FMC Corporation Announces First Quarter 2018 Results

FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited, in millions, except per share amounts)

Three Months Ended

March 31,

2018

2017

Revenue

$

1,210.7

$

596.0

Costs of sales and services

656.0

379.8

Gross margin

$

554.7

$

216.2

Selling, general and administrative expenses

200.4

114.3

Research and development expenses

65.9

28.2

Restructuring and other charges (income)

(77.7)

8.3

Total costs and expenses

$

844.6

$

530.6

Income (loss) from operations

$

366.1

$

65.4

Equity in (earnings) loss of affiliates

(0.1)

(0.1)

Non-operating pension and postretirement charges (income)

0.5

(4.6)

Interest expense, net

33.9

15.7

Income (loss) from continuing operations before income taxes

$

331.8

$

54.4

Provision (benefit) for income taxes

68.7

9.4

Income (loss) from continuing operations

$

263.1

$

45.0

Discontinued operations, net of income taxes

6.5

(168.8)

Net income (loss)

$

269.6

$

(123.8)

  Less: Net income (loss) attributable to noncontrolling interests

2.4

0.4

Net income (loss) attributable to FMC stockholders

$

267.2

$

(124.2)

Amounts attributable to FMC stockholders:

  Income (loss) from continuing operations, net of tax

$

260.7

$

44.5

  Discontinued operations, net of tax

6.5

(168.7)

  Net income (loss)

$

267.2

$

(124.2)

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

  Continuing operations

$

1.93

$

0.33

  Discontinued operations

0.05

(1.26)

  Basic earnings per common share

$

1.98

$

(0.93)

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

134.6

134.0

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

Continuing operations

$

1.91

$

0.33

  Discontinued operations

0.05

(1.25)

  Diluted earnings per common share

$

1.96

$

(0.92)

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

136.2

135.1

Other Data:

Capital additions

$

19.3

$

11.5

Depreciation and amortization expense

39.1

23.6

FMC CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO FMC STOCKHOLDERS (GAAP) TO ADJUSTED AFTER-TAX EARNINGS FROM CONTINUING OPERATIONS, ATTRIBUTABLE TO FMC STOCKHOLDERS (NON-GAAP)
(Unaudited, in millions, except per share amounts)

Three Months Ended

March 31,

2018

2017

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

$

267.2

$

(124.2)

Corporate special charges (income):

Restructuring and other charges (income) ^(a)

(77.7)

8.3

Non-operating pension and postretirement charges (income) ^(b)

0.5

(4.6)

Transaction-related charges ^(c)

52.2

9.2

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

7.3

(4.4)

Discontinued operations attributable to FMC stockholders, net of income taxes ^(e)

(6.5)

168.7

Tax adjustment ^(f)

7.7

5.4

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

$

250.7

$

58.4

Diluted earnings per common share (GAAP)

$

1.96

$

(0.92)

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

Restructuring and other charges (income)

(0.57)

0.06

Non-operating pension and postretirement charges

—

(0.04)

Transaction-related charges

0.38

0.07

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

0.06

(0.03)

Discontinued operations attributable to FMC stockholders, net of income taxes per diluted share

(0.05)

1.25

Tax adjustments per diluted share

0.06

0.04

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

$

1.84

$

0.43

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

136.2

135.1

____________________

(1)

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

(a)      

Three Months Ended March 31, 2018:

Restructuring and other charges (income) primarily consists of a gain on sale of $85.0 million from the divestment of a portion of FMC's European herbicide portfolio to Nufarm Limited. This divestiture satisfied FMC's commitment to the European Commission related to the DuPont Crop Protection Acquisition. Additionally, restructuring and other charges (income) includes charges within FMC Agricultural Solutions of $2.6 million, which includes approximately $1 million of accelerated depreciation charges related to certain fixed assets that will no longer be used when we exit our Ewing R&D facility as well as miscellaneous restructuring efforts. Additionally, we implemented a formal plan to restructure our operations at the FMC Lithium manufacturing site located in Bessemer City, North Carolina. The objective of this restructuring plan was to optimize both the assets and cost structure by reducing certain production lines at the plant which resulted in restructuring and asset disposal charges of $2.1 million.

Three Months Ended March 31, 2017:

Restructuring and other charges (income) represents $4.5 million of exit costs related to the termination of our interest in a variable interest entity that was previously consolidated and part of our FMC Agricultural Solutions segment. Additionally, restructuring and other charges (income) includes charges of continuing environmental sites treated as a Corporate charge of $2.3 million and other Corporate charges of $1.5 million.

