10-K 1 fmc201610k.htm 10-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
 FORM 10-K
_______________________________________________________________________
X
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2016
or
 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 1-2376
__________________________________________________________________________
FMC CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________________________ 
Delaware
 
94-0479804
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
2929 Walnut Street
Philadelphia, Pennsylvania
 
19104
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 215-299-6668
__________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.10 par value
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

INDICATE BY CHECK MARK IF THE REGISTRANT IS A WELL-KNOWN SEASONED ISSUER, AS DEFINED IN RULE 405 OF THE SECURITIES ACT.    YES  x    NO  ¨
INDICATE BY CHECK MARK IF THE REGISTRANT IS NOT REQUIRED TO FILE REPORTS PURSUANT TO SECTION 13 AND SECTION 15(d) OF THE ACT.    YES  ¨    NO  x
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.    YES  x    NO   ¨
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INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K    ¨




INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER OR A SMALLER REPORTING COMPANY. SEE DEFINITIONS OF “LARGE ACCELERATED FILER,” “ACCELERATED FILER,” AND “SMALLER REPORTING COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT. (CHECK ONE):
LARGE ACCELERATED FILER
 
X
  
ACCELERATED FILER
 
 
 
 
 
 
 
 
 
NON-ACCELERATED FILER
 
 
  
SMALLER REPORTING COMPANY
 
 
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT)    YES  ¨    NO  x
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF JUNE 30, 2016, THE LAST DAY OF THE REGISTRANT’S SECOND FISCAL QUARTER WAS $6,151,803,443. THE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES EXCLUDES THE VALUE OF THOSE SHARES HELD BY EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE
Class
 
December 31, 2016
Common Stock, par value $0.10 per share
 
133,690,106

DOCUMENTS INCORPORATED BY REFERENCE
 
DOCUMENT
 
FORM 10-K REFERENCE
Portions of Proxy Statement for 2017 Annual Meeting of Stockholders
 
Part III




FMC Corporation
2016 Form 10-K Annual Report
Table of Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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PART I
FMC Corporation (FMC) was incorporated in 1928 under Delaware law and has its principal executive offices at 2929 Walnut Street, Philadelphia, Pennsylvania 19104. Throughout this Annual Report on Form 10-K, except where otherwise stated or indicated by the context, “FMC”, “We,” “Us,” or “Our” means FMC Corporation and its consolidated subsidiaries and their predecessors. Copies of the annual, quarterly and current reports we file with the Securities and Exchange Commission (“SEC”), and any amendments to those reports, are available on our website at www.FMC.com as soon as practicable after we furnish such materials to the SEC.

ITEM 1.
BUSINESS
General
We are a diversified chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and market-leading products. We operate in three distinct business segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium. Our FMC Agricultural Solutions segment develops, markets and sells all three major classes of crop protection chemicals: insecticides, herbicides and fungicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as in non-agricultural markets for pest control. The FMC Health and Nutrition segment focuses on nutritional ingredients, health excipients, and functional health ingredients. Nutritional ingredients are used to enhance texture, color, structure and physical stability. Health excipients are used for binding, encapsulation and disintegrant applications. Functional health ingredients are used as active ingredients in nutraceutical and pharmaceutical markets. Our FMC Lithium segment manufactures lithium for use in a wide range of lithium products, which are used primarily in energy storage, specialty polymers and chemical synthesis application.

Cheminova A/S
On April 21, 2015, pursuant to the terms and conditions set forth in the Purchase Agreement, we completed the acquisition of 100 percent of the outstanding equity of Cheminova A/S, a Denmark Aktieselskab ("Cheminova") from Auriga Industries A/S, a Denmark Aktieselskab for an aggregate purchase price of $1.2 billion, excluding assumed net debt and hedged-related costs of approximately $0.6 billion (the “Acquisition”).
At December 31, 2016, we had substantially completed the integration of Cheminova into our FMC Agricultural Solutions segment.
FMC Strategy
FMC has streamlined its portfolio over the past six years to focus on technology-driven end markets with attractive long-term demand trends. The actions we have taken over the past year have better positioned each of our businesses to capitalize on future growth opportunities.
2016 was a critical year for Agricultural Solutions, as we took proactive steps during a challenging year in agriculture markets to better position the company for an eventual recovery of that market. We facilitated channel destocking and continued our product rationalization, removing approximately $175 million in sales of low-margin products around the world. This has allowed us to sell proprietary products at better prices and terms, even in a challenging year for crop chemicals. We continue to benefit from the greater regional balance and direct market access in key markets that came with our 2015 acquisition of Cheminova. FMC’s technology pipeline of nine new active ingredients is well-funded and set to begin major product launches starting in 2018. We began the registration process in North America for the first one, our bixafen fungicide. We also launched about 60 new product formulations, which is key to life cycle management of our products. FMC has the scale to operate with greater resources and global reach to address changing market conditions.
In Health and Nutrition, we have a portfolio of naturally-derived, functional ingredients that serve health, nutrition and nutraceutical end markets. We provide innovative solutions to our customers by leveraging our application know-how as well as differentiating the manufacture and delivery of our market leading products through best in class Quality, Service, Reliability (QSR). We continue to optimize our organizational and manufacturing footprints to increase our competitive positioning. As a technology-focused company, we continue to pursue process technology improvements and develop innovative application solutions to drive the highest value for customers.
In Lithium, FMC remains one of the leading global producers of specialty lithium products, and in May 2016 we announced plans to triple our manufacturing capacity for lithium hydroxide by 2019. The first phase of this modular expansion is set to begin selling product in mid-2017 to serve the rapidly expanding market for lithium batteries in electric vehicles. We will continue to invest in lithium hydroxide and similar higher growth, higher value segments of the market, including butyllithium for use in chemical synthesis and high purity lithium metal for aerospace applications.

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We maintain our commitment to enterprise sustainability, including responsible stewardship. As we grow, we will do so in a responsible way. Safety and business ethics will remain of utmost importance. Meeting and exceeding our customers’ expectations will continue to be a primary focus.

Financial Information About Our Business Segments
(Financial Information (in Millions))
See Note 19 "Segment Information" to our consolidated financial statements included in this Form 10-K. Also see below for selected financial information related to our segments.
The following table shows the principal products produced by our three business segments, their raw materials and uses:
 
Segment
Product
Raw Materials
Uses
FMC Agricultural Solutions
Insecticides
Synthetic chemical intermediates
Protection of crops, including soybean, corn, fruits and vegetables, cotton, sugarcane, rice, and cereals, from insects and for non-agricultural applications including pest control for home, garden and other specialty markets
 
Herbicides
Synthetic chemical intermediates
Protection of crops, including cotton, sugarcane, rice, corn, soybeans, cereals, fruits and vegetables from weed growth and for non-agricultural applications including turf and roadsides
 
Fungicides
Synthetic and biological chemical intermediates
Protection of crops, including fruits and vegetables from fungal disease
 
 
 
 
FMC Health and Nutrition
Microcrystalline Cellulose
Specialty pulp
Drug dry tablet binder and disintegrant, food ingredient
 
Carrageenan
Refined seaweed
Food ingredient for thickening and stabilizing, pharmaceutical and nutraceutical encapsulates
 
Alginates
Refined seaweed
Food ingredient, pharmaceutical excipient, healthcare and industrial uses
 
Natural Colorants
Plant sources, select insect species
Food, pharmaceutical and cosmetics
 
Omega-3 EPA/DHA
Fish oils
Nutraceutical and pharmaceutical uses
 
 
 
 
FMC Lithium
Lithium
Various lithium products
Batteries, polymers, pharmaceuticals, greases and lubricants, glass and ceramics and other industrial uses

With a worldwide manufacturing and distribution infrastructure, we are better able to respond rapidly to global customer needs, offset downward economic trends in one region with positive trends in another and match local revenues to local costs to reduce the impact of currency volatility. The charts below detail our sales and long-lived assets by major geographic region.

fmcrevenueandllabyregionfmc2.jpg


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FMC Agricultural Solutions
    agsrevenueandomfmc201610k03h.jpg        agscapexfmc201610k04histo01.jpg
Overview

agssalesmixrevenuefmc201610k.jpg


Our FMC Agricultural Solutions segment, which represents approximately 69 percent of our 2016 consolidated revenues, operates in the agrochemicals industry. This segment develops, manufactures and sells a portfolio of crop protection, professional pest control and lawn and garden products.

Products and Markets
 
FMC Agricultural Solutions' portfolio is comprised of three major pesticide categories: insecticides, herbicides and fungicides. The majority of our product lines consist of insecticides and herbicides, and we have a small but fast-growing portfolio of fungicides mainly used in high value crop segments. Our insecticides are used to control a wide spectrum of pests, while our herbicide portfolio primarily targets a large variety of difficult-to-control weeds. We are also investing substantially in a plant health program that includes biological crop protection products, seed treatments and micronutrients.
In the Latin American region, which includes the large agricultural market of Brazil, we sell directly to large growers through our own sales and marketing organization, and we access the market through independent distributors. In North America, we access the market through several major national and regional distributors and have our own sales and marketing organization in Canada. With the Cheminova acquisition, we now access a majority of the European markets through our own sales and marketing organizations. We access key Asian markets either through local independent distributors or our own sales and marketing organizations. Through these and other alliances, along with our own targeted marketing efforts, access to novel technologies and

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our innovation initiatives, we expect to maintain and enhance our access in key agricultural and non-crop markets and develop new products that will help us continue to compete effectively.
Industry Overview
The three principal categories of agricultural and non-crop chemicals are: herbicides, insecticides and fungicides, representing approximately 42 percent, 28 percent and 27 percent of global industry revenue, respectively.
The agrochemicals industry is relatively consolidated but further consolidation is likely as several of the leading crop protection companies are actively pursuing merger opportunities. Leading crop protection companies FMC, Syngenta AG, Bayer AG, Monsanto Company, BASF AG, The Dow Chemical Company, E. I. du Pont de Nemours and Company (DuPont), and Adama currently represent approximately 74 percent of the industry’s global sales. The next tier of agrochemical producers include Sumitomo Chemical Company Ltd., Nufarm Ltd., Platform Specialty Products Corporation, and United Phosphorous Ltd. FMC employs various differentiated strategies and competes with unique technologies focusing on certain crops, markets and geographies, while also being supported by a low-cost manufacturing model.

Growth
The acquisition of Cheminova positions FMC among leading agrochemical producers in the world.  Our complementary technologies will lead to improved formulation capabilities and a broader innovation pipeline, resulting in new and differentiated products. We will take advantage of enhanced market access positions and an expanded portfolio to deliver near-term growth. 
We will continue to grow by obtaining new and approved uses for existing product lines and acquiring, accessing, developing, marketing, distributing and/or selling complementary chemistries and related technologies in order to strengthen our product portfolio and our capabilities to effectively service our target markets and customers.
Our growth efforts focus on developing environmentally compatible and sustainable solutions that can effectively increase farmers’ yields and provide cost-effective alternatives to chemistries which may be prone to resistance. We are committed to providing unique, differentiated products to our customers by acquiring and further developing technologies as well as investing in innovation to extend product life cycles. Our external growth efforts include product acquisitions, in-licensing of chemistries and technologies and alliances that bolster our market access, complement our existing product portfolio or provide entry into adjacent spaces. We have entered into a range of development and distribution agreements with other companies that provide access to new technologies and products which we can subsequently commercialize.
FMC Health and Nutrition         
            hnrevenueomfmc201610k11histo.jpg


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Overview
Our FMC Health and Nutrition segment, which represents 23 percent of our 2016 consolidated revenues, is focused on high-performance food ingredients, pharmaceutical excipients and Omega-3 oils. The majority of FMC Health and Nutrition sales are to customers in non-cyclical end markets. We believe our future growth in this segment will continue to be based on the value-added performance of these products and our research and development capabilities, as well as on the alliances and close working relationships we have developed with key global customers.

Products and Markets  

    hnrevenuebyregionfmc201610k0.jpg        hncapexfmc201610k12histo01.jpg

Our product offerings into nutrition markets principally provide texture, structure and physical stability ("TSPS") solutions to thicken and stabilize certain food products. Our formulation ingredients serve the health excipient industry functioning as binders, disintegrants, suspending agents, and control-release compounds for the production of both solid and liquid pharmaceutical products. The majority of our functional ingredient product offerings are high purity Omega-3 products as well as certain alginate products which are considered to be active pharmaceutical ingredients.
FMC Health and Nutrition is a supplier of microcrystalline cellulose ("MCC"), carrageenan, alginates, natural colorants, and omega-3, all naturally derived ingredients that have high value-added applications in the production of processed and convenience foods, oral dose form pharmaceuticals and nutraceuticals. MCC, processed from specialty grades of renewable hardwood and softwood pulp, provides binding and disintegrant properties for dry tablets and capsules and has unique functionality that improves the texture and stability of many nutrition products. Carrageenan and alginates, both processed from natural seaweeds, are used in a wide variety of food, pharmaceutical and oral care applications. Natural colorants are utilized in specialty products used in the food, beverage, personal care, nutrition and health excipient markets. Omega-3 is sourced from fish oils and used in other pharmaceutical and nutraceutical applications.
Industry Overview
Nutritional Ingredients
The industry is dispersed geographically, with sales predominantly in Europe, North America and Asia. The nutritional ingredients market is comprised of a large number of suppliers due to the broad spectrum of chemistries employed. Segment leadership, global position and investment in technology are key factors to sustaining profitability. The top suppliers of TSPS ingredients include FMC, DuPont, J.M. Huber Corporation, Kerry Group plc and Cargill Incorporated.
Health Excipients and Functional Health Ingredients
Competitors tend to be grouped by chemistry. Our principal MCC competitors include J. Rettenmaier & Sôhne GmbH, Ming Tai Chemical Co., Ltd., Asahi Kasei Corporation and Blanver Farmoquimica Ltda. While pricing pressure from low-cost producers is a common competitive dynamic, companies look to offset that pressure by providing the most reliable and broadest range of products and services. Our customers are pharmaceutical firms who depend upon reliable therapeutic performance of their drug products. In Omega-3, our competitors include DSM, BASF, Croda and other smaller producers. Competition has intensified in this market over the past several years as many smaller producers attempt to enter in what is considered by many as an attractive growth market. Differentiation among higher end producers such as FMC is achieved through know-how to produce high concentration oils at high levels of purity.

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FMC Lithium

            lithiumrevenueomfmc201610k07.jpg        

Overview
Our FMC Lithium segment represents eight percent of our 2016 consolidated revenues.
While lithium is sold into a variety of end markets, we have focused our strategy on specialty products that require a high level of manufacturing and technical know-how to meet customer requirements.
The electrochemical properties of lithium make it an ideal material for portable energy storage, including smart phones, tablets, laptop computers, military devices and other energy storage technologies. Lithium is a critical element in advanced batteries for use in hybrid electric, plug-in hybrids and all-electric vehicles.
Organolithium products are highly valued in the polymer market as initiators in the production of synthetic rubbers and elastomers. Organolithiums are also sold to fine chemical and pharmaceutical customers who use lithium's unique chemical properties to synthesize high value-added products.
Industry Overview
    lithiumrevenuebyregionfmc201.jpg        lithiumcapexfmc201610k08hist.jpg

FMC Lithium serves a diverse group of markets. Our product offerings are primarily inorganic and generally have few cost-effective substitutes. A major growth driver for lithium in the future will be the rate of adoption of electric vehicles.

