FMC (FMC) - 2022 Q4 - Annual Report

Part I Item 1. Business FMC Corporation, a global agricultural sciences company, achieved 15% revenue growth to $5.8 billion in 2022, driven by its R&D pipeline and leading diamide insecticide franchise, while advancing sustainability and human capital development 2022 Performance Highlights | Metric | Value | Change vs. 2021 | | :--- | :--- | :--- | | Revenue | $5.8 Billion | ▲ 15% | | Organic Revenue | - | ▲ 18% | | Diamides Sales | $2.1 Billion | - | | Plant Health Sales | >$230 Million | ▲ 8% | - The company's competitive position is driven by technology, innovation, geographic balance, and crop diversity, leading to market share gains in 2020, 2021, and 2022[13] - FMC is investing in a robust R&D pipeline featuring 23 new active ingredients in discovery and 11 in development, with over 18 of these molecules featuring new modes of action[14] - In July 2022, FMC acquired BioPhero ApS, a Denmark-based pheromone research and production company, for approximately $193 million to enhance its sustainable crop protection solutions[17] - The company employs approximately 6,600 people, with about 1,600 in domestic operations and 5,000 in foreign operations[54] - FMC has set a sustainability goal to achieve net-zero Greenhouse Gas (GHG) emissions across its value chain (Scopes 1, 2, and 3) by 2035[65] Item 1A. Risk Factors The company faces significant industry, operational, technology, and financial risks, including intense competition, supply chain disruptions, intellectual property challenges, foreign exchange volatility, and geopolitical instability - The business faces significant competition from generic suppliers and alternative technologies, a trend expected to continue as major product patents expire[70] - The company's future performance depends on its ability to manage the expiration of active ingredient composition of matter patents for its high-value diamide insecticides through enforcement of other patents and life cycle management[79] - Operations are dependent on five large-scale active ingredient manufacturing facilities in the U.S., Puerto Rico, China, Denmark, and India, which are subject to hazards inherent in chemical manufacturing[75] - The company is particularly sensitive to foreign exchange rate risks involving the Brazilian real, Chinese yuan, Indian rupee, Euro, Mexican peso, and Argentine peso[83] - Economic and geopolitical risks include the decision to discontinue operations in Russia, the military conflict in Ukraine, inflation and foreign exchange controls in Argentina, and unpredictable environmental enforcement in China[84] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[87] Item 2. Properties FMC operates 21 manufacturing facilities across 16 countries and major R&D centers, maintaining its properties in good operating condition Owned or Leased Production Properties by Region | Region | Number of Properties | | :--- | :--- | | North America | 5 | | Latin America | 1 | | Europe, Middle East and Africa | 6 | | Asia | 9 | | Total | 21 | Item 3. Legal Proceedings FMC faces ongoing asbestos-related personal injury litigation with 10,561 pending claims as of December 31, 2022, for which a reserve has been established within discontinued operations - As of December 31, 2022, there were approximately 10,561 pending asbestos-related claims against FMC[90] - Since the 1980s, approximately 120,000 asbestos claims have been discharged, with total settlements amounting to about $182 million[90] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[94] Item 4A. Information about our Executive Officers This section details FMC Corporation's executive officers as of December 31, 2022, including their roles and experience, noting the team comprises four male and two female members - The executive officers include Mark A. Douglas (President, CEO), Andrew D. Sandifer (EVP, CFO), and four other Executive Vice Presidents[96] Executive Officer Diversity | Gender | Male | Female | | :--- | :--- | :--- | | Number of executive officers | 4 | 2 | Part II Item 5. Market for the Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities FMC's common stock trades on the NYSE, with its five-year total return of 42.0% outperforming the S&P 500 Chemicals Index but underperforming the S&P 500, and a $1 billion share repurchase program was authorized in 2022 Five-Year Cumulative Total Return Comparison | | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | FMC Corporation | $100.00 | $78.83 | $108.10 | $126.37 | $122.94 | $141.99 | | S&P 500 Index | $100.00 | $95.78 | $125.68 | $148.41 | $190.71 | $156.33 | | S&P 500 Chemicals Index | $100.00 | $88.56 | $107.84 | $126.81 | $159.38 | $141.72 | Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | Dollar Amount Purchased | | :--- | :--- | :--- | :--- | :--- | | October | 875,724 | $114.22 | 875,480 | $99,999,895 | | November | 399 | $120.29 | — | — | | December | 33 | $126.61 | — | — | | Total | 876,156 | $114.23 | 875,480 | $99,999,895 | - In February 2022, the Board authorized a new $1 billion share repurchase program, replacing the previous one. As of December 31, 2022, approximately $900 million remained available under this program[110] Item 6. [Reserved] This item is reserved Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes FMC's 2022 financial performance, highlighting a 15% revenue increase to $5.8 billion despite gross margin pressure, and provides a 2023 outlook projecting 6% revenue growth and 8% adjusted EBITDA growth 2022 Financial Highlights | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $5,802.3 Million | $5,045.2 Million | ▲ 15% | | Gross Margin | $2,326.8 Million | $2,161.3 Million | ▲ 8% | | Net Income (attributable to FMC) | $736.5 Million | $739.6 Million | ▼ 0.4% | | Adjusted EBITDA (Non-GAAP) | $1,406.8 Million | $1,313.8 Million | ▲ 7% | - In mid-April 