UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number 1-2376

FMC CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 215/299-6000

Securities registered pursuant to Section 12(b) of the Act:

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

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.    YES x    NO ¨

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. ¨

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE 12b-2 OF THE ACT.)    YES x    NO ¨

THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF JUNE 30, 2002, THE END OF THE REGISTRANT’S SECOND FISCAL QUARTER, WAS $1,024,289,693. THE NUMBER OF NON-AFFILIATE SHARES OF THE REGISTRANT’S COMMON STOCK, $0.10 PAR VALUE, OUTSTANDING AS OF THAT DATE WAS 33,950,603. THE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES EXCLUDES THE VALUE OF THOSE SHARES HELD BY EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT.

DOCUMENTS INCORPORATED BY REFERENCE

PART I

FMC Corporation was incorporated in 1928 under Delaware law and has its principal executive offices at 1735 Market Street, Philadelphia, Pennsylvania 19103. As used in this report, except where otherwise stated or indicated by the context, “FMC,” “we,” “our company,” “the company” or “the Registrant” means FMC Corporation and its consolidated subsidiaries and their predecessors.

ITEM 1.    BUSINESS

General

We are a diversified, global chemical company providing innovative solutions, applications and market-leading products to a wide variety of end markets. We operate in three distinct business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products’ principal focus is on insecticides, which are used to enhance crop yield and quality by controlling a wide spectrum of pests, and on herbicides, which are used to reduce the need for manual or mechanical weeding by inhibiting or preventing weed growth. Specialty Chemicals consists of our biopolymers and lithium businesses and focuses on food ingredients that are used to enhance texture, structure and physical stability, pharmaceutical additives for binding and disintegrant use and lithium specialties for pharmaceutical synthesis and energy storage. Our Industrial Chemicals segment manufactures a wide range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and phosphorus chemicals.

The following table shows the principal products produced by our three business segments and their raw materials and uses:

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We have operations in many areas around the world. North America represents our single largest geographic market, generating approximately 48 percent of revenue in 2002, with our second largest market, Europe, the Middle East and Africa representing 25 percent and Latin America, our third largest, representing 15 percent of 2002 revenue. With a worldwide manufacturing and distribution infrastructure, we are able to respond rapidly to global customer needs, offset downward economic trends in one region with positive trends in another and better match revenues to local costs in order to mitigate the impact of currency volatility. The charts below detail our sales and long-term assets by major geographic region.

Effective December 31, 2001, we completed our plan to split into two companies. FMC has retained the three chemical segments. A separate company, FMC Technologies, Inc. (“Technologies”), operates the businesses that comprised the former Energy Systems and Food and Transportation Systems segments. Our plan of separation was first announced on October 31, 2000. On May 31, 2001, we contributed the two non-chemical business segments to Technologies, which at the time was a wholly-owned subsidiary of FMC. We completed an initial public offering of approximately 17 percent 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 stockholders.

Our Strategy

Our strategy is balanced between driving growth and innovation within our Specialty Chemicals and Agricultural Products segments and maintaining market shares through low-cost positions in our Industrial Chemicals segment. Our financial focus is on maximizing cash flow and reducing debt, principally through continuing to reduce our costs and prudently managing capital expenditures and working capital.

We have a strategic objective toward concentrating our focus on areas with the greatest growth potential. In that regard, we are exploring opportunities for divestitures and acquisitions.

Develop new technologies and products.    We have refocused our Agricultural Products segment on the development and marketing of new insecticides and new applications for our existing products, including expanding the range of approved applications for our proprietary insecticides and herbicides (also known as “label expansions”). We are also developing strategic alliances in Agricultural Products to accelerate market penetration in certain geographic regions and to access and develop new technologies. In this regard, we have obtained exclusive rights from Ishihara Songyo Kaisha, Ltd. (“ISK”) a leading Japanese crop protection company to develop and market industry-leading research that applies knowledge of gene functions to identify biological targets and to distribute new insecticides. Additionally, we are accelerating discovery of new insecticides through

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our so-called “genomics-based” research and related screening program. In our Specialty Chemicals segment, we continue to enhance our product portfolio and grow market share through strategic alliances with large pharmaceutical and food customers to develop innovative drugs and new food products. We have shifted our lithium product mix from commodity lithium applications to higher margin end-uses, such as pharmaceuticals and lithium ion battery products.

Manage Industrial Chemicals for cash.    We intend to maintain our market positions and low-cost structure by continually developing improved mining and manufacturing processes and prudently managing our asset base. For example, in soda ash, we continually strive to optimize our proprietary and low-cost solution mining and longwall mining techniques, thereby reducing our production costs which we believe are already among the lowest in the industry. Our phosphorus chemicals joint venture with Solutia, Inc. (“Solutia”), Astaris LLC (“Astaris”), recently shifted from an elemental phosphorus manufacturing process to a lower cost process based on purified phosphoric acid (“PPA”). Also, we are focusing our marketing and technical resources within high-value niche applications in the food processing, environmental and electronics markets.

Continue to reduce costs.    We aggressively seek ways to continue to reduce costs in each of our business segments. We have achieved our 2002 goal of reducing our cost structure and will continue to review all of our businesses for additional cost saving opportunities.

Reduce debt and re-establish an investment-grade rating.    We are committed to the goal of re-establishing our investment-grade rating through debt reduction and the execution of our business strategies.

Financial Information About Our Business Segments

See Note 18 to our consolidated financial statements included in this Form 10-K. Also see below for selected financial information related to our segments.

Agricultural Products

Financial Information (In Millions)

Overview

Our Agricultural Products segment, which represents approximately 33 percent of our consolidated revenues, manufactures and sells a portfolio of crop protection, structural pest control, and turf and ornamental products around the globe. Our product development efforts focus on developing more environmentally compatible solutions that can cost-effectively increase farmers’ yields and provide more cost-effective alternatives to older chemistries to which insects may have developed resistance. We believe that our genomics-based discovery strategy will identify novel new insecticides that enable farmers to enhance their crop yields.

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Products and Markets

Agricultural Products provides a wide range of proprietary, branded products—based on both patented and off-patent technologies—for worldwide markets. Product branding is a prevalent industry practice used to help maintain and grow market share by promoting consumer recognition and the reputation of the product and the supplier. While our position is particularly strong in North America, we derived more than half of Agricultural Products’ revenue from outside North America in 2002.