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Most markets for lithium chemicals are global with significant growth occurring both in Asia and North America, primarily driven by the development and manufacture of lithium ion batteries. There are three key producers of lithium compounds: FMC, Albemarle Corporation (previously Rockwood Holdings, Inc.) and Sociedad Química y Minera de Chile S.A. In addition to these producers, Orocobre is ramping up production from its brine source in Argentina and several Chinese producers convert lithium containing hard rock concentrates sourced from Australia into lithium compounds. We expect additional capacity to be added by new and existing producers within the next 24 months. FMC and Albemarle Corporation are the primary producers of specialty lithium products.
Source and Availability of Raw Materials
Raw materials used by FMC Agricultural Solutions, primarily processed chemicals, are obtained from a variety of suppliers worldwide. Raw materials used by FMC Health and Nutrition include various types of seaweed, specialty pulps, natural colorant, raw materials and fish oils that are all sourced on a global basis and purchased from selected global producers/suppliers. We extract ores used in FMC Lithium’s manufacturing processes from lithium brines in Argentina.
Patents
We own a number of U.S. and foreign patents, trademarks and licenses that are cumulatively important to our business. We do not believe that the loss of any individual or combination of related patents, trademarks or licenses would have a material adverse effect on the overall business of FMC. The duration of our patents depends on their respective jurisdictions.
Seasonality
The seasonal nature of the crop protection market and the geographic spread of the FMC Agricultural Solutions business can result in significant variations in quarterly earnings among geographic locations. FMC Agricultural Solutions' products sold in the northern hemisphere (North America, Europe and parts of Asia) serve seasonal agricultural markets from March through September, generally resulting in earnings in the first, second and third quarters. Markets in the southern hemisphere (Latin America and parts of the Asia Pacific region, including Australia) are served from July through February, generally resulting in earnings in the third, fourth and first quarters. The remainder of our business is generally not subject to significant seasonal fluctuations.
Competition
We encounter substantial competition in each of our three business segments. We market our products through our own sales organization and through alliance partners, independent distributors and sales representatives. The number of our principal competitors varies from segment to segment. In general, we compete by providing advanced technology, high product quality, reliability, quality customer and technical service, and by operating in a cost-efficient manner.
Our FMC Agricultural Solutions segment competes primarily in the global chemical crop protection market for insecticides, herbicides and fungicides. Industry products include crop protection chemicals and, for certain major competitors, genetically engineered (crop biotechnology) products. Competition from generic agrochemical producers is significant as a number of key product patents held industry-wide have expired in the last decade. In general, we compete as an innovator by focusing on product development, including novel formulations, proprietary mixes, and advanced delivery systems and by acquiring or licensing (mostly) proprietary chemistries or technologies that complement our product and geographic focus. We also differentiate ourselves by our global cost-competitiveness through our manufacturing strategies, establishing effective product stewardship programs and developing strategic alliances that strengthen market access in key countries and regions.
Our FMC Health and Nutrition segment has significant positions in markets that include alginate, carrageenan, and microcrystalline cellulose. We compete with both direct suppliers of cellulose and seaweed extract as well as suppliers of other hydrocolloids, which may provide similar functionality in specific applications. In microcrystalline cellulose, competitors are typically smaller than FMC, while in seaweed extracts (carrageenan and alginates) and Omega-3 fish oils, we compete with other broad-based chemical companies.
FMC Lithium segment sells lithium-based products worldwide. We and our two most significant competitors in lithium extract the element from naturally occurring lithium-rich brines located in the Andes Mountains of Argentina and Chile, which are believed to be the world’s most significant and lowest cost sources of lithium.
Research and Development Expense
We perform research and development in all of our segments with the majority of our efforts focused in the FMC Agricultural Solutions segment. The development efforts in the FMC Agricultural Solutions segment focus on developing environmentally sound solutions and new product formulations that cost-effectively increase farmers’ yields and provide alternatives to existing and new chemistries. Our research and development expenses in the last three years are set forth below:

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Year Ended December 31,
(in Millions)
2016
 
2015
 
2014
FMC Agricultural Solutions
$
131.4

 
$
132.4

 
$
111.8

FMC Health and Nutrition
7.0

 
7.8

 
10.0

FMC Lithium
3.1

 
3.5

 
4.5

Total
$
141.5

 
$
143.7

 
$
126.3

Environmental Laws and Regulations
A discussion of environmental related factors can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 10 “Environmental Obligations” in the notes to our consolidated financial statements included in this Form 10-K.
Employees
We employ approximately 5,900 people with about 1,300 people in our domestic operations and 4,600 people in our foreign operations.
Approximately seven percent of our U.S.-based and 35 percent of our foreign-based employees, respectively, are represented by collective bargaining agreements. We have successfully concluded most of our recent contract negotiations without any material work stoppages. In those rare instances where a work stoppage has occurred, there has been no material effect on consolidated sales and earnings. We cannot predict, however, the outcome of future contract negotiations. In 2017, 11 foreign collective-bargaining agreements will be expiring. These contracts affect about 15 percent of our foreign-based employees. There will be no U.S. collective-bargaining agreements expiring in 2017.
Securities and Exchange Commission Filings
Securities and Exchange Commission (SEC) filings are available free of charge on our website, www.fmc.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are posted as soon as practicable after we furnish such materials to the SEC.
In accordance with New York Stock Exchange (NYSE) rules, on May 23, 2016, we filed a certification signed by our Chief Executive Officer (CEO) that, as of the date of the certification, he was unaware of any violation by FMC of the NYSE’s corporate governance listing standards. We also file with each Form 10-Q and our Form 10-K certifications by the CEO and Chief Financial Officer under sections 302 and 906 of the Sarbanes-Oxley Act of 2002.


ITEM 1A.
RISK FACTORS
Below lists our risk factors updated for these events.
Among the factors that could have an impact on our ability to achieve operating results and meet our other goals are:
Industry Risks:
Pricing and volumes in our markets are sensitive to a number of industry specific and global issues and events including:
Capacity utilization - Our businesses are sensitive to industry capacity utilization. As a result, pricing tends to fluctuate when capacity utilization changes occur within our industry.
Competition - All of our segments face competition, which could affect our ability to maintain or raise prices, successfully enter certain markets or retain our market position. Competition for our FMC Agricultural Solutions business, includes not only generic suppliers of the same pesticidal active ingredients, but also alternative proprietary pesticide chemistries, and crop protection technologies that are bred into or applied onto seeds. Increased generic presence in agricultural chemical markets has been driven by the number of significant product patents and product data protections that have expired in the last decade, and this trend is expected to continue. Also, there are changing competitive dynamics in the agro-chemical industry as some of our competitors are attempting to consolidate, resulting in them having greater scale and diversity.  These competitive differences may not be overcome and erode our business.
Changes in our customer base - Our customer base has the potential to change, especially when long-term supply contracts are renegotiated. Our FMC Lithium and FMC Health and Nutrition businesses are most sensitive to this risk.
Climatic conditions - Our FMC Agricultural Solutions markets are affected by climatic conditions, which could adversely impact crop pricing and pest infestations; for example, drought may reduce the need for fungicides, which could result in fewer sales and greater unsold inventories in the market, whereas excessive rain could lead to increased plant disease

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or weed growth requiring growers to purchase and use more pesticides. Adverse weather conditions can impact our ability to extract lithium efficiently from our lithium reserves in Argentina. Natural disasters can impact production at our facilities in various parts of the world. The nature of these events makes them difficult to predict.
Changing regulatory environment - Changes in the regulatory environment, particularly in the United States, Brazil, China, Argentina and the European Union, could adversely impact our ability to continue producing and/or selling certain products in our domestic and foreign markets or could increase the cost of doing so. Our FMC Agricultural Solutions business is most sensitive to this general regulatory risk given the need to obtain and maintain pesticide registrations in every country in which we sell our products. Many countries require re-registration of pesticides to meet new and more challenging requirements; while we defend our products vigorously, these re-registration processes may result in significant additional data costs, reduced number of permitted product uses, or potential product cancellation.   Compliance with changing laws and regulations may involve significant costs or capital expenditures or require changes in business practice that could result in reduced profitability. In the European Union, the regulatory risk specifically includes chemicals regulation known as REACH (Registration, Evaluation, and Authorization of Chemicals), which affects each of our business segments to varying degrees. The fundamental principle behind the REACH regulation is that manufacturers must verify through a special registration system that their chemicals can be marketed safely.
Geographic concentration - Although we have operations in most regions, the majority of our FMC Agricultural Solutions sales outside the United States have principally been to customers in Latin America, including Brazil, Argentina and Mexico. With the acquisition of Cheminova, we are expanding our international sales, particularly in Europe and key Asian countries such as India. Accordingly, developments in those parts of the world will generally have a more significant effect on our operations. Our operations outside the United States are subject to special risks and restrictions, including: fluctuations in currency values; exchange control regulations; changes in local political or economic conditions; governmental pricing directives; import and trade restrictions; import or export licensing requirements and trade policy; restrictions on the ability to repatriate funds; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad.
Food and pharmaceutical regulation - Some of our manufacturing processes and facilities, as well as some of our customers, are subject to regulation by the U.S. Food and Drug Administration (FDA) or similar foreign agencies. Regulatory requirements of the FDA are complex, and any failure to comply with them including as a result of contamination due to acts of sabotage could subject us and/or our customers to fines, injunctions, civil penalties, lawsuits, recall or seizure of products, total or partial suspension of production, denial of government approvals, withdrawal of marketing approvals and criminal prosecution. Any of these actions could adversely impact our net sales, undermine goodwill established with our customers, damage commercial prospects for our products and materially adversely affect our results of operations.
Consumer preferences - Changing consumer preferences is a risk particularly within FMC Health and Nutrition. Any significant changes in consumer preferences or any inability on our part to anticipate or react to such changes could result in reduced demand for our products and impact our results of operations.
Climate change regulation - Changes in the regulation of greenhouse gases, depending on their nature and scope, could subject our manufacturing operations to significant additional costs or limits on operations.
Fluctuations in commodity prices - Our operating results could be significantly affected by the cost of commodities, including raw materials. We may not be able to raise prices or improve productivity sufficiently to offset future increases in commodity pricing. Accordingly, increases in commodity prices may negatively affect our financial results. We also use hedging strategies to address material commodity price risks, where hedge strategies are available on reasonable terms. However, we are unable to avoid the risk of medium- and long-term increases. Additionally, fluctuations in commodity prices could negatively impact our customers' ability to sell their products at previously forecasted prices resulting in reduced customer liquidity. Inadequate customer liquidity could affect our customers’ abilities to pay for our products and, therefore, affect existing and future sales or our ability to collect on customer receivables.
Supply arrangements - Certain raw materials are critical to our production process. While we have made supply arrangements to meet planned operating requirements, an inability to obtain the critical raw materials or operate under contract manufacturing arrangements would adversely impact our ability to produce certain products. We increasingly source critical intermediates and finished products from a number of suppliers, largely outside of the U.S. and principally in China. An inability to obtain these products or execute under contract sourcing arrangements would adversely impact our ability to sell products. In FMC Lithium, geological conditions can affect production of raw materials.
Economic and political change - Our business has been and could continue be adversely affected by economic and political changes in the markets where we compete including: inflation rates, recessions, trade restrictions, foreign ownership restrictions and economic embargoes imposed by the United States or any of the foreign countries in which we do business; changes in laws, taxation, and regulations and the interpretation and application of these laws, taxes, and regulations; restrictions imposed by the United States government or foreign governments through exchange controls or taxation policy; nationalization or expropriation of property, undeveloped property rights, and legal systems or political instability; other governmental actions; and other external factors over which we have no control. Economic and political conditions within the United States and foreign jurisdictions or strained relations between countries can cause fluctuations in demand,

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price volatility, supply disruptions, or loss of property. In Argentina, continued inflation and tightening of foreign exchange controls along with deteriorating economic and financial conditions could adversely affect our business.

Operational Risks:
Market access risk - Our results may be affected by changes in distribution channels, which could impact our ability to access the market.
Business disruptions - Although more recently, FMC Agricultural Solutions has engaged in pesticide active ingredient contract manufacturing rather than owned and operated manufacturing facilities, we now own and operate large-scale manufacturing facilities in Denmark and India as a result of the Cheminova acquisition. This presents us with additional operating risks as our operating results will be dependent in part on the continued operation of the various acquired production facilities and the ability to manufacture products on schedule. Interruptions at these facilities may materially reduce the productivity and profitability of a particular manufacturing facility, or our business as a whole, during and after the period of such operational difficulties. Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations and those of our contract manufacturers are subject to hazards inherent in chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These potential hazards include explosions, fires, severe weather and natural disasters, mechanical failure, unscheduled downtimes, supplier disruptions, labor shortages or other labor difficulties, information technology systems outages, disruption in our supply chain or manufacturing and distribution operations, transportation interruptions, chemical spills, discharges or releases of toxic or hazardous substances or gases, shipment of contaminated or off-specification product to customers, storage tank leaks, other environmental risks, or other sudden disruption in business operations beyond our control as a result of events such as acts of sabotage, terrorism or war, civil or political unrest, natural disasters, pandemic situations and large scale power outages. Some of these hazards may cause severe damage to or destruction of property and equipment or personal injury and loss of life and may result in suspension of operations or the shutdown of affected facilities.
Information technology security risks - As with all enterprise information systems, our information technology systems could be penetrated by outside parties’ intent on extracting information, corrupting information, or disrupting business processes. Our systems have in the past been, and likely will in the future be, subject to unauthorized access attempts. Unauthorized access could disrupt our business operations and could result in failures or interruptions in our computer systems and in the loss of assets and could have a material adverse effect on our business, financial condition or results of operations. In addition, breaches of our security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential information about the company, our employees, our vendors, or our customers, could result in litigation, violations of various data privacy regulations in some jurisdictions, and also potentially result in liability to us. This could damage our reputation, or otherwise harm our business, financial condition, or results of operations.
Capital-intensive business - With the acquisition of Cheminova, our business is more capital intensive than it has been historically. We rely on cash generated from operations and external financing to fund our growth and ongoing capital needs. Limitations on access to external financing could adversely affect our operating results. Moreover, interest payments, dividends and the expansion of our business or other business opportunities may require significant amounts of capital. We believe that our cash from operations and available borrowings under our revolving credit facility will be sufficient to meet these needs in the foreseeable future. However, if we need external financing, our access to credit markets and pricing of our capital will be dependent upon maintaining sufficient credit ratings from credit rating agencies and the state of the capital markets generally. There can be no assurances that we would be able to obtain equity or debt financing on terms we deem acceptable, and it is possible that the cost of any financings could increase significantly, thereby increasing our expenses and decreasing our net income. If we are unable to generate sufficient cash flow or raise adequate external financing, including as a result of significant disruptions in the global credit markets, we could be forced to restrict our operations and growth opportunities, which could adversely affect our operating results.
Credit default risks - We may use our existing revolving credit facility to meet our cash needs, to the extent available. In the event of a default in this credit facility or any of our senior notes, we could be required to immediately repay all outstanding borrowings and make cash deposits as collateral for all obligations the facility supports, which we may not be able to do. Any default under any of our credit arrangements could cause a default under many of our other credit agreements and debt instruments. Without waivers from lenders party to those agreements, any such default could have a material adverse effect on our ability to continue to operate.
Litigation and environmental risks - Current reserves relating to our ongoing litigation and environmental liabilities may ultimately prove to be inadequate.
Hazardous materials - We manufacture and transport certain materials that are inherently hazardous due to their toxic or volatile nature. While we take precautions to handle and transport these materials in a safe manner, if they are mishandled or released into the environment, they could cause property damage or result in personal injury claims against us.
Environmental compliance - We are subject to extensive federal, state, local, and foreign environmental and safety laws, regulations, directives, rules and ordinances concerning, among other things, emissions in the air, discharges to land and water, and the generation, handling, treatment, disposal and remediation of hazardous waste and other materials. We may

13


face liability arising out of the normal course of business, including alleged personal injury or property damage due to exposure to chemicals or other hazardous substances at our current or former facilities or chemicals that we manufacture, handle or own. We take our environmental responsibilities very seriously, but there is a risk of environmental impact inherent in our manufacturing operations and transportation of chemicals. Any substantial liability for environmental damage could have a material adverse effect on our financial condition, results of operations and cash flows.
Workforce - The inability to recruit and retain key personnel or the unexpected loss of key personnel may adversely affect our operations. In addition, our future success depends in part on our ability to identify and develop talent to succeed senior management and other key members of the organization. We operate in markets where business ethics and local customs may differ from our standards, increasing the potential for the misunderstanding or misapplication of those standards.  This may increase the risk of noncompliance.

