Filed pursuant to rule
424(b)5 Registration
Statement No. 333-59543
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 6, 2002)
[LOGO] FMC
3,250,000 Shares
FMC Corporation
Common Stock
$32.65 PER SHARE
-------------
We are selling 3,250,000 shares of our common stock. We have granted the
underwriter an option to purchase up to 487,500 additional shares of common
stock to cover over-allotments.
Our common stock is listed on the New York Stock Exchange, Chicago Stock
Exchange and Pacific Stock Exchange under the symbol "FMC." The last reported
sale price of our common stock on the New York Stock Exchange on June 5, 2002
was $33.47 per share.
-------------
Investing in our common stock involves risks. See Risk Factors beginning on
page S-11.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-------------
Per
Share Total
------ ------------
Public Offering Price $32.65 $106,112,500
Underwriting Discount $ 1.40 $ 4,550,000
Proceeds to FMC (before expenses) $31.25 $101,562,500
The underwriter will also receive a commission from investors in the amount
of $.05 for each share of common stock sold in this offering.
The underwriter expects to deliver the shares to purchasers on or about June
12, 2002.
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Salomon Smith Barney
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June 6, 2002
IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the common stock being offered. The
second part, the base prospectus, gives more general information, some of which
may not apply to the common stock being offered. Generally, when we refer only
to the prospectus, we are referring to both parts combined, and when we refer
to the accompanying prospectus, we are referring to the base prospectus.
If the description of the common stock varies between the prospectus
supplement and the accompanying prospectus, you should rely on the information
in the prospectus supplement.
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information from that contained in this prospectus. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer of the common stock in any state where the offer
is not permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus is accurate as of any date later
than June 5, 2002.
S-1
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Forward-Looking Information.......................................................... S-3
Prospectus Summary................................................................... S-5
Risk Factors......................................................................... S-11
Use of Proceeds...................................................................... S-18
Market Price of Common Stock......................................................... S-19
Dividend Policy...................................................................... S-19
Capitalization....................................................................... S-20
Selected Consolidated Financial Data................................................. S-21
Management's Discussion and Analysis of Financial Condition and Results of Operations S-23
Business............................................................................. S-47
Underwriting......................................................................... S-58
Prospectus
Page
----
Available Information.................................................. 3
Documents Incorporated by Reference.................................... 4
Forward-Looking Information............................................ 4
The Company............................................................ 5
Use of Proceeds........................................................ 5
Ratio of Earnings to Fixed Charges..................................... 5
General Description of the Offered Securities.......................... 6
Description of the Common Stock........................................ 6
Certain Certificate of Incorporation Provisions........................ 6
Description of the Preferred Stock..................................... 7
Description of Depository Shares....................................... 9
Description of the Debt Securities..................................... 13
Description of the Warrants to Purchase Common Stock or Preferred Stock 23
Description of the Warrants to Purchase Debt Securities................ 25
Plan of Distribution................................................... 26
Legal Matters.......................................................... 27
Independent Public Accountants......................................... 27
S-2
FORWARD-LOOKING INFORMATION
This prospectus supplement includes "forward-looking statements" within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 under the captions "Prospectus Summary--The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere. These forward-looking statements are
typically identified by use of the words "anticipate," "believe," "estimate,"
"expect" and similar expressions, although some forward-looking statements are
expressed differently. Such forward-looking statements include, among other
things, statements about the following:
. the effectiveness of our strategy to align our business with our future
growth plans and increase our flexibility to changing market conditions;
. our ability to expand our sulfentrazone sales;
. our ability to concentrate our future research and development
activities on insecticides while still maximizing the market potential
of already commercialized herbicides;
. the effect of price increases in Industrial Chemical products on revenue;
. our ability to make up last year's earnings decline that resulted from
the lack of sulfentrazone sales to DuPont within our Agricultural
Products segment;
. the continued growth within our Specialty Chemicals segment in 2002;
. the improvement of results in our Industrial Chemicals segment in 2002;
. our ability to lower the cost of production within our Industrial
Chemicals segment;
. the ability to increase cash returns from mothballing of hydrogen
peroxide production capacity;
. an improvement in our phosphorus operations;
. the renewal or replacement of our receivables securitization and senior
credit facility;
. the success of our genomics-based discovery strategy;
. the growth of herbicide sales and new label expansions;
. the improvement in outlook for our Lithium division in 2003;
. the amount, if any, of the contingent obligations we may incur in
connection with the spin-off of FMC Technologies, Inc. ("Technologies");
and
. the amount of cash generated from our businesses and our ability to do
refinancings that will be sufficient to enable us to make our debt
payments as they become due.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, these statements, including:
Industry-Related Risks:
. the cyclicality of our business and the overall demand for our products;
. the negative effect that declines in average selling prices could have
on our profitability;
. the seasonality of our crop protection business and volatility resulting
from climate conditions;
. competition in each of our business segments;
. our ability to make improvements in our technology and productivity;
Financial Risks:
. the adverse effect our indebtedness and other commitments and guarantees
could have on our liquidity, financial condition and ability to grow and
compete in our markets;
S-3
. our ability to complete the sale on satisfactory terms of debt
securities, which we expect to undertake before the end of this year;
. a downgrade in our credit rating;
. our commitments under the "keep-well" agreement for Astaris LLC, our
50/50 phosphorus joint venture;
. our ability to remain compliant under our revolving credit facility as
well as our ability to renegotiate the revolving credit facility on
terms favorable to us;
. the effect our guarantees of performance obligations of Technologies
will have on our liquidity and capital resources;
Other Business Risks:
. the impact of changing exchange rates;
. the enactment of new government regulations and other changes in the
regulatory environment;
. operating hazards in our facilities which may disrupt our business; and
. environmental matters.
We undertake no obligation to update forward-looking statements.
S-4
PROSPECTUS SUMMARY
You should read this entire prospectus supplement and the accompanying
prospectus carefully, including our financial statements and the other
documents incorporated by reference into this prospectus supplement. Unless the
context otherwise indicates, references in this prospectus supplement and the
accompanying prospectus to we, us, our, the Company and FMC refer to FMC
Corporation and its direct and indirect subsidiaries.
The Company
We are a diversified chemical company serving agricultural, industrial and
consumer markets globally with innovative solutions, applications and quality
products. We operate in three distinct business segments: Agricultural
Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products
provides crop protection and pest control products for worldwide markets.
Specialty Chemicals' products include food ingredients that are used to enhance
structure, texture and taste; pharmaceutical additives for binding and
disintegrant use; and lithium specialties for pharmaceutical synthesis and
energy storage. Our Industrial Chemicals business manufactures a wide range of
inorganic materials, including soda ash, hydrogen peroxide, phosphorus and
specialty peroxygens. We employ approximately 6,000 people and have 37
manufacturing facilities in 19 countries.
Our strategy is balanced between driving focused innovation in agricultural
and specialty growth platforms within the crop protection, food, pharmaceutical
and electronics markets and maintaining leading market shares through low-cost
positions in high-volume industrial chemicals. Our current financial focus is
on operating profit after tax and return on invested capital. We are managing
capital expenditures and working capital to maximize cash flow. We have
completed a strategic review of our business with a view toward concentrating
our focus on areas with the greatest growth potential. In that regard,
management will continue to evaluate opportunities for divestiture of
non-strategic businesses, an action which we believe will also enhance
liquidity. We also intend to evaluate opportunities for targeted strategic
acquisitions in areas that complement our growth businesses. Management
believes that completion of this offering will help us to strengthen our
financial condition and enhance our financial flexibility in carrying out our
strategic plan.
S-5
The following chart shows the principal products, including their source and
uses, produced by our three business segments. A brief description of each
segment follows the chart.
Segment Product Source Uses
------- ------- ------ ----
Agricultural Products Insecticides Synthetic chemical Protection of corn, cotton, rice,
intermediates cereals, fruits, vegetables from
insects
Herbicides Synthetic chemical Protection of corn, cotton, cereals,
intermediates fruits, vegetables from weed growth
Specialty Chemicals.. Lithium Mined lithium ore Pharmaceuticals, batteries, polymers
Microcrystalline Refined wood pulp Drug tablet binder and disintegrants,
cellulose food additive
Carrageenan Refined seaweed Food additive for thickening and
stabilizing
Alginates Refined seaweed Food additive and key ingredient in
health and wound care
Industrial Chemicals. Soda Ash Mined trona ore Glass, chemicals, detergents
Peroxygens Processed hydrogen Pulp, paper, textiles, electronics
Phosphorus Mined phosphorus rock Detergents, food, cleaning
compounds, agriculture
Agricultural Products
Agricultural Products' sales are primarily insecticides and, to a lesser
extent, herbicides. Key crops that utilize these products include cotton, corn,
fruits, rice, cereals and vegetables. This segment has a leading global
position in pyrethroids, a widely-used class of insecticide, and possesses a
portfolio of commercialized herbicides with market growth opportunities.
Agricultural Products differentiates itself from its competitors by its
flexibility to react to worldwide market conditions, direct distribution in key
markets and focused research and development.
In an increasingly competitive market, our innovative R&D, market access
programs and lower cost manufacturing initiatives has been and will continue to
be essential. Agricultural Products has a focused strategy to:
. gain near-term growth through label expansions to allow new uses of our
existing insecticides and herbicides;
. develop novel insecticide chemistry in a strategic alliance with
Ishihara Sangyo Kaisha, Ltd. for use on certain pests in the Americas;
. through a strategic alliance with Devgen Benelux NV, a Belgian
biotechnology company ("Devgen"), expand a leading genomics-based
research program to identify genetic sites of insects and chemistries to
target them;
. focus our sales and marketing organization in the Americas and expand
market access internationally through regional alliances in Europe and
Asia; and
. shift to manufacturing crop protection chemicals through low-cost toll
producers.
S-6
Specialty Chemicals
FMC's BioPolymer and Lithium divisions make up the Specialty Chemicals
segment. FMC BioPolymer manufactures products that add structure, texture and
physical stability to a wide range of beverage, dairy, meat and bakery products
and that act as binders and disintegrants for dry tablet drugs. Lithium is a
technology-based business in which mined lithium is refined for many end uses,
including pharmaceutical synthesis and energy storage in batteries.
Our Specialty Chemicals segment has leading or significant market positions
in alginates, carrageenan, microcrystalline cellulose and lithium-based
products. A significant majority of Specialty Chemicals' sales are to customers
engaged in non-cyclical end markets, including the food, pharmaceutical and
personal care businesses. Additional sales are to customers engaged in
manufacturing energy storage devices and polymer-related products.
The ongoing strength of Specialty Chemicals is the development of
customer-focused solutions and new product concepts. Our business strategies
for this segment include:
. growing market share through strategic alliances with large food and
pharmaceutical firms for developing new food categories and innovative
drugs;
. exploring complementary technologies that could further enhance the
product offering of the food and pharmaceutical franchises;
. focusing on high value-added applications for lithium specialties while
continuing to exit commodity-like markets; and
. investing in longer-term growth opportunities such as new lithium ion
battery technology for next generation hand-held devices and
pharmaceutical synthesis.
Industrial Chemicals
Our Industrial Chemicals segment comprises several products: soda ash,
peroxygens (hydrogen peroxide and active oxidants) and phosphorus.
Industrial Chemicals manufactures soda ash and related derivatives for the
glass, detergents and chemicals markets. Industrial Chemicals is the world's
largest producer of natural soda ash and has enjoyed strong growth outside the
United States based upon the superior cost economics of naturally occurring
soda ash from Green River, Wyoming as compared with synthetic soda ash produced
abroad.
Industrial Chemicals is a U.S. market leader in hydrogen peroxide and
specialty peroxygens, including peracetic acid and persulfates, the latter of
which we are both the largest U.S. producer and the worldwide leader. The array
of end-use markets served includes pulp and paper, polymers, electronics and
food.
Industrial Chemicals is a 50% owner with Solutia Inc. of Astaris LLC
("Astaris"), a leading producer in the U.S. of phosphorus chemicals for a wide
array of markets ranging from food to detergents. During late 2001, Astaris
undertook significant restructuring of its supply chain to improve its cost
structure by switching from a production platform based on elemental phosphorus
to one based on lower-cost purified phosphoric acid.
S-7
Our European Industrial Chemicals subsidiary, FMC Foret, S.A. ("Foret"),
leverages its low production costs and strong brand name in southern Europe to
provide sulfur derivatives, zeolites, peroxygens and phosphorus products to
Europe, Africa and the Middle East.
The focus of Industrial Chemicals is toward maintaining its market
leadership positions while maximizing cash generation through cost reduction
initiatives and prudent capital management. The segment has three key
strategies:
. focus on the development of new and innovative process and mining
technologies to continue to lower unit production costs;
. shift commercial resources towards the development of specialty niches
that have few competitive alternatives and correspondingly higher
margins; and
. manage capacity effectively in order to keep utilization rates high and
control fixed costs.
-----------------
On December 31, 2001, we completed the spin-off of Technologies, which is
engaged in machinery businesses, by distributing all shares of Technologies
owned by us as a tax-free dividend to our stockholders. Our principal executive
offices are located at 1735 Market Street, Philadelphia, PA 19103. Our
telephone number is (215) 299-6000.
S-8
RECENT DEVELOPMENTS
On May 22, 2002, we announced that we expect second quarter 2002 after-tax
earnings before special items to be $0.25 to $0.30 per share lower than the
current consensus estimate of $0.92 surveyed by First Call. A majority of the
expected second quarter shortfall will result from the loss of a major European
detergent customer within our Foret subsidiary based in Spain and from a
slower-than-expected ramp-up of the purified phosphoric acid (PPA) plant at
Astaris, our phosphorus chemicals joint venture with Solutia. The remainder of
the quarter's expected shortfall will result from the shift of certain
Agricultural Products sales to the latter half of 2002. For the second half of
2002, cost savings, resulting from the previously announced restructuring
initiatives, and higher production rates at the PPA plant are expected to
mitigate the ongoing impact of the second quarter shortfall in Industrial
Chemicals. Agricultural Products is expected to recover most of its second
quarter shortfall later in 2002 through higher second half sales and lower
overhead costs.
From May 21, 2002 to May 31, 2002, holders of $26.0 million of our 6.75%
Exchangeable Senior Subordinated Debentures, outstanding in the principal
amount of $28.8 million, exercised their right to exchange their debentures for
shares of Meridian Gold, Inc., a Canadian company trading on the New York Stock
Exchange and successor to our former subsidiary, at a price of $15.125 per
share. Because we do not hold any shares of Meridian Gold, Inc., we exercised
our right to pay the fair market value of the Meridian Gold stock in cash.
Because the price of Meridian Gold common stock rose substantially above the
exchange price of $15.125, we were required to pay an amount above the
principal amount of the debentures exchanged, which amount will result in a net
charge of approximately $1.9 million after tax in the second quarter of 2002.
The remaining $2.8 million of debentures were redeemed on June 3, 2002 at the
principal amount thereof plus accrued interest.
S-9
THE OFFERING
The following summary contains basic information about our common stock. It
does not contain all the information that is important to you. For a more
complete understanding of the common stock, please refer to the section of the
accompanying prospectus entitled "Description of the Common Stock,"
particularly those subsections to which we have referred you.
Common Stock Offered...... 3,250,000 shares
Common Stock to be
outstanding after
the offering............ 34,936,962 shares
Use of Proceeds........... We expect to use the net
proceeds of this offering
to repay certain existing
indebtedness. See "Use of
Proceeds."
New York Stock Exchange
symbol.................. "FMC"
Risk Factors.............. See "Risk Factors"
beginning on page S-11
and other information
included or incorporated
by reference in this
prospectus supplement and
the accompanying
prospectus for a
discussion of factors you
should consider carefully
before deciding to invest
in shares of our common
stock.
Dividend Policy........... No cash dividends were
paid in 2000 or 2001 and
no cash dividends are
expected to be paid in
2002. See "Dividend
Policy."
The table set forth above is based on 31,686,962 shares of our common stock
outstanding as of March 31, 2002. This table excludes 487,500 shares of our
common stock to be sold by us if the underwriter's over-allotment is exercised
in full. This table also excludes 4,314,920 shares issuable upon the exercise
of options outstanding, of which 2,780,585 were currently exercisable as of
March 31, 2002.
S-10
RISK FACTORS
You should carefully consider the risks described below and the other
information included in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference in this prospectus supplement
before investing in the common stock. The risks described below are not the
only ones facing our company. Additional risks not currently known to us or
that we currently deem immaterial may also impair our business.
Industry Related Risks
Some of our businesses are cyclical and demand by our customers for our
products weakens during economic downturns.
The businesses of a significant number of our customers, particularly our
customers for industrial chemicals, are, to varying degrees, cyclical, and have
historically experienced periodic downturns. Consequently, some of our
businesses are also cyclical. These economic and industry downturns have been
characterized by diminished product demand, excess manufacturing capacity and,
in some cases, lower average selling prices. Therefore, any continued weakness
in our customers' markets and overall global economic conditions could result
in a reduction in demand for our products and could adversely affect our
consolidated results of operations or financial condition. As a result of the
depressed economic conditions beginning in the fourth quarter of 2000 and
continuing throughout 2001 and the first quarter of 2002, demand for our soda
ash and hydrogen peroxide has fallen among our glass, textile and pulp and
paper customers. Weak conditions in the electronics industry have suppressed
demand for our hydrogen peroxide and specialty peroxygen products. Overall,
weak demand for products in our Industrial Chemicals segment has adversely
affected our consolidated results of operations.
Our business is also affected by general economic conditions and other
factors in Europe, South America, and most of Asia, including fluctuations in
interest rates, market demand, labor costs and other factors beyond our
control. The demand for our customers' products and, therefore, our products,
is directly affected by these fluctuations. Our agricultural business in Asia
and Brazil is particularly susceptible to these fluctuations. Although our U.S.
Industrial Chemicals business is largely focused on the North American market,
we sell nearly one third of our soda ash to markets outside of North America.
Our Foret industrial chemicals business based in Spain is dependent on economic
and political conditions in the European Community and the Middle East. We
cannot assure you that events having an adverse effect on the countries and
regions in which we operate will not occur or continue, whether they be
increases in interest rates, unfavorable currency fluctuations or a slowdown in
industrial activity generally.
Our profitability could be reduced by declines in average selling prices in the
industries in which we operate, particularly weakness in the prices in our
Industrial Chemicals soda ash and hydrogen peroxide businesses.
We experience cycles of fluctuating supply and demand in each of our
business segments, particularly among our Industrial Chemicals soda ash and
hydrogen peroxide businesses, which results in changes in selling prices.
Periods of high demand, tight supply and increasing operating margins tend to
result in increased capacity and production until supply exceeds demand,
generally followed by periods of oversupply and declining prices. Continued
weak demand and industry overcapacity may make it difficult for us to improve
the profitability of our soda ash business.
S-11
Because of the cyclical nature of our businesses, we cannot assure you that
pricing or profitability in the future will be comparable to any particular
historical period, including the most recent period shown in our consolidated
operating results. We cannot assure you that any of the industries or
businesses in which we compete will not experience adverse trends in the
future, or that our consolidated operating results and financial condition will
not be adversely affected by them.
Our crop protection business is seasonal and could be negatively impacted by
factors affecting the agricultural industry.
Our crop protection business is seasonal because of the planting, growing
and harvesting cycles of the agricultural industry, which impact our customers'
purchase patterns. The peak quarters for our sales are usually the second and
third fiscal quarters and therefore interim period operating results of the
crop business reflect the seasonal nature of the business and are not
indicative of results expected for the full fiscal year.
In addition, our crop protection business faces volatility as a result of a
number of other factors, including weather patterns and field conditions,
levels of pest pressure, current and projected grain stocks and prices, and the
agricultural policies of the United States and foreign governments. These
factors can negatively impact production in the agricultural industry and
thereby reduce the demand for our crop protection products. The consolidated
results of operations or cash flows may be adversely affected by these factors
in any given period.
We face competition from other chemical companies, which could adversely affect
our revenues and financial condition.
We actively compete with companies producing the same or similar products,
as well as, in some instances, with companies producing different products
designed for the same uses. We encounter competition in price, delivery,
service, performance, product innovation, and product recognition and quality,
depending on the product involved. Within our agricultural group, most of our
competitors are larger and have greater financial resources than we do. As a
result, these competitors may be better able to withstand a change in
conditions within the industries in which we operate and throughout the economy
as a whole.
Our competitors can be expected to continue to develop and introduce new and
enhanced products, which could cause a decline in market acceptance of our
products. In addition, our competitors could cause a reduction in the prices
for some of our products as a result of intensified price competition.
Competitive pressures can also result in the loss of major customers. For
example, Foret lost a major European detergent customer in the second quarter
of 2002 as a result of a change in marketing strategy by a major competitor
(see "Recent Developments"). If we cannot compete successfully, our business,
financial condition and consolidated results of operations could be adversely
affected.
Failure to make continued improvements in our technology and productivity could
hurt our competitive position.
Many of our products could be affected by rapid technological change and new
product introductions and enhancements. We believe we must continue to enhance
our existing products and to develop and manufacture new products with improved
capabilities in order to continue to be a market leader. We also believe that
we must continue to make improvements in our productivity in order to maintain
our competitive position. When we invest in new technologies, processes or
production facilities, we face risks related to construction delays, cost
over-runs and unanticipated technical difficulties related to start-up. Our
inability to anticipate, respond to or utilize changing technologies could have
a material adverse effect on our business and consolidated results of
operations.
S-12
Financial Risks
We have a significant amount of indebtedness, which could adversely affect our
financial condition and limit our ability to grow and compete successfully in
our markets.
We have a significant level of indebtedness. Our level of indebtedness could
have important consequences for stockholders. For example, it:
. will require us to dedicate a significant portion of our cash flow to
make interest and principal payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital,
capital expenditures, acquisitions or other general corporate purposes;
. may make us less attractive to prospective or existing customers or less
attractive to potential acquisition targets;
. may limit our flexibility to adjust to changing business and market
conditions and make us more vulnerable to a downturn in general economic
conditions as compared to a competitor that may be less leveraged;
. may reduce our cash flow due to increased interest expense in times of
rising interest rates; and
. may limit our ability to borrow additional funds due to restrictive
covenants.
Any of the foregoing consequences could have a material adverse effect on
our future consolidated operations.
Our ability to pay the principal and interest on our indebtedness as it
comes due will depend upon our current and future performance. Our performance
is affected by general economic conditions and by financial, competitive,
political, business and other factors. Many of these factors are beyond our
control. We believe that the cash generated from operations as well as our
commercial paper borrowings, accounts receivable securitization, borrowings
under bank credit facilities, and if necessary, the issuance of additional long
term debt or equity, will be sufficient to enable us to make our debt payments
as they become due. We actively evaluate opportunities to refinance our
existing obligations when financing is available on attractive terms. If,
however, we do not generate sufficient cash or complete such financings or
equity offerings on a timely basis, we may be required to seek additional
financing or sell equity on terms which may not be as favorable. No assurance
can be given that any refinancing, additional borrowing or sale of equity will
be possible when needed or that we will be able to negotiate acceptable terms.
In addition, our access to capital is affected by prevailing conditions in the
financial and equity capital markets, as well as our own financial condition.
Our ability to complete, on terms satisfactory to us, an offering of debt
securities may be adversely affected by rating downgrades.
We expect to issue debt securities before the end of this year to refinance
a portion of our debt. Our ability to complete an offering on terms favorable
to us will depend upon the status of our credit rating following the completion
of this offering. The current rating of our senior unsecured long-term
indebtedness is BBB- by Standard & Poor's Ratings Group (S&P) and Baa3 by
Moody's Investor Service, Inc (Moody's). Either S&P or Moody's or both may
downgrade our credit rating at any time, which would make it more difficult to
complete the offering of debt securities on satisfactory terms and would
generally result in increased future borrowing costs and adversely affect our
access to capital.
S-13
Our commitments under a "keep-well" agreement in favor of lenders to our
Astaris joint venture could have an adverse effect on our liquidity and
financial condition.
In connection with the financing of Astaris, our 50/50 phosphorus joint
venture with Solutia, we have promised to Astaris' lenders that we will
contribute cash to make up for any shortfall in Astaris' earnings (before
interest, taxes, depreciation and amortization) below agreed targets. We
contributed $31.3 million to Astaris in 2001 under these "keep-well"
arrangements and expect to contribute a similar amount to Astaris in 2002.
Although such contributions increase our investment in Astaris, our rights to
recover on these investments are subordinated to the rights of Astaris'
creditors, whose interests are secured by a pledge of Astaris' assets.
Consequently, in the event of financial difficulties affecting Astaris, no
assurance can be given that we will recover our "keep-well" contributions in a
timely fashion, or at all. Furthermore, in the event that Solutia fails to meet
its commitments under its identical "keep-well" arrangement with Astaris'
lenders, we could face a situation in which it would be in our interest to make
additional contributions to Astaris beyond our contractual commitment. The
decision to make such additional contributions would increase our risks
associated with the joint venture and could have an adverse effect on our
liquidity and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
If we are unable to comply with the covenants under our revolving credit
facility, our future operating performance will be affected.
Our unsecured revolving credit facility contains restrictive covenants that
limit our ability to, among other things:
. borrow money and guarantee the debts of others;
. use assets as security in other transactions;
. enter into new lines of business; and
. sell assets or merge with or into other companies.