2022, FMC decided to discontinue its operations in Russia, resulting in exit charges of approximately $76.8 million for the year[115] - Global inflationary pressures, primarily higher raw material costs, negatively impacted operating margins. The company partially mitigated this through pricing actions and cost-saving initiatives[116] 2023 Outlook | Metric | Projected Range/Value | % Change vs. 2022 (Midpoint) | | :--- | :--- | :--- | | Revenue | $6.08 Billion - $6.22 Billion | ▲ 6% | | Adjusted EBITDA | $1.48 Billion - $1.56 Billion | ▲ 8% | | Adjusted EPS | $7.20 - $8.00 | ▲ 3% | Item 7A. Quantitative and Qualitative Disclosures about Market Risk FMC manages market risks from commodity prices, interest rates, and foreign currency fluctuations, with primary exposures to the Brazilian real, Chinese yuan, and Euro, and a debt portfolio of 62% fixed-rate at year-end 2022 - The company's primary foreign currency exchange rate exposures are the U.S. dollar versus the Brazilian real, Chinese yuan, Indian rupee, euro, Mexican peso, and Argentine peso[307] - The debt portfolio at December 31, 2022, consisted of 62% fixed-rate debt and 38% variable-rate debt[312] - A hypothetical one percentage point increase in interest rates would have increased gross interest expense by $12.4 million for the year ended December 31, 2022[313] Item 8. Financial Statements and Supplementary Data This section presents FMC's audited consolidated financial statements for the three years ended December 31, 2022, including statements of income, balance sheets, and cash flows, with an unqualified opinion from KPMG LLP on both financial statements and internal controls Consolidated Statement of Income (Loss) Highlights (in Millions) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $5,802.3 Million | $5,045.2 Million | $4,642.1 Million | | Gross Margin | $2,326.8 Million | $2,161.3 Million | $2,046.7 Million | | Income from continuing operations | $838.7 Million | $805.3 Million | $579.8 Million | | Net income (loss) attributable to FMC stockholders | $736.5 Million | $739.6 Million | $552.4 Million | | Diluted EPS attributable to FMC stockholders | $5.81 | $5.73 | $4.23 | Consolidated Balance Sheet Highlights (in Millions) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $5,438.6 Million | $5,053.8 Million | | Total Assets | $11,171.3 Million | $10,673.1 Million | | Total Current Liabilities | $3,799.6 Million | $3,520.3 Million | | Total Liabilities | $7,770.4 Million | $7,529.4 Million | | Total FMC Stockholders' Equity | $3,377.9 Million | $3,124.3 Million | Consolidated Statement of Cash Flows Highlights (in Millions) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Cash from Operating Activities | $582.4 Million | $820.1 Million | $647.8 Million | | Cash from Investing Activities | $(266.4) Million | $(112.0) Million | $(169.3) Million | | Cash from Financing Activities | $(237.4) Million | $(747.9) Million | $(250.3) Million | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[758] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal controls over financial reporting during Q4 2022 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[759] - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[762] Item 9B. Other Information The company reports no other information for this item - None[763] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable[764] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, the Audit Committee, and the Code of Ethics is incorporated by reference from the 2023 Proxy Statement - Information regarding directors, executive officers, the Audit Committee, and the Code of Ethics is incorporated by reference from the Proxy Statement for the 2023 Annual Meeting of Stockholders[766] Item 11. Executive Compensation Information regarding executive and director compensation is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on executive compensation and director compensation is incorporated by reference from the 2023 Proxy Statement[767] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and management is incorporated by reference from the 2023 Proxy Statement, with 2.1 million securities available for future issuance under equity compensation plans as of December 31, 2022 Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise (A) | Weighted-average exercise price (B) | Securities available for future issuance (C) | | :--- | :--- | :--- | :--- | | Approved by stockholders | 1,982,000 | $87.35 | 2,100,000 | | Not approved by stockholders | — | — | — | | Total | 1,982,000 | $87.35 | 2,100,000 | Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding director independence and the company's policy on related party transactions is incorporated by reference from the company's 2023 Proxy Statement - Information concerning independent directors and related party transactions is incorporated by reference from the 2023 Proxy Statement[772] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement. The company's independent registered public accounting firm is KPMG LLP - Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement[774] - The independent registered public accounting firm is KPMG LLP[774] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all documents filed with the report, including financial statements, schedules, and various exhibits such as credit agreements and certifications - The report includes Financial Statement Schedule II – Valuation and qualifying accounts and reserves[775] - A comprehensive list of exhibits is provided, including material contracts, articles of incorporation, and instruments defining the rights of security holders, many of which are incorporated by reference from previous filings[776] Item 16. Form 10-K Summary This is an optional disclosure that was not included in the report - Optional disclosure, not included in this Report[783]