Technology Risks:
Technological change - Our ability to compete successfully depends in part upon our ability to maintain a superior technological capability and to continue to identify, develop and commercialize new and innovative, high value-added products for existing and future customers.
Failure to make process improvements - Failure to continue to make process improvements to reduce costs could impede our competitive position.
Patents of competitors - Some of our competitors may secure patents on production methods or uses of products that may limit our ability to compete cost-effectively.

Portfolio Management and Integration Risks:
Portfolio management risks - We continuously review our portfolio which includes the evaluation of potential business acquisitions that may strategically fit our business and strategic growth initiatives. If we are unable to successfully integrate and develop our acquired businesses, we could fail to achieve anticipated synergies which would include expected cost savings and revenue growth. Failure to achieve these anticipated synergies, could materially and adversely affect our financial results. In addition to strategic acquisitions we evaluate the diversity of our portfolio in light of our objectives and alignment with our growth strategy. In implementing this strategy we may not be successful in separating underperforming or non-strategic assets. The gains or losses on the divestiture of, or lost operating income from, such assets (e.g., divesting) may affect the company’s earnings. Moreover, we may incur asset impairment charges related to acquisitions or divestitures that reduce earnings.
Continuing integration challenges - Failure to successfully integrate the operating and financial systems of Cheminova into our systems poses technology integration risks and could result in our inability to achieve the synergies we have projected. This could thereby cause our future results of operations to be materially and adversely worse than expected. As we evaluate and adjust our supply chain as part of integrating Cheminova to achieve synergies and efficiencies, we face execution and sustainability risks if we are unable to modify and timely execute the supply chain as planned.

Financial Risks:
Exposure to global economic conditions - Deterioration in the global economy and worldwide credit and foreign exchange markets could adversely affect our business. A worsening of global or regional economic conditions or financial markets could adversely affect our customers' ability to meet the terms of sale or our suppliers' ability to perform all their commitments to us. A slowdown in economic growth in our international markets, particularly Latin American regions, or a deterioration of credit or foreign exchange markets could adversely affect customers, suppliers and our overall business there. Customers in weakened economies may be unable to purchase our products, or it could become more expensive for them to purchase imported products in their local currency, or sell their commodities at prevailing international prices, and we may be unable to collect receivables from such customers. The ongoing economic challenges in Brazil has adversely impacted and could continue to adversely impact our business there.
Foreign exchange rate risks - We are an international company and face foreign exchange rate risks in the normal course of our business. We are particularly sensitive to the Brazilian real, the euro, the Chinese yuan, the Mexican peso, and the Argentine peso. Our acquisition of Cheminova has significantly expanded our operations and sales in foreign countries and correspondingly increased our exposure to foreign exchange risks. During 2015, adverse changes in the Brazilian real exchange rate adversely impacted our financial results and continued weakness in the real could continue to adversely impact our financial results.
Uncertain tax rates - Our future effective tax rates may be materially impacted by numerous items including: a future change in the composition of earnings from foreign and domestic tax jurisdictions, as earnings in foreign jurisdictions are typically taxed at more favorable rates than the United States federal statutory rate; accounting for uncertain tax positions; business combinations; expiration of statute of limitations or settlement of tax audits; changes in valuation allowance; changes in tax law; and the potential decision to repatriate certain future foreign earnings on which United States taxes have not been previously accrued.

14


Uncertain recoverability of investments in long-lived assets - We have significant investments in long-lived assets and continually review the carrying value of these assets for recoverability in light of changing market conditions and alternative product sourcing opportunities.
Pension and postretirement plans - Obligations related to our pension and postretirement plans reflect certain assumptions. To the extent our plans' actual experience differs from these assumptions, our costs and funding obligations could increase or decrease significantly.

ITEM 1B.
UNRESOLVED STAFF COMMENTS

None.

ITEM 2.
PROPERTIES
FMC leases executive offices in Philadelphia, Pennsylvania and operates 32 manufacturing facilities in 19 countries as well as one mine in Argentina. Our major research and development facilities are in Ewing, New Jersey, Shanghai, China and Copenhagen, Denmark.
We have long-term mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. Our FMC Lithium division requires the lithium brine that is mined from these reserves, without which other sources of raw materials would have to be obtained.
We believe our facilities are in good operating conditions. The number and location of our owned or leased production properties for continuing operations are:
 
United
States
 
Latin
America
&
Canada
 
Western
Europe
 
Asia-
Pacific
 
Total
FMC Agricultural Solutions
2
 
1
 
4
 
5
 
12
FMC Health and Nutrition
2
 
1
 
7
 
3
 
13
FMC Lithium
1
 
2
 
1
 
3
 
7
Total
5
 
4
 
12
 
11
 
32

ITEM 3.
LEGAL PROCEEDINGS

Like hundreds of other industrial companies, we have been named as one of many defendants in asbestos-related personal injury litigation. Most of these cases allege personal injury or death resulting from exposure to asbestos in premises of FMC or to asbestos-containing components installed in machinery or equipment manufactured or sold by discontinued operations. The machinery and equipment businesses we owned or operated did not fabricate the asbestos-containing component parts at issue in the litigation, and to this day, neither the U.S. Occupational Safety and Health Administration nor the Environmental Protection Agency has banned the use of these components. Further, the asbestos-containing parts for this machinery and equipment were accessible only at the time of infrequent repair and maintenance. A few jurisdictions have permitted claims to proceed against equipment manufacturers relating to insulation installed by other companies on such machinery and equipment. We believe that, overall, the claims against FMC are without merit.
As of December 31, 2016, there were approximately 8,000 premises and product asbestos claims pending against FMC in several jurisdictions. Since the 1980s, approximately 113,000 asbestos claims against FMC have been discharged, the overwhelming majority of which have been dismissed without any payment to the claimant. Since the 1980s, settlements with claimants have totaled approximately $80 million.
We intend to continue managing these asbestos-related cases in accordance with our historical experience. We have established a reserve for this litigation within our discontinued operations and believe that any exposure of a loss in excess of the established reserve cannot be reasonably estimated. Our experience has been that the overall trends in asbestos litigation have changed over time. Over the last several years, we have seen changes in the jurisdictions where claims against FMC are being filed and changes in the mix of products named in the various claims. Because these claim trends have yet to form a predictable pattern, we are presently unable to reasonably estimate our asbestos liability with respect to claims that may be filed in the future.
See Note 1 “Principal Accounting Policies and Related Financial Information—Environmental Obligations,” Note 10 “Environmental Obligations” and Note 18 “Guarantees, Commitments and Contingencies” in the notes to our consolidated financial statements included in this Form 10-K, the content of which are incorporated by reference to this Item 3.

15


In September 2015, EPA Region 3 filed an administrative complaint against the Company, claiming that certain advertising and labeling regarding one of our pesticide products did not comply with the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) and has calculated a proposed penalty in the amount of $4,709,400.  We disagree with EPA on whether a violation occurred and, if a violation did occur, the appropriate penalty calculation, and will defend ourselves vigorously.   We do not expect that any penalty associated with final judgment or other resolution would be material.

ITEM 4.
MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 4A.
EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of FMC Corporation, the offices they currently hold, their business experience since at least January 1, 2010 and their ages as of December 31, 2016, are as follows:

Name
 
Age on
12/31/2016
 
Office, year of election and other
information
Pierre R. Brondeau
 
59
 
President, Chief Executive Officer and Chairman of the Board (10-present); President and Chief Executive Officer of Dow Advanced Materials, a specialty materials company (08-09); President and Chief Operating Officer of Rohm and Haas Company, a predecessor of Dow Advanced Materials (07-08); Board Member, T.E. Connectivity Electronics (07-present)
Paul W. Graves
 
45
 
Executive Vice President and Chief Financial Officer (12-present); Managing Director, Goldman Sachs Group (06-12)
Andrea E. Utecht
 
68
 
Executive Vice President, General Counsel and Secretary (01-present)
Eric W. Norris
 
50
 
President, FMC Health and Nutrition (15-present); Vice President, Global Business Director, FMC Lithium (12-14); Global Commercial Director, FMC Lithium (09-12)
Mark A. Douglas
 
54
 
President, FMC Agricultural Solutions (12-present); President, Industrial Chemicals Group (11-12); Vice President, Global Operations and International Development (10-11); Vice President, President Asia, Dow Advanced Materials (09-10); Board Member, Quaker Chemical (13-present)
All officers are elected to hold office for one year or until their successors are elected and qualified. No family relationships exist among any of the above-listed officers, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. The above-listed officers have not been involved in any legal proceedings during the past ten years of a nature for which the SEC requires disclosure that are material to an evaluation of the ability or integrity of any such officer.

PART II
 
ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
FMC common stock of $0.10 par value is traded on the New York Stock Exchange (Symbol: FMC). There were 2,869 registered common stockholders as of December 31, 2016. Presented below are the 2016 and 2015 quarterly summaries of the high and low prices of the FMC common stock.
 
 
2016
 
2015
Common stock prices:
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
High
$
42.03

 
$
50.57

 
$
49.19

 
$
60.00

 
$
64.72

 
$
61.11

 
$
52.74

 
$
43.37

Low
$
32.24

 
$
36.72

 
$
43.26

 
$
45.77

 
$
55.41

 
$
51.18

 
$
32.58

 
$
33.29

Our Board of Directors has declared regular quarterly dividends since 2006; however, any future payment of dividends will depend on our financial condition, results of operations, conditions in the financial markets and such other factors as are deemed relevant by our Board of Directors. Total cash dividends of $88.6 million, $86.4 million and $78.1 million were paid in 2016, 2015 and 2014, respectively.

16


FMC’s annual meeting of stockholders will be held at 2:00 p.m. on Tuesday, April 25, 2017, at FMC Tower, 2929 Walnut Street Philadelphia, Pennsylvania. Notice of the meeting, together with proxy materials, will be mailed approximately 30 days prior to the meeting to stockholders of record as of February 28, 2017.
 
Transfer Agent and Registrar of Stock:
Wells Fargo Bank, N.A.
 
 
Shareowner Services
 
 
1110 Centre Pointe Curve, Suite 101
or
P.O. Box 64854
Mendota Heights, MN 55120-4100
St. Paul, MN 55164-0854
 
 
 
Phone: 1-800-468-9716
 
 
(651-450-4064 local and outside the U.S.)
 
 
www.wellsfargo.com/shareownerservices

Stockholder Return Performance Presentation
The graph that follows shall not be deemed to be incorporated by reference into any filing made by FMC under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The following Stockholder Performance Graph compares the five-year cumulative total return on FMC’s Common Stock with the S&P 500 Index and the S&P 500 Chemicals Index. The comparison assumes $100 was invested on December 31, 2011, in FMC’s Common Stock and in both of the indices, and the reinvestment of all dividends.
 
2011
 
2012
 
2013
 
2014
 
2015
 
2016
FMC Corporation
$
100.00

 
$
136.97

 
$
177.88

 
$
135.85

 
$
94.79

 
$
138.60

S&P 500 Index
$
100.00

 
$
115.88

 
$
153.01

 
$
173.69

 
$
176.07

 
$
196.78

S&P 500 Chemicals Index
$
100.00

 
$
123.39

 
$
162.18

 
$
179.44

 
$
172.04

 
$
189.21



fmcstockperformancechartfmc2.jpg




17


The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2016:
ISSUER PURCHASES OF EQUITY SECURITIES
 
 
 
 
 
 
Publicly Announced Program (1)
Period
Total Number
of Shares
Purchased (2)
 
Average
Price Paid
Per  Share
 
Total Number of
Shares Purchased
 
Total Dollar
Amount
Purchased
 
Maximum Dollar  Value of
Shares that May  Yet be
Purchased
October 1-31, 2016
2,579

 
$
46.64

 

 
$

 
$
250,000,000

November 1-30, 2016
210,000

 
$
53.43

 
210,000

 
$
11,220,922

 
$
238,779,078

December 1-31, 2016
558

 
$
52.76

 

 
$

 
$
238,779,078

Total
213,137

 
$
53.35

 
210,000

 
$
11,220,922

 
$
238,779,078

____________________ 
(1)
This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors.
(2)
We also reacquire shares from time to time from employees in connections with vesting, exercise, and forfeiture of awards under our equity compensation plans.

18


ITEM 6.
SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial and other data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 2016, are derived from our consolidated financial statements. The selected consolidated financial data should be read in conjunction with our consolidated financial statements for the year ended December 31, 2016.
 
 
Year Ended December 31,
(in Millions, except per share data and ratios)
2016
 
2015
 
2014
 
2013
 
2012
Income Statement Data:
 
 
 
 
 
 
 
 
 
Revenue
$
3,282.4


$
3,276.5

 
$
3,258.7

 
$
3,130.7

 
$
2,677.6

Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
421.5


(50.2
)
 
414.8

 
538.7

 
487.7

Income (loss) from continuing operations before income taxes
339.3


(130.5
)
 
363.8

 
503.2

 
453.5

Income (loss) from continuing operations
245.4


(177.9
)
 
307.6

 
371.6

 
345.8

Discontinued operations, net of income taxes (1)
(33.7
)

676.4

 
14.5

 
(63.6
)
 
89.9

Net income
211.7

 
498.5

 
322.1

 
308.0

 
435.7

Less: Net income attributable to noncontrolling interest
2.6

 
9.5

 
14.6

 
14.1

 
19.5

Net income attributable to FMC stockholders
$
209.1

 
$
489.0

 
$
307.5

 
$
293.9

 
$
416.2

Amounts attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations, net of income taxes
242.8


(187.4
)
 
298.2

 
365.1

 
341.3

Discontinued operations, net of income taxes
(33.7
)

676.4

 
9.3

 
(71.2
)
 
74.9

Net income
$
209.1

 
$
489.0

 
$
307.5

 
$
293.9

 
$
416.2

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations
1.81


(1.40
)
 
2.23

 
2.69

 
2.47

Discontinued operations
(0.25
)

5.06

 
0.07

 
(0.53
)
 
0.54

Net income
$
1.56

 
$
3.66

 
$
2.30

 
$
2.16

 
$
3.01

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations
1.81


(1.40
)
 
2.22

 
2.68

 
2.46

Discontinued operations
(0.25
)

5.06

 
0.07

 
(0.52
)
 
0.54

Net income
$
1.56

 
$
3.66

 
$
2.29

 
$
2.16

 
$
3.00

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
6,139.3


$
6,325.9

 
$
5,326.0

 
$
5,224.6

 
$
4,366.2

Long-term debt
1,801.2


2,037.8

 
1,140.9

 
1,178.2

 
906.8

Other Data:
 
 
 
 
 
 
 
 
 
Ratio of earnings (loss) to fixed charges (2)
4.5x

 
(0.4)x

 
6.3x

 
11.2x

 
10.8x

Cash dividends declared per share
$
0.660

 
$
0.660

 
$
0.600

 
$
0.540

 
$
0.405

 ____________________
(1)
Discontinued operations, net of income taxes includes, in periods up to their respective sales, our discontinued FMC Peroxygens and Alkali businesses. It also includes other historical discontinued gains and losses related to adjustments to our estimates of our retained liabilities for environmental exposures, general liability, workers’ compensation, postretirement benefit obligations, legal defense, property maintenance and other costs, losses for the settlement of litigation and gains related to property sales. Amounts in 2015 include the divestiture gain associated with the Alkali sale while 2014 and 2013 include charges associated with the sale of the Peroxygens business.
(2)
In calculating this ratio, earnings consist of income (loss) from continuing operations before income taxes plus interest expense, net of amortization expense related to debt discounts, fees and expenses, amortization of capitalized interest, interest included in rental expenses (assumed to be one-third of rent) and equity in (earnings) loss of affiliates. Fixed charges consist of interest expense, amortization of debt discounts, fees and expenses, interest capitalized as part of fixed assets and interest included in rental expenses.