In addition, the credit facility requires us to meet financial ratios and
tests, including maximum leverage, minimum net worth and interest coverage
levels. These restrictions could limit our ability to plan for or react to
market conditions or meet extraordinary capital needs and could otherwise
restrict corporate activities.
Our ability to comply with the covenants and other terms of the credit
facility will depend on our future operating performance. If we fail to comply
with such covenants and terms, we will be in default and the maturity of
related debt could be accelerated and become immediately due and payable. As of
June 5, 2002, we had $116.0 million outstanding under this credit facility. We
may be required to obtain waivers from our lenders in order to maintain
compliance under our credit facility, including waivers with respect to our
compliance with certain financial covenants. If we are unable to obtain any
necessary waivers and the debt under this credit facility is accelerated, it
would have a material adverse effect on our financial condition.
Failure to renegotiate our revolving credit facility on favorable terms could
hamper our ability to fund daily cash needs.
We currently rely on our revolving credit facility to fund a portion of our
daily cash needs. This credit facility will expire on December 5, 2002. Failure
to successfully renegotiate this credit facility will significantly restrict
our ability to fund our daily cash needs.
S-14
We continue to be liable for certain obligations of Technologies, which could
put a burden on our limited capital resources and adversely affect our
liquidity and financial condition.
Prior to the spin-off of Technologies on December 31, 2001, we were directly
liable for or guaranteed certain debt and contractual obligations of
subsidiaries which now are part of Technologies. As part of the spin-off,
Technologies agreed to use reasonable efforts to obtain releases in our favor.
As of March 31, 2002, $159.2 million in face amount of obligations remained
outstanding. Technologies has agreed to indemnify us against any obligations
for which Technologies cannot obtain a release in our favor. Although we are
protected by a contractual indemnity from Technologies, we cannot assure you
that use of our borrowing capacity to meet such obligations may not in the
future have an adverse effect on our liquidity and financial condition.
Other Business Risks
We are an international company and therefore face exchange rate and other
risks.
A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains and losses arising from our operations in the period incurred. As a
result, currency fluctuations among the U.S. dollar and the currencies in which
we do business have caused and will continue to cause foreign currency
transaction gains and losses, which could be material. Due to the weakness of
the euro in the period from 1999 through 2001, our business results have been
adversely affected by unfavorable dollar translation of earnings of our Foret
subsidiary in Europe. We cannot predict the effects of exchange rate
fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposures and the potential
volatility of currency exchange rates. We take actions to manage our foreign
currency exposure such as entering into hedging transactions, where available,
but we cannot assure you that our strategies will adequately protect our
consolidated operating results from the effects of exchange rate fluctuations.
We also face risks arising from the imposition of exchange controls and
currency devaluations. Exchange controls may limit our ability to convert
foreign currencies into U.S. dollars or to remit dividends and other payments
by our foreign subsidiaries or businesses located in or conducted within a
country imposing controls. Currency devaluations result in a diminished value
of funds denominated in the currency of the country instituting the
devaluation. Our lithium business has operations in Argentina which may be
adversely affected by the banking and currency crises in that country and
action taken by governmental authorities to respond to such crises. Actions of
this nature, if they occur or continue for significant periods, could adversely
affect our earnings or cash flow.
Our businesses are subject to substantial government regulation, which prohibit
or restrict the sale of some of our products or increase our operating expenses
in order to comply with those regulations.
All of our businesses face extensive government regulation in the United
States and abroad. In our Agricultural Products segment, all of our
insecticides and herbicides sold or distributed in the United States must first
be registered with the U.S. Environmental Protection Agency under the Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA). Several products of our
Industrial Chemicals segment are also registered under FIFRA. The registration
process under FIFRA requires us to demonstrate that our product will not cause
unreasonable adverse effects on the environment or human
S-15
health. Many of the products of our Specialty Chemicals segment are used as
ingredients in pharmaceutical and food products. Several products of our
Industrial Chemicals segment are also sold for use in food processing and
pharmaceutical applications. Consequently, a number of our manufacturing
operations are subject to regulation by the U.S. Food and Drug Administration
under rules governing "good manufacturing practices" for materials to be used
as ingredients in food and pharmaceuticals and incorporated in the design of
medical devices.
We currently sell soda ash outside of North America and Europe through
American Natural Soda Ash Corporation (ANSAC), a foreign sales association
organized under the Webb-Pomerene Act. While we do not believe any U.S.
government action affecting the status of ANSAC is likely, net prices for soda
ash in international markets may weaken if the U.S. or other governments change
their policies so as to limit the effectiveness of North American soda ash
producers joining together to sell soda ash using a foreign sales association.
Our facilities are subject to operating hazards, which may increase our
liabilities or disrupt our business.
We are dependent upon the continued safe operation of our production
facilities. Our production facilities are subject to hazards associated with
the manufacture, handling, storage and transportation of chemical materials and
products, including leaks and ruptures, explosions, fires, inclement weather
and natural disasters, unscheduled downtime and environmental hazards. From
time to time in the past, we have had incidents that have temporarily shut down
or otherwise disrupted our manufacturing, causing production delays and
resulting in liability for workplace injuries and fatalities. Some of our
products involve the manufacture and/or handling of a variety of reactive,
explosive and flammable materials. Use of these products by our customers could
also result in liability if an explosion, fire, spill or other accident were to
occur. We cannot assure you that we will not experience these types of
incidents in the future or that these incidents will not result in production
delays or otherwise have a material adverse effect on our business, financial
condition or consolidated results of operations.
Environmental matters could have a substantial negative impact on our business.
We are subject to extensive federal, state, local and foreign environmental,
safety and health laws and regulations concerning, among other things,
emissions to the air, discharges to land and water and the generation,
handling, treatment and disposal of hazardous waste and other materials. Our
operations entail the risk of violations of those laws and regulations, many of
which provide for substantial fines and criminal sanctions for violations. We
cannot assure you that we have been or will be at all times in compliance with
all of these requirements.
In addition, these requirements, and enforcement of these requirements, may
become more stringent in the future. Although we cannot predict the ultimate
cost of compliance with any such requirements, the costs could be material.
Non-compliance could subject us to material liabilities, such as government
fines, third-party lawsuits or the suspension of non-compliant operations. We
may also be required to make significant site or operational modifications at
substantial cost. Future developments could also restrict or eliminate the use
of or require us to make modifications to our products, which could have a
significant negative impact on our consolidated results of operations and
consolidated cash flows.
At any given time, we are involved in claims, litigation, administrative
proceedings and investigations of various types in a number of jurisdictions
involving potential environmental
S-16
liabilities, including clean-up costs associated with hazardous waste disposal
sites, natural resource damages, property damage and personal injury. We cannot
assure you that the resolution of these environmental matters will not have a
material adverse effect on our consolidated results of operations or
consolidated cash flows.
The ultimate costs and timing of environmental liabilities are difficult to
predict. Liability under environmental laws relating to contaminated sites can
be imposed retroactively and on a joint and several basis. One liable party
could be held responsible for all costs at a site, regardless of fault,
percentage of contribution to the site or the legality of the original
disposal. We could incur significant costs, including cleanup costs, natural
resources damages, civil or criminal fines and sanctions and third-party
claims, as a result of past or future violations of, or liabilities under,
environmental laws.
We have obligations under environmental consent decrees relating to Astaris'
former Pocatello, Idaho phosphorus facility and our former fiber manufacturing
facility in Front Royal, Virginia that will require us to make significant cash
expenditures over a number of years. Although we believe that we have
accurately estimated future spending and have made adequate reserves for such
expenditures and for other environmental liabilities related to these and other
sites, we cannot assure you that such expenditures or liabilities will not
exceed our current estimates and have an adverse affect on our consolidated
results of operations and consolidated cash flows.
Risks Related to the Offering
Our stock price has been, and may continue to be, volatile, which could result
in losses for investors purchasing shares in this offering. Investors may not
be able to resell their shares at or above the offering price.
The trading price of our common stock has been, and may continue to be,
volatile. The stock market in general and the market for companies with
significant sales to clients in cyclical industries, such as chemicals, have
experienced volatility. Many factors contribute to this volatility, including,
but not limited to:
. variations in our results of operations;
. perceptions about market conditions in the industries we serve; and
. general market conditions.
This volatility may have a significant impact on the market price of our
common stock. Moreover, the possibility exists that the stock market could
experience extreme price and volume fluctuations unrelated to our operating
performance. Such volatility makes it difficult to ascribe a stable valuation
to a stockholder's holdings of our common stock.
Anti-takeover provisions in our charter may deter a third party from acquiring
us, limiting our stockholders' ability to profit from such a transaction.
Our certificate of incorporation includes provisions that may delay, deter
or prevent a takeover attempt that stockholders might consider desirable. For
example, our certificate of incorporation provides that our directors are to be
divided into three classes and elected to serve staggered three-year terms.
This structure could impede or discourage an attempt to obtain control of us by
preventing
S-17
stockholders from replacing our entire board in a single proxy contest, making
it more difficult for a third party to take control of us without the consent
of our board of directors. In addition, our certificate of incorporation
provides that significant asset sales, dispositions of stock, liquidations,
mergers and certain other business combinations involving us and persons
beneficially owning 10% or more of the voting power of the outstanding shares
of common stock must be approved by the holders of at least 80% of the voting
power of our outstanding voting stock. Our certificate of incorporation further
provides that our stockholders may not take any action in writing without a
meeting. This prohibition could impede or discourage an attempt to obtain
control of us by requiring that any actions required to be taken by
stockholders be taken at properly called stockholder meetings.
We also have adopted a stockholder rights plan that will dilute the stock
ownership of an acquirer of our common stock upon the occurrence of certain
events. The provisions in our certificate of incorporation and our stockholder
rights plan may have the effect of deterring hostile takeovers, including
transactions in which stockholders might otherwise profit.
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be approximately
$101.3 million, after deducting the underwriting discount and estimated
offering expenses. We expect to use the aggregate net proceeds of this offering
to repay outstanding borrowings under our revolving credit facility, which had
an outstanding balance of $116.0 million on June 5, 2002. Amounts so repaid may
be reborrowed. Our revolving credit facility matures on December 5, 2002. As of
June 5, 2002, the weighted average interest rate as of that date was 3.7% per
year.
S-18
MARKET PRICE OF COMMON STOCK
Our common stock is listed on the New York Stock Exchange, Chicago Stock
Exchange and Pacific Stock Exchange under the symbol "FMC." The following table
sets forth for the periods indicated the high and low sales prices per share of
our common stock as reported on The New York Stock Exchange. Prices prior to
2002 do not reflect the effect of the spin-off of Technologies that became
effective on December 31, 2002. Effective December 31, 2001, we spun-off
Technologies. As a result, prices of our common stock during periods prior to
December 31, 2001 may not be comparable with prices subsequent periods.
High Low
------ ------
2000
First Quarter.................................................. $59.63 $46.69
Second Quarter................................................. 66.00 56.56
Third Quarter.................................................. 71.38 58.34
Fourth Quarter................................................. 76.44 65.75
2001
First Quarter.................................................. $83.64 $68.56
Second Quarter................................................. 78.85 67.91
Third Quarter.................................................. 69.90 47.00
Fourth Quarter................................................. 59.74 46.93
2002
First Quarter.................................................. $41.92 $31.38
Second Quarter (through June 5, 2002).......................... 41.27 33.47
The closing sale price per share of common stock on the New York Stock
Exchange on June 5, 2002 was $33.47. There are approximately 7,829 holders of
record of our common stock.
DIVIDEND POLICY
No cash dividends were paid in 2000 or 2001 and no cash dividends are
expected to be paid in 2002. In general, the payment of cash dividends is
subject to the discretion of the board of directors and will be determined in
light of then-current conditions, including our earnings, our operations, our
financial condition, our capital requirements and other factors deemed relevant.
S-19
CAPITALIZATION
The following table sets forth our cash and cash equivalents, total
short-term debt and total long-term debt and stockholders' equity as of March
31, 2002 on an actual basis and as adjusted to give effect to receipt of net
proceeds from the sale of 3,250,000 shares of common stock, less the
underwriting discounts and estimated offering expenses and the application of
the net proceeds of the offering. The information set forth below should be
read in conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Use of Proceeds" included elsewhere in this prospectus supplement and our
consolidated financial statements and related notes incorporated by reference
in this prospectus supplement.
March 31, 2002
-------------------
Actual As Adjusted
------- -----------
($ in millions)
Cash and cash equivalents............................ $ 14.2 $ 14.2
======= =======
Short-term debt:
Revolving credit facility(1)..................... $ 174.0 $ 72.7
Current portion of long-term debt................ 125.3 125.3
6.75% Exchangeable senior subordinated
debentures due 2005(2)......................... 28.8 28.8
Other short-term debt............................ 111.4 111.4
------- -------
Total short-term debt........................ $ 439.5 $ 338.2
======= =======
Long-term debt:
6.375% Debentures due 2003....................... $ 160.3 $ 160.3
7.75% Debentures due 2011........................ 45.2 45.2
Medium-term notes, 6.38% to 7.32% due
2002 to 2008................................... 197.4 197.4
Pollution control and industrial revenue
bonds, 3.2% to 7.1% due 2002 through
2032........................................... 220.2 220.2
------- -------
Total long-term debt......................... 623.1 623.1
Stockholders' equity
Preferred stock, no par value,
authorized 5,000,000 shares; no shares
issued......................................... -- --
Common stock, $0.10 par value,
authorized 130,000,000 shares; issued
39,620,053 shares, actual, 42,870,053
shares, as adjusted............................ 4.0 4.3
Capital in excess of par value of common
stock.......................................... 228.9 329.9
Retained earnings................................ 700.8 700.8
Accumulated other comprehensive loss............. (200.1) (200.1)
Treasury stock, common, at cost;
7,933,091 shares............................... (508.1) (508.1)
------- -------
Stockholders' equity......................... 225.5 326.8
------- -------
Total long-term debt and
stockholders' equity.................... $ 848.6 $ 949.9
======= =======
--------
(1) As of June 5, 2002, $116.0 was outstanding under our revolving credit
facility.
(2) See "Recent Developments" on page S-9.
S-20
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented under the captions
"Income Statement Data," "Balance Sheet Data" and "Segment Data" for, and as of
the end of, each of the years in the five-year period ended December 31, 2001,
are derived from our consolidated financial statements which have been audited
by KPMG LLP, independent auditors. The consolidated financial statements as of
December 31, 2001 and 2000, and for each of the years in the three-year period
ended December 31, 2001, and the report thereon, are incorporated by reference
in this prospectus supplement. The selected unaudited consolidated financial
data presented below for the three months ended March 31, 2001 and 2002 are
derived from our unaudited condensed consolidated financial statements for the
quarter ended March 31, 2002, to which KPMG LLP has reported it has applied
limited procedures in accordance with professional standards for a review of
such information. The unaudited condensed consolidated financial statements as
of March 31, 2002 and the three months ended March 31, 2002 and 2001 and the
review report thereon are incorporated by reference in this prospectus
supplement.
The selected consolidated financial data should be read in conjunction with
the consolidated financial statements for the year ended December 31, 2001, the
related notes, and the independent auditor's report, which refers to a change
in the method of accounting for derivative instruments and hedging activities,
incorporated by reference in this prospectus supplement.
Three Months
Ended March 31
(unaudited)(2) Years Ended December 31
------------- ------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ -------- -------- -------- -------- --------
(In millions, except per share amounts)
Income Statement Data: (1)
Revenue.................................................... $434.2 $447.2 $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4
Costs and expenses:
Cost of sales and services............................... 322.8 326.3 1,408.7 1,450.9 1,691.6 1,738.7 1,585.7
Selling, general and administrative expenses............. 57.9 61.7 243.3 231.3 273.0 274.9 301.2
Research and development expenses........................ 20.6 23.6 99.8 97.8 100.6 107.0 127.3
Gains on divestitures of businesses...................... -- -- -- -- (55.5) -- --
Asset impairments........................................ -- -- 323.1 10.1 23.1 -- 197.0
Restructuring and other charges.......................... 7.0 1.0 280.4 35.2 11.1 -- 13.0
------ ------ -------- -------- -------- -------- --------
Total costs and expenses................................. 408.3 412.6 2,355.3 1,825.3 2,043.9 2,120.6 2,224.2
------ ------ -------- -------- -------- -------- --------
Income (loss) from continuing operations before minority
interests, interest income and expense, income taxes and
cumulative effect of change in accounting principle....... 25.9 34.6 (412.3) 225.0 276.6 236.3 3.2
Minority interests......................................... 0.5 0.4 2.3 4.6 5.1 6.2 8.9
Interest expense, net...................................... 15.4 14.4 58.3 61.8 76.4 75.3 71.6
------ ------ -------- -------- -------- -------- --------
Income (loss) from continuing operations before income
taxes and cumulative effect of change in accounting
principle................................................. 10.0 19.8 (472.9) 158.6 195.1 154.8 (77.3)
Provision (benefit) for income taxes....................... 1.0 5.4 (166.6) 33.0 36.4 37.7 (42.9)
------ ------ -------- -------- -------- -------- --------
Income (loss) from continuing operations before
cumulative effect of change in accounting principle....... 9.0 14.4 (306.3) 125.6 158.7 117.1 (34.4)
Discontinued operations, net of income taxes............... -- (40.0) (30.5) (15.0) 53.9 25.5 201.3
Cumulative effect of change in accounting principle, net of
income taxes.............................................. -- (0.9) (0.9) -- -- (36.1) (4.5)
------ ------ -------- -------- -------- -------- --------
Net income (loss).......................................... $ 9.0 $(26.5) $ (337.7) $ 110.6 $ 212.6 $ 106.5 $ 162.4
====== ====== ======== ======== ======== ======== ========
Basic earnings (loss) per common share:
Continuing operations.................................... $ 0.29 $ 0.47 $ (9.85) $ 4.13 $ 5.04 $ 3.44 $ (0.94)
Discontinued operations.................................. -- (1.30) (0.98) (0.49) 1.71 0.75 5.47
Cumulative effect of changes in accounting principle..... -- (0.03) (0.03) -- -- (1.06) (0.12)
------ ------ -------- -------- -------- -------- --------
$ 0.29 $(0.86) $ (10.86) $ 3.64 $ 6.75 $ 3.13 $ 4.41
====== ====== ======== ======== ======== ======== ========
S-21
Three Months
Ended March 31
(unaudited) (2) Years Ended December 31
---------------- ------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------- ------ -------- -------- -------- -------- --------
(In millions, except per share amounts)
Diluted earnings (loss) per common share:
Continuing operations................................. $ 0.28 $ 0.47 $ (9.85) $ 3.97 $ 4.90 $ 3.35 $ (0.94)
Discontinued operations............................... -- (1.30) (0.98) (0.47) 1.67 0.73 5.47
Cumulative effect of changes in accounting principle.. -- (0.03) (0.03) -- -- (1.03) (0.12)
-------- ------ -------- -------- -------- -------- --------
$ 0.28 $(0.86) $ (10.86) $ 3.50 $ 6.57 $ 3.05 $ 4.41
======== ====== ======== ======== ======== ======== ========
Balance Sheet Data: (3)
Total assets............................................ $2,432.5 $2,477.2
Total debt.............................................. 1,062.6 923.5
Stockholders' equity.................................... 225.5 218.8
Segment Data:
Revenue:
Agricultural Products................................. $ 131.1 $134.6 $ 653.1 $ 664.7 $ 632.4 $ 647.8 $ 637.6
Specialty Products.................................... 115.8 116.3 472.0 488.8 564.5 598.2 604.8
Industrial Products................................... 189.8 198.6 822.0 905.6 1,141.3 1,138.4 1,012.0
Eliminations.......................................... (2.5) (2.3) (4.1) (8.8) (17.7) (27.5) (27.0)
-------- ------ -------- -------- -------- -------- --------
Total................................................. $ 434.2 $447.2 $1,943.0 $2,050.3 $2,320.5 $2,356.9 $2,227.4
======== ====== ======== ======== ======== ======== ========
Segment Operating Profit:
Agricultural Products................................. $ 6.3 $ 13.8 $ 72.8 $ 87.8 $ 64.3 $ 76.3 $ 35.1
Specialty Products.................................... 18.2 20.0 87.5 92.4 73.5 77.9 77.2
Industrial Products................................... 23.1 14.4 72.6 114.5 144.4 117.5 135.7
-------- ------ -------- -------- -------- -------- --------
Total................................................. $ 47.6 $ 48.2 $ 232.9 $ 294.7 $ 282.2 $ 271.7 $ 248.0
======== ====== ======== ======== ======== ======== ========
Other Data: (1)
After-tax income from continuing operations excluding
special income and expense items, and before cumulative
effect of change in accounting principle (4)........... $ 13.2 $ 16.4 $ 99.6 $ 153.5 $ 132.0 $ 117.1 $ 93.7
EBITDA (5).............................................. 59.1 67.2 322.8 400.1 439.3 385.2 389.3
Capital expenditures.................................... 19.8 38.6 145.6 197.3 195.4 207.0 250.4
Depreciation and amortization (6)....................... 26.2 31.6 131.6 129.8 128.5 148.9 176.1
--------
(1) In 2001 we spun off a significant portion of our business into
Technologies. "Income Statement Data" and "Other Data" for the five years
ending December 31, 2001 and for the three months ending March 31, 2001
have been reclassified to reflect Technologies as a discontinued operation.
(2) The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which we consider necessary for a fair
presentation of our financial position and the results of operation for
these periods. Results for the three months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the full year.
(3) Balance sheet data is not presented for periods prior to December 31, 2001
because these balance sheets would not be comparable due to the spin-off of
Technologies that became effective on December 31, 2001.
(4) Income from continuing operations excluding special income and expense
items is not a measure of financial performance under accounting principles
generally accepted in the United States and should not be considered in
isolation from, or as a substitute for, income from continuing operations
or net income determined in accordance with accounting principles generally
accepted in the United States, nor as the sole measure of our
profitability. Special income and expense items include asset impairments,
restructuring and other costs and gains on the divestiture of businesses.
(5) EBITDA consists of income (loss) from continuing operations before special
income and expense items, minority interest, interest expense, net, income
taxes and cumulative effect of change in accounting principle plus
depreciation and amortization expense. EBITDA is presented because we
believe it is frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our industry. However,
other companies in our industry may calculate EBITDA differently than we
do. EBITDA is not a measurement of financial performance under accounting
principles generally accepted in the United States and should not be
considered as an alternative to cash flow from operating activities or as a
measure of liquidity or an alternative to net income as an indicator of
operating performance or any other measure of performance derived in
accordance with accounting principles generally accepted in the United
States.
(6) The three months ended March 31, 2002 reflect the effect of the adoption of
SFAS No. 142 "Goodwill and Other Intangible Assets." See "New Accounting
Standards Adopted" in Management's Discussion and Analysis of Financial
Condition and Results of Operations.
S-22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Reorganization of our Company
We implemented our plan to split FMC into separate chemical and machinery
companies in 2001 through a two-step process. The first step included an
initial public offering ("IPO") of 17% of Technologies, which took place in the
second quarter of 2001. Technologies consists of our former Energy Systems and
Food and Transportation Systems business segments. Subsequent to the IPO,
Technologies made payments of $480.1 million to us in exchange for the net
assets distributed to Technologies on June 1, 2001, which we used to retire
short-term and long-term debt. The second step, the distribution of our
remaining 83% ownership in Technologies (the "spin-off ") occurred on December
31, 2001. Total net assets distributed on December 31, 2001 were $509.5 million.
We believe that the spin-off of Technologies will allow us to focus our
efforts in the chemical industry through improved customer orientation,
increased innovation and overall growth. In an effort to align our business
with our future growth plans, we took various strategic measures, including the
restructuring of businesses, reduction of staff, plant shutdowns and the
writedown of certain underperforming assets. We believe these steps will
increase our financial flexibility as market conditions change.
Risk and our Significant Accounting Policies
As would be expected, these changes in our company have altered our overall
risk environment as described below and as elsewhere in this prospectus
supplement.
In addition to risk factors, we have also identified and reviewed our
significant accounting policies, all of which are described in Note 1 to our
2001 consolidated financial statements incorporated by reference in this
prospectus supplement, while noting that the preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that require
judgment. These estimates and assumptions can significantly affect the reported
amounts of assets, liabilities, revenues and expenses at the date of our
financial statements and for the reporting periods shown. Our disclosures of
contingent assets and liabilities at the date of our financial statements are
similarly affected by estimates and assumptions.
Some of these accounting estimates and assumptions are particularly
sensitive because of their significance to our consolidated financial
statements and because of the possibility that future events affecting them may
differ markedly from what had been assumed when the financial statements were
prepared.
For example, we provide for environmental-related obligations when they are
believed to be probable and amounts can be reasonably estimated. Also, we
review the recoverability of the net book values of our investments in
affiliates and our fixed and intangible assets whenever events or circumstances
suggest that the net book value of these assets may not be recoverable. When
this is the case, we record an impairment loss. We also continually assess the
return on our business segments, which sometimes results in a plan to
restructure the operations of a business. When such a plan is final, we record
an accrual for severance and other contractual commitments and obligations.