In contrast to most other major crop protection companies, insecticides dominate our Agricultural Products segment, particularly pyrethroid and carbamate chemistries in which we maintain leading global positions, based on revenues. Pyrethroids are a major class of insecticides whose low spread rates are unique compared to other classes of insecticides. They are most effective against worm pests. Carbamates are a broad spectrum of insecticides used to control a wide variety of pests in both soil and foliage. We also maintain niche positions in the herbicide market. We differentiate ourselves through a highly-focused strategy in selected crops and regions and leverage our proprietary chemistries and pest-specific R&D to develop and market new insecticides and new applications of our existing products. The following table summarizes the principal product chemistries in Agricultural Products and the principal uses of each chemistry:

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Recently, we entered into several agreements with ISK, under which we will work together to market and distribute existing and new insecticide chemistries in various markets. With the ISK alliance, we have expanded our distribution capabilities in Japan and in Europe by jointly investing with ISK in the Belgian-based pesticide distribution company, Belchim Benelux N.V. Through these alliances and our own targeted marketing efforts, we expect to continue to enhance our access to markets and develop new products that will help us continue to compete effectively.

Research and Development

We plan to grow by obtaining new and approved uses for existing product lines as well as complementary chemistries from other pesticide companies. We have recently obtained new labels for zeta-cypermethrin for use on corn, rice, alfalfa, sugar cane and leafy vegetable crops. Meanwhile, our carfentrazone herbicide has been approved for cotton defoliation in North America. In addition, we continue to develop new applications for sulfentrazone and clomazone herbicides.

In the next few years, we expect to launch on an exclusive basis, in the Americas, a novel sucking pest insecticide discovered by ISK. The EPA has prioritized this patented new chemistry for registration in certain applications as an organophosphate alternative. The EPA is encouraging the development of alternative products for organophosphates, currently the number one class of insecticides in terms of worldwide demand.

We are among the first agrochemicals companies to pursue a predominantly genomics-based approach in our long-term discovery efforts to identify compounds with a specific biological function on agricultural pests. We believe this approach, which is used extensively in the pharmaceutical industry, will enable a more rapid and cost-effective way to discover new insecticide chemistries that target unique mechanisms of action in economically important insects.

Industry Overview

The three principal categories of agricultural chemicals are herbicides, representing approximately half of global industry revenue, insecticides, representing approximately a quarter of global industry revenue, and fungicides representing the remaining portion of global industry revenue. We do not participate in the fungicide category.

Insecticides are used to control a wide range of insects, including chewing pests (such as caterpillars) and sucking pests (such as aphids). Insecticides are applied as sprays, dusts or granules and are used on a wide variety of crops such as fruits, vegetables, cotton, soybean, corn and cereal crops. There are several major classes of insecticide chemistries, including organophosphates, carbamates and pyrethroids.

Herbicides prevent or inhibit weed growth, thereby reducing or eliminating the need for manual or mechanical weeding. Herbicides can be selective (killing only specific unwanted foliage) or non-selective (killing all foliage), and are also segmented by their time of application: pre-planting, pre-emergent and post-emergent.

The agrochemicals industry has recently undergone significant consolidation. Based on sales and giving effect to recent acquisitions, the top crop protection companies, Syngenta AG, Bayer AG, Monsanto Company, BASF AG, The Dow Chemical Company and E. I. du Pont de Nemours and Company (“DuPont”), currently represent more than three quarters of global sales, while in 1995, the top six companies represented approximately half of global sales. Four of the these companies, Syngenta, Bayer, BASF and Dow, have all made significant acquisitions of other crop protection companies over the past few years. A significant driver for this consolidation has been the advent of biotechnology and the resulting escalation of research and development costs, particularly in herbicides employed in row crops.

The next tier agrochemical producers, including Makhteshim-Agan Industries Ltd., Sumitomo Chemical Company Limited, FMC and Nufarm Limited, generally employ strategies focusing on niche crops and markets

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(i.e., fruits, vegetables, household plants, turf and ornamental markets and/or generic products). Additionally, there is an emerging trend among these producers to partner with one another to gain economies of scale more comparable to larger competitors.

Specialty Chemicals

Financial Information (In Millions)

Overview

Our Specialty Chemicals segment, which represents 26 percent of our consolidated revenues, is focused on high-performance food ingredients, pharmaceutical excipients and intermediates, and lithium specialty products that enjoy solid customer bases and consistent, growing demand. The majority of Specialty Chemicals revenues are to customers in non-cyclical end markets. We believe that our future growth in this segment will continue to be based on the performance capabilities of these products and our research and development capabilities, as well as on the alliances and close working relationships developed with key global customers.

Products and Markets

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BioPolymer

BioPolymer is a 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 wood pulp, provides binding and disintegrant properties for tablets and capsules 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 companies in these markets. Many of BioPolymer’s customers have come to rely on FMC for the majority of their supply requirements for these product lines. We believe that such reliance is based on our innovative solutions and operational quality. The following chart summarizes the major markets for BioPolymer’s products and our chemistries in each market:

Lithium

Lithium is a vertically-integrated, technology-based business, based on both inorganic and organic lithium chemistries. While lithium is sold into a variety of end-markets, we have focused our efforts on selected growth niches such as fine chemicals for pharmaceutical synthesis, specialty polymers and energy storage.

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 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.

Organolithium products are sold to fine chemical and pharmaceutical customers who use lithium’s unique chemical properties to synthesize high value-added products. Organolithiums are also highly valued in the specialty polymer markets as polymer initiators in the production of synthetic rubbers and elastomers. Based on our proprietary technology, the lithium business is developing new, highly specialized polymers for a variety of end uses, such as rocket fuels, industrial applications and automotive coatings.

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The following chart summarizes the major markets for various lithium products:

Industry Overview

Food Ingredients

Our BioPolymers business serves the texture, structure and physical stability ingredients (“TSPS”) market. TSPS imparts physical properties to thicken and stabilize foods. There is a wide range of ingredients used for TSPS and a wide range of food groups served, including bakery, meats, dairy and convenience products. The industry is dispersed geographically, with the majority of the sales in Europe, North America and Asia.