19


FORWARD-LOOKING INFORMATION
Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: We and our representatives may from time to time make written or oral statements that are “forward-looking” and provide other than historical information, including statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations within, in our other filings with the SEC, or in reports to our stockholders.
In some cases, we have identified forward-looking statements by such words or phrases as “will likely result,” “is confident that,” “expect,” “expects,” “should,” “could,” “may,” “will continue to,” “believe,” “believes,” “anticipates,” “predicts,” “forecasts,” “estimates,” “projects,” “potential,” “intends” or similar expressions identifying “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words and phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the risk factors listed in Item 1A of this Form 10-K. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.


20


ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview
We are a diversified chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and market-leading products. We operate in three distinct business segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium. Our FMC Agricultural Solutions segment develops, markets and sells all three major classes of crop protection chemicals: insecticides, herbicides and fungicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as in non-agricultural markets for pest control. The FMC Health and Nutrition segment focuses on nutritional ingredients, health excipients, and functional health ingredients. Nutritional ingredients are used to enhance texture, color, structure and physical stability. Health excipients are used for binding, encapsulation and disintegrant applications. Functional health ingredients are used as active ingredients in nutraceutical and pharmaceutical markets. Our FMC Lithium segment manufactures lithium for use in a wide range of lithium products, which are used primarily in energy storage, specialty polymers and chemical synthesis application.

2016 Highlights
The following are the more significant developments in our businesses during the year ended December 31, 2016:
Revenue of $3,282.4 million in 2016 increased $5.9 million or approximately one percent versus last year. A more detailed review of revenues by segment is included under the section entitled “Results of Operations”. On a regional basis, sales in Latin America decreased by 18 percent, sales in North America decreased two percent, sales in Asia increased five percent and sales in Europe, Middle East and Africa (EMEA) increased by 26 percent.
Our gross margin, excluding acquisition-related charges, of $1,199.8 million increased approximately $66.6 million or approximately six percent versus last year. Gross margin as a percent of revenue is approximately 37 percent versus 35 percent in 2015. The increase in gross margin was driven by improved pricing and mix in both Brazil and North America in our FMC Agricultural Solutions business.
Selling, general and administrative expenses decreased 28 percent from $737.9 million to $529.5 million. In 2015, we incurred significant acquisition related charges that occurred to a much lesser extent in 2016 accounting for the majority of the decrease. Selling, general and administrative expenses, excluding non-operating pension and postretirement charges and acquisition-related charges, of $481.0 million increased $10.9 million or approximately two percent. Non-operating pension and postretirement charges and acquisition-related charges are presented in our Adjusted Earnings Non-GAAP financial measurement below under the section titled “Results of Operations”.
Research and development expenses of $141.5 million decreased $2.2 million or two percent. The decrease was due to registration and regulatory timing within FMC Agricultural Solutions.
Net income attributable to FMC stockholders of $209.1 million decreased approximately $279.9 million from $489.0 million in the prior year period. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $379.8 million increased approximately $47.2 million or 14 percent due to higher results in FMC Agricultural Solutions and FMC Lithium. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below under the section titled “Results of Operations”.
Other 2016 Highlights
In our FMC Agricultural Solutions business, we continue to see the benefits of the Cheminova acquisition, which brought greater scale and regional balance to our business, improved our market access and expanded our product portfolio and technology pipeline. Challenging market conditions specifically in the global crop protection market persisted throughout the year. During the quarter, as discussed above, our FMC Agricultural Solutions business had significantly improved operating results primarily due to improved performance in Brazil which last year was significantly impacted by unfavorable foreign currency.

In FMC Health and Nutrition, global demand for our naturally-derived ingredient product lines continues to be strong and we remain focused on protecting the business’s high margins through the implementation of Manufacturing Excellence programs, process technology improvements and product differentiation. However, the Omega-3 business is having challenges due to the overcapacity in the industry. In the fourth quarter of 2016, we commissioned our new MCC production facility in Rayong, Thailand, which will facilitate our ability to serve a growing nutrition market in Asia.


21


In FMC Lithium, we are seeing the benefits of our strategy to grow our business in the technology-driven specialty end markets, where demand continues to accelerate and pricing trends across our portfolio remain favorable. In May, we announced plans to triple our production capacity of lithium hydroxide to 30,000 metric tons by 2019 in order to meet growing demand from our key customers. In late October, we announced a supply agreement that will source 8,000 metric tons per year of lithium carbonate, beginning in mid-2018. This agreement will help to support our hydroxide expansion.


2017 Outlook

Despite continued challenging Agricultural market conditions, we believe that our 2017 plan is very achievable. It relies on things we control rather than on expectations of positive external events.  

We expect to deliver segment earnings growth in each business and a reduction in income tax expense in 2017 as a result of the integration of Cheminova. The strategy of each business is aligned with its respective market conditions.  Therefore, we expect revenue and earnings growth in our Lithium and Health and Nutrition businesses, and we will continue a very disciplined approach in Ag Solutions to ensure earnings growth while positioning the business strongly for the eventual upturn in that market.

On a long term basis, we continue to remain a technology-driven company with low-cost, asset light operations, a unique business research and development model that balances short-and mid-term developments with long-term innovations, and global scale with strong regional expertise to support local customers.

Please see segment discussions under the section entitled “Results of Operations” for 2017 outlook for each segment.

22


Results of Operations—2016, 2015 and 2014
Overview
The following presents a reconciliation of our segment operating profit to the net income attributable to FMC stockholders as seen through the eyes of our management. For management purposes, we report the operating performance of each of our business segments based on earnings before interest and income taxes excluding corporate expenses, other income (expense), net and corporate special income (charges).
SEGMENT RESULTS RECONCILIATION
(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Revenue
 
 
 
 
 
FMC Agricultural Solutions
$
2,274.8

 
$
2,252.9

 
$
2,173.8

FMC Health and Nutrition
743.5

 
785.5

 
828.2

FMC Lithium
264.1

 
238.1

 
256.7

Total
$
3,282.4

 
$
3,276.5

 
$
3,258.7

Income from continuing operations before income taxes
 
 
 
 
 
FMC Agricultural Solutions
$
399.9

 
$
363.9

 
$
497.8

FMC Health and Nutrition
191.3

 
194.7

 
187.9

FMC Lithium
70.2

 
23.0

 
27.2

Segment operating profit
$
661.4

 
$
581.6

 
$
712.9

Corporate and other
(83.6
)
 
(62.4
)
 
(71.4
)
Operating profit before the items listed below
577.8

 
519.2

 
641.5

 
 
 
 
 
 
Interest expense, net
(82.7
)
 
(80.1
)
 
(51.2
)
Corporate special (charges) income:
 
 
 
 
 
Restructuring and other (charges) income (1)
(107.3
)
 
(244.0
)
 
(56.4
)
Non-operating pension and postretirement charges (2)
(25.1
)
 
(35.3
)
 
(10.5
)
Business separation costs (3)

 

 
(23.6
)
Acquisition-related charges (4)
(23.4
)
 
(290.3
)
 
(136.0
)
Provision for income taxes
(93.9
)
 
(47.4
)
 
(56.2
)
Discontinued operations, net of income taxes
(33.7
)
 
676.4

 
14.5

Net income attributable to noncontrolling interests
(2.6
)
 
(9.5
)
 
(14.6
)
Net income attributable to FMC stockholders
$
209.1

 
$
489.0

 
$
307.5

____________________
(1)
See Note 7 to the consolidated financial statements included within this Form 10-K for details of restructuring and other (charges) income by segment:
 
 
Year Ended December 31,
(in Millions)
 
2016
 
2015
 
2014
FMC Agricultural Solutions
 
$
(62.0
)
 
$
(123.7
)
 
$
4.5

FMC Health and Nutrition
 
(10.0
)
 
(93.8
)
 
(14.1
)
FMC Lithium
 
(0.6
)
 
(2.7
)
 

Corporate
 
(34.7
)
 
(23.8
)
 
(46.8
)
Restructuring and other (charges) income
 
$
(107.3
)
 
$
(244.0
)
 
$
(56.4
)

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


23


(3)    Charges are associated with the previously planned separation of our FMC Corporation into two independent public companies. On
September 8, 2014, we announced that we would no longer proceed with the planned separation. At that time we announced the acquisition of Cheminova. See Note 3 within these consolidated financial statements included within this Form 10-K for more information. These charges are included within "Business separation costs" on our consolidated income statement. These costs were primarily related to professional fees associated with separation activities within the finance and legal functions through September 8, 2014.
(4)     Charges related to the expensing of the inventory fair value step-up resulting from the application of acquisition purchase accounting,
legal and professional fees and gains or losses on hedging purchase price associated with the planned or completed acquisitions. See Note 3 for details. Amounts represent the following:
 
Twelve Months Ended
 
December 31,
(in Millions)
2016
 
2015
 
2014
Acquisition-related charges - Cheminova (c)
 
 
 
 
 
Legal and professional fees (a)
$
23.4

 
$
60.4

 
$
32.2

Inventory fair value step-up amortization (b)

 
57.8

 

Unrealized loss/(gain) on hedging purchase price (a)

 
172.1

 
99.6

Acquisition-related charges - Epax
 
 
 
 
 
Inventory fair value step-up amortization (b)

 

 
4.2

Total Acquisition-related charges
$
23.4

 
$
290.3

 
$
136.0

        
(a)
On the consolidated statements of income, these charges are included in “Selling, general and administrative expenses.”
(b)
On the consolidated statements of income, these charges are included in “Costs of sales and services.”
(c)
Acquisition-related charges associated with the integration of Cheminova with Agricultural Solutions were completed at the end of 2016.
 
ADJUSTED EARNINGS RECONCILIATION

The following chart, which is provided to assist the readers of our financial statements, depicts certain after-tax charges (gains). These items are excluded from the measures we use to evaluate business performance and determine certain performance-based compensation. These after-tax items are discussed in detail within the “Other results of operations” section that follows. Additionally, the chart below discloses our Non-GAAP financial measure “Adjusted after-tax earnings from continuing operations attributable to FMC stockholders” reconciled from the GAAP financial measure “Net income (loss) attributable to FMC stockholders.” We believe that this measure provides useful information about our operating results to investors. We also believe that excluding the effect of restructuring and other income and charges, non-operating pension and postretirement charges, certain Non-GAAP tax adjustments from operating results and discontinued operations allows management and investors to compare more easily the financial performance of our underlying businesses from period to period. This measure should not be considered as a substitute for net income (loss) or other measures of performance or liquidity reported in accordance with GAAP.
(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Net income attributable to FMC stockholders (GAAP)
$
209.1

 
$
489.0

 
$
307.5

Corporate special charges (income), pre-tax
155.8

 
569.6

 
226.5

Income tax expense (benefit) on Corporate special charges (income) (1)
(48.5
)
 
(144.9
)
 
(84.1
)
Corporate special charges (income), net of income taxes
107.3

 
424.7

 
142.4

Discontinued operations attributable to FMC Stockholders, net of income taxes
33.7

 
(676.4
)
 
(9.3
)
Non-GAAP tax adjustments (2)
29.7

 
95.3

 
(13.8
)
Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)
$
379.8

 
$
332.6

 
$
426.8

____________________
(1)
The income tax expense (benefit) on Corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the Corporate special charge or income occurred and includes both current and deferred income tax expense (benefit) based on the nature of the non-GAAP performance measure.
(2)
We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon the annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to current year ongoing business operations; tax

24


adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to ongoing operations thereby providing investors with useful supplemental information about FMC's operational performance.

In the discussion below, please refer to our chart titled "Segment Results Reconciliation" within the Results of Operations section. All comparisons are between the periods unless otherwise noted.
Segment Results
For management purposes, segment operating profit is defined as segment revenue less segment operating expenses (segment operating expenses consist of costs of sales and services, selling, general and administrative expenses ("SG&A") and research and development expenses ("R&D"). We have excluded the following items from segment operating profit: corporate staff expense, interest income and expense associated with corporate debt facilities and investments, income taxes, gains (or losses) on divestitures of businesses, restructuring and other charges (income), non-operating pension and postretirement charges, investment gains and losses, loss on extinguishment of debt, asset impairments, Last-in, First-out (“LIFO”) inventory adjustments, acquisition/divestiture related charges, business separation costs and other income and expense items.
Information about how each of these items relates to our businesses at the segment level and results by segment are discussed below and in Note 19 to our consolidated financial statements included in this Form 10-K.
FMC Agricultural Solutions
 
(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Revenue
$
2,274.8

 
$
2,252.9

 
$
2,173.8

Operating Profit
399.9

 
363.9

 
497.8

2016 vs. 2015
Revenue of $2,274.8 million increased approximately one percent versus the prior year period.
Operating profit of $399.9 million increased approximately 10 percent compared to the year-ago period.
Refer to the FMC Agricultural Solutions Pro Forma Financial Results with Cheminova section below for further discussion.
For 2017, full-year segment revenue is expected to be approximately $2.2 billion to $2.4 billion and full-year segment earnings are expected to be in the range of $410 million to $450 million. In Europe, we expect our key markets to have increased demand compared to last year which could be somewhat unfavorably impacted by foreign currency. In North America, we expect challenging market conditions will continue in 2017 given elevated channel inventory levels, lower commodity prices, and cautious purchasing decisions by the growers. As a result, we expect the market in North America to be down in 2017. Across Asia, we expect market demand to increase slightly in 2017 assuming more normal weather conditions. In Latin America, market conditions across the region are expected to be favorable, resulting in somewhat higher demand than 2016. However, foreign exchange headwinds could impact the region negatively.

2015 vs. 2014
Revenue of $2,252.9 million increased approximately four percent versus the prior year period due to revenue from the Cheminova acquisition on April 20, 2015.
Operating profit of $363.9 million decreased approximately 27 percent compared to the year-ago period. This decline was primarily driven by market conditions and currency movements in Brazil.