Finally, our reserves for discontinued operations consist of obligations for
discontinued operations, for
S-23
environmental remediation and study obligations from some of our former
chemical plant sites, and product liabilities and other potential claims,
including those related to retiree medical and life insurance benefits. (See a
further discussion on all of the policies in Notes 1, 3, 6, 7, 11, 12 and 13 to
our 2001 consolidated financial statements and Notes 1, 6, 9 and 14 to our
unaudited consolidated financial statements for the three months ended March
31, 2002, each of which is incorporated by reference in this prospectus
supplement.)
Results of Operations
All results discussed in this analysis address the continuing operations of
our chemical businesses. Technologies' results have been reclassified to
discontinued operations within our consolidated statements of income and
consolidated statements of cash flows for the three months ended March 31, 2001
and the periods ended December 31, 2001, 2000 and 1999. Accordingly, the
results of the Energy Systems and Food and Transportation Systems business
segments will not be included in the results of operations discussion and
analysis.
March 31, 2002 compared to March 31, 2001
Income from continuing operations before cumulative effect of a change in
accounting principle for the quarter ended March 31, 2002 was $9.0 million
compared to $14.4 million in the prior year's quarter. Income from continuing
operations before cumulative effect of a change in accounting principle
excluding special items for the quarter was $13.2 million, or $0.41 per share,
compared to $16.4 million, or $0.51 per share, in the prior year's quarter.
This decline can be attributed to the lack of the $10.0 million
sulfentrazone-related payment from E.I. du Pont de Nemours and Company
("DuPont") in 2001 (see "Segment Results--2002 compared to 2001--Agricultural
Products" for further details) and weaker industrial markets compared to the
prior year somewhat offset by cost reduction programs throughout our company,
especially within our Agricultural Products and Industrial Chemicals segments.
Restructuring and other charges totaled $7.0 million for the first quarter of
2002 compared to $1.0 million in the prior year's quarter.
The following table displays the results for the quarters ended March 31,
2002 and 2001 through a reconciliation between as reported income from
continuing operations before cumulative effect of change in accounting
principle and income from continuing operations before cumulative effect of
change in accounting principle, excluding special items:
Quarters Ended
March 31,
--------------
2002 2001
----- -----
($ in millions)
Income from continuing operations before cumulative effect
of change in accounting principle--as reported............ $ 9.0 $14.4
Restructuring and other charges............................. 7.0 1.0
Tax effect of restructuring and other charges............... (2.8) 1.0
----- -----
Income from continuing operations before cumulative effect
of change in accounting principle, excluding special items $13.2 $16.4
===== =====
Revenue. First quarter 2002 revenue decreased $13.0 million, or 3.0%, to
$434.2 million, as compared to $447.2 million in the prior year's quarter.
Lower revenue in 2002 when compared with
S-24
2001 was principally attributable to weaker demand in our Industrial Chemicals
segment and a decrease in sulfentrazone revenue in the North American soybean
market within our Agricultural Products segment.
Income from continuing operations in the first quarter of 2002 was $9.0
million compared to $14.4 million in the first quarter of 2001. The majority of
this decrease can be attributed to higher restructuring and other charges in
2002 accompanied by the lack of $10.0 million sulfentrazone-related profit
protection payment from DuPont, which were somewhat offset by the results of
cost reduction programs throughout our business segments (see "Segment
Results--March 31, 2002 Compared to March 31, 2001--Agricultural Products" for
more details).
Restructuring and other charges in the first quarter of 2002 totaled $7.0
million compared to $1.0 million in the prior year's quarter. Of these charges,
$2.4 million related to severance and other costs of idling our Agricultural
Products' sulfentrazone plant. In the Industrial Chemicals segment, the
mothballing of the Granger caustic facility in Green River and other
restructuring activities resulted in $3.4 million of severance and other costs.
The remaining charges related to reorganization costs of $1.2 million related
to the spin-off and distribution of Technologies stock. The restructuring
charges in the first quarter of 2001 related to corporate reorganization costs
and several minor restructuring activities within our Industrial Chemicals
segment.
Corporate expenses (excluding restructuring and other charges) in the first
quarter of 2002 were $10.0 million compared to $9.4 million in the first
quarter of 2001. This increase reflects the continuance of certain transition
service costs associated with the spin-off of Technologies. We do not expect
these incremental transition costs to continue beyond the second quarter of
2002.
Other income and expense, net for the first quarter of 2002 was $3.5 million
compared to $2.0 million for the period ended March 31, 2001.
Net interest expense for the first quarter of 2002 was $15.4 million
compared to $14.4 million in the prior year's quarter.
Provision for income taxes was $1.0 million in the first quarter of 2002
compared to $5.4 million in the prior year's quarter resulting in effective tax
rates of 10.0% and 27.2%, respectively. The 2002 rate results largely from the
effect of restructuring charges. Our provision for income taxes on income from
continuing operations before restructuring and other charges was $3.8 million
for the current quarter and $4.4 million in the prior year's quarter. We expect
our effective tax rate excluding special charges to be approximately 22.1% on a
full year basis in 2002.
Discontinued operations. We recorded a loss from discontinued operations of
$40.0 million in the first quarter of 2001 related to the spin-off of
Technologies. Included in this amount are losses of our spun-off Technologies
business, including interest expense of $6.9 million, which was allocated to
discontinued operations in accordance with Accounting Principles Board
Statement No. 30 and later relevant accounting guidance, and additional income
tax provision of $28.8 million related to the reorganization of our worldwide
entities in anticipation of the separation of Technologies from FMC.
Net Income (loss). We recorded net income of $9.0 million for the first
quarter of 2002 compared to a net loss of $26.5 million in the first quarter of
2001. This variance reflects the impact of several one-time tax charges
discussed above under discontinued operations.
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Average shares outstanding used in the quarter's diluted earnings (loss) per
common share calculations were 32.4 million in 2002 compared with 30.8 million
in the prior year's quarter. Additional weighted average shares of 1.4 million,
assuming conversion of stock awards, for the quarter ended March 31, 2001 were
not included in the computation of diluted earnings per share as their effect
would be antidilutive.
Segment Results--March 31, 2002 compared to March 31, 2001
Segment operating profit is presented before taxes and restructuring and
other charges. Information about how each of these items relates to our
businesses at the segment level is discussed below, in Note 15 of our unaudited
consolidated financial statements for the three months ended March 31, 2002 and
Note 20 of our 2001 consolidated financial statements, both of which are
incorporated by reference in this prospectus supplement.
Agricultural Products
Agricultural Products' revenue for the quarter ended March 31, 2002 was
$131.1 million, down from $134.6 million in last year's quarter due to lower
sulfentrazone revenue in the soybean market and decreased demand in Eastern
Europe and East Africa which was somewhat offset by an increase in specialty
markets demand.
Earnings for the 2002 first quarter were $6.3 million down from $13.8
million in the first quarter of 2001. Contributing to this decline was the lack
of a $10.0 million profit protection payment from DuPont, which we received in
the first quarter of 2001 as compensation for DuPont's decision to cease
sulfentrazone purchases (see "Segment Results--2001 compared to
2000--Agricultural Products"). Increases in our profitability due to changes in
our Fury product revenue mix as well as lower selling, administrative and
research expenses partially offset the lack of a protection payment from DuPont
in 2002.
We continue our efforts to reduce costs and improve overall segment
profitability as seen in our shift in focus from sulfentrazone revenue for
soybeans to higher value crops such as tobacco, sugar cane and sun flowers,
although we plan to continue to market sulfentrazone on soybeans in partnership
with third-party chemistries. We continued to reduce our selling, general and
research expenses successfully implementing the majority of our fourth quarter
2001 restructuring efforts. We engaged in additional restructuring activities
in the first quarter of 2002 (see Note 6 to our unaudited consolidated
financial statements for the three months ended March 31, 2002 incorporated by
reference in this prospectus supplement) and began idling our Baltimore
sulfentrazone plant at the end of April 2002. We believe these efforts will
allow our Agricultural Products segment to refocus on insecticides while
realigning our herbicide portfolio towards higher value crops. We expect total
restructuring activities within Agricultural Products in 2001 and the first
quarter of 2002 to result in approximately $20.0 million of annual savings of
which approximately $15.0 million will be realized this year.
Specialty Chemicals
Specialty Chemicals' revenue for the three months ended March 31, 2002 were
$115.8 million, down slightly from $116.3 million in the prior year period.
Revenue reflected increased microcrystalline cellulose revenue resulting from
our new European distribution strategy offset by weaker carrageenan and
alginate revenue in the industrial and specialty markets and weaker lithium
demand in Japan when compared to the first quarter of 2001.
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Earnings of $18.2 million in the first quarter of 2002 were down from $20.0
in the prior year's quarter due to decreased pricing in certain specialty and
industrial markets, increased inventory and production variances and decreased
prices due to competition in the Japanese energy storage markets in the second
quarter of 2001.
Industrial Chemicals
Industrial Chemicals' first quarter 2002 revenue of $189.8 million was lower
than last year's revenue by $8.8 million largely reflecting the impact of lower
caustic prices on soda ash volumes and decreased volumes and prices in hydrogen
peroxide. Also contributing to the change in segment revenue were lower selling
prices at FMC Foret somewhat offset by increased volumes.
Earnings for the first quarter of 2002 improved to $23.1 million from $14.4
million in the prior year's quarter. Highlighting our earnings increase were
higher earnings of Astaris resulting from lower consent decree spending and
lower raw material costs. However, we continue to address start-up issues at
our new purified phosphoric acid plant near Soda Springs, Idaho.
First quarter 2002 revenue in our alkali operations remained relatively flat
from the 2001 quarter with lower alkali volumes resulting from lower caustic
prices being offset by higher foreign and domestic prices for soda ash.
Earnings increased compared to the first quarter of 2001 as a result of lower
natural gas prices and our continued effort to reduce costs.
Peroxygen (hydrogen peroxide and active oxidants) revenue and earnings were
down for the quarter compared to the prior year's quarter. Lower volumes and
lower prices in our pulp and paper markets and printed circuit board markets,
due to market contraction and Asian competition were somewhat offset by
increased revenue in several other markets.
FMC Foret saw a decrease in revenue in the first quarter of 2002 when
compared to 2001 due to the devaluation of the euro compared to the prior year
period and lower prices in phosphates and hydrogen peroxide being offset
somewhat by volume increases in zeolites, percarbonates and perborates.
Earnings for the quarter were relatively flat.
The current manufacturing slowdown continues to significantly impact those
markets served by our Industrial Chemicals segment and has led to continued
efforts to aggressively reduce costs and to refocus our strategies within the
segment. For example, a decline in caustic soda pricing due to a supply surplus
has resulted in our decision to mothball our Granger caustic soda facility in
Green River, Wyoming. This has resulted in restructuring charges of $2.3
million in the first quarter of 2002, which we believe will provide
approximately $7.0 million of annual savings beginning in the second half of
2002. During the quarter, we also sold our sodium cyanide operations.
1999 Through 2001
Our loss from continuing operations for the year ended December 31, 2001 was
$306.3 million compared to income of $125.6 million and $158.7 million in 2000
and 1999, respectively. Income from continuing operations before cumulative
effect of change in accounting principle, excluding special items defined below
for the year ended December 31, 2001, was $99.6 million compared to $153.5
million and $132.0 million in 2000 and 1999, respectively. Special items in
2001 consisted of asset impairments and restructuring and other charges
totaling $603.5 million ($405.9 million after
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tax). Special items in 2000 consisted of asset impairments and restructuring
and other charges totaling $45.3 million ($27.9 million after tax). Special
items in 1999 consisted of asset impairments, restructuring and other charges
and gains on divestitures of businesses totaling a gain of $21.3 million ($26.7
million after tax).
The following table displays the results for the years 2001, 2000 and 1999
through a reconciliation between as-reported income (loss) from continuing
operations before cumulative effect of change in accounting principle and
income from continuing operations before cumulative effect of change in
accounting principle, excluding special items.
Years Ended December 31
-----------------------
2001 2000 1999
------- ------ ------
(In millions)
Income (loss) from continuing operations before cumulative effect of
change in accounting principle--as reported............................. $(306.3) $125.6 $158.7
Asset impairments......................................................... 323.1 10.1 23.1
Restructuring and other charges........................................... 280.4 35.2 11.1
Gains on divestitures of businesses....................................... -- -- (55.5)
Tax effect of asset impairments, restructuring and other charges and gains
on divestitures of businesses........................................... (197.6) (17.4) (5.4)
------- ------ ------
Income from continuing operations before cumulative effect of change in
accounting principle, excluding special items........................... $ 99.6 $153.5 $132.0
======= ====== ======
2001 Compared to 2000
In the following discussion, "year" refers to the year ending December 31,
2001 and "prior year" refers to the year ending December 31, 2000. All
comparisons are between these periods unless otherwise noted.
Revenue was $1,943.0 million in 2001, down from $2,050.3 million in 2000.
Revenue in the United States decreased 8.6% compared with 2000, while revenue
outside the United States, including exports, decreased 2.2% from 2000. Sales
in the United States represented 45.4% of our 2001 revenue, slightly less than
in 2000.
Income from continuing operations, before the cumulative effect of change in
accounting principle, net of income taxes, excluding asset impairments and
restructuring and other charges was $99.6 million in 2001 compared to $153.5
million in 2000. This decline can be attributed to an overall economic downturn
impacting the chemical industry worldwide and other factors discussed under
"Segment Results" below.
Asset impairments totaled $323.1 million ($233.8 million after tax) for 2001
compared to $10.1 million ($6.2 million after tax) in 2000.
Based upon a comprehensive review of our long-lived assets, we recorded
asset impairment charges of $211.9 million related to our U.S.-based phosphorus
business. The components of asset impairments related to this business, include
a $171.0 million impairment of environmental assets built to comply with a
Resource Conservation and Recovery Act ("RCRA") consent decree ("Consent
Decree") at the Pocatello, Idaho facility and a $36.5 million impairment charge
for our investment in
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Astaris, our phosphorus joint venture with Solutia. (See Notes 4 and 13 to our
2001 consolidated financial statements incorporated by reference in this
prospectus supplement.) Driving these charges were a decline in market
conditions, the loss of a potential site on which to develop an economically
viable second PPA plant and our agreement to pay into a fund for the
Shoshone-Bannock Tribes resulting from an agreement to support a proposal to
amend the Consent Decree, which permitted the earlier closure of the largest
remaining waste disposal pond at Pocatello. In addition, we recorded an
impairment charge of $98.9 million related to our Specialty Chemicals segment's
lithium operations in Argentina. We established this operation, which includes
a lithium mine and processing facilities, approximately five years ago in a
remote area of the Andes Mountains. The entry of a South American manufacturer
into this business resulted in decreased revenues. In addition, market
conditions continued to be unfavorable. As a result, our lithium assets in
Argentina became impaired, as the total capital invested is not expected to be
recovered. An additional $12.3 million of charges is related to the impairment
of assets in our cyanide operations.
During the second quarter of 2000, we recorded asset impairments of $10.1
million ($6.2 million after tax). Impairments of $9.0 million were recognized
because of the formation of Astaris (see Note 4 to our consolidated financial
statements incorporated by reference in this prospectus supplement), including
the write down of certain phosphorus assets retained by our company and the
accrual of costs related to our planned closure of two phosphorus facilities.
Other asset impairments were due to the impact of underlying changes within the
Specialty Chemicals segment.
See Notes 1 and 6 to our 2001 consolidated financial statements incorporated
by reference in this prospectus supplement for further discussion on our
accounting policies related to asset impairments.
Restructuring and other charges. A change in market conditions and in our
corporate strategy resulted in restructuring and other charges of $280.4
million ($172.1 million after tax) in the year. A charge of $35.2 million
($21.7 million after tax) was recorded in 2000.
We believe that the restructuring and other charges recorded in 2001 will
enable us to engage in long-term growth opportunities for all of our business
segments. See Note 1 to our 2001 consolidated financial statements incorporated
by reference in this prospectus supplement for further discussion on our
accounting policies related to restructuring and other charges.
We had several minor restructuring activities related to corporate
reorganization in the first quarter of 2001 totaling approximately $1.0 million.
During the second quarter of 2001, we recorded $175.0 million in
restructuring and other charges, including $160.0 million related to our
Industrial Chemicals segment's U.S.-based phosphorus business. The components
included in restructuring and other charges related to the phosphorus business
were as follows: a $68.7 million reserve for further required Consent Decree
spending at the Pocatello site; $42.7 million of financing ("keep-well")
obligations to the Astaris joint venture and other related costs; and a $40.0
million reserve for payments to the Shoshone-Bannock Tribes and $8.6 million of
other related charges. In addition, restructuring charges for the quarter
included $8.0 million related to our corporate reorganization. The remaining
charges of $7.0 million were for the restructuring of two smaller chemical
facilities. We reduced our workforce by approximately 135 people in connection
with these restructuring activities.
During the third quarter of the year, we recorded restructuring charges of
$8.5 million. These charges were largely for reorganization costs and corporate
restructuring activities including severance
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and contract commitment costs. (See Notes 2 and 7 to our 2001 consolidated
financial statements incorporated by reference in this prospectus supplement).
We recorded restructuring and other charges of $95.9 million in the fourth
quarter of 2001. Most of these charges related to our decision to shutdown
operations at Pocatello. These charges include $36.3 million for our share of
Astaris shut down costs including environmental cleanup, waste removal and
other activities and $44.6 million of Pocatello costs related to plant
demolition, plant shutdown, severance and other activities. In addition, $12.5
million of severance and other costs related to the Agricultural Products
segment were recorded primarily as a result of our decision to refocus certain
research and development activities. The remaining charges reflected
restructuring initiatives in our Specialty Chemicals segment and in corporate.
We reduced our workforce by approximately 182 people in connection with the
third and fourth quarter restructuring activities.
During 2000, we recorded restructuring and other charges of $35.2 million
($21.7 million after tax). Restructuring charges of $20.6 million were
attributable to the formation of Astaris and the concurrent reorganization of
our Industrial Chemicals sales, marketing and support organizations, the
reduction of office space requirements in our Philadelphia chemical
headquarters and pension expense related to the separation of phosphorus
personnel from our company. In addition, we recorded environmental accruals of
$12.5 million because of increased cost estimates for ongoing remediation of
several phosphorus properties. Other restructuring charges included $2.1
million for other projects. Of the approximately 350 employee severances that
were expected to occur through the completion of these programs in 2000, 281
occurred at December 31, 2000 while the remainder occurred in 2001.
Income (loss) from continuing operations was a loss of $306.3 million in
2001 compared to income of $125.6 million in 2000. Most of the decline can be
attributed to after-tax asset impairments and restructuring and other charges
of $405.9 million in 2001 compared to after-tax charges of $27.9 million in
2000. Poor economic conditions affecting the chemical industry worldwide also
contributed to this decline.
Corporate expenses (excluding restructuring and other charges in 2001 and
2000) were $36.3 million in 2001 and $36.2 million in 2000.
Other income and expense, net is comprised primarily of LIFO inventory
adjustments and pension income or expense. Net other expense for the year was
$1.6 million compared to net other income of $9.6 million in 2000. This
variance is largely attributable to increased pension costs and lower
amortization of a deferred pension asset.
Net interest expense in 2001 was $58.3 million compared to $61.8 million in
2000. The decrease in net interest expense in 2001 was primarily the result of
lower average debt levels during the year.
Provision (benefit) for income taxes. We recorded an income tax benefit of
$166.6 million in 2001, resulting in an effective tax rate of 35.2% compared to
income tax expense of $33.0 million and an effective tax rate of 20.8% in 2000.
The differences between the effective tax rates for these periods and the
statutory U.S. federal income tax rate relate primarily to differing foreign
tax rates, the impairment of certain Argentina assets, foreign sales
corporation benefits, incremental state taxes and non-deductible goodwill
amortization.
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Discontinued operations. We recorded a loss from discontinued operations of
$42.5 million ($30.5 million after tax) in 2001. Included in this amount are
earnings of Technologies, including interest expense of $11.2 million, which
was allocated to discontinued operations in accordance with Accounting
Principles Board Statement No. 30 ("APB 30") and later relevant accounting
guidance, costs related to the spin-off and additional income tax provision
related to the reorganization of our worldwide entities in anticipation of the
separation of Technologies from FMC. In addition, we recorded a charge of $18.0
million for updated estimates of environmental remediation costs related to our
other discontinued businesses.
During 2000, we recorded a net loss from discontinued operations of $17.7
million ($15.0 million after tax). Of this amount, $64.0 million represent
earnings of the spun-off Technologies business, including allocated interest
expense of $30.9 million. Also included are an $80.0 million loss for a
settlement of litigation related to our discontinued Defense Systems business
and a charge of $1.7 million for interest charges on postretirement benefit
obligations.
Net income (loss). We recorded a net loss of $337.7 million for 2001
compared to net income of $110.6 million in 2000. This variance reflects the
effect of significant asset impairments and restructuring and other charges
recorded in 2001.
Additional information regarding discontinued operations and the related
accounting policies can be found in Notes 1, 3 and 20 to our 2001 consolidated
financial statements incorporated by reference in this prospectus supplement.
Segment Results--2001 Compared to 2000
(See Note 20 to our 2001 consolidated financial statements incorporated by
reference in this prospectus supplement for detailed segment results.)
Segment operating profit is presented before taxes, asset impairments and
restructuring and other charges. Information about how each of these items
relates to our businesses at the segment level is discussed below and in Note
20 to our 2001 consolidated financial statements incorporated by reference in
this prospectus supplement.
Agricultural Products
Agricultural Products revenue decreased to $653.1 million in 2001 from
$664.7 million in 2000. Agricultural Products segment operating profit declined
to $72.8 million, down 17.1% from the prior year.
The decrease in Agricultural Products revenues was largely due to a lack of
sulfentrazone sales to DuPont in 2001. In 1998 we entered into an exclusive
agreement to provide DuPont with sulfentrazone in North America for use on
soybeans. However, the sale of formulated products incorporating sulfentrazone
did not reach expectations and the contract purchases were cancelled in 2001.
DuPont no longer has exclusive rights to the use of sulfentrazone on soybeans
in North America. We began developing new markets in 2001, expanding our
sulfentrazone sales, including sales into the soybean market in North America.
We believe that we have recovered approximately one third of the sulfentrazone
volumes lost from the absence of DuPont's purchases. Somewhat offsetting the
sulfentrazone sales decline in North America was an increase in carfentrazone
sales into the rice and cotton defoliation markets as a result of new product
registrations. We believe that sulfentrazone sales
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will increase slightly in 2002; however, we will idle our production facility
early in 2002 to allow product inventories to align with expected sales volumes.
Agricultural Products sales were also affected by weakened Asian markets due
to depressed crop prices, unfavorable climate conditions and lower pricing in
some Asian markets due to weaker exchange rates. Asian revenue shortfalls were
offset by stronger demand for herbicides in Latin and South America due mainly
to the introduction of several new herbicide registrations in 2001.
Agricultural Products' operating profit declined to $72.8 million from $87.8
million as a result of a decline in operating margins to 11.1% in 2001 from
13.2% in 2000. This lower profitability reflects reduced volumes of
sulfentrazone, weaker pricing due to lower crop prices, and weaker currencies
in Asia and Brazil. The adverse impact of the lower sulfentrazone volumes in
North America was significantly offset by a one time contract penalty payment
from DuPont of $20.0 million which was paid in the first half of 2001.
Additionally, Agricultural Products incurred higher selling costs in North
America in 2001 as it pursued new sulfentrazone markets through direct selling
instead of through DuPont's sales channels.
During the fourth quarter of 2001, Agricultural Products began a
restructuring of its operations to focus on key markets and products. We will
concentrate our future research and development activities on our core strength
of insecticides and reduce all work on herbicides, while continuing our efforts
to maximize the market potential of already commercialized herbicide
chemistries including clomazone, carfentrazone and sulfentrazone. Additionally,
we have reduced our direct sales and support staffs outside North, South and
Latin America, relying instead on new and expanded strategic alliances with
Ishihara Sangyo Kaisha, Ltd. in Asia and Belchim in Europe. A restructuring
charge of $12.5 million ($7.8 million after tax) was taken in the fourth
quarter to implement these plans. This restructuring should be complete by the
end of the first quarter 2002.
We believe that Agricultural Products will have a challenging year in 2002,
but the actions we have taken to expand product labels, improve market access
and reduce costs should allow us to recover the earnings decline that resulted
from the loss of DuPont's sulfentrazone business.
Specialty Chemicals
Specialty Chemicals revenue was $472.0 million in 2001, down from $488.8
million in 2000, due to lower revenue in both the FMC BioPolymer AS and Lithium
businesses. Specialty Chemicals segment operating profit declined to $87.5
million, or 5.3%, from $92.4 million in the prior year.
BioPolymer revenue decreases resulted from a combination of weaker demand
and lower selling prices for alginate and carrageenan in specialty markets,
partially offset by strong growth from microcrystalline cellulose in the
pharmaceutical and food ingredients markets. Specialty markets, which include
pet food, textiles and household products, experienced the impacts of a slowing
economy and lower competitor pricing. Customer inventory corrections and a weak
euro also drove sales lower.
Lithium revenue decreases resulted from our strategic exit from the
commodity lithium carbonate market and slower industrial markets, particularly
in Europe. The lithium carbonate market has experienced substantially lower
prices since the entry of a new competitor in 1997, which resulted in
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our decision to exit the market. These sales declines were offset by continued
growth in lithium specialty products.
