------------------------------------- (In millions) 1995 1994 - ------------------------------------------------------------------- Revolving credit facility, effective rate (1995-6.5%; 1994-6.1%)/(1)/ $ 95.0 $ 85.0 Commercial paper, effective rate (1995-5.9%)/(2)/ 155.0 - Uncommitted facilities, effective rate (1995-6.1%; 1994-4.5%)/(2)/ - 76.0 Notes payable to banks, various rates, due 1996 to 2042 49.6 75.3 Pollution control and industrial revenue bonds, 3.8% to 7.1%, due 1997 to 2024 178.9 181.2 Senior debt, 8-3/4%, due 1999, less unamortized discount (1995-$0.5; 1994-$0.7), effective rate 8.8% 249.5 249.3 Senior debt, 6-3/8%, due 2003, less unamortized discount (1995-$0.9; 1994-$1.0), effective rate 6.4% 199.1 199.0 Exchangeable senior subordinated debentures, 6-3/4%, due 2005 75.0 75.0 Other 2.1 1.7 - ------------------------------------------------------------------- Total 1,004.2 942.5 Less current portion 29.8 41.3 - ------------------------------------------------------------------- Long-term portion $ 974.4 $901.2 ===================================================================
(1) The effective rate on the revolving credit facility is based on average balances outstanding during the year and includes facility fees. (2) The effective rate is based on average balances outstanding during the year. In December 1994, the company entered into a $250 million, five-year non- amortizing revolving credit agreement and a $250 million, 364-day non- amortizing revolving credit agreement, which was amended in December 1995 to extend the maturity date to December 1996. These agreements replaced the company's previous credit agreements and provide the company with $500 million in committed credit facilities. At December 31, 1995, no amounts were outstanding under the 364-day revolving credit agreement. Among other restrictions, the credit agreements contain covenants relating to dividends, liens, consolidated net worth and cash flow coverage and leverage ratios (as defined in the agreements). The company is in compliance with all financial debt covenants. In November 1995, the company entered into a commercial paper program supported by the committed facilities. 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, $155 million of the total $274.8 million in outstanding commercial paper has been classified as long-term debt at December 31, 1995. In June 1994 and September 1994, the company borrowed $45 million at 7.0% interest and $45 million at 6.9% interest, respectively, maturing in 2024, from the proceeds of Sweetwater County, Wyoming's Solid Waste Disposal Revenue Bonds. Proceeds of $13.0 million and $64.0 million at December 31, 1995 and 1994, respectively, from these bonds are included in investments and are being used to fund a soda ash business capital project. During 1993, with funds obtained through its revolving credit agreement, the company repurchased debt with an aggregate face value of $706 million, less unamortized discount of $481 million. As a result of the write-off of related unamortized debt issue costs, as well as other costs and expenses incurred, the company recognized an extraordinary charge of $4.7 million, net of tax benefits of $2.7 million. The exchangeable senior subordinated debentures bearing interest at 6-3/4% and maturing in 2005 are exchangeable at any time into FMC Gold Company common stock held by FMC Corporation at an exchange price of $15-1/8, subject to change as defined in the offering circular. However, the company may, at its option, pay an amount equal to the market price of FMC Gold Company common stock in lieu of delivery of the shares. The debentures are subordinated in right of payment to all existing and future senior indebtedness of the company. The debentures are redeemable at the option of FMC at prices decreasing from 103-3/8% of face amount on January 16, 1995, to par on January 16, 2000. Aggregate maturities and sinking fund requirements over the next five years are (in millions): 1996--$29.8, 1997--$22.5, 1998--$20.7, 1999--$523.7, 2000--$18.7, and thereafter--$388.8. Short-term debt and compensating balance agreements. At December 31, 1995, components of short-term debt were commercial paper borrowings, advances under uncommitted facilities and foreign short-term borrowings. In November 1995, the company commenced a short-term commercial paper program, providing for the 49 issuance of up to $500 million in aggregate maturity value of commercial paper at any given time. Fourteen-day to 30-day commercial paper with an aggregate maturity value of $274.8 million and an effective interest rate of 5.9 percent was outstanding at December 31, 1995, the proceeds of which were used to retire other short-term borrowings. As described above, $155 million of the outstanding balance at December 31, 1995 was classified as long-term debt. Advances under uncommitted facilities were $201 million and $76 million in 1995 and 1994, respectively. In 1994, committed credit available under the revolving credit facility provided management with the ability to refinance this debt on a long-term basis and, therefore, the entire $76 