Item 1. Business
(a) General Development of Business			 Annual Report to Stockholders 				(Exhibit 13), pages 1-18,34,35
(b) Financial Information About Industry Segments 				 Annual Report to Stockholders, 				 (Exhibit 13) pages 5, 18-19, 33
(c) Narrative Description of Business	 Annual Report to Stockholders, 						 (Exhibit 13) pages 1-25,33,35, 						45-46,50-52,54-55
(d) Financial Information About 						 Annual Report to Stockholders, Foreign and Domestic Operations (Exhibit 13) page 45-46 and Export Sales
Item 2.
Item 2. Properties 						 Annual Report to Stockholders, 					(Exhibit 13) pages 15-16,54-55
Item 3.
Item 3. Legal Proceedings 						 Annual Report to Stockholders, 									 (Exhibit 13) pages 20-21,50-51
Item 4.
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, 1989, and their ages, are as follows:
Age Office; year of election; Name 3/15/94 and other information for past 5 years Robert N. Burt 					 56 Chairman of the Board and Chief 					 Executive Officer (91);President 					 (90-93); Executive Vice President 					 (88); Vice President (78); 						General Manager-Defense Systems	Group 						 (83); General Manager-Agricultural 						 Chemical Group (77)
Larry D. Brady 51 								President (93) and a	Director (89); 						 Executive Vice President (89-93) Vice 						 President-Corporate Development (88); 						 Vice President and General Manager- 						 Agricultural Chemical Group (83); 						 Manager, Citrus Machinery Division 					(81-83)
William F. Beck 55 Vice President (86) and General Manager-Chemical Products Group (86); President of FMC Europe (91); Director of Business Planning (84-86)
Jerome D. Brady 50 Vice President (92) and General Manager-Food Machinery Group (92); Vice President, Harsco Corporation (78-92)
Cheryl A. Francis 40 Treasurer (93); Adjunct Professor, University of Chicago Graduate School of Business (91-93); various financial positions with FMC (79-91); Vice President-Finance, FMC Gold Company (87-89)
W. Reginald Hall 58 Vice President (91) and General Manager-Specialty Chemicals Group (92) General Manager-Food Machinery Group (90); General Manager-Food Processing Systems (86-90)
Robert I. Harries 50 Vice President (92) and Deputy General Manager-Chemical Products Group (92)
Patrick J. Head 61							 Vice President and General Counsel (81)
Robert B. Hoffman 57 Vice President (90); International Consultant (88-90); Executive Vice President, Staley Continental (85-88); Executive Vice President, Castle & Cooke, Inc. (84-85); Vice President and Chief Financial Officer, FMC (75- 84)
Lawrence P. Holleran 63						 Vice President-Human Resources (88); Director, Human Resources (85-88); Director, Employee Relations and Management Development (77-85)
Dan W. Irwin 53						 Vice President-Technology, Manufacturing 																														and Information Services (87); Director- 																														Information resources (84-87); Director- 																														Business Planning (80-84)
William J. Kirby 56 Vice President-Administration (85); Vice President- Personnel (76-85)
Arthur D. Lyon 57 							Vice President-Finance (87); Vice President (82) and Controller (77)
James A. McClung 56 Vice President (91); Vice President- International (81-91)
Earl M. Morgan 63 Vice President (91); General Manager- Agricultural Chemical Group (90); General Manager-International Department of Agricultural Chemical Group (76-90)
Joseph Netherland 47 Vice President (87) and General Manager-Petroleum Equipment Group (86), Specialized Machinery Group (89); Manager- Wellhead Equipment Division (84); Manager-Fluid Control Division (83)
Thomas W. Rabaut 45 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) and Director of Operations for that Division (89-90)
Frank A. Riddick, III 37 				Controller (93); Treasurer (90-93); previously with Merrill Lynch (87-90) most recently as Vice President, Mergers and Acquisitions; various finance-related positions with General Motors Corporation (84-87)
William J. Wheeler 51 Vice President (91); President, FMC Asia-Pacific (91); General Manager, Phosphorus Chemical Division (86-91)
Scott H. Williamson 42				 Vice President-Corporate Development (93); Vice President, Acquisitions and Development, Itel Corporation (85-93)
Each of the Company's executive officers has been employed by the Company in a managerial capacity for the past five years except for Messrs. J. Brady, Hoffman, Riddick and Williamson and Ms. Francis. 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 were 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.
Item 5. Market for Registrant's 							Annual Report to Common Equity and Related Stockholders,													(Exhibit 13)	Stockholder Matters 																																							pages 23,25, 43-45, 59-60
Item 6.
Item 6. Selected Financial Data 						Annual Report to Stockholders, 									 Exhibit 13) pages 34-35, 48-51, 59
Item 7.
Item 7. Management's Discussion						 Annual Report to Stockholders, and Analysis of Financial 								 (Exhibit 13) pages 1-25, 28-29, 31-52, Condition and Results of 									 54-55 Operations
Item 8.
Item 8. Financial Statements and						 Annual Report to Stockholders, Supplementary Data (including (Exhibit 13) pages 26-53 all Schedules required under Item 14 of Part IV)
Item 9
Item 9 Changes in and disagree- ments with Accountants on Account- ing and Financial Disclosure 										(Not Applicable)
PART III.
Item 10
Item 10 Directors and Executive									Part 1; Proxy Statement for Officers of the Registrant 											1994 Annual Meeting of 												Stockholders pages 2-8,21;
Item 11
Item 11 Executive Compensation										Proxy Statement for 1994 											 Annual Meeting of Stockholders 											 pages 9-10, 13-20
Item 12.
Item 12. Security Ownership of									 Proxy Statement for 1994 Annual Certain Beneficial Owners 											 Meeting of Stockholders, pages	11-12 and Management
Item 13.
Item 13. Certain Relationships 										Proxy Statement for 1994 Annual and Related Transactions 											 Meeting of Stockholders, page 10
PART IV.
Item 14.
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. Exhibits: See attached exhibit index, page 6.
(b) Reports on Form 8-K
1. Report filed on December 10, 1993, regarding restructuring and other charges including writedown of carrying value of certain assets.
(c) Exhibits
See Index of Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 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)
Arthur D. Lyons By_________________ Arthur D. Lyons Vice President-Finance
Date: March 28, 1994
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 Arthur D. Lyons Vice President-Finance and 					 Principal Financial Officer Arthur D. Lyons
Frank A. Riddick 					 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 Paul L. Davies, Jr. 						Director Jean A. Francois-Poncet Director Robert H. Malott 						 Director Edward C. Meyer 								Director James R. Thompson 						 Director Clayton Yeutter 						 Director
By: Robert L. Day Robert L. Day
																																																					Attorney-in-fact
		 March 28, 1994DOCUMENT HEADER DOCUMENT DESCRIPTION EXHIBIT INDEX DOCUMENT TYPE 2 COUNT 3
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description 										 Page No. This 10-K 										 This 10-K
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). N/A
3.2 Amendment to Restated Certificate of Incorporation filed on April 30, 1987 (incorporated by reference from Exhibit 3.2 to the Form SE filed on March 25, 1993).													 N/A
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).																																			N/A
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).																																										N/A
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 unconsolidated financial statements are required to be filed.																 N/A
4.2 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).												 N/A
4.3 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).											 N/A
4.4 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) 												 N/A
4.5 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).													 N/A
4.6 Management Services Agreement, dated as of January 1, 1994, by and between FMC Corporation and United Defense, L.P.* (incorporated by reference from Exhibit 4.5 to the Form 8-K filed on February 14, 1994).		 N/A
*The Registrant has omitted the schedules and certain exhibits to the Participation Agreement, the Partnership Agreement and the Management Services Agreement and agrees to furnish supplementally a copy of such schedules and exhibits to the Commission upon request.
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description 							 	 Page No. This 10-K 								 This 10-K
4.7 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).																																						N/A
10.1 Directors' Retirement Plan (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 27, 1992).											 N/A
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).												 N/A
10.3 FMC 1990 Incentive Share Plan (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 26, 1991). 												 N/A
10.4 FMC Corporation Salaried Employees' Retirement Plan, as revised on January 1, 1985 (incorporated by reference from Exhibit 10.2 to the Form SE filed on March 27, 1992).												 N/A
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).																		N/A
10.6 FMC Salaried Employees' Equivalent Retirement Plan (incorporated by reference from Exhibit 10.4 to the Form SE filed on March 27, 1992).													N/A
10.7 FMC Deferred Compensation Equivalent Retirement and Thrift Plan (incorporated by reference from Exhibit 10.5 to the Form SE filed on March 27, 1992).		 N/A
10.8 FMC Management Bonus Plan (incorporated by reference from Exhibit 10.6 to the Form SE filed on March 27, 1992).																																							N/A
10.9 FMC Corporation Amended and Restated Executive Severance Plan, (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 28, 1990).					N/A
10.10 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). 																																				N/A
10.11 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).																																							N/A
INDEX OF EXHIBITS FILED WITH OR INCORPORATED BY REFERENCE INTO FORM 10-K OF FMC CORPORATION FOR YEAR ENDED DECEMBER 31, 1993
Exhibit No. Exhibit Description 						 	Page No. This 10-K 								 This 10-K
10.12 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).																																																		N/A
10.13 Credit Agreement dated as of August 21, 1992, among the Company, the Lenders listed therein and Morgan Guaranty Trust Company of New York as Agent (incorporated by reference from Exhibit 10.1 to the Form SE filed on March 25, 1993).																			N/A
10.14 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).																																						N/A
10.15 Amended and Restated FMC Deferred Stock Plan for Non-Employee Directors (incorporated by reference from Exhibit 10.2 to the Form SE filed on March 25, 1993).																																									N/A
10.16 Consulting Agreement dated as of September 1, 1990 between the Company and Edward C. Meyer.																		-
13 Annual Report of FMC Corporation for the year ended December 31, 1993.																																		1
22 List of Significant Subsidiaries of Registrant.										56
24 Consent of Auditors.																																					57
25 Powers of Attorney. 							 58-59 DOCUMENT HEADER DOCUMENT DESCRIPTION EXHIBITS DOCUMENT TYPE 2 COUNT 59 EXHIBIT 13 MESSAGE TO SHAREHOLDERS FMC's financial results for 1993 were disappointing. Overcapacity in key chemical markets and poor economic conditions reduced operating income to $203 million from $244 million. In addition, we took a $123 million charge to cover restructuring costs and asset write-downs. Cash flow, however, remained strong as we reduced debt to $832 million by year-end 1993 from $907 million at year-end 1992. This performance, coupled with the decline of the defense market, continued weak economic conditions in Europe, and overcapacity in our key industrial chemical markets, prompts questions about how FMC will increase long-term value for our shareholders. That's what our shareholders should be and are asking me. I personally am confident that we can and will continue our tradition of providing superior shareholder returns. Even more important, the FMC management team is equally confident. Our conviction is based on the fundamental strengths and future strategies of our company, specifically:(1) The majority of our businesses have strong positions in attractive markets and are run by a superior management team with a solid track record of running our businesses well.(2) We have earned high returns and generated excellent cash flow through the economic cycles of the markets in which we operate.(3) We have a long-term strategy to increase FMC's historic growth rates by making investments that will increase growth in our major markets at returns above the cost of capital. And it's this combination of management strength, ability to earn high returns and generate strong cash flow, and commitment to our long-term growth strategy that will allow us to continue and strengthen FMC s tradition of consistently increasing shareholder value. Our management strength and our dedication to long-term strategies based on growing the company were seriously tested by business conditions we faced in 1993 and will face again in 1994. Two of our highest return businesses, defense and gold, are shrinking. Our Performance Chemicals businesses continue to perform well, with solid growth prospects, but the Industrial Chemical businesses while fundamentally strong have been hit by industry overcapacity and a weak worldwide economy. Our Energy and Transportation Equipment businesses are growing worldwide, despite the dip in petroleum prices, but the continuing slump in Europe, together with the collapse of our markets in the former Soviet Union, has hurt our food machinery businesses. To address these challenges, we must first and foremost remain dedicated to running our businesses superbly. Our approach is two-pronged paring costs and investing in solid growth opportunities. Given difficult business conditions, our lack of sales growth in constant dollars, and the need to de-layer our organization and streamline our systems to support our growth initiatives, we have initiated a thorough review of our processes that will significantly reduce overhead throughout the company. A significant portion of our $123 million write- off will cover reductions in functional staffs throughout the company, as well as downsizing and consolidating facilities. We realize that cost-cutting and lean management alone won't deliver maximum value to our shareholders, but these approaches remain an important part of running our businesses superbly. Yet even as we reduce spending at some operations, we are determined to maintain and in some cases increase the spending needed to achieve our long-term growth goals. As we pursue these dual objectives of paring costs and growing the company, we are focusing on five key strategies. These strategies are outlined briefly below and will be reviewed in more detail throughout this report.STRATEGY: CONTINUING TO RUN OUR BUSINESSES SUPERBLY.We are determined to preserve the strengths that have brought us to where we are: demanding strong operating performance, running our businesses for cash flow, rigorously analyzing investment decisions and accurately measuring our performance. And as we implement our growth strategy, we will make investments that generate returns above our cost of capital. Meeting these standards, we believe, is the way to increase shareholder value. Our new partnership with Harsco's BMY division, for example, will combine FMC's research and engineering expertise with Harsco's low-cost, flexible manufacturing capabilities, positioning us to emerge as a profitable survivor in the defense marketplace making good returns in the lean years that lie ahead for the defense industry. STRATEGY: DEVELOPING NEW PRODUCTS AND MARKETS. FMC's growth initiatives will build on a strong technological base. Our agricultural chemical researchers, for example, are aggressively developing several exciting
new compounds, and we are looking for ways to expand our profitable food ingredients and bioscience businesses. Even as we restructure our food machinery businesses, we are investing more aggressively in research and development. Our subsea petroleum equipment continues to win technical kudos and new customers. STRATEGY: GLOBALIZING OUR BUSINESSES. Globalization means thinking globally about strategy, markets, competitors, product sourcing, components yet operating locally with a strong awareness of individual customer and market needs. That's nothing new. It's the standard definition of globalization, which is not so much an operating strategy as a state of mind. Last year I described the regional organizations we had created to achieve critical mass in key markets, identify more global growth opportunities and promote this global state of mind throughout the company. While these organizations are still moving up the steep part of the learning curve, they've already helped us generate new opportunities and run our businesses better. STRATEGY: ACQUIRING BUSINESSES AND TECHNOLOGIES IN MARKETS WE UNDERSTAND.
