FMC Corporation Announces Fourth Quarter and Full Year 2017 Results

FMC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In Millions, Except Per Share Data)

2017

2016

2017

2016

Revenue

$

979.6

$

688.4

$

2,878.6

$

2,538.9

Costs of sales and services

594.8

423.2

1,777.3

1,607.7

Gross margin

$

384.8

$

265.2

$

1,101.3

$

931.2

Selling, general and administrative expenses

$

231.6

$

137.9

$

618.6

$

458.5

Research and development expenses

51.1

36.5

141.5

134.5

Restructuring and other charges (income)

59.1

62.3

81.4

95.0

Total costs and expenses

$

936.6

$

659.9

$

2,618.8

$

2,295.7

Income (loss) from operations

$

43.0

$

28.5

$

259.8

$

243.2

Equity in (earnings) loss of affiliates

0.1

(0.1)

(0.1)

(0.5)

Interest expense, net

27.8

16.5

79.1

62.9

Income (loss) from continuing operations before income taxes

$

15.1

$

12.1

$

180.8

$

180.8

Provision (benefit) for income taxes

263.0

2.7

264.1

50.1

Income (loss) from continuing operations

$

(247.9)

$

9.4

$

(83.3)

$

130.7

Discontinued operations, net of income taxes

779.0

7.0

621.7

81.0

Net income (loss)

$

531.1

$

16.4

$

538.4

$

211.7

  Less: Net income attributable to noncontrolling interests

1.0

0.5

2.6

2.6

Net income (loss) attributable to FMC stockholders

$

530.1

$

15.9

$

535.8

$

209.1

Amounts attributable to FMC stockholders:

  Income (loss) from continuing operations, net of tax

$

(249.0)

$

8.9

$

(85.9)

$

128.4

  Discontinued operations, net of tax

779.1

7.0

621.7

80.7

  Net income (loss)

$

530.1

$

15.9

$

535.8

$

209.1

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

  Continuing operations

$

(1.85)

$

0.07

$

(0.64)

$

0.96

  Discontinued operations

5.79

0.05

4.63

0.60

  Basic earnings per common share

$

3.94

$

0.12

$

3.99

$

1.56

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

134.5

133.9

134.3

133.9

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

Continuing operations

$

(1.85)

$

0.07

$

(0.64)

$

0.96

  Discontinued operations

5.79

0.05

4.63

0.60

  Diluted earnings per common share

$

3.94

$

0.12

$

3.99

$

1.56

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

134.5

134.8

134.3

134.5

Other Data:

Capital additions

$

61.9

$

26.2

$

109.4

$

89.9

Depreciation and amortization expense

41.8

25.4

113.0

100.6

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)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In Millions, except per share amounts)

2017

2016

2017

2016

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

$

530.1

$

15.9

$

535.8

$

209.1

Corporate special charges (income):

Restructuring and other charges (income) ^(a)

59.1

62.3

81.4

95.0

Non-operating pension and postretirement charges ^(b)

30.5

20.9

18.2

23.4

Acquisition-related charges ^(c)

71.7

6.6

150.4

23.4

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

(37.1)

(30.2)

(67.5)

(44.9)

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

(779.1)

(7.0)

(621.7)

(80.7)

Tax adjustments ^(f)

274.5

20.2

271.7

32.4

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

$

149.7

$

88.7

$

368.3

$

257.7

Diluted earnings per common share (GAAP)

$

3.94

$

0.12

$

3.99

$

1.56

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

Restructuring and other charges (income)

0.44

0.46

0.60

0.71

Non-operating pension and postretirement charges

0.23

0.16

0.14

0.17

Acquisition-related charges

0.53

0.05

1.11

0.17

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

(0.27)

(0.23)

(0.50)

(0.33)

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

(5.79)

(0.05)

(4.63)

(0.60)

Tax adjustments per diluted share

2.02

0.15

2.00

0.24

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

$

1.10

$

0.66

$

2.71

$

1.92

Average number of shares outstanding used in diluted adjusted after-tax
earnings from continuing operations per share computations ⁽²⁾

136.2

134.8

135.7

134.5

(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.

(2)

The average number of shares outstanding used in the three and twelve months ended December 31, 2017 diluted adjusted after-tax earnings from continuing operations per share computation (Non-GAAP) include 1.7 million and 1.4 million diluted shares, respectively. The number of shares differs from the average number of shares outstanding used in diluted earnings per share computations (GAAP) as we had a net loss from continuing operations attributable to FMC stockholders.