million of advances was classified as long-term debt. In 1995, the advances under uncommitted facilities were classified as short-term debt. FMC maintains informal credit arrangements in many foreign countries. Foreign lines of credit, which usually include overdraft facilities, typically do not require the maintenance of compensating balances, as credit extension is not guaranteed but is subject to the availability of funds. Outstanding foreign short-term borrowings totaled $100 million and $66.9 million at December 31, 1995 and 1994, respectively. The weighted average interest rates on outstanding foreign short-term borrowings at December 31, 1995 and 1994 were 12.1% and 8.2%, 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 (loss) before income taxes are shown below:
- ---------------------------------------------- Year ended December 31 - ---------------------------------------------- (In millions) 1995 1994 1993 - ---------------------------------------------- Domestic $137.2 $173.1 $(17.2) Foreign 109.7 79.2 55.0 - ---------------------------------------------- Total $246.9 $252.3 $ 37.8 ==============================================
The provision (benefit) for income taxes consists of:
- ---------------------------------------------- Year ended December 31 - ---------------------------------------------- (In millions) 1995 1994 1993 - ---------------------------------------------- Current: Federal $ 19.5 $ 24.7 $ 23.7 Foreign 14.4 21.6 8.3 State and local 1.1 2.3 3.7 - ---------------------------------------------- Total current 35.0 48.6 35.7 Deferred (3.7) 30.3 (38.9) - ---------------------------------------------- Total income taxes $ 31.3 $ 78.9 $ (3.2) ==============================================
Total income tax provisions (benefits) for the years ended December 31 were allocated as follows:
- --------------------------------------------------------------- (In millions) 1995 1994 - --------------------------------------------------------------- Net income $ 31.3 $ 78.9 Items charged directly to stockholders' equity (3.7) (2.9) - ---------------------------------------------------------------- Income tax expense $ 27.6 $ 76.0 ===============================================================
Significant components of the deferred income tax provision (benefit) attributable to income before income taxes are as follows:
- --------------------------------------------------------------- (In millions) 1995 1994 - --------------------------------------------------------------- Deferred tax (exclusive of the effects of other components listed below) $ (7.4) $ 28.5 Increase in the valuation allowance for deferred tax assets 3.7 1.8 - --------------------------------------------------------------- Deferred income tax expense (benefit) $ (3.7) $ 30.3 ===============================================================
Significant components of the company's deferred tax assets and liabilities as of December 31 are as follows:
- --------------------------------------------------------------- (In millions) 1995 1994 - --------------------------------------------------------------- Accrued pension and other postretirement benefits $109.9 $119.2 Reserves for discontinued operations and restructuring 105.4 94.0 Other reserves 107.2 111.1 Net operating loss carryforwards 33.0 25.0 Alternative minimum tax credit carryforwards 51.0 31.8 Capitalized research and development costs (6.5) (2.3) Other 22.4 16.8 - --------------------------------------------------------------- Deferred tax assets 422.4 395.6 Valuation allowance (42.8) (39.1) - --------------------------------------------------------------- Deferred tax assets, net of valuation allowance $379.6 $356.5 =============================================================== Property, plant and equipment $204.3 $170.2 Other 5.7 5.5 - --------------------------------------------------------------- Deferred tax liabilities $210.0 $175.7 =============================================================== Net deferred tax assets $169.6 $180.8 ===============================================================
As of December 31, 1995, the company has prepaid $51.0 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. The effective income tax rate applicable to income before income taxes is less than the statutory U.S. federal income tax rate due to the various factors listed in the following table: 50
- -------------------------------------------------------------------------- (Percent of income before income taxes) Year ended December 31 - -------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------- Statutory U.S. tax rate 35% 35% 35% - -------------------------------------------------------------------------- Net increase (decrease): Foreign sales corporation income not subject to U.S. tax (3) (3) (30) Percentage depletion (5) (6) (51) State and local income taxes, less federal income tax benefit 1 3 (6) Foreign earnings subject to different tax rates (2) (1) (15) Tax on intercompany dividends and deemed dividends for tax purposes 2 3 54 Sale of a minority interest in FMC Wyoming not taxed (15) - - Adjustment to deferred tax assets for enacted changes in tax rates - - (13) Equity in earnings of affiliates not taxed (2) (2) (9) Minority interest on FMC Gold restructuring charge - - (11) Change in valuation allowance - - 44 Other 2 2 (6) - -------------------------------------------------------------------------- Total decrease (22) (4) (43) - -------------------------------------------------------------------------- Effective tax rate 13% 31% (8)% ============================================================================