Our empirical analyses of successful industrial products companies and we define success as generating share] holder returns in the top quartile of the Standard & Poor's 400 showed that almost all these companies increased value by generating both strong returns and growth. There was only one surprise only about one- quarter of them grew without acquisitions and for at least half of these premier companies, acquisitions were the primary engine of growth. We followed up on this finding and reconfirmed that most acquisitions did not earn an adequate return on investment. But we also learned that the odds of success were dramatically improved when companies pursued acquisitions of less than 10 percent of their capital employed that were related to their core businesses. As a result, we are primarily looking for smaller acquisitions investments up to $200 million that are natural extensions of our businesses in markets that we already serve and technologies that we understand. We will systematically pursue these acquisitions aggressively, but within our culture of rigorously analyzing opportunities to determine if they meet our return standards. The three acquisitions that we have made in the past two years fit our criteria. Ciba-Geigy's global flame retardant business, combined with our domestic operations, gave us a 40 percent market share world wide. Our two energy industry-related acquisitions better position us to serve the oilfield of the future. Kongsberg's subsea control and engineering systems gave us the capability to provide our worldwide petroleum customers with a total subsea engineering system. SOFEC's single-point mooring system brought us a promising oil field technology that we have the resources, expertise and market presence to turn into a major business. STRATEGY: GETTING, DEVELOPING AND KEEPING MORE THAN OUR FAIR SHARE OF THE BEST PEOPLE. If we achieve this goal, the rest will be relatively easy because it is the people of FMC who will spark innovation, identify growth opportunities and generate exciting new products. We are especially committed to valuing, and leveraging, the diversity of our worldwide work force. A global growth strategy demands that we generate new ideas and deepen our understanding of different cultures. We also need to create a workplace where people can develop their capabilities and know they have contributed to achieving our goals. 1993 RESULTS. Now to the specifics of 1993. Income from continuing operations was $164 million before restructuring and other charges, or $4.45 per share, compared with $193 million, or $5.23 per share, in 1992. Sales slipped 6 percent to $3.8 billion for the year. Performance Chemicals posted another year of record sales and profits, and Defense Systems profits remained strong due primarily to favorable cost performance. Weak worldwide economic conditions and overcapacity in some key markets affected our Industrial Chemicals businesses, while significantly weakened markets for several food machinery businesses depressed Machinery and Equipment results. Operating results are fully described in the operating review section. In December 1993, we recorded an after-tax special charge of $123 million, or $3.34 per share, related to restructuring costs and asset write-downs. After the effects of the restructuring and other charges, income from continuing operations was $41 million, or $1.11 per share, in 1993. After extraordinary charges in 1993 and 1992 related to debt refinancing, a
$73 million after-tax charge in 1992 related to previously discontinued operations, as well as a $184 million charge in 1992 for adopting Statement of Financial Accounting Standards No. 106 (Postretirement Benefits Other than Pensions), net income in 1993 was $36 million, or $0.98 per share, compared with a net loss in 1992 of $76 million, or $2.06 per share. Strong cash flow in 1993 enabled us to fund the acquisitions of Kongsberg Offshore and SOFEC, invest in capital assets of $215 million, invest $149 million in research and development projects, and reduce debt by $75 million.
MANAGEMENT CHANGES In 1993, our board elected Larry Brady president of the corporation. (I had previously held both this position and the chairmanship, with Larry serving as executive vice president.) This promotion confirmed Larry's leadership role in the company for the past two years. Larry's experience, enthusiasm, creativity and proven ability to get the job done are a big part of why I think we will perform as well in the 1990s as we did in the preceding decade. We were also delighted to welcome Cheryl Francis back to FMC from the University of Chicago Business School, where she had been an adjunct professor. Cheryl was elected treasurer, while former treasurer Frank Riddick was named controller. Scott Williamson, our new vice president corporate development, joined FMC from Itel Corporation, where he had been vice president acquisition and development, since 1986. We are extremely pleased to welcome Dr. Patricia Buffler to our board of directors. As the dean of the School of Public Health, University of California at Berkeley, and professor of public health and epidemiology, Pat brings us expertise that will be particularly helpful in our Agricultural Chemical and other chemical businesses, as well as in ongoing efforts in our environment, health and safety programs. Bill Boyd is retiring from our board at our 1994 annual meeting. Bill has been an enormous help in providing practical insights and direction to our strategic and global development efforts. We will miss his operations know-how and his wise counsel. OUTLOOK I don't want to underestimate the short-term challenges or the difficulty of keeping the balance between cutting costs and investing in future growth. But I believe and our management team believes that we have charted a solid course for FMC's future. We are building on our strengths, and supplementing those strengths with more growth initiatives in each of our businesses. These new initiatives will demand new resources and some trade-offs are inevitable. On the other hand, I think FMC's management team is especially well-equipped to make these decisions. We know how to make decisions that are rooted in careful financial analysis, not wishful thinking. We know how to run our businesses for solid cash flow. We have strong positions in attractive markets. We also remain committed to protecting our environment, being good citizens in our plant communities and becoming our customers' most valued supplier. And most important, we have a company full of terrific, dedicated people who are committed to achieving our ambitious goal of becoming the company we want to be by the year 2000: a growing, high- performing company that has substantially increased sales while continuing to earn returns above the cost of capital.
Robert N. Burt Chairman of the Board and Chief Executive Officer February 25, 1994
REVIEW OF OPERATIONS Last year, the weak economy in certain key markets caught up to FMC. After performing well during the U.S. business downturn from 1990 to 1992, our sales and earnings declined in 1993 as market conditions worsened across a number of our industrial chemical and machinery lines. Furthermore, our Defense Systems business began to feel the effects of diminishing defense budgets, as anticipated, and we have not yet found the reserves to replace the sliding production for our Precious Metals business. In 1993, FMC's sales were down 6 percent to $3.8 billion, and income from continuing operations before taxes and restructuring and other charges decreased to $210.1 million. We recorded restructuring and other charges of $172.3 million after minority interest to cover costs
related to restructuring our Machinery and Equipment and Chemicals operations and support staffs companywide, as well as the write-down of assets in our Precious Metals segment. This restructuring program will reduce expense levels in those operations where we continue to face difficult market conditions without sacrificing critical expenditures necessary for our long-term growth. The high point of our business last year was our Performance Chemicals segment, which contributed higher sales and profits. Our Agricultural Chemical business produced another year of record results. Markets for our Food Ingredients, Pharmaceutical and BioProducts businesses continue to expand, and our performance was strong. With a full year of operations, our new Process Additives business made a solid contribution to sales and earnings. Our Industrial Chemicals businesses did not fare well in 1993. Weak economic conditions and overcapacity in soda ash, phosphorus and hydrogen peroxide markets depressed demand and kept prices low. The cycle shows no signs of reversing until 1995, and in the interim, we are stepping up our efforts to reduce operating costs. The worldwide economic slump also depressed results for our Machinery and Equipment businesses. Continued weak markets in Europe and the United States, as well as political and economic instability in the former Soviet republics led to significantly decreased sales and earnings for our Food Machinery lines. Energy Equipment posted higher sales, but falling oil prices pressured margins. We continued to downsize our Defense Systems business in line with shrinking defense budgets in this post-Cold War world. Segment sales did decline in 1993, but better cost performance resulted in earnings that remained nearly even with the previous years. Finally, lower sales and earnings for Precious Metals reflected the closing of our Paradise Peak gold and silver mine in Nevada. Our challenge is to replace depleted reserves. To meet that challenge, we are refocusing our exploration on higher potential areas around the globe. Last year, we continued to make strategic moves necessary for a healthy future. Anticipating our global energy customers' needs, we made two acquisitions that will allow us to provide high-tech, turnkey services. And to secure our role in the changing defense industry, we concluded the combination of our defense business with Harsco Corporation's BMY Combat Systems Division. Our newly formed company, United Defense, L.P., will be a stronger, more diversified contender in the shrinking defense industry. In the midst of major changes in our markets and our operations, we stayed on course with one of our basic principles: assuring the health and safety of our employees and customers, and protecting the environment in the areas where we operate. Once again, in keeping with the chemical industrys Responsible Care codes of management practice, our safety and environmental programs spanned the range of our operations from enhanced environmental controls in manufacturing to comprehensive product stewardship campaigns. In one of our most unique outreach efforts to date, our agricultural chemicals business rolled out a complete product safety program expressly for our customers in developing countries in tandem with rolling out a new product. As we plan for the future, we are working hard to develop the people who will be leading our efforts. We are encouraging the development of a talented and diverse work force, and we are broadening our global perspective. Attracting and keeping the best people in business today is a critical precursor to reach our goals for the end of this decade and beyond.
LARRY D. BRADY PRESIDENT
INDUSTRY SEGMENT DATA (In millions) Year ended December 31 	 1993 1992 1991 		 1990 			 1989 SALES* Industrial Chemicals		 			$ 979.5	$1,045.2 $1,035.4 $1,029.6$ 975.9 Performance Chemicals				 	 857.9 	 790.1 648.7 594.4 565.6 Precious Metals 					 125.0 	 170.6 157.5 187.7 190.2 Defense Systems 					 950.2	 1,111.8 1,171.6 1,067.2 900.3 Machinery and Equipment 					870.9 	 876.7 891.5 845.5 783.0 Eliminations 					 (29.6) (20.7) (5.3)	 (2.2) (0.5) Total 					 $3,753.9	$3,973.7 $3,899.4 $3,722.2	$3,414.5 INCOME BEFORE INCOME TAXES Industrial Chemicals					 $ 64.3		$ 91.9 $ 102.1 $ 106.9	$ 137.7 Performance Chemicals 					 132.9		 121.3 101.1 84.8 88.0 Precious Metals(1) 					 9.7 		 36.4 28.7 81.3 100.9 Defense Systems 					 161.7 		 167.2 160.2 96.8 47.3 Machinery and Equipment 					 6.7		 32.1 46.2 52.0 28.3 Operating profit 					375.3 		448.9 438.3 421.8 402.2 Restructuring and other charges(2)(3) 					 (172.3) 		 - - - - Net interest expense 					 (62.6) 		 (82.7) (107.4) (128.1) (133.7) Corporate and other(3) 					 (112.8)		 (115.9) (92.6) (101.8) (86.2) Other income and (expense), net(3) 					 10.2 		 29.3 17.6 19.5 36.0 Total 					$ 37.8		$ 279.6 $ 255.9 $ 211.4	$ 218.3
IDENTIFIABLE ASSETS Industrial Chemicals 						 $ 945.4	$ 988.0 $1,032.7 $1,048.3	$ 931.5 Performance Chemicals 						 576.2 	 546.4 421.8 420.9 	 397.4 Precious Metals 						 64.8 	 131.8 145.1 157.4 	 99.3 Defense Systems 						 269.0 	 277.7 367.6 444.7 	 502.9 Machinery and Equipment					 522.9	 473.0 	 503.3 495.2 	 459.3 Subtotal 						 2,378.3	 2,416.9 2,470.5 2,566.5	 2,390.4
Corporate and other 						 434.8 	 409.7 345.1 392.7 	 428.6
Total 						 $2,813.1	$2,826.6 $2,815.6 $2,959.2	$2,819.0
(1) Includes 100 percent of FMC Gold company's income of $9.0 million before income taxes and restructuring and other charges in 1993, $16.2 million in 1992, $9.2 million in 1991, $49.0 million in 1990 and $60.7 million in 1989, and the effects of the FMC Corporation hedging program. Minority shareholder interests are included in Corporate and other, except the portion related to 1993 restructuring and other charges. See (2) below.
(2) Restructuring and other charges are described in Note 2 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) See Financial Review for discussion of these items.
* Certain 1992 amounts have been reclassified to conform with the current year's presentation. Industry segment mix has not changed between years.
RETURN ON SALES RETURN ON ASSETS 24% 40%
18% 14.1 30% 10.4 12% 8.8 9.9 20% 10.8 15.5 9.8 6% 6.6 10% 9.1 6.7 0% 0% 93 92 91 90 89 93 92 91 90 89
INDUSTRIAL CHEMICALS FMC's Industrial Chemicals segment, producer of soda ash, phosphates, hydrogen peroxide, lithium and related chemicals, faced another difficult year. Prolonged poor global markets for chemicals and overcapacity situations in some of our major chemical lines continued to depress demand and prices. Our sales declined 6 percent to $979 million, and our profits declined to $64 million (before restructuring and other charges of $30 million).
Alkali Chemicals sales and profits were down in 1993 as overcapacity persisted worldwide and prices remained under pressure.
Increased production worldwide and reduced pricing of caustic soda, a substitute product for soda ash, has caused some customers to convert to caustic soda in the last half of the year. In Europe, a strengthening U.S. dollar against European currencies made it more difficult for U.S. producers to compete. To combat market pressures, FMC concentrated on cost improvements. We have streamlined our work force and operations, and temporarily stopped production of caustic soda until pricing improves. We'll continue to reduce our costs and focus on manufacturing improvements as this down cycle continues in 1994. Capacity utilization and industry pricing should increase in 1995. Our alkali lines remain a sound, attractive business for the long term. Phosphorus Chemicals sales and profits were also down last year as U.S. manufacturers of home laundry detergents rapidly phased down their use of phosphates. In an effort to reduce costs last year, we closed our phosphate production facility in Newark, Calif., and idled one of four phosphorus furnaces at our Pocatello, Idaho, facility for a portion of the year. Sales were almost even, but earnings were down for Peroxygen Chemicals. Overcapacity was an issue in the U.S. market, contributing to soft prices in spite of double-digit growth. In 1993 we worked closely with our customers on new hydrogen peroxide applications, including recycling processes for the pulp and paper industry and Caro's Acid for cyanide detoxification in the mining industry. Volume growth is projected to continue in North America and Europe for the coming years. In anticipation of the expanding hydrogen peroxide market in northern and central Europe, in 1993 we announced that FMC Foret, our European industrial chemicals operation, will open a new hydrogen peroxide facility in late 1995 in Delfzijl, an industrial port city in the Netherlands. The Delfzijl plant will augment FMC Foret's existing hydrogen peroxide plant in La Zaida, Spain, where a new cogeneration facility started up to assure a substantial reduction in energy costs. In addition to hydrogen peroxide, FMC Foret is a producer of phosphates, perborates, zeolites, silicates, sodium sulfate and sulphur derivatives for a wide range of industries, including detergents, pulp and paper and textiles. Overall, FMC Foret's sales were down in 1993 due to the effects of currency translations and general weakness in Europe, but profits were even with last year through significant cost-control efforts. In a major cost-reduction effort for our phosphate business, we closed the sulfuric acid plant at Palos, Spain, based on a favorable supply contract with a neighboring copper smelter. Meanwhile, our plant to produce zeolites, a builder used in detergents, was in its first full year of operation and met expectations for 1993. Sales and profits declined for FMC's Lithium business, reflecting increased spending on resource exploration as well as weak markets worldwide, which had an adverse effect on the lithium industry and FMC's position. Demand fell in one of lithium's key markets, aluminum processing. North American and European aluminum producers, experiencing keen competition from increased exports by Russian producers,
reduced output and cut purchases of our product. Our specialized lithium products for pharmaceutical, agrochemical, polymer synthesis and energy markets performed better in 1993. We expanded our capability and flexibility to produce organolithium for pharmaceutical applications and polymerization at our two facilities in Bessemer City, N.C., and Bromborough, United Kingdom. We also expanded our research and development capabilities last year to develop new, customer-focused applications for our lithium products. To assure a supply of low-cost lithium reserves for future production, we have been actively exploring potential opportunities in South America. We're particularly encouraged by our work in Argentina, and we're developing a proprietary technology that could cut our production costs significantly. Prospects for FMC's Industrial Chemicals segment remain unchanged for 1994. The ongoing recession in Europe and continuing overcapacity in some of our product lines will continue to depress sales. We have weathered similar down cycles of the industrial chemicals industry in the past, and we see our businesses as solid performers for the long term. We are emphasizing cost reduction efforts to maintain profitability until markets improve.
PERFORMANCE CHEMICALS Performance Chemicals continued to produce strong results throughout 1993. Sales were up 9 percent to $858 million, and profits increased 10 percent to $133 million (before restructuring and other charges of $3 million). A wide range of products including agricultural chemicals, pest control chemicals, food and pharmaceutical ingredients, flame retardants and water treatment chemicals contributed to the positive results. Agricultural Chemical posted another year of record results. Sales increased in 1993, and profits remained strong even as FMC substantially increased research and development spending to focus on the next generation of herbicides to be marketed later this decade. While the continued recession in Europe created a difficult market for agricultural chemicals, sales were strong in the United States and Latin America. In the United States, sales were brisk for flowable Furadan insecticide/nematicide, Command herbicide on cotton and new Fury pyrethroid on cotton.