FMC Agricultural Solutions Pro Forma Financial Results with Cheminova

In the second quarter of 2015, we began to present pro forma combined results for the FMC Agricultural Solutions segment. We believe that reviewing our operating results by combining actual and pro forma results for the FMC

25


Agricultural Solutions segment for 2015 is more useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of this segment. Our pro forma segment information includes adjustments as if the Cheminova transaction had occurred on January 1, 2014. Our pro forma data have also been adjusted for the effects of acquisition accounting but do not include adjustments for costs related to integration activities, cost savings or synergies that might have been achieved by the combined businesses. Pro forma amounts presented are not necessarily indicative of what our results would have been had we operated Cheminova since January 1, 2014, nor our future results. We believe that reviewing our operating results by combining actual and pro forma results for the FMC Agricultural Solutions segment for the periods set forth below is more useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of the segment.

FMC Agricultural Solutions Pro Forma Financial Results
 
Twelve Months Ended December 31,
(in Millions)
2016
 
2015
 
2014
Revenue
 
 
 
 
 
Revenue, FMC Agricultural Solutions, as reported (1)
$
2,274.8

 
$
2,252.9

 
$
2,173.8

Revenue, Cheminova, pro forma (2)

 
362.0

 
1,225.7

Pro Forma Combined, Revenue (3)
$
2,274.8

 
$
2,614.9

 
$
3,399.5

Operating Profit
 
 
 
 
 
Operating Profit, FMC Agricultural Solutions, as reported (1)
$
399.9

 
$
363.9

 
$
497.8

Operating Profit, Cheminova, pro forma (2)

 
19.9

 
38.2

Pro Forma Combined, Operating Profit (3)
$
399.9

 
$
383.8

 
$
536.0

___________________
(1)
As reported amounts are the results of operations of FMC Agricultural Solutions, including the results of the Cheminova acquisition from April 21, 2015 onward.
(2)
Cheminova pro forma amounts include the historical results of Cheminova, prior to April 21, 2015. These amounts also include adjustments as if the Cheminova transaction had occurred on January 1, 2014, including the effects of acquisition accounting. The pro forma amounts do not include adjustments for expenses related to integration activities, cost savings or synergies that may have been or may be achieved by the combined segment.
(3)
The pro forma combined amounts are not necessarily indicative of what the results would have been had we acquired Cheminova on January 1, 2014 or indicative of future results. For the twelve months ended December 31, 2016, pro forma results and actual results are the same.

FMC Agricultural Solutions Pro Forma Combined Revenue by Region (1)
 
Twelve Months Ended December 31,
(in Millions)
2016
 
2015
 
2014
Europe, Middle East and Africa (EMEA) (2)
$
516.3

 
$
585.7

 
$
639.6

North America (3)
557.8

 
595.2

 
658.3

Latin America (4)
758.8

 
965.3

 
1,488.3

Asia (5)
441.9

 
468.7

 
613.3

Total
$
2,274.8

 
$
2,614.9

 
$
3,399.5


26


___________________
(1)
The pro forma combined revenue by region amounts are not necessarily indicative of what the results would have been had we acquired Cheminova on January 1, 2014 or indicative of future results. For the twelve months ended December 31, 2016, pro forma revenues and actual revenues are the same.
(2)
Decrease in the twelve months ended December 31, 2016 was driven by unfavorable weather in both Central and Western Europe. Additionally, the shift in the timing of sales as a result of our change to a direct market access model across Europe and product rationalization each contributed to the decline in revenue.
(3)
Decrease in the twelve months ended December 31, 2016 was driven by elevated channel inventory levels and lower demand due to the deterioration in farm incomes which resulted in more cautious purchasing decisions.
(4)
Lower sales volumes in Brazil contributed to the reduction in revenue for the twelve months ended December 31, 2016. Continued product rationalization resulted in lower revenues as well as the decision to allow the existing channel inventory to reduce. The volumes were also impacted by our disciplined approach to reduce our credit exposure in Brazil. Additionally, foreign exchange headwinds from the Mexican Peso contributed to the revenue decrease. Decrease in the twelve months ended December 31, 2015 was due lower volumes in Brazil including the deliberate action to reduce third party resales in Brazil, in part as the result of the sale of our Consagro business in 2015.
(5)
Decline in the twelve months ended December 31, 2016 was driven by softer demand in China as well as our actions to reduce channel inventories in India, following two years of drought.

Actual Results for 2016 vs. Pro Forma Combined Results for 2015
Revenue of $2,274.8 million decreased approximately 13 percent versus pro forma combined revenue the prior year period. Volumes contributed to 14 percent of the decline and unfavorable foreign currency contributed another one percent to the decline . These declines were partially offset by favorable pricing which contributed a two percent increase. The lower volumes were partially due to actions we took to eliminate certain product sales as previously described.  These actions reduced revenue by approximately $175 million compared to the pro forma revenue for 2015.   See chart above for discussion on revenue by region.
Operating profit of $399.9 million increased approximately four percent compared to the pro forma combined operating profit for the prior period. Improved pricing and mix impacted pro forma operating profit by ten percent which was predominantly experienced in both Brazil and North America and favorable foreign currency impacted pro forma results by four percent. Lower costs, primarily selling, general and administrative in nature also favorably impacted results by 10 percent. The lower volumes noted above had a negative impact on pro forma operating profit of 20 percent.    

Pro Forma Combined Results - 2015 vs. 2014
Pro forma combined revenue of $2,614.9 million decreased approximately 23 percent versus the prior year period. Favorable pricing impacted revenue by five percent in 2015 compared to the same period in 2014; however, the price increases only partially offset the unfavorable impact of foreign currency movements and lower volumes. Unfavorable currency negatively impacted revenue by 11 percent while volumes impacted revenue by 16 percent. Most of this decline was experienced in Latin America, primarily Brazil. Lower volume was also a result of the deliberate action to reduce third party resales also in Brazil. These reduced third party sales were partially the result of the sale of our Consagro business.
Pro forma combined operating profit of $383.8 million decreased approximately 28 percent compared to the year-ago period. The significant movement in foreign currency rates compared to the prior year, particularly the real, was the main driver of the decline in operating profit as price increases in local currencies were not enough to offset the impact of foreign currency. During 2015, the Brazilian real depreciated significantly versus the U.S. dollar. As a result, foreign currency contributed 55 percent to the decline in year over year pro forma combined operating profit while to a lesser extent lower volumes contributed to a 16 percent impact. Higher pricing and mix partially offset these declines by 23 percent while lower costs primarily selling, general and administrative combined with lower research and development costs improved profits year over year by 19 percent. These lower costs were driven by cost savings driven by synergies associated with the Cheminova acquisition as well as reduced spending primarily in Brazil to address with near-term market conditions.
In 2015, we announced several targeted measures to reduce operating costs and reorganize our operations in Brazil to align the business with near-term market conditions. These measures included:
Enhancing our focus on proprietary technology platforms and differentiated products, and rationalizing our product offerings to eliminate low-margin sales. This portfolio rationalization program, including the sale of our generic subsidiary, Consagro, reduced 2015 pro forma combined operating profit by $48 million compared to 2014. This will enable us to further reduce the region's operating costs and enhance our potential to deliver higher future earnings and return on capital. At the completion of this reorganization, FMC's workforce in Brazil will be approximately half its size compared to 2014. Aside from the product rationalization, all of these actions were substantially completed by December 31, 2015.

27




FMC Health and Nutrition

(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Revenue
$
743.5

 
$
785.5

 
$
828.2

Operating Profit
191.3

 
194.7

 
187.9

2016 vs. 2015
Revenue was $743.5 million, a decrease of approximately five percent versus the prior-year period. Lower volume was the main driver of the decrease, contributing four percent, primarily due to Omega-3. Unfavorable foreign currency impacts and unfavorable price and mix decreased revenue by approximately one percent total.
Segment operating profit of $191.3 million decreased approximately two percent versus the year ago period driven by lower revenue partially offset by lower manufacturing costs. The lower volumes discussed in the preceding paragraph drove the lower earnings.
Segment revenue for the full year of 2017 is anticipated to be approximately $750 million to $790 million, while full-year segment earnings are expected to be between $190 million and $200 million. The anticipated revenue increase is driven by increased volumes of MCC-based products associated with our new MCC plant in Thailand. The relatively flat earnings will be impacted by costs of bringing the new plant on-line which are expected to offset by the benefits of other operational improvements across the business.

2015 vs. 2014
Revenue was $785.5 million, a decrease of approximately five percent versus the prior-year period. Unfavorable foreign currency impacts, primarily a weaker euro, decreased revenue by approximately five percent with volume, price and mix flat in the aggregate compared to prior year. Volume was slightly positive as lower volume in carrageenan and alginates were offset by growth in the MCC family of products in both pharmaceuticals and food end markets. Pricing for 2015 as compared to 2014 was slightly positive and mix was slightly negative.
Segment operating profit of $194.7 million increased approximately four percent versus the year ago period driven by the higher volumes discussed in the preceding paragraph, the operating profit impact of improved price and mix and lower manufacturing costs as well as lower selling, general and administrative costs, partially offset by unfavorable currency. Volumes and price mix improved operating profit by three percent and two percent, respectively while lower manufacturing costs and lower selling, general and administrative costs improved profits by two percent and three percent, respectively. The reduction in these costs was driven by various manufacturing initiatives to improve profitability as well as the benefits of restructuring activities and cost control initiatives. Finally, unfavorable currency negatively impacted results by six percent year over year.
FMC Lithium
(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Revenue
$
264.1

 
$
238.1

 
$
256.7

Operating Profit
70.2

 
23.0

 
27.2

2016 vs. 2015
Revenue of $264.1 million increased by approximately 11 percent versus the prior-year period driven by favorable pricing of Carbonate, Chloride, and Hydroxide, which accounted for 14 percent of the change. This was offset by lower volumes due to increased demand from downstream products, which impacted revenues by three percent.
Segment operating profit of $70.2 million increased approximately $47 million versus the year ago period. The favorable pricing noted above impacted operating profit by approximately $33 million while volume had a negative impact on operating profit of $3 million. Favorable foreign currency impacts increased operating profit by approximately $3 million. Additionally, lower raw material prices, lower energy prices and increased manufacturing efficiencies improved operating profit by approximately $14 million.

28


Demand for lithium remains strong and pricing trends continue to be favorable. In 2016, we announced plans to triple our production capacity of lithium hydroxide to 30,000 metric tons by 2019 in order to meet growing demand from our key customers. This hydroxide expansion will result in increased volumes in the second half of 2017. Full year segment revenue is expected to be approximately $315 million to $355 million while segment operating profit is expected to be between $90 million and $110 million for the full year of 2017, an increase of approximately 42 percent over 2016 at the mid-point of the range.

2015 vs. 2014
Revenue of $238.1 million decreased by approximately seven percent versus the prior-year period driven by lower volumes of upstream products and weaker foreign currencies. These impacted revenues by seven percent and three percent, respectively. This was partially offset by favorable pricing which impacted revenue by three percent.
Segment operating profit of $23.0 million decreased approximately 15 percent versus the year ago period. Pricing impacted operating profit favorably by approximately $7 million while volume had about an equal negative impact on operating profit. Foreign currency, primarily the Argentine peso and the euro, impacted operating profit by approximately $9 million. This was partially offset by manufacturing cost savings and other miscellaneous items.
Corporate and other
Corporate expenses are included as a component of the line item “Selling, general and administrative expenses” except for last in, first-out (LIFO) related charges that are included as a component of "Cost of sales and other services" on our consolidated statements of income.
2016 vs. 2015
Corporate and other expenses of $83.6 million increased by $21.2 million from $62.4 million in 2015. Approximately $10 million of the increase is driven by the higher incentive compensation due to improved business performance as well as costs associated with the relocation of our Corporate headquarters which totaled approximately $2.2 million. The remaining $9 million increase was primarily the result of other project initiatives.

2015 vs. 2014
Corporate and other expenses of $62.4 million decreased by $9.0 million from $71.4 million in the same period in 2014. The decrease was driven primarily by reduced LIFO inventory expense of approximately $7.0 million. The reduced LIFO expense was driven by lower inflation rates applied to the inventory subject to LIFO calculations. Excluding the LIFO reductions, corporate staff expenses and incentive payments were flat year over year.

Interest expense, net
2016 vs. 2015
Interest expense, net of $82.7 million increased by approximately three percent compared to $80.1 million in 2015. The slight increase was primarily due to higher foreign debt balances, partially offset by lower term balance and other minor factors.

2015 vs. 2014
Interest expense, net of $80.1 million increased approximately 56 percent as compared to $51.2 million in 2014. The increase was primarily due to our borrowings under our senior unsecured Term Loan facility. The proceeds of these borrowings were used to finance the acquisition of Cheminova as well as to pay costs, fees and expenses incurred in connection with the acquisition and the term loan facility. See Note 12 to our consolidated financial statements included in this Form 10-K for more information.

Corporate special charges (income)

29


Restructuring and other charges (income)
Our restructuring and other charges (income) are comprised of restructuring, assets disposals and other charges (income) as described below:
 
Year Ended December 31,
(in Millions)
2016
 
2015
 
2014
Restructuring Charges and Asset Disposals
$
53.4

 
$
217.7

 
$
17.2

Other Charges (Income), Net
53.9

 
26.3

 
39.2

Total Restructuring and Other Charges (1)
$
107.3

 
$
244.0

 
$
56.4

_______________
(1)    See Note 7 within the consolidated financial statements included in this Form 10-K for more information.

2016
Restructuring and asset disposal charges in 2016 totaled $53.4 million. Included in this were final charges totaling $42.3 million associated with the integration of Cheminova into our existing FMC Agricultural Solutions segment. The amount includes final adjustments to severances, long lived asset write offs, contract termination costs and other miscellaneous items.
Additionally, other charges (income), net in 2016 consisted of $36.8 million for continuing environmental sites treated as Corporate charges, $13.2 million associated with a license agreement to obtain certain technology and intellectual property rights for new compounds still under development and $4.2 million as a result of the Argentina government's action to devalue its currency. These charges were offset by other miscellaneous income of $0.3 million.
2015
Restructuring and asset disposal charges in 2015 totaled $244.0 million. Included in this were significant charges totaling $118.3 million associated with charges as part of the integration of Cheminova into our existing FMC Agricultural Solutions segment. The Cheminova charges included those associated with the sale of Consagro, which amounted to $64.5 million. Restructuring and asset disposal charges also include charges associated with various activities in Health and Nutrition of $93.6 million. The majority of these charges are from the loss on sale of our Pectin business of $12 million as well as asset write downs associated with the mothballing of our Seal Sands plant equaling $70.5 million. The Seal Sands plant, in the UK, was mothballed in 2015 due to a lack of demand for the Omega-3 pharmaceuticals products that were manufactured at that facility.
Other charges (income), net in 2015 consisted of environmental charges of $21.7 million, the impacts of the Argentina currency devaluation in December of 2015 of $10.7 million, and $20.5 million of expenses associated with acquired in-process research and development activity. Partially offsetting these amounts was a gain of $26.6 million related to the sale of our remaining ownership interest in a Belgian-based pesticide distribution company, Belchim Crop Protection N.V. ("Belchim").
2014
Restructuring and asset disposal charges in 2014 of $17.2 million were primarily associated with our Health and Nutrition restructuring as well as other miscellaneous exit costs. Other charges (income), net in 2014 of $39.2 million were primarily related to corporate environmental charges of $43.7 million and charges of $22.1 million associated with our FMC Agricultural Solutions segment which entered into collaboration and license agreements with various third-party companies for the purpose of obtaining certain technology and intellectual property rights relating to new compounds still under development. Offsetting these charges is income from the sale of a portion of our ownership interest in a pesticide distribution company which resulted in a gain on the sale of approximately $26.6 million.

