10-K 1 fmc201710k.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, 2017
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: 215-299-6000
__________________________________________________________________________
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 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
 
 
 
 
 
 
 
 
 
 
 
 
 
EMERGING GROWTH COMPANY
 
 
 
 
 
 
 
 
 
IF AN EMERGING GROWTH COMPANY, INDICATE BY CHECK MARK IF THE REGISTRANT HAS ELECTED NOT TO USE THE EXTENDED TRANSITION PERIOD FOR COMPLYING WITH ANY NEW OR REVISED FINANCIAL ACCOUNTING STANDARDS PROVIDED PURSUANT TO SECTION 13(A) OF THE EXCHANGE ACT.

 
 
 
o
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, 2017, THE LAST DAY OF THE REGISTRANT’S SECOND FISCAL QUARTER WAS $9,724,855,894. 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, 2017
Common Stock, par value $0.10 per share
 
134,330,556

DOCUMENTS INCORPORATED BY REFERENCE
 
DOCUMENT
 
FORM 10-K REFERENCE
Portions of Proxy Statement for 2018 Annual Meeting of Stockholders
 
Part III




FMC Corporation
2017 Form 10-K
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 two distinct business segments: FMC Agricultural Solutions 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. 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.
DuPont Crop Protection Business
On March 31, 2017, we entered into a definitive Transaction Agreement (the “Transaction Agreement”) with E. I. du Pont de Nemours and Company (“DuPont"). On November 1, 2017, pursuant to the terms and conditions set forth in the Transaction Agreement, we completed the acquisition of certain assets relating to DuPont's Crop Protection business and research and development organization ("DuPont Crop Protection Business") (collectively, the "DuPont Crop Protection Business Acquisition"). In connection with this transaction, we sold to DuPont our FMC Health and Nutrition segment and paid DuPont $1.2 billion in cash. Our FMC Health and Nutrition business and its results have been presented as a discontinued operation for all periods presented throughout this document.
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 seven 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.
2017 was a pivotal year for FMC Agricultural Solutions, as we acquired a significant portion of the DuPont Crop Protection Business to transform FMC into a tier-one leader and the fifth largest global provider in the agricultural chemicals market. The acquisition included DuPont’s industry-leading insecticides and herbicides (the majority of which are patented technologies), exceptional discovery research capabilities and a global manufacturing network. FMC’s legacy business also had a strong year, as it reaped the benefits of proactive measures taken in 2015 and 2016 to outperform the market in another challenging year for crop chemical providers. FMC will begin launching its legacy technology pipeline of eight new active ingredients, starting with our bixafen fungicide launch in North America targeted for early 2019. We also launched about 50 new legacy product formulations in 2017, which is key to life cycle management of our products. The DuPont Crop Protection Business Acquisition added 15 discovery leads to our pipeline, and as a result of the acquisition, we expect to spend approximately 8 percent of FMC Agricultural Solutions sales on research and development annually. FMC acquired 14 manufacturing plants from DuPont, and with 26 total plants today, we have the scale to operate this business with greater resources and global reach to address changing market conditions.
FMC is one of the leading global producers of specialty lithium products, and 2017 was a year of significant growth for FMC Lithium. In March, we announced our intention to separate FMC Lithium into a publicly traded company during 2018. We took an important step in December, when we finalized  new operating agreements in Argentina. The provincial government of

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Catamarca formalized these agreements by passing legislation that sets our royalty rates and our  commitments to corporate social responsibility programs, while also paving the way for us to expand capacity. As an independent company, FMC Lithium will have a focused investor base and strong balance sheet, ensuring it has the financial capacity to pursue its growth plans and be a leading force in this critical industry. We made several strategic decisions during the last few years to focus FMC Lithium on downstream, higher-value products. We convert most of our lithium carbonate and chloride production into high-purity materials, including lithium hydroxide used in electric vehicle ("EV") batteries, and butyllithium and lithium metals for specialty applications. In 2017, we expanded capacity in multiple locations, including a new lithium hydroxide plant in China that can produce 9,000 metric tons per year to meet accelerating demand for FMC’s products. Commercial sales from this facility began in June, and we had full commercial production for the final four months of 2017. We remain on track to reach 30,000 metric tons of lithium hydroxide manufacturing capacity by the end of 2019, by adding another 12,000 metric tons of capacity. To feed these downstream products, we also announced plans to more than double lithium carbonate production at our Argentina site to approximately 40,000 metric tons per year by 2022. In addition, debottlenecking projects at our major facilities are contributing to short-term capacity increases. We will also continue to invest in other higher growth, higher value segments of the lithium market, including butyllithium for use in chemical synthesis and high purity lithium metal for aerospace and energy storage applications.
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 two 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 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.
    

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    fmc201710krevenuelonglivedas.jpg        
FMC Agricultural Solutions
    fmc201710kagsrevopmargin.jpg        fmc201710kagscapexandda.jpg            
Overview

    fmc201710kagsolutionssalesmi.jpg        fmc201710kagsrevbyregion1.jpg



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Our FMC Agricultural Solutions segment, which represents approximately 88 percent of our 2017 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 2015 acquisition of Cheminova, we now access the European markets through our own sales and marketing organizations. With the 2017 acquisition of the DuPont Crop Protection Business, we now access key Asian markets through large distributors, in addition to either 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 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, DowDuPont, 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 2017 acquisition of a significant portion of the DuPont Crop Protection Business positions FMC among leading agrochemical producers in the world. The acquired insecticides are predominantly based on patent-protected active ingredients and are growing well above market patterns. 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 Lithium


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            fmc201710klithiumrevopmargin.jpg
                    

Overview
Our FMC Lithium segment represents 12 percent of our 2017 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.
Lithium is a critical element in advanced batteries for use in hybrid electric, plug-in hybrids and all-electric vehicles. The electrochemical properties of lithium make it an ideal material for portable energy storage, including EVs, smart phones, tablets, laptop computers, military devices and other energy storage technologies.
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
    fmc201710klithrevbyregiona.jpg        fmc201710klithiumcapexandda.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 for the next several years. 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. We extract ores used in FMC Lithium’s manufacturing processes from lithium brines in Argentina.
Patents
We own and license a significant number of U.S. and foreign patents, trademarks, trade secrets and other intellectual property that are cumulatively important to our business. The FMC intellectual property estate provides us with an important competitive advantage. Our patents cover many of our products, processes and product uses as well as many aspects of our research and development activities. Patents are granted by individual jurisdictions and the duration of our patents depends on their respective jurisdictions. We also own many trademarks that are well recognized by customers or product end-users. Unlike patents, ownership rights in trademarks do not expire so long as the trademarks are continued in use and properly protected - we actively monitor and manage our trademarks to maintain such protection. We believe that the invalidity or loss of any particularly significant patent, trademark or license would be a remote possibility and/or would not likely have a material adverse effect on the overall business of FMC.
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 two 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 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

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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:
 
Year Ended December 31,
(in Millions)
2017
 
2016
 
2015
FMC Agricultural Solutions
$
138.4

 
$
131.4

 
$
132.4

FMC Lithium
3.1

 
3.1

 
3.5

Total
$
141.5

 
$
134.5

 
$
135.9

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 7,000 people with about 1,800 people in our domestic operations and 5,200 people in our foreign operations.
Approximately 2 percent of our U.S.-based and 32 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 2018, seven foreign collective-bargaining agreements will be expiring. These contracts affect about 27 percent of our foreign-based employees. There will be no U.S. collective-bargaining agreements expiring in 2018.
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 22, 2017, 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 Lithium business is sensitive to industry capacity utilization. As a result, pricing tends to fluctuate when capacity utilization changes occur within the 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 business is 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 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 the DuPont Crop Protection business, 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.
Pharmaceutical regulation - Our Lithium facility in Bessemer City, North Carolina, and some of our manufacturing processes at that facility, 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.