RETURN ON SALES RETURN ON ASSETS
24% 40%
18% 30% 15.5 15.4 15.6 15.6 23.7 25.0 24.0 20.7 22.3 12% 14.3 20%
6% 10%
0% 0% 93 92 91 90 89 93 92 91 90 89
Latin America showed major sales increases in 1993 as we expanded the application of Command/Gamit herbicide to rice and sugarcane in Brazil and the application of Rugby nematicide on bananas throughout the Caribbean region. Meanwhile, our specialty, or non-crop, chemical business continued to grow and produce attractive returns. In 1993, we began an aggressive international sales effort for our key specialty product, Dragnet termiticide.
In January 1994, our global reach expanded as we finalized a joint venture in Indonesia, with FMC as the 51-percent owner, to formulate and distribute agricultural chemicals.
Our research and development efforts in 1993 continued to focus on herbicides and insecticides, and by 1997-1998, we're anticipating the introduction of several promising new herbicide products. Our research budget for 1994 will increase to reflect the development investment needed to commercialize these products.
Continuing a trend over several years, FMC's Food Ingredients, Pharmaceutical and BioProducts businesses again posted strong sales and profits in 1993. FMC's Avicel cellulose gel continues to be one of the world's leading fat-replacement products, and we remain the world's largest and most experienced producer of carrageenan products. In the pharmaceutical arena, we are the market leader in supplying tablet binders and other inactive ingredients for pharmaceutical processing. Our BioProducts business now a separate business
unit is a leading supplier of specialty chemicals used in life science research and development.
As consumer demand for low-fat and non-fat food products continued to rise, our Food Ingredients business produced higher sales and profits in 1993. Avicel sales were strong throughout North America and, despite a highly competitive market for carrageenan, sales improved in North America and Asia-Pacific. Regional recessionary problems contributed to slightly lower sales and earnings in Europe and Latin America.
To enhance our ability to solve our customers' problems and meet their applications needs, last year we opened a new food ingredients lab at our Research and Development Center in Princeton, N.J., and increased staffing in R&D and technical sales support. In 1994, we anticipate opening new technical applications labs in Latin America and the Asia- Pacific region to concentrate on developing regional applications for existing as well as new products.
In the pharmaceutical sector, FMC realigned its Pharmaceutical and BioProducts businesses an action that will help FMC move from its position as a leading worldwide supplier of specialty excipients to a broader, more strategic role as a provider of value-added technologies and services to our pharmaceutical customers. As these customers undergo profound changes in their industry and markets, FMC will be focusing on providing them with innovations for cost reduction, product design and rapid commercialization.
In 1993, we further strengthened our leadership position in core specialty excipients. Despite a major slowdown in Europe, where a weak economy and health care reform tempered sales to the pharmaceutical industry, FMC continued to increase our market share and strengthen our financial performance. Last year we introduced a new product, AviSphere, for time-release applications, launched a new line of specialty excipients and entered an agreement to apply our advanced technologies to develop products for a leading pharmaceutical maker. BioProducts also contributed higher sales and profits in 1993. We succeeded in extending our reach to key segments of the life science market by improving the performance of our line of agarose products seaweed-derived gelling polymers that are indispensable in DNA research and protein analysis and introducing several new products for mapping genes and conducting DNA separations. The market for BioProducts is growing rapidly. We plan to introduce new products in 1994, and we will continue our R&D investments to meet the higher demand for DNA research reagents. Finally, in a complete year of combined operations, our new Process Additives business contributed strong sales and earnings despite a weak European economy and marketplace shifts in Eastern Europe. Process Additives combines our original flame retardants business with the flame retardants and water treatment businesses we acquired from Ciba-Geigy in 1992. The synergies of these operations have boosted FMC's market position worldwide. Our capabilities include more extensive customer sales efforts and technical service, expanded product offerings, enhanced research and development, and improved worldwide sourcing. Last year, we introduced a unique flame retardant, Reoflam PB-460, the only product on the market to combine bromine and phosphorus in the same molecule for superior flame suppression. The product is gaining acceptance worldwide and will have a positive impact on 1994 sales. Our water additives business performed extremely well in 1993, and we expect to see significant future growth. Last year we introduced new products for water desalination that will serve our customers in arid regions and other areas that need quality water. Performance Chemicals should continue at this peak performance throughout 1994. For our agricultural chemical business, we expect continued success in the United States and Latin America, as well as increased sales throughout Asia with the start-up of our Indonesian joint venture. Even with the unstable economic conditions in the former Soviet states, our opportunities for crop protection product sales should continue to expand in that area. Markets for specialty food ingredients and pharmaceutical products continue to grow, and we're encouraged by the increasing demand for our
DNA research-related BioProducts. Our Process Additives product lines will continue to see significant growth with new product development and expanding market presence.
DEFENSE SYSTEMS Despite shrinking defense budgets worldwide, FMC's Defense Systems segment performed better than expected in 1993. Sales decreased to $950 million and, given improved cost performance, earnings of $162 million remained relatively even with 1992 results.
We completed the transaction to combine our defense business with Harsco Corporation's BMY Combat Systems Division. The BMY operation, a producer of tracked vehicles, is a strong strategic fit with FMC's business. By broadening FMC's product line and adding resources and capabilities, the new, jointly owned partnership, United Defense, L.P., will create the most diversified, low-cost company in the combat vehicle industry. FMC has a 60 percent interest and is responsible for managing the operation.
Last year, sales and profits were down for our Ground Systems business. The Bradley Fighting Vehicle continued as the major product for this business, even as we reduced production rates in line with lower demand to 1.4 vehicles per day in the second quarter from 2.6 vehicles previously. Last year, Ground Systems produced 293 Bradleys for the U.S. Army and 88 Bradleys for Saudi Arabia. We also produce Bradley-derived carriers for the Multiple Launch Rocket System, and last year we delivered 68 to the U.S. Army and five to Japan.
In the third quarter, the U.S. Army exercised an option to purchase an additional 54 Bradleys. This $39 million contract continues production through February 1995. FMC won a two-year, $46 million contract from the Army to provide technical support to its existing fleet of Bradleys. FMC also will upgrade six older-model Bradleys, setting the stage to upgrade as many as 100 vehicles later in 1994.
RETURN ON SALES RETURN ON ASSETS
24% 60% 59.2 17.0 51.8 18% 15.0 45% 13.7 39.4 12% 9.1 30% 20.4 6% 5.3 15%
9.5 0% 0% 93 92 91 90 89 93 92 91 90 89
Meanwhile, Ground Systems is meeting the Army's aggressive schedule for the Armored Gun System, a new, light, deployable combat vehicle. Last year, Ground Systems delivered the ballistic systems structure, autoloader and armor test samples; in 1994 we will deliver the first six prototype vehicles.
Last year, Ground Systems won a $317 million contract to upgrade the Paladin self-propelled howitzer. United Defense will produce 630 units of a technologically advanced model over four years, and the Army could exercise another $70 million in options.
United Defense research in ground systems is focused on enhancing mobility and survivability. Our work continues on the next generation of the Bradley, the A3, which will continue the Army's cap]ability to dominate the land battle. We've also completed the first phase of work on the Composite Armored Vehicle Program and won a $54 million follow-on contract to test the viability of composite material technology.
FMC's Armament Systems business, formerly Naval Systems, recorded higher sales and profits in 1993, and continued to broaden its scope beyond its established customer base of U.S. and international navies
providing value-added engineering work across a number of defense systems lines and applying its expertise in armament systems on several ground systems contracts.
Armament Systems had a busy production year in 1993. We delivered 57 Vertical Launching Systems modules, 206 VLS canisters and six Mk 45 gun systems to the U.S. Navy, as well as two Mk13 Pointing Launching Systems to Taiwan, two Mk 45 gun systems to Turkey and one Mk 45 gun system to Australia.
Armament Systems also played a crucial role in the development of the Advanced Technology Demonstrator, a component of FMC's $67 million sole-source contract for the Advanced Field Artillery System, a self-propelled howitzer. Armament Systems will deliver the demonstrator in 1994, and we believe we're well positioned to win a contract for the next phase of the program.
Sales and profits were down for our Steel Products business. Last year, the business won a $23 million contract from the U.S. Army to overhaul and convert 471 M113A2 armored personnel carriers to the newer A3 configuration. This business continues to pursue commercial opportunities outside the defense arena and is targeting the mining equipment market, among others.
While international defense sales were down for 1993, profits were up, and new international business looks promising. We recently opened an office in Taipei, Taiwan, where we have strong potential to develop new business. With a new order from Kuwait, we're back in business with the M113 line of armored personnel carriers. We will also provide Singapore and Pakistan with kits to upgrade their M113 fleet, and we will deliver an additional 36 MLRS carriers to Japan over the next four years.
FMC's Defense Systems continued to downsize the business in tandem with diminishing opportunities. At the end of 1993, Ground Systems' work force totaled 2,500, down from 4,200 in 1990. Armament Systems' force was down to 1,800 by the end of 1993, from 2,500 in 1990. At the end of 1993, FMC employed a total of 4,900 employees in its Defense Systems businesses.
Our defense operations will remain a profitable but significantly smaller contributor to FMC in the coming years. In 1994, we'll direct much of our attention to the combination of FMC's and BMY's businesses. We're excited about the enhanced capabilities, lower cost structure and more competitive market position this partnership will enable us to achieve. And we're confident that the advanced research work we're currently conducting on several key defense projects will enhance our ability to win follow-on contracts.
PRECIOUS METALS As expected, performance declined for our Precious Metals segment, which includes FMC Gold Company, our 79-percent-owned precious metals subsidiary. Sales diminished by nearly one-third to $125 million, and earnings declined substantially to $10 million (before writedowns and other charges of $61 million) due to decreased production and continuing soft gold prices.
The closing of our 100-percent-owned Paradise Peak mine in western Nevada last year had a significant impact on production, sales and earnings. Reserves of mill-grade ore were depleted by mid-year, and remaining reserves were exhausted at the end of the year. In 1992, Paradise Peak had accounted for 60 percent of FMC Gold's total production.
In 1993, FMC Gold's total gold production was down 23 percent to 321,000 ounces. Total silver production, at 863,000 ounces, was less than half the previous year's production.
Production was up at Jerritt Canyon, also in Nevada, with improving ore grades and recovery rates. Production was down at our Royal Mountain King mine in California, and the operation will close by mid-1994. We continued to delay development of our Beartrack property in Idaho because of low gold prices. We are also awaiting the results of government environmental studies.
As several of our operations shut down, we are more dependent on exploration for success. Given the declining attractiveness of exploration in the United States, we are increasingly investing in offshore exploration, but some U.S. efforts continue in selected high-potential areas. In early 1994 we also signed memoranda to participate in investigating known deposits in Russia and China.
RETURN ON SALES RETURN ON ASSETS
100.0 60% 53.0 100% 43.3 45% 75% 63.3
30% 21.3 50% 18.2 26.3 15% 25% 19.0 7.8 9.9 0% 0% 93 92 91 90 89 93 92 91 90 89
MACHINERY AND EQUIPMENT FMC's Machinery and Equipment results were disappointing in 1993. Sales were down slightly to $871 million, but profits were down substantially to $7 million (before restructuring and other charges of $66 million). Food Machinery sales and earnings decreased significantly with the prolonged European recession and weakened European currencies, disruption of major markets of the former Soviet states, and continuing poor business cycles in the United States. Higher sales in our energy equipment businesses helped offset depressed Food Machinery sales, but falling oil prices pressured margins.
Our best performers were a number of our Energy and Transportation Equipment businesses. With an eye toward providing the type of turnkey engineering and production services that many of our large, global energy customers now expect, FMC completed two strategic energy-related acquisitions in 1993. In June, we purchased Norway-based Kongsberg Offshore, a.s., an expert in subsea technology and a leading supplier of control systems. FMC and Kongsberg combined create the world's largest company for engineering, procurement and production on subsea projects a lucrative market that FMC has been targeting for several years.
Also in June, FMC acquired SOFEC, Inc., a Houston-based engineering and construction firm that designs, fabricates and installs marine terminals and floating production systems. This capability gives our customers an economical alternative to underwater pipeline construction in remote, harsh regions of the world. In the last six months of the year, SOFEC posted nearly $45 million in inbound orders.
RETURN ON SALES RETURN ON ASSETS
24% 40%
18% 30%
12% 6.2 20% 10.9 5.2 9.3 6% 3.7 3.6 10% 6.6 6.2 0.8 1.3 0% 0% 93 92 91 90 89 93 92 91 90 89
The Kongsberg acquisition boosted sales for our energy equipment businesses in 1993. But with demand for oil essentially flat, and excess OPEC production keeping oil prices low and triggering lower energy equipment pricing, our profits for this business were down.
The outlook for our Wellhead Equipment business is encouraging. Following the addition of Kongsberg and SOFEC, FMC succeeded in capturing a $55 million contract from Amoco for turnkey engineering and production services on a project off the coast of China. We recently renewed our long-standing licensing agreement with Niigata Engineering of Japan to manufacture and market marine loading systems and fluid control products a relationship that continues FMC's firm foothold in the growing Asia/Pacific market. Our new joint venture to produce wellhead equipment in Russia, FMC Tyumen Petroleum Equipment, is benefiting from increased activity by Western oil companies in the Russian federation. We already are furnishing equipment for Conoco, BP/Statoil and Shell. And late last year we announced a new strategic alliance with Rockwater, a Brown & Root company, to provide turnkey subsea services.
Our Fluid Control business had an excellent year in 1993. Our valves and connectors were in demand by energy service companies, and our cost control efforts and manufacturing efficiencies improved profitability. Last year we entered into alliances with several major well service customers, and in some cases, we will be the sole supplier. In 1994, we'll bring to market an advanced plug valve that should provide additional competitive advantage.
Sales and earnings for our transportation equipment businesses were essentially flat. The downturn in the airline industry had a slight impact on FMC's Airline Equipment business. We were helped by our strong product portfolio, including state-of-the-art loading and deicing equipment, as well as our efforts in cost control and efficient manufacturing. We continued to retool our Automotive Service Equipment operations and succeeded in reducing fixed assets. Our Material Handling Systems operations, meanwhile, implemented a cost-control program emphasizing gains in engineering productivity and efficiencies in manufacturing.
FMC's Food Machinery businesses had a difficult year, with sales and profits declining for the second consecutive year. A combination of soft domestic markets, the continuing recession in Europe, depressed agricultural commodity markets and consolidations among food producers have created uncertainty among our customers. Our citrus business was a bright spot in 1993, contributing increased sales and profits. Last year we installed processing systems for U.S. Sugar Corporation's new citrus juice facility the first new processing plant to open in Florida in many years.
Europe's weak marketplace did not present opportunities for the type of large-scale food processing projects we completed in past years. Our agricultural machinery business also suffered from the poor market conditions in Europe and North America, but we believe we have reached the bottom of the business cycle in our harvester operations. Weak market conditions also depressed demand for our packaging and material
handling equipment businesses. The 1994 outlook for these businesses should improve somewhat, but full recovery isn't anticipated until 1995. This past year, FMC conducted a major strategic review of our Food Machinery businesses. We concluded that we should concentrate on those core areas that allow growth opportunities, eliminate weak product positions and restructure our operations with fewer facilities and lower overhead. The coming year will mirror the successes and the challenges of 1993. A major challenge will be in managing the realignment of our businesses to improve our profit picture for the coming years. At the same time, we recognize that Food Machinery markets will continue to be depressed, as the recession continues in Europe, soft market conditions persist in the United States, and unstable economies and hard-currency shortages continue in the states of the former Soviet Union. The outlook is brighter for our Energy and Transportation Equipment business, strengthened in 1993 by acquisitions and strategic alignments, and rebounding from successful cost-control measures. Oil prices continue to be an area of concern in 1994. But our capabilities and our customer ties in these industries will provide a strong competitive edge in winning major contracts and growing profitably.