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. Income taxes have not been provided for the equity in undistributed earnings of foreign consolidated subsidiaries ($367.2 million and $299.7 million at December 31, 1995 and 1994, respectively) or unconsolidated subsidiaries and affiliates ($49.5 million and $53.4 million at December 31, 1995 and 1994, respectively). Restrictions on the distribution of these earnings are not significant. Foreign earnings taxable to the company as dividends were $24.3 million, $66.2 million and $131.0 million in 1995, 1994 and 1993, 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). Incentive options expire not later than 10 years from 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 384,250 shares remaining from the 1990 plan. 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, 1995, 3,001,950 shares were available for future use under these plans. The following summary shows stock option activity for the two years ended December 31, 1995:
- ------------------------------------------------------------------------ Shares optioned (In thousands, except but not Option price per share data) exercised per share - ------------------------------------------------------------------------ December 31, 1993 2,466 $10.43-$46.375 Granted 851 $46.25 Exercised (340) $10.43-$31.25 Cancelled (89) $29.50-$46.375 - ------------------------------------------------------------------------ December 31, 1994 2,888 $17.625-$46.375 Granted 372 $46.25-$79.00 Exercised (210) $17.625-$31.125 Cancelled (66) $29.50-$59.625 - ------------------------------------------------------------------------ December 31, 1995 2,984 $17.625-$79.00 ========================================================================
At December 31, 1995, 1,091,767 of the optioned shares are exercisable at prices ranging from $17.625 to $31.125 per share, with expiration dates from July 8, 1996 to January 9, 2006. On January 2, 1996, an additional 562,700 shares became exercisable at a price of $46.375 with an expiration date of March 12, 2007. In April 1987, the stockholders approved the FMC Deferred Stock Plan for Nonemployee Directors. Under this plan, a portion of the annual retainer for these directors will be deferred and paid in the form of shares of common stock upon retirement or other termination of their directorships. At December 31, 1995, stock units representing an aggregate of 16,130 shares of stock were credited to the nonemployee directors' accounts. 51 Note 11 Stockholders' Equity The following is a summary of FMC's capital stock activity over the past three years:
- ----------------------------------------------------------- Common Treasury (In thousands) stock stock - ----------------------------------------------------------- Balance December 31, 1992 36,159 286 Stock options exercised 314 Stock repurchases 6 - ----------------------------------------------------------- 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 Stock repurchases - ----------------------------------------------------------- Balance December 31, 1995 37,024 300 ===========================================================
At December 31, 1995, 6,025,567 shares of unissued FMC common stock were reserved for stock options and awards. Covenants of the revolving credit facility agreement (Note 8) restrict aggregate payment of dividends on the company's common stock and contain minimum net worth and other requirements. No dividends are expected to be paid on the company's common stock in 1996. 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 plan. 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 1995 net pension cost and plan funded amounts include salaried and hourly retirement plans of Moorco International Inc. and Jetway Systems. Beginning in 1994, net pension benefit and plan funded pension amounts include salaried and hourly retirement plans contributed by Harsco Corporation as part of a limited partnership agreement between FMC's Defense Systems Group and Harsco's BMY Combat Systems Division. The following table summarizes the assumptions used and the components of the domestic net cost (benefit):