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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 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 processes. 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.
Economic and political change - Our business has been and could continue to 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, price volatility, supply disruptions, or loss of property. In Argentina, continued inflation and foreign exchange controls could adversely affect our business. Realignment of change in regional economic arrangements could have an operational impact on our businesses. In China, unpredictable enforcement of environmental regulations could result in unanticipated shutdowns of manufacturing activity in broad geographic areas due to non-attainment across the entire area rather than specific infractions or actions of individual producers, impacting our contract manufacturers and raw material suppliers.

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 - As a part of the DuPont Crop Protection integration we now own and operate large-scale manufacturing facilities in the United States (Mobile), Puerto Rico (Manati) and China (Pudong and Jinshan) in addition to our Legacy active ingredient plants in Denmark (Ronland) and India (Panoli). 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,

11


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 DuPont Crop Protection assets and the planned continued expansion of our Lithium business, 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 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.
Compliance with Laws and Regulations: The global regulatory environment is becoming increasingly complex and requires more resources to effectively manage, which may increase the potential for misunderstanding or misapplication of regulatory standards.
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.

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.  Our investment in the discovery and development of new pesticidal active ingredients for FMC Agricultural Solutions relies on discovery of new chemical molecules. Such discovery processes depend on our scientists being able to find new molecules, which are novel and outside of patents held by others, and such molecules being efficacious against target pests without creating an undue risk to human health and the environment, and then meeting applicable regulatory criteria.    
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

12


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 acquired DuPont business and transition the management information systems of the DuPont business from the ERP system provided under Transition Services Agreement by DuPont to a management information system integrated with FMC’s legacy products could result in interruption of operations or failure to achieve synergies we expect. This could cause our future results of operations to be materially worse than expected. 
FMC Lithium separation challenges - We are separating our FMC Lithium business at that same time as we continue to integrate the DuPont assets into FMC Agricultural Solutions as well as implement other major initiatives such as the migration to a single global instance of SAP S4 HANA.  These three projects will place significant demands on certain functions who are heavily involved in all three projects, particularly finance and information technology.  Failure to successfully execute such projects could materially and adversely affect our expected performance in FMC Agricultural Solutions and/or FMC Lithium.

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, 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.
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 DuPont Crop Protection business has significantly expanded our operations and sales in certain foreign countries and correspondingly may increase our exposure to foreign exchange risks.
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 or foreign withholding taxes have not been previously accrued.
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 33 manufacturing facilities in 17 countries as well as one mine in Argentina. Our major research and development facilities are in Newark, Delaware, 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:

13


 
North America
 
Latin
America
 
Europe, Middle East and Africa
 
Asia-
Pacific
 
Total
FMC Agricultural Solutions
4
 
3
 
6
 
13
 
26
FMC Lithium
1
 
2
 
1
 
3
 
7
Total
5
 
5
 
7
 
16
 
33

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, 2017, there were approximately 9,000 premises and product asbestos claims pending against FMC in several jurisdictions. Since the 1980s, approximately 114,000 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 $89 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.

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, 2017, are as follows:

Name
 
Age on
12/31/2017
 
Office, year of election and other
information
Pierre R. Brondeau
 
60
 
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
 
46
 
Executive Vice President and Chief Financial Officer (12-present); Managing Director, Goldman Sachs Group (06-12)
Andrea E. Utecht
 
69
 
Executive Vice President, General Counsel and Secretary (01-present)
Mark A. Douglas
 
55
 
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 2,673 registered common stockholders as of December 31, 2017. Presented below are the 2017 and 2016 quarterly summaries of the high and low prices of the FMC common stock.
 
 
2017
 
2016
Common stock prices:
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
High
$
72.04

 
$
77.38

 
$
93.44

 
$
96.02

 
$
42.03

 
$
50.57

 
$
49.19

 
$
60.00

Low
56.42

 
69.81

 
72.65

 
87.56

 
32.24

 
36.72

 
43.26

 
45.77

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 $88.8 million, $88.6 million and $86.4 million were paid in 2017, 2016 and 2015, respectively.
FMC’s annual meeting of stockholders will be held at 2:00 p.m. on Tuesday, April 24, 2018, at FMC Tower, 2929 Walnut Street Philadelphia, Pennsylvania. Notice of the meeting, together with proxy materials, will be mailed approximately five weeks prior to the meeting to stockholders of record as of February 27, 2018.
 
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, 2012, in FMC’s Common Stock and in both of the indices, and the reinvestment of all dividends.
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017
FMC Corporation
$
100.00

 
$
129.87

 
$
99.18

 
$
69.20

 
$
101.19

 
$
170.54

S&P 500 Index
100.00

 
132.04

 
149.89

 
151.94

 
169.82

 
206.62

S&P 500 Chemicals Index
100.00

 
131.43

 
145.42

 
139.42

 
153.34

 
194.02



14


fmc201710kstockperformance.jpg

The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2017:
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, 2017
340

 
$
93.14

 

 
$

 
$
238,779,078

November 1-30, 2017
118

 
93.68

 

 

 
238,779,078

December 1-31, 2017
9,274

 
93.03

 

 

 
238,779,078

Total
9,732

 
$
93.05

 

 
$

 
$
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.

15


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, 2017, 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, 2017.
 
 
Year Ended December 31,
(in Millions, except per share data and ratios)
2017
 
2016
 
2015
 
2014
 
2013
Income Statement Data:
 
 
 
 
 
 
 
 
 
Revenue
$
2,878.6


$
2,538.9

 
$
2,491.0

 
$
2,430.5

 
$
2,368.7

Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
259.8


243.2

 
(146.5
)
 
246.0

 
380.6

Income (loss) from continuing operations before income taxes
180.8


180.8

 
(207.4
)
 
206.8

 
353.8

Income (loss) from continuing operations
(83.3
)

130.7

 
(212.6
)
 
190.4

 
342.4

Discontinued operations, net of income taxes (1)
621.7


81.0

 
711.1

 
131.7

 
(34.4
)
Net income
$
538.4

 
$
211.7

 
$
498.5

 
$
322.1

 
$
308.0

Less: Net income attributable to noncontrolling interest
2.6

 
2.6

 
9.5

 
14.6

 
14.1

Net income attributable to FMC stockholders
$
535.8

 
$
209.1

 
$
489.0

 
$
307.5

 
$
293.9

Amounts attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations, net of income taxes
$
(85.9
)

$
128.4

 
$
(222.0
)
 
$
180.6

 
$
336.0

Discontinued operations, net of income taxes
621.7


80.7

 
711.0

 
126.9

 
(42.1
)
Net income
$
535.8

 
$
209.1

 
$
489.0

 
$
307.5

 
$
293.9

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(0.64
)

$
0.96

 
$
(1.66
)
 
$
1.35

 
$
2.48

Discontinued operations
4.63


0.60

 
5.32

 
0.95

 
(0.32
)
Net income
$
3.99

 
$
1.56

 
$
3.66

 
$
2.30

 
$
2.16

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(0.64
)

$
0.96

 
$
(1.66
)
 
$
1.34

 
$
2.47

Discontinued operations
4.63


0.60

 
5.32

 
0.95

 
(0.31
)
Net income
$
3.99

 
$
1.56

 
$
3.66

 
$
2.29

 
$
2.16

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
9,206.3


$
6,139.3

 
$
6,325.9

 
$
5,326.0

 
$
5,224.6

Long-term debt
3,094.2


1,801.2

 
2,037.8

 
1,140.9

 
1,178.2

Other Data:
 
 
 
 
 
 
 
 
 
Ratio of earnings (loss) to fixed charges (2)
3.0

  
3.4

 
(1.9
)
 
5.5

 
11.2

Cash dividends declared per share
$
0.660

 
$
0.660

 
$
0.660

 
$
0.600

 
$
0.540

 ____________________
(1)
Discontinued operations, net of income taxes includes, in periods up to their respective sales, our discontinued FMC Health and Nutrition, FMC Peroxygens and FMC Alkali Chemicals division. 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. Amount in 2017 includes the divestiture gain associated with FMC Health and Nutrition. Amount in 2015 includes the divestiture gain associated with the FMC Alkali Chemicals division sale while 2014 and 2013 include charges associated with the sale of the FMC 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.