FINANCIAL REVIEW Additional information highlighting FMC's operating performance and financial position is presented below.
Sales and Earnings Sales in 1993 were $3.8 billion, 6 percent lower than in 1992. Income from continuing operations was $41.0 million, or $1.11 per share, compared with $192.6 million, or $5.23 per share, for 1992. Income from continuing operations for 1993 includes pretax restructuring and other charges of $172.3 million, net of minority interest ($123.3 million on an after-tax basis, or $3.34 per share). An after-tax extraordinary charge of $4.7 million was also recorded in 1993 for additional debt restructuring. After this charge, net income for 1993 was $36.3 million, or $0.98 per share. After-tax special charges recorded in 1992 included $183.7 million resulting from the adoption of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," $73.2 million for previously discontinued operations' additional environmental and product liability requirements, and an extraordinary charge of $11.4 million related to the restructuring of debt. After these charges, the net loss for 1992 was $75.7 million, or $2.06 per share. Declining operating earnings in the Industrial Chemicals, Machinery and Equipment, and Precious Metals segments contributed to the overall decrease in 1993 earnings per share. Corporate and other expenses decreased slightly in 1993 primarily due to gains on sales of Corporate assets. A breakdown of sales, income before income taxes, and identifiable assets by industry segment appears on page 17, followed by a review of operating performance on pages 22 through 37. Segment operating profits exclude 1993 restructuring and other charges (Note 2), net interest expense, and other income and expense items. A discussion of other income and expense, order backlog, and research and development expenditures follows.
OTHER INCOME AND (EXPENSE), NET Year ended December 31 (In millions) 1993 1992 		 1991
Industrial Chemicals $ 3.6 $ 0.6 $ 3.2 Performance Chemicals (2.8) (0.5)						0.1 Defense Systems 2.6 13.9							4.3 Machinery and Equipment (0.8) 11.5						14.8 Corporate and other 7.6 3.8						(4.8) Total $10.2 $29.3						$17.6
Other income and expense for Industrial Chemicals, Performance Chemicals, Defense Systems, and Machinery and Equipment reflect the allocation of LIFO inventory adjustments for all three years.
Corporate and other includes items that are not allocated to specific business segments, primarily pension-related income. Pension-related income was $7.6 million in 1993, $3.8 million in 1992 (net of a $4.6 million curtailment charge), and $8.2 million in 1991. 1991 also included a $12.0 million charge for general environmental clean-up.
ORDER BACKLOG December 31 (In millions) 1993 1992 1991 Defense Systems $1,105.0 $1,342.6 $1,939.5 Machinery and Equipment 333.1 340.9 342.9 Total $1,438.1 $1,683.5 $2,282.4
The decline in Defense Systems backlog reflects the overall downsizing of the U.S. defense industry.
The slight decline in backlog for Machinery and Equipment stems from weaker demand for food machinery equipment, particularly in Europe, partially offset by increases in energy equipment due to 1993 acquisitions (Note 2).
Backlogs are not reported for Industrial Chemicals, Performance Chemicals and Precious Metals due to the nature of these businesses.
RESEARCH AND DEVELOPMENT EXPENDITURES Year ended December 31 (In millions) 1993 1992 1991 Industrial Chemicals $19.3 $21.3 $18.6 Performance Chemicals 79.0 67.9 57.5 Precious Metals 0.1 0.1 0.2 Defense Systems 24.0 27.8 27.8 Machinery and Equipment 26.1 26.2 28.6 Corporate 0.7 1.7 1.9 Total $149.2 $145.0 $134.6
Expenditures for research and development increased in Performance Chemicals primarily due to the development of the next generation of herbicides and insecticides, as well as product development in the Food Ingredients and BioProducts businesses. Reduced defense spending by the U.S. government on existing contracts resulted in lower research and development expense for Defense Systems in 1993.
Not included in these amounts are $208.8 million, $139.2 million and $76.9 million in 1993, 1992 and 1991, respectively, for research and development projects contracted directly with the U.S. government and commercial sponsors. The increase in 1993 is attributable to the armored gun and advanced field artillery systems that are being developed by Defense Systems.
EXPLORATION COSTS Mineral exploration costs were $19.9 million, $16.6 million and $13.5 million in 1993, 1992 and 1991, respectively. Approximately 85 percent of exploration spending in 1993 relates to original exploration for gold, silver, and lithium reserves, with the remainder for development of reserves near existing mines.
TAXES FMC's effective tax rate was an 8 percent tax benefit on earnings compared with a 31 percent tax provision on earnings in 1992. The effective tax rate in 1993 was affected by lower domestic earnings due to restructuring and other charges (of which $61 million relates to FMC Gold Company and was not tax effected), a higher level of foreign earnings taxed as dividends in 1993, and a change in the mix of foreign and domestic earnings combined with favorable foreign effective tax rates.
RESTRUCTURING AND OTHER CHARGES In 1993, FMC recorded pretax restructuring and other charges of $172.3 million, net of minority interest (after-tax $123.3 million, or $3.34 per share). These charges primarily relate to restructuring costs associated with the Machinery and Equipment segment and Chemical businesses, expenses to restructure companywide functional support staffs, as well as a write-down of the book value of the Beartrack development property in the Precious Metals segment.
The company will focus on growing profitable businesses with strong market potential and intends to exit several small, unprofitable product lines in the Machinery and Equipment segment that are not projected to meet established financial criteria. Machinery and equipment operations will be streamlined by reducing staffing levels and consolidating manufacturing locations. Total pretax restructuring and other charges for this segment approximate $66.0 million.
In the Chemical businesses, the company has initiated a number of restructuring activities aimed at reducing manufacturing costs and improving operating efficiencies. In addition, reserves have been provided for the shutdown of unprofitable or redundant facilities. Total pretax restructuring and other charges for the Chemical segments approximate $32.9 million.
Restructuring and other charges of $47.9 million, net of minority interest, relate to the Precious Metals segment. These charges include costs for the write- down of the book value of the Beartrack development property, as well as expenses to close the Royal Mountain King and Paradise Peak mines. The long-term outlook for gold prices has changed significantly since the Beartrack property was acquired in 1990, and consequently, the book value of the property has been reduced.
The company is undertaking a review of functional support staffs throughout the organization. The objective is to align resources to support the company's long-term growth initiatives and improve operating efficiencies. Related severance, relocation and other costs are expected to approximate $25.5 million on a pretax basis.
The restructuring activities will result in planned, or already implemented, work force reductions of approximately 2,500 positions 12 percent of the total work force. These actions are expected to be implemented largely during 1994 and 1995. The after- tax cash outflow to fund related charges will be approximately 40 percent of the $172.3 million charge. Once completed, it is anticipated that they will result in ongoing annual cost savings and better align the company's business and support staff with its growth strategy.
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 such issues arise, including notices from the Environmental Protection Agency (EPA), or other government agencies, identifying FMC as a Potentially Responsible Party (PRP), the company utilizes multifunctional advisory teams comprised of environmental, legal, financial and communications management to ensure that the companies actions are consistent with its responsibilities to the environment and public health, as well as employees and shareholders.
To ensure FMC is held responsible only for its equitable share of site redemption costs, FMC has initiated, and will continue to initiate, legal proceedings for contributions from other PRPs and for a determination of coverage against insurance carriers that provided insurance coverage for the cost of clean- up at a number of waste sites. 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. In July 1993, in the Supreme Court of Santa Clara County, a jury verdict determined that these exclusions do not apply to several of these sites. The other sites will be the subject of future litigation.
Regarding current operating sites, the company spent approximately $16 million, $20 million and $28 million for the years 1993, 1992 and 1991, respectively, on capital projects relating to environmental control facilities, and expects to spend additional capital of approximately $26 million and $28 million in 1994 and 1995, respectively. Additionally, in 1993, 1992 and 1991, FMC spent approximately $63 million, $57 million and $48 million, respectively, for environmental compliance costs for these sites.
Regarding previously operated and other sites for the years 1993, 1992 and 1991, FMC charged approximately $17 million, $11 million and $5 million, respectively, against established reserves for remediation spending, and charged approximately $10 million, $11 million and $10 million, respectively, against reserves for spending on Remediation Investigation/Feasibility Studies(RI/FS). Recoveries from third parties of approximately $7 million and $3 million, respectively, were received and credited to the reserves in 1993 and 1992. No recoveries were received in 1991. FMC anticipates that the expenditures for current operating, previously operated and other sites will continue to be significant for the foreseeable future.
In accordance with the company's environmental accounting policy, reserves at the end of 1993 were $133 million, net of approximately $54 million of recoveries, including recoveries from insurance companies, the federal government and other PRPs. The company cannot reasonably estimate any additional amount of loss or range of loss in excess of the recorded amounts. While the liability from potential environmental obligations that have not been reserved may or may not have a material effect on the results of operations in any one year, based on information currently available, management believes environmental- related expenditures will not likely have a material adverse effect on the company's liquidity or financial condition and will be spent over many years in the future. Additional information regarding the company's environmental accounting policies and potential environmental liability is included in Note 1 and Note 16, respectively, to the company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES Cash and marketable securities plus cash generated from operations provided the resources to meet 1993 operating needs, fund capital expenditures and acquisitions, and reduce debt levels. Debt levels and interest costs were reduced by $75 million and $21.3 million, respectively, in 1993. Cash requirements for capital expenditures and acquisitions approximated $245 million.
During 1993, the company, with funds obtained through its revolving credit agreement, repurchased $655 million, less unamortized discount of $481 million, of 7-1/2% zero coupon senior subordinated debentures, $32 million of 7-1/2% sinking fund debentures, and $19 million of industrial revenue bonds. In August 1993, subsequent to the repurchases noted above, the company issued $200 million of 6.375% senior notes due 2003. The net proceeds of $198 million were used to repay advances under
the revolving credit agreement. As of December 31, 1993, there were no borrowings under the company's revolving credit facility or uncommitted facilities. In order to secure long-term financing in the United Kingdom, the company also issued Sterling denominated debt in December 1993 due 2042 with a yield to maturity of 7.65% and a maturity value of $124 million.
Cash generated from operations in 1994 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 1994 include approximately $275 million to $375 million for planned capital expenditures and acquisitions, plus approximately $40 million for net after-tax interest payments.
Working capital December 31 (In millions) 1993 1992 1991 Operating working capital: Trade receivables $573.2 $543.5 $529.7 Inventories 268.1 319.3 364.8 Accounts payable (501.2) (513.9)			(600.4) Accrued liabilities (449.3) (406.8)			(403.9) Total operating working capital (109.2) (57.9)			(109.8) Cash and marketable securities 77.5 24.3 44.2 Other current assets and liabilities, net 35.4 32.5					52.4 Total working capital $ 3.7 $ (1.1)		$(13.2)
Operating working capital decreased in 1993 compared with 1992.
Reduced inventory levels resulted from lower business volume at Defense Systems, as well as continued inventory management initiatives and translation effects.
Accrued liabilities increased due to acquisitions and timing of expenditures at year end.
Operating working capital was affected by the partial liquidation of lower-cost LIFO inventories, which increased reported earnings per share by $0.04, $0.42 and $0.32 in 1993, 1992 and 1991, respectively. FMC has sustained lower inventories over the long term, producing sufficient savings in inventory carrying costs tooffset the negative cash flow effect of additional taxes paid on the increased earnings from the liquidation of lower-cost LIFO inventories.
CAPITAL EXPENDITURES Year ended December 31 (In millions) 1993 1992					 1991 Industrial Chemicals $ 91.0 $ 91.5 $		94.5 Performance Chemicals 40.7 144.9							30.0 Precious Metals 18.5 19.1							19.4 Defense Systems 19.2 20.5							25.1 Machinery and Equipment 70.7 30.5							42.7 Corporate 4.4 8.0								5.1 Total $244.5 $314.5					$216.8
Capital expenditures in 1993 decreased $70 million from 1992 levels.
Performance Chemicals reduced spending reflects the impact of the acquisition of Ciba-Geigy fixed assets in 1992.
The increase in Machinery and Equipment spending is attributable to the acquisitions of Kongsberg Offshore a.s. (Kongsberg) and SOFEC, Inc. (SOFEC) assets in 1993. Depreciation Year ended December 31 (In millions) 1993 1992 1991 Industrial Chemicals $ 86.1 $ 96.5 $ 93.0 Performance Chemicals 41.8 40.3 31.2 Precious Metals 25.7 28.6 29.6 Defense Systems 26.0 30.4 33.1 Machinery and Equipment 28.6 26.9 26.2 Corporate 14.2 12.3 11.8 Total $222.4 $235.0 $224.9
Depreciation expense decreased $12.6 million in 1993.
The decrease for Industrial Chemicals resulted from assets which became fully depreciated in 1992, and translation effects related to a Spanish operation. The decline at Defense is consistent with continued downsizing efforts.
DIVIDENDS No dividends were paid in 1993, 1992 and 1991, and no dividends are expected to be paid in 1994.
1993 FOURTH QUARTER RESULTS COMPARED WITH 1992 For the fourth quarter of 1993, FMC reported sales of $946 million, a 6 percent decrease compared with the year-ago quarter. Income from continuing operations (before restructuring and other charges) of $21 million, or $0.57 per share, decreased compared with $31 million, or $0.85 per share, in last year's quarter. In December 1993, the company recorded pretax restructuring and other charges of $172.3 million, net of minority interest (after-tax $123.3 million, or $3.34 per share) related to restructuring activities and asset write- downs. After the effects of the restructuring and other charges, the company recorded a loss from continuing operations of $102 million, or $2.77 per share, in the quarter. Earnings of $33 million before interest, taxes, and restructuring and other charges decreased compared with the prior year's strong quarter. Performance Chemicals improved profits in the quarter were more than offset by decreased profits for Defense Systems and Industrial Chemicals. Net interest expense decreased 21 percent to $15 million in the quarter. Industrial Chemicals. Sales decreased 12 percent to $242.1 million from $274.1 million in 1992. Earnings for the quarter declined due to weak worldwide economic conditions and overcapacity in FMC's major product lines. Alkali sales and earnings decreased due to weak worldwide soda ash pricing and volumes, and the impact of lower caustic soda prices. Lower phosphate sales also negatively affected results of operations. Performance Chemicals. Performance Chemicals sales for the fourth quarter increased 16 percent in 1993 to $178.5 million from $154.2 million in 1992, and earnings also increased. Agricultural Chemicals sales increased primarily due to higher sales in South America. Sales of the Food Ingredients business also rose given increased global research and marketing efforts. Precious Metals. Sales declined 35 percent to $26 million in 1993 from $39.8 million in 1992, and profits also declined, primarily due to the shutdown of the Paradise Peak mine in the second quarter of 1993 and reduced gold production. Defense Systems. Sales of $246.2 million in 1993 decreased 20 percent from $306.3 million in 1992, and profits also decreased compared with fourth quarter 1992 results. Lower sales and profits primarily resulted from reduced production of the Bradley Fighting Vehicle. Machinery and Equipment. Machinery and Equipment sales of $258.9 million in 1993 increased 11 percent from $233.8 million in 1992, and profits were down between years. Fourth quarter 1993 sales benefitted from the acquisitions of Kongsberg and SOFEC.