(b)      

Our non-operating pension and postretirement costs are defined as those costs related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We exclude these non-operating pension and postretirement costs from our segments as we believe that removing them provides a better understanding of the underlying profitability of our businesses, provides increased transparency and clarity in the performance of our retirement plans and enhances period-over-period comparability. We continue to include the service cost and amortization of prior service cost in our Adjusted Earnings results noted above. We believe these elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

(c)     

Charges related to the legal and professional fees associated with acquisitions and separation activities. Amounts represent the following:

Three Months Ended March 31,

(in Millions)

2018

2017

Transaction-related charges

Legal and professional fees ⁽¹⁾

$

22.3

$

9.2

Inventory fair value amortization ⁽²⁾                                              

29.9

—

Total Transaction-related charges 

$

52.2

$

9.2

____________________

(1)

Represents transaction costs, costs for transitional employees, other acquired employees related costs, and integration-related and transactional-related legal and professional third-party fees. These charges are recorded as a component of "Selling, general and administrative expense" on the condensed consolidated statements of income (loss).

(2)

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

(d)

The income tax expense (benefit) on Corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the corporate special charge or income occurred and includes both current and deferred income tax expense (benefit) based on the nature of the non-GAAP performance measure.

(e)

Three Months Ended March 31, 2018 and 2017

Discontinued operations, net of income taxes include, in periods up to its sale (on November 1, 2017), the results of FMC Health and Nutrition as well as provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations. Discontinued operations, net of income taxes for the three months ended March 31, 2018 includes an additional gain on sale of the FMC Health and Nutrition business to DuPont of approximately $16 million as a result of the adjustment to the final working capital. During the three months ended March 31, 2017, we reclassified the FMC Health and Nutrition segment as a discontinued operation. We determined the fair value of the Omega-3 business, which was previously part of the broader FMC Health and Nutrition reporting unit, was significantly less than its carrying value. As a result, we recorded an impairment charge of approximately $185 million ($165 million, net of tax) for the three months ended March 31, 2017.

(f)

We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon the projected annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but are not limited to: income tax expenses or benefits that are not related to ongoing business operations in the current year; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets and related interim accounting impacts; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to ongoing operations thereby providing investors with useful supplemental information about FMC's operational performance.

Three Months Ended

March 31,

(in Millions)

2018

2017

Non-GAAP tax adjustments

Impacts of Tax Cuts and Jobs Act ⁽¹⁾

$

0.8

$

—

Revisions to valuation allowances of historical deferred tax assets

(1.8)

3.4

Foreign currency remeasurement and other discrete items

8.7

2.0

Total Non-GAAP tax adjustments

$

7.7

$

5.4

___________________

(1)

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act"), which, among other things, reduces the federal income tax rate from 35% to 21% effective January 1, 2018, and imposes a transition tax on deemed repatriated earnings of foreign subsidiaries which will be payable over eight years. During the three months ended March 31, 2018, we recorded an adjustment to our provisional tax expense of $0.8 million of income tax benefit pertaining to a change in the estimated impact of the remeasurement of the Company's U.S. net deferred tax assets and the realizability of the Company's U.S. state net deferred tax assets.

RECONCILIATION OF NET INCOME (LOSS) (GAAP) TO ADJUSTED EARNINGS FROM CONTINUING OPERATIONS, BEFORE INTEREST, DEPRECIATION AND AMORTIZATION, AND INCOME
TAXES (NON-GAAP)
(Unaudited, in millions)

Three Months Ended

March 31,

2018

2017

Net income (loss) (GAAP)

$

269.6

$

(123.8)

Restructuring and other charges (income)

(77.7)

8.3

Non-operating pension and postretirement charges (income)

0.5

(4.6)

Transaction-related charges

52.2

9.2

Discontinued operations, net of income taxes

(6.5)

168.8

Interest expense, net

33.9

15.7

Depreciation and amortization

39.1

23.6

Provision (benefit) for income taxes

68.7

9.4

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

$

379.8

$

106.6

___________________

(1)

Referred to as Adjusted EBITDA. Adjusted EBITDA is defined as operating profit excluding depreciation and amortization expense.