The industry has experienced steady revenue growth over the last five years. Trends driving growth include increasing consumer interest in healthier foods, greater convenience and growth in per capita consumption of processed foods in emerging markets. The trend toward health and convenience drive the need for more functional ingredients to impart desired food tastes and textures. Carrageenan and microcrystalline cellulose (“MCC”), which address this need, are growing faster than the overall TSPS market. The global customer base for TSPS is relatively fragmented and includes large and small food processors. Consolidation among these customers has been a significant trend. Over the past several years, large companies have merged with other large market participants (notably, Slimfast Foods Company/Bestfoods/Unilever PLC, Nabisco Group Holdings Corp./Kraft Foods Inc., The Pillsbury Company/General Mills, Inc., Suiza Foods Corporation/Dean Foods Company) and have grown at twice the rate of smaller firms. In light of these conditions, TSPS ingredient suppliers such as FMC have focused on establishing strategic alliances with market leaders with the goal of reducing costs, leveraging technology and expanding product offerings with key accounts.

Within the entire food ingredients market, there are a relatively large number of suppliers, due principally to the broad spectrum of chemistries employed. Segment leadership, global position and investment in technology are key factors to sustaining profitability. In addition, larger suppliers may often provide a broader product line and a range of services including functional systems or blends. The top suppliers of TSPS ingredients include Danisco A/S, DuPont, CP Kelco ApS, Imperial Chemical Industries PLC, Cargill Incorporated, Sobel N.V., DGF Stoess AG, FMC, Degussa AG, and Tate & Lyle PLC.

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Pharmaceutical Chemicals

Our BioPolymers business sells into the formulation chemicals segment of the pharmaceutical market. The major end markets for formulation chemicals include coatings and colors, fillers, binders, sweeteners and flavors, disintegrants and others.

Competitors tend to be grouped by chemistry. Our principal MCC competitors in pharmaceuticals include J. Rettenmaier & Sôhne GmbH, Ming Tai Chemical Co., Ltd., Asahi Kasei Corporation and Blanver Farmoquimica Ltda. While pricing pressures from low cost producers is a common competitive dynamic, companies like FMC offset that pressure by providing the most reliable and broadest range of products and services. Customers of excipients are pharmaceutical firms who depend upon reliable therapeutic performance of their drug products.

We also supply alginates into food and health care markets. Highly refined extracts from selected seaweeds provide a broad range of alginate functionality, including uses in anti-reflux disorders, dental impressions, control release of drugs and wound dressings as well as food texture management.

Lithium Specialties

Lithium is a highly versatile metal with diverse end-use markets including glass/ceramics, aluminum production, pharmaceuticals, polymers and both rechargeable and disposable batteries.

We market a wide variety of lithium-based products ranging from upstream, commodity lithium carbonate to highly specialized downstream products such as organolithium compounds and cathodic materials for batteries. In recent years, lithium carbonate has experienced a significant price decline due largely to industry oversupply.

New entry into the specialty lithium markets is difficult due to the level of proprietary process and product technology involved. Three major companies (FMC, Chemetall SA and Sociedad Quimica y Minera de Chile S.A.) produce lithium carbonate. The markets for specialty lithium products tend to be concentrated in more developed regions, including North America, Europe and Asia.

Industrial Chemicals

Financial Information (In millions)

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Overview

Our Industrial Chemicals segment, which represents 41 percent of our consolidated revenues, has low-cost positions in high-volume inorganic chemicals including soda ash, phosphorus chemicals and hydrogen peroxide, complemented by high-value niche positions in specialty alkali, phosphorus and peroxygen products.

Products and Markets

Industrial Chemicals serves a diverse group of markets, from economically sensitive industrial sectors to technology-intensive specialty markets. We process and sell refined inorganic products that are sought by customers for their critical reactivity or specific functionality. In addition, we produce, purify and market higher-value downstream derivatives into specialized and customer-specific applications. These applications include dialysis, rocket propulsion, animal nutrition, biocides, semiconductors and baking.

Alkali

Our alkali chemical division produces natural soda ash. Soda ash is used by manufacturers in the glass, chemical processing and detergent industries. To a lesser degree, we also produce sodium bicarbonate, caustic soda and sodium sesquicarbonate. Our products are manufactured and sold through FMC Wyoming Corporation, which we manage as an integral part of our alkali business in which we own shares representing an 87.5 percent economic interest, with the remaining shares held by two Japanese companies.

We mine and produce natural soda ash using proprietary, low-cost mining technologies, such as long-wall and solution mining, which, we believe, gives FMC the lowest cost versus other suppliers. Our two production sites in Green River, Wyoming have the capacity to produce approximately 4.9 million tons of soda ash annually, though the business over the last several years has mothballed 1.3 million tons of capacity to improve cost structure and to respond to market conditions.

Peroxygens

We produce hydrogen peroxide worldwide, with production facilities in the United States, Canada and Mexico, through Foret, in Spain and the Netherlands, and through a joint venture company, in Thailand. We sell hydrogen peroxide into the pulp and paper industry, and to a lesser extent, in the electronics, chemical processing, food and textiles industries. We believe we are a leading North American producer of hydrogen peroxide due in part to our broad product line, geographically-advantaged plant locations, and our state-of-the-art processing technology. Hydrogen peroxide represents three quarters of our peroxygens sales.

Our specialty peroxygens business supplies persulfate products primarily to polymer and printed circuit board markets and peracetic acid predominately to the food industry for biocidal applications. Typically, we compete as a specialty player where we believe that we are differentiated by our strong technical expertise, unique process technology and geographic location.

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Foret

Our European subsidiary, Foret, headquartered in Barcelona, Spain, is a leader in providing chemical products to the detergent, paper, textile, tanning and chemical industries. Foret is a large and diverse operation with seven manufacturing locations in Europe. Foret has positions in phosphates, hydrogen peroxides, perborates, sulfur derivatives, silicates and zeolites. Foret’s sales efforts are focused in Southern Europe, Africa and the Middle East.

Astaris

Astaris, our 50 percent-owned unconsolidated joint venture with Solutia is one of two large diversified phosphorus chemical suppliers in the western hemisphere. Astaris was formed as a separate company in 2000 with headquarters in St. Louis, Missouri. Astaris’s products are used in chemical processing, baking, food processing, detergent applications and fire suppressants.

Astaris is shifting its manufacturing process to take advantage of lower-cost sourcing of phosphorus. We believe that the move from a manufacturing strategy based on elemental phosphorus to one based on purified phosphoric acid (“PPA”) feedstock will eliminate the high environmental compliance and energy costs that adversely affected our Pocatello elemental phosphorus facility and unfavorably impacted our earnings in recent years.