1992 RESULTS OF OPERATIONS COMPARED WITH 1991. Sales rose 2 percent in 1992 to $4 billion, due to higher sales in the Performance Chemicals and Precious Metals segments. Income from continuing operations of $192.6 million before special charges was 11 percent higher than 1991's $173.1 million. Primary earnings per
share before special charges were $5.23 compared with $4.77 for 1991. After-tax special charges recorded in 1992 included $183.7 million resulting from the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," $73.2 million related to previously discontinued operations for additional environmental and product liability requirements, and an extraordinary charge of $11.4 million related to restructuring of debt. After special charges, the net loss for 1992 was $75.7 million, or $2.06 per share, compared with net income of $163.9 million, or $4.52 per share, in 1991. The 1991 results included an after-tax extraordinary charge of $9.2 million related to the early retirement of high-coupon subordinated debt. Income from continuing operations before interest and taxes in 1992 was $362 million compared with $363 million in 1991. Industrial Chemicals. Sales were flat at $1 billion, but profits decreased 10 percent to $92 million. Stronger phosphorus chemical prices were offset by weaker European markets and higher spending to develop new, low-cost lithium reserves. Alkali sales and profits were flat in 1992, primarily due to flat demand and weaker prices for soda ash in the United States. Export sales, however, remained strong. Phosphorus profits improved in 1992 due to firm prices and the departure of two U.S. producers from this business in 1991. Peroxygen sales and earnings were down modestly as prices declined because of continued industry overcapacity.
FMC Foret sales were flat, and earnings decreased due to price deterioration and manufacturing problems which have subsequently been corrected.
Lithium sales improved in 1992 due to increased demand for several lithium products, but profits declined as a result of higher operating costs and spending associated with efforts to develop new, low-cost lithium reserves.
Performance Chemicals. Sales rose 22 percent to $790 million, and profits increased 20 percent to $121 million. FMC's Agricultural Chemicals business posted record sales and profits, resulting from an improved product mix, cost reductions in operations and an increasing international presence. The Food Ingredients, Pharmaceuticals and BioProducts businesses showed strong sales and earnings performance. The acquisition of Ciba- Geigy's flame retardants and water treatment chemical businesses in 1992 increased sales,but marginally contributed to the profitability of the Performance Chemicals segment.
Precious Metals. Sales increased 8 percent to $171 million, and profits rose 27 percent to $36 million in 1992 due to higher mill throughput and expanded heap- leaching activities.
Defense Systems. Sales were down 5 percent to $1.1 billion due to slower international business, but profits increased 4 percent to $167 million because of favorable cost performance and lower discretionary spending.
Machinery and Equipment. Sales decreased slightly to $877 million, and profits declined 31 percent to $32 million due to the effects of a weak economy in some markets. Food Machinery sales declined, and profits decreased by more than 50 percent. Energy and Transportation Equipment sales, however, increased due to strong international presence, and effective cost control increased earnings.
*Per share amounts are antidilutive
Fourth-quarter 1993 results include after-tax restructuring and other charges of $123.3 million (Note 2). The second quarter of 1993 reflects an after-tax extraordinary charge of $4.7 million related to debt restructuring.
Fourth-quarter 1992 includes an after-tax special charge of $73.2 million related to previously discontinued operations. First-quarter 1992 reflects the cumulative effect of a change in accounting principleto January 1, 1992, for the change in accounting for retiree health and life insurance benefits ($183.7 million, net of taxes). The first and third quarters of 1992 also include after- tax extraordinary charges of $9.2 million and $2.2 million, respectively, related to the restructuring of debt.
Quarterly earnings per common share may differ from full- year amounts due to changes in the number of shares outstanding during the year.
CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Year ended December 31 1993 1992 1991 REVENUE Sales $3,753,933$3,973,663$3,899,449 Equity in net earnings of affiliates (Note 6) 6,435 11,069 6,549 Other revenue 28,585 18,727 17,531 Total revenue 3,788,953 4,003,4593,923,529
COSTS AND EXPENSES Cost of sales 2,835,286 2,987,9082,943,717 Selling, general and administrative expenses 539,432 533,931 496,393 Research and development 149,244 144,990 134,644 Minority interests 2,484 3,634 3,046 Restructuring and other charges (Note 2) 172,300 - - Other (income) and expense, net																(10,241) (29,294) (17,552) Total costs and expenses 3,688,505 3,641,1693,560,248 Income from continuing operations before interest and taxes 100,448 362,290 363,281 Interest income 11,015 12,275 17,334 Interest expense 73,649 94,930 124,683 Income from continuing operations before income taxes 37,814 279,635 255,932 Provision (benefit) for income taxes (Note 10) 		 (3,153) 87,034 82,849 Income from continuing operations																				40,967		 192,601 173,083 Provision for discontinued operations, net of taxes (Note 2) 												 - 	 (73,200) - Income before extraordinary item and cumulative effect of change in accounting principle 											 40,967 119,401 173,083 Extraordinary items, net of taxes (Note 9) (4,683) (11,417) (9,206) Cumulative effect of change in accounting principle, net of taxes (Note 14) -		 (183,730) - Net income (loss) $36,284$ 		(75,746) $163,877
EARNINGS PER COMMON SHARE (NOTE 1) Primary: Income from continuing operations																				$ 1.11	$ 5.23 $ 4.77 Provision for discontinued operations																										- (1.99) - Income before extraordinary items and cumulative effect of change in accounting principle 											 1.11 3.24 4.77 Extraordinary items (0.13) (0.31) (0.25) Cumulative effect of change in accounting principle - (4.99) - Net income (loss) $ 0.98 $ (2.06) $ 4.52 Assuming full dilution: Income from continuing operations																				$ 1.11	$ 5.04 	$ 4.68 Provision for discontinued operations																										- (1.84) - Income before extraordinary items and cumulative effect of change in accounting principle 												 $ 1.11 $ 3.20 $ 4.68 Extraordinary items (0.13) * (0.24) Cumulative effect of change in accounting principle - 	 * - Net income $ 0.98 $ * $ 4.44
See notes to consolidated financial statements. *Per share amounts are antidilutive.
CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
December 31 1993 1992 ASSETS
CURRENT ASSETS Cash $20,450 $11,855 Marketable securities 57,071 12,423 Trade receivables, net (Note 3) 573,181 543,523 Inventories (Note 4) 268,107 319,280 Other current assets 111,439 100,524 Deferred income taxes (Note 10) 129,479 135,434 Total current assets 1,159,727 1,123,039
INVESTMENTS (NOTE 6) 76,197 85,819 PROPERTY, PLANT AND EQUIPMENT, NET (NOTE 7) 1,390,249 1,502,122 PATENTS, DEFERRED CHARGES AND INTANGIBLES OF ACQUIRED COMPANIES 																								 91,741 63,168 DEFERRED INCOME TAXES (NOTE 10) 95,199 52,493 TOTAL ASSETS $2,813,113 $2,826,641
LIABILITIES AND STOCKHOLDERS ' EQUITY
CURRENT LIABILITIES Short-Term Debt (Note 8) $66,904 $54,759 Accounts payable, trade and other 501,163 513,948 Accrued payroll 84,663 85,248 Accrued and other liabilities 364,694 321,576 Current portion of long-term debt (Note 9)																							15,029 						 8,476 Current portion of accrued pension and other postretirement benefits (Notes 13 and 14) 37,119 37,302 Income taxes payable (Note 10) 86,432 102,837 Total current liabilities 1,156,004 1,124,146 LONG-TERM DEBT, LESS CURRENT PORTION (NOTE 9) 749,855 843,625 ACCRUED PENSION AND OTHER POSTRETIREMENT BENEFITS, LESS CURRENT PORTION (NOTES 13 AND 14) 									 302,725 327,100 RESERVE FOR DISCONTINUED OPERATIONS, RESTRUCTURING AND OTHER RESERVES (NOTE 2)											344,267						 256,909 COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 16) MINORITY INTERESTS IN CONSOLIDATED COMPANIES 							 43,379							 55,860 STOCKHOLDERS' EQUITY (NOTE 11) Common stock, $0.10 par value, authorized 60,000,000 shares; issued 36,472,641 shares in 1993 and 36,158,866 shares in 1992																					3,647 3,616 Capital in excess of par value of capital stock 79,582 71,955 Retained earnings 207,133 170,849 Foreign currency translation adjustment (Note 5) (64,766) (19,012) Treasury stock, common, at cost; 292,018 shares in 1993 and 285,959 shares in 1992																														(8,713)							 (8,407) Total stockholders' equity 216,883 219,001 Total liabilities and stockholders' equity $2,813,113 $2,826,641
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS RECONCILIATION FROM INCOME FROM CONTINUING OPERATIONS TO CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) 												 Year ended December 31 															1993 		 1992 		 1991 Income from continuing operations													$40,967	$192,601 	$173,083 After-tax net interest expense																	38,878 51,626 	 67,240 Restructuring and other charges (Note 2) 																	 172,300 - - Operating income 																	 252,145 244,227 240,323 Adjustments for non-cash components of income from continuing operations: Depreciation and amortization														226,612			236,896 227,635 Interest on zero coupon senior subordinated convertible debentures 								7,419 11,852				4,500 Deferred income taxes 																		 (38,898) (3,046) (4,339) Equity in net earnings of affiliates (Note 6) 																		 (6,435) (11,069) (6,549) Amortization of accrued pension costs (Note 13)																		 (7,631) (3,825) (8,216) Other 																	2,500 4,019 (362) 																	435,712 479,054 452,992 Tax benefit of extraordinary items														2,664 			6,663 5,407 																	438,376 485,717 458,399 (INCREASE) DECREASE IN ASSETS: Trade receivables 																		(40,073) (18,632) 3,866 Inventories 																	37,523 33,093 	 75,717 Other current assets 																		(10,916) (6,589) 	 (9,049) (Decrease) increase in liabilities: Accounts payable and accruals 																	24,748 	 (53,845)	 (68,056) Income taxes payable 																		 (21,165) 9,028 9,950 Accrued pension and other postretirement benefits, net																(16,927)			 (22,009) (769) 																	(26,810) 		 (58,954) 11,659 Cash provided by operating activities before after-tax net interest expense 																 $411,566 	 	$426,763	 $470,058
See notes to consolidated financial statements.*
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 													 Year ended December 31 											 1993 	 	1992 			 1991 Cash provided by operating activities before after-tax net interest expense								$411,566		$426,763			$470,058 After-tax net interest expense 												 (38,878)		(51,626)			(67,240) CASH PROVIDED BY OPERATING ACTIVITIES									372,688			375,137				402,818 CASH PROVIDED (REQUIRED) BY DISCONTINUED OPERATIONS AND RESTRUCTURING 												 (28,935)		(29,964) 		 17,766
Cash provided (required) by investing activities: Capital spending 												 (244,532)	(314,480)		(216,803) Disposal of property, plant and equipment 											 7,773		 17,973 			12,152 Decrease (increase) in investments 											23,616 		 12,092				 (1,501) CASH REQUIRED BY INVESTING ACTIVITIES								(213,143)	(284,415)		(206,152) Cash provided (required) by financing activities: Net increase (decrease) in short-term debt			 14,014	 	(4,339)				(29,678) Net repayments under credit facilities								(10,000)	(130,000)		(195,000) Increase in other long-term debt 											206,363		 413,214			 157,815 Repayment of other long-term debt										(285,138)	(355,070)		(200,167) Premium on early retirement of debt												(3,413)		(14,304)			(10,011) Issuance of capital stock, net 											 7,352		 14,725			 9,568 Cash required by financing activities									(70,822)		(75,774)		(267,473) Effect of exchange rate changes on cash and marketable securities 												 (6,545)		 (4,939) 		 4,242 Increase (decrease) in cash and marketable securities 											 53,243			(19,955)			(48,799) Cash and marketable securities, beginning of year 											 24,278 		 44,233			 93,032 Cash and marketable securities, end of year 											 $77,521 		$24,278 			$44,233
Supplemental cash flow information:
The company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Under this definition, cash and marketable securities as shown on the balance sheet are considered 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 $41.8 million, $67.7 million and $61.5 million for 1993, 1992 and 1991, respectively. Interest payments, net of amounts capitalized, for 1993, 1992 and 1991 were $60.1 million, $99.9 million and $137.0 million, respectively.
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands) Common Capital Retained Foreign stock, $0.10 in excess earnings currency Treasury par value of par (deficit) translation stock
Balance December 31, 1990						$3,502 				 $46,603 $ 82,718 $23,983 $(7,234) Net income 			 163,877 Stock options exercised (Note 11) 	 53 	 10,373 Purchase of treasury shares 																							 (858) Translation adjustment (Note 5) 				 (13,169) Balance December 31, 1991									3,555 56,976 246,595 10,814 (8,092) Net loss 		 (75,746) Stock options exercised (Note 11) 			 61 14,979 Purchase of treasury shares 																								 (315) Translation adjustment (Note 5) 								 						 (29,826) Balance December 31, 1992									3,616 71,955 170,849 (19,012) (8,407) 		Net income 	 36,284 Stock options exercised (Note 11)		 31 7,627 Purchase of treasury shares 													 (306) Translation adjustment (Note 5)	 	 	 (45,754) Balance December 31, 1993								$3,647 	 $79,582 	 $207,133	$(64,766) $ (8,713)
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 PRINCIPAL ACCOUNTING POLICIES CONSOLIDATION. The consolidated financial statements include the accounts of the company and all significant majority- owned subsidiaries, except those excluded because control is restricted or temporary in nature. All material intercompany accounts and transactions are eliminated in consolidation.
Investments. Investments in unconsolidated majority- owned subsidiaries, as well as companies in which ownership interests are 50 percent or less and FMC has significant influence over operating and financial policies, are accounted for using the equity method. All other investments are carried at their fair values or cost if appropriate.
Equity in net earnings of affiliates. Equity in net earnings of affiliates has been adjusted to eliminate the effects of any material intercompany transactions.
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. Inventoried costs relating to long-term contracts not valued on the LIFO basis 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 manufacturing overhead, except that domestic inventories exclude depreciation, factory administration, property taxes and certain other fixed expenses.
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.
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. Maintenance and repairs are charged to expense in the year incurred ($189.8 million, $203.0 million and $196.1 million in 1993, 1992 and 1991, respectively). Expenditures that extend the useful life of property, plant and equipment or increase its productivity are capitalized.
Interest expense. Interest costs of $0.7 million ($2.1 million in 1992 and $3.5 million in 1991) 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.
Interest expense for 1993 includes $0.3 million ($0.3 million in 1992 and $1.5 million in 1991) for amortization of fees and expenses associated with the revolving credit facility and
subordinated debentures. Unamortized fees and expenses of $4.0 million, $3.7 million and $2.7 million related to debt restructuring were charged off as extraordinary items in 1993, 1992, and 1991, respectively.
Patents, deferred charges and intangibles of acquired companies. Patents are capitalized and amortized over the lesser of their remaining useful or legal lives. Debt issuance costs are amortized over the term of the related debt. Intangibles represent the excess of the consideration paid for companies acquired in purchase transactions over the estimated fair value of the net assets acquired. Intangibles acquired since October 31, 1970, are amortized on a straight-line basis over periods normally not exceeding 15 years. Intangibles acquired before that date ($8.6 million at December 31, 1993 and 1992) are not being amortized, as management believes that their values have not diminished.
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 ($148.9 million at December 31, 1993 and $121.5 million at December 31, 1992).
Income taxes. Effective January 1, 1993, the company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires an asset and liability approach, whereby deferred tax liabilities and assets are recognized for expected future tax consequences of temporary differences between the carrying amounts and 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. Prior to January 1, 1993, income tax provisions were based on income reported for financial statement purposes, adjusted for transactions (permanent differences) that do not enter into the computation of income taxes payable. The company deferred the tax effects of timing differences between financial reporting and taxable income.
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 exchange rates for 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, 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. Gains and losses resulting from foreign currency transactions are generally included in income.