RECONCILIATION OF CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES (GAAP) TO ADJUSTED CASH FROM OPERATIONS (NON-GAAP)
(Unaudited, in millions)

Three Months Ended

March 31,

2018

2017

Cash provided (required) by operating activities (GAAP)

$

(61.7)

$

(70.0)

Transaction and integration costs

34.0

—

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

$

(27.7)

$

(70.0)

___________________

(1)

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

FMC CORPORATION
INDUSTRY SEGMENT DATA
(Unaudited, in millions)

Three Months Ended March 31,

2018

2017

Revenue

FMC Agricultural Solutions

$

1,107.9

$

530.4

FMC Lithium

102.8

65.6

Total

$

1,210.7

$

596.0

Earnings before interest, taxes and depreciation and amortization (EBITDA)

FMC Agricultural Solutions

$

356.4

$

101.8

FMC Lithium

50.3

25.8

Corporate and other

(26.9)

(21.0)

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

$

379.8

$

106.6

Depreciation and amortization

$

(39.1)

$

(23.6)

Interest expense, net

(33.9)

(15.7)

Corporate special (charges) income:

Restructuring and other (charges) income ^(a)

77.7

(8.3)

Non-operating pension and postretirement (charges) income ^(b)

(0.5)

4.6

Transaction-related charges ^(c)

(52.2)

(9.2)

(Provision) benefit for income taxes

(68.7)

(9.4)

Discontinued operations, net of income taxes ^(d)

6.5

(168.8)

Net income attributable to noncontrolling interests

(2.4)

(0.4)

Net income (loss) attributable to FMC stockholders

$

267.2

$

(124.2)

____________________

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

Three Months Ended March 31,

(in millions)

2018

2017

FMC Agricultural Solutions

$

82.4

$

(4.5)

FMC Lithium

(2.1)

—

Corporate

(2.6)

(3.8)

Restructuring and other (charges) income

$

77.7

$

(8.3)

(b)

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

(c)

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

(d)

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

FMC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)

March 31, 2018

December 31, 2017

Cash and cash equivalents

$

359.7

$

283.0

Trade receivables, net of allowance of $44.0 in 2018 and $38.7 in 2017

2,399.7

2,043.5

Inventories

1,035.2

992.5

Prepaid and other current assets

534.5

326.4

Current assets of discontinued operations held for sale

6.5

7.3

Total current assets

$

4,335.6

$

3,652.7

Property, plant and equipment, net

1,030.4

1,025.2

Goodwill

1,242.8

1,198.9

Other intangibles, net

2,805.2

2,631.8

Deferred income taxes

261.4

252.7

Other long-term assets

473.7

445.0

Total assets

$

10,149.1

$

9,206.3

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

$

328.9

$

192.6

Accounts payable, trade and other

914.1

714.2

Advanced payments from customers

191.6

380.6

Accrued and other liabilities

611.5

497.7

Accrued customer rebates

412.0

266.6

Guarantees of vendor financing

66.9

51.5

Accrued pensions and other postretirement benefits, current

5.7

5.7

Income taxes

155.1

99.2

Current liabilities of discontinued operations held for sale

0.2

1.3

Total current liabilities

$

2,686.0

$

2,209.4

Long-term debt, less current portion

2,993.2

2,993.0

Long-term liabilities

1,455.2

1,296.8

Equity

3,014.7

2,707.1

Total liabilities and equity

$

10,149.1

$

9,206.3

FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)

Three Months Ended March 31,

2018

2017

Cash provided (required) by operating activities of continuing operations

$

(61.7)

$

(70.0)

Cash provided (required) by operating activities of discontinued operations

(16.7)

35.1

Cash provided (required) by investing activities of continuing operations

60.1

(24.9)

Cash provided (required) by investing activities of discontinued operations

(15.0)

(6.2)

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

Increase (decrease) in short-term debt

$

138.0

$

120.1

Financing fees

—

(8.5)

Repayments of long-term debt

(0.6)

(0.7)

Issuances of common stock, net

3.9

9.6

Transactions with noncontrolling interests

—

(0.5)

Dividends paid

(22.3)

(22.1)

Other repurchases of common stock

(5.1)

(1.4)

Cash provided (required) by financing activities

$

113.9

$

96.5

Effect of exchange rate changes on cash

(3.9)

1.4

Increase (decrease) in cash and cash equivalents

$

76.7

$

31.9

Cash and cash equivalents, beginning of year

283.0

64.2

Cash and cash equivalents, end of period

$

359.7

$

96.1