Specialty Chemicals operating profit decreased to $87.5 million in 2001 from
$92.4 million in 2000 despite relatively flat operating margins as compared to
2000. The decrease in operating profit can be attributed to a decrease in
BioPolymer volumes and prices in the pet food, textile and household products
markets, offset, in part, by lower operating costs and an improved mix in
lithium. A weaker euro, compared to the prior year, also unfavorably impacted
earnings.
Industrial Chemicals
Industrial Chemicals' revenue decreased to $822.0 million in 2001, compared
to $905.6 million in 2000. The Industrial Chemicals segment's operating profit
declined by 36.6% to $72.6 million in 2001 from $114.5 million in 2000.
Revenue decreases reflected weaker demand in most markets for Industrial
Chemicals. Weaker end-market demand for glass and the entry of a new competitor
resulted in lower soda ash volumes and revenue compared to the prior year.
Price increases announced in the late summer of 2001 are not expected to have
any material effect on revenues until 2002. In hydrogen peroxide, weakness in
the pulp and textile markets resulted in decreased revenues despite the price
increases initiated in late 2000 and the application of an energy surcharge in
early 2001. Softer demand in the polymer and electronics end-markets also
resulted in lower volumes for specialty peroxygens.
Foret, our Spain-based operation, recorded increases in sales that reflected
strong phosphate and zeolite markets. Phosphate volumes improved as a result of
a recovery in their export markets, particularly in the Middle East and North
Africa. Zeolite sales increased as a result of an acquisition in the third
quarter of 2001 and stronger sales to new and existing customers. Conversely,
peroxygen sales declined on lower export sales. Foret's increase in sales was
offset by unfavorable translation, due to a weaker euro in 2001.
These revenue comparisons were further affected by the inclusion of the
sales of our U.S.-based phosphorus business in the first three months of 2000.
Subsequent U.S. phosphorus sales have been deconsolidated and recorded in
earnings from equity investments as part of Astaris, which was formed effective
April 1, 2000 (see Note 4 to our consolidated financial statements incorporated
by reference in this prospectus supplement). We account for Astaris on an
equity basis for Industrial Chemicals and, therefore, the sales of Astaris are
not reflected in our consolidated revenues after March 2000.
Industrial Chemicals' operating profit (net of minority interests) decreased
36.6% to $72.6 million in 2001 from $114.5 million in 2000. Driving the
Industrial Chemicals segment's profit decreases were lower sales volumes in
hydrogen peroxide, soda ash and active oxidants and reduced earnings from
Astaris, as discussed below. Additionally, during 2000 we hedged our natural
gas requirements for 2001, which, due to the forward pricing in the market at
that time, resulted in generally higher gas costs in 2001 versus the prior
year. Offsetting these unfavorable factors were increased pricing in several
products.
Our U.S.-based phosphorus business is comprised of our 50% interest in
Astaris for the manufacture and sale of our phosphorus-based products, and the
activities of our corporate phosphorus division, which manages remediation and
other environmental projects associated with the Astaris elemental phosphorus
plant in Pocatello, Idaho. Astaris has experienced a difficult business
S-33
environment as a result of the economic slowdown and significant changes in its
manufacturing and sourcing strategy. During the first quarter of 2001, Astaris
was asked by its electric power provider, Idaho Power Company, to assist in
combating the energy crisis in the state of Idaho. Historically, the Astaris
elemental phosphorus facility has been the largest consumer of power in the
state. Astaris agreed to work with Idaho Power and signed a two-year agreement
to resell 50 megawatts of power to Idaho Power at rates below the then current
market prices, but above the rate paid by Astaris under its power contract. The
gross economic value of the power contract, in the nine months of 2001 during
which the contract was in effect, was $68.0 million of which half, or $34.0
million, is reflected in FMC's earnings in Astaris. However, this decision
required Astaris to shut down one of the two remaining operating furnaces in
Pocatello and to source raw materials, including purified phosphoric acid and
other products, from third-party suppliers at an additional cost to Astaris of
approximately $60.0 million ($30.0 million is reflected in FMC's earnings in
Astaris). This significant restructuring of the supply chain also adversely
impacted Astaris' sales. Sales declined due to the intentional reduction of
volume capacity and Astaris' inability to meet customer material needs. In
December 2001, the Idaho Public Utility Commission ("IPUC") was petitioned by
its staff to reduce the future amounts to be paid to Astaris under the power
resale contract. In May 2002, we reached a tentative agreement with the IPUC
and Idaho Power to resolve the disputes regarding the electrical power contract
for Pocatello. We do not believe the net impact of this agreement will have a
material effect on our consolidated results of operations in 2002.
Additionally, the start-up of the new Astaris PPA plant in Soda Springs,
Idaho in the second half of the year added costs in 2001.
Our corporate phosphorus division also affected segment operating profit in
2001. Working with the EPA and the Shoshone-Bannock Tribes, we agreed to amend
the July 1999 Consent Decree to permit the capping of a specific waste disposal
pond at the Pocatello site. As part of this settlement, FMC agreed to
contribute $40.0 million to a fund for the Tribes to support various Tribal
activities ($30.0 million was paid during 2001). This agreement enabled Astaris
to shut down the Pocatello operation in December 2001.
We expect the results of our U.S.-based phosphorus operations to improve in
2002. The new Astaris PPA plant in Idaho should be fully operational in the
second half of 2002 and start-up expenses experienced in 2001 should be
significantly less in 2002. In addition, we expect spending by the corporate
phosphorus division to be lower in 2002 compared with 2001 due to lower
spending on projects under the Consent Decree. We believe the shutdown of the
elemental phosphorus production at Pocatello will enable Astaris to lower its
costs by increasing the share of the supplies it obtains from lower cost
purified phosphoric acid.
Following this challenging year, we believe that results in the Industrial
Chemicals segment will improve in 2002. We will continue to focus on lowering
the cost of production and we expect to benefit from the 2001 restructuring of
our U.S. phosphorus business. However, market demand is expected to continue to
be weak through most of 2002 partially offsetting the improvements in our U.S.
phosphorus business.
2000 Compared to 1999
Revenue was $2,050.3 million in 2000, down from $2,320.5 million in 1999.
Revenue in the United States decreased 17.3% compared with 1999, while revenue
outside the United States,
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including exports, decreased by less than 5.9% when compared to 1999. Sales in
the United States represented 47.1% of our 2000 revenue compared to 50.3% in
1999.
Revenue. Lower revenue in 2000 when compared with 1999 was principally
attributable to the contribution of our phosphorus operations to a joint
venture and to divestitures of other businesses, and was offset by revenue from
a Specialty Chemicals business acquired in 1999. Beginning April 1, 2000, sales
of phosphorus chemicals were recorded by Astaris and are not reflected as
revenue in our 2001 consolidated financial statements incorporated by reference
in this prospectus supplement. Our interest in Astaris is accounted for under
the equity method and our share of Astaris' operating earnings is included in
operating profit for our Industrial Chemicals segment. (See Note 4 to our 2001
consolidated financial statements incorporated by reference in this prospectus
supplement.)
Income from continuing operations, before the cumulative effect of change in
accounting principle, net of income taxes excluding asset impairments and
restructuring and other charges (in 2000 and 1999) and gains on divestitures of
businesses (in 1999) was $153.5 million in 2000 compared with $132.0 million in
1999. This increase reflects the performance of our business segments discussed
more fully below and in Note 20 to our 2001 consolidated financial statements
incorporated by reference in this prospectus supplement.
Gains on divestitures of businesses. On July 9, 1999, we completed the sale
of our bioproducts business to Cambrex Corporation for $38.2 million in cash,
resulting in a pre-tax gain of $20.1 million. Our bioproducts business was
included in our Specialty Chemicals segment and had 1999 revenue of $13.3
million (through the date of divestiture).
On July 31, 1999, we completed the sale of our process additives business to
Great Lakes Chemical Corporation for $161.1 million in cash, resulting in a
gain of $35.4 million on both a pre-tax and after-tax basis. Our process
additives business was included in our Specialty Chemicals segment and had 1999
revenue of $98.5 million (through the date of divestiture).
Asset impairments recorded by the company amounted to $10.1 million ($6.2
million after tax) and $23.1 million ($14.1 million after tax) for the years
ended December 31, 2000 and 1999, respectively.
During the second quarter of 2000, we recorded asset impairments of $10.1
million. Impairments of $9.0 million were recognized as a result of the
formation of Astaris (see Note 4 to our 2001 consolidated financial statements
incorporated by reference in this prospectus supplement), including the
writedown of certain phosphorus assets retained by our company and the accrual
of costs related to the planned closure of two phosphorus facilities. Other
impairments were due to the impact of underlying changes within the Specialty
Chemicals segment.
In the third quarter of 1999, we recorded asset impairments of $23.1
million. Asset impairments of $14.7 million were required to write off the
remaining net book values of two U.S. lithium facilities. Both facilities were
constructed to run pilot and development quantities for new lithium-based
products. During the third quarter of 1999, management determined that it would
not be feasible to use the facilities as configured. Additionally, an
impairment charge of $8.4 million was required to write off the remaining net
book value of a caustic soda facility in Green River, Wyoming. Estimated future
cash flows related to this facility indicated that an impairment of the full
value had occurred.
S-35
Restructuring and other charges. Total restructuring and other charges of
$35.2 million ($21.7 million after tax) were recorded in 2000 compared to $11.1
million ($6.8 million after tax) in 1999.
Restructuring charges of $20.6 million were attributable to the Astaris
formation and the concurrent reorganization of our Industrial Chemicals sales,
marketing and support organizations, the reduction of office space requirements
in our Philadelphia chemical headquarters and pension expense related to the
separation of phosphorus personnel from our company. In addition, we recorded
environmental accruals of $12.5 million because of increased cost estimates for
ongoing remediation of several phosphorus properties. Other restructuring
charges included $2.1 million for several smaller projects.
In the third quarter of 1999, we recorded restructuring and other charges of
$11.1 million ($6.8 million after tax). Restructuring and other charges of $9.2
million resulted primarily from strategic decisions to divest or restructure a
number of businesses and support departments, including certain Agricultural
Products and corporate and shared service support departments. The remaining
charge related to actions, including headcount reductions, required to achieve
planned synergies from acquisitions of businesses in Specialty Chemicals.
Income from continuing operations was $125.6 million in 2000, down from
$158.7 million in 1999, primarily resulting from gains on divestitures of
businesses in 1999 and higher restructuring and other charges recorded in 2000.
Corporate expenses (excluding restructuring and other charges in 2000 and
1999) of $36.2 million in 2000 reflected a decrease of $5.1 million from 1999.
The company's cost reduction efforts are responsible for this trend.
Net interest expense was $61.8 million and $76.4 million during 2000 and
1999, respectively. The decrease in 2000 was the result of lower average debt
levels when compared with 1999.
Other income and expense, net is comprised primarily of LIFO inventory
adjustments and pension and postretirement plan adjustments. Other income of
$9.6 million remained relatively flat when compared to $9.3 million recorded in
1999.
Discontinued operations. During 2000, we recorded a net loss from
discontinued operations of $17.7 million ($15.0 million after tax). Of this
amount, $64.0 million represents the earnings of the spun-off Technologies
business, including interest expense of $30.9 million allocated to discontinued
operations in accordance with APB 30 and later relevant accounting guidance.
Also included is a $80.0 million loss for a settlement of litigation related to
our discontinued Defense Systems business and a charge of $1.7 million for
interest charges on postretirement benefit obligations.
We recorded net income from discontinued operations of $73.5 million ($53.9
million after tax) in 1999. Of this amount, $79.2 million related to the
earnings of the spun-off Technologies businesses including allocated interest
expense of $30.3 million. Results of discontinued operations in 1999 included
gains of $53.7 million from the sale of properties in California that were
formerly used by our divested defense business (as discussed below). In
addition, in the fourth quarter of 1999, we provided $59.4 million in response
to updated estimates of environmental remediation costs, primarily at our
former Defense Systems sites, and increased estimates of our liabilities for
general liability, workers' compensation, postretirement benefit obligations,
legal defense, property maintenance and other costs.
S-36
During the year ended December 31, 1999, we sold several real estate
properties formerly used by United Defense, Industries, Inc., and our Defense
Systems operations divested by our company in 1997. In the second quarter of
1999, we received $33.5 million in cash, recognizing a gain of $29.5 million,
and in the fourth quarter of 1999, we received $31.0 million in cash,
recognizing a gain of $24.2 million related to property sales.
Net income in 2000 was $110.6 million compared to $212.6 million in 1999.
Contributing to this decrease was a one-time gain of $55.5 million related to
the divestiture of a Specialty Chemicals business in 1999 offset by a charge of
$66.7 million to discontinued operations in 2000 related to our former Defense
Systems business segment.
Segment Results--2000 Compared to 1999
Agricultural Products
Agricultural Products' revenue increased to $664.7 million in 2000 compared
to $632.4 million in 1999. Operating profits increased to $87.8 million in 2000
compared to $64.3 million in 1999.
Agricultural Products' revenue increased because of stronger sales in Latin
and North America, which more than offset lower sales in Asia. North American
revenue improved after a return to more normal pest pressures following 1999's
unusually low levels. Latin American sales improved due to a rapid recovery
from the devaluation of the Brazilian real in 1999, a new distribution
agreement for third-party products in Brazil and a stronger Mexican market.
Increased revenue in 2000 also reflected higher volumes for herbicides and
pyrethroids, offset by lower sales of carbamates.
Operating profits in our Agricultural Products segment increased to $87.8
million in 2000 from $64.3 million in 1999 on increased volumes and lower
costs, partially offset by higher research and development spending to develop
a new herbicide and to fund our strategic alliance with Devgen, a Belgian
biotechnology company, to support our insecticide discovery program.
Specialty Chemicals
Specialty Chemicals' revenue was $488.8 million in 2000, down from $564.5
million in 1999. Operating profit was $92.4 million compared to $73.5 million.
Lower revenue in 2000 reflected our divestitures of the process additives
and bioproducts businesses, both of which occurred in the third quarter of
1999, and the effect of unfavorable foreign currency exchange rates. Partially
offsetting this decrease in 2000 was revenue from Pronova Biopolymer AS, an
alginate business acquired in mid-1999. The Pronova Biopolymer operation was
combined with certain carrageenan and microcrystalline cellulose businesses and
renamed FMC BioPolymer AS. BioPolymer's revenue reflected a strong market for
pharmaceutical and food-grade microcrystalline cellulose along with growth in
sales to Latin America and Asia, but was partially offset by the impact of
foreign currency translation of the euro to the U.S. dollar.
Sales of lithium products were up slightly in 2000. Increased revenue
reflected higher volumes of butyllithium to the polymer and pharmaceutical
markets. Lithium volume increases were offset by lower pricing, primarily the
result of weak European currencies.
Specialty Chemicals' operating profit in 2000 increased to $92.4 million
from $73.5 million in 1999. BioPolymer's increased profitability was based on
lower manufacturing costs in 2000 for
S-37
carrageenan and realized synergies associated with the acquisition of the
alginate product line when compared with 1999. Lithium's improved operating
profitability in 2000 when compared with 1999 was a result of higher sales, and
the successful implementation of manufacturing cost reduction initiatives.
Industrial Chemicals
Industrial Chemicals revenue decreased to $905.6 million in 2000 from
$1,141.3 million in 1999. Operating profit (net of minority interests) declined
to $114.5 million in 2000 from $144.4 million in 1999.
Lower revenue was primarily the result of the contribution of the phosphorus
business to the newly formed Astaris joint venture, effective April 1, 2000.
After that date, phosphorus revenue was no longer consolidated with our
revenue. Phosphorus revenue of $327.0 million through December 31, 1999 is
included in 1999 segment revenue, while revenue in 2000 before the joint
venture formation amounted to $79.2 million. Subsequent to the first quarter of
2000, our equity share of Astaris' earnings was included in segment operating
profit for Industrial Chemicals.
Other factors contributing to reduced revenue were the translation impact of
the weaker euro and competitive pressures both at Foret and at Astaris.
Partially offsetting the decline in revenue were increased sales of hydrogen
peroxide, reflecting both volume and price increases compared with 1999, and
soda ash, a result of the Tg Soda Ash acquisition in mid-1999.
Reduced profitability for Industrial Chemicals to $114.5 million in 2000 was
primarily the result of increased energy costs for all businesses, but
especially at Astaris, while foreign currency translation losses negatively
affected reported operating profitability at Foret. In addition, segment
profits were down due to phosphorus environmental compliance costs retained by
our company for design, implementation and depreciation of capital assets in
Pocatello, Idaho in connection with the Consent Decree.
Offsetting these declines in profitability were higher earnings for soda ash
and hydrogen peroxide. Soda ash profitability increased in 2000, reflecting the
Tg Soda Ash acquisition and reduced costs despite significant increases in
energy prices. Hydrogen peroxide's favorable operating profits were largely the
result of a strong pulp and paper market. In addition, our share of Astaris'
results reflected the cost reduction benefits of the joint venture's
rationalization and restructuring programs.
Taxes
Although our domestic earnings (losses) are generally subject to tax expense
(benefit) at the statutory rate of 35.0%, many factors alter our consolidated
tax rate. These factors include non-deductible or non-taxable transactions
related to goodwill or other items, differing foreign tax rates, state tax
increments, depletion, extraterritorial income exclusion, and other permanent
differences. Our effective tax rate of 35.2% on income from continuing
operations in 2001 also includes the beneficial impact of deductible
restructuring and impairment charges recorded during the year. (See Notes 6, 7
and 10 to our consolidated financial statements incorporated by reference in
this prospectus supplement.)
S-38
New Accounting Standards Adopted
Goodwill and Intangible Assets. Prior to January 1, 2002 we amortized
goodwill and identifiable intangible assets (such as trademarks) on a
straight-line basis over their estimated useful lives not to exceed 40 years.
The recoverability of the net book value of these assets was periodically
reviewed based on the expected future undiscounted cash flows of the businesses
to which they relate.
On January 1, 2002, the company adopted the Financial Accounting Standards
Board ("FASB") issued SFAS No. 141, "Business Combinations." SFAS No. 141
requires that all business combinations be accounted for by the purchase method
and adds disclosure requirements related to business combination transactions.
SFAS No. 141 also establishes criteria for the recognition of intangible assets
apart from goodwill. This Statement applies to all business combinations for
which the acquisition date was July 1, 2001 or later. We had no significant
acquisitions during 2001. We intend to implement the provisions of SFAS No. 141
in any of our future business combinations.
On January 1, 2002 we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets." With the adoption of SFAS No. 142, goodwill and other indefinite
intangible assets ("intangibles") are no longer subject to amortization, rather
they are subject to at least an annual assessment for impairment by applying a
fair value based test. During 2001, 2000 and 1999, goodwill and other
intangible amortization (pretax and after discontinued operations) was $19.4
million, $13.5 million and $12.0 million, respectively. We believe adopting
SFAS No. 142 will result in approximately a $4.0 million pre-tax benefit to
earnings in 2002.
We are currently conducting the transitional goodwill and indefinite life
intangibles impairment tests required by SFAS No. 142, and expect to be
completed by the second quarter of 2002 and each year, beginning in 2003, will
conduct an assessment of goodwill impairment based on fair value in the future
in accordance with the requirements of SFAS No. 142.
Goodwill amortization was $4.2 million ($2.8 million after tax), or $0.09
per diluted share in 2001. Goodwill amortization for the three months ended
March 31, 2001 was $1.1 million, or $0.02 per diluted share. Goodwill
amortization for the first quarter of 2002 would also have been $1.1 million.
Goodwill at March 31, 2002 and December 31, 2001 was $111.1 million and
$113.5 million, respectively. The majority of our goodwill can be attributed to
an acquisition in our Specialty Chemicals segment. The decrease in goodwill
since year-end 2001 is due to the devaluation of Norwegian krone in the first
quarter of 2002 in FMC's BioPolymer operations within its Specialty Chemicals
segment. There are no material indefinite life intangibles, other than
goodwill, at March 31, 2002.
Our definite life intangibles totaled $7.9 million at March 31, 2002. At
March 31, 2002 these definite life intangibles are allocated among our segments
as follows: $3.6 million in Agricultural Products, $2.8 million in Specialty
Chemicals and $1.5 million in Industrial Chemicals. All definite life
intangibles are amortizable and consist primarily of patents, industry licenses
and other intangibles.
On January 1, 2002 the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This Statement establishes a single accounting
model, based on the framework established in SFAS No. 121, for long-
S-39
lived assets to be disposed of by sale. The Statement retains most of the
requirement of SFAS No. 121 related to the recognition of the impairment of
long-lived assets to be held and used. There was no impact of adopting SFAS No.
144 in the first quarter of 2002.
On January 1, 2001, the company implemented SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
SFAS No. 138 (collectively, the "Statement.") The Statement requires the
company to recognize all derivatives in the consolidated balance sheets at fair
value, with changes in the fair value of derivative instruments to be recorded
in current earnings or deferred in other comprehensive income, depending on
whether a derivative is designated as an effective hedge and on the type of
hedging transaction. In accordance with the provisions of the Statement, the
company recorded a first-quarter 2001 loss from the cumulative effect of a
change in accounting principle of $0.9 after-tax in our consolidated statement
of earnings and a deferred gain of $16.4 million after-tax in accumulated other
comprehensive loss.
New Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. We are required to adopt the provisions
of this pronouncement no later than the beginning of 2003 and are evaluating
the potential impact of adopting SFAS No. 143.
In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements
Nos. 4, 44 and 64, Amendment of FASB No. 13, and Technical Corrections." The
Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. The
Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets
of Motor Carriers. The Statement amends FASB Statement No.13, Accounting for
Leases, to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. We are required to adopt
the provision of this pronouncement no later than the beginning of 2003 and are
evaluating the potential impact of adopting SFAS No. 145.
Environmental Obligations
We, like other industrial manufacturers, are involved with a variety of
environmental matters in the ordinary course of conducting our business and are
subject to federal, state and local environmental laws. We believe strongly
that we have a responsibility to protect the environment, public health and
employee safety. This responsibility includes cooperating with other parties to
resolve issues created by past and present handling of wastes.
When issues arise, including notices from the Environmental Protection
Agency or other government agencies identifying our company as a Potentially
Responsible Party ("PRP"), our environmental remediation management assesses
and manages the issues. When necessary, we use multifunctional teams composed
of environmental, legal, financial and communications personnel to ensure that
our actions are consistent with our responsibilities to the environment and
public health, as well as to our employees and stockholders.
S-40
Environmental provisions totaling $68.8 million ($42.0 million after tax)
were recorded in 2001. These provisions largely related to the remediation of
the Pocatello site. Also included were costs related to continued cleanup of
certain discontinued manufacturing operations from previous years. This
provision and those made in 2000 and 1999, and our accounting policies on
environmental remediation, are more fully described in Notes 1 and 13 to our
consolidated financial statements incorporated by reference into this
prospectus supplement.
In the second quarter of 2000, we provided environmental reserves totaling
$12.5 million related to ongoing remediation of several phosphorus
manufacturing properties as part of the restructuring and other charges
described previously.
Additional information regarding our environmental accounting policies and
environmental liabilities is included in Notes 1 and 13, respectively, to our
2001 consolidated financial statements and Note 9 to our unaudited consolidated
financial statements for the three months ended March 31, 2002, each of which
is incorporated by reference in this prospectus supplement. Information
regarding environmental obligations associated with our discontinued operations
is included in Note 3 to our consolidated financial statements incorporated by
reference into this prospectus supplement. Estimates of 2002 environmental
spending are included in the section below entitled "Cash Flow Analysis."
Liquidity and Capital Resources
In 2001, we experienced the net cash impact of significant special items
recorded in the year and spending related to the spin-off of Technologies. This
spending was somewhat offset by the cash proceeds received in the IPO of
Technologies. Cash from operations, supplemented with proceeds from the IPO and
a new credit facility, provided funding for our capital spending program, debt
reduction and interest payments throughout 2001.
Capital expenditures totaling $145.6 million in 2001, which included $41.2
million of required Pocatello Consent Decree spending, were down 26.2% from
2000. We believe capital expenditures will be reduced in 2002, largely because
of the absence of this Consent Decree spending. Principal categories of capital
spending in 2002 include replacement of existing plant equipment and compliance
spending related to environmental and safety standards.
We retired $128.3 million of long-term debt in 2001, in part with a portion
of the proceeds from the IPO of Technologies. Cash paid for interest in 2001
was $79.1 million compared with $101.6 million in 2000. This decrease can be
attributed to lower average debt levels in 2001 compared to 2000.
Future cash needs include the scheduled repayment of several significant
financings over the next two years, operating cash requirements and capital
expenditures. We plan to meet these liquidity needs through cash generated from
operations, commercial paper borrowings, accounts receivable securitization,
borrowings under bank credit facilities, and if necessary, the issuance of
additional long-term debt. We maintain a universal shelf registration under
which, at March 31, 2002, $345.0 million of securities could be issued.
We currently maintain a commercial paper financing program with outstanding
borrowings at March 31, 2002 of $57.2 million compared to $33.0 million and
$16.8 million at December 31, 2001 and 2000, respectively.