- -------------------------------------------------------------------- Year ended December 31 Assumptions: 1995 1994 1993 - -------------------------------------------------------------------- Weighted average discount rate 8.0% 8.0% 8.0% Rates of increase in future compensation levels 5.0% 5.0% 5.0% Weighted average expected long-term asset return 9.3% 9.3% 9.3% - -------------------------------------------------------------------- Components (in millions): - -------------------------------------------------------------------- Service cost of benefits earned $ 25.0 $ 25.5 $ 22.6 Interest cost on projected benefit obligation 60.2 55.5 50.2 Actual return on plan assets-- investment (gains) losses (210.5) 2.6 (105.9) Net amortization and deferral: Net transition asset amortization (23.7) (23.7) (23.0) Prior service cost amortization 5.0 5.2 3.9 Net gain amortization 3.1 (2.3) (1.9) Net asset gain (loss) deferred 143.1 (72.8) 46.5 - -------------------------------------------------------------------- Net pension (benefit) cost $ 2.2 $(10.0) $ (7.6) ====================================================================
During 1994 and 1995, FMC continued implementing programs to reorganize functional support staffs across the corporation and to consolidate and downsize various operations within the Industrial Chemicals and Machinery and Equipment segments. Voluntary incentive benefit packages which either eliminated or reduced early retirement penalties were offered to salaried and non-union hourly employees whose age and service qualified them for the program. In addition to the voluntary program, early retirement penalties were adjusted for certain employees affected by the company's restructuring, downsizing or consolidation activities. 52 Net pension (benefit) cost for 1995 and 1994 includes charges of $4.7 million and $2.4 million, respectively, related to these programs. In addition, $6.2 million of special termination benefits (early retirement incentives) were accrued for as part of the 1993 restructuring charge and are included in accrued pension cost. The funded status of the plans and accrued pension cost recognized in the company's consolidated financial statements as of December 31 are as follows:
- ----------------------------------------------------------------------- (In millions) 1995 1994 - ----------------------------------------------------------------------- Actuarial present value of benefits for service rendered to date: Accumulated benefit obligation based on salaries to date, including vested benefits of $663.8 in 1995 and $581.8 in 1994 $(708.3) $(611.6) Additional benefits based on estimated future salary levels (117.6) (145.4) - ----------------------------------------------------------------------- Projected benefit obligation (825.9) (757.0) Plan assets at fair value(1) 920.4 727.4 - ----------------------------------------------------------------------- Projected benefit obligation (in excess of) or less than plan assets 94.5 (29.6) Unrecognized net (gain) loss (94.5) 55.7 Unrecognized prior service cost 20.7 25.5 Unrecognized net transition asset (126.0) (149.6) - ----------------------------------------------------------------------- Accrued pension cost $(105.3) $ (98.0) =======================================================================
(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 $8.6 million in 1995, $6.3 million in 1994 and $6.7 million in 1993. 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 $20.3 million in 1995, $18.8 million in 1994 and $17.1 million in 1993. 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. The effect of 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 1995 and 1994, 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 $9.9 million and would increase annual service and interest costs by $1.0 million. The following table summarizes the assumptions used and the components of net periodic postretirement benefit cost:
- ----------------------------------------------------------------------- Year ended December 31 - ----------------------------------------------------------------------- Assumptions: 1995 1994 1993 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 $ 4.2 $ 4.2 $ 4.7 Interest cost on accumulated postretirement benefit obligation 13.5 13.3 14.3 Actual return on plan assets- investment (gain) losses (4.5) 0.4 (1.2) Net amortization and deferral: Plan amendment amortization (15.2) (7.7) (6.1) Net gain amortization (0.6) (0.6) - Net asset gain (loss) deferred 2.1 (2.5) (0.3) - ----------------------------------------------------------------------- Net periodic postretirement (benefit) cost $ (0.5) $7.1 $11.4 =======================================================================
53 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:
- ------------------------------------------------------------- (In millions) 1995 1994 - ------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO): Retirees $ (98.4) $(110.4) Fully eligible active participants (24.0) (24.5) Other active participants (59.1) (53.8) - ------------------------------------------------------------- APBO (181.5) (188.7) Plan assets at fair value(1) 32.2 24.5 - ------------------------------------------------------------- APBO obligation in excess of plan assets (149.3) (164.2) Unamortized plan amendments (58.0) (62.8) Unrecognized net gain (8.4) (4.3) - ------------------------------------------------------------- Accrued postretirement benefits $(215.7) $(231.3) =============================================================