Industry Overview

We primarily participate in three markets: soda ash, peroxygens and phosphorus chemicals. These products are generally inorganic-based, produced from minerals or air, and are generally commodities, which, in many cases, have few cost effective substitutes. Growth is typically a function of GDP or the rate of industrialization in key export markets. Pricing tends to reflect short-term supply and demand as producers add or reduce capacity and demand changes.

Soda Ash

Soda ash is a highly alkaline inorganic chemical essential in the production of glass, and widely used in the production of chemicals, soaps and detergents and many other products. Natural soda ash is generally produced from trona, a natural form of sodium sesquicarbonate, through mining and chemical processing. Soda ash may also be produced synthetically using the process developed in the 19th century by Ernest Solvay, which uses salt, ammonia, carbon dioxide and limestone as raw materials. The Solvay process requires a significant amount of heat energy and produces large quantities of waste by-products, making it much less cost-effective than natural soda ash production.

Because of the processing cost advantages of trona and the large natural reserves of trona in the U.S., particularly in Green River, Wyoming, all U.S. soda ash production is natural. By contrast, due to a lack of trona, a large percentage of the soda ash that is manufactured in the rest of the world is produced synthetically. Other U.S. producers are OCI Chemical Corporation, Solvay S.A., The General Chemical Group Inc., IMC Global Inc. and American Soda, LLP.

Approximately 30 percent to 35 percent of U.S. natural soda ash production is exported through the American Natural Soda Ash Association (“ANSAC”). ANSAC is the foreign sales association of all U.S. producers of soda ash, and was established in 1983 under the Webb-Pomerene Act and subsequent legislation. Since its creation, ANSAC has been successful in coordinating soda ash exports, exploiting the natural cost benefits of U.S.-produced natural soda ash and leveraging its large scale of operations to the benefit of its member companies. U.S. exports of soda ash have risen significantly over the last twenty years.

Peroxygens

Hydrogen peroxide is typically sold in aqueous solutions for use as a bleach or oxidizer. As such, it often competes with other chemicals capable of performing similar functions. Some of our specialty peroxygen

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derivatives (e.g., perborates) also function as bleaching or oxidizing agents. Environmental regulations, regional cost differences (often due to transportation costs) and technical differences in product performance enter into the decision to use hydrogen peroxide or one of its derivatives rather than another product. Since these considerations vary by region, the consumption patterns vary in different parts of the world. Hydrogen peroxide is sold in aqueous solutions, usually 35 percent, 50 percent or 70 percent by weight.

The U.S. pulp and paper industry represents approximately 65 percent of domestic demand for hydrogen peroxide. In this market, hydrogen peroxide is used as an environmentally friendly bleaching agent to brighten chemical, mechanical and recycled pulps, as well as treat a wide range of mill pollutants in the waste stream. During the 1990s the hydrogen peroxide market became increasingly cyclical dependent on the pulp industry, which has recently experienced a general slowdown. In addition, demand growth for hydrogen peroxide has slowed as the conversion from elemental chlorine by the U.S. pulp industry is largely complete. These trends have had a negative effect on pricing. The other North American hydrogen peroxide producers are Akzo Nobel, N.V., ATOFINA Chemicals, Inc., Degussa AG, Kemira Oyj and Solvay.

Phosphorus Chemicals

Phosphorus chemicals are used in many industrial applications in a wide array of chemical compounds. Overall growth in demand for phosphorus chemicals tends to correlate with GDP. Phosphoric acid and phosphate salts (e.g., sodium phosphates, calcium phosphates, potassium phosphates) are sold into many markets including food, beverage, water treatment, automotive, metal cleaning, detergents, specialty agricultural and fire suppressants.

The basic feed for making phosphorus chemicals is now produced using two processes. Most industrial applications use the cost-effective process which involves making PPA by the purification of fertilizer-grade phosphoric acid. Thermal phosphoric acid, long the industry standard, is produced from elemental phosphorus but is far more costly due to energy and environmental compliance costs, and is now used mainly in limited applications. While Astaris ceased the production of elemental phosphorus in 2001, it is still produced by Monsanto in the United States, Thermphos in the Netherlands, and in several other countries, principally China.

Worldwide demand for phosphorus chemicals declined in the early 1990s as detergents containing phosphates for home-laundry use were banned in North America and parts of Europe. Though not projected to occur in 2003, over the next few years, industrial demand for phosphorus chemicals is expected to improve, driven by growing demand in the detergents and food and beverage industries in newly industrializing nations, and by the growth of food and beverage applications in the United States and Europe.

Beginning in the 1990s, reduced demand, the shift in growth toward developing regions, and the advent of new technology resulted in a significant restructuring of the phosphorus chemicals industry as producers consolidated or exited the business.

In North America, we participate in the industrial phosphate business through our Astaris joint venture. In Europe, we participate in this business through Foret. Both Astaris and Foret use the PPA process. Major competitors include Rhodia, S.A., Potash Corporation of Saskachewan, Inc., Prayon Rupel, S.A., and Rotem Amfer & Negev Ltd.

Source and Availability of Raw Materials

Our raw material requirements vary by business segment and include mineral-related natural resources (trona ore, lithium brines and phosphate rock), processed chemicals, seaweed, specialty wood pulp and energy sources such as oil, gas, coal and electricity. Raw materials represented approximately 30 percent of our 2002 cost of sales and services, and no one raw material represented more than 7 percent of our total raw material purchases.

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Ores used in Industrial Chemicals manufacturing processes, such as trona, are extracted from mines in the U.S. 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, which is currently obtained from a South American manufacturer under a long-term sourcing agreement, various types of seaweed that are sourced 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 a variety of suppliers worldwide.

Patents

FMC owns a number of U.S. and foreign patents, trademarks and licenses that are cumulatively important to its business. We do 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. The duration of our patents depends on their respective jurisdictions. Their expiration dates range through 2020.

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 and parts of the Asia Pacific region, including Australia) are served from July through February. The remainder of our businesses are generally not subject to significant seasonal fluctuations.

Competition

We have a number one or number two market position in many of our product lines, based on revenue, either globally or in North America, largely as a result of our proprietary technologies and, with respect to Industrial Chemicals, our position as a low-cost producer. The following product lines accounted for approximately 77 percent of our 2002 consolidated revenue:

Competitive Conditions

We encounter substantial competition in each of our three business segments. This competition is expected to continue in both the United States and markets outside the United States. We market our products through our own sales organization and through independent distributors and sales representatives. The number of our principal competitors varies from segment to segment. In general, we compete by operating in a cost-efficient manner and by leveraging our industry experience to provide advanced technology, high product quality and reliability and quality customer and technical service.