16


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.


17


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 two distinct business segments: FMC Agricultural Solutions 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. 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.

2017 Highlights
The following are the more significant developments in our businesses during the year ended December 31, 2017:
On November 1, 2017, we successfully completed the acquisition of the DuPont Crop Protection Business which was a significant milestone and transformed FMC into a tier-one leader and the fifth largest global provider in the agricultural chemicals market. This acquisition brought greater scale and regional balance to our business, improved our market access and expanded our product portfolio and technology pipeline significantly. On November 1, 2017, we completed the previously disclosed sale of our FMC Health and Nutrition business to DuPont. The sale resulted in a gain of approximately $918 million ($727 million, net of tax).
Revenue of $2,878.6 million in 2017 increased $339.7 million or approximately 13 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 North America increased 14 percent, sales in Asia increased 21 percent and sales in Europe, Middle East and Africa (EMEA) increased by 5 percent and sales in Latin America increased by 14 percent.
Our gross margin, excluding acquisition-related charges, of $1,121.5 million increased approximately $190.3 million or approximately 20 percent versus last year. Gross margin as a percent of revenue is approximately 39 percent versus 37 percent in 2016. The increase in gross margin was primarily driven by improved pricing and mix in our FMC Lithium business as well as the sale of higher margin products from the acquired DuPont Crop Protection Business.
Selling, general and administrative expenses increased 35 percent from $458.5 million to $618.6 million. The change is primarily due to acquisition-related charges incurred in 2017 related to the DuPont Crop Protection Business Acquisition which was $130.2 million of the increase. Selling, general and administrative expenses, excluding non-operating pension and postretirement charges and acquisition-related charges, of $470.2 million increased $58.5 million or approximately 14 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 increased $7.0 million or 5 percent. The increase was due to investments in discovery and product development from the newly acquired state of the art facilities from the DuPont Crop Protection Business Acquisition.
Net income attributable to FMC stockholders of $535.8 million increased approximately $326.7 million from $209.1 million in the prior year period primarily due to the gain on sale of our discontinued FMC Health and Nutrition of approximately $727 million, net of tax. The increase was partially offset by a provisional income tax charge of $315.9 million related to the recently enacted Tax Cuts and Jobs Act (the "Act"). Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $368.3 million increased approximately $110.6 million or 43 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 2017 Highlights
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 March, we announced our intention to separate FMC Lithium into a publicly traded company during 2018. In June, we started commercial sales from our new lithium hydroxide facility in China. We expanded production of lithium carbonate at our Argentina site through debottlenecking projects, and we also announced plans to more than double lithium carbonate production at that same site to at least 40,000 metric tons by 2022.
    

18


On August 1, 2017, we completed the sale of the Omega-3 business to Pelagia AS for $38 million.

In May 2017, we entered into a new $1.5 billion term loan facility to fund the Transaction Agreement with DuPont.We also entered into an amended and restated $1.5 billion revolving credit facility and amended the existing term loan facility at that time. Among other things, the amendments temporarily increased the maximum leverage ratio financial covenant in order to permit the debt incurred under the contemplated New Term Loan Facility along with certain other changes to permit the expected transaction.

2018 Outlook

We believe the crop protection chemical market will be flat to up low single digits and we believe that the Lithium market will continue to see significant demand growth in 2018. We believe that our 2018 plan is very achievable, as it relies on things we control rather than on expectations of positive external events.

We expect to deliver segment revenue and earnings growth in each business. In FMC Agricultural Solutions, we will focus on the integration of the DuPont Crop Protection Business and on creating a stronger combined business to capitalize on the products and expertise of these two former organizations. We expect to outperform the crop protection market in 2018, owing to our recently acquired products and to our proactive competitive positioning of our legacy business. We believe that FMC Lithium will increase earnings significantly through volume and price increases in 2018.

On a long-term basis, we are a technology-driven company with low-cost operations, a world class research and development organization 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 2018 outlook for each segment.

19


Results of Operations—2017, 2016 and 2015
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,
2017
 
2016
 
2015
Revenue
 
 
 
 
 
FMC Agricultural Solutions
$
2,531.2

 
$
2,274.8

 
$
2,252.9

FMC Lithium
347.4

 
264.1

 
238.1

Total
$
2,878.6

 
$
2,538.9

 
$
2,491.0

Income (loss) from continuing operations before income taxes
 
 
 
 
 
FMC Agricultural Solutions
$
485.6

 
$
399.9

 
$
363.9

FMC Lithium
126.7

 
70.2

 
23.0

Segment operating profit
$
612.3

 
$
470.1

 
$
386.9

Corporate and other
(102.4
)
 
(84.6
)
 
(63.0
)
Operating profit before the items listed below
$
509.9

 
$
385.5

 
$
323.9

Interest expense, net
(79.1
)
 
(62.9
)
 
(60.9
)
Restructuring and other (charges) income (1)
(81.4
)
 
(95.0
)
 
(150.3
)
Non-operating pension and postretirement (charges) income (2)
(18.2
)
 
(23.4
)
 
(29.8
)
Acquisition related charges (3)
(150.4
)
 
(23.4
)
 
(290.3
)
(Provision) benefit for income taxes
(264.1
)
 
(50.1
)
 
(5.2
)
Discontinued operations, net of income taxes
621.7

 
81.0

 
711.1

Net (income) loss attributable to noncontrolling interests
(2.6
)
 
(2.6
)
 
(9.5
)
Net income attributable to FMC stockholders
$
535.8

 
$
209.1

 
$
489.0

____________________
(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)
2017
 
2016
 
2015
FMC Agricultural Solutions
$
(49.9
)
 
$
(62.4
)
 
$
(123.7
)
FMC Lithium
(7.8
)
 
(0.6
)
 
(2.7
)
Corporate
(23.7
)
 
(32.0
)
 
(23.9
)
Restructuring and other (charges) income
$
(81.4
)
 
$
(95.0
)
 
$
(150.3
)

(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).
(3)
Charges relate to the expensing of the inventory fair value step-up resulting from the application of purchase accounting, transaction costs, costs for transitional employees, other acquired employee related costs, integration related legal and professional third-party fees and gains or losses on hedging purchase price associated with the acquisitions. Amounts represent the following:
 

20


 
Year Ended December 31,
(in Millions)
2017
 
2016
 
2015
Acquisition-related charges - DuPont
 
 
 
 
 
Legal and professional fees (1) (2)
$
130.2

 
$

 
$

Inventory fair value amortization (3)
20.2

 

 

Acquisition-related charges - Cheminova (4)
 
 
 
 
 
Legal and professional fees (1) (2)
$

 
$
23.4

 
$
60.4

Inventory fair value amortization (3)

 

 
57.8

(Gain)/loss on hedging purchase price (2)

 

 
172.1

Total acquisition-related charges
$
150.4

 
$
23.4

 
$
290.3

____________________ 
(1)
Represents transaction costs, costs for transitional employees, other acquired employee related costs and integration related legal and professional third-party fees.
(2)
These charges are included in “Selling, general and administrative expense" on the consolidated statements of income (loss).
(3)
These charges are included in “Costs of sales and services” on the consolidated statements of income (loss).
(4)
Acquisition-related charges and restructuring charges to integrate Cheminova with FMC 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,
2017
 
2016
 
2015
Net income (loss) attributable to FMC stockholders (GAAP)
$
535.8

 
$
209.1

 
$
489.0

Corporate special charges (income), pre-tax
250.0

 
141.8

 
470.4

Income tax expense (benefit) on Corporate special charges (income) (1)
(67.5
)
 
(44.9
)
 
(137.8
)
Corporate special charges (income), net of income taxes
$
182.5

 
$
96.9

 
$
332.6

Discontinued operations attributable to FMC Stockholders, net of income taxes
(621.7
)
 
(80.7
)
 
(711.0
)
Non-GAAP tax adjustments (2)
271.7

 
32.4

 
94.7

Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP)
$
368.3

 
$
257.7

 
$
205.3

____________________
(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 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 which includes the impact of the Act enacted on December 22, 2017. 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.