(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 clean up 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 27 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, 1995 and 1994, 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 $302 million and $229 million, before recoveries, have been provided at December 31, 1995 and December 31, 1994, respectively, of which $132 million and $142 million are included in the reserve for discontinued operations at December 31, 1995 and December 31, 1994, respectively. The company's total environmental reserves include approximately $270 million and $183 million for remediation activities and $32 million and $46 million for remedial investigation/feasibility study costs at December 31, 1995 and December 31, 1994, respectively. In addition, the company has estimated reasonably possible environmental loss contingencies may exceed amounts accrued by as much as $150 million. 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. 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 54 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 $140 million of recoveries ($56 million as other assets and $84 million as an offset to the reserve for discontinued operations) and approximately $123 million of recoveries ($44 million as other assets and $79 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, 1995 and 1994, respectively. The substantial 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, $20 million and $16 million for the years 1995, 1994 and 1993, respectively, on capital projects relating to environmental control facilities, and expects to spend additional capital of approximately $16 million and $21 million in 1996 and 1997, respectively. Additionally, in 1995, 1994, and 1993, FMC spent approximately $58 million, $55 million and $63 million, respectively, for environmental compliance costs. Regarding current operating, previously operated and other sites for the years 1995, 1994 and 1993, FMC charged approximately $14 million, $18 million and $17 million, respectively, against established reserves for remediation spending, and charged approximately $12 million, $13 million and $10 million, respectively, against reserves for spending on RI/FS. Recoveries from third parties of approximately $5 million, $5 million and $7 million, respectively, were received in 1995, 1994 and 1993. 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 $64.1 million, $64.1 million and $60 million in 1995, 1994 and 1993, respectively. Minimum future rentals under noncancellable leases aggregated approximately $314 million as of December 31, 1995 and are estimated to be payable as follows: $44 million in 1996, $39 million in 1997, $35 million in 1998, $31 million in 1999, $30 million in 2000 and $135 million thereafter. The real estate leases generally provide for payment of property taxes, insurance and repairs by FMC. In September 1995, FMC Gold Company, an 80-percent-owned subsidiary of FMC, announced that it had engaged the investment banking firm of Wood Gundy Inc., Toronto, to act as its financial advisor in connection with the possible sale of FMC Gold Company. On February 9, 1996, FMC Gold Company determined that it will augment its previously announced sale process to include a range of options based on current gold equity market conditions and interest in individual properties. FMC Gold Company is retaining J. P. Morgan & Co., Inc. to join Wood Gundy Inc. as financial advisors for this process. At this time, there can be no assurance as to whether any transaction will result from FMC Gold Company's work with Wood Gundy and J.P. Morgan & Co., Inc. or as to the value, timing or structure of any such transaction. FMC Gold Company management's decisions with respect to the value or structure of a potential sale could have a material impact on the valuation of FMC Gold Company and its assets. In 1994, a lawsuit was filed against the National Marine Fisheries Service ("NMFS") and other federal agencies for violation of the Endangered Species Act (the "Act") alleging that NMFS' biological opinion relating to FMC Gold Company's Beartrack property failed to satisfy the requirements of the Act. On November 9, 1995, the court ordered the federal agencies to reinitiate consultation under Section 7 of the Act on the potential environmental impacts of the Beartrack mine on endangered salmon or the designated critical habitat for salmon. The plaintiffs did not seek, and the court did not impose, any injunction or other restriction on the operation of the Beartrack mine pending completion of such consultation. If the consulting agencies were to determine that an activity associated with the Beartrack mine would jeopardize and/or adversely modify or destroy designated critical habitat, such activities could be required to cease pending completion of consultation. Under the Act's regulations, consultation must be completed within 135 days of initiation. The company continues to believe that operation of the Beartrack mine will not jeopardize endangered salmon or the critical habitat and that, upon completion of consultation, the agencies will agree with the company's position. 