S-41
Our total committed contracts that will affect cash over the next five years
and beyond are as follows:
Expected Cash Payments by Year
-----------------------------------------------
Contractual Commitments (as 2006 &
of December 31, 2001) 2002 2003 2004 2005 beyond Total
--------------------- ------ ------ ----- ------ ------ --------
(In millions)
Short-term debt............... $136.5 $ -- $ -- $ -- $ -- $ 136.5
Long-term debt................ 135.2 182.2 0.5 89.5/(1)/ 379.6 787.0
Lease obligations............. 25.8 24.9 23.3 22.7 103.2 199.9
Forward energy and foreign
exchange contracts.......... 16.2 6.2 2.4 1.1 -- 25.9
Guarantees of vendor financing 56.0 -- -- -- -- 56.0
------ ------ ----- ------ ------ --------
Total......................... $369.7 $213.3 $26.2 $113.3 $482.8 $1,205.3
====== ====== ===== ====== ====== ========
--------
(1) Includes $28.8 million in exchangeable senior subordinated debentures
that were to mature in 2005. See "Recent Developments" on page S-9.
Our five-year, non-amortizing committed revolving credit agreement expired
in December 2001. There were no outstanding balances under this agreement at
the due date. At the same time, we entered into a new $240.0 million committed
revolving credit facility to meet certain operating cash needs, capital
expenditures, and commercial paper demands. This credit facility will expire in
December 2002. The total amount outstanding under this facility at March 31,
2002 and December 31, 2001 was $174.0 million and $68.0 million, respectively.
The credit agreement contains financial covenants related to leverage (measured
as the ratio of debt to adjusted earnings), interest coverage (measured as the
ratio of interest expense to adjusted earnings) and consolidated net worth. We
were in compliance with the covenants as of December 31, 2001. We expect to
renew or replace this credit facility prior to its expiration. In January 2002,
we acquired a supplemental $50.0 million committed credit facility to meet
short-term seasonal financing needs. This credit facility expires at the
earlier of August 31, 2002 or upon the successful completion of certain capital
market transactions. There have been no borrowings during the quarter ended
March 31, 2002 under this facility. As of March 31, 2002, we are in compliance
with all debt covenants on both facilities.
We also obtain financing through an accounts receivable securitization. We
sell receivables, without recourse, through our wholly owned bankruptcy-remote
subsidiary, FMC Funding Corporation, which then sells the receivables to an
unrelated finance company. The sold receivables and repurchase obligations
related to the financing are not recorded on our consolidated balance sheets,
because we have limited risk to repurchase the receivables. The financing from
the securitization totaled $145.0 million at March 31, 2002 compared to $79.0
million and $113.0 million on December 31, 2001 and 2000, respectively. The
agreement for the sale of accounts receivable provides for the continuation of
the program on a revolving basis through November 2002. We expect to renew or
replace this financing prior to its expiration.
At March 31, 2002 we had short-term debt (which includes commercial paper
and the current portion of long-term debt) of $439.5 million. An additional
$182.4 million in long-term debt matures in 2003. Also, at March 31, 2002 the
current portion of long-term debt includes $28.8 million in exchangeable senior
subordinate debentures maturing in 2005 and exchangeable at any time into
Meridian Gold Inc. common stock (NYSE: MDG) at an exchange price of $15.125 per
share, subject to adjustment. On May 3, 2002 we published notice for the
redemption of these debentures on June 3, 2002. (See Note 7 to the unaudited
consolidated financial statements for the three months ended March 31, 2002
incorporated by reference in this prospectus supplement.) Subsequently, the
price of Meridian Gold common stock rose significantly. As of May 31, 2002,
holders of $26.0 million aggregate
S-42
principal amount of the debentures exercised their exchange rights. Because we
do not own any shares of Meridian Gold common stock, we exercised our right to
pay the fair market value of the Meridian Gold common stock in cash. As a
result, we were required to pay an additional amount above the principal amount
of the debentures exchanged, which amount will be result in a net charge of
approximately $1.9 million after tax in the second quarter of 2002. The
remaining $2.8 million of debentures were redeemed on June 3, 2002 at the
principal amount thereof plus accrued interest.
Along with these near-term requirements our future liquidity could also be
affected by letters of credit, bank guarantees, securitization programs,
contingent payments, surety bonds and commitments and guarantees we provide on
behalf of our spun-off Technologies business' vendors, customers and others.
(See Notes 6, 7, 8, 9, 12, 13 and 14 of the unaudited consolidated financial
statements for the quarter ended March 31, 2002 incorporated by reference in
this prospectus supplement.)
Except for the application of the proceeds of this offering, we do not
expect our debt level to decline significantly in 2002 due to continuing cash
demands largely caused by restructuring charges, primarily associated with our
Phosphorus business. Consequently, we are evaluating several financing options,
which will be structured to address our current liquidity and capital resource
constraints. We intend to renew our $240.0 million committed revolving credit
agreement later in 2002. We are continually assessing the best sources of
financing and intend to access the capital markets later in 2002 primarily to
pre-fund our upcoming maturities of long-term debt, repay short-term debt and
meet other payment obligations. Long-term debt at March 31, 2002 also includes
$44.0 million of variable rate industrial and pollution control revenue bonds
that are supported by bank letters of credit. The letters of credit generally
have a term of thirteen months and extend each month for an additional month
unless and until the bank sends us a letter of non-renewal. At May 31, 2002, no
notice of non-renewal had been received.
The current rating of our commercial paper and similar short-term
indebtedness is A-3 by S&P and P-3 by Moody's. The market for commercial paper
with this rating is limited. The current rating of our senior unsecured
long-term indebtedness is BBB- by S&P and Baa3 by Moody's. A downgrade in our
credit ratings, which may be changed, superseded or withdrawn at any time,
could increase the cost and restrict the availability of future financings. The
following table displays credit facilities, debt obligations and other items
along with the cash payments that could be required to be repaid following a
downgrade or series of downgrades in our credit rating:
Potential
Cash
Payments
(as of
March 31,
Facility 2002)
-------- -------------
(In millions)
Commercial paper................................................. $ 57.2
Accounts receivable securitization(1)............................ $145.0
Forward energy contracts......................................... $ 7.6
--------
(1) Program terminates upon a reduction in rating to Ba2 by Moody's or BB by
S&P or below.
Our future liquidity could be affected by certain letters of credit,
commitments and guarantees we provide to vendors, customers and others for
which we are contingently liable. In connection with the spin-off of
Technologies, we retained liability for various contingent obligations totaling
$289.0 million at December 31, 2001. Contingent obligations include guarantees
of the performance of Technologies under various customer contracts,
reimbursements on behalf of Technologies under
S-43
letters of credit and surety bonds, and guarantees of indebtedness of
Technologies. We have a guarantee from Technologies providing for reimbursement
to us if we are ever called upon to satisfy these obligations. Technologies has
obtained contractual releases of FMC reducing the level of liabilities for
which we are contingently liable to $159.2 million at March 31, 2002. Because
of our expectation that the underlying obligations will be met and the
existence of the guarantee from Technologies, we believe it is unlikely that we
would have to pay any of these contingent obligations and expect this
contingent liability to continue to be reduced throughout 2002. The majority of
these obligations will expire before the end of 2003.
We have provided an agreement to lenders of Astaris under which we have
agreed to make equity contributions to Astaris sufficient to make up one half
of any short-fall in Astaris earnings below certain levels. Astaris' earnings
did not meet the agreed levels for 2001 and we do not expect that such earnings
will meet the levels agreed for 2002. We contributed $31.3 million to Astaris
under this arrangement in 2001 and expect to contribute a similar amount in
2002. The proportional amount of Astaris indebtedness subject to this agreement
from FMC was $118.0 million at March 31, 2002. Our estimates of future
contributions are based on Astaris forecasts and are subject to some
uncertainty.
We provide guarantees to financial institutions on behalf of certain
Agricultural Products customers for their seasonal borrowing. The customers'
obligations to us are largely secured by liens on their crops. The total of
these guarantees at March 31, 2002 was $55.4 million. (See Note 19 to our 2001
consolidated financial statements incorporated by reference in this prospectus
supplement.)
On June 30, 1999, FMC acquired the assets of Tg Soda Ash, Inc. from Elf
Atochem North America, Inc. for approximately $51.0 million in cash and a
contingent payment due at year-end 2003. The contingent payment amount, which
will be based on the financial performance of the combined soda ash operations
between 2001 and 2003, cannot currently be determined precisely but is expected
to be in the range of $40.0 million to $45.0 million.
Our ability to pay the principal and interest on our indebtedness as it
comes due will depend upon our current and future performance. Our performance
is affected by general economic conditions and by financial, competitive,
political, business and other factors. Many of these factors are beyond our
control. We believe that the cash generated from our businesses coupled with
our ability to obtain financing will be sufficient to enable us to make our
debt payments as they become due. We also actively evaluate opportunities to
refinance our existing obligations when financing is available on attractive
terms. If, however, we do not generate sufficient cash or complete such
financings on a timely basis, we may be required to seek additional financing
or sell equity on terms which may not be as favorable as we could have
otherwise obtained. No assurance can be given that any refinancing, additional
borrowing or sale of equity will be possible when needed or that we will be
able to negotiate acceptable terms. In addition, our access to capital is
affected by prevailing conditions in the financial and equity capital markets,
as well as our own financial condition.
Cash Flow Analysis
Cash and cash equivalents at March 31, 2002, December 31, 2001 and December
31, 2000 were $14.2 million, $23.4 million and $7.3 million, respectively. We
had total borrowings of $1,062.6 million, $923.5 million and $1,007.5 million
as of March 31, 2002, December 31, 2001 and December 31, 2000, respectively.
The increase in debt at March 31, 2002 is primarily a function of the normal
seasonal cash demands of our Agricultural Products business, which we are
expecting to reverse over the course of 2002.
S-44
Operating working capital at December 31, 2001, which includes trade
receivables (net), inventories, other current assets, accounts payable, accrued
payroll, other current liabilities and the current portion of accrued pension
and other postretirement benefits, increased $67.0 million to $24.8 million,
from an unfavorable $42.2 million at December 31, 2000. Factors contributing to
the increase in operating working capital at year-end 2001 when compared with
2000 include increased accounts receivable and inventory amounts.
Cash used in operating activities was $129.9 million for the three months
ended March 31, 2002 compared to $158.4 million for the first three months of
2001 reflecting our normal first quarter working capital build. Our first
quarter 2002 operating cash flows benefited from an additional $52.8 million in
cash proceeds from our accounts receivable financing program (see Note 13 to
the unaudited consolidated financial statements for the quarter ended March 31,
2002 incorporated by reference in this prospectus supplement). For the year
ended December 31, 2001, cash required by operating activities of $90.0 million
decreased from $298.3 million of cash provided by operations in the year ended
December 31, 2000 primarily as a result of increased restructuring spending
accompanied by higher inventory and accounts receivable balances. Also
contributing to the variance was a decrease in our accounts receivable
financing balance during 2001 compared to the prior year.
Cash required by discontinued operations for the first quarter of 2002 and
2001 were $12.5 million and $93.1 million, respectively. The 2001 results were
affected by $80.0 million of cash used for a settlement of litigation related
to our discontinued Defense Systems business.
Cash required by investing activities was $14.9 million for the three months
ended March 31, 2002 compared to $34.8 million for the three months ended March
31, 2001. The lower requirements were a direct result of lower Consent Decree
spending at Pocatello. For the year ended December 31, 2001, cash required by
investing activities of $154.9 million increased from the 2000 requirement of
$97.4 million, reflecting the impact of a prior year distribution from Astaris,
which was not repeated in the current year. Capital spending (excluding
acquisitions) of $145.6 million for the year ended December 31, 2001 decreased
when compared with 2000. Lower spending on significant capital projects was due
to lower Consent Decree spending at Pocatello.
Cash provided by financing activities for the first three months of 2002 of
$148.2 million decreased by $149.8 million when compared to cash provided by
financing activities of $298.0 million for the first three months of 2001. Both
years reflect the impact of short-term seasonal borrowing. The 2001 period also
reflects borrowings to fund the payment of the settlement of litigation
mentioned above. For the year ended December 31, 2001, cash provided by
financing activities of $376.5 million was higher than the 2000 requirement of
$162.0 million, primarily due to the contribution related to the distribution
of Technologies assets and an increase in long-term debt offset by long-term
debt paydowns of $128.3 million.
Projected 2002 spending also includes approximately $10.3 million for
environmental compliance at current operating sites, which is an operating
expense of the company, plus approximately $35.5 million of remediation
spending and $11.2 million for environmental study costs at current operating,
previously operated and other sites, which have been accrued in prior periods.
Derivative Financial Instruments and Market Risks
Our primary financial market risks include changes in foreign currency
exchange rates, interest rates and commodity pricing. In managing our exposure
to these risks, we may use derivative financial instruments in accordance with
established policies and procedures. We account for these derivatives in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 133
(see "Recently
S-45
Adopted Accounting Pronouncements" and Note 1 to our 2001 consolidated
financial statements). We do not use derivative financial instruments for
trading purposes. At March 31, 2002 our derivative holdings consisted primarily
of foreign currency forward contracts and natural gas forward contracts.
When we sell or purchase products or services outside the United States,
transactions are frequently denominated in currencies other than the U.S.
dollar. Exposure to variability in currency exchange rates is mitigated, when
possible, with natural hedges, whereby purchases and sales in the same foreign
currency and with similar maturity dates offset one another.
A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains and losses arising from our operations in the period incurred. As a
result, currency fluctuations among the U.S. dollar and the currencies in which
we do business have caused and will continue to cause foreign currency
transaction gains and losses, which could be material. Due to the weakness of
the euro in the period from 1999 through 2002, our business results have been
adversely affected by unfavorable U.S. dollar translation of earnings of our
operations in Europe. We cannot predict the effects of exchange rate
fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposures and the potential
volatility of currency exchange rates. We take actions to manage our foreign
currency exposure such as entering into forwards and swaps, where available,
but we cannot ensure that our strategies will adequately protect our operating
results from the effects of exchange rate fluctuations.
The maturity dates of the currency exchange agreements that provide hedge
coverage are consistent with those of the underlying purchase or sales
commitments.
We are exposed to changes in interest rates because of our financing and
cash management activities, which include long-term and short-term debt to
maintain liquidity and fund our business operations. In managing interest rate
risk, our strategic policy is to monitor the ratio of our fixed- to
floating-rate debt. We may, from time to time, use interest rate swaps to
manage our exposure to changes in interest rates. We did not enter into any
material interest rate swaps in the first quarter of 2002.
To address our exposure to risks from changes in commodity prices, we enter
into forward or swap contracts relating to energy purchases used in our
manufacturing processes. The forward energy contracts qualifying as hedges are
accounted for in accordance with SFAS No. 133. The gains or losses on these
contracts are included as an adjustment to the cost of sales or services when
the contracts are settled.
Dividends
On November 29, 2001, our Board of Directors approved the spin-off of the
remaining 83% of Technologies making it an independent publicly-traded company.
The spin-off qualified as a tax-free distribution to U.S. stockholders.
Stockholders of record as of December 31, 2001 received approximately 1.72
shares of common stock of the new company for every share of our stock.
Fractional shares were paid in cash to stockholders in lieu of fractional
shares on December 31, 2001.
No cash dividends were paid in 2001 other than amounts paid in lieu of
fractional shares as discussed above. No cash dividends were paid in 2000. No
cash dividends are expected to be paid in 2002.
S-46
BUSINESS
Overview
FMC is a diversified chemical company serving agricultural, industrial and
consumer markets globally with innovative solutions, applications and quality
products. FMC operates in three distinct business segments: Agricultural
Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products
provides crop protection and pest control products for worldwide markets.
Specialty Chemicals' products include food ingredients that are used to enhance
structure, texture and taste; pharmaceutical additives for binding and
disintegrant use; and lithium specialties for pharmaceutical synthesis and
energy storage. FMC's Industrial Chemicals business manufactures a wide range
of inorganic materials, including soda ash, hydrogen peroxide, phosphorus and
specialty peroxygens. FMC employs approximately 6,000 people and has 37
manufacturing facilities in 19 countries.
Effective December 31, 2001, FMC completed its previously announced plan to
separate into two separately traded public companies. FMC has retained the
three chemical segments. A separate company, Technologies, operates the
businesses that comprised the former Energy Systems and Food and Transportation
Systems segments. On May 31, 2001, FMC contributed the two non-chemical
business segments to Technologies, which at the time was a wholly owned
subsidiary of FMC. FMC completed an initial public offering of approximately
17% of Technologies' stock in June 2001 and completed the separation on
December 31, 2001 by distributing all remaining shares of Technologies owned by
FMC as a tax-free dividend to its stockholders.
Agricultural Products
General Description
FMC's Agricultural Products business includes a portfolio of crop
protection, structural pest control, and turf and ornamental products that meet
important market needs around the globe. FMC's product development efforts
focus on developing more environmentally compatible solutions that can
cost-effectively increase farmers' yields and provide alternatives to
insect-resistant chemistries. Management believes that Agricultural Products'
genomics-based discovery strategy, focused on new insecticides, may lead to
additional, yield-enhancing innovations.
Products and Markets
Agricultural Products provides a wide range of products--both patented and
off-patented technologies--for worldwide markets. While FMC's position is
particularly strong in North America, the company derives more than 50 percent
of Agricultural Products' sales from outside the United States.
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[CHART]
2001 SALES BY CATEGORY
-----------------------------------------
Insecticides 75%
Herbicides 25%
2001 SALES BY CATEGORY
-----------------------------------------
North America 41%
Latin America 28%
Asia 19%
Europe, Middle East & Africa 12%
The following table summarizes the principal product chemistries in
Agricultural Products and the principal uses of each chemistry:
Prof. Pest
Control,
Fruits, Home &
Cotton Corn Rice Cereals Vegetables Garden
-------------------------------------------------------------------------------------
------------------------------------------------------------
permethrin X X X
------------------------------------------------------------
cypermethrin X X X X
------------------------------------------------------------
Pyrethroids bifenthrin X X X X
------------------------------------------------------------
Alpha- X
cypermethrin
Insecticides ------------------------------------------------------------
Zeta- X X X X X
cypermethrin
------------------------------------------------------------------------
Carbamates carbofuran X X X X X
------------------------------------------------------------------------
carbosulfan X X
------------------------------------------------------------------------
cadusafos X
Other ------------------------------------------------------------
sulfuramid X
-------------------------------------------------------------------------------------
carfentrazone X X X X X
Herbicides ------------------------------------------------------------
clomazone X X X
-------------------------------------------------------------------------------------
In contrast to most other major crop protection companies, insecticides
dominate FMC's Agricultural Products business, particularly carbamate and
pyrethroid chemistries, in which FMC maintains leading global positions. FMC
also maintains a strong niche position in its herbicide sulfentrazone.
Recently, FMC entered into several agreements with Ishihara Sangyo Kaisha, Ltd
(ISK), a leading Japanese crop protection company, under which both companies
will work together to market and distribute existing and new insecticide
chemistries in various focus markets. With the ISK alliance, FMC has expanded
its distribution capabilities in Japan (via an alliance with ISK) and in Europe
by jointly investing with ISK in the Belgian-based pesticide distribution
company, Belchim Benelux NV. Through these alliances and its own targeted
marketing efforts, FMC expects to continue to enhance its access to markets and
expand its product breadth for more complete solutions.
Discovery Program
FMC plans to grow through obtaining new labels for existing product lines as
well as potential acquisitions of complementary chemistries from other
pesticide companies that may become available because of industry
consolidation. FMC has recently obtained label expansions for zeta-cypermethrin
use on corn, rice, alfalfa, sugarcane and leafy vegetable crops. Meanwhile,
FMC's carfentrazone
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herbicide has been recently approved for cotton defoliation in North America.
In addition, sulfentrazone and clomazone herbicides continue to provide new
opportunities worldwide.
In the next few years, FMC expects to launch a new sucking pest insecticide,
obtained via the ISK alliance, for controlling sucking pests in the Americas.
FMC believes that this patented and new chemistry is a potential candidate for
expedited EPA review as an organophosphate replacement.
FMC is among the first agricultural products companies to pursue a
predominantly genomics-based approach in its longer-term discovery efforts to
identify compounds with a specific biological function on agricultural pests.
Such an approach, used extensively in the pharmaceutical industry, allows more
rapid and cost-effective discovery of new insecticide chemistries with unique
modes of action. FMC believes that collaboration with its Belgian partner,
Devgen, to identify new molecular target sites sensitive to chemical
application has significantly enhanced its genomics-based discovery efforts.
Strategy
FMC expects that its global insecticide franchise will continue to benefit
from new label expansions on zeta-cypermethrin and the introduction and/or
acquisition of innovative new chemistries in the longer term. Management
believes that the growth of herbicide sales and new label expansions will
continue to contribute to the segment's profitability. FMC believes that its
attention to division-wide cost improvements will further enhance its
competitive positions.
FMC believes that a critical component of Agricultural Products'
competitiveness is its global sourcing strategy. FMC is taking advantage of
lower-cost manufacturing economics offered by offshore producers (such as in
China and India) through tolling and purchase agreements for a majority of
FMC's products. This strategy has resulted in material manufacturing cost
reductions versus production in the United States, with the resulting benefit
of lower capital intensity.
FMC believes that its Agricultural Products business has built a strong
business base with quality products, focused international exposure and
effective market access. FMC's future strategic initiatives include, increased
focus in key markets, expanded market access for its products and lower
manufacturing and distribution costs. Alliances with selected strategic
partners are expected to extend product offerings and enhance the
competitiveness of FMC's market access in key markets by leveraging FMC's
distribution network in the Americas and its alliances in Asia and Europe. FMC
has also developed and implemented what it believes to be solid product
stewardship programs throughout its global sourcing and distribution systems.
Specialty Chemicals
General Description
FMC's Specialty Chemicals business is centered on high-performance food
ingredients, pharmaceutical excipients and intermediates, and lithium specialty
products that enjoy solid customer bases and consistent, growing demand. FMC
believes that its future growth will continue to be based on the valuable
attributes of these products and research and development capabilities, as well
as on the alliances and close working relationships developed with key global
customers.
S-49
Products and Markets
The following is a summary of the sales of the two divisions within
Specialty Chemicals, BioPolymer and Lithium, and a breakdown of the combined
sales of the two divisions by market segment:
[CHART]
2001 SALES BY DIVISION
----------------------
BioPolymer 72%
Lithium 28%
2001 SALES BY MARKET
------------------------
Pharmaceuticals 36%
Food 31%
Other 21%
Specialty Polymers 8%
Energy Storage* 4%
*Excludes unconsolidated sales from JV.
FMC BioPolymer
FMC BioPolymer is a leading supplier of microcrystalline cellulose,
carrageenan and alginates-- ingredients that have high, value-added
applications in the production of food, pharmaceutical and other specialty
consumer and industrial products. Microcrystalline cellulose, processed from
specialty grades of pulp, provides important binding and controlled release
properties for pills and tablets and has unique functionality that improves the
texture and stability of many food products. Carrageenan and alginates, both
processed from seaweed, are used in a wide variety of food, pharmaceutical and
specialty areas.
BioPolymer is organized around three major markets--food, pharmaceutical and
specialty ingredients--and is a key supplier to many global leaders in these
markets. Many of BioPolymer's customers have come to rely on FMC for the
majority of their supply requirements. Management believes that such reliance
is based on FMC's innovative solutions and operational quality. The following
chart summarizes the major markets for BioPolymer's products, and the FMC
chemistries that meet customer needs in each market.
Cellulose Carrageenan Alginates Other
-----------------------------------------------------------------------------
--------------------------------------------------------------
Beverage X X
--------------------------------------------------------------
Food Convenience Foods X X X X
--------------------------------------------------------------
Meat & Poultry X
-----------------------------------------------------------------------------
Tablet Binding & Coating X X
--------------------------------------------------------------
Anti-reflux X
Pharmaceutical --------------------------------------------------------------
Liquid Suspension X X
--------------------------------------------------------------
Biomedical X
-----------------------------------------------------------------------------
Personal Care X X
--------------------------------------------------------------
Specialties Pet Food X X
--------------------------------------------------------------
Household & Other X X X
-----------------------------------------------------------------------------
S-50
Lithium
Lithium is a vertically integrated, technology-based business, rooted in
inorganic and organic lithium chemistries and related technologies that have
many applications that enhance the quality of life. Because FMC Lithium serves
a variety of markets, FMC has focused its efforts on growing key niches such as
fine chemicals for pharmaceutical synthesis, specialty polymers and energy
storage. FMC's organolithium products are sold to fine chemical and
pharmaceutical customers who seek high chemical selectivities, efficient
production throughputs and high yields, product attributes that contribute to
lowering the costs of pharmaceutical production. Organolithiums are also highly
valued in the specialty polymer markets as polymer initiators in the production
of synthetic rubbers and elastomers. Based on FMC's proprietary technology,
Lithium is developing new, highly specialized polymers for industrial coatings,
automotive coatings and rocket fuels.
The electrochemical properties of lithium make it an ideal material for
portable energy storage in high performance applications, including heart
pacemakers, cell phones, camcorders, personal computers and the next-generation
technologies that combine cellular and wireless capabilities into a single
device. Lithium is also being developed as the enabling element in advanced
batteries for use in hybrid electric vehicles.
The following chart summarizes the major markets for Lithium's products and
the FMC chemistries that meet customer needs in each market.