Hedging. FMC enters into formal contracts designated as hedges against interest rates related to floating rate financing facilities, gold, silver and other commodity prices, and certain foreign currency denominated transactions. The gains or losses on these contracts are included in the measurement of these transactions.
The company has entered into commodity swap transactions to reduce the impact of changes in prices of commodities used in the manufacture of products. These agreements generally involve the cash settlement of the differential between the contract price and the average monthly spot price of the commodity. These contracts are denoted in their nominal amounts, which indicate the level of involvement the company has in these contracts and do not indicate
risk of loss. At December 31, 1993 and 1992, the company had commodity swaps of $9.1 million and $11.0 million, respectively, extending through 1995.
Earnings per common share. Primary earnings per common share are computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents (primarily stock options) outstanding during the year (36,943,000 in 1993, 36,796,000 in 1992 and 36,267,000 in 1991). Fully diluted earnings per common share reflect the maximum dilution that would result from exercise of convertible debentures and stock options, unless such amounts are antidilutive. The average number of shares used in the fully diluted computation was 36,943,000 in 1993, 39,694,000 in 1992 and 37,566,000 in 1991. The fully diluted computation is based upon income from continuing operations after adding back after-tax interest on convertible debentures when dilutive ($7.6 million and $2.8 million in 1992 and 1991, respectively).
Other income and expense items. Items not related to operating results are classified as other income and expense items in the income statements.
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, equity in net earnings of affiliates not directly associated with asegment, minority interests, significant gains or losses on abnormal retirements of assets, 1993 restructuring and other charges, and other income and expense items as defined above. Identifiable assets by industry segment are those assets that are used by segment operations. Corporate assets are principally cash and marketable securities, deferred income tax benefits, investments and property and equipment.
Financial instruments. The fair values of financial instruments approximated their carrying values at December 31, 1993 and 1992. Fair values have been determined through information obtained from market sources and management estimates.
Environmental. The company provides for environmental- related obligations, such as estimated contractor costs and fees, site study costs, reimbursements of regulatory agency costs, post-closure costs, litigation costs, and other remediation costs, when they are probable and amounts can be reasonably estimated. 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 Remediation Investigation/Feasibility Study (RI/FS) that is accepted by FMC and the appropriate government agency or agencies. As remediations and investigations proceed, the estimates are reviewed quarterly by the company's Environmental 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 governmental agencies or private parties.
Provisions for environmental costs are reflected in income, net of estimated recoveries from named Potentially Responsible Parties (PRPs) or other third parties, incorporate inflation and are not discounted to their present values. Estimated recoveries from third parties or other PRPs are recorded when probable and reasonably estimable.
Accounting standards not adopted. In November 1992, the Financial Accounting Standards Board issued SFAS No. 112, "Employers' Accounting for Post-employment Benefits." Effective for fiscal year 1994, SFAS No. 112 establishes accounting standards for benefits provided to former or inactive employees after employment but before retirement. The company is continuing to evaluate the new statement's provisions, although it does not expect that implementation will have a material impact on the company's results of operations and financial position.
Reclassifications. Certain prior-year amounts have been reclassified to conform with the current year's presentation.
NOTE 2 RESTRUCTURING, ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS
Restructuring and other charges. In the fourth quarter of 1993, the company recorded a charge of $172.3 million (after-tax $123.3 million, or $3.34 per share), net of $12.7 million of minority interest, to cover primarily restructuring costs in the Machinery and Equipment and Chemical businesses, as well as the write-down of assets in the Precious Metals operation. The restructuring program is designed to reduce costs and improve operating efficiencies in these businesses.
The Machinery and Equipment restructuring program includes, among other items, costs for consolidating facilities and exiting unprofitable product lines, including relocation and severance costs.
The charges for the Chemical businesses are due primarily to weak market conditions, and reflect costs for the shutdown of unproductive facilities and associated severance expenses.
The Precious Metals' charges include closure costs for the shutdown of the Royal Mountain King and Paradise Peak mines, as well as a $51 million asset write-down of the Beartrack development property. This write-down was based on the long-term outlook for gold prices.
The restructuring program also includes costs to reorganize functional support staff and services throughout the company to improve operating efficiencies and align these activities more closely with the company's growth initiatives.
The after-tax cash outflow required to fund these charges will be approximately 40 percent of the $172.3 million charge.
Acquisitions and divestitures. In April 1993, FMC Gold Company purchased the remaining 50 percent interest in the Humboldt Gold joint venture from TRE Management Company, bringing FMC Gold's owner-ship interest in all gold and precious metal-bearing ores in the related property to 100 percent. The former Humboldt Gold venture is targeting deep gold mineralization at the "Rossi Property" on the Carlin Gold Trend in Nevada.
On June 30, 1993, the company acquired the assets of Kongsberg Offshore a.s. (Kongsberg), a wholly owned subsidiary of Siemens a.s. Kongsberg provides subsea and metering systems on a worldwide basis as well as turnkey subsea systems, including systems integration, project management and FMC subsea products. The company also acquired SOFEC, Inc. (SOFEC), a Houston based engineering and construction company that designs, fabricates and installs offshore mooring systems for export and import terminals and for floating storage and production facilities for offshore oil and gas. During 1993, these acquisitions were successfully integrated without significantly affecting consolidated results of operations.
During 1992, the company acquired the worldwide flame retardants and fluids, and water treatment chemicals businesses of Ciba-Geigy
Additives Division (Ciba-Geigy), with annual sales of approximately $150 million. The company also sold the street sweeper operation. These transactions did not significantly affect the 1992 consolidated results of operations of the company.
In 1991, the company acquired the airplane wing deicer business of The Trump Companies, Inc. The 1991 consolidated results were not significantly affected by this acquisition.
The aforementioned acquisitions were financed with cash, marketable securities, and long-term financing. The company has accounted for these acquisitions using the purchase method of accounting.
Discontinued operations. In the fourth quarter of 1992, FMC recorded a $73.2 million charge, net of applicable tax benefits of $46.8 million, for increases in the projected costs of liquidating liabilities associated with discontinued operations. The provision included pretax charges of $75 million for environmental clean-up, and $45 million for higher projected product liability claims. In addition, a one-time, pretax adjustment of $92.5 million ($57.4 million net of tax) was recorded for retiree benefits provided to former employees of discontinued operations. The provision for retiree benefits was recorded in conjunction with the company's adoption of Statement of Financial Accounting Standards No. 106 (Note 14).
The environmental provision increased reserves for Remediation Investigation/Feasibility Study (RI/FS) and remediation costs related to formerly discontinued businesses. The additions to the product liability reserve primarily represented higher-than-previously- projected product liability claims relating to equipment manufactured by the construction equipment group prior to the sale of that business to Sumitomo Heavy Industries, Ltd.
Management believes that the reserve for discontinued operations of $223.5 million at December 31, 1993 is adequate to provide for the estimable costs associated with the liquidation and disposal of discontinued operations, including the possible longer-term requirements for potential product liability claims, retiree medical costs and clean-up of former manufacturing facilities and associated waste sites.
NOTE 3 TRADE RECEIVABLES Trade receivables do not contain any material amounts representing receivables collectible over a period in excess of one year, receivables billed under retainage provisions of contracts or similar items whose determination or ultimate realization is uncertain. Trade receivables included approximately $29 million of unbilled receivables at December 31, 1993 for defense equipment awaiting final acceptance by the U.S. Government. There were no significant unbilled receivables at December 31, 1992.
The company maintains an allowance for doubtful accounts based upon the expected collectibility of all trade receivables, including receivables discounted with recourse. A summary of activity in the allowance for doubtful accounts is shown below:
(In thousands) 1993 1992 1991 Balance at beginning of year $7,358 $5,971					$6,284 Provision for doubtful accounts 2,954 7,211						3,438 Receivables written off as uncollectible, net of recoveries (3,535) (5,824)					(3,751) Balance at end of year $6,777 $7,358						$5,971
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 $238.0 million at December 31, 1993 and $228.0 million at December 31, 1992. During 1993, 1992 and 1991, the company reduced LIFO inventories that were carried at lower than prevailing costs. These reductions increased pretax income by $2.6 million in 1993, $25.5 million in 1992 and $19.1 million in 1991.
Inventories at December 31, 1993 included approximately $40.7 million ($55.2 million at December 31, 1992) of inventoried costs relating to contracts-in-progress. Costs normally associated with general and administrative functions are expensed as incurred. There were no material amounts in inventory at December 31, 1993 and 1992 relating to the excess of production cost of delivered units over the estimated average cost of all units expected to be produced under contracts-in- progress, or other non-recurring costs for which ultimate recovery may be uncertain.
Note 5 Foreign currency Net income for 1993, 1992 and 1991 included aggregate foreign currency losses of $1.0 million and $1.4 million and foreign currency gains of $3.4 million, respectively. Translation gains or losses for operations in highly inflationary economies are included in income, while substantially all other translation gains or losses are reported through a separate account in stockholders' equity. The following table presents the foreign currency adjustments to key balance sheet categories and the offsetting adjustment to stockholders' equity or income. The 1993 decrease in stockholders' equity is primarily attributable to a stronger U.S. dollar in relation to European currencies, particularly the Spanish peseta. Interest earned on foreign marketable securities and debt service costs are classified as interest income and interest expense, respectively, and are not offset in the amounts shown below. In addition, foreign currency impacts on marketable securities and debt in hyperinflationary economies are netted against interest income and expense and are not shown in the amounts below.
Gains (Losses) (In thousands) 1993 1992 1991 Cash and marketable securities $ (6,545) $ (4,939) 		$		4,242 Debt 7,730 20,951							3,582 Other working capital (24,065) (17,244)					(8,969) Property, plant & equipment, net (33,350) (36,153)					(7,175) Other 9,477 6,112						(1,482) $(46,753) (31,273) $	(9,802) Stockholders' equity $(45,754) $(29,826)			$(13,169) Gain (loss) in income (999) (1,447)						3,367 $(46,753) $(31,273) 		$	(9,802)
The company has entered into foreign currency contracts to hedge certain foreign transactions. Foreign exchange contracts mature at the anticipated cash requirement date of the hedged transaction, generally within one year, except for the sale of $104 million of foreign currencies which mature annually through the year 2000. The contract amounts reflect the extent of involvement the company has in foreign exchange transactions. At December 31, 1993 and 1992, the company had forward contracts primarily for the purchase and sale of European, Singapore and Canadian currencies. U.S. dollar-denominated contracts to purchase foreign currencies at December 31, 1993 were approximately
$134 million ($192 million at December 31, 1992). U.S. dollar-denominated contracts to sell foreign currencies were approximately $277 million at December 31, 1993 ($160 million at December 31, 1992). Significant cross-currency contracts at December 31, 1993 were the exchange of 2.5 million German marks for 1.0 million British pounds, and 13 million German marks for 983 million Spanish pesetas. There were no significant cross-currency contracts outstanding at December 31, 1992.
NOTE 6 INVESTMENTS For the year ended December 31, 1993, FMC's equity in net earnings of unconsolidated subsidiaries and affiliates was $6.4 million ($11.1 million in 1992 and $6.6 million in 1991).
Dividends received from affiliates were $6.0 million in 1993 ($4.3 million in 1992 and $3.4 million in 1991). Dividends included in other revenue from other investments were $9.7 million, $8.2 million and $0.4 million in 1993, 1992 and 1991, respectively.
Income taxes have not been provided for the company's share of the cumulative undistributed earnings of unconsolidated subsidiaries and affiliates ($50.6 million at December 31, 1993). Restrictions on the payment of dividends by these affiliates are insignificant.
December 31 (In thousands) 1993 1992
Investments in, and advances to, unconsolidated subsidiaries and affiliates $64,607 $57,615 Other investments, net 11,590 28,204 Total $76,197 $85,819
NOTE 7 PROPERTY, PLANT AND EQUIPMENT
A summary of changes in property, plant and equipment and related accumulated depreciation accounts follows:
(In thousands) Land Machinery Construction and Buildings and in improvements equipment progress Total
COST Balance December 31, 1990 $ 261,556 $ 404,268 $2,487,372 $ 126,590 $3,279,786 Additions 14,276 26,890 202,119 (26,482) 216,803 Disposals, retirements and reclassifications (43,043) (5,413) (85,896) 43,569 (90,783) Translation adjustment (117) (1,692) (14,025) (303) (16,137)
Balance December 31, 1991 						 232,672 424,053 2,589,570 143,374 3,389,669 Additions 20,336 47,031 251,145 (4,032) 314,480 Disposals, retirements and reclassifications 36,004 (3,841) (93,817) (40,972) (102,626) Translation adjustment (1,210) (8,596) (48,666) (1,330) (59,802)
Balance December 31, 1992 287,802 458,647 2,698,232 97,040 3,541,721 Additions 17,723 25,979 173,666 (2,302) 215,066 Disposals, retirements and reclassifications (51,748) (15,487) (103,035) (14,348) (184,618) Translation adjustment (965) (7,858) (62,824) (2,128) (73,775)
BALANCE DECEMBER 31, 1993 						 $252,812 $461,281 $2,706,039 $ 78,262	$3,498,394
ACCUMULATED DEPRECIATION Balance December 31, 1990 						$ 91,076 $150,707	 $1,530,860											$1,772,643 Depreciation 13,165 14,779 196,980														224,924 Disposals, retirements and reclassifications (2,123) (3,410) (77,636)													(83,169) Translation adjustment (28) (725) (8,209)														(8,962)
Balance December 31, 1991 					102,090 161,351 1,641,995												1,905,436 Depreciation 17,218 16,840 200,920 234,978 Disposals, retirements and reclassifications (244) (2,425) (74,497)												(77,166) Translation adjustment (90) (1,401) (22,158)												(23,649)
Balance December 31, 1992 				118,974 174,365 1,746,260												2,039,599 Depreciation 15,005 16,449 190,935														222,389 Disposals, retirements and reclassifications (7,947) (741) (104,730) (113,418) Translation adjustment (75) 1,084 (41,434)													(40,425)
BALANCE DECEMBER 31, 1993 				 $125,957 $191,157 $1,791,031 $2,108,145
PROPERTY, PLANT AND EQUIPMENT, NET, DECEMBER 31, 1993 $126,855 $270,124 $ 915,00 $78,262 $1,390,249
NOTE 8 SHORT-TERM DEBT AND COMPENSATING BALANCE AGREEMENTS 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. At December 31, 1993, $67 million was extended to FMC pursuant to the above foreign credit arrangements.
December 31 (In thousands) 1993 1992 1991 Balance at end of year $66,904 $54,759				$59,287 Weighted average interest rate end of year(1) 7.4% 8.4%				9.3% Maximum outstanding $66,904 $77,970 $94,899 Average outstanding $38,085 $61,580 $75,067 Weighted average interest rate during the year(1), (2) 8.8% 12.7% 13.0%
(1) The average interest rates have been adjusted for currency devaluation associated withborrowings in hyperinflationary countries.(2) Weighted average interest rate is computed as related interest expense divided by the average outstanding balance during the year.