Non-operating pension and postretirement (charges) income
Non-operating pension and postretirement (charges) income are included in “Selling, general and administrative expenses” on our consolidated statements of income (loss).
2016 vs. 2015
The charge for 2016 was $25.1 million compared to $35.3 million in 2015. The decrease in charges was in part due to the estimation method used in 2016 to calculate the interest cost components of our net periodic benefit cost as described in the Critical Accounting Policies section of Item 7 within this Form 10-K. The decrease was also the result of $13.3 million of

30


lower amortization of net actuarial losses. These decreases were partially offset by an increase of $12.1 million for recognized losses due to plan settlements. See Note 13 for more information.

2015 vs. 2014
The charge for 2015 was $35.3 million compared to $10.5 million for 2014. The increase in charges was primarily the result of $24.1 million of higher amortization of net actuarial losses. See Note 13 to the consolidated financial statements included in this Form 10-K for more information.

Business Separation costs
On September 8, 2014, we announced that we would no longer proceed with the planned separation as a result of the planned acquisition of Cheminova and divestiture of FMC Alkali Chemicals division. As a result there were no business separation charges in 2015 or 2016. Business separation cost for the twelve months ended December 31, 2014 represent charges associated with the planned separation activities through December 31, 2015.

Acquisition-related charges
A detailed description of the acquisition related charges is included in Note 19 to the consolidated financial statements included within this Form 10-K and in the Segment Results Reconciliation above within the "Results of Operations" section of the Management's Discussion and Analysis.
Provision for income taxes
A significant amount of our earnings is generated by our foreign subsidiaries (e.g. Denmark, Ireland and Hong Kong), which tax earnings at lower rates than the United States federal statutory rate. Our future effective tax rates may be materially impacted by numerous items including: a future change in the composition of earnings from foreign and domestic tax jurisdictions, as earnings in foreign jurisdictions are typically taxed at more favorable rates than the United States federal statutory rate; accounting for uncertain tax positions; business combinations; expiration of statute of limitations or settlement of tax audits; changes in valuation allowance; changes in tax law; and the potential decision to repatriate certain future foreign earnings on which United States taxes have not been previously accrued.
 
Twelve Months Ended December 31,
(in Millions)
2016
 
2015
 
2014
 
Income (Expense)
Tax Provision (Benefit)
Effective Tax Rate
 
Income (Expense)
Tax Provision (Benefit)
Effective Tax Rate
 
Income (Expense)
Tax Provision (Benefit)
Effective Tax Rate
GAAP - Continuing operations
$
339.3

$
93.9

27.7
%
 
$
(130.5
)
$
47.4

(36.3
)%
 
$
363.8

$
56.2

15.4
%
Corporate special charges
155.8

48.5

 
 
569.6

144.9

 
 
226.5

84.1

 
Tax adjustments (1)
 
(29.7
)
 
 
 
(95.3
)
 
 
 
13.8

 
 
$
495.1

$
112.7

22.8
%
 
$
439.1

$
97.0

22.1
 %
 
$
590.3

$
154.1

26.1
%
_______________  
(1)
Tax adjustments in 2016 were primarily associated with valuation allowance adjustments to U.S. state deferred tax balances. Tax adjustments in 2015 were primarily associated with valuation allowance adjustments taken in our Brazil subsidiaries. Tax adjustments in 2014 were primarily associated with revisions to our tax liabilities associated with prior year tax matters.
The primary drivers for the fluctuations in the effective tax rate from 2016 to 2015 and 2015 to 2014 are provided in the table above. Excluding the items in the table above, the changes in the effective tax rate were primarily due to shifts in earnings mix as it relates to domestic versus foreign income. Foreign profits are generally taxed at lower rates compared to domestic income. See Note 11 to the Consolidated Financial Statements for additional details related to the provisions for income taxes on continuing operations, as well as items that significantly impact our effective tax rate.
Discontinued operations, net of income taxes
Our discontinued operations, in periods up to its sale, represent our discontinued FMC Alkali Chemicals and Peroxygens business results as well as adjustments to retained liabilities from other previously discontinued operations. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities. See Note 9 to the Consolidated Financial Statements for additional details on our discontinued operations.

31



2016 vs. 2015
Discontinued operations, net of income taxes represented a loss of $33.7 million in 2016 compared to a gain of $676.4 million in 2015. The change was driven by the divestiture of our discontinued FMC Alkali Chemicals division which resulted in an after tax gain of $702.1 million in 2015.

2015 vs. 2014
Discontinued operations, net of income taxes represented a gain of $676.4 in 2015 compared to a gain of $14.5 million in 2014. The change was driven by the divestiture of our discontinued FMC Alkali Chemicals division which resulted in an after tax gain of $702.1 million in 2015.
Net income attributable to FMC stockholders

2016 vs. 2015
Net income attributable to FMC stockholders decreased to $209.1 million from $489.0 million. The decrease was primarily due to the gain from the sale of our discontinued FMC Alkali Chemicals division in 2015 which was partially offset by lower acquisition-related costs in 2016.

2015 vs. 2014
Net income attributable to FMC stockholders increased to $489.0 million from $307.5 million. The increase was primarily
due to the gain from the sale of our discontinued FMC Alkali Chemicals division offset by reduced Agricultural Solutions results as well as higher interest expense from higher debt levels needed to fund the Cheminova acquisition. Also significantly impacting results was a higher tax rate in 2015 primarily due to the increases in certain foreign valuation allowances against deferred tax assets.


32


Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2016 and 2015, were $64.2 million and $78.6 million, respectively. Of the cash and cash equivalents balance at December 31, 2016, $64.1 million was held by our foreign subsidiaries. Our intent is to reinvest indefinitely the earnings of our foreign subsidiaries and therefore we have not recorded taxes that would be payable if we repatriated these earnings.
At December 31, 2016, we had total debt of $1,893.0 million as compared to $2,148.9 million at December 31, 2015. Total debt included $1,798.8 million and $2,036.3 million of long-term debt (excluding current portions of $2.4 million and $1.5 million) at December 31, 2016 and 2015, respectively. As of December 31, 2016, we are in compliance with all of our debt covenants. During 2016, the maximum leverage ratio stepped down in accordance with the provisions of the Credit Facility and the Term Loan Facility. By the end of 2017, the maximum leverage ratio will step down to 3.5 in accordance with the provisions of the Credit Facility and the Term Loan Facility. We will take a variety of steps, if necessary, to ensure compliance with the maximum leverage ratio at the applicable measurement dates.
The decrease in long-term debt was due to the repayments of borrowing under our term loan and redemption of certain outstanding industrial revenue bonds. At December 31, 2016, $750.0 million remained outstanding under the Term Loan Facility. The scheduled maturity of the Term Loan Facility is on April 21, 2020. The borrowings under the Term Loan Agreement will bear interest at a floating rate, which will be a base rate or a Eurocurrency rate equal to the London interbank offered rate for the relevant interest period, plus in each case an applicable margin, as determined in accordance with the provisions of the Term Loan Agreement.
Our short-term debt, consists of foreign borrowings and our commercial paper program. Foreign borrowings decreased from $87.2 million at December 31, 2015 to $85.5 million at December 31, 2016 while outstanding commercial paper also decreased from $23.9 million to $6.3 million at December 31, 2015 and 2016, respectively.
Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. At December 31, 2016, the average effective interest rate on these borrowings was 0.95 percent.
See Note 12 in the consolidated financial statements included in this Form 10-K for further details.



33


Statement of Cash Flows
Cash provided (required) by operating activities was $537.3 million, $(277.1) million and $284.9 million for 2016, 2015 and 2014, respectively.
The table below presents the components of net cash provided by operating activities.
(in Millions)
Twelve months ended December 31,
2016
 
2015
 
2014
Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
$
421.5

 
$
(50.2
)
 
$
414.8

Corporate special charges and depreciation and amortization (1)
293.4

 
685.1

 
320.2

Operating income before depreciation and amortization (Non-GAAP)
$
714.9

 
$
634.9

 
$
735.0

 
 
 
 
 
 
Change in trade receivables, net (2)
(6.1
)
 
140.9

 
(274.7
)
Change in inventories (3)
72.5

 
78.3

 
36.2

Change in accounts payable (4)
(24.1
)
 
(292.5
)
 
(16.2
)
Change in accrued customer rebates (5)
(5.3
)
 
11.0

 
34.3

Change in advance payments from customers (6)
(10.0
)
 
60.6

 
11.3

Change in all other operating assets and liabilities (7)
86.4

 
(22.9
)
 
61.2

Cash basis operating income (Non-GAAP)
828.3

 
610.3

 
587.1

 
 
 
 
 
 
Restructuring and other spending (8)
(26.0
)
 
(34.9
)
 
(9.5
)
Environmental spending, continuing, net of recoveries (9)
(28.1
)
 
(32.2
)
 
(17.5
)
Pension and other postretirement benefit contributions (10)
(68.7
)
 
(78.7
)
 
(68.3
)
Net interest payments (11)
(81.6
)
 
(74.7
)
 
(61.0
)
Tax payments, net of refunds (12)
(62.8
)
 
(340.3
)
 
(109.0
)
Excess tax benefits from share-based compensation (13)
(0.4
)
 
(1.4
)
 
(4.7
)
Payments associated with the Cheminova purchase price hedges (14)

 
(264.8
)
 

Acquisition legal and professional fees (15)
(23.4
)
 
(60.4
)
 
(32.2
)
Cash provided (required) by operating activities of continuing operations
$
537.3

 
$
(277.1
)
 
$
284.9

____________________ 
(1)
Represents the sum of corporate special charges and depreciation and amortization.
(2)
The changes in cash flows related to trade receivables in 2016 and 2015 were primarily driven by timing of collections. Collection timing is more pronounced in our FMC Agricultural Solutions business where sales, particularly in Brazil, have terms significantly longer than the rest of our businesses. Additionally, timing of collection is impacted as amounts for both periods include carry-over balances remaining to be collected in Latin America, where collection periods are measured in months rather than weeks. During 2016, we collected approximately $650 million of receivables in Brazil.  A significant proportion of the collections in Brazil are coming from those accounts that were past due at the start of the year, improving the quality of the remaining receivable balance.
(3)
The changes in inventory are a result of inventory levels being adjusted to take into consideration the change in market conditions mostly in FMC Agricultural Solutions.
(4)
The change in accounts payable in 2015 was due to timing of payments including inventory reductions activities across the company, particularly as we integrated Cheminova, as well as adjusting inventory levels in light of current market conditions. These events did not repeat in 2016.
(5)
These rebates are associated with our FMC Agricultural Solutions segment in North America and Brazil and generally settle in the fourth quarter of each year. The changes year over year are primarily associated with the mix in sales eligible for rebates and incentives in 2016 compared to 2015 and timing of rebate payments.
(6)
The advance payments from customers represent advances from our FMC Agricultural Solutions segment customers. Customers did not participate in as many pre-payment programs in 2016 as they did in 2015 due to market dynamics in North America.
(7)
Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities, including guarantees issued to vendors under our vendor finance program.
(8)
See Note 7 in our consolidated financial statements included in this Form 10-K for further details.
(9)
Included in our results for each of the years presented are environmental charges for environmental remediation at our operating sites of $36.8 million, $21.7 million and $43.7 million, respectively. The amounts in 2016 will be spent in future years. The amounts represent environmental remediation spending at our operating sites which were recorded against pre-existing reserves, net of recoveries.

34


Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
(10)
Amounts include voluntary contributions to our U.S. qualified defined benefit plan of $35.0 million, $65.0 million and $50.0 million, respectively.
(11)
Interest payments in all periods remained fairly constant.
(12)
The significant increase in tax payments in 2015 is due the tax paid on the gain associated with the sale of the discontinued FMC Alkali Chemicals division.
(13)
Amounts are presented as a financing activity in the statement of cash flows, from share-based compensation.
(14)
Represents payments for the Cheminova purchase price hedges. See Note 3 to the consolidated financial statements for more information.
(15)
Represents payments for legal and professional fees associated with the Cheminova acquisition. See Note 3 to the consolidated financial statements for more information.

Cash provided (required) by operating activities of discontinued operations was $(39.5) million, $(80.6) million and $88.8 million for 2016, 2015 and 2014, respectively.
Cash required by operating activities of discontinued operation is directly related to environmental, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities. Amounts in 2015 included divestiture costs associated with the sale of our FMC Alkali Chemicals business as well as related operating activities.
The increase of cash required by operating activities of discontinued operations in 2015 is due primarily to divestiture costs associated with the sale of our discontinued FMC Alkali Chemicals business on April 1, 2015. Additionally, 2014 includes a full year of positive cash flows associated with FMC Alkali while 2015 only includes one quarter’s worth due to sale date timing.
Cash required by investing activities of continuing operations was $(139.2) million, $(1,285.5) million and $(190.2) million for 2016, 2015 and 2014, respectively.
The decrease of cash required by investing activities in 2016 is due primarily due to the Cheminova acquisition on April 21, 2015 for an aggregate purchase price of $1.2 billion, excluding assumed net debt and hedged-related costs totaling $0.6 billion.
Cash provided by investing activities of discontinued operations was $4.0 million, $1,634.3 million and $154.9 million for 2016, 2015 and 2014, respectively.
Cash provided by investing activities of discontinued operations in 2016 decreased as a result of the sale of our FMC Alkali Chemicals business which was completed on April 1, 2015 resulting in $1.64 billion in proceeds in 2015 that did not recur in 2016.
Cash provided by investing activities of discontinued operations in 2015 is directly associated with the sale of our discontinued FMC Alkali Chemicals business. Cash provided by investing activities of discontinued operations in 2014 is directly associated with the sale of our discontinued FMC Peroxygens business which was completed on February 28, 2014. The proceeds from this sale were approximately $200 million. Also included in these investing activities was capital expenditures of these same discontinued operations for historical periods up to the point of sale. The decrease in these capital expenditures in 2015 was due to only one quarter’s worth of Alkali capital expenditures in 2015 compared to a full year’s in 2014.
Cash required by financing activities was $(377.0) million, $(16.7) million and $(349.9) million in 2016, 2015 and 2014, respectively.
2016 vs. 2015
The change period over period in financing activities is primarily due to the repayments of borrowings under our term loan and redemption of certain outstanding industrial revenue bonds.
2015 vs. 2014
The change period over period in financing activities is primarily due to the $1.65 billion we borrowed under our previously announced senior unsecured Term Loan facility. The proceeds of the borrowing were used to finance the acquisition of Cheminova as well as to pay costs, fees and expenses incurred in connection with the acquisition and the term loan facility. Offsetting this borrowing in 2015 was repayments of long-term debt totaling $1.1 billion primarily due to repayments associated with acquired Cheminova long term debt. Additionally short term debt decreased $547 million in 2015 as compared to $140 million in 2014. Additionally in 2014 we paid $98.7 million to noncontrolling interests (primarily to acquire the remaining ownership of our discontinued FMC Alkali Chemicals division) as compared to zero such payments in 2015.

2017 Outlook

35


In 2017, we expect a continued improvement in cash generation. In aggregate, we expect cash basis operating income to increase driven by higher earnings within each segment partially offset by higher working capital requirements in 2017. We also expect lower restructuring spending and a reduction in spending from completing substantially all acquisition-related integration activities in 2016. We anticipate lower cash taxes in 2017 as compared to 2016.

