This summary is based on the third quarter fiscal 2006 earnings call conducted by FMC Corp. (FMC: chart) on November 2, 2006.
Key Investors Issues
- Net income was 89 cents a share compared to a loss of 12 cents a share a year ago.
- The quarterly sales of $572 million were up 12% versus the third quarter of 2005.
- Fiscal 2006 EPS before restructuring and other income and charges is $5.35 to $5.45.
- In the first nine months of fiscal 2006, net income rose 30% and revenue grew by 8%.
Third Quarter Fiscal 2006 Financial Highlights
During the quarter, earnings per share of $1.02 were above the midpoint of the company’s guidance range.
The earnings before restructuring and other income and charges of $1.02 per share were 20% above last year’s third quarter. On a GAAP basis, the company reported net income of $35.1 million or 89 cents per share. GAAP earnings for the quarter included a net after-tax charge of 13 cents per share, primarily related to discontinued operations. With that reconciliation, the company’s non-GAAP earnings were $1.02 per share versus 85 cents per share in the prior year quarter.
- Agriculture Products delivered 8% earnings growth on the strength of its market positions in South America and the favorable timing of certain export sales.
- Specialty Chemicals earnings increased 9% on continued volume growth and higher selling prices.
- The Industrial Chemicals continued to realize significant pricing leverage to deliver 18% earnings growth.
The third quarter performance was achieved despite the headwinds of higher energy and raw material costs.
Compared to the prior year, higher company-wide energy and raw material costs unfavorably impacted earnings by 32 cents per share in the quarter. Currency translation, however, unlike the last 12 months, had essentially no impact on the earnings results versus the year ago quarter. In the third quarter of this year, the firm’s share repurchase program provided approximately 1 cent per share earnings benefit.
- During the quarter, corporate expense of $11.3 million rose modestly from the level of a year ago.
- Interest expense net was $7.5 million, down from $13.3 million in the prior year period due to lower interest rates and debt levels.
- On September 30, 2006, gross consolidated debt was $677 million and debt net of cash was 419 million.
- For the quarter, depreciation and amortization was $32.4 million and capital expenditures were 34.6 million.
During the quarter, FMC repurchased approximately 821,000 shares at a total cost of $50 million.
Year-to-date, the firm has repurchased approximately 1.1 million shares at a total cost of $70 million. Though the company’s $150 million share repurchase program does not include a specific timetable or price targets and may be suspended at any time, the management expects that the program will be accomplished over a two-year period. The firm will not include future repurchase amounts in its earnings per share projections.
Going forward, the company will continue to use its cash to fund all internal opportunities for profitable growth.
In addition, the firm will continue to evaluate attractive growth opportunities outside the company such as product acquisitions, in-licensing deals or equity ventures in the agricultural products and bolt-on acquisitions in its Specialty Chemicals business.
Financial Performance of Segments
Agricultural Products
Agricultural Products revenue of $180 million was 12% above last year, primarily due to stronger sales in South America, particularly Brazil, as well as the favorable timing of sales in Europe and Asia. Sales in Brazil benefited from the growth in sugarcane and cotton as planted acres increased 10% and 30% respectively versus last season. In North America, pest pressures were moderate as expected.
Segment earnings of $28.5 million were 8% higher than the prior year due to the increased sales. Partially offsetting the sales growth were higher raw material costs principally solvents, a less favorable geographic mix than a year ago, and higher development spending associated with the company’s growth and innovation initiatives.
Specialty Chemicals
This segment continued to deliver solid top line growth, as revenue of $147 million increased 7% over the prior year quarter. Lithium sales growth was driven by higher volumes and selling prices in upstream primary molecules due to the tight industry supply and demand situation as well as higher butyllithium sales. Biopolymer sales growth was broad based, coming from the company’s core food and pharmaceutical market positions as well as early sales from the firm’s healthcare initiatives.