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. 55 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, 1995 and 1994, 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, 1995. 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 and for the years ended December 31, 1995 and 1994, we did not audit the financial statements of United Defense, L.P., which statements reflect total assets constituting 13% and 13% and total revenues constituting 22% and 27% in 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, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois January 17, 1996 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. Michael J. Callahan Ronald D. Mambu Executive Vice President Vice President and Chief Financial Officer and Controller Chicago, Illinois January 17, 1996 56 Directors and Officers Board of Directors Robert N. Burt/1,5/ Chairman of the Board and Chief Executive Officer William W. Boeschenstein/2,3/ Retired Chairman of the Board and Chief Executive Officer, Owens-Corning Fiberglas Corporation Larry D. Brady/4/ President B. A. Bridgewater, Jr./1,3,5/ 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 Adviser, 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 Patrick J. Head* 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 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; President FMC Asia-Pacific *Executive Officer 57
Ten-Year Financial Summary ================================================================================ (In millions, except per share, employee and stockholder data) 1995 1994 1993 - -------------------------------------------------------------------------------- Summary of earnings - -------------------------------------------------------------------------------- Total revenue $4,566.6 4,051.3 3,788.9 - -------------------------------------------------------------------------------- Restructuring and other charges/(1)/ $ 150.0 - 172.3 - -------------------------------------------------------------------------------- Total costs and expenses/(1)/ $4,287.8 3,678.5 3,686.0 - -------------------------------------------------------------------------------- Income from continuing operations before interest, minority interest, gain on sales of FMC Gold Company and FMC Wyoming stock and taxes/(1)/ $ 278.8 372.8 102.9 - -------------------------------------------------------------------------------- Gain on sale of FMC Wyoming Corporation stock $ 99.7 - - - -------------------------------------------------------------------------------- Gain on sale of FMC Gold Company stock $ - - - - -------------------------------------------------------------------------------- Income from continuing operations before income taxes/(1)(2)/ $ 246.9 252.3 37.8 Provision (benefit) for income taxes 31.3 78.9 (3.2) - -------------------------------------------------------------------------------- Income from continuing operations/(3)/ 215.6 173.4 41.0 Discontinued operations, net of taxes - - - - -------------------------------------------------------------------------------- Income before extraordinary items and cumulative effect of change in accounting principle/(3)/ 215.6 173.4 41.0 Extraordinary items, net of taxes - - (4.7) Cumulative effect of change in accounting principle, net of taxes - - - - -------------------------------------------------------------------------------- Net income (loss)/(3)/ $ 215.6 173.4 36.3 - -------------------------------------------------------------------------------- Total dividends $ - - - - -------------------------------------------------------------------------------- Share data Average number of shares used in earnings per share computations (thousands) 37,721 37,195 36,943 Earnings (loss) per share: Continuing operations/(3)/ $ 5.72 4.66 1.11 Discontinued operations - - - Extraordinary items - - (0.13) Cumulative effect of change in accounting principle - - - - -------------------------------------------------------------------------------- Net income (loss)/(3)/ $ 5.72 4.66 0.98 - -------------------------------------------------------------------------------- Financial position at year-end Total assets $4,301.1 3,351.5 2,845.1 Long-term debt (less current portion) $ 974.4 901.2 749.9 Stockholders' equity (deficit) $ 653.4 416.5 216.9 Other data Income from continuing operations as a return on investment 15.3% 17.2 7.8 Capital expenditures $ 566.3 356.0 244.5 Provision for depreciation $ 232.8 220.5 222.4 Employees at year-end 22,164 21,344 20,696 Stockholders of record at year-end 11,844 12,438 13,180 - --------------------------------------------------------------------------------
(1)Includes pretax restructuring and other charges of $134.5 million in 1995 and $172.3 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 Corporation stock of $99.7 million in 1995 and a nontaxable gain on the sale of FMC Gold Company stock of $94.7 million in 1987. (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 Corporation stock of $3.5 million, net, after tax in 1995 ($0.09 per share); restructuring and other charges of $(123.3) million after tax in 1993 ($(3.34) per share); and a nontaxable gain on the sale of FMC Gold Company stock of $94.7 million in 1987 ($2.00 per share). =============================================================================== 58