21


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.

Beginning in 2018 we will present earnings before interest, taxes, and depreciation and amortization ("EBITDA") by operating segment, which is a Non-GAAP financial measure. We define segment EBITDA as segment operating profit excluding depreciation and amortization expense. We believe that this Non-GAAP financial measure provides a useful metric for management and investors to better assess operating performance and enables transparency to investors and analysts for period-to-period comparability of financial performance. Due to the recent DuPont Crop Protection Business acquisition, we acquired a large number of intangible assets and property, plant, and equipment. The depreciation and amortization on the intangible assets is expected to significantly increase our depreciation and amortization expense.

FMC Agricultural Solutions
(in Millions)
Year Ended December 31,
2017
 
2016
 
2015
Revenue
$
2,531.2

 
$
2,274.8

 
$
2,252.9

Operating Profit
485.6

 
399.9

 
363.9


2017 vs. 2016
Revenue of $2,531.2 million increased approximately 11 percent versus the prior year period. Higher volumes contributed 12 percent to the increase while favorable foreign currency had an impact of 1 percent. The acquired DuPont Crop Protection Business contributed 8 percent to these higher volumes, or approximately $193 million. These increases were partially offset by lower pricing which impacted revenue by 2 percent.
Operating profit of $485.6 million increased approximately 21 percent compared to the year-ago period. The higher volumes discussed above impacted the change in operating profit by 43 percent and favorable foreign currency impacted the change in operating profit by 5 percent. The acquired business represented a majority of these higher volumes. Offsetting these increases were lower pricing which had an unfavorable impact of 11 percent as well as higher costs which unfavorably impacted the segment by 16 percent to the increase. The higher costs were also due to the recently acquired business.
For 2018, full-year segment revenue is expected to be approximately $3.95 billion to $4.15 billion and full-year segment EBITDA is expected to be approximately $1.05 billion to $1.15 billion. Full-year depreciation and amortization is expected to be approximately $145 million. We anticipate legacy FMC Agricultural Solutions revenue will grow 2 to 4 percent, while the acquired business is expected to grow by 6 to 10 percent.

FMC Agricultural Solutions Pro Forma Financial Results with Cheminova

22


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

 
$
2,252.9

Revenue, Cheminova, pro forma (2)

 
362.0

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

 
$
2,614.9

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

 
$
363.9

Operating Profit, Cheminova, pro forma (2)

 
19.9

Pro Forma Combined, Operating Profit (3)
$
399.9

 
$
383.8

___________________
(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, 2015, 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, 2015 or indicative of future results. For the twelve months ended December 31, 2016, pro forma results and actual results are the same.

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 2 percent increase. The lower volumes were partially due to actions we took to eliminate certain product sales in Latin America. Refer to the chart below for discussion on revenue by region. These actions reduced revenue by approximately $175 million compared to the pro forma revenue for 2015.
Operating profit of $399.9 million increased approximately 4 percent compared to the pro forma combined operating profit for the prior period. Improved pricing and mix impacted pro forma operating profit by 10 percent which was predominantly experienced in both Brazil and North America and favorable foreign currency impacted pro forma results by 4 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.

FMC Agricultural Solutions Combined Revenue by Region
 
Twelve Months Ended December 31,
(in Millions)
2017
 
2016
 
2015 (1)
Europe, Middle East and Africa (EMEA) (2) (6)
$
523.8

 
$
516.3

 
$
585.7

North America (3) (7)
626.7

 
557.8

 
595.2

Latin America (4) (8)
866.6

 
758.8

 
965.3

Asia (5) (9)
514.1

 
441.9

 
468.7

Total
$
2,531.2

 
$
2,274.8

 
$
2,614.9

___________________
(1)
Combined revenue by region for the twelve months ended December 31, 2015 includes the results of Cheminova assuming the acquisition occurred on January 1, 2015. 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, 2015 or indicative of future results.

2017 vs. 2016

23



(2)
Increase in the twelve months ended December 31, 2017 was driven by strong sales in France as we moved to direct market access. Additionally, favorable pricing and new product launches in cereal herbicides and fungicides contributed to the increase. These increases were partially offset by a late start to the season in Northwestern Europe in the first quarter of 2017.
(3)
Increase in the twelve months ended December 31, 2017 was driven by strong demand for both pre- and post-emergent herbicides, as well as foliar insecticides.
(4)
Increase for the twelve months ended December 31, 2017 was driven by growth in soybean applications in Brazil, as well as increased insecticide volumes in Argentina and Mexico. Additionally, successful product launches contributed to the revenue increase.
(5)
The increase in the twelve months ended December 31, 2017 was primarily due to successful product launches in China, strong demand for rice insecticides in Indonesia and increased herbicide demand in Australia.

Actual Results for 2016 vs. Pro Forma Combined Results for 2015

(6)
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.
(7)
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.
(8)
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.
(9)
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.

FMC Lithium
(in Millions)
Year Ended December 31,
2017
 
2016
 
2015
Revenue
$
347.4

 
$
264.1

 
$
238.1

Operating Profit
126.7

 
70.2

 
23.0

2017 vs. 2016
Revenue of $347.4 million increased by approximately 32 percent versus the prior-year period driven by improved pricing and mix, which accounted for a 23 percent increase. Additionally, higher volumes impacted revenue by 9 percent. Foreign currency had a minimal impact on the change in revenue.
Segment operating profit of $126.7 million increased approximately $57 million versus the year ago period. The improved pricing and mix noted above impacted operating profit by approximately $60 million while volume contributed to the change by $11 million. These increases were offset by higher raw material prices and energy prices as well as expansion related costs by approximately $13 million. Foreign currency had a negative impact of less than $1 million on the change in operating profit.
Full year segment revenue is expected to be approximately $420 million to $460 million for 2018 and full-year segment EBITDA is expected to be approximately $180 million to $200 million. Full-year depreciation and amortization is expected to be approximately $20 million.

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 3 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.

24



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 (loss).
2017 vs. 2016
Corporate and other expenses of $102.4 million increased by $17.8 million from $84.6 million in 2016. The increase was driven by approximately $6 million of corporate incentives due to higher business results and share-based compensation. Additionally, the prior period included approximately $7 million of LIFO income that did not recur in 2017. The remaining increase was due to other corporate items including corporate facility costs, foreign exchange losses and other shared corporate costs.
2016 vs. 2015
Corporate and other expenses of $84.6 million increased by $21.6 million from $63.0 million in the same period 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 million. The remaining $9 million increase was primarily the result of other project initiatives.

Interest expense, net
2017 vs. 2016
Interest expense, net of $79.1 million increased by approximately 26 percent compared to $62.9 million in 2016. The increase was driven by the impacts of higher foreign debt balances of approximately $6 million, the addition of the 2017 Term Loan Facility of $6 million, and increases in interest rates of approximately $4 million.
2016 vs. 2015
Interest expense, net of $62.9 million increased by 3 percent as compared to $60.9 million in 2015. The slight increase was due to higher foreign debt balances, partially offset by lower term balance and other minor factors.