(a) 

Three Months Ended December 31, 2017:

Restructuring and other charges (income) includes an impairment charge to write down certain indefinite-lived intangible assets of the acquired DuPont Crop Protection Business as a result of a triggering event associated with the United States' enactment of the Tax Cuts and Jobs Act which was passed in the fourth quarter. The impairment, solely due to tax reform, impacted the fair value and resulted in a charge of $42.1 million. Additionally, restructuring and other charges (income) include asset write-offs of approximately $1.7 million and $3.3 million within FMC Lithium and Corporate, respectively. Restructuring and other charges (income) also includes $8.3 million of charges for continuing environmental sites treated as a Corporate charge. Amounts also include miscellaneous other charges of $3.7 million.

Three Months Ended December 31, 2016:

Restructuring and other charges (income) includes charges of $27.6 million representing final adjustments to severance, asset write-offs, and other costs associated with the integration of Cheminova within FMC Agricultural Solutions. In the fourth quarter, we also entered into an agreement to obtain certain technology and intellectual property rights related to compounds still under development for our FMC Agricultural Solutions businesses. The $13.2 million paid to acquire these rights was expensed as in-process research and development costs. Restructuring and other charges (income) also includes $19.4 million of charges for continuing environmental sites treated as a Corporate charge. Amounts also include miscellaneous restructuring charges totaling $1.1 million and other charges of $1.0 million.

Twelve Months Ended December 31, 2017:

Restructuring and other charges (income) includes an impairment charge to write down certain indefinite-lived intangible assets of the acquired DuPont Crop Protection Business as a result of a triggering event for the United States' enactment of the Tax Cuts and Jobs Act which was passed in the fourth quarter. The impairment, solely due to tax reform, impacted the fair value and resulted in a charge of $42.1 million. Additionally, restructuring and other charges (income) includes $7.7 million of costs related to miscellaneous restructuring efforts and asset-write downs within FMC Lithium. Restructuring and other charges (income) also includes asset write-offs of approximately $2.2 million and $5.5 million within FMC Agricultural Solutions and Corporate, respectively. Restructuring and other charges (income) also includes $4.7 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 $16.6 million. Remaining restructuring and other charges (income) includes net miscellaneous charges of $2.6 million.

Twelve Months Ended December 31, 2016:

Restructuring and other charges (income) includes charges of $42.3 million representing final adjustments to severance, asset write-offs, and other costs associated with the integration of Cheminova within FMC Agricultural Solutions. Integration-related costs associated with the integration of Cheminova were completed at the end of 2016. Amount also includes other miscellaneous restructuring costs of $1.1 million. Additionally, restructuring and other charges (income) includes $36.8 million of charges for continuing environmental sites treated as Corporate charges, $13.2 million associated with a license agreement to obtain certain technology and intellectual property rights for new compounds still under development, and $4.2 million as a result of the Argentina government's action to devalue its currency. These charges were offset by other miscellaneous income of $2.6 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 expensing of the inventory fair value step-up resulting from the application of acquisition accounting, legal and professional fees and gains or losses on hedging purchase price associated with the completed acquisitions. Amounts represent the following:

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(in Millions)

2017

2016

2017

2016

Acquisition related charges

     Legal and professional fees ⁽¹⁾

$

51.5

$

6.6

$

130.2

$

23.4

     Inventory fair value amortization ⁽²⁾

20.2

—

20.2

—

Total Acquisition-related charges ⁽³⁾

$

71.7

$

6.6

$

150.4

$

23.4

(1)

Represents transaction costs, costs for transitional employees, other acquired employee related costs and integration-related legal and professional third-party fees. These charges are included in "Selling, general and administrative expenses" 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).

(3)

Acquisition-related charges for the three and twelve months ended December 31, 2017 relate to the acquisition of a significant portion of DuPont's Crop Protection business, while charges for the three and twelve months ended December 31, 2016 relate to the integration of Cheminova with FMC Agricultural Solutions, which were completed at the end of 2016.