Lithium
Primary Specialty Metal/Cathodic
Inorganics Inorganics Materials Organometallics Intermediates
-----------------------------------------------------------------------------------------
Fine Chemicals X X X X
--------------
Pharmaceuticals,
agricultural products
-----------------------------------------------------------------------------------------
Polymers X X X
--------
Elastomers, rocket
fuels, synthetic
rubbers, industrial
coatings
-----------------------------------------------------------------------------------------
Energy Storage X X X
--------------
Non-rechargeable
batteries, lithium-ion
batteries
(rechargeable)
-----------------------------------------------------------------------------------------
Other X X
-----
Glass & ceramics,
construction, greases
& lubricants, air
treatment, pool water
treatment
-----------------------------------------------------------------------------------------
Strategy
Management expects continued growth in BioPolymer to be driven by stable
consumption patterns and new product introductions. In food, BioPolymer is
focusing on developing product
S-51
features related to health and convenience which management believes is
reflective of our customer's interest in new solutions for beverages and other
consumer foods. As a leading excipient supplier to the major pharmaceutical
companies, FMC expects to see continued growth in this important market. FMC's
presence in the food and pharmaceutical ingredient markets affords bolt-on
acquisition opportunities to expand BioPolymer's franchise by adding more
ingredients for food and pharmaceutical solutions. A small example of this
strategy is the recent acquisition of Pronova Biomedical, an addition that will
allow FMC to advance its efforts in developing novel wound care products.
Lastly, in specialties markets, management expects that the development of
innovative oral and skin care applications will create new opportunities for
the sale of BioPolymer's products.
FMC is focusing on organolithium opportunities in pharmaceutical synthesis
and lithium ion opportunities for secondary batteries where it believes there
exists greater potential for growth. At the same time, FMC is reducing its
exposure to the commodity lithium carbonate markets which are extremely price
competitive. FMC believes that its position as one of only three integrated
global producers of lithium will also enhance its opportunities to grow its
lithium business.
Industrial Chemicals
General Description
FMC's extensive Industrial Chemicals business is built on low-cost positions
in high-volume inorganic chemicals, including soda ash, phosphate and hydrogen
peroxide, complemented by high-value technology positions in specialty alkali,
phosphorus and peroxygen products. Industrial Chemicals serves the major
customers in each market and is a leader in low-cost technology and the
development of specialty niches, such as persulfates and peracetic acid.
Products and Markets
The following is a summary of the sales of the four main businesses within
Industrial Chemicals, Alkali, Peroxygens, FMC Foret and the Astaris joint
venture in phosphorus chemicals, as well as a breakdown of the combined sales
of the combined Industrial Chemicals businesses by geographic region:
[CHART]
2001 SALES BY BUSINESS
-----------------------------------
Alkali 38%
Foret 24%
Astaris** 21%
Peroxygens* 17%
2001 SALES BY REGION
----------------------------------
North America 62%
Europe, Middle East & Africa 23%
South America 11%
Asia 4%
* Includes sales from Hydrogen Peroxides and Active Oxidants.
** Sales not consolidated.
Industrial Chemicals serves a diverse group of markets, from economically
sensitive industrial sectors to technology-intensive specialty markets. The
business processes and sells refined inorganic
S-52
products that are sought by customers globally for their critical reactivity or
unique functionality. In addition, FMC produces, purifies and markets
higher-value downstream derivatives into specialized and customer-specific
applications. These applications include dialysis, rocket propulsion, animal
nutrition, biocides, semi-conductors and baking.
Alkali
FMC's Alkali Chemical Division is the world's largest producer of natural
soda ash and the largest producer of soda ash in North America. FMC's natural
soda ash is used by manufacturers in the glass, chemical processing and
detergent industries. Alkali also produces sodium bicarbonate, caustic soda and
sodium sesquicarbonate, a refined trona product used in animal feed and
personal care applications.
FMC is a leader in mining and production, having developed and implemented
multiple proprietary, low-cost mining technologies. Management believes that
Alkali's production facilities give it an advantage in terms of scale,
flexibility and reliability. FMC's two mining sites in Wyoming can produce
approximately 5 million tons of alkali annually, though the business has
recently mothballed 1.3 million tons of capacity to improve costs and respond
to current market conditions. Management believes that Alkali will be able to
continue to generate significant cash flows for the company in future periods
because it will be able to expand to meet any expected increase in demand
without major capital expenditures.
Peroxygens
Demand for hydrogen peroxide is driven primarily by the demand for more
environmentally friendly substitutes for chlorine within the pulp and paper
industry. FMC is the leading producer of hydrogen peroxide in the United States.
FMC is a worldwide producer of hydrogen peroxide with production facilities
in the United States, Canada, Mexico, Spain, the Netherlands and Thailand.
These plant locations, along with the business's state-of-the-art process
technology, are key to FMC's low-cost supply network and leading North American
market position. Management believes that FMC will improve cash flow as a
result of recent restructuring and the mothballing of 105 million pounds of
FMC's production capacity.
FMC's Active Oxidant Division is the world's leading supplier of persulfate
products, a major producer of peracetic acid and other specialty oxidants, and
a low cost producer through its unique process technology and geographic
location. FMC persulfates are used in polymer manufacture as initiators, in
electronic circuit board manufacture as etchants and cleaners and in hair care
products as an active ingredient. FMC peracetic acid is a strong oxidizer with
many important biocidal applications in the food industry. FMC competes as a
specialty player in markets where there are few competitive matches and where
management believes that FMC has strong technical expertise.
FMC Foret
FMC's Foret subsidiary, headquartered in Barcelona, Spain, is a leader in
providing basic chemistry to the detergent, paper, textile, tanning and
chemical industries. Foret is a large and diverse
S-53
operation with seven manufacturing locations in Europe. Foret has strong
positions in phosphates and hydrogen peroxides as well as in perborates, sulfur
derivatives, silicates and zeolites. Foret boasts a strong brand presence in
Southern Europe, Africa and the Middle East.
Astaris
Astaris is one of the two largest diversified phosphorus chemical supplier
in the Western Hemisphere. Astaris is a joint venture between FMC and Solutia
Inc. that was formed as a separate company in 2000 and has its headquarters in
St. Louis, Missouri. Astaris' products are used in detergent applications,
chemical processing, baking, food processing and fire suppressants.
Astaris is focused on a fundamental restructuring based upon new lower-cost
sources of phosphorus for value-added, end-market products. Management believes
that the move from a manufacturing strategy based on elemental phosphorus to
one based more on purified phosphoric acid (or PPA) feedstocks will eliminate
the high environmental compliance and energy costs that adversely affected the
Pocatello elemental phosphorus facility and unfavorably impacted FMC's earnings
in recent years. In addition, Astaris' management is taking active steps to
improve profitability by increasing the prices of its products. Management
expects profitability to improve as Astaris realizes the benefits of its recent
restructuring and an improving economic environment.
Strategy
The overall strategy for FMC's Industrial Chemicals business is employing
low cost process technology and prudent capacity management in its high-volume
businesses, while also expanding participation in profitable niches where FMC
holds a differentiated high-value position.
The financial performance of Industrial Chemicals is largely driven by such
factors as timing of investment in capacity, as well as end-user demand
patterns. Management believes that each of the Industrial Chemicals businesses
has the size and breadth to effectively compete in its markets. In the high
volume businesses, regional and global demand growth for FMC products tends to
be relatively predictable and stable, and market shares of industry
participants have tended to balance, over time, with such participant's
invested capacity shares. Current effective capacity utilization in these
markets is at or above 90 percent. In the high value segments, FMC is currently
developing a number of niche markets for its specialty alkali products, like
sodium sesquicarbonate, and for hydrogen peroxide and peracetic acid.
Raw Materials
FMC's raw material requirements vary by business segment and include mineral
related natural resources, processed chemicals, seaweed, and energy sources
such as oil, gas, coal, and electricity generated by hydroelectric and nuclear
power.
Ores used in Industrial Chemicals manufacturing processes, such as trona,
are extracted from mines in the United States on property held by FMC under
long-term leases subject to periodic adjustment of royalty rates. Raw materials
used by Specialty Chemicals include lithium carbonate,
S-54
which is currently obtained from a South American manufacturer under a
long-term sourcing agreement, alginates and carrageenan, which are derived from
various types of seaweed that are sourced by the company on a global basis and
wood pulp, which is purchased from several North American producers. Raw
materials used by Agricultural Products, primarily processed chemicals, are
obtained from worldwide sources.
The company does not use single-source suppliers for the majority of its raw
material purchases and believes the available supplies of raw materials are
adequate.
Patents
FMC owns a number of U.S. and foreign patents, trademarks and licenses that
are cumulatively important to its business. FMC does not believe that the loss
of any one or group of related patents, trademarks or licenses would have a
material adverse effect on the overall business of FMC.
Seasonality
The seasonal nature of the crop protection market and the geographic spread
of the Agricultural Products business generally produce stronger earnings in
the second and third quarters. Agricultural products sold into the northern
hemisphere (North America, Europe and parts of Asia) serve seasonal
agricultural markets from March through September, while markets in the
southern hemisphere (Latin America, parts of Asia and Australia) are served
from July through December.
The remainder of FMC's businesses are generally not subject to significant
seasonal fluctuations.
Competitive Conditions
FMC encounters competition in each of its three business segments. This
competition is expected to continue in both the United States and markets
outside the United States. FMC markets its products through its own sales
organization and through independent distributors and sales representatives.
The number of the company's principal competitors varies from segment to
segment. In general, FMC competes by operating in a cost-efficient manner and
by leveraging its industry experience to provide advanced technology, high
product quality, reliable supply and quality customer and technical service.
FMC's Agricultural Products segment competes in the global crop protection
market for insecticides and herbicides. The industry is characterized by a
small number of large competitors that have consolidated a great number of the
smaller and regional firms. Industry products include crop protection chemicals
and, for major competitors, genetically engineered (crop biotechnology)
products. Competition from generic producers has increased as a significant
number of product patents have expired in the last decade. In general, FMC
competes as a product innovator by focusing on insecticide discovery and
development and licensing products from alliance partners when the products
complement FMC's product portfolio. FMC also differentiates itself by reacting
quickly in key markets, establishing effective product stewardship programs,
and developing strategic alliances, which strengthen market access in key
countries.
With leading or significant positions in markets that include alginate,
carrageenan, microcrystalline cellulose and lithium-based products, Specialty
Chemicals competes on the basis of product development, application support and
customer service. BioPolymer competes with both direct suppliers of cellulose
and seaweed extract as well as suppliers of other hydrocolloids and naturally
S-55
occurring ingredients, which may provide similar functionality in specific
applications. In cellulose, competitors are typically smaller than FMC, while
in seaweed extracts, FMC competes with other broad-based chemical companies. A
critical FMC advantage in serving the needs of global food and pharmaceutical
customers is BioPolymer's global presence and supply chain integration around
the world. In Lithium, FMC and each of its two most significant competitors
extract the element from naturally occurring, lithium-rich brines located in
the Andes mountains. Only one of these two other integrated producers also
possesses the know-how and technical skills that FMC leverages to participate
in downstream specialty markets.
Industrial Chemicals serves the alkali, hydrogen peroxide and phosphorus
markets predominantly in the United States and to a lesser extent, Europe and
the Middle East, South America and Asia. In North America, Alkali's soda ash
business competes with five domestic producers of natural soda ash, three of
which operate in the vicinity of FMC's mine and processing facility in Green
River, Wyoming. Outside of North America and Europe, FMC sells soda ash through
American Natural Soda Ash Corporation (ANSAC), a foreign sales association
organized under the Webb-Pomerene Act. Internationally, FMC's natural soda ash
competes with synthetic soda ash manufactured by numerous producers, ranging
from integrated multinational companies to smaller regional players. Hydrogen
Peroxide maintains a leading position in the North American market for hydrogen
peroxide. There are currently five firms competing in the hydrogen peroxide
market in North America. The primary competitive factor affecting the sales of
soda ash and hydrogen peroxide is price. FMC seeks to maintain its competitive
position by employing low cost processing technology and, in the case of
hydrogen peroxide, which is shipped in water, the most efficient plant network
for the lowest delivered cost product. At Foret, FMC possesses a strong cost
and market position in phosphates, perborates, peroxygens, zeolites and sulfur
derivatives. In each of these markets, FMC faces competition from a range of
multinational and regional chemical producers which the company combats through
its entrenched Iberian franchise and its ability to supply across a broad range
of industrial inorganic products. FMC participates in the phosphorus business
in the United States through Astaris. Astaris competes primarily with Rhodia
which is the only other global producer competing with Astaris across a wide
variety of phosphorus chemicals in the North American market. Competition in
phosphorus is based primarily on price and product differentiation through
customer service.
Research and Development Expense
FMC's research and development expenditures in the last three years are set
forth below:
Year Ended
December 31,
------------------
2001 2000 1999
----- ----- ------
In Millions
Agricultural Products $72.5 $66.7 $ 60.9
Specialty Chemicals.. 15.9 19.1 21.2
Industrial Chemicals. 11.4 12.0 18.5
----- ----- ------
Total............ $99.8 $97.8 $100.6
===== ===== ======
Employees
FMC employs approximately 6,000 people in its domestic and foreign
operations. Approximately 18% of such employees are represented by collective
bargaining agreements in the United States. In
S-56
2002, one of the company's six collective bargaining agreements will expire,
covering less than 100 employees. FMC believes that it maintains good employee
relations and has successfully concluded virtually all of its recent
negotiations without a work stoppage. In those rare instances where a work
stoppage has occurred, there has been no material effect on consolidated sales
and earnings. FMC cannot predict, however, the outcome of future contract
negotiations.
S-57
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date of this prospectus supplement, Salomon Smith Barney Inc. has
agreed to purchase, and we have agreed to sell to Salomon Smith Barney Inc.,
the number of shares of common stock set forth on the cover of this prospectus
supplement.
The underwriting agreement provides that the obligations of the underwriter
to purchase the shares of common stock included in this offering are subject to
approval of legal matters by its counsel and to other conditions. The
underwriter is obligated to purchase all the shares (other than those covered
by the over-allotment option described below) of common stock if it purchases
any of the shares of common stock.
We have granted to the underwriter an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 487,500 additional
shares of common stock at the public offering price less the underwriting
discount. The underwriter may exercise the option solely for the purpose of
covering over-allotments, if any, in connection with this offering.
We have agreed that, subject to certain exceptions, during the period ending
90 days after the date of this prospectus supplement, we and they will not,
without the prior written consent of the underwriter, issue, sell, contract to
sell, or otherwise dispose of, any shares of common stock, any options or
warrants to purchase any shares of common stock or any securities convertible
into, exercisable for or exchangeable for shares of common stock other than our
sale of shares in this offering, the issuance of our common stock upon the
exercise of outstanding options and the issuance of options or shares of common
stock under existing stock option and incentive plans. Salomon Smith Barney
Inc. in its sole discretion may release any of the securities subject to these
lock-up arrangements any time without notice.
Our common stock is listed on the New York Stock Exchange, Chicago Stock
Exchange and Pacific Stock Exchange under the symbol "FMC."
The following table shows the underwriting discounts and commissions that we
are to pay to the underwriter in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriter's
option to purchase additional shares of common stock.
Paid by FMC
-------------------------
No Exercise Full Exercise
----------- -------------
Per share $ 1.40 $ 1.40
Total.... $4,550,000 $5,232,500
The underwriters will also receive a commission from investors in the amount
of $.05 for each share of common stock sold in this offering.
In connection with the offering, Salomon Smith Barney may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, syndicate covering transactions
S-58
and stabilizing transactions. Short sales involve syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriter in
the offering, which creates a syndicate short position. "Covered" short sales
are sales of shares made in an amount up to the number of shares represented by
the underwriter's over-allotment option. In determining the source of shares to
close out the covered syndicate short position, the underwriter will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which it may purchase shares through the
over-allotment option. Transactions to close out the covered syndicate short
involve either purchases of the common stock in the open market after the
distribution has been completed or the exercise of the over-allotment option.
The underwriter may also make "naked" short sales of shares in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing shares of common stock in the open market. A naked short position
is more likely to be created if the underwriter is concerned that there may be
downward pressure on the price of the shares in the open market after pricing
that could adversely affect investors who purchase in the offering. Stabilizing
transactions consist of bids for or purchases of shares in the open market
while the offering is in progress.
The underwriter also may impose a penalty bid. Penalty bids permit the
underwriter to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc. repurchases shares originally sold by that syndicate
member in order to cover syndicate short positions or make stabilizing
purchases.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriter may
conduct these transactions on the New York Stock Exchange or in the
over-the-counter market, or otherwise. If the underwriter commences any of
these transactions, it may discontinue them at any time.
We estimate that our total expenses for this offering, exclusive of
underwriting discounts and commissions, will be approximately $250,000.
Salomon Smith Barney Inc. has performed investment banking and advisory
services for us from time to time for which it has received customary fees and
expenses. Salomon Smith Barney Inc. may, from time to time, engage in
transactions with and perform services for us in the ordinary course of its
business. Because more than 10% of the net proceeds of the offering will be
used to repay indebtedness that we owe to affiliates of the underwriter under
our senior credit facility, the offering is being made in accordance with Rule
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriter may be required to make because of any of those
liabilities.
S-59
PROSPECTUS
$500,000,000
FMC CORPORATION
COMMON STOCK, PREFERRED STOCK, DEPOSITORY SHARES, DEBT SECURITIES, WARRANTS TO
PURCHASE COMMON STOCK, WARRANTS TO PURCHASE PREFERRED STOCK AND WARRANTS TO
PURCHASE DEBT SECURITIES
FMC Corporation, a Delaware corporation (the "Company"), may from time to
time offer in one or more series (i) shares of Common Stock, $.10 par value per
share ("Common Stock"), (ii) whole or fractional shares of Preferred Stock, no
par value (collectively, "Preferred Stock"), (iii) Preferred Stock represented
by depository shares ("Depository Shares"), (iv) unsecured debt securities
(Debt Securities), which may be senior debt securities ("Senior Debt
Securities") or subordinated debt securities ("Subordinated Debt Securities"),
(v) warrants to purchase Common Stock ("Common Stock Warrants"), (vi) warrants
to purchase Preferred Stock ("Preferred Stock Warrants"), and (vii) warrants to
purchase Debt Securities ("Debt Warrants"), with an aggregate public offering
price of up to $500,000,000, on terms to be determined at the time or times of
offering. The Common Stock, Preferred Stock, Depository Shares, Debt
Securities, Common Stock Warrants, Preferred Stock Warrants and Debt Warrants
(collectively referred to herein as the "Offered Securities") may be offered,
separately or together, in separate classes or series, in amounts, at prices
and on terms to be set forth in one or more supplements to this Prospectus
(each, a "Prospectus Supplement").
All specific terms of the offering and sale of the Offered Securities in
respect of which this Prospectus is being delivered will be set forth in the
applicable Prospectus Supplement and will include, when applicable: (i) in the
case of Common Stock, any public offering price and the aggregate number of
shares offered; (ii) in the case of Preferred Stock, the specific class,
series, title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, any dividend payment dates, any sinking
fund provisions, the aggregate number of shares offered and any public offering
price; (iii) in the case of Depository Shares, the aggregate number of shares
offered, the shares of whole or fractional Preferred Stock represented by each
such Depository Share and any public offering price; (iv) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking as Senior
Debt Securities or as Subordinated Debt Securities, currency, form (which may
be registered or bearer or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, if any, terms for redemption at the option of the Company or
repayment at the option of the holder thereof, terms for sinking fund payments,
terms for conversion into Common Stock or Preferred Stock and any public
offering price; (v) in the case of Common Stock Warrants, the duration,
offering price, exercise price and detachability features; (vi) in the case of
Preferred Stock Warrants, description of the Preferred Stock for which each
warrant will be exercisable and the duration, offering price, exercise price
and detachability features; and (vii) in the case of Debt Warrants, description
of the Debt Securities for which each warrant will be exercisable and the
duration, offering price, exercise price and detachability features.
The applicable Prospectus Supplement will also contain information, when
applicable, about certain United States federal income tax considerations
relating to the Offered Securities covered by that Prospectus Supplement.
1
The Common Stock is listed on the New York Stock Exchange, the Pacific Stock
Exchange and the Chicago Stock Exchange under the symbol FMC. Any Common Stock
sold pursuant to a Prospectus Supplement will be listed on such exchanges,
subject to official notice of issuance. The Company has not yet determined
whether any other Offered Securities offered hereby will be listed on any
exchange or over-the-counter market. If the Company decides to seek listing of
any other Offered Securities, the Prospectus Supplement relating thereto will
disclose such exchange or market.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth in or will be
calculable from the information set forth in the applicable Prospectus
Supplement. No Offered Securities may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of those Offered Securities. See Plan of Distribution for possible
indemnification arrangements with underwriters, dealers and agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------------
This Prospectus may not be used to consummate sales of the Offered
Securities unless accompanied by a Prospectus Supplement.
-----------------
The date of this prospectus is June 6, 2002.
2
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, reports, proxy statements and other
information concerning the Company may be inspected and copied at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York
10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois
60605 and the Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco,
California 94104 or 618 South Spring Street, Los Angeles, California 90014. The
Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), which
relates to the Offered Securities (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto as permitted by
the rules and regulations of the Commission. For information with respect to
the Company and the Offered Securities, reference is hereby made to such
Registration Statement, exhibits and schedules. The Registration Statement may
be inspected without charge by anyone at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and copies of all or any part
thereof may be obtained from the Commission upon payment of the prescribed
fees. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in all respects by such reference.
3
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 1-02376) are
incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December 31,
2001;
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2002;
(iii) the Company's Current Reports on Form 8-K filed January 15, 2002 and
May 23, 2002;
(iv) the description of the Company's Preferred Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A filed on March 6,
1986 pursuant to Section 12 of the Exchange Act and all amendments thereto and
reports filed for the purposes of updating such description; and
(v) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on May 12, 1986 pursuant to Section 12
of the Exchange Act and all amendments thereto and reports filed for the
purposes of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in the applicable Prospectus
Supplement) or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any document incorporated by reference herein other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
in such document. Requests should be directed to Andrea E. Utecht, Vice
President, General Counsel and Secretary, FMC Corporation, 1735 Market Street,
Philadelphia, Pennsylvania 19103 (telephone: (215) 299-6000).
FORWARD-LOOKING STATEMENTS
This Prospectus contains, any Prospectus Supplement will contain and the
documents incorporated by reference herein contain or will contain certain
statements which describe the Company's beliefs concerning future business
conditions and the outlook for the Company based on currently available
information. Wherever possible, the Company has identified these forward-
looking statements (as defined in Section 27A of the Securities Act and Section
21E of the Exchange Act) by words such as anticipates, believes, estimates,
expects and similar expressions. These forward-looking statements are subject
to risks and uncertainties which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks
4
and uncertainties include, but are not limited to, the following: risks
associated with significant price competition, higher ingredient and raw
material prices or shortages of such commodities, risks associated with new
product introductions (including the potential for unanticipated delays or cost
overruns in connection with introductions of new products and the development
of new manufacturing processes), freight transportation delays beyond the
control of the Company, inability of the Company or its suppliers to remedy
potential information systems problems related to the year 2000, risks
associated with joint ventures, partnerships or limited endeavors, future
environmental liabilities not covered by insurance or indemnity, risks relating
to general economic conditions and unforeseen outcomes of litigation or other
contingencies. The Company assumes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
THE COMPANY
The Company is one of the world's leading producers of inorganic chemicals,
biopolymers and insecticides for industry and agriculture. The Company employs
over 6,000 people at over 37 manufacturing facilities and mines in 19
countries. The Company divides its businesses into three main segments:
Agricultural Products, Specialty Chemicals and Industrial Chemicals. Industrial
Chemicals businesses manufacture a wide variety of chemicals including soda
ash, phosphates and hydrogen peroxide. Major customers include detergent, glass
and paper producers, as well as other chemical companies. Specialty Chemicals
develops, manufactures and markets proprietary specialty chemicals for the
agricultural, food and pharmaceutical industries.
The Company was incorporated in 1928 under Delaware law and has its
principal executive offices at 1735 Market Street, Philadelphia, Pennsylvania
19103 (telephone: (215) 299-6000). As used herein, FMC or the Company refers to
FMC Corporation and its subsidiaries, unless otherwise indicated by the context.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include the repayment of existing
indebtedness and the financing of capital expenditures and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES/(1)/
The following table sets forth the unaudited historical ratio of earnings to
fixed charges of the Company for the periods indicated.
Year Ended December 31,
------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
-- 2.2x 3.1x 2.7x .3xx
/(1)/ In calculating this ratio, earnings consist of income (loss) from
continuing operations before income taxes and cumulative effect of a
change in accounting principle less minority interests, less interest
income and interest expense, less amortization expense related to debt
discounts, fees and expenses, less amortization of capitalized interest,
less interest included in rental expenses and plus undistributed earnings
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. For the year ended
December 31, 2001 earnings did not cover fixed charges, with a deficiency
of $331.4 million. The ratio of earnings to fixed charges would have been
a negative 5.4x at December 31, 2001. The ratio of earnings to fixed
charges before special income (expenses) items was 1.7x.
5
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
The Company may offer under this Prospectus Common Stock, Preferred Stock,
Depository Shares, Debt Securities, Common Stock Warrants, Preferred Stock
Warrants or Debt Warrants, or any combination of the foregoing, either
individually or as units consisting of two or more Offered Securities. The
aggregate offering price of Offered Securities offered by the Company under
this Prospectus will not exceed $500,000,000. If Offered Securities are offered
as units, the terms of the units will be set forth in a Prospectus Supplement.