Our 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 and a large number of smaller,

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often regional competitors such as FMC. 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, we compete as a product innovator by focusing on insecticide discovery and development and licensing products from alliances when the products complement our product portfolio. We also differentiate ourselves by reacting quickly in key markets, establishing effective product stewardship programs, and developing strategic alliances, which strengthen market access in key countries.

With significant positions in markets that include alginate, carrageenan, microcrystalline cellulose and lithium-based products, Specialty Chemicals competes on the basis of product differentiation, customer service and price. BioPolymer competes with both direct suppliers of cellulose and seaweed extract as well as suppliers of other hydrocolloids, which may provide similar functionality in specific applications. In microcrystalline cellulose, competitors are typically smaller than FMC, while in seaweed extracts (alginates), we compete with other broad-based chemical companies. FMC and each of its two most significant competitors in lithium extract the element from naturally occurring, lithium-rich brines located in the Andes mountains of Argentina and Chile which are believed to be the world’s most significant and lowest cost sources of lithium.

Industrial Chemicals serves the alkali, peroxygens and phosphorus markets predominantly in the United States and to a lesser extent, Europe. In North America, the soda ash business competes with five domestic producers of natural soda ash, three of which operate in the vicinity of our mine and processing facility in Green River, Wyoming. Outside of North America and Europe, FMC sells soda ash through ANSAC. 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. We seek to maintain our competitive position by employing low cost processing technology. At Foret, we possess a strong cost and market position in phosphates, perborates, peroxygens, zeolites and sulfur derivatives. In each of these markets we face significant competition from a range of multinational and regional chemical producers. We participate in the phosphorus chemicals business in the United States through Astaris. Competition in phosphorus chemicals is based primarily on both product differentiation and price.

Research and Development Expense

We perform product research and development in all of our segments with the majority of our efforts focused in our Agricultural Products segment. The product development efforts in our Agricultural Products segment focus on developing more environmentally compatible solutions that can cost-effectively increase farmers’ yields and provide alternatives to insect-resistant chemistries. Our research and development expenses in the last three years are set forth below:

Environmental Laws and Regulations

We are subject to various federal, state, local and foreign environmental laws and regulations that govern emissions of air pollutants, discharges of water pollutants, and the manufacture, storage, handling and disposal of

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hazardous substances, hazardous wastes and other toxic materials and remediation of contaminated sites. We are also subject to liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances, and on current and previous owners and operators of a facility for the clean-up of hazardous substances released from the facility into the environment. In addition, we are subject to liabilities under the Resource Conservation and Recovery Act (“RCRA”) and analogous state laws that require owners and operators of facilities that treat, store or dispose of hazardous waste to follow certain waste management practices and to clean up releases of hazardous waste into the environment associated with past or present practices.

We have been named a potentially responsible party, or PRP, at 26 sites on the federal government’s National Priority List. In addition, we also have received notice from the Environmental Protection Agency (“EPA”) or other regulatory agencies that we may be a Potentially Responsible Party (“PRP”), or PRP equivalent, at other sites, including 43 sites at which we have determined that it is reasonably possible that we have an environmental liability. In cooperation with appropriate government agencies, we are currently participating in, or have participated in, a Remedial Investigation/Feasibility Study (“RI/FS”) or its equivalent at most of the identified sites, with the status of each investigation varying from site to site. At certain sites, a RI/FS has only recently begun, providing limited information, if any, relating to cost estimates, timing, or the involvement of other PRPs; whereas, at other sites, the studies are complete, remedial action plans have been chosen, or a Record of Decision has (“ROD”) been issued.

Environmental liabilities include obligations relating to waste handling and the remediation and/or study of sites at which we are alleged to have disposed of regulated materials. These sites include current operations, previously operated sites, and sites associated with discontinued operations. We have provided reserves for potential environmental obligations that management considers probable and for which a reasonable estimate of the obligation could be made. As of December 31, 2002, our total environmental reserve (after accounting for any potential recoveries from third parties, which we estimate at $27.7 million) was $195.7 million compared to $218.9 million at December 31, 2001 (after accounting for recoveries of $41.5 million). In addition, we have estimated that reasonably possible environmental loss contingencies may exceed this reserve by as much as $80.0 million at December 31, 2002.

Employees

We employ approximately 5,500 people, with approximately 3,000 people in our domestic operations and approximately 2,500 people in our foreign operations. Approximately 30 percent of our U.S.-based employees and approximately 40 percent of our foreign-based employees are represented by collective bargaining agreements. We have successfully concluded virtually all of our 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. We cannot predict, however, the outcome of future contract negotiations.

ITEM 2.    PROPERTIES

FMC leases executive offices in Philadelphia and subleases administrative offices from Technologies in Chicago. We operate 37 manufacturing facilities and mines in 19 countries. Our major research and development facility is in Princeton, New Jersey.

Trona ore, used for soda ash production in Green River, Wyoming, is mined primarily from property held under long-term leases. We own the land and mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina. A number of our chemical plants require the basic raw materials which are provided by these FMC-owned or leased mines, without which other sources would have to be obtained. With regard to our mining properties operated under long-term leases, no single lease or related group of leases is material to our businesses or to our company as a whole.

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Most of our plant sites are owned, with some under lease. We believe our properties and facilities meet present requirements and are in good operating condition and that each of our significant manufacturing facilities is operating at a level consistent with capacity utilization prevalent in the industries in which it operates. The number and location of our production properties for continuing operations are:

ITEM 3.    LEGAL PROCEEDINGS

Like hundreds of other industrial companies, we have been named as one of many defendants in asbestos-related personal injury litigation. These cases (most cases involve between 50 and 350 defendants) allege personal injury or death resulting from exposure to asbestos in premises of FMC or to asbestos-containing components installed in machinery or equipment manufactured or sold by discontinued operations. The machinery and equipment businesses we owned or operated did not fabricate the asbestos-containing component parts at issue in the litigation, and to this day, neither the U.S. Occupational Safety and Health Administration nor the EPA has banned the use of these components. Further, the asbestos-containing materials were housed inside of machinery and equipment and accessible only at the time of infrequent repair and maintenance. Therefore, we believe that, overall, the claims against FMC are without merit and consider ourselves to be a peripheral defendant in these matters. Indeed, the bulk of the claims against us to date have been dismissed without payment.