(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 and Twelve Months Ended December 31, 2017 and 2016:

Discontinued operations, net of income taxes include, in periods up to its sale, 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. The three and twelve months ended December 31, 2017 include the divestiture gain of approximately $918 million ($727 million, net of tax), which includes $33 million ($28 million, net of tax) of divestiture related costs, associated with the sale of FMC Health and Nutrition which was completed on November 1, 2017. The twelve months ended December 31, 2017 included a $168 million ($148 million, net of tax) impairment charge related to our Omega-3 business which was sold on August 1, 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 annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to ongoing business operations in the current year; unusual or infrequently occurring items; 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 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

Twelve Months Ended

December 31,

December 31,

(in Millions)

2017

2016

2017

2016

Tax adjustments:

Impacts of Tax Cuts and Jobs Act ⁽¹⁾

$

315.9

$

—

$

315.9

$

—

Revisions to our tax liabilities due to finalization of prior year tax returns

2.7

0.7

1.9

2.9

Revisions to valuation allowances of historical deferred tax assets

(1.9)

18.5

(1.9)

18.9

Foreign currency remeasurement and other discrete items

(42.2)

1.0

(44.2)

10.6

Total tax adjustments

$

274.5

$

20.2

$

271.7

$

32.4

________________

(1)

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the Tax 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. As a result of the Tax Act, the Company has recognized provisional income
tax expense of $315.9 million, related to both the remeasurement of the Company's U.S. net deferred tax asset and the deemed
repatriation of foreign earnings.

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

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In Millions)

2017

2016

2017

2016

Net income (loss) (GAAP)

$

531.1

$

16.4

$

538.4

$

211.7

Restructuring and other charges (income)

59.1

62.3

81.4

95.0

Non-operating pension and postretirement charges

30.5

20.9

18.2

23.4

Acquisition-related charges

71.7

6.6

150.4

23.4

Discontinued operations, net of income taxes

(779.0)

(7.0)

(621.7)

(81.0)

Interest expense, net

27.8

16.5

79.1

62.9

Provision (benefit) for income taxes

263.0

2.7

264.1

50.1

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

$

204.2

$

118.4

$

509.9

$

385.5

__________________

(1)         Referred to as Adjusted Operating Profit.

RECONCILIATION OF CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES (GAAP) TO ADJUSTED CASH FROM OPERATIONS
(Unaudited)

Twelve Months Ended

December 31,

(In Millions)

2017

2016

Cash provided (required) by operating activities (GAAP)

$

314.5

$

368.9

Transaction and integration costs related to acquisitions

78.9

23.4

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

$

393.4

$

392.3

________________

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 acquisition-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)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In Millions)

2017

2016

2017

2016

Revenue

FMC Agricultural Solutions

$

866.2

$

617.8

$

2,531.2

$

2,274.8

FMC Lithium

113.4

70.6

347.4

264.1

Total

$

979.6

$

688.4

$

2,878.6

$

2,538.9

Income from continuing operations before income taxes

FMC Agricultural Solutions

$

188.5

$

127.1

$

485.6

$

399.9

FMC Lithium

44.1

21.3

126.7

70.2

Segment operating profit ^(a)

$

232.6

$

148.4

$

612.3

$

470.1

Corporate and other

(28.4)

(30.0)

(102.4)

(84.6)

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

$

204.2

$

118.4

$

509.9

$

385.5

Interest expense, net

(27.8)

(16.5)

(79.1)

(62.9)

Corporate special (charges) income:

Restructuring and other (charges) income ^(b)

(59.1)

(62.3)

(81.4)

(95.0)

Non-operating pension and postretirement charges ^(c)

(30.5)

(20.9)

(18.2)

(23.4)

Acquisition-related charges ^(d)

(71.7)

(6.6)

(150.4)

(23.4)

(Provision) benefit for income taxes

(263.0)

(2.7)

(264.1)

(50.1)

Discontinued operations, net of income taxes ^(e)

779.0

7.0

621.7

81.0

Net income (loss) attributable to noncontrolling interests

(1.0)

(0.5)

(2.6)

(2.6)

Net income (loss) attributable to FMC stockholders

$

530.1

$

15.9

$

535.8

$

209.1

_________________________

(a)            Referred to as Segment Earnings.

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

Three Months Ended December 31,

Twelve Months Ended December 31,

(In Millions)

2017

2016

2017

2016

FMC Agricultural Solutions

$

(42.9)

$

(40.8)

$

(49.9)

$

(62.4)

FMC Lithium

(5.1)

—

(7.8)

(0.6)

Corporate

(11.1)

(21.5)

(23.7)

(32.0)

                    Restructuring and other (charges) income

$

(59.1)

$

(62.3)

$

(81.4)

$

(95.0)

(c)           

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.

(d)          

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.