DESCRIPTION OF THE COMMON STOCK
GENERAL
Under the Company's Restated Certificate of Incorporation (the "Certificate
of Incorporation"), the Company is authorized to issue up to 130,000,000 shares
of Common Stock. As of March 31, 2002, there were 31,686,962 shares of Common
Stock issued and outstanding. In addition, up to 8,600,686 shares have been
reserved as of March 31, 2002 for issuance upon the exercise of options and
awards under the Company's incentive compensation plans. The shares of Common
Stock are listed on the New York Stock Exchange, the Pacific Stock Exchange and
the Chicago Stock Exchange under the symbol FMC. National City Bank, Cleveland,
Ohio, is the transfer agent and registrar of the shares of Common Stock.
The Common Stock is not redeemable, does not have any conversion rights and
is not subject to call. Holders of shares of Common Stock have no preemptive
rights to maintain their percentage of ownership in future offerings or sales
of stock of the Company. Holders of shares of Common Stock have one vote per
share in all elections of directors and on all other matters submitted to a
vote of stockholders of the Company. The holders of Common Stock are entitled
to receive dividends, if any, as and when declared from time to time by the
Board of Directors of the Company out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock will be entitled to participate equally and ratably, in
proportion to the number of shares held, in the net assets of the Company
available for distribution to holders of Common Stock. The shares of Common
Stock currently outstanding are fully paid and nonassessable. The shares of
Common Stock offered hereby, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable.
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS
GENERAL EFFECT
The Company has adopted a number of provisions in its Certificate of
Incorporation that might discourage certain types of transactions that involve
an actual or threatened change in control of the Company. The provisions may
make it more difficult and time-consuming to change majority control of the
Board of Directors and thus reduce the vulnerability of the Company to an
unsolicited offer, particularly an offer that does not contemplate the
acquisition of all of the Company's outstanding shares.
These provisions are intended to encourage persons seeking to acquire
control of the Company to initiate such an acquisition through arm's-length
negotiations with the Company's management and Board of Directors.
Additionally, such provisions provide management with the time and information
6
necessary to evaluate a takeover proposal and to study alternative proposals.
Nonetheless, the provisions could have the effect of discouraging a third party
from making a tender offer or otherwise attempting to obtain control of the
Company, even though such an attempt might be beneficial to the Company and its
stockholders.
Business Combination
The Certificate of Incorporation provides that significant asset sales,
dispositions of stock, liquidations, mergers and certain other business
combinations ("Business Combinations") involving the Company and persons
beneficially owning 10% or more of the voting power of the outstanding shares
of Common Stock (an "Interested Stockholder") must be approved by the holders
of at least 80% of the voting power of the Company's outstanding voting stock
("Voting Stock"). The Certificate of Incorporation requires the affirmative
vote of the holders of 80% or more of the outstanding Voting Stock to amend,
alter or repeal, or to adopt any provisions inconsistent with, such provisions.
Stockholders' Meetings
The Certificate of Incorporation provides that special meetings of the
stockholders may only be called pursuant to a resolution approved by a majority
of the Board of Directors. This limitation prevents a stockholder or group of
stockholders from forcing the Company to conduct a stockholders' meeting at any
time not sanctioned by the Board of Directors, regardless of the number of
shares of Common Stock held by such stockholder or group of stockholders.
No Action by Stockholder Consent
The Certificate of Incorporation prohibits action that is required or
permitted to be taken at any annual or special meeting of stockholders of the
Company from being taken by the written consent of stockholders without a
meeting. This provision may be altered, amended or repealed only if the holders
of 80% or more of Voting Stock vote in favor of such action.
PREFERRED STOCK PURCHASE RIGHTS
The Company has adopted a preferred stock purchase rights plan and has
distributed preferred stock purchase rights (the "Rights") to holders of the
Company's Common Stock. The preferred stock purchase rights plan enables the
holder of such Rights to purchase, under certain circumstances, one
one-hundredth of a share of Junior Participating Preferred Stock, Series A,
without par value, of the Company at a price of $300 per one one-hundredth of a
share, subject to certain adjustments. The Rights are intended to deter
attempts to acquire the Company on terms not approved by the Company's Board of
Directors.
DESCRIPTION OF THE PREFERRED STOCK
Under the Certificate of Incorporation, the Board of Directors of the
Company may direct the issuance of up to 5,000,000 shares of Preferred Stock in
one or more series and with rights, preferences, privileges and restrictions,
including dividend rights, voting rights, conversion rights, terms of
redemption and liquidation preferences, that may be fixed or designated by the
Board of Directors pursuant to a certificate of designation without any further
vote or action by the Company's stockholders. As of March 31, 2002, the Board
of Directors had designated 400,000 shares of the Preferred Stock as Junior
Participating Preferred Stock, Series A for possible issuance in connection
7
with the Rights. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company. Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. The specific terms of a particular series of
Preferred Stock will be described in the Prospectus Supplement relating to that
series. The description of Preferred Stock set forth below and the description
of the terms of a particular series of Preferred Stock set forth in the related
Prospectus Supplement do not purport to be complete and are qualified in their
entirety by reference to the certificate of designation relating to that
series. The related Prospectus Supplement will contain a description of certain
United States federal income tax consequences relating to the purchase and
ownership of the series of Preferred Stock described in such Prospectus
Supplement.
As of the date of this Prospectus, no shares of Preferred Stock were issued
or outstanding.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the certificate of designation relating to such
series. A Prospectus Supplement, relating to each series, will specify the
terms of the Preferred Stock as follows:
(a) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of the series, whether such
rate is fixed or variable or both, the date or dates from which dividends will
begin to accrue or accumulate and whether dividends will be cumulative;
(c) The price at and the terms and conditions on which the shares of the
series may be redeemed, including the time during which shares of the series
may be redeemed and any accumulated dividends thereon that the holders of
shares of the series shall be entitled to receive upon the redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of the series shall be entitled to receive
upon the liquidation, dissolution or winding up of the affairs of the Company;
(e) Whether or not the shares of the series will be subject to operation of
a retirement or sinking fund, and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of the
series for retirement or for other corporate purposes and the terms and
provisions relating to the operation of such fund;
(f) The terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class or
classes of capital stock of the Company or a third party or of any other series
of the same class, including the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same and
whether such conversion is mandatory or optional;
(g) The stated value of the shares of such series;
(h) The voting rights, if any, of the shares of the series; and
(i) Any or all other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions thereof.
In the event of any voluntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of any series of any class of Preferred
Stock shall be entitled to receive in full out of the
8
assets of the Company, including its capital, before any amount shall be paid
or distributed among the holders of the Common Stock or any other shares
ranking junior to such series, the amounts fixed by the Board of Directors with
respect to such series and set forth in the applicable Prospectus Supplement
plus an amount equal to all dividends accrued and unpaid thereon to the date of
payment of the amount due pursuant to such liquidation, dissolution or winding
up of the affairs of the Company. After payment to the holders of the Preferred
Stock of the full preferential amounts to which they are entitled, the holders
of Preferred Stock, as such, shall have no right or claim to any of the
remaining assets of the Company.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective numbers of shares. The merger or consolidation of the Company into
or with any other corporation, or the sale, lease or conveyance of all or
substantially all of the assets of the Company, shall not constitute a
dissolution, liquidation or winding up of the Company.
DESCRIPTION OF DEPOSITORY SHARES
GENERAL
The Company may offer receipts ("Depository Receipts") for Depository
Shares, each of which will represent a fractional interest in a share of a
particular series of a class of Preferred Stock, as specified in the applicable
Prospectus Supplement. Preferred Stock of each series of each class represented
by Depository Shares will be deposited under a separate Deposit Agreement
(each, a "Deposit Agreement") among the Company, the depository named therein
(such depository or its successor, the "Preferred Stock Depository") and the
holders from time to time of the Depository Receipts. Subject to the terms of
the Deposit Agreement, each owner of a Depository Receipt will be entitled, in
proportion to the fractional interest of a share of the particular series of a
class of Preferred Stock represented by the Depository Shares evidenced by such
Depository Receipt, to all the rights and preferences of the Preferred Stock
represented by such Depository Shares (including dividend, voting, conversion,
redemption and liquidation rights).
The Depository Shares will be evidenced by Depository Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the Preferred Stock by the Company to the Preferred
Stock Depository, the Company will cause the Preferred Stock Depository to
issue, on behalf of the Company, the Depository Receipts. Copies of the
applicable form of Deposit Agreement and Depository Receipt may be obtained
from the Company upon request.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depository will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of the Depository Receipts evidencing the related Depository Shares in
proportion to the number of such Depository Receipts owned by such holder,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to the Preferred
Stock Depository.
9
In the event of a distribution other than in cash, the Preferred Stock
Depository will distribute property received by it to the record holders of
Depository Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depository, unless the Preferred Stock
Depository determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depository may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depository Receipts at the corporate trust office of
the Preferred Stock Depository (unless the related Depository Shares have
previously been called for redemption), the holders thereof will be entitled to
delivery at such office, to or upon such holder's order, of the number of whole
shares of Preferred Stock and any money or other property represented by the
Depository Shares evidenced by such Depository Receipts. Holders of Depository
Receipts will be entitled to receive whole shares of the related Preferred
Stock on the basis of the proportion of Preferred Stock represented by each
Depository Share as specified in the applicable Prospectus Supplement, but
holders of such Preferred Stock will not thereafter be entitled to receive
Depository Shares therefor. If the Depository Receipts delivered by the holder
evidence a number of Depository Shares in excess of the number of Depository
Shares representing the number of shares of Preferred Stock to be withdrawn,
the Preferred Stock Depository will deliver to such holder at the same time a
new Depository Receipt evidencing such excess number of Depository Shares.
REDEMPTION OF DEPOSITORY SHARES
Whenever the Company redeems Preferred Stock held by the Preferred Stock
Depository, the Preferred Stock Depository will redeem as of the same
redemption date the number of Depository Shares representing the Preferred
Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depository the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid dividends (except, with
respect to noncumulative shares of Preferred Stock, dividends for the current
dividend period only) thereon to the date fixed for redemption. The redemption
price per Depository Share will be equal to the redemption price and any other
amounts per share payable with respect to the Preferred Stock. If less than all
the Depository Shares are to be redeemed, the Depository Shares to be redeemed
will be selected by the Preferred Stock Depository by lot.
After the date fixed for redemption, the Depository Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depository Receipts evidencing the Depository Shares so called
for redemption will cease, except the right to receive any moneys payable upon
such redemption and any money or other property to which the holders of such
Depository Receipts were entitled upon such redemption upon surrender thereof
to the Preferred Stock Depository.
VOTING OF THE UNDERLYING PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depository will mail the
information contained in such notice of meeting to the record holders of the
Depository Receipts evidencing the Depository Shares which represent such
Preferred Stock. Each record holder of Depository Receipts evidencing
Depository Shares on the
10
record date (which will be the same date as the record date for the Preferred
Stock) will be entitled to instruct the Preferred Stock Depository as to the
exercise of the voting rights pertaining to the amount of Preferred Stock
represented by such holder's Depository Shares. The Preferred Stock Depository
will vote the amount of Preferred Stock represented by such Depository Shares
in accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depository in order to enable the Preferred Stock Depository to do so. The
Preferred Stock Depository will abstain from voting the amount of Preferred
Stock represented by such Depository Shares to the extent it does not receive
specific instructions from the holders of Depository Receipts evidencing such
Depository Shares.
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depository Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depository Share evidenced by such
Depository Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depository Shares, as such, are not convertible into Common Stock or any
securities or property of the Company. Nevertheless, if so specified in the
applicable Prospectus Supplement relating to an offering of Depository Shares,
the Depository Receipts may be surrendered by holders thereof to the Preferred
Stock Depository with written instructions to the Preferred Stock Depository to
instruct the Company to cause conversion of the Preferred Stock represented by
the Depository Shares evidenced by such Depository Receipts into whole shares
of Common Stock, other Preferred Stock of the Company or other shares of
capital stock, and the Company has agreed that upon receipt of such
instructions and any amounts payable in respect thereof, it will cause the
conversion thereof utilizing the same procedures as those provided for delivery
of Preferred Stock to effect such conversion. If the Depository Shares
evidenced by a Depository Receipt are to be converted in part only, one or more
new Depository Receipts will be issued for any Depository Shares not to be
converted. No fractional shares of Common Stock will be issued upon conversion,
and if such conversion will result in a fractional share being issued, an
amount will be paid in cash by the Company equal to the value of the fractional
interest based upon the closing price of the Common Stock on the last business
day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depository Receipt evidencing the Depository Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Stock
Depository. However, any amendment that materially and adversely alters the
rights of the holders of Depository Receipts will not be effective unless such
amendment has been approved by the existing holders of at least a majority of
the Depository Shares evidenced by the Depository Receipts then outstanding.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Stock Depository if a majority of
each class of Depository Shares affected by such termination consents to such
termination, whereupon the Preferred Stock Depository shall deliver or make
available to each holder of Depository Receipts, upon surrender of the
Depository
11
Receipts held by such holder, such number of whole or fractional shares of
Preferred Stock as are represented by the Depository Shares evidenced by such
Depository Receipts. In addition, the Deposit Agreement will automatically
terminate if (i) all outstanding Depository Shares shall have been redeemed,
(ii) there shall have been a final distribution in respect of the related
Preferred Stock in connection with any liquidation, dissolution or winding up
of the Company and such distribution shall have been distributed to the holders
of Depository Receipts evidencing the Depository Shares representing such
Preferred Stock or (iii) each related share of Preferred Stock shall have been
converted into capital stock of the Company not so represented by Depository
Shares.
CHARGES OF PREFERRED STOCK DEPOSITORY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depository in
connection with the performance of its duties under the Deposit Agreement.
However, holders of the Depository Receipts will pay the fees and expenses of
the Preferred Stock Depository for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF PREFERRED STOCK DEPOSITORY
The Preferred Stock Depository may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depository, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depository. A successor
Preferred Stock Depository must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depository will forward to holders of Depository
Receipts any reports and communications from the Company that are received by
the Preferred Stock Depository with respect to the related Preferred Stock.
Neither the Preferred Stock Depository nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The
obligations of the Company and the Preferred Stock Depository under the Deposit
Agreement will be limited to performing their duties thereunder in good faith
and without gross negligence or willful misconduct, and the Company and the
Preferred Stock Depository will not be obligated to prosecute or defend any
legal proceeding in respect of any Depository Receipts, Depository Shares or
Preferred Stock represented thereby unless satisfactory indemnity is furnished.
The Company and the Preferred Stock Depository may rely on written advice of
counsel or accountants, or information provided by persons presenting Preferred
Stock represented thereby for deposit, holders of Depository Receipts or other
persons believed to be competent to give such information, and on documents
believed to be genuine and signed by a proper party.
If the Preferred Stock Depository shall receive conflicting claims, requests
or instructions from any holders of Depository Receipts, on the one hand, and
the Company, on the other hand, the Preferred Stock Depository shall be
entitled to act on such claims, requests or instructions received from the
Company.
12
DESCRIPTION OF THE DEBT SECURITIES
The Senior Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Indenture"), between the Company
and Bank of New York, as successor trustee (the "Trustee"). The Subordinated
Debt Securities will be issued under an Indenture, as amended or supplemented
from time to time (the "Subordinated Indenture"), between the Company and the
Trustee. The Senior Indenture and the Subordinated Indenture are sometimes
referred to herein collectively as the "Indentures" and each individually as an
"Indenture".
The Senior Indenture and the form of Subordinated Indenture have been filed
as exhibits to the Registration Statement of which this Prospectus is a part
and are available for inspection at the corporate trust office of the Trustee
at 385 Rifle Camp Road, West Paterson, New Jersey 07424. The Indentures are
subject to, and are governed by, the Trust Indenture Act of 1939, as amended.
The statements made hereunder relating to the Indentures and the Debt
Securities to be issued hereunder are summaries of certain provisions thereof
and do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indentures and such Debt
Securities. All section references appearing in this section Description of the
Debt Securities are to sections of the applicable Indenture, and capitalized
terms used but not defined herein shall have the respective meanings set forth
in the applicable Indenture.
GENERAL
The Indentures do not limit the amount of Debt Securities that can be issued
thereunder and provide that Debt Securities of any series may be issued
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Company. The Indentures do not limit the amount of other
indebtedness or securities, other than certain secured indebtedness as
described below which is limited by the Senior Indenture, that may be issued by
the Company or its subsidiaries.
The Debt Securities will be direct, unsecured obligations of the Company and
will constitute Senior Debt Securities and/or Subordinated Debt Securities.
Creditors of the Company's subsidiaries are entitled to a claim on the assets
of such subsidiaries. Consequently, in the event of a liquidation or
reorganization of any subsidiary, creditors of the subsidiary are likely to be
paid in full before any distribution is made to the Company and holders of Debt
Securities, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would
still be subordinate to any security interests in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
Reference is made to the Prospectus Supplement for the following and other
possible terms of each series of the Debt Securities in respect of which this
Prospectus is being delivered: (i) the title of the Debt Securities; (ii) any
limit upon the aggregate principal amount of the Debt Securities; (iii) if
other than 100% of the principal amount, the percentage of their principal
amount at which the Debt Securities will be offered; (iv) the date or dates on
which the principal of the Debt Securities will be payable (or method of
determination thereof); (v) the rate or rates (or method of determination
thereof) at which the Debt Securities will bear interest, if any, the date or
dates from which any such interest will accrue and on which such interest will
be payable and the record dates for the determination of the holders to whom
interest is payable; (vi) if other than as set forth herein, the place or
places where the principal of and interest, if any, on the Debt Securities will
be payable; (vii) the price or prices at which, the period or periods within
which and the terms and conditions upon which Debt Securities
13
may be redeemed, in whole or in part, at the option of the Company; (viii) if
other than the principal amount thereof, the portion of the principal amount of
the Debt Securities payable upon declaration of acceleration of the maturity
thereof; (ix) the obligation, if any, of the Company to redeem, repurchase or
repay Debt Securities, whether pursuant to any sinking fund or analogous
provisions or pursuant to other provisions set forth therein or at the option
of a Holder thereof; (x) whether the Debt Securities will be represented in
whole or in part by one or more global notes registered in the names of a
depository or its nominee; (xi) any conversion or exchange provisions and
whether such conversion or exchange is optional or mandatory; (xii) the ranking
of such Debt Securities as Senior Debt Securities or Subordinated Debt
Securities; and (xiii) any other terms or conditions not inconsistent with the
provisions of the Indenture under which the Debt Securities will be issued.
(Section 2.3) Principal when used herein includes, when appropriate, the
premium, if any, on the Debt Securities.
Unless otherwise provided in the Prospectus Supplement relating to any Debt
Securities, principal and interest, if any, will be payable, and the Debt
Securities will be transferable, at the office or offices or agency maintained
by the Company for such purposes, provided that payment of interest on the Debt
Securities will be paid at such place of payment by check mailed to the persons
entitled thereto at the addresses of such persons appearing on the Security
register. Interest on the Debt Securities will be payable on any interest
payment date to the persons in whose name the Debt Securities are registered at
the close of business on the record date with respect to such interest payment
date.
The Debt Securities may be issued only in fully registered form in minimum
denominations of $1,000 and any integral multiple thereof. Additionally, the
Debt Securities may be represented in whole or in part by one or more global
notes registered in the name of a depository or its nominee, and, if so
represented, interests in such global note will be shown on, and transfers
thereof will be effected only through, records maintained by the designated
depository and its participants.
The Debt Securities may be exchanged for an equal aggregate principal amount
of Debt Securities of the same series and date of maturity in such authorized
denominations as may be requested upon surrender of the Debt Securities at an
agency of the Company maintained for such purpose and upon fulfillment of all
other requirements of such agent. No service charge will be made for any
transfer or exchange of the Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. (Section 2.8)
The Indentures require the annual filing by the Company with the Trustee of
a certificate as to compliance with certain covenants contained in the
Indentures. (Section 3.4)
The Company will comply with Section 14(e) under the Exchange Act, to the
extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation of the Company
to purchase Debt Securities at the option of the holders thereof. Any such
obligation applicable to a series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
Unless otherwise described in a Prospectus Supplement relating to any Debt
Securities, there are no covenants or provisions contained in the Indentures
which may afford the holders of Debt Securities protection in the event of a
highly leveraged transaction involving the Company.
CONVERSION AND EXCHANGE
The terms, if any, on which Debt Securities of any series are convertible
into or exchangeable for Common Stock or Preferred Stock, property or cash, or
a combination of any of the foregoing, will be
14
set forth in the Prospectus Supplement relating thereto. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder or at the option of the Company, in which the number of shares of Common
Stock or Preferred Stock to be received by the holders of the Debt Securities
would be calculated according to the factors and at such time as set forth in
the related Prospectus Supplement.
COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES
Limitations on Liens
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary (as hereinafter defined) to, secure
indebtedness for money borrowed ("Secured Debt") by placing a Lien (as
hereinafter defined) on any Principal Property (as hereinafter defined) now or
hereafter owned by the Company or any Restricted Subsidiary or on any shares of
stock or securing indebtedness for money borrowed of any Restricted Subsidiary
without equally and ratably securing the Debt Securities of such series, unless
(i) the aggregate principal amount of such Secured Debt then outstanding plus
(ii) all Attributable Debt (as hereinafter defined) of the Company and its
Restricted Subsidiaries in respect of sale and leaseback transactions described
below covering Principal Properties (other than sale and leaseback transactions
under (b) of the following paragraph) does not exceed an amount equal to 10% of
Consolidated Net Tangible Assets (as hereinafter defined). This restriction
will not apply to, and there shall be excluded in computing such Secured Debt
for purposes of this restriction, certain permitted Liens, including (a) with
respect to each series of Senior Debt Securities, Liens existing as of the date
of the issuance of Senior Debt Securities of such series; (b) Liens on property
or assets of, or any shares of stock or securing indebtedness for money
borrowed of, any corporation existing at the time such corporation becomes a
Restricted Subsidiary; (c) Liens on property or assets or shares of stock or
securing indebtedness for money borrowed existing at the time of acquisition
(including acquisition through merger or consolidation) and certain Liens to
secure indebtedness incurred prior to, at the time of or within 120 days after
the later of the acquisition of, or the completion of the construction of and
commencement of operation of, any such property, for the purpose of financing
all or any part of the purchase price or construction cost thereof; (d) Liens
to secure certain development, operation, construction, alteration, repair or
improvement costs; (e) Liens in favor of, or which secure indebtedness owing
to, the Company or a Restricted Subsidiary; (f) Liens in connection with
government contracts, including the assignment of moneys due or to come due
thereon; (g) certain Liens in connection with legal proceedings to the extent
such proceedings are being contested in good faith; (h) certain Liens arising
in the ordinary course of business and not in connection with the borrowing of
money such as mechanics', materialmens', carriers' or other similar Liens; (i)
Liens on property securing obligations issued by a domestic governmental issuer
to finance the cost of acquisition or construction of such property; and (j)
extensions, substitutions, replacements or renewals of the foregoing. (Section
3.5)
Limitations on Sale and Leaseback Transactions
The Senior Indenture provides that, so long as any of the Senior Debt
Securities of a series remain outstanding, the Company will not, nor will it
permit any Restricted Subsidiary to, enter into any sale and leaseback
transaction (except a lease for a period not exceeding three years) covering
any Principal Property which was or is owned by the Company or a Restricted
Subsidiary and which has been or is to be sold or transferred more than 120
days after such property has been owned by the Company or such Restricted
Subsidiary and completion of construction and commencement of full operation
15
thereof, unless (a) the Attributable Debt in respect thereto and all other sale
and leaseback transactions entered into after the date of the first issuance of
Senior Debt Securities of such series (other than those the proceeds of which
are applied to reduce indebtedness or acquire additional property under (b)
following), plus the aggregate principal amount of then outstanding Secured
Debt not otherwise permitted or excepted without equally and ratably securing
the Senior Debt Securities does not exceed 10% of Consolidated Net Tangible
Assets; or (b) an amount equal to the value of the Principal Property sold and
leased back is applied within 120 days after the sale or transfer to (x) the
voluntary retirement of Funded Debt (as hereinafter defined), including Senior
Debt Securities, or (y) the acquisition of properties, facilities or equipment
used for general operating purposes for the Company or any Restricted
Subsidiary. (Section 3.6)
Certain Definitions
The term "Subsidiary" is defined to mean (i) a corporation, a majority of
whose capital stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly owned by the
Company, by one or more Subsidiaries of the Company or by the Company and one
or more Subsidiaries of the Company, (ii) a partnership in which the Company or
a Subsidiary of the Company holds a majority interest in the equity capital or
profits of such partnership or (iii) any other person (other than a
corporation) in which the Company, a Subsidiary of the Company or the Company
and one or more Subsidiaries of the Company, directly or indirectly, at the
date of determination, has (x) at least a majority ownership interest or (y)
the power to elect or direct the election of a majority of the directors or
other governing body of such person.
The term "Restricted Subsidiary" is defined to mean any Subsidiary (i)
substantially all the property of which is located within the continental
United States of America or Canada and (ii) which owns or leases a Principal
Property.