======================================================================== 1992 1991 1990 1989 1988 1987 1986 - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ 4,003.5 3,926.8 3,769.7 3,437.1 3,324.1 3,166.5 3,078.9 - ------------------------------------------------------------------------ - - - - - - - - ------------------------------------------------------------------------ 3,637.6 3,560.5 3,422.1 3,078.2 2,977.9 2,870.2 2,753.8 - ------------------------------------------------------------------------ 365.9 366.3 347.6 358.9 346.2 296.3 325.1 - ------------------------------------------------------------------------ - - - - - - - - ------------------------------------------------------------------------ - - - - - 94.7 - - ------------------------------------------------------------------------ 279.6 255.9 211.4 218.3 189.5 201.4 192.6 87.0 82.8 56.1 61.5 60.3 10.2 40.1 - ------------------------------------------------------------------------ 192.6 173.1 155.3 156.8 129.2 191.2 152.5 (73.2) - - - - - - - ------------------------------------------------------------------------ 119.4 173.1 155.3 156.8 129.2 191.2 152.5 (11.4) (9.2) - (20.4) - (10.7) - (183.7) - - - - - - - ------------------------------------------------------------------------ (75.7) 163.9 155.3 136.4 129.2 180.5 152.5 - ------------------------------------------------------------------------ - - - - - - 14.4 - ------------------------------------------------------------------------ 36,796 36,267 36,075 36,006 35,860 42,108 92,746 5.23 4.77 4.30 4.35 3.60 4.54 1.64 (1.99) - - - - - - (0.31) (0.25) - (0.56) - (0.25) - (4.99) - - - - - - - ------------------------------------------------------------------------ (2.06) 4.52 4.30 3.79 3.60 4.29 1.64 - ------------------------------------------------------------------------ 2,856.6 2,774.2 2,959.2 2,819.0 2,748.8 2,595.1 2,685.8 843.6 929.0 1,158.6 1,325.6 1,468.0 1,380.2 1,787.3 219.0 309.8 149.6 (70.6) (223.6) (343.2) (506.6) 20.6 18.4 17.9 19.1 18.8 16.1 15.8 314.5 216.8 324.4 280.8 186.5 157.2 232.8 235.0 224.9 211.2 197.8 199.3 200.5 192.1 22,097 23,150 23,882 24,110 24,342 24,797 24,966 14,487 14,959 17,451 18,151 19,155 20,231 21,203 - ------------------------------------------------------------------------
======================================================================== 59 Major Operating Units Performance Chemicals Agricultural Products Specialty Chemicals Food Ingredients Lithium Pharmaceutical Process Additives BioProducts Industrial Chemicals Chemical Products 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 Airport Products and Systems Material Handling Systems Food Machinery Agricultural Machinery Food Machinery Europe Food Processing Systems Packaging and Food Handling Defense Systems United Defense, L.P. Armament Systems Ground Systems International Steel Products Precious Metals FMC Gold Executive Offices FMC Corporation 200 E. Randolph Drive Chicago, Illinois 60601 Subsidiaries and Affiliates in Other Nations Argentina FMC Argentina, S.A. Minera Del Altiplano, S.A. Australia FMC (Australia), 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. Brazil CBV Industria Mecanica, S.A. Crosby Valve & Gage Participacoes Ltda. FMC do Brasil, Ltda. Jetway Systems Equipamentos Aeroportuarios Ltda. Canada FMC of Canada, 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. Huzhou FMC Chemical Company, Ltd. Colombia FMC Latino America, S.A. Denmark FMC A/S Egypt FMC International, A.G. France FMC Europe, S.A. FMC Food Machinery, S.A. FMC France S.A. FMC Overseas, S.A. Gabon FMC Gabon, S.A.R.L. Germany FMC G.m.b.H. Jetway Systems, 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 Moorco (India)Limited FMC Asia Pacific, Inc. Indonesia FMC Hong Kong Limited P.T. Bina Guna Kimia 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. Japan Asia Lithium Corporation FMC Asia Pacific, Inc. Honjo-FMC Energy Systems, Inc. L.H. Company, Ltd. Tokai Denka Kogyo, K.K. Kenya FMC International, A.G. Korea FMC International, A.G. FMCKorea Limited UDLP International, Inc. Malaysia Antah FMC Supplies and Services Sdn. Bhd. FMC Petroleum Equipment (Malaysia) Sdn. Bhd. UDLPInternational, Inc. Mexico Electro Quimica Mexicana, S.A. de C.V. E.M.D., 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 Minera FMC S.A. de C.V. 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. 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 Southeast Asia Pte., Ltd. Spain FMC Airline Equipment Europe, S.A. FMC Spain, S.A. FMC Foret, S.A. Forel S.L. Forsean, S.L. Peroxidos Organicos, S.A. Sibelco Espanola, S.A. Valentin Herraiz, S.A. Switzerland FMC International, A.G. Taiwan UDLP International, Inc. Thailand Thai Peroxide Company, Ltd. Turkey FMC-Nurol Savunma Sanayii A.S. Ukraine FMC International, A.G. United Arab Emirates FMC International, S.A. (Dubai) United Kingdom FMC Corporation (GB), Ltd. FMC Corporation (UK), Ltd. Crosby Services International Limited Crosby Valve and Engineering Company, Limited SOFEC, Ltd. (UK) Uruguay Lanfor Investments, S.A. Venezuela Tripoliven, C.A. FMC Wellhead de Venezuela, S.A. Virgin Islands FMC Gold International Sales Corp. FMC International Sales Corporation Independence/FMC Foreign Sales Corporation 60 Stockholder Data Annual Meeting of Stockholders FMC's annual meeting of stockholders will be held at 2 p.m. on Friday, April 19, 1996, 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 29, 1996. 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 1995 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. [FMC LOGO] FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 EX-21 6 SIGNIFICANT SUBSIDARIES OF REGISTRANT EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES OF REGISTRANT 12/31/95