NOTE 9 LONG-TERM DEBT LONG-TERM DEBT CONSISTS OF THE FOLLOWING:
December 31 (In thousands) 1993 1992 Revolving credit facility, effective rate (1993 5.9%; 1992 6.9%)(1) $ - $ - Uncommitted facilities, effective rate (1993 4.2%; 1992 5.9%)(2) -						10,000 Notes payable to banks, various rates, due 1994 to 1998 39,594 198,437 Sinking fund debentures, 7-1/2%, due 2001 - 32,258 Pollution control and industrial revenue bonds, 2.9% to 7.1%, due 1995 to 2024 94,845 117,530 Senior debt, 8-3/4% due 1999, less unamortized discount (1993 $885; 1992 $1,056), effective rate 8.8% 249,115 248,944 Senior debt, 6-3/8% due 2003, less unamortized discount of $1,057, effective rate 6.4% 198,943 - Zero coupon senior subordinated convertible debentures due 2011, less unamortized discount of $488,430 in 1992, 7-1/2% yield to maturity - 166,570 Sterling denominated debt, due 2042, less unamortized discount of $18,901, 7.65% yield to maturity 104,849 - Exchangeable senior subordinated debentures, 6-3/4%, due 2005 75,000 75,000 Other 2,538 3,362 Total 764,884 852,101 Less current portion 15,029 8,476 Long-term portion $749,855 $843,625
(1) The effective rate on the revolving credit facility is based on average balances outstanding during the year and includes facility fees and expenses incurred due to interest rate swaps.
(2) The effective rate on uncommitted facilities is based on average balances outstandingduring the year and includes expenses incurred due to interest rate swaps.
During 1993, the company, with funds obtained through its revolving credit agreement, repurchased the remaining $655 million, less unamortized discount of $481 million, of 7-1/2% zero coupon senior subordinated convertible debentures with an original maturity date of 2011, $32 million of 7-1/2% sinking fund debentures, originally due 2001, and $19 million of industrial revenue bonds. 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.
In August 1993, subsequent to the repurchases noted above, the company issued $200 million of 6-3/8% senior notes due 2003. The net proceeds of $198 million were used to repay advances under the revolving credit agreement. In order to secure long-term financing in the United Kingdom, the company also issued Sterling denominated debt in December 1993 due 2042 with a yield to maturity of 7.65% and a maturity value of $124 million.
The company previously entered into an interest rate collar agreement, with a notional amount of $50 million at December 31, 1992, to reduce the impact of changes in interest rates on floating rate long-term debt. The agreement effectively capped interest rates by exchanging floating rate for fixed rate interest payment obligations. During 1993, the company terminated the interest rate collar agreement.
During 1992, the company issued $250 million of 8-3/4% senior debt with a maturity date of April 1, 1999. The net proceeds of $247 million were used to repurchase the remaining $123 million of 12-1/4% senior subordinated debentures, and to reduce debt incurred in February 1992 to repurchase the remaining $99 million of 12-1/2% subordinated debentures. In October 1992, the company also repurchased the remaining $45 million of the 9-1/2% sinking fund debentures prior to their maturities. As a result of the premium paid on the above repurchases, the write-off of related unamortized debt issuance costs, and other expenses, the company incurred an extraordinary charge of $11.4 million, net of tax benefits of $6.7 million, in 1992.
Net proceeds from the 1991 issuance of $146.7 million of zero coupon senior subordinated convertible debentures, repurchased in 1993, were originally used to repurchase $159 million of 12-1/2% subordinated debentures prior to their scheduled maturities. As a result of the premium paid on the repurchases, the write-off of related unamortized debt issuance costs, and other expenses, the company incurred an extraordinary charge of $9.2 million, net of tax benefits of $5.4 million, in 1991.
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.
In 1992, FMC entered into a $700 million, five-year, non- amortizing revolving credit agreement that replaced the company's previous credit agreement which had a maximum credit limit of $583 million. At December 31, 1993, no amounts were outstanding under the company's revolving credit facility or uncommitted facilities. Among other restrictions, the credit agreement contains covenants relating to dividends, liens, consolidated net worth and cash flow coverage and leverage ratios (as defined in the agreement). The company is in compliance with all financial debt covenants.
Aggregate maturities and sinking fund requirements over the next five years are (in millions): 1994 $15.0, 1995 $42.0, 1996 $28.1, 1997 $24.3, 1998 $19.1, and thereafter $636.4.
NOTE 10 INCOME TAXES Effective January 1, 1993, the company adopted SFAS No. 109, "Accounting for Income Taxes," which changed the company's method of accounting for income taxes from the deferred method to an asset and
liability approach. Previously, the company deferred the tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities.
The company has elected not to restate the financial statements of prior years for this change in accounting. The cumulative effect of the change on pretax income and net income was not material.
Domestic and foreign components of pretax income (loss) from continuing operations are shown below:
Year ended December 31 (In thousands) 1993 1992 1991 Domestic $(17,165) $226,471 $205,278 Foreign 54,979 53,164 50,654 Total $ 37,814 $279,635 $255,932
The provision (benefit) for income taxes consists of: Year ended December 31 (In thousands) 1993 1992 1991 Current: Federal $23,733 $56,356 $56,353 Foreign 8,352 21,058 17,531 State and local 3,660 12,666 13,304 Total current 35,745 90,080 87,188 Deferred (38,898) (3,046) (4,339) Total income taxes $(3,153) $87,034 $82,849
Total income tax benefit for the year ended December 31, 1993 was allocated as follows:
(In thousands) 1993 Income from continuing operations $(3,153) Extraordinary item (2,664) Stockholders' equity, for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes (2,388) Income tax benefit $(8,205)
Significant components of the deferred income tax benefit attributable to income from continuing operations for the year ended December 31, 1993 are as follows:
(In thousands) 1993 Deferred tax (exclusive of the effects of other components listed below) $(50,653) Adjustments to deferred tax assets and liabilities for enacted changes in tax laws and rates (5,083) Increase in the valuation allowance for deferred tax assets 16,838 Deferred income tax benefit $(38,898)
Significant components of the company's deferred tax assets and liabilities as of December 31, 1993 are as follows:
(In thousands) 1993 Accrued pension and other postretirement benefits $107,218 Reserve for discontinued operations and restructuring 149,208 Other reserves 108,561 Net operating loss carryforwards 22,737 Alternative minimum tax credit carryforwards 12,446 Capitalized research and development costs 14,660 Other 17,078 Deferred tax assets 431,908 Valuation allowance (37,281) Deferred tax assets, net of valuation allowance $394,627 Property, plant and equipment $163,797 Other 6,152 Deferred tax liabilities $169,949 Net deferred tax assets $224,678
The valuation allowance for deferred tax assets as of January 1, 1993 was $20.5 million. The total valuation allowance increased $16.8 million, primarily due to an increase in the valuation allowance for FMC Gold's deferred tax assets as a result of the write-down of the Beartrack property (Note 2), offset by a $6 million decrease in the valuation allowance due to revised estimates for realizing foreign tax net operating losses.
As of December 31, 1993, the company has prepaid $12.4 million of alternative minimum tax. These prepayments represent credits that are available in future years to offset regular taxes to the extent they exceed alternative minimum tax.
The effective income tax rate applicable to pretax income is less than the statutory U.S. federal income tax rate for the following reasons:
Percent of pre-tax income Year ended December 31 1993 1992 1991 Statutory U.S. tax rate 35% 34% 34% Net increase (decrease): Foreign sales corporation income not subject to U.S. tax (30) (3) (3) Percentage depletion (51) (7) (8) State and local income taxes, less federal income tax benefit (6) 3 4 Foreign earnings subject to different tax rates (15) 1 (1) Tax on intercompany dividends and deemed dividends for tax purposes 54 1 3 Adjustment to deferred tax assets for enacted changes in tax rates (13) - - Equity in earnings of affiliates not taxed (9) (1) (1) Minority interest on FMC Gold restructuring charge (11) - - Change in valuation allowance 44 1 2 Other (6) 2 2 Total decrease (43) (3) (2) Effective tax rate (8)% 31% 32%
The 1992 net loss included pretax special charges of $296.3 million for postretirement benefits and $120.0 million for discontinued operations. The tax benefits attributable to these special charges are included in deferred taxes and are expected to be realized over an extended period of time as the charges become deductible for tax purposes.
The source and tax effect of the deferred income tax provision (benefit) were as follows:
Year ended December 31 (In thousands) 1992 1991 Tax depreciation less than book $(7,215) $(11,430) Prepaid pension costs 9,040 10,390 Change in other reserves (10,475) (11,863) Research, intangible drilling, exploration and development 1,510 6,566 Tax on intercompany dividends - 4,900 Other timing differences 4,094 (2,902) Continuing operations (3,046) (4,339) Postretirement health care and life insurance benefits (112,609) - Discontinued operations (47,285) 8,013 Total deferred income tax provision (benefit) $(162,940) $3,674
FMC Corporation's federal income tax returns for years through 1986 have been examined by the Internal Revenue Service and have been settled, except for a few issues awaiting final resolution in the U.S. Tax Court for years 1978 through 1984. Management believes that adequate provision for income taxes has been made for the open issues in the U.S. Tax Court and for all other open years. Income taxes have not been provided for the equity in undistributed earnings of foreign consolidated subsidiaries ($244.9 million at December 31, 1993). Restrictions on the distribution of these earnings are not significant. Foreign earnings taxable to the company as dividends were $131.0 million, $22.2 million and $15.1 million in 1993, 1992, and 1991, respectively.
NOTE 11 STOCKHOLDERS' EQUITY The company is authorized to issue 60,000,000 shares of common stock, par value $0.10 per share, and 5,000,000 shares of preferred stock, no par value. None of the preferred stock is issued or outstanding.
The 1990 Incentive Share Plan is a continuation of previous plans providing certain incentives and rewards to key employees. The plan is administered by the Compensation and Organization Committee of the Board of Directors (the Committee) which, subject to the provisions of the plan, approves participants and awards, and times and conditions for payment.
Awards may be made in the form of an unconditional stock option and a conditional dollar amount. Unconditional stock options are exercisable at the end of an award period, usually four years from the date of the grant, while all, part, or none of the conditional dollar amount may be paid at the end of the award period if the stock option has little or no value and, in the case of performance awards, financial targets have been met and approved by the Committee.
Stock options may be incentive stock options and/or nonqualified stock options. The exercise price for options is the fair market value of the stock at the date of grant. Incentive stock options expire not more than 10 years after the grant date. Nonqualified stock options expire not more than 15 years after the grant date (10 years for grants prior to 1990), although the Committee may extend the expiration date of any nonqualified stock option.
Under the plan, 2.8 million shares became available for awards and options to be granted in 1990 and later years. At December 31, 1993, awards covering approximately 1.7 million of these shares had been made in the form of stock options.
The following summary shows stock option activity:
Shares optioned but not Option price exercised per share
December 31, 1991 2,671,826 $6.53-$31.25 Granted 681,300 $46.375 Exercised (609,979) $6.53-$24.50 Cancelled (63,789) $24.50-$46.375 December 31, 1992 2,679,358 $7.39-$46.375 Granted 199,300 $45.00 Exercised (313,775) $7.39-$24.50 Cancelled (98,700) $29.50-$46.375 December 31, 1993 2,466,183 $10.43-$46.375
At December 31, 1993, 776,683 of the optioned shares are exercisable at prices ranging from $10.43 to $31.25 per share, with expiration dates from December 12, 1994 to February 19, 1998. On January 3, 1994, an additional 704,800 shares became exercisable at prices ranging from $29.875 to $31.125 with an expiration date of April 27, 2005. The excess of proceeds over the par value of optioned shares issued is credited to capital in excess of par value of capital stock. Cancellation (through expiration, forfeiture or otherwise) of awards granted after 1989 increases the shares available for future awards.
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, 1993, stock units representing an aggregate of 12,437 shares of stock were credited to the nonemployee directors' accounts.
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, 1990 35,021 258 Stock options exercised 528 Stock repurchases 21 Balance December 31, 1991 35,549 279 Stock options exercised 610 Stock repurchases 7 Balance December 31, 1992 36,159 286 Stock options exercised 314 Stock repurchases 6 Balance December 31, 1993 36,473 292
At December 31, 1993, 3,576,683 shares of FMC common stock were reserved for stock options and awards.
Covenants of the revolving credit facility agreement (Note 9) restrict aggregate payment of dividends on the company's common stock to 50 percent of consolidated net income (as defined) after December 31, 1991, plus $170 million. However, no dividends are expected to be paid on the company's common stock in 1994. The covenants also contain a minimum net worth requirement (as defined) of $300 million plus 50 percent of consolidated net income (as defined) after June 30, 1992.
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, one one- hundredth of a share of Junior Participating Preferred Stock, Series A, without par value, at a price of $75 per share (subject to adjustment), subject to the terms and conditions of a Rights Agreement dated February 22, 1986.
The rights are not exercisable or transferable apart from the common stock until 10 days after a public announcement that a person or group either (1) has acquired, or has obtained the right to acquire, beneficial ownership of 20 percent or more of the company's outstanding shares of common stock, or (2) has commenced, or announced an intention to commence, a tender offer or exchange offer that would result in the person or group beneficially owning 30 percent or more of the outstanding shares of common stock. The rights expire on March 7, 1996, 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 Preferred Stock for possible issuance under the plan.
In February 1988, the Rights Agreement was amended, such that if an entity acquired more than 20 percent of FMC's common stock, FMC stockholders, except the acquiring stockholder, will have the right to purchase FMC common stock at a substantial discount to market value. For a period of 10 days after the date of the stock acquisition, the FMC Board of Directors may redeem the rights, permit the rights to be exercised or extend the 10-day redemption period.
NOTE 12 SEGMENT INFORMATION A description and summary of the results of the company's industry segments are on pages 17 through 37 of this annual report.
Sales to various agencies of the U.S. government aggregated $768.4 million, $839.5 million and $854.1million in 1993, 1992 and 1991, respectively. These sales were made primarily by the Defense Systems segment.
Summarized financial information for the geographic areas in which the company operates (including export sales) is shown in the following tables. Other income and expense items are included in the profits below and are summarized and discussed on page 38.
U. S. EXPORT SALES TO UNAFFILIATED CUSTOMERS BY DESTINATION OF SALE
Year ended December31 (In thousands) 1993 1992 1991
Latin America and Canada $176,842 $172,171 $136,752 Europe 192,182 250,506				262,026 Asia, Africa and others 415,301 474,813				515,049 Total $784,325 $897,490			$913,827
NOTE 13 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.
The following table summarizes the assumptions used and the components of the domestic net benefit:
Year ended December 31 Assumptions: 1993 1992 1991
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% 9.8%
Components (in thousands): Service cost-benefits earned $22,621 $22,650 $22,283 Interest cost on projected benefit obligation 50,222 47,128 43,464 Actual return on plan assets investment (gains) losses (105,917) (43,942) (126,360) Net amortization and deferral: Net transition asset amortization (22,970) (22,970) (22,970) Prior service cost amortization 3,857 8,485 4,013 Net gain amortization (1,948) (2,270)		(1,468) Net asset gain (loss) deferred 46,504 (12,906) 72,822 Net pension benefit $(7,631) $ (3,825)		$(8,216)
In 1992, the net pension benefit included a pension curtailment charge of $4.6 million relating to the elimination of certain employees in the company's hourly plans.
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 thousands) 1993 1992 Actuarial present value of benefits for service rendered to date: Accumulated benefit obligation based on salaries to date, including vested benefits of $541,096 in 1993 and $492,874 in 1992 $(565,222)			$(509,705) Additional benefits based on estimated future salary levels (117,110)			(134,649) Projected benefit obligation (682,332)			(644,354) Plan assets at fair value(1) 717,011					633,984 Projected benefit obligation (in excess of) or less than plan assets 34,679				(10,370) Unrecognized net loss 413					49,295 Unrecognized prior service cost 24,553					24,066 Unrecognized net transition asset (167,791)		(190,761) Accrued pension cost $(108,146)	$(127,770)
(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 $6.7 million in 1993, $5.9 million in 1992 and $3.8 million in 1991.