The term "Principal Property" is defined to mean any manufacturing or
processing plant or facility (other than any pollution control facility) or any
mineral producing property which is located within the continental United
States of America and is owned by the Company or any Subsidiary, whether owned
at or acquired after the date of the applicable Indenture, the gross book value
on the books of the Company or such Subsidiary (without deduction of any
depreciation reserve) of which on the date as of which the determination is
being made exceeds 1% of Consolidated Net Tangible Assets, other than any such
property, plant or facility, or any portion thereof, which in the opinion of
the Board of Directors is not of material importance to the total business
conducted by the Company and its Restricted Subsidiaries as an entirety or
which is financed with certain tax exempt securities.
The term "Attributable Debt", in respect of the sale and leaseback
transactions described above, is defined to mean the amount determined by
multiplying the greater, at the time such transaction is entered into, of (i)
the fair value of the property, plant or facility subject to such arrangement
(as determined by the Company); or (ii) the net proceeds of the sale of such
property, plant or facility to the lender or investor, by a fraction of which
the numerator shall be the unexpired initial term of the lease of such real
property as of the date of determination of such computation and of which the
denominator shall be the full initial term of such lease. Sale and leasebacks
with respect to facilities financed with certain tax exempt securities are
excepted from the definition.
The term "Consolidated Net Tangible Assets" is defined to mean the aggregate
amount of assets (less applicable reserves and other properly deductible items)
after deducting therefrom (a) all current
16
liabilities (excluding any thereof constituting Funded Debt by reason of being
extendible or renewable); and (b) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles, all
as set forth on the books and records of the Company and its consolidated
subsidiaries and computed in accordance with generally accepted accounting
principles.
The term "Funded Debt" is defined to mean all indebtedness whether or not
evidenced by a bond, debenture, note or similar instrument or agreement, for
the repayment of money borrowed, having a maturity of more than 12 months from
the date of its creation or having a maturity of less than 12 months from the
date of its creation but by its terms being renewable or extendible beyond 12
months from such date at the option of the borrower. For the purpose of
determining Funded Debt of any corporation, there shall be excluded any
particular indebtedness if, on or prior to the maturity thereof, there shall
have been deposited with the proper depository in trust the necessary funds for
the payment, redemption or satisfaction of such indebtedness. (Section 1.1)
The term "Lien" is defined to mean any pledge, mortgage or other lien
(including lease purchase, installment purchase and other title retention
financing arrangements) on or in respect of any Principal Property owned by the
Company or any Restricted Subsidiary or on any shares of stock or indebtedness
for money borrowed of any Restricted Subsidiary. (Section 3.5)
EVENTS OF DEFAULT
An Event of Default with respect to the Debt Securities of any series is
defined in the Indentures as: (i) default in the payment of any installment of
interest upon any of the Debt Securities of such series as and when the same
shall become due and payable, and continuance of such default for a period of
30 days; (ii) default in the payment of all or any part of the principal of any
of the Debt Securities of such series as and when the same shall become due and
payable either at maturity, upon any redemption, by declaration or otherwise;
(iii) default in the performance, or breach, of any other covenant or warranty
of the Company contained in the Debt Securities of such series or set forth in
the applicable Indenture (other than a covenant or warranty included in the
applicable Indenture solely for the benefit of a series of Debt Securities
other than such series) and continuance of such default or breach for a period
of 90 days after due notice by the Trustee or by the holders of at least 25% in
principal amount of the outstanding securities of that series; or (iv) certain
events of bankruptcy, insolvency or reorganization of the Company. (Section
5.1) Additional Events of Default may be added for the benefit of holders of
certain series of Debt Securities which, if added, will be described in the
Prospectus Supplement relating to such Debt Securities. The Indentures provide
that the Trustee shall notify the holders of Debt Securities of each series of
any continuing default known to the Trustee which has occurred with respect to
that series within 90 days after the occurrence thereof. The Indentures provide
that notwithstanding the foregoing, except in the case of default in the
payment of the principal of, or interest, if any, on any of the Debt Securities
of such series, the Trustee may withhold such notice if the Trustee in good
faith determines that the withholding of such notice is in the interests of the
holders of Debt Securities of such series. (Section 6.5)
The Indentures provide that if an Event of Default with respect to any
series of Debt Securities shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in aggregate principal amount of
Debt Securities of that series then outstanding may declare the principal
amount of all Debt Securities of that series to be due and payable immediately,
but upon certain conditions such declaration may be annulled. (Section 5.1) Any
past defaults and the consequences thereof (except a default in the payment of
principal of or interest, if any, on Debt Securities of that
17
series) may be waived by the holders of a majority in principal amount of the
Debt Securities of that series then outstanding. (Section 5.9) The Senior
Indenture also permits the Company to omit compliance with certain covenants in
such Indenture with respect to Senior Debt Securities of any series upon waiver
by the holders of a majority in principal amount of the Senior Debt Securities
of such series then outstanding. (Section 3.7)
Subject to the provisions of the Indentures relating to the duties of the
Trustee, in case an Event of Default with respect to any series of Debt
Securities shall occur and be continuing, the Trustee shall not be under any
obligation to exercise any of the trusts or powers vested in it by the
Indentures at the request or direction of any of the holders of that series,
unless such holders shall have offered to such Trustee reasonable security or
indemnity. (Sections 6.1 and 6.2) The holders of a majority in aggregate
principal amount of the Debt Securities of each series affected and then
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee under the
applicable Indenture or exercising any trust or power conferred on the Trustee
with respect to the Debt Securities of that series; provided that the Trustee
may refuse to follow any direction which is in conflict with any law or such
Indenture and subject to certain other limitations. (Section 5.8)
No holder of any Debt Security of any series will have any right by virtue
or by availing of any provision of the Indentures to institute any proceeding
at law or in equity or in bankruptcy or otherwise upon or under or with respect
to the Indentures or for any remedy thereunder, unless such holder shall have
previously given the Trustee written notice of an Event of Default with respect
to Debt Securities of that series and unless the holders of at least 25% in
aggregate principal amount of the outstanding Debt Securities of that series
shall also have made written request, and offered reasonable indemnity, to the
Trustee to institute such proceeding as trustee and the Trustee shall have
failed to institute such proceeding within 60 days after its receipt of such
request, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Debt Securities of that series
a direction inconsistent with such request. (Section 5.5) However, the right of
a holder of any Debt Security to receive payment of the principal of and
interest, if any, on such Debt Security on or after the due dates expressed in
such Debt Security, or to institute suit for the enforcement of any such
payment on or after such dates, shall not be impaired or affected without the
consent of such holder. (Section 5.6)
MERGER
Each Indenture provides that the Company may consolidate with, or sell,
convey or lease all or substantially all of its assets to, or merge with or
into, any other corporation, if (i) either the Company is the continuing
corporation or the successor corporation is a domestic corporation and
expressly assumes the due and punctual payment of the principal of and interest
on all the Debt Securities outstanding under such Indenture according to their
tenor and the due and punctual performance and observance of all of the
covenants and conditions of such Indenture to be performed or observed by the
Company; and (ii) the Company or such successor corporation, as the case may
be, is not, immediately after such merger or consolidation, or such sale,
conveyance or lease, in material default in the performance or observance of
any such covenant or condition. (Section 9.1)
SATISFACTION AND DISCHARGE OF INDENTURES
The applicable Indenture with respect to any series of Debt Securities
(except for certain specified surviving obligations including, among other
things, the Company's obligation to pay the principal of
18
and interest on the Debt Securities of such series) will be discharged and
canceled upon the satisfaction of certain conditions, including the payment of
all the Debt Securities of such series or the deposit with the Trustee under
such Indenture of cash or appropriate Government Obligations or a combination
thereof sufficient for such payment or redemption in accordance with the
applicable Indenture and the terms of the Debt Securities of such series.
(Section 10.1)
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series at the time
outstanding under the applicable Indenture, to execute supplemental indentures
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the applicable Indenture or any supplemental indenture with
respect to the Debt Securities of such series or modifying in any manner the
rights of the holders of the Debt Securities of such series; provided that no
such supplemental indenture may (i) extend the final maturity of any Debt
Security, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of any interest thereon, or reduce any amount payable on
redemption thereof, or impair or affect the right of any holder of Debt
Securities to institute suit for payment thereof or, if the Debt Securities
provide therefor, any right of repayment at the option of the holders of the
Debt Securities, without the consent of the holder of each Debt Security so
affected or (ii) reduce the aforesaid percentage of Debt Securities of such
series, the consent of the holders of which is required for any such
supplemental indenture, without the consent of the holders of all Debt
Securities of such series so affected. (Section 8.2) Additionally, in certain
prescribed instances, the Company and the Trustee may execute supplemental
indentures without the consent of the holders of Debt Securities. (Section 8.1)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide, if such provision is made applicable to the Debt
Securities of any series, that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of the Debt Securities,
to compensate and indemnify the Trustee and to punctually pay or cause to be
paid the principal of, and interest, if any, on all Debt Securities of such
series when due) (defeasance); or (b) in the case of the Senior Indenture, to
be released from its obligations with respect to Senior Debt Securities under
Sections 3.5 and 3.6 of the Senior Indenture (being the restrictions described
above under Limitations on Liens and Limitations on Sale and Leaseback
Transactions) (covenant defeasance), upon the deposit with the Trustee, in
trust for such purpose, of money and/or Government Obligations which through
the payment of principal and interest in accordance with their terms will
provide money, in an amount sufficient (in the opinion of a nationally
recognized firm of independent public accountants) to pay the principal of and
premium and interest, if any, on the outstanding Debt Securities of such
series, and any mandatory sinking fund or analogous payments thereon, on the
scheduled due dates therefor. Such a trust may be established only if, among
other things, the Company has delivered to the Trustee an opinion of counsel
(as specified in the applicable Indenture) with regard to certain matters,
including an opinion to the effect that the Holders of such Debt Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and discharge and will be subject to federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance or covenant defeasance, as the
case may be, had not occurred. The Prospectus Supplement
19
may further describe these or other provisions, if any, permitting defeasance
or covenant defeasance with respect to the Debt Securities of any series.
(Section 10.1)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The Senior Debt Securities will constitute part of the Senior Indebtedness
(as defined below) of the Company and will rank pari passu with all outstanding
senior debt. Except as set forth in the related Prospectus Supplement, the
Subordinated Debt Securities will be subordinated, in right of payment, to the
prior payment in full of the Senior Indebtedness (as defined below), including
the Senior Debt Securities, whether outstanding at the date of the Subordinated
Indenture or thereafter incurred, assumed or guaranteed. The term Senior
Indebtedness means (1) the principal of and premium, if any, and unpaid
interest on indebtedness for money borrowed, (2) purchase money and similar
obligations, (3) obligations under capital leases, (4) guarantees, assumptions
or purchase commitments relating to, or other transactions as a result of which
the Company is responsible for the payment of, such indebtedness of others, (5)
renewals, extensions and refunding of any such indebtedness, (6) interest or
obligations in respect of any such indebtedness accruing after the commencement
of any insolvency or bankruptcy proceedings and (7) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts, and similar arrangements,
unless, in each case, the instrument by which the Company incurred, assumed or
guaranteed the indebtedness or obligations described in clauses (1) through (7)
hereof expressly provides that such indebtedness or obligation is not senior in
right of payment to the Subordinated Debt Securities.
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, whether
in a bankruptcy, insolvency, reorganization or receivership proceeding or upon
an assignment for the benefit of creditors or any other marshaling of the
assets and liabilities of the Company or otherwise, except a distribution in
connection with a merger or consolidation or a conveyance or transfer of all or
substantially all of the properties of the Company in accordance with the
Subordinated Indenture, the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or provision shall
be made for such payment in money or money's worth, before the holders of any
of the Subordinated Debt Securities are entitled to receive any payment in
respect of the Subordinated Debt Securities. In the event that a payment
default shall have occurred and be continuing with respect to the Senior
Indebtedness, the holders of all Senior Indebtedness shall first be entitled to
receive payment of the full amount due thereon, or provision shall be made for
such payment in money or money's worth, before the holders of any of the
Subordinated Debt Securities are entitled to receive any payment in respect of
the Subordinated Debt Securities. In the event that the principal of the
Subordinated Debt Securities of any series shall have been declared due and
payable pursuant to the Subordinated Indenture and such declaration shall not
have been rescinded and annulled, the holders of all Senior Indebtedness
outstanding at the time of such declaration shall first be entitled to receive
payment of the full amount due thereon, or provision shall be made for such
payment in money or money's worth, before the holders of any of the
Subordinated Debt Securities are entitled to receive any payment in respect of
the Subordinated Debt Securities.
This subordination will not prevent the occurrence of any event of default
with respect to the Subordinated Debt Securities. There is no limitation on the
issuance of additional Senior Indebtedness in the Subordinated Indenture.
20
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a Debt Depository identified in the applicable
Prospectus Supplement. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form. Unless otherwise
provided in such Prospectus Supplement, Debt Securities that are represented by
a Global Security will be issued in denominations of $1,000 or any integral
multiple thereof and will be issued in registered form only, without coupons.
Payments of principal of, and interest, if any, on Debt Securities represented
by a Global Security will be made by the Company to the Trustee under the
applicable Indenture and then forwarded to the Debt Depository.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and
that such Global Securities will be registered in the name of Cede & Co., DTC's
nominee. The Company further anticipates that the following provisions will
apply to the depository arrangements with respect to any such Global
Securities. Any additional or differing terms of the depository arrangements
will be described in the Prospectus Supplement relating to a particular series
of Debt Securities issued in the form of Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the applicable Indenture. Except as described below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities in certificated
form and will not be considered the owners or Holders thereof under the
applicable Indenture. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in certificated form;
accordingly, such laws may limit the transferability of beneficial interests in
a Global Security.
If DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act
if so required by applicable law or regulation, and, in either case, a
successor Debt Depository is not appointed by the Company within 90 days, the
Company will issue individual Debt Securities in certificated form in exchange
for the Global Securities. In addition, the Company may at any time, and in its
sole discretion, determine not to have any Debt Securities represented by one
or more Global Securities, and, in such event, will issue individual Debt
Securities in certificated form in exchange for the relevant Global Securities.
In any such instance, an owner of a beneficial interest in a Global Security
will be entitled to physical delivery of individual Debt Securities in
certificated form of like tenor and rank, equal in principal amount to such
beneficial interest, and to have such Debt Securities in certificated form
registered in its name. Unless otherwise described in the applicable Prospectus
Supplement, Debt Securities so issued in certificated form will be issued in
denominations of $1,000, or any integral multiple thereof, and will be issued
in registered form only, without coupons.
DTC will act as securities depository for the Debt Securities. The Debt
Securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully registered Debt Security
certificate will be issued with respect to each $200 million of principal
amount of the Debt Securities of a series, and an additional certificate will
be issued with respect to any remaining principal amount of such series.
21
DTC is a limited purpose trust company organized under the New York Banking
Law, a banking organization within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a clearing corporation within the meaning
of the New York Uniform Commercial Code, and a clearing agency registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, LLC and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, and banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Debt Securities on
DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner does not receive written confirmation
from DTC of its purchase, but is expected to receive a written confirmation
providing details of the transaction, as well as periodic statements of its
holdings, from the Direct or Indirect Participants through which such
Beneficial Owner entered into the action. Transfers of ownership interests in
Debt Securities are accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners do not receive
certificates representing their ownership interests in Debt Securities, except
in the event that use of the book-entry system for the Debt Securities is
discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. will
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Debt Securities; DTC records reflect only the identity
of the Direct Participants to whose accounts Debt Securities are credited,
which may or may not be the Beneficial Owners. The Participants remain
responsible for keeping account of their holdings on behalf of their customers.
Delivery of notice and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal and interest payments, if any, on the Debt Securities are made to
DTC. DTC's practice is to credit Direct Participants' accounts on the payment
date in accordance with their respective holdings
22
as shown on DTC's records unless DTC has reason to believe that it will not
receive payment on the payment date. Payments by Participants to Beneficial
Owners are governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in street name and are the responsibility of such Participant and
not of DTC, the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest, if any, to DTC is the responsibility of the Company or the Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a successor
securities depository is not appointed, Debt Security certificates are required
to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the Trustee or any applicable
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial interest.
CONCERNING THE TRUSTEE
The Trustee has extended credit facilities to the Company and conducts other
business with the Company.
DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON STOCK OR PREFERRED STOCK
The following statements with respect to the Common Stock Warrants and
Preferred Stock Warrants (collectively, the "Stock Warrants") are summaries of,
and subject to, the detailed provisions of a warrant agreement ("Stock Warrant
Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Stock Warrant Agent"), which Stock Warrant
Agreement may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Stock Warrant Provisions (the "Stock
Warrant Provisions") filed as an exhibit to the Registration Statement.
23
GENERAL
The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant
Certificates"), may be issued under the Stock Warrant Agreement independently
or together with any Offered Securities offered by any Prospectus Supplement
and may be attached to or separate from such Offered Securities. If Stock
Warrants are offered, the related Prospectus Supplement will describe the terms
of the Stock Warrants, including, without limitation, the following: (1) the
offering price, if any; (2) the designation and terms of the Common or
Preferred Stock purchasable upon exercise of the Stock Warrants; (3) the number
of shares of Common or Preferred Stock purchasable upon exercise of one Stock
Warrant and the initial price at which such shares may be purchased upon
exercise; (4) the date on which the right to exercise the Stock Warrants shall
commence and the date on which such right shall expire; (5) a discussion of
certain federal income tax considerations; (6) the call provisions, if any; (7)
the currency, currencies or currency units in which the offering price, if any,
and exercise price are payable; (8) the antidilution provisions of the Stock
Warrants; and (9) any other terms of the Stock Warrants. The shares of Common
or Preferred Stock issuable upon exercise of the Stock Warrants will, when
issued in accordance with the Stock Warrant Agreement, be fully paid and
nonassessable.
EXERCISE OF STOCK WARRANTS
Stock Warrants may be exercised by surrendering to the Stock Warrant Agent
the Stock Warrant certificate signed by the warrantholder, or its duly
authorized agent, indicating the warrantholder's election to exercise all or a
portion of the Stock Warrants evidenced by the certificate. Surrendered Stock
Warrant certificates shall be accompanied by payment of the aggregate exercise
price of the Stock Warrants to be exercised, as set forth in the related
Prospectus Supplement, which payment may be made in the form of cash or a check
equal to the exercise price. Certificates evidencing duly exercised Stock
Warrants will be delivered by the Stock Warrant Agent to the transfer agent for
the Common Stock or the Preferred Stock, as the case may be. Upon receipt
thereof, the transfer agent shall deliver or cause to be delivered, to or upon
the written order of the exercising warrantholder, a certificate representing
the number of shares of Common Stock or Preferred Stock purchased. If fewer
than all of the Stock Warrants evidenced by any certificate are exercised, the
Stock Warrant Agent shall deliver to the exercising warrantholder a new Stock
Warrant certificate representing the unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common or Preferred
Stock purchasable upon the exercise of each Stock Warrant will be subject to
adjustment in certain events, including the issuance of a stock dividend to
holders of Common or Preferred Stock, respectively, or a combination,
subdivision or reclassification of Common or Preferred Stock, respectively. In
lieu of adjusting the number of shares of Common or Preferred Stock purchasable
upon exercise of each Stock Warrant, the Company may elect to adjust the number
of Stock Warrants. No adjustment in the number of shares purchasable upon
exercise of the Stock Warrants will be required until cumulative adjustments
require an adjustment of at least 1% thereof. The Company may, at its option,
reduce the exercise price at any time. No fractional shares will be issued upon
exercise of Stock Warrants, but the Company will pay the cash value of any
fractional shares otherwise issuable. Notwithstanding the foregoing, in case of
any consolidation, merger or sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, the holder of each outstanding
Stock Warrant shall have the right to the kind and amount of shares of stock
and other securities and property (including cash) receivable by a
24
holder of the number of shares of Common or Preferred Stock into which such
Stock Warrants were exercisable immediately prior thereto.
NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company or any other matter or to exercise any rights
whatsoever as stockholders of the Company.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the Debt Warrants are summaries of,
and subject to, the detailed provisions of a warrant agreement (the "Debt
Warrant Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Debt Warrant Agent"), which Debt Warrant
Agreement may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Debt Securities Warrant Provisions
(the "Debt Warrant Provisions") filed as an exhibit to the Registration
Statement.
GENERAL
The Debt Warrants, evidenced by warrant certificates (the "Debt Warrant
Certificates"), may be issued under the Debt Warrant Agreement independently or
together with any Offered Securities offered by any Prospectus Supplement and
may be attached to or separate from such Offered Securities. If Debt Warrants
are offered, the related Prospectus Supplement will describe the terms of the
warrants, including, without limitation, the following: (1) the offering price,
if any; (2) the designation, aggregate principal amount and terms of the Debt
Securities purchasable upon exercise of the warrants; (3) if applicable, the
designation and terms of the Debt Securities with which the Debt Warrants are
issued and the number of Debt Warrants issued with each such Debt Security; (4)
if applicable, the date on and after which the Debt Warrants and the related
Offered Securities will be separately transferable; (5) the principal amount of
Debt Securities purchasable upon exercise of one Debt Warrant and the price at
which such principal amount of Debt Securities may be purchased upon exercise;
(6) the date on which the right to exercise the Debt Warrants shall commence
and the date on which such right shall expire; (7) a discussion of certain
federal income tax considerations; (8) whether the warrants represented by the
Debt Warrant Certificates will be issued in registered or bearer form; (9) the
currency, currencies or currency units in which the offering price, if any, and
exercise price are payable; (10) the antidilution provisions of the Debt
Warrants; and (11) any other terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Debt Warrant
Agent, which will be listed in the related Prospectus Supplement, or at such
other office as may be set forth therein. Warrantholders do not have any of the
rights of holders of Debt Securities (except to the extent that the consent of
warrantholders may be required for certain modifications of the terms of an
Indenture or form of the Debt Security, as the case may be, and the series of
Debt Securities issuable upon exercise of the Debt Warrants) and are not
entitled to payments of principal of and interest, if any, on the Debt
Securities.
25
EXERCISE OF DEBT WARRANTS
Debt Warrants may be exercised by surrendering the Debt Warrant Certificate
at the corporate trust office of the Debt Warrant Agent, with the form of
election to purchase on the reverse side of the Debt Warrant Certificate
properly completed and executed, and by payment in full of the exercise price,
as set forth in the Prospectus Supplement. Upon the exercise of Debt Warrants,
the Debt Warrant Agent will, as soon as practicable, deliver the Debt
Securities in authorized denominations in accordance with the instructions of
the exercising warrantholder and at the sole cost and risk of such holder. If
less than all of the Debt Warrants evidenced by the Debt Warrant Certificate
are exercised, a new Debt Warrant Certificate will be issued for the remaining
amount of Debt Warrants.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities (1) through underwriters or dealers,
(2) directly to one or more purchasers or (3) through agents. A Prospectus
Supplement will set forth the terms of the offering of the Offered Securities
offered thereby, including the name or names of any underwriters, the purchase
price of the Offered Securities and the proceeds to the Company from the sale,
any underwriting discounts and other items constituting underwriters'
compensation, any public offering price, any discounts or concessions allowed
or reallowed or paid to dealers and any securities exchange or market on which
the Offered Securities may be listed. Only underwriters so named in such
Prospectus Supplement are deemed to be underwriters in connection with the
Offered Securities offered thereby.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the Offered Securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Offered Securities of the series offered by the
Prospectus Supplement if any of the Offered Securities are purchased. Any
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Offered Securities may also be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offering and sale of Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the related Prospectus Supplement, any such agent will be acting
on a best-efforts basis for the period of its appointment.
All Offered Securities offered other than Common Stock will be a new issue
of securities with no established trading market. Any underwriters to whom such
Offered Securities are sold by the Company for public offering and sale may
make a market in such Offered Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of or the trading markets
for any such Offered Securities.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the
26
Securities Act that may arise from any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to state a
material fact in this Prospectus, any supplement or amendment hereto, or in the
registration statement of which this Prospectus forms a part, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Offered Securities
will be passed upon for the Company by Morgan, Lewis & Bockius LLP,
Philadelphia, Pennsylvania. Certain legal matters with respect to the Offered
Securities will be passed upon for any underwriters or agents by Mayer, Brown,
Rowe & Maw, Chicago, Illinois. Mayer, Brown, Rowe & Maw from time to time acts
as counsel for the Company on certain matters.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of FMC Corporation and consolidated
subsidiaries as of December 31, 2001 and 2000, and for each of the years in the
three-year period ended December 31, 2001, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The audit report
covering the December 31, 2001 consolidated financial statements refers to a
change in the method of accounting for derivative instruments and hedging
activities.
With respect to the unaudited interim financial information for the periods
ended March 31, 2002 and 2001 incorporated by reference herein, the independent
accountants have reported that they applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate report included in the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 2002, and incorporated by reference herein, states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions
of Section 11 of the Securities Act of 1933 (the "Securities Act") for their
report on the unaudited interim financial information because that report is
not a "report" or a "part" of the registration statement prepared or certified
by the accountants within the meaning of Sections 7 and 11 of the Securities
Act.
27
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3,250,000 Shares
FMC Corporation
Common Stock
[LOGO] FMC
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PROSPECTUS SUPPLEMENT
June 6, 2002
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Salomon Smith Barney
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