Percent of Voting Organized Under Securities Company(1) Laws of Owned(2) - ------- --------------- ---------- FMC Corporation Delaware Registrant FMC of Canada Limited Canada 100 FMC Corporation (UK) Limited England 100 FMC Europe, S.A. France 100 FMC Gold Company Delaware 80 FMC Jerritt Canyon Corporation Delaware 100 Meridian Gold Company Montana 100 FMC Wyoming Corporation Delaware 80 Food Machinery Holding Company B.V. Spain 100 Foret, S.A. Spain 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 Litex A/S Denmark 100 Mid-Atlantic Investments Limited Canada 100 Mid-Atlantic Acceptance Company Bermuda 100 Limited Moorco International Inc. Delaware 100 FMC Industrial Chemical B.V. Netherlands 100 FMC Asia Pacific Inc. Delaware 100 United Defense, L.P. Delaware 60
____________________ (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. EX-23 7 CONSENT OF AUDITORS Exhibit 23 Consent of KPMG Peat Marwick LLP The Board of Directors FMC Corporation: We consent to incorporation by reference in Registration Statement Nos. 33-7749 and 33-10661 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, 1996, relating to the consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 1995 and 1994, 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, 1995, which report is incorporated by reference in the December 31, 1995 annual report on Form 10-K of FMC Corporation and consolidated subsidiaries. KPMG Peat Marwick LLP Chicago, Illinois March 11, 1996 EXHIBIT 23 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 16, 1996 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, 1995: 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) ERNST & YOUNG LLP Washington, DC March 14, 1996 EX-24 8 POWERS OF ATTORNEY FMC CORPORATION EXHIBIT 24 Executive Offices 200 East Randolph Drive Chicago Illinois 60601 312 861 6000 [LOGO OF FMC] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: WHEREAS, FMC CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), is a corporation with securities registered pursuant to Section 12(b) of the Securities and Exchange Act of 1934, as Amended, (the "Act"), and is subject to the reporting requirements of the Act including the obligation to file an annual report on Form 10-K; and WHEREAS, the undersigned holds and may hereafter from time to time hold one or more positions in the Corporation whether as an Officer, a Director, or both, such that the undersigned may be required or permitted in such capacity or capacities, or on behalf of the Corporation, to sign such document; NOW, THEREFORE, the undersigned hereby constitutes and appoints M.J. Callahan, R.D. Mambu, or R.L. Day, or any of them, his attorney for him and in his name, place and stead, and in his office and capacity in the Company, to sign and file the Company's Annual Report on Form 10-K for the year ended December 31, 1995, including all schedules, exhibits and amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 9th day of February, 1996. _________________________ EX-27 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from FMC Corporation Form 10-K for the year ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. 1,000,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 71 0 849 12 615 1805 4172 2342 4301 1793 974 4 0 0 650 4301 4510 4567 3332 4288 0 0 87 247 31 216 0 0 0 216 5.72 0 INCOME BEFORE TAXES INCLUDES MINORITY INTERESTS OF 59 AND 61 FOR DECEMBER 31, 1995 AND 1994, RESPECTIVELY. MINORITY INTERESTS ARE PRIMARILY LIMITED PARTNER'S SHARE OF PARTNERSHIP PROFITS FOR WHICH TAX HAS NOT BEEN PROVIDED. INCOME BEFORE TAXES IN 1995 INCLUDES RESTRUCTURING AND OTHER CHARGES OF $135, A WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT OF $15 AND A GAIN ON THE SALE OF FMC WYOMING STOCK OF $98. SEE FOOTNOTE 2. THE AFTER-TAX IMPACT OF THESE ITEMS WAS A FAVORABLE $3.5, OR $0.09 PER SHARE.
EX-99 10 REPORT OF ERNST & YOUNG EXHIBIT 99 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Partners United Defense, L.P. We have audited the balance sheets of United Defense, L.P. as of December 31, 1995 and 1994 and the related statements of income, partners' capital and cash flows for the years then ended (not presented separately herein). 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, 1995 and 1994 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Washington, DC January 16, 1996 -----END PRIVACY-ENHANCED MESSAGE-----