As of December 31, 2002, there were approximately 26,000 premises and product claims pending against FMC in several jurisdictions. To date, we have had discharged, all before trial, approximately 51,000 claims against FMC, the overwhelming majority of which have been dismissed without any payment to the plaintiff. The costs of all settlements to date have totaled approximately $3 million.

We intend to continue managing these cases in accordance with our historical experience. We have established a reserve for this litigation and believe that the outcome of these cases will not have a material adverse effect on our consolidated results of operations, cash flows or financial condition.

We are party to various other lawsuits, both as defendant and plaintiff, arising in the normal course of business. We believe that the disposition of these lawsuits will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, cash flows or financial condition.

See Note 1 “Principal Accounting Policies—Environmental Obligations,” Note 11 “Environmental Obligations” and Note 17 “Commitments and Contingent Liabilities” in the company’s consolidated financial statements beginning on page 51, page 72 and page 85, respectively, to our consolidated financial statements included in this Form 10-K.

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ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Executive Officers of the Registrant

The executive officers of FMC Corporation, the offices currently held by them, their business experience since January 1, 1998 and earlier and their ages as of March 1, 2003, are as follows:

No family relationships exist among any of the above-listed officers, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. All officers are elected to hold office for one year or until their successors are elected and qualified.

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PART II

The company’s common stock of $0.10 par value is traded on the New York Stock Exchange, the Pacific Stock Exchange and the Chicago Stock Exchange (Symbol: FMC). There were 7,719 registered common stockholders as of December 31, 2002. The 2002 and 2001 quarterly summaries of the high and low prices of the company’s common stock are represented herein under Item 8 (see Note 19 to our consolidated financial statements included in this Form 10-K). No cash dividends were paid in 2002, 2001 or 2000.

FMC’s annual meeting of stockholders will be held at 2:00 p.m. on Tuesday, April 22, 2003, at the Top of the Tower, 1717 Arch Street, 50^th Floor, Philadelphia, Pennsylvania 19103. Notice of the meeting, together with proxy materials, will be mailed approximately 30 days prior to the meeting to stockholders of record as of February 28, 2003.

Transfer Agent and Registrar of Stock:    National City Bank

                                                                            Corporate Trust Operations

                                                                            P.O. Box 92301

                                                                            Cleveland, Ohio 44193-0900

A copy of this report on Form 10-K for 2002 is available through our website at www.fmc.com or upon written request to: FMC Corporation, Communications Department, 1735 Market Street, Philadelphia, Pennsylvania, 19103.

Equity Compensation Plan Information

All of our equity compensation plans have been approved by stockholders.

The FMC Corporation Incentive Compensation and Stock Plan (the “Plan”) was approved by the stockholders on April 20, 2001. The provisions for incentives under the Plan provide for the grant of multi-year incentive awards payable partly in cash and partly in common stock. The provisions under the Plan and its predecessor plans for stock options provide for regular grants of common stock options, which may be incentive and/or nonqualified stock options. The exercise price for stock options is not less than the fair market value of the stock at the date of grant. Options are exercisable approximately four years from the grant date for grants prior to 1995 and approximately three years from the grant date for grants during 1995 and thereafter. Incentive and nonqualified options expire not later than 10 years from the grant date (15 years for grants prior to 1996).

Under the FMC Corporation Compensation Plan for Non-Employee Directors, non-employee directors were granted options in 1998 and 1999 to purchase shares of stock at the fair market value of the stock at the date of grant. At December 31, 2002, options for 46,040 shares were outstanding at prices ranging from $33.76 to $40.56. These grants vested one year from the grant date and expire after ten years. Beginning in 2000, non-employee directors were paid in restricted stock units in lieu of stock options.

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ITEM 6.    SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial and other data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 2002, are derived from our consolidated financial statements, which have been audited by KPMG LLP, independent auditors. The consolidated financial statements as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002, and the report thereon, are included elsewhere in this Form 10-K. The selected consolidated financial data should be read in conjunction with our consolidated financial statements for the year ended December 31, 2002, the related notes, and the independent auditors’ report, which refers to the adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” on January 1, 2002 and Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” on January 1, 2001, included elsewhere in this Form 10-K.

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FORWARD-LOOKING INFORMATION

Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: FMC Corporation (“FMC,” “we,” “our company” or the “company”) and its representatives may from time to time make written or oral statements that are “forward-looking” and provide other than historical information, including statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations within, in the company’s other filings with the Securities and Exchange Commission, or in reports to its stockholders. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the risk factors listed under “Risks” below.

In some cases, FMC has identified forward-looking statements by such words or phrases as “will likely result,” “is confident that,” “expect,” “expects,” “should,” “could,” “may,” “will continue to,” “believe,” “believes,” “anticipates,” “predicts,” “forecasts,” “estimates,” “projects,” “potential,” “intends” or similar expressions identifying “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words and phrases. Such forward-looking statements are based on management’s current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. 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. The company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

In connection with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, the company is hereby identifying forward-looking information that could affect the company’s financial performance and could cause the company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. Such forward-looking statements include, among other things, statements about the following:

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We undertake no obligation to update forward-looking statements.

RISKS

The company wishes to caution that the preceding list may not be all inclusive and specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Among the factors that could have an impact on our ability to achieve operating results and meet our other goals are:

Industry Risks:

Pricing and volumes in our markets are sensitive to a number of industry specific and global issues and events including:

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Technology Risks:

Financial Risks:

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

                   RESULTS OF OPERATIONS

Our Company

We are a diversified, global chemical company providing innovative solutions and applications to a wide variety of end markets. We operate in three business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Agricultural Products’ principal focus is on insecticides, which are used to enhance crop yield and quality by controlling a wide spectrum of pests, and on herbicides, which are used to reduce the need for manual or mechanical weeding by inhibiting or preventing weed growth. Specialty Chemicals consists of our biopolymers and lithium businesses and focuses on food ingredients that are used to enhance texture, structure and physical stability, pharmaceutical additives for binding and disintegrant use and lithium specialties for pharmaceutical synthesis and energy storage. Our Industrial Chemicals segment manufactures a wide range of inorganic materials, including soda ash, peroxygens and phosphorus chemicals.