Corporate special charges (income)
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)
2017
 
2016
 
2015
Restructuring charges and asset disposals
$
16.3

 
$
43.4

 
$
124.0

Other charges (income), net
65.1

 
51.6

 
26.3

Total restructuring and other charges (income) (1)
$
81.4

 
$
95.0

 
$
150.3

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

2017
Restructuring and asset disposal charges in 2017 were primarily associated with charges in our FMC Lithium segment of $7.8 million related to miscellaneous restructuring. There were also impairment charges of intangible assets within FMC Agricultural Solutions of $2.2 million. In Corporate, there were asset write-downs of approximately $5.5 million. Amounts also include miscellaneous restructuring charges of $0.8 million.
Other charges (income), net in 2017 consisted of a $42.1 million impairment on certain indefinite-lived intangible assets from the acquired DuPont Crop Protection Business Acquisition as a result of a triggering event due to the Act. Other charges (income) also includes $16.6 million for continuing environmental sites treated as Corporate charges. Additionally, we incurred exit costs of $4.8 million resulting from the termination and de-consolidation of our interest in a variable interest entity that was previously consolidated and was part of our FMC Agricultural Solutions segment. We had other miscellaneous charges, net of approximately $1.6 million.
2016

25


Restructuring and asset disposal charges in 2016 totaled $43.4 million. Included in this were final charges totaling $42.3 million associated with the integration of Cheminova into our existing FMC Agricultural Solutions segment. This amount included final adjustments to severances, long lived asset write offs, contract termination costs and other miscellaneous items. There were miscellaneous restructuring charges of $1.1 million.
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 $2.6 million.
2015
Restructuring and asset disposal charges in 2015 totaled $124.0 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. There were other miscellaneous restructuring charges in both FMC Agricultural Solutions and Corporate of $5.7 million.
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").

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).
2017 vs. 2016
The charge for 2017 was $18.2 million compared to $23.4 million in 2016. The decrease was the result of $22.8 million lower amortization of net actuarial losses as a result of a change in estimate in fiscal 2017 to amortize the gains and losses over the expected life time of the inactive population rather than the average remaining service period of the active participants which was partially offset by an increase of $15.4 million for recognized losses due to plan settlements. See Note 13 for more information.
2016 vs. 2015
The charge for 2016 was $23.4 million compared to $29.8 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 $15.1 million lower amortization of net actuarial losses. These decreases were partially offset by an increase of $17.7 million for recognized losses due to plan settlements. See Note 13 for more information.

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, Singapore 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 or foreign withholding taxes have not been previously accrued. As a result of the Act, we currently estimate our effect tax rate for 2018 will increase by low single digits as a result of a minimum tax on overseas income, combined with a restriction on the use of foreign tax credits to offset this additional tax. In foreign jurisdictions, with a tax rate outside the U.S. of less than around 13 percent, we will have an additional U.S. tax bill under the GILTI provisions of the Act.

Provision for income taxes for 2017 was expense of $264.1 million resulting in an effective tax rate of 146.1 percent primarily attributable to the $315.9 million of provisional tax expense associated with the Act. Provision for income taxes for 2016 was

26


expense of $50.1 million resulting in an effective tax rate of 27.7 percent and provision for income taxes for 2015 was $5.2 million resulting in an effective tax rate of negative 2.5 percent. During 2015, our FMC Agricultural Solutions business in Brazil experienced significant current and cumulative losses driven by unfavorable market conditions. As of December 31, 2016, sufficient positive evidence to realize the net deferred tax assets in Brazil was not available and a full valuation allowance against those assets remains established. Note 11 to the consolidated financial statements included in this Form 10-K includes more details on the drivers of the GAAP effective rate and year-over-year changes. We believe showing the reconciliation below of our GAAP to Non-GAAP effective tax rate provides investors with useful supplemental information about our tax rate on the core underlying business.

 
Twelve Months Ended December 31,
 
2017
 
2016
 
2015
(in Millions)
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
$
180.8

$
264.1

146.1
%
 
$
180.8

$
50.1

27.7
%
 
$
(207.4
)
$
5.2

(2.5
)%
Corporate special charges
250.0

67.5

 
 
141.8

44.9

 
 
470.4

137.8

 
Tax adjustments (1)
 
(271.7
)
 
 
 
(32.4
)
 
 
 
(94.7
)
 
 
$
430.8

$
59.9

13.9
%
 
$
322.6

$
62.6

19.4
%
 
$
263.0

$
48.3

18.4
 %
_______________  
(1)
Tax adjustments in 2017 were primarily associated with the provisional income tax expense recorded as a result of the enactment of the Act in December 2017. See Note 11 for additional discussion. 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.

The primary drivers for the decrease in the year-to-date effective tax rate for 2017 compared to 2016 are shown in the table above. The remaining change was due to reduced domestic earnings in our FMC Agricultural Solutions business and the impact of the full integration of Cheminova into our global supply chain.
Discontinued operations, net of income taxes
Our discontinued operations, in periods up to its sale, represent our discontinued FMC Health and Nutrition and FMC Alkali Chemicals 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.

2017 vs. 2016
Discontinued operations, net of income taxes represented income of $621.7 million in 2017 compared to income of $81.0 million in 2016. The increase was primarily driven by the divestiture of FMC Health and Nutrition to DuPont which resulted in an after-tax gain of approximately $727 million. Amount also includes the impairment charge of approximately $148 million, net of tax to write down our Omega-3 business to its sales price.
2016 vs. 2015
Discontinued operations, net of income taxes represented income of $81.0 million in 2016 compared to income of $711.1 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.
Net income attributable to FMC stockholders

2017 vs. 2016
Net income attributable to FMC stockholders increased to $535.8 million from $209.1 million. The increase was primarily due to the gain on sale recorded in discontinued operations, net of income taxes as discussed above, offset by the impacts of U.S. Tax Reform and increases in acquisition-related charges. Refer to Note 11 to these consolidated financial statements.
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.

27


Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2017 and 2016, were $283.0 million and $64.2 million, respectively. Of the cash and cash equivalents balance at December 31, 2017, $97.2 million was held by our foreign subsidiaries. As a result of the Act, we recognized a one-time transition tax on the deemed repatriation of foreign earnings and the remeasurement of the Company’s U.S. net deferred tax asset. See Note 11 to these consolidated financial statements for more information. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries’ operating activities and future foreign investments. We have not provided additional income taxes for any additional outside basis differences inherent in our investments in subsidiaries because the investments are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable or in process and not yet complete. We are still in the process of analyzing the impact of the Act on our indefinite reinvestment assertion.
At December 31, 2017, we had total debt of $3,185.6 million as compared to $1,893.0 million at December 31, 2016. Total debt included $2,993.0 million and $1,798.8 million of long-term debt (excluding current portions of $101.2 million and $2.4 million) at December 31, 2017 and 2016, respectively. As of December 31, 2017, we were in compliance with all of our debt covenants. See Note 12 in the consolidated financial statements included in this Form 10-K for further details. Following the DuPont Crop Protection Business Acquisition, the maximum leverage ratio temporarily stepped up to 4.75 from 3.5 and will step down to 4.5 in accordance with the provisions of the Credit Facility and the 2014 and 2017 Term Loan Facilities in the third quarter of 2018. We will take a variety of steps, if necessary, to ensure compliance with the maximum leverage ratio at the applicable measurement dates.
On November 1, 2017, we borrowed $1.5 billion under our previously announced senior unsecured term loan facility to finance the DuPont Crop Protection Business Acquisition. $1.2 billion was used to fund a cash payment to DuPont. The remaining $300 million will be used to pay various obligations related to the transaction, including taxes payable on the gain from the sale of FMC Health and Nutrition. See Note 12 in the consolidated financial statements included in this Form 10-K for further details.
The increase in long-term debt was due to the drawing down of funds under the 2017 Term Loan Facility and increased foreign debt balances, which were partially offset by prepayments of the 2014 Term Loan Facility. At December 31, 2017, $450.0 million and $1,500.0 million remained outstanding under the 2014 and 2017 Term Loan Facilities, respectively. The scheduled maturities of the 2014 and 2017 Term Loan Facilities are on April 21, 2020 and November 1, 2022, respectively. The borrowings under the 2014 and 2017 Term Loan Facilities 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 2014 and 2017 Term Loan Facilities.
Our short-term debt, which consists of foreign borrowings and our commercial paper program. Foreign borrowings increased from $85.5 million at December 31, 2016 to $91.4 million at December 31, 2017 while outstanding commercial paper decreased $6.3 million.
Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. At December 31, 2017, we had no borrowings under the commercial paper program.