(e)           

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)

December 31, 2017

December 31, 2016

Cash and cash equivalents

$

283.0

$

64.2

Trade receivables, net of allowance of $38.7 in 2017 and $17.6 in 2016

2,043.5

1,692.5

Inventories

992.5

478.9

Other current assets

326.4

232.1

Current assets held for sale

7.3

381.5

Total current assets

$

3,652.7

$

2,849.2

Property, plant and equipment, net

$

1,025.2

$

538.1

Goodwill

1,198.9

498.7

Other intangibles, net

2,631.8

719.9

Deferred income taxes

252.7

242.1

Other long-term assets

445.0

455.7

Noncurrent assets held for sale

—

835.6

Total assets

$

9,206.3

$

6,139.3

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

$

192.6

$

94.2

Accounts payable, trade and other

714.2

317.4

Accrued customer rebates

266.6

246.7

Guarantees of vendor financing

51.5

104.5

Accrued pensions and other postretirement benefits, current

5.7

7.1

Other current liabilities

977.5

609.3

Current liabilities held for sale

1.3

59.0

Total current liabilities

$

2,209.4

$

1,438.2

Long-term debt, less current portion

$

2,993.0

$

1,798.8

Long-term liabilities

1,296.8

841.6

Long-term liabilities held for sale

—

67.7

Equity

2,707.1

1,993.0

Total liabilities and equity

$

9,206.3

$

6,139.3

FMC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Twelve Months Ended December 31,

(In Millions)

2017

2016

Cash provided (required) by operating activities of continuing operations

$

314.5

$

368.9

Cash provided (required) by operating activities of discontinued operations

$

21.0

$

128.9

Cash provided (required) by investing activities of continuing operations

$

(1,349.5)

$

(100.8)

Cash provided (required) by investing activities of discontinued operations

$

15.7

$

(34.4)

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

Increase (decrease) in short-term debt

(3.1)

(19.4)

Financing fees

(11.0)

(0.7)

Repayments of long-term debt

(302.3)

(242.6)

Proceeds from borrowings of long-term debt

1,598.9

2.8

Acquisition of noncontrolling interest

—

(20.0)

Transactions with noncontrolling interests

(0.5)

—

Dividends paid

(88.8)

(88.6)

Repurchases of common stock under publicly announced program

—

(11.2)

Other repurchases of common stock

(2.6)

(1.8)

Excess tax benefits from share-based compensation

—

0.4

Issuances of common stock, net

22.5

4.1

Cash provided (required) by financing activities

$

1,213.1

$

(377.0)

Effect of exchange rate changes on cash

4.0

—

Increase (decrease) in cash and cash equivalents

$

218.8

$

(14.4)

Cash and cash equivalents, beginning of year

64.2

78.6

Cash and cash equivalents, end of period

$

283.0

$

64.2

FMC CORPORATION
RECASTED - SEGMENT EARNINGS BEFORE INTEREST, TAXES, AND DEPRECIATION AND AMORTIZATION
(Unaudited)

2017

2016

(In Millions)

Q1

Q2

Q3

Q4

FY

FY

FMC Agricultural Solutions

Segment operating profit (GAAP) ⁽¹⁾

$

83.0

$

95.7

$

118.4

$

188.5

$

485.6

$

399.9

Depreciation and amortization

18.8

17.9

18.9

34.9

90.5

80.8

EBITDA (Non-GAAP)

$

101.8

$

113.6

$

137.3

$

223.4

$

576.1

$

480.7

FMC Lithium

Segment operating profit (GAAP) ⁽¹⁾

$

21.6

$

24.2

$

36.8

$

44.1

$

126.7

$

70.2

Depreciation and amortization

4.2

3.5

3.4

4.1

15.2

14.8

EBITDA (Non-GAAP)

$

25.8

$

27.7

$

40.2

$

48.2

$

141.9

$

85.0

FMC Corporate

Corporate expenses (GAAP)

$

(21.6)

$

(27.2)

$

(25.2)

$

(28.4)

$

(102.4)

$

(84.6)

Depreciation and amortization

0.7

1.0

2.9

2.7

7.3

5.0

Corporate expenses excluding depreciation
and amortization (Non-GAAP)

$

(20.9)

$

(26.2)

$

(22.3)

$

(25.7)

$

(95.1)

$

(79.6)

(1)           Referred to as Segment Earnings. See Industry Segment Data for reconciliation of our Segment Earnings to Net income (loss) attributable to FMC stockholders.