Agricultural Products

Our Agricultural Products segment manufactures and sells proprietary, branded insecticides and herbicides. We have a strong position in two widely-used classes of insecticides, pyrethroids and carbamates, and possess a niche portfolio of proprietary herbicides. These products are used for the protection of cotton, corn, rice, cereals, vegetables and other crops. In addition in North America we sell into the professional pest control and home and garden markets. We differentiate ourselves through a highly-focused strategy in selected crops and regions, and by leveraging proprietary chemistries and pest-specific research and development (“R&D”) to develop and market new insecticides and new applications of our existing products. We have also developed strategic alliances with companies such as Ishihara Sangyo Kaisha, Ltd. (“ISK”), a Japanese crop protection company, to access new markets and develop new insecticides.

Specialty Chemicals

Our Specialty Chemicals segment is comprised of our biopolymers and lithium businesses. BioPolymer manufactures and sells microcrystalline cellulose, carrageenan and alginates, products that add texture, structure and physical stability to a wide range of beverage, dairy, meat and bakery products and/or that act as binders and disintegrants for tablets and capsules. Our lithium business is a technology-based business in which mined lithium is processed and sold for use in a broad array of specialty products, including pharmaceuticals, specialty polymers and energy storage devices. The majority of Specialty Chemicals’ sales are to customers engaged in non-cyclical end markets, such as food and pharmaceuticals.

Industrial Chemicals

Our Industrial Chemicals segment manufactures soda ash, peroxygens and phosphorus chemicals. Through our manufacturing facility in Green River, Wyoming, we process naturally occurring soda ash, a commonly used ingredient in detergents and chemical processing and an essential ingredient in glass. We produce hydrogen peroxide, leveraging our geographically advantaged plant locations throughout North America to reach our customers. We also market specialty grades of hydrogen peroxide and specialty peroxygens to the electronics, polymers and food processing industries. Our European subsidiary, FMC Foret, S.A. (“Foret”), leverages its low production costs and strong brand name to manufacture and sell phosphorus chemicals, peroxygens, sulfur derivatives, silicates, zeolites and other products in Europe, Africa and the Middle East. We are also a 50 percent owner with Solutia, Inc. (“Solutia”) of Astaris LLC (“Astaris”), a North American producer of phosphorus chemicals used in a wide array of markets, including the detergent, food, agricultural and industrial markets. We account for Astaris as an equity investment. The majority of Industrial Chemicals’ sales are to customers engaged in relatively non-cyclical end markets.

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 percent of FMC Technologies,

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Inc. (“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 net payments of $430.7 million to FMC 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 percent 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 has allowed us to focus our efforts in the chemical industry through improved customer orientation, increased innovation and overall growth in certain businesses. In an effort to align our business with our future growth plans, we took various strategic measures in 2002, 2001 and 2000, including the restructuring of businesses, reduction of staff, plant shut downs, plant mothballing and the impairment of certain underperforming assets. We believe these steps will increase our financial flexibility as operating conditions change.

Application of Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of asset, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in this Form 10-K. We have reviewed these accounting policies, identifying those which we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed with the Audit Committee those accounting policies that we have deemed critical. Critical accounting policies are central to our presentation of results of operations and financial condition and require management to make estimates and judgments on certain matters. We base our estimates and judgments on historical experience, current conditions and other reasonable factors.

Environmental

We provide for environmental-related obligations when they are probable and amounts can be reasonably estimated. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used.

Estimated obligations to remediate sites that involve oversight by the U.S. Environmental Protection Agency (“EPA”), or similar government agencies, are generally accrued no later than when a Record of Decision (“ROD”), or equivalent, is issued, or upon completion of a Remedial Investigation/Feasibility Study (“RI/FS”) that is accepted by FMC and the appropriate government agency or agencies. Estimates are reviewed quarterly by our environmental remediation management, as well as by our financial and legal management and, if necessary, adjusted as additional information becomes available. The estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, required remediation methods, and other actions by or against governmental agencies or private parties.

Our liabilities for continuing and discontinued operations are principally for costs associated with the remediation and/or study of sites at which our company is alleged to have disposed of hazardous substances. Such costs principally include, among other items, RI/FS, site remediation, costs of operation and maintenance of the remediation plan, fees to outside law firms and consultants for work related to the environmental effort, and future monitoring costs. Estimated site liabilities are determined based upon existing remediation laws and technologies, specific site consultants’ engineering studies or by extrapolating experience with environmental issues at comparable sites.

Provisions for environmental costs are reflected in income, net of probable and estimable recoveries from named Potentially Responsible Parties (“PRPs”) or other third parties. Such provisions incorporate inflation and are not discounted to their present values.

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In calculating and evaluating the adequacy of its environmental reserves, the company has taken into account the joint and several liability imposed by the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and the analogous state laws on all PRPs and has considered the identity and financial condition of each of the other PRPs at each site to the extent possible. We also considered the identity and financial condition of other third parties from whom recovery is anticipated, as well as the status of our claims against such parties. Although we are unable to forecast the ultimate contributions of PRPs and other third parties with absolute certainty, the degree of uncertainty with respect to each party is taken into account when determining the environmental reserve by adjusting the reserve to reflect the facts and circumstances on a site-by-site basis. Our liability includes management’s best estimate of the costs expected to be paid before its consideration of any potential recoveries from third parties. We believe that any recorded recoveries related to PRPs are realizable in all material respects. We have recorded recoveries in “Environmental reserves, continuing and discontinued,” representing probable realization of claims against insurance companies, U.S. government agencies and other third parties, of $27.7 million and $41.5 million, respectively, at December 31, 2002 and 2001. These recoveries are recorded as an offset to the “Environmental reserve, continuing and discontinued.” Cash recoveries for the years 2002, 2001 and 2000 were $16.2 million, $12.5 million and $14.2 million, respectively. We expect to continue to receive payments for recoveries in the future. Our total environmental reserves, before recoveries, totaled $223.4 million and $260.4 million at December 31, 2002, and 2001, respectively. In addition, at December 31, 2002 we have estimated that reasonably possible environmental loss contingencies may exceed amounts accrued by as much as $80 million.

Impairments and valuation of long-lived assets

Our long-lived assets include property, plant and equipment and long-term investments, goodwill and intangible assets. We review the carrying value of these assets for impairment in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” The standard requires that we test for impairment whenever events or circumstances indicate that the net book value of these assets may not be recoverable from the estimated undiscounted expected future cash flows expected to result from their use and eventual disposition. In cases where the estimated undiscounted expected future cash flows are less than net book value, an impairment loss is recognized equal to the amount by which the net book value exceeds the estimated fair value of assets. The fair value of long-lived assets is based on discounted cash flows at the lowest level determinable. The estimated cash flows reflect our assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time. We recognized $323.1 million and $10.1 million in asset impairments in 2001 and 2000, respectively, related to our Industrial Chemicals and Specialty Chemicals segments.