28


Statement of Cash Flows
Cash provided (required) by operating activities was $314.5 million, $368.9 million and $(471.2) million for 2017, 2016 and 2015, respectively.
The table below presents the components of net cash provided (required) by operating activities.
(in Millions)
Twelve months ended December 31,
2017
 
2016
 
2015
Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
$
259.8

 
$
243.2

 
$
(146.5
)
Corporate special charges and depreciation and amortization (1)
363.0

 
242.9

 
547.2

Operating income before depreciation and amortization (Non-GAAP)
$
622.8

 
$
486.1

 
$
400.7

Change in trade receivables, net (2)
(262.4
)
 
11.8

 
140.6

Change in inventories (3)
(96.8
)
 
79.0

 
27.8

Change in accounts payable (4)
331.7

 
(29.7
)
 
(294.4
)
Change in accrued customer rebates (5)
16.9

 
(5.2
)
 
9.5

Change in advance payments from customers (6)
140.5

 
(10.0
)
 
60.6

Change in all other operating assets and liabilities (7)
(166.9
)
 
84.8

 
30.8

Cash basis operating income (Non-GAAP)
$
585.8

 
$
616.8

 
$
375.6

Restructuring and other spending (8)
(8.2
)
 
(18.0
)
 
(24.7
)
Environmental spending, continuing, net of recoveries (9)
(20.5
)
 
(28.1
)
 
(32.2
)
Pension and other postretirement benefit contributions (10)
(56.5
)
 
(65.8
)
 
(75.4
)
Net interest payments (11)
(82.2
)
 
(62.0
)
 
(56.8
)
Tax payments, net of refunds (12)
(25.0
)
 
(50.2
)
 
(331.1
)
Excess tax benefits from share-based compensation (13)

 
(0.4
)
 
(1.4
)
Payments associated with the Cheminova purchase price hedges (14)

 

 
(264.8
)
Acquisition legal and professional fees (15)
(78.9
)
 
(23.4
)
 
(60.4
)
Cash provided (required) by operating activities of continuing operations
$
314.5

 
$
368.9

 
$
(471.2
)
____________________ 
(1)
Represents the sum of corporate special charges and depreciation and amortization.
(2)
The changes in cash flows related to trade receivables in 2017 and 2016 were primarily driven by timing of collections. Note, that approximately $213 million of the change in receivables for 2017 was due to receivable build from the acquired DuPont Crop Protection Business as we did not acquire any receivables as part of the transaction. Collection timing is more pronounced in our FMC Agricultural Solutions business where sales, particularly in Brazil, can have a longer collection period. 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 2017, we collected approximately $848 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)
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 cash flows related to accounts payable is primarily driven by the timing of payments made to suppliers and vendors. Note that approximately $191 million of the change in payables for 2017 was due to payable build from the acquired DuPont Crop Protection Business as we did not acquire any payables as part of the transaction. The change in accounts payable in 2015 was also attributable to inventory reduction activities across the company particularly as we integrated Cheminova as well as adjusting inventory levels in light of market conditions at the time. 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 2017 compared to 2016 and timing of rebate payments.
(6)
The advance payments from customers represent advances from our FMC Agricultural Solutions segment customers. Revenue associated with advance payments is recognized, generally in the first quarter of each year, as shipments are made and title, ownership and risk of loss pass to the customer. Approximately $85 million of the change for 2017 was attributable to the acquired DuPont Crop Protection Business.
(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.

29


(9)
Included in our results for each of the years presented are environmental charges for environmental remediation at our operating sites of $16.6 million, $36.8 million and $21.7 million, respectively. The amounts in 2017 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. 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 $44.0 million, $35.0 million and $65.0 million, respectively.
(11)
Interest payments increased through the year primarily due to higher foreign debt balances, the addition of the 2017 Term Loan Facility, and increases in interest rates.
(12)
Tax payments in 2015 primarily represent 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 consolidated statement of cash flows in 2016 and 2015, 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)
2017 activity represents payments for legal and professional fees associated with the DuPont Crop Protection Business Acquisition. acquisitions. 2016 and 2015 activity represents payments for legal an 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 $21.0 million, $128.9 million and $113.1 million for 2017, 2016 and 2015, 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 2017 and 2015 included divestiture costs associated with the sale of our FMC Health and Nutrition and FMC Alkali Chemicals business as well as related operating activities.
Cash provided (required) by investing activities of continuing operations was $(1,349.5) million, $(100.8) million and $(1,230.4) million for 2017, 2016 and 2015, respectively.
The changes in cash required by investing activities are primarily due to the acquisitions of the DuPont Crop Protection Business in 2017 and Cheminova in 2015.
Cash provided (required) by investing activities of discontinued operations was $15.7 million, $(34.4) million and $1,579.1 million for 2017, 2016 and 2015, respectively.
Cash provided by investing activities of discontinued operations in 2017 includes the cash proceeds from the sale of the Omega-3 business for $38.0 million while the amount in 2015 includes the proceeds of $1.65 billion from sale of our FMC Alkali Chemicals business.
Cash provided (required) by financing activities was $1,213.1 million, $(377.0) million and $(16.7) million in 2017, 2016 and 2015, respectively.
The change in cash provided by financing activities in 2017 primarily related to the increase in proceeds from borrowings of long-term debt, partially offset by higher repayments of long-term debt during the year.
The change in cash required by financing activities in 2016 primarily related to repayments of borrowings under our term loan and redemption of certain outstanding industrial revenue bonds.

2018 Outlook
In 2018, we expect a continued improvement in cash generation. In aggregate, we expect cash basis operating income to increase driven by significantly higher earnings within each segment, including a full year of results from the DuPont Crop Protection Business Acquisition partially offset by higher working capital requirements in 2018.

Other potential liquidity needs
Our cash needs for 2018 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 costs associated with acquisition-related charges as well as costs to integrate the DuPont Crop Protection Business into FMC Agricultural Solutions. 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, 2017 our remaining borrowing capacity under our credit facility was $1,354.0 million.

30


Projected 2018 capital expenditures and expenditures related to contract manufacturers are expected to increase to approximately $250 million primarily driven by the lithium expansion as well as expenditures from the recently acquired DuPont Crop Protection Business. Additionally, we will incur corporate level spending associated with the two year implementation of a new SAP system.
Projected 2018 spending includes approximately $60 to $65 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 (loss) 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.
As a result of the Act, we will have to pay a transition tax of $202.7 million which is payable over the next eight years.
Our U.S. Pension Plan assets decreased slightly from $1,203.3 million at December 31, 2016 to $1,334.9 million at December 31, 2017. Our U.S. Pension Plan assets comprise approximately all 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 $44.0 million and $35.0 million in 2017 and 2016, respectively, and intend to contribute $30 million in 2018. Our contributions in 2016, 2017 and our intended contribution in 2018 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. In 2017, we changed our U.S. qualified pension plan’s investment strategy to a liability hedging approach with an objective of minimizing funded status volatility. As a result, we expect lower contributions in future periods. While we do not believe that the contribution in 2018 will have a material impact on our current and future liquidity needs, the volatility of interest rates and equity returns may require greater contributions in the future.
During the year ended December 31, 2017, no shares were repurchased under the publicly announced repurchase program. At December 31, 2017, $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 18, 2018, we paid dividends aggregating $22.3 million to our shareholders of record as of December 31, 2017. This amount is included in “Accrued and other liabilities” on the consolidated balance sheet as of December 31, 2017. For the years ended December 31, 2017, 2016 and 2015, we paid $88.8 million, $88.6 million and $86.4 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 $58.4 million at December 31, 2017. 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 at December 31, 2017 and foreign credit lines and commercial paper December 31, 2016. We provide parent-company guarantees to lending institutions providing credit to our foreign subsidiaries.
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. In cases where it is not possible for us to predict the likelihood that a claim will be made or to make a reasonable estimate of the maximum potential loss or range of loss, no specific liability has been recorded. If triggered, we may be able to recover certain of the indemnity payments from third parties. In cases where it is possible, we have recorded a specific liability within our Reserve for Discontinued Operations. Refer to Note 9 for further details.