NOTE 14 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 conformance with Federal Cost Accounting Standards.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," was implemented by the company effective January 1, 1992 using the immediate recognition transition option. SFAS No. 106 requires accrual of the expected cost of providing postretirement benefits, other than pensions, during the years that the employee renders the necessary service. This resulted in a one-time, pretax adjustment of $296.3 million ($183.7 million, net of tax) in 1992, of which $92.5 million ($57.4 million, net of tax) was recorded for retiree benefits provided to former employees of discontinued operations.
Prior to 1992, the company recognized postretirement health care costs using the cash basis of accounting, while the estimated costs of postretirement life insurance benefits were generally accrued over the employees' active working lives. These costs were $17.2 million in 1991.
For measurement purposes, the assumed rate of future increases in per capita cost of health care benefits was 13 percent in 1993 and 1992, 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 $10 million and would increase annual service and interest costs by $1 million.
The following table summarizes the assumptions used and the components of net periodic postretirement benefit cost:
Year ended December 31 Assumptions: 1993 1992 Weighted average discount rate 8.0% 8.0% Weighted average expected long-term asset return 9.0% 9.0%
Components (in thousands): Service cost of benefits earned $4,721 $6,938 Interest cost on accumulated postretirement benefit obligation 14,300 18,299 Actual return on plan assets (1,246) (707) Net amortization and deferral: Plan amendment amortization (6,132) (258) Net asset loss deferred (266) (361) Net periodic postretirement benefit cost $11,377 $23,911
The accrued postretirement benefit cost recognized in the company's consolidated financial statements and the funded status of the plan as of December 31 are as follows:
(In thousands) 1993 1992 Accumulated postretirement benefit obligation (APBO): Retirees $(85,180) $(90,882) Fully eligible active participants (30,764) (61,448) Other active participants (61,395) (85,249) APBO (177,339) (237,579) Plan assets at fair value(1) 20,792 14,826 APBO obligation in excess of plan assets (156,547) (222,753) Unamortized plan amendments (70,426) (14,240) Unrecognized net (gain) or loss (4,725) 361 Accrued postretirement benefit cost $(231,698) (236,632)
(1) Primarily equities and fixed income securities
In 1993, the company announced plan changes to establish a service-related premium and a fixed-dollar cap on the company's medical plan contributions for its salaried and non-union hourly retiree medical plans. These changes, effective April 1, 1993, reduced the benefit obligation by $62.4 million, amortizable over the remaining years of service to full eligibility.
In the fourth quarter of 1992, the company announced plan design changes to its salaried and non-union hourly retiree medical plans. These changes, effective January 1, 1993, reduced the
benefit obligation by $14.5 million, amortizable over the remaining years of service to full eligibility.
NOTE 15 EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN The FMC Employees' Thrift and Stock Purchase Plan (Thrift 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. Under the Thrift Plan, participants may elect to have up to 15 percent of their compensation contributed to the plan. An employee's contribution, up to five percent of compensation, is matched by the company anywhere from 15 percent to 100 percent (80 percent prior to April 1, 1993), depending on profits and fund elections. A participant's interest in the company's contributions vests gradually during the first five years of active service and is fully vested thereafter. The employee-elected contributions may be invested in company stock, a fixed income fund or an equity fund. All matching contributions by the company are invested in the company's stock. Charges against income for FMC's matching contributions, net of forfeitures, were $17.1 million in 1993, $13.9 million in 1992 and $12.6 million in 1991.
NOTE 16 COMMITMENTS AND CONTINGENT LIABILITIES FMC leases office space, plants and facilities, and various types of manufacturing, data processing and transportation equipment. Leases of a capital nature are not significant. Total rent expense under all leases not capitalized amounted to $60.0 million, $59.8 million and $54.3 million in 1993, 1992 and 1991, respectively. Minimum future rentals under noncancellable leases aggregated approximately $321 million as of December 31, 1993 and are estimated to be payable $51 million in 1994, $42 million in 1995, $32 million in 1996, $26 million in 1997, $25 million in 1998 and $145 million thereafter. The real estate leases generally provide for payment of property taxes, insurance and repairs by FMC.
The company may be obligated to recognize expenses required to comply with federal, state, and local environmental laws under which the company has been identified as a PRP by the EPA or other government agencies. The company has been named a PRP at 34 sites on the government's National Priority List (NPL). Similarly, 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. The company, in cooperation with appropriate government agencies, is currently participating in, or has participated in, Remediation Investigation/Feasibility Studies (RI/FS) at the identified sites, with the status of each investigation varying from site to site. RI/FS at certain sites have just begun whereby limited information, if any, is available 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, and RODs have been issued.
Reserves at the end of 1993 were provided for potential environmental obligations which management considers probable and for which a reasonable estimate of the obligation could be made. In accordance with the company's environmental accounting policy, reserves of $133 million, net of approximately $54 million of recoveries, including recoveries from insurance
companies, the federal government and other PRPs that management considers probable, have been provided at the end of 1993, primarily in discontinued operations and other reserves. The liability arising from potential environmental obligations that have not been reserved for at this time because amounts cannot be reasonably determined due to uncertainties associated with remedial- related activities, relevant clean-up technologies and methods, and amounts to be recovered from third parties may or may not be material to any one year's results of operations in the future. Management, however, believes the liability arising from these potential environmental obligations is not likely to have a material adverse effect on the company's liquidity or financial condition and will be satisfied over many years.
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 insurance carriers that provided insurance coverage for the cost of clean-up at a number of waste sites. 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. In July 1993, in the Supreme Court of Santa Clara County, a jury verdict determined that these exclusions do not apply to several of these sites. The other sites will be the subject of future litigation.
Regarding current operating sites, the company spent approximately $16 million, $20 million and $28 million for the years 1993, 1992 and 1991, respectively, on capital projects relating to environmental control facilities, and expects to spend additional capital of approximately $26 million and $28 million in 1994 and 1995, respectively. Additionally, in 1993, 1992, and 1991, FMC spent approximately $63 million, $57 million and $48 million, respectively, for environmental compliance costs for these sites.
Regarding previously operated and other sites for the years 1993, 1992 and 1991, FMC charged approximately $17 million, $11 million and $5 million, respectively, against established reserves for remediation spending, and charged approximately $10 million, $11 million and $10 million, respectively, against reserves for spending on Remediation Investigation/Feasibility Studies (RI/FS). Recoveries from third parties of approximately $7 million and $3 million, respectively, were received and credited to the reserves in 1993 and 1992. No recoveries were received in 1991. FMC anticipates that the expenditures for current operating, previously operated and other sites will continue to be significant for the foreseeable future.
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.
NOTE 17 SUBSEQUENT EVENT On January 28, 1994, FMC Corporation and Harsco Corporation announced completion of the transaction, first announced in December 1992, to combine FMC's Defense Systems Group and
Harsco's BMY Combat Systems Division. The new partnership, United Defense, L.P., is jointly owned, with FMC holding a controlling interest of 60 percent and Harsco holding 40 percent. FMC will also manage the business.
United Defense, L.P. product lines include armored combat and combat support vehicles, weapons delivery systems, track and components for military vehicles, system overhaul and conversion, and logistics support services. Annual sales of approximately $1 billion are expected.
The 1994 consolidated financial statements will include the combined results as if the combination had occurred on January 1, 1994. The consolidated results for the Defense Systems segment are not expected to differ significantly from those results expected prior to the combination.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders, FMC Corporation:
We have audited the consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31, 1993 and 1992, 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, 1993. 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.
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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of FMC Corporation and consolidated subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, the company changed its method of accounting for post retirement benefits other than pensions in 1992.
KPMG Peat Marwick Chicago, Illinois January 24, 1994
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.
The company's system of internal accounting controls provides reasonable assurance as to the reliability of financial records and the protection of assets. Internal accounting control 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 which constantly evaluates the adequacy and effectiveness of such internal accounting 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. The 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, KPMG Peat Marwick, 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.
Arthur D. Lyons Frank A. Riddick, III Vice President-Finance Controller
Chicago, Illinois January 24, 1994
ADDITIONAL 10-K INFORMATION
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, the 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. FMC 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.
Employees. The company had 20,696 employees at December 31, 1993. Contracts covering 11 percent of domestic hourly employees will expire during 1994. Management believes that these contracts will be renewed without a material effect on the company's businesses.
Resources and raw materials. The company uses oil, gas, coal, coke, hydro-electric power and nuclear power to meet its energy needs.
Chemical operations' natural resource requirements are purchased or provided from properties under long-term lease, which are subject to periodic royalty adjustments. Raw materials for the machinery businesses, principally steel and related products, are obtained from many foreign and domestic sources.
Patents. The company's patents, trademarks and licenses are cumulatively important to its businesses. The loss of any one or group of related patents, trademarks or licenses would not have a material adverse effect on the overall businesses of the company or on any of its industry segments.
Properties. FMC leases executive offices in Chicago and administrative offices in Philadelphia. The company operates 99 manufacturing facilities and mines in 21 countries. Major research facilities are in Santa Clara, Calif., and Princeton, N.J. 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, Wyo., is mined primarily from property held under long-term lease. FMC also owns half of a lithium mine located near Cherryville, N.C., and has long-term lease commitments for the remaining portion. FMC Gold Company owns mineral rights to gold and silver ore bodies at the Paradise Peak mine in Gabbs, Nev., the Royal Mountain King mine in Copperopolis, Calif., and 86 percent of the undeveloped Beartrack property in Idaho, as well as the right to 30 percent of the gold ore reserves at the Jerritt Canyon mine in Elko, Nev., operated by its joint- venture partner, Independence Mining Company Inc., a wholly owned subsidiary of Minorco (USA) Inc. 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. Generally, the leases may be extended at FMC's option.
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:
United Latin America Western States and Canada Europe Other Total Industrial Chemicals 18 2 8 - 28 Performance Chemicals 8 4 5 2						19 Precious Metals 5 - - -							5 Defense Systems 10 - - -						10 Machinery and Equipment 16 4 12 5						37
FIVE YEAR FINANCIAL SUMMARY (In millions, except per share, employee and stockholder data) 1993 1992 1991 1990 1989 Summary of earnings Sales $3,753.9 3,973.7 3,899.4 3,722.2			3,414.5 Equity in earnings of affiliates 6.4 11.1 6.6 7.0						3.8 Other revenue 28.6 18.7 20.8 40.5					18.8 Total revenue 3,788.9 4,003.5 3,926.8 3,769.7		3,437.1 Cost of sales 2,825.3 2,960.2 2,930.2 2,787.8		2,497.2 Selling, general and administrative expenses 541.7 536.0 498.7 484.8				438.2 Research and development 149.2 145.0 134.6 157.6				149.7 Restructuring and other charges 172.3 - - - - Total costs and expenses 3,688.5 3,641.2 3,563.5 3,430.2 3,085.1 Income from continuing operations before interest, gain on FMC Gold Company sale of stock and taxes 100.4 362.3 363.3 339.5 352.0 Interest income 11.0 12.2 17.3 22.5 28.2 Interest expense 73.6 94.9 124.7 150.6 161.9 Gain on FMC Gold Company sale of stock - - - - - Income from continuing operations before income taxes 37.8 279.6 255.9 211.4 218.3 Provision (benefit) for income taxes (3.2) 87.0 82.8 56.1 61.5 Income from continuing operations 41.0 192.6 173.1 155.3 156.8 Discontinued operations, net of taxes - (73.2) - - - Income before extraordinary items and cumulative effect of change in accounting principle 41.0 119.4 173.1 155.3 156.8 Extraordinary items, net of taxes (4.7) (11.4) (9.2) - (20.4) Cumulative effect of change in accounting principle, net of taxes - (183.7) - - - Net income (loss) $36.3 (75.7) 163.9 155.3 136.4 Total dividends $ - - - - - Share data Average number of shares used in earnings per share computations (thousands): Primary 36,943 36,796 36,267 36,075 36,006 Fully diluted 36,943 39,694 37,566 36,094 36,106 Primary earnings (loss) per share: Continuing operations $1.11 5.23 4.77 4.30 4.35 Discontinued operations - (1.99) - - - Extraordinary items (0.13) (0.31) (0.25) - (0.56) Cumulative effect of change in accounting principle - (4.99) - - - Net income (loss) $0.98 (2.06) 4.52 4.30 3.79 Earnings (loss) per share assuming full dilution: Continuing operations $1.11 5.04 4.68 4.30 4.34 Discontinued operations - * - - - Extraordinary items (0.13) * (0.24) - (0.56) Cumulative effect of change in accounting principle - * - - - Net income $0.98 * 4.44 4.30 3.78 FINANCIAL POSITION AT YEAR-END Working capital $ 3.7 (1.1) (13.2) 40.6 117.6 Property, plant and equipment, at cost 3,498.4 3,541.7 3,389.7 3,279.8 2908.0 Accumulated depreciation 2,108.1 2,039.6 1,905.4 1,772.6 1,573.1 Total assets 2,813.1 2,826.6 2,815.6 2,959.2 2,819.0 Long-term debt 749.9 843.6 929.0 1,158.6 1,325.6 Stockholders' equity (deficit) 216.9 219.0 309.8 149.6 (70.6) OTHER DATA Income from continuing operations as a return on investment 7.8% 20.6 18.4 17.9 19.1 Capital expenditures $244.5 314.5 216.8 324.4 	280.8 Provision for depreciation $222.4 235.0 224.9 211.2		197.8 Employees at year-end 20,696 22,097 23,150 23,882	24,110 Stockholders of record at year-end, common and preferred 13,180 14,487 14,959 17,451	18,151
*Per share amounts are antidilutive. FMC CORPORATION Annual Report on Form 10-K for 1993
Exhibit 22 LIST OF SIGNIFICANT SUBSIDIARIES OF REGISTRANT 12/31/93
Organized Percent of Under Laws Voting of Securities 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														 79.8 FMC Paradise Peak Corporation........... Nevada																	 100 FMC Jerritt Canyon Corporation.......... Delaware															 100 Meridian Gold Company................... Montana 																100 FMC Wyoming Corporation................. Delaware															 100 Food Machinery Holding Company B.V.... Netherlands												 100 Foret, S.A.............................. Spain																		 100 Intermountain Research & Development Corporation............................. Wyoming																 100 FMC Do Brasil S.A....................... 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 Limited..					Bermuda 																100
(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.
FMC CORPORATION Annual Report on Form 10-K for 1993
Exhibit 24 Consent of Auditors
The Board of Directors FMC Corporation:
We consent to incorporation by reference in Registration Statement No. 33-7749 and Registration Statement No. 33-10661 on Forms S-8 and Registration Statement No. 33-45648 on Form S- 3 of FMC Corporation and consolidated subsidiaries of our report dated January 24, 1994, relating to the consolidated balance sheets of FMC Corporation and consolidated subsidiaries as of December 31,1993 and 1992, and the related consolidated statements of income, cash flows and changes in stockholder's equity for each of the years in the three-year period ended December 31, 1993, which report appears in the December 31,1993 annual report on Form 10-K of FMC Corporation and consolidated subsidiaries.
Chicago, Illinois March 28, 1994
FMC CORPORATION Annual Report on Form 10-K for 1993
Exhibit 25 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 one or more of such documents;
NOW, THEREFORE, the undersigned hereby constitutes and appoints A.D. Lyons, P.J. Head 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, 1993, 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 11th day of February, 1994.
Signature 										 Title Arthur D. Lyons 						 Vice President-Finance and 					 Principal Financial Officer Arthur D. Lyons
Frank A. Riddick 						 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 Paul L. Davies, Jr. 						 Director Jean A. Francois-Poncet 						Director Robert H. Malott 						 Director Edward C. Meyer 						Director James R. Thompson 						 Director Clayton Yeutter 						 Director
By: Robert L. Day Robert L. Day Attorney-in-fact