Other potential liquidity needs
Our cash needs for 2017 include operating cash requirements, capital expenditures, scheduled mandatory payments of long-term debt, dividend payments, share repurchases, contributions to our pension plans, environmental and asset retirement obligation spending and restructuring. We plan to meet our liquidity needs through available cash, cash generated from operations, commercial paper issuances and borrowings under our committed revolving credit facility. At December 31, 2016 our remaining borrowing capacity under our credit facility was $1,376.1 million.
Projected 2017 capital expenditures and expenditures related to contract manufacturers are expected to approximate 2016 levels.
Projected 2017 spending includes approximately $50 to $55 million of net environmental remediation spending. This spending does not include expected spending on capital projects relating to environmental control facilities or expected spending for environmental compliance costs, which we will include as a component of costs of sales and services in our consolidated statements of income since these amounts are not covered by established reserves. Capital spending to expand, maintain or replace equipment at our production facilities may trigger requirements for upgrading our environmental controls, which may increase our spending for environmental controls over the foregoing projections.
Our U.S. Pension Plan assets decreased slightly from $1,204.6 million at December 31, 2015 to $1,203.3 million at December 31, 2016. Our U.S. Pension Plan assets comprise approximately 95 percent of our total plan assets with the difference representing plan assets related to foreign pension plans. See Note 13 to the consolidated financial statements included within this Form 10-K for details on how we develop our long-term rate of return assumptions. We made contributions of $35.0 million and $65.0 million in 2016 and 2015, respectively, and intend to contribute $40 million in 2017. Our contributions in 2015, 2016 and our intended contribution in 2017 are all in excess of the minimum requirements. Our contributions in excess of minimums are done with the objective of avoiding variable rate Pension Benefit Guaranty Corporation ("PBGC") premiums as well as potentially reducing future funding volatility. We do not believe that the additional contribution in 2017 will have a material impact on our current and future liquidity needs. However, volatility of interest rates and equity returns may require greater contributions in the future.
During the year ended December 31, 2016, 210,000 shares were repurchased under the publicly announced repurchase program. At December 31, 2016, $238.8 million remained unused under our Board-authorized repurchase program. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors. We also reacquire shares from time to time from employees in connections with vesting, exercise and forfeiture of awards under our equity compensation plans.
Dividends
On January 19, 2017, we paid dividends aggregating $22.1 million to our shareholders of record as of December 31, 2016. This amount is included in “Accrued and other liabilities” on the consolidated balance sheet as of December 31, 2016. For the years ended December 31, 2016, 2015 and 2014, we paid $88.6 million, $86.4 million and $78.1 million in dividends, respectively.

Commitments
We provide guarantees to financial institutions on behalf of certain FMC Agricultural Solutions customers, principally Brazilian customers, for their seasonal borrowing. The total of these guarantees was $108.7 million at December 31, 2016. These guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates. Non-performance by the guaranteed party triggers the obligation requiring us to make payments to the beneficiary of the guarantee. Based on our experience these types of guarantees have not had a material effect on our consolidated financial position or on our liquidity. Our expectation is that future payment or performance related to the non-performance of others is considered unlikely.
Short-term debt consisted of foreign credit lines and commercial paper at December 31, 2016 and 2015. We provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.
We continually evaluate our options for divesting real estate holdings and property, plant and equipment that are no longer integral to our operating businesses. In connection with our property and asset sales and divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale. Our indemnification obligations with respect to these liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. As such, it is not possible for us to predict the likelihood that a claim will be made or

36


to make a reasonable estimate of the maximum potential loss or range of loss. If triggered, we may be able to recover certain of the indemnity payments from third parties. We have not recorded any specific liabilities for these guarantees.
Our total significant committed contracts that we believe will affect cash over the next four years and beyond are as follows:
Contractual Commitments
Expected Cash Payments by Year
 (in Millions)
2017
 
2018
 
2019
 
2020
 
2021 & beyond
 
Total
Debt maturities (1)
$
94.2

 
$
2.3

 
$
557.3

 
$
496.9

 
$
753.6

 
$
1,904.3

Contractual interest (2)
62.6

 
62.5

 
56.6

 
31.5

 
100.8

 
314.0

Lease obligations (3)
19.5

 
22.5

 
22.9

 
21.4

 
146.6

 
232.9

Certain long-term liabilities (4)
4.4

 
4.4

 
4.6

 
4.6

 
35.1

 
53.1

Derivative contracts
2.5

 

 

 

 

 
2.5

Purchase obligations (5)
9.4

 
3.8

 

 

 

 
13.2

Total (6)
$
192.6

 
$
95.5

 
$
641.4

 
$
554.4

 
$
1,036.1

 
$
2,520.0

 ____________________
(1)
Excluding discounts.
(2)
Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $1.7 million of long-term debt subject to variable interest rates at December 31, 2016. The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2016. Variable rates are determined by the market and will fluctuate over time.
(3)
Before sub-lease rental income.
(4)
Obligations associated with our Ewing, NJ and Shanghai, China research and technology centers.
(5)
Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased, price provisions and timing of the transaction. We have entered into a number of purchase obligations for the sourcing of materials and energy where take-or-pay arrangements apply. Since the majority of the minimum obligations under these contracts are take-or-pay commitments over the life of the contract and not a year by year take-or-pay, the obligations in the table related to these types of contacts are presented in the earliest period in which the minimum obligation could be payable under these types of contracts.
(6)
As of December 31, 2016, the liability for uncertain tax positions was $121.1 million. This liability is excluded from the table above. Additionally, accrued pension and other postretirement benefits and our environmental liabilities as recorded on our consolidated balance sheets are excluded from the table above. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, we are unable to make a reasonably reliable estimate of the amount and periods in which these liabilities might be paid.
Contingencies
See Note 18 to our consolidated financial statements included in this Form 10-K.

Climate Change
As a global corporate citizen, we are concerned about the consequences of climate change and will take prudent and cost effective actions that reduce greenhouse gas emissions to the atmosphere.
FMC is committed to doing its part to address climate change and its impacts. We have set 2025 goals that we will reduce both energy intensity and Green House Gas (GHG) intensity for our operations by 15% from our 2013 baseline year. In 2016, FMC's actions to implement best practices in environmental stewardship and climate change action were recognized by CDP (formerly Carbon Disclosure Project). CDP is widely recognized as one of the top environmental data reporting organizations in the world, and over 8,500 companies responded to CDP in 2016. FMC submitted its first-ever response to CDP's climate change program and received an "A-" score, which places FMC in CDP's Leadership scoring category.
FMC detailed the business risks and opportunities we have due to climate change and its impacts in our 2016 CDP climate change report.
Even as we take action to control the release of GHGs, additional warming is anticipated. Long-term, higher average global temperatures could result in induced charges in natural resources, growing seasons, precipitation patterns, weather patterns, species distributions, water availability, sea levels, and biodiversity. These impacts could cause changes in supplies of raw materials used to maintain FMC’s production capacity and could lead to possible increased sourcing costs. Depending on how pervasive the climate impacts are in the different geographic locations experiencing changes in natural resources, FMC’s customers could be impacted. Demand for FMC’s products could increase if our products meet our customers’ needs to adapt to climate change impacts or decrease if our products do not meet their needs. Within our own operations, we continually assess our manufacturing sites worldwide for risks and opportunities to increase our preparedness for climate change. We are evaluating sea level rise and storm surge at three of our plants located within 4 meters of sea level to understand timing of potential impacts and response actions that

37


may need to be taken. To lessen FMC’s overall environmental footprint, we have taken actions to increase the energy efficiency in our manufacturing sites. We have also committed to 2025 goals to reduce our water use in high-risk areas by 20% and our waste intensities by 15%.
In our product portfolio, we see market opportunities for our products to address climate change and its impacts. For example, FMC Agricultural Solutions’ products can help customers increase yield, energy and water efficiency, and decrease greenhouse gas emissions. Our products can also help growers adapt to more unpredictable growing conditions and the effects these types of threats have on crops. FMC Health and Nutrition addresses consumers’ changing preferences and increased environmental concerns with natural products and differentiated food and health ingredients for healthier lifestyles. FMC Lithium’s products can be used in energy storage applications, fuel-efficient and electric vehicles, lighter-weight aluminum in the aircraft and aerospace industries.
We are improving existing products and developing new platforms and technologies that help mitigate impacts of climate change. Agricultural Solutions is developing products with a lighter environmental footprint in its biologicals products. FMC Lithium is researching new applications of our lithium products in a range of industries. These business opportunities could lead to new products and services for our existing and potential customers. Beyond our products and operations, FMC recognizes that energy consumption throughout our supply chain can impact climate change and product costs. Therefore, we will actively work with our entire value chain - suppliers, contractors, and customers - to improve their energy efficiencies and to reduce their GHG emissions.
We continue to follow legislative and regulatory developments regarding climate change because the regulation of greenhouse gases, depending on their nature and scope, could subject some of our manufacturing operations to additional costs or limits on operations. In December 2015, 195 countries at the United Nations Climate Change Conference in Paris reached an agreement to reduce GHGs. It remains to be seen how and when each of these countries will implement this agreement. The United States Environmental Protection Agency’s Clean Power Plan (Plan) is the U.S.’s centerpiece for meeting its Paris commitment. Implementation of the Plan has been stayed by the U.S. Supreme Court pending appeals and the legal challenges to the Plan have yet to be resolved in the U.S. federal court of appeals. The Plan gives states flexibility to craft their own programs, so the impact to FMC of the Plan, if implemented, is not estimable at this time. At this point, our U.S. facilities are not subject to any state or regional greenhouse gas regulation that limits GHG emissions. Some of our foreign operations are subject to national or local energy management or climate change regulation, such as our plant in Denmark that is subject to the EU Emissions Trading Scheme. At present, that plant’s emissions are below its designated cap.
Future GHG regulatory requirements may result in increased costs of energy, additional capital costs for emissions control or new equipment, and/or costs associated with cap and trade or carbon taxes. We are currently monitoring regulatory developments. The costs of complying with possible future climate change requirements are difficult to estimate at this time.
Recently Adopted and Issued Accounting Pronouncements and Regulatory Items
See Note 2 "Recently Issued and Adopted Accounting Pronouncements and Regulatory Items" to our consolidated financial statements included in this Form 10-K.
Off-Balance Sheet Arrangements
See Note 18 to our consolidated financial statements included in this Form 10-K and Part I, Item 3 - Legal Proceedings for further information regarding any off-balance sheet arrangements.
Fair Value Measurements
See Note 17 to our consolidated financial statements included in this Form 10-K for additional discussion surrounding our fair value measurements.

Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 "Principal Accounting Policies and related Financial Information" to our consolidated financial statements included in this Form 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed these critical accounting policies with the Audit Committee of the Board of Directors. Critical accounting policies are central to our presentation of results of operations and financial condition in accordance with U.S. GAAP and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors.

38


Revenue recognition and trade receivables
We recognize revenue when the earnings process is complete, which is generally upon transfer of title. This transfer typically occurs either upon shipment to the customer or upon receipt by the customer. In all cases, we apply the following criteria in recognizing revenue: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable and collection is reasonably assured. Rebates due to customers are accrued as a reduction of revenue in the same period that the related sales are recorded based on the contract terms.
We periodically enter into prepayment arrangements with customers, primarily in our FMC Agricultural Solutions segment, and receive advance payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue and classified as “Advance payments from customers” on the consolidated balance sheet. Revenue associated with advance payments is recognized as shipments are made and title, ownership and risk of loss pass to the customer.
We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of sales and services. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue-producing transactions are presented on a net basis and excluded from sales in the consolidated income statements. We record a liability until remitted to the respective taxing authority.
Trade receivables consist of amounts owed from customer sales and are recorded when revenue is recognized. The allowance for trade receivables represents our best estimate of the probable losses associated with potential customer defaults. In developing our allowance for trade receivables, we use a two stage process which includes calculating a general formula to develop an allowance to appropriately address the uncertainty surrounding collection risk of our entire portfolio and specific allowances for customers where the risk of collection has been reasonably identified either due to liquidity constraints or disputes over contractual terms and conditions.
Our method of calculating the general formula consists of estimating the recoverability of trade receivables based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. Our analysis of trade receivable collection risk is performed quarterly, and the allowance is adjusted accordingly.

We also hold long-term receivables that represent long-term customer receivable balances related to past-due accounts which are not expected to be collected within the current year. Our policy for the review of the allowance for these receivables is consistent with the discussion in the preceding paragraph above on trade receivables. Therefore on an ongoing basis, we continue to evaluate the credit quality of our long-term receivables utilizing aging of receivables, collection experience and write-offs, as well as existing economic conditions, to determine if an additional allowance is necessary
Environmental obligations and related recoveries
We provide for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used.
Estimated obligations to remediate sites that involve oversight by the United States Environmental Protection Agency (“EPA”), or similar government agencies, are generally accrued no later than when a Record of Decision (“ROD”), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study (“RI/FS”), or equivalent, that is submitted by us to the appropriate government agency or agencies. Estimates are reviewed quarterly by our environmental remediation management, as well as by financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties.
Our environmental liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which we are alleged to have released hazardous substances into the environment. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, management costs, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants’ engineering studies or by extrapolating experience with environmental issues at comparable sites.
Included in our environmental liabilities are costs for the operation, maintenance and monitoring of site remediation plans (OM&M). Such reserves are based on our best estimates for these OM&M plans. Over time we may incur OM&M costs in excess of these reserves. However, we are unable to reasonably estimate an amount in excess of our recorded reserves because we cannot reasonably

39


estimate the period for which such OM&M plans will need to be in place or the future annual cost of such remediation, as conditions at these environmental sites change over time. Such additional OM&M costs could be significant in total but would be incurred over an extended period of years.
Included in the environmental reserve balance, other assets balance and disclosure of reasonably possible loss contingencies are amounts from third party insurance policies, which we believe are probable of recovery.
Provisions for environmental costs are reflected in income, net of probable and estimable recoveries from named Potentially Responsible Parties (“PRPs”) or other third parties. Such provisions incorporate inflation and are not discounted to their present values.
In calculating and evaluating the adequacy of our environmental reserves, we have taken into account the joint and several liability imposed by Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and the analogous state laws on all PRPs and have considered the identity and financial condition of the other PRPs at each site to the extent possible. We have also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of our claims against such parties. Although we are unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve by adjusting the reserve to reflect the facts and circumstances on a site-by-site basis. Our liability includes our best estimate of the costs expected to be paid before the consideration of any potential recoveries from third parties. We believe that any recorded recoveries related to PRPs are realizable in all material respects. Recoveries are recorded as either an offset in “Environmental liabilities, continuing and discontinued” or as “Other assets” in our consolidated balance sheets in accordance with U.S. accounting literature.
See Note 10 to our consolidated financial statements included in this Form 10-K for changes in estimates associated with our environmental obligations.

Impairments and valuation of long-lived and indefinite-lived assets
Our long-lived assets primarily include property, plant and equipment, goodwill and intangible assets. The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The principal assumptions utilized in our valuation methodologies include revenue growth rates, operating margin estimates and discount rates. Although the estimates were deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently uncertain.
We test for impairment whenever events or circumstances indicate that the net book value of our property, plant and equipment may not be recoverable from the estimated undiscounted expected future cash flows expected to result from their use and eventual disposition. In cases where the estimated undiscounted expected future cash flows are less than net book value, an impairment loss is recognized equal to the amount by which the net book value exceeds the estimated fair value of assets, which is based on discounted cash flows at the lowest level determinable. The estimated cash flows reflect our assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time.
We perform an annual impairment test of goodwill and indefinite-lived intangible assets in the third quarter of each year, or more frequently whenever an event or change in circumstances occurs that would require reassessment of the recoverability of those assets. In performing our evaluation we assess qualitative factors such as overall financial performance of our reporting units, anticipated changes in industry and market structure, competitive environments, planned capacity and cost factors such as raw material prices. Based on our assessment for 2016, we determined that no goodwill impairment charge to our continuing operations was required. The majority of the Brands intangible asset relates to our proprietary brand portfolio for which the fair value was substantially in excess of the carrying value. During the 3rd quarter of 2016, we recorded a $1 million impairment charge in our generic brand portfolio which is part of the FMC Agricultural Solutions segment. The carrying value of the generic portfolio subsequent to the charge is approximately $6 million.
See Note 7 to our consolidated financial statements included in this Form 10-K for charges associated with long-lived asset disposal costs and the activity associated with the restructuring reserves.