Our total significant committed contracts that we believe will affect cash over the next four years and beyond are as follows:

31


Contractual Commitments
Expected Cash Payments by Year
 (in Millions)
2018
 
2019
 
2020
 
2021
 
2022 & beyond
 
Total
Debt maturities (1)
$
192.6

 
$
302.5

 
$
452.0

 
$
302.6

 
$
1,950.4

 
$
3,200.1

Contractual interest (2)
102.3

 
101.7

 
76.5

 
69.0

 
92.0

 
441.5

Lease obligations (3)
25.5

 
24.3

 
22.5

 
19.9

 
183.9

 
276.1

Certain long-term liabilities (4)
3.6

 
3.7

 
3.7

 
3.9

 
38.3

 
53.2

Derivative contracts (5)

 

 

 

 

 

Purchase obligations (6)
4.4

 
0.1

 
0.1

 
0.1

 

 
4.7

Total (7)
$
328.4

 
$
432.3

 
$
554.8

 
$
395.5

 
$
2,264.6

 
$
3,975.6

 ____________________
(1)
Excluding discounts.
(2)
Contractual interest is the interest we are contracted to pay on our long-term debt obligations. We had $1,974.3 million of long-term debt subject to variable interest rates at December 31, 2017. The rate assumed for the variable interest component of the contractual interest obligation was the rate in effect at December 31, 2017. Variable rates are determined by the market and will fluctuate over time.
(3)
Obligations associated with operating leases, before sub-lease rental income.
(4)
Obligations associated with our Ewing, NJ and Shanghai, China research and technology centers.
(5)
Derivative contracts were in a net asset position as of December 31, 2017. See Note 17. As a result, they are excluded from the table above.
(6)
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.
(7)
As of December 31, 2017, the liability for uncertain tax positions was $93.9 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. Also excluded from the table above is the liability attributable to the transition tax on deemed repatriated foreign earnings incurred as a result of the Act of $202.7 million.
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 Green House Gas (GHG) 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 GHG intensity for our operations by 15 percent from our 2013 baseline year. To date, our FMC Agricultural Solutions and FMC Lithium segments have reduced energy use by 13 percent and 16 percent and GHG intensity by 4 percent and 19 percent, respectively. FMC has been reporting its GHG emissions and mitigation strategy to CDP (formerly Carbon Disclosure Project) since 2016. FMC detailed the business risks and opportunities we have due to climate change and its impacts in our CDP climate change reports.
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 changes 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 continuing to evaluate sea level rise and storm surge at our plants located within 4 meters of sea level to understand timing of potential impacts and response actions that 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

32


percent and our waste intensities by 15 percent. To date, FMC Agricultural Solutions and FMC Lithium have reduced our water use in high risk areas by 21 percent and 13 percent and our waste disposal intensity by 20 percent and 20 percent, respectively.
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 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 is a signatory to the Paris Agreement, but on June 1, 2017, President Trump announced that the United States would withdraw from the Paris Agreement and on August 4, 2017, the United States delivered notice of its intention to withdraw to United Nations. On October 16, 2017, the United States Environmental Protection Agency (EPA) Filed notice of a rulemaking to repeal the lean Power Plan. EPA followed this action with the issuance of an advance notice of proposed rulemaking seeking comment on the proper roles of the state and federal government in regulating emissions from electric power plants, and also seeking information on technologies and strategies for reducing emissions from existing plants.
Notwithstanding the United States’ withdrawal from the Paris Agreement, will actively manage climate risks and incorporate them in our decision making as indicated in our responses to the CDP Climate Change Module. FMC remains deeply committed to reducing our GHG emissions and energy consumption at all of our facilities around the world.
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.
During 2018 we will be assessing the GHG impact of our facilities acquired from DuPont and will adjust our disclosures and targets accordingly.
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.


33


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.
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.

On January 1, 2018, Accounting Standards Update 2014-09, Revenue from Contracts with Customers, became effective. See Note 2 to these consolidated financial statements for more information.
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

34


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 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

35


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 2017, 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 third quarter of 2017, 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 $4 million. Separately, as a result of the Act we performed an impairment assessment on the recently acquired brand portfolio and recorded an impairment charge of approximately $42 million solely due to the new tax legislation. See Note 11 for more details.
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.
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 January 1, 2017, 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 amortized 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 increased from about eight years to about nineteen years as a result of this change. We consider this a change in estimate and, accordingly, have accounted for it prospectively beginning 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 reduced US pension and postretirement net periodic benefit cost by approximately $20 million when compared to the prior estimate.
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, 2017, 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 3.68 percent for our U.S. qualified plan, 3.29 percent for our U.S. nonqualified, and 3.41 percent for our U.S. other postretirement benefit plans.
The discount rates used at our December 31, 2017 and 2016 measurement dates for the U.S. qualified plan were 3.68 percent and 4.22 percent, respectively. The effect of the change in the discount rate from 4.22 percent to 3.68 percent at December 31, 2017 resulted in a $77.5 million increase to our U.S. qualified pension benefit obligations. The effect of the change in the discount rate from 4.50 percent at December 31, 2015 to 4.22 percent at December 31, 2016 resulted in a $0.3 million increase to the 2017 U.S. qualified pension expense.

The change in discount rate from 4.22 percent at December 31, 2016 to 3.68 percent at December 31, 2017 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 2016 and 2017 measurement dates. Using the December 31, 2017 and 2016 yield curves, our U.S. qualified plan cash flows produced a single weighted-average discount rate of approximately 3.68 percent and 4.22 percent, respectively.


36


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 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 7.9 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, 2017, 2016 and 2015 was 6.50 percent, 7.00 percent and 7.25 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 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 $73.6 million and $70.3 million at December 31, 2017 and 2016, respectively, and decreased pension and other postretirement benefit costs by $0.4 million, $5.2 million and $6.4 million for 2017, 2016 and 2015, respectively. A one-half percent decrease in the assumed discount rate would have increased pension and other postretirement benefit obligations by $81.3 million and, $78.5 million at December 31, 2017 and 2016, respectively, and increased pension and other postretirement benefit cost by $0.4 million, $5.7 million and $6.5 million for 2017, 2016 and 2015, 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, $6.0 million and $5.8 million for 2017, 2016 and 2015, 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, $6.0 million and $5.8 million for 2017, 2016 and 2015, 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.
On December 22, 2017, the Act was enacted in the United States. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.
As of December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act, however, as described further in Note 11, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax.
See Note 11 to our consolidated financial statements included in this Form 10-K for additional discussion surrounding income taxes.

37


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, 2017, our net financial instrument position was a net asset of $4.4 million compared to a net liability of $2.5 million at December 31, 2016. The change in the net financial instrument position was primarily due to exchange rate fluctuations in our foreign exchange portfolio.
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, 2017 and 2016, 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, 2017
$—
 
$—
 
$—
 
 
 
 
 
 
Net asset/(liability) position at December 31, 2016
$2.0
 
$3.3
 
$0.8
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, 2017 and 2016, 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, 2017
$4.4
 
$10.8
 
$(3.2)
 
 
 
 
 
 
Net asset/(liability) position at December 31, 2016
$(4.5)
 
$31.9
 
$(39.0)
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, 2017 and 2016, we had no interest rate swap agreements.
Our debt portfolio at December 31, 2017 is composed of 38 percent fixed-rate debt and 62 percent variable-rate debt. The variable-rate component of our debt portfolio principally consists of borrowings under our 2014 and 2017 Term Loan Facilities, 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.

38


Based on the variable-rate debt in our debt portfolio at December 31, 2017, a one percentage point increase in interest rates would have increased gross interest expense by $19.7 million and a one percentage point decrease in interest rates would have decreased gross interest expense by $19.7 million for the year ended December 31, 2017.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Page


    



39


FMC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 
(in Millions, Except Per Share Data)
Year Ended December 31,
2017
 
2016
 
2015
Revenue
$
2,878.6

 
$
2,538.9

 
$
2,491.0

Costs and Expenses
 
 
 
 
 
Costs of sales and services
$
1,777.3

 
$
1,607.7

 
$
1,690.6

 
 
 
 
 
 
Gross Margin
$
1,101.3

 
$
931.2

 
$
800.4

 
 
 
 
 
 
Selling, general and administrative expenses
$
618.6

 
$
458.5

 
$
660.7

Research and development expenses
141.5

 
134.5

 
135.9

Restructuring and other charges (income)
81.4

 
95.0

 
150.3

Total costs and expenses
2,618.8

 
2,295.7

 
2,637.5

Income (loss) from continuing operations before equity in (earnings) loss of affiliates, interest income and expense and income taxes
$
259.8

 
$
243.2

 
$
(146.5
)
Equity in (earnings) loss of affiliates
(0.1
)
 
(0.5
)
 

Interest income
(0.9
)
 
(0.6
)
 
(1.3
)
Interest expense
80.0

 
63.5

 
62.2

Income (loss) from continuing operations before income taxes
$
180.8

 
$
180.8

 
$
(207.4
)
Provision for income taxes
264.1

 
50.1

 
5.2

Income (loss) from continuing operations
$
(83.3
)
 
$
130.7

 
$
(212.6
)
Discontinued operations, net of income taxes
621.7

 
81.0

 
711.1

Net income
$
538.4

 
$
211.7

 
$
498.5

Less: Net income attributable to noncontrolling interests
2.6

 
2.6

 
9.5

Net income attributable to FMC stockholders
$
535.8

 
$
209.1

 
$
489.0

Amounts attributable to FMC stockholders:
 
 
 
 
 
Continuing operations, net of income taxes
$
(85.9
)
 
$
128.4

 
$
(222.0
)
Discontinued operations, net of income taxes
621.7

 
80.7

 
711.0

Net income attributable to FMC stockholders
$
535.8

 
$
209.1

 
$
489.0

Basic earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
Continuing operations
$
(0.64
)
 
$
0.96

 
$
(1.66
)
Discontinued operations
4.63

 
0.60

 
5.32

Net income attributable to FMC stockholders
$
3.99

 
$
1.56

 
$
3.66

Diluted earnings (loss) per common share attributable to FMC stockholders:
 
 
 
 
 
Continuing operations
$
(0.64
)
 
$
0.96

 
$
(1.66
)
Discontinued operations
4.63

 
0.60

 
5.32

Net income attributable to FMC stockholders
$
3.99

 
$
1.56

 
$
3.66

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


40


FMC CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
(in Millions)
Year Ended December 31,
2017
 
2016
 
2015
Net Income
$
538.4

 
$
211.7

 
$
498.5

Other comprehensive income (loss), net of tax:
 
 
 
 
 
Foreign currency adjustments:
 
 
 
 
 
Foreign currency translation gain (loss) arising during the period
$
172.7

 
$
(48.7
)
 
$
(97.3
)
Reclassification of foreign currency translations losses
13.9

 

 

Total foreign currency translation adjustments (1)
$
186.6

 
$
(48.7
)
 
$
(97.3
)
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
Unrealized hedging gains (losses) and other, net of tax of $0.5, ($0.2) and $0.4
$
(1.2
)
 
$
7.3

 
$
0.7

Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax of ($0.1), $3.3 and ($2.7)
(0.7
)
 
6.0

 
(3.0
)
Total derivative instruments, net of tax of $0.4, $3.1 and ($2.3)
$
(1.9
)
 
$
13.3

 
$
(2.3
)
 
 
 
 
 
 
Pension and other postretirement benefits:
 
 
 
 
 
Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax of $1.9, ($7.7) and ($16.1) (2)
$
0.6

 
$
(26.9
)
 
$
(26.4
)
Reclassification of net actuarial and other (gain) loss, amortization of prior service costs and settlement charges, included in net income, net of tax of $14.5, $20.6 and $23.2 (3)
51.6

 
39.2

 
44.1

Total pension and other postretirement benefits, net of tax of $16.4, $12.9 and $7.1
$
52.2

 
$
12.3

 
$
17.7

 
 
 
 
 
 
Other comprehensive income (loss), net of tax
$
236.9

 
$
(23.1
)
 
$
(81.9
)
Comprehensive income
$
775.3

 
$
188.6

 
$
416.6

Less: Comprehensive income attributable to the noncontrolling interest
1.4

 
0.6

 
9.1

Comprehensive income attributable to FMC stockholders
$
773.9

 
$
188.0

 
$
407.5

____________________ 
(1)
Income taxes are not provided on the equity in undistributed earnings of our foreign subsidiaries or affiliates since it is our intention that such earnings will remain invested in those affiliates indefinitely. The amount for 2017 includes reclassification to net income due to the divestiture of our FMC Health and Nutrition segment which includes the portion of FMC Health and Nutrition sold to DuPont and the Omega-3 business sold to Pelagia AS. See Note 9 for more information. In accordance with accounting guidance, this amount was previously factored into the lower of cost or fair value test associated with the 2017 Omega-3 asset held for sale write-down charges.
(2)
At December 31 of each year, we remeasure our pension and postretirement plan obligations at which time we record any actuarial gains (losses) and prior service (costs) credits to other comprehensive income. During the year ended December 31, 2017, due to the announced plans to divest of FMC Health and Nutrition business, we triggered a curtailment of our U.S. pension plans. As a result, we revalued our pension plans as of March 31, 2017 in addition to the normal December 31st remeasurement, which resulted in adjustments to comprehensive income. See Note 13 for more information.
(3)
For more detail on the components of these reclassifications and the affected line item in the consolidated statements of income (loss) see Note 15 within these consolidated financial statements.


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





41


FMC CORPORATION
CONSOLIDATED BALANCE SHEETS
 
December 31,
(in Millions, Except Share and Par Value Data)
2017
 
2016
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
283.0

 
$
64.2

Trade receivables, net of allowance of $38.7 in 2017 and $17.6 in 2016
2,043.5

 
1,692.5

Inventories
992.5

 
478.9

Prepaid and other current assets
326.4

 
232.1

Current assets of discontinued operations held for sale
7.3

 
381.5

Total current assets
$
3,652.7

 
$
2,849.2

Investments
1.4

 
1.0

Property, plant and equipment, net
1,025.2

 
538.1

Goodwill
1,198.9

 
498.7

Other intangibles, net
2,631.8

 
719.9

Other assets including long-term receivables, net
443.6

 
454.7

Deferred income taxes
252.7

 
242.1

Noncurrent assets of discontinued operations held for sale

 
835.6

Total assets
$
9,206.3

 
$
6,139.3

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Short-term debt and current portion of long-term debt
$
192.6

 
$
94.2

Accounts payable, trade and other
714.2

 
317.4

Advance payments from customers
380.6