40


Pension and other postretirement benefits
We provide qualified and nonqualified defined benefit and defined contribution pension plans, as well as postretirement health care and life insurance benefit plans to our employees and retirees. The costs (benefits) and obligations related to these benefits reflect key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates, expected rates of return on plan assets and the rates of compensation increase for employees. The costs (benefits) and obligations for these benefit programs are also affected by other assumptions, such as average retirement age, mortality, employee turnover, and plan participation. To the extent our plans’ actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans’ demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans’ funding requirements, could increase or decrease. When actual results differ from our assumptions, the difference is typically recognized over future periods. In addition, the unrealized gains and losses related to our pension and postretirement benefit obligations may also affect periodic benefit costs (benefits) in future periods.
Historically, we have amortized unrecognized gains and losses using the corridor method over the average remaining service period of active participants of approximately eight years. As of December 31, 2016, approximately 95% of the participants in our U.S. qualified plan and approximately 93% of the participants in our U.S. postretirement life plan were inactive. Therefore, for fiscal 2017, we will amortize gains and losses over the average remaining life expectancy of the inactive population for these two plans. The gain/loss amortization period for the U.S. qualified pension plan will increase from about eight years to about nineteen years as a result of this change. We consider this a change in estimate and, accordingly, will account for it prospectively in 2017. For fiscal 2017, the change in estimate from amortizing gains and losses over the expected lifetime of the inactive population rather than the average remaining service period of active participants is expected to reduce US pension and postretirement net periodic benefit cost by approximately $18 to $22 million when compared to the prior estimate.
In 2016, the Society of Actuaries released an updated mortality table projection scale for measurement of retirement program obligations. We adopted this update in measuring the December 31, 2016 U.S. defined benefit and post retirement obligations. Adoption of this new projection scale has decreased the benefit obligations at December 31, 2016 by approximately $17.7 million. The effect of this adoption will be amortized into net periodic benefit cost beginning in 2017.
We use several assumptions and statistical methods to determine the asset values used to calculate both the expected rate of return on assets component of pension cost and to calculate our plans’ funding requirements. The expected rate of return on plan assets is based on a market-related value of assets that recognizes investment gains and losses over a five-year period. We use an actuarial value of assets to determine our plans’ funding requirements. The actuarial value of assets must be within a certain range, high or low, of the actual market value of assets, and is adjusted accordingly.
We select the discount rate used to calculate pension and other postretirement obligations based on a review of available yields on high-quality corporate bonds as of the measurement date. In selecting a discount rate as of December 31, 2016, we placed particular emphasis on a discount rate yield-curve provided by our actuary. This yield-curve, when populated with projected cash flows that represent the expected timing and amount of our plans' benefit payments, produced an effective discount rate of 4.22 percent for our U.S. qualified plan, 3.55 percent for our U.S. nonqualified, and 3.77 percent for our U.S. other postretirement benefit plans.
The discount rates used at our December 31, 2016 and 2015 measurement dates for the U.S. qualified plan were 4.22 percent and 4.50 percent, respectively. The effect of the change in the discount rate from 4.50 percent to 4.22 percent at December 31, 2016 resulted in a $39.1 million increase to our U.S. qualified pension benefit obligations. The effect of the change in the discount rate from 4.15 percent at December 31, 2014 to 4.50 percent at December 31, 2015 resulted in a $5.4 million decrease to the 2016 U.S. qualified pension expense.

The change in discount rate from 4.50 percent at December 31, 2015 to 4.22 percent at December 31, 2016 was attributable to a decrease in yields on high quality corporate bonds with cash flows matching the timing and amount of our expected future benefit payments between the 2015 and 2016 measurement dates. Using the December 31, 2016 and 2015 yield curves, our U.S. qualified plan cash flows produced a single weighted-average discount rate of approximately 4.22 percent and 4.50 percent, respectively.

On December 31, 2015, we changed the method we used to estimate the service cost and interest cost components of our net periodic benefit cost for our US defined benefit pension plans. We use a full yield curve approach in the estimate of these components of benefit cost by applying specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows as we believe this provides a better estimate of service and interest costs. For fiscal 2016, the change in estimate from a single weighted average discount rate to a spot rate approach reduced US pension and postretirement net periodic benefit cost by $12 million.
In developing the assumption for the long-term rate of return on assets for our U.S. Plan, we take into consideration the technical analysis performed by our outside actuaries, including historical market returns, information on the assumption for

41


long-term real returns by asset class, inflation assumptions, and expectations for standard deviation related to these best estimates. We also consider the historical performance of our own plan’s trust, which has earned a compound annual rate of return of approximately 8.4 percent over the last 20 years (which is in excess of comparable market indices for the same period) as well as other factors which are discussed in Note 13 to our consolidated financial statements in this Form 10-K. Our long-term rate of return for the fiscal year ended December 31, 2016, 2015 and 2014 was 7.00 percent, 7.25 percent and 7.75 percent, respectively.
For the sensitivity of our pension costs to incremental changes in assumptions see our discussion below.
Sensitivity analysis related to key pension and postretirement benefit assumptions.
A one-half percent increase in the assumed discount rate would have decreased pension and other postretirement benefit obligations by $70.3 million and $76.8 million at December 31, 2016 and 2015, respectively, and decreased pension and other postretirement benefit costs by $5.2 million, $6.4 million and $6.9 million for 2016, 2015 and 2014, respectively. A one-half percent decrease in the assumed discount rate would have increased pension and other postretirement benefit obligations by $78.5 million and, $85.3 million at December 31, 2016 and 2015, respectively, and increased pension and other postretirement benefit cost by $5.7 million, $6.5 million and $7.5 million for 2016, 2015 and 2014, respectively.
A one-half percent increase in the assumed expected long-term rate of return on plan assets would have decreased pension costs by $6.0 million, $5.8 million and $5.2 million for 2016, 2015 and 2014, respectively. A one-half percent decrease in the assumed long-term rate of return on plan assets would have increased pension costs by $6.0 million, $5.8 million and $5.2 million for 2016, 2015 and 2014, respectively.
Further details on our pension and other postretirement benefit obligations and net periodic benefit costs (benefits) are found in Note 13 to our consolidated financial statements in this Form 10-K.
Income taxes
We have recorded a valuation allowance to reduce deferred tax assets in certain jurisdictions to the amount that we believe is more likely than not to be realized. In assessing the need for this allowance, we have considered a number of factors including future taxable income, the jurisdictions in which such income is earned and our ongoing tax planning strategies. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Similarly, should we conclude that we would be able to realize certain deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.
Additionally, we file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Certain income tax returns for FMC entities taxable in the U.S. and significant foreign jurisdictions are open for examination and adjustment. We assess our income tax positions and record a liability for all years open to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We adjust these liabilities, if necessary, upon the completion of tax audits or changes in tax law.
See Note 11 to our consolidated financial statements included in this Form 10-K for additional discussion surrounding income taxes.

42


ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings, cash flows and financial position are exposed to market risks relating to fluctuations in commodity prices, interest rates and foreign currency exchange rates. Our policy is to minimize exposure to our cash flow over time caused by changes in commodity, interest and currency exchange rates. To accomplish this, we have implemented a controlled program of risk management consisting of appropriate derivative contracts entered into with major financial institutions.
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates and prices. The range of changes chosen reflects our view of changes that are reasonably possible over a one-year period. Market value estimates are based on the present value of projected future cash flows considering the market rates and prices chosen.
At December 31, 2016, our net financial instrument position was a net liability of $2.5 million compared to a net liability of $13.4 million at December 31, 2015. The change in the net financial instrument position was primarily due to lower unrealized losses in our commodity and foreign exchange portfolios.
Since our risk management programs are generally highly effective, the potential loss in value for each risk management portfolio described below would be largely offset by changes in the value of the underlying exposure.
Commodity Price Risk
Energy costs are diversified among coal, electricity and natural gas. We attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas and by entering into fixed-price contracts for the purchase of coal and fuel oil. To analyze the effect of changing energy prices, we have performed a sensitivity analysis in which we assume an instantaneous 10 percent change in energy market prices from their levels at December 31, 2016 and 2015, with all other variables (including interest rates) held constant.
 
 
 
Hedged energy exposure vs. Energy market pricing
(in Millions)
Net Asset / (Liability) Position on Consolidated Balance Sheets
 
Net Asset / (Liability) Position with 10% Increase
 
Net Asset / (Liability) Position with 10% Decrease
Net asset/(liability) position at December 31, 2016
$2.0
 
$3.3
 
$0.8
 
 
 
 
 
 
Net asset/(liability) position at December 31, 2015
$(2.0)
 
$(1.1)
 
$(2.9)

Foreign Currency Exchange Rate Risk
The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the euro, the Chinese yuan, the Brazilian real and the Argentine peso. Foreign currency debt and foreign exchange forward contracts are used in countries where we do business, thereby reducing our net asset exposure. Foreign exchange forward contracts are also used to hedge firm and highly anticipated foreign currency cash flows.
To analyze the effects of changing foreign currency rates, we have performed a sensitivity analysis in which we assume an instantaneous 10 percent change in the foreign currency exchange rates from their levels at December 31, 2016 and 2015, with all other variables (including interest rates) held constant.
 
 
 
Hedged Currency vs. Functional Currency
(in Millions)
Net Asset / (Liability) Position on Consolidated Balance Sheets
 
Net Asset / (Liability) Position with 10% Strengthening
 
Net Asset / (Liability) Position with 10% Weakening
Net asset/(liability) position at December 31, 2016
$(4.5)
 
$31.9
 
$(39.0)
 
 
 
 
 
 
Net asset/(liability) position at December 31, 2015
$(11.4)
 
$24.4
 
$(47.2)

Interest Rate Risk
One of the strategies that we can use to manage interest rate exposure is to enter into interest rate swap agreements. In these agreements, we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated on an agreed-upon notional principal amount. As of December 31, 2016 and 2015, we had no interest rate swap agreements.

43


Our debt portfolio at December 31, 2016 is composed of 58.9 percent fixed-rate debt and 41.1 percent variable-rate debt. The variable-rate component of our debt portfolio principally consists of borrowings under our Term Loan Facility, commercial paper program, Credit Facility, variable-rate industrial and pollution control revenue bonds, and amounts outstanding under foreign subsidiary credit lines. Changes in interest rates affect different portions of our variable-rate debt portfolio in different ways.
Based on the variable-rate debt in our debt portfolio at December 31, 2016, a one percentage point increase in interest rates would have increased gross interest expense by 7.8 million and a one percentage point decrease in interest rates would have decreased gross interest expense by 6.1 million for the year ended December 31, 2016.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Page


    



44


FMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 
(in Millions, Except Per Share Data)
Year Ended December 31,
2016
 
2015
 
2014
Revenue
$
3,282.4

 
$
3,276.5

 
$
3,258.7

Costs and Expenses
 
 
 
 
 
Costs of sales and services
2,082.6

 
2,201.1

 
2,047.8

 
 
 
 
 
 
Gross Margin
1,199.8

 
1,075.4

 
1,210.9

 
 
 
 
 
 
Selling, general and administrative expenses
529.5

 
737.9

 
589.8

Research and development expenses
141.5

 
143.7

 
126.3

Restructuring and other charges (income)
107.3

 
244.0

 
56.4

Business separation costs

 

 
23.6

Total costs and expenses
2,860.9

 
3,326.7

 
2,843.9

Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
421.5

 
(50.2
)
 
414.8

Equity in (earnings) loss of affiliates
(0.5
)
 
0.2

 
(0.2
)
Interest income
(0.6
)
 
(1.3
)
 
(0.2
)
Interest expense
83.3

 
81.4

 
51.4

Income (loss) from continuing operations before income taxes
339.3

 
(130.5
)
 
363.8

Provision for income taxes
93.9

 
47.4

 
56.2

Income (loss) from continuing operations
245.4

 
(177.9
)
 
307.6

Discontinued operations, net of income taxes
(33.7
)
 
676.4

 
14.5

Net income
211.7

 
498.5

 
322.1

Less: Net income attributable to noncontrolling interests
2.6

 
9.5

 
14.6

Net income attributable to FMC stockholders
$
209.1

 
$
489.0

 
$
307.5

Amounts attributable to FMC stockholders:
 
 
 
 
 
Continuing operations, net of income taxes
$
242.8

 
$
(187.4
)
 
$
298.2

Discontinued operations, net of income taxes
(33.7
)
 
676.4

 
9.3

Net income attributable to FMC stockholders
$
209.1

 
$
489.0

 
$
307.5

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
Continuing operations
$
1.81

 
$
(1.40
)
 
$
2.23

Discontinued operations
(0.25
)
 
5.06

 
0.07

Net income attributable to FMC stockholders
$
1.56

 
$
3.66

 
$
2.30

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
Continuing operations
$
1.81

 
$
(1.40
)
 
$
2.22

Discontinued operations
(0.25
)
 
5.06

 
0.07

Net income attributable to FMC stockholders
$
1.56

 
$
3.66

 
$
2.29

The accompanying notes are an integral part of these consolidated financial statements.


45


FMC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
(in Millions)
Year Ended December 31,
2016
 
2015
 
2014
Net Income
$
211.7

 
$
498.5

 
$
322.1

Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency adjustments:
 
 
 
 
 
Foreign currency translation gain (loss) arising during the period
(48.7
)
 
(97.3
)
 
(76.5
)
Reclassification of foreign currency translations losses

 

 
49.6

Total foreign currency translation adjustments (1)
(48.7
)
 
(97.3
)
 
(26.9
)
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
Unrealized hedging gains (losses) and other, net of tax of ($0.2), $0.4 and ($0.8)
7.3

 
0.7

 
3.1

Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of $3.3, ($2.7) and ($0.6)
6.0

 
(3.0
)
 
(0.9
)
Total derivative instruments, net of tax of $3.1, ($2.3) and ($1.4)
13.3

 
(2.3
)
 
2.2

 
 
 
 
 
 
Pension and other postretirement benefits:
 
 
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of ($7.7), ($16.1) and $70.9 (2)
(26.9
)
 
(26.4
)
 
(173.3
)
Reclassification of net actuarial and other (gain) loss, amortization of prior service costs and settlement charges, included in net income, net of tax of $20.6, $23.2 and $12.9 (3)
39.2

 
44.1

 
22.3

Total pension and other postretirement benefits, net of tax of $12.9, $7.1 and $83.8
12.3

 
17.7

 
(151.0
)
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
(23.1
)
 
(81.9
)
 
(175.7
)
Comprehensive income
$
188.6

 
$
416.6

 
$
146.4

Less: Comprehensive income attributable to the noncontrolling interest
0.6

 
9.1

 
12.8

Comprehensive income attributable to FMC stockholders
$
188.0

 
$
407.5

 
$
133.6

____________________