We also prepare an annual impairment test of goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” The fair value of goodwill and intangible assets is based on estimated discounted cash flows. The assumptions used to estimate fair value include management’s best estimate of future growth rates, discount rates and market conditions over a reasonable period. We performed this test in 2002 and determined that no impairment charge was required. Total goodwill as of December 31, 2002 and 2001 was $129.7 million and $113.5 million, respectively.

Depreciation for financial reporting is reported on a straight-line basis over the estimated useful lives of the fixed asset. Estimated useful lives are based on historical useful-life trends as well as common industry practice. Useful lives are as follows: 20 years—land improvements, 20 to 50 years—buildings (depending on location and use), 3 to 18 years machinery and equipment (depending on type and use). Depreciation expense totaled $105.2 million, $112.2 million and $116.3 million in 2002, 2001 and 2000, respectively.

Pension and other postretirement benefits

We provide qualified and nonqualified defined benefit and defined contribution pension plans, as well as other postretirement health care and life insurance benefit plans to our employees. The costs (or benefits) and

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obligations related to these benefits reflect our key assumptions related to general economic conditions, including interest (discount) rates, healthcare cost trend rates, expected rates of return on plan assets and the rates of compensation increases for employees. The costs (or benefits) and obligations for these benefit programs are also affected by other assumptions, including things such as the average retirement age, mortality tables, employee turnover, and plan participation. To the extent our plans’ actual experience, as influenced by changing economic and financial market conditions or by changes to our own plans’ demographics, differs from these assumptions, the costs and obligations for providing these benefits, as well as the plans’ funding requirements, could increase or decrease. When actual results differ from our assumptions, the difference is typically recognized over future periods.

We use certain calculated values of assets under methods permitted under SFAS No. 87, “Employer’s Accounting for Pensions,” (“SFAS 87”) both to estimate the expected rate of return on assets component of pension cost and to calculate our plans’ funding requirements. The expected rate of return on plan assets is based on a market-related value of assets that recognizes investment gains and losses over a five-year period. We use an actuarial value of assets to determine our plans’ funding requirements. The actuarial value of assets must be within a certain range, high or low, of the actual market value of assets, and is adjusted accordingly.

The unrealized gains and losses related to our pension and postretirement benefit obligations may affect periodic benefit costs in future periods, however, we do not expect this to have a significant impact in 2003.

We recorded $4.9 million and $4.0 million of pension and other postretirement benefit cost in 2002 and 2001, respectively, and a $5.1 million credit in pension and other postretirement benefit cost in 2000. We expect pension and other postretirement benefit costs to increase in 2003, due to a combination of factors, including changes in key assumptions such as the discount rate and an increase in the amortization of prior service cost. At December 31, 2002 and 2001, $106.6 million and $116.7 million, respectively, was recorded for pension and other postretirement benefit obligations. The recorded amounts for pension benefit obligations include additional minimum pension liabilities of $84.8 million and $8.3 million at December 31, 2002 and 2001, respectively, which were recorded as other comprehensive losses in stockholders’ equity. The company’s operating cash flows for 2002 included a $2.8 million voluntary cash contribution to the U.S. qualified pension plan. Although we are not required to make any cash contributions to this plan in 2003, we are considering making voluntary cash contributions of approximately $5 million.

We select the discount rate used to calculate pension and other postretirement obligations based on a review of high-quality corporate bonds (with particular focus on the Moody’s Investors Service, Inc. (“Moody’s”) Aa-rated Corporate and Industrial bond indices) at the end of each respective year. Bonds in these indices have remaining maturities of at least 20 years and the indices are constructed to have an average remaining maturity of approximately 30 years. We selected a discount rate of 6.5 percent at December 31, 2002 for pension and other postretirement benefit obligations.

As described within SFAS 87, the expected rate of return on plan assets is viewed as a long-term, average rate of return to be earned on the assets invested or to be invested to provide for the benefits included in the projected benefit obligation. In developing the expected long-term rate of return on asset assumption for our plan, we take into consideration the technical analysis (using a geometric average) performed by our outside actuaries, including historical market returns, information on long-term real return expectations by asset class, inflation assumptions, and expectations for standard deviation related to these best estimates. We also consider the historical performance of our own plan’s trust, which has averaged 12.3 percent over the last 10 years (in excess of comparable market indices for the same period) as well as other factors. The current asset allocation for our plan is approximately 70 percent equities (U.S. and non-U.S.) and 30 percent fixed-income investments. Given an actively managed investment portfolio, the expected returns by asset class for our portfolio, using a geometric average, and after being adjusted for an estimated inflation rate of approximately three percent, are between nine and eleven percent for both U.S. and non-U.S. equities, and between five and seven percent for fixed-income

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investments, which generates a total expected portfolio return in excess of 9.25 percent. We continually monitor the appropriateness of this rate in light of current market conditions. For the sensitivity of our pension costs to incremental changes in this assumption see our discussion below.

Sensitivity analysis related to key pension and postretirement benefit assumptions.    A one-half percent increase in the assumed discount rate would have decreased pension and other postretirement benefit obligations by $47.6 million at December 31, 2002 and $43.7 million at December 31, 2001, and decreased pension and other postretirement benefit costs by $1.2 million, $1.2 million and $2.6 million for 2002, 2001 and 2000, respectively. A one-half percent decrease in the assumed discount rate would have increased pension and other postretirement benefit obligations by $50.5 million at December 31, 2002 and $46.4 million at December 31, 2001, and increased pension and other postretirement benefit by $1.0 million, $1.1 million and $2.7 million for 2002, 2001 and 2000, respectively.

A one-half percent increase in the assumed expected long-term rate of return on plan assets would have decreased pension costs by $3.0 million, $2.9 million and $4.0 million for 2002, 2001 and 2000, respectively. A one-half percent decrease in the assumed long-term rate of return on assets would have increased pension costs by $3.0 million, $2.9 million and $4.0 million for 2002, 2001 and 2000, respectively.

Income taxes

We have recorded a valuation allowance to reduce deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for this allowance, we have considered future taxable income and our ongoing tax planning strategies. In the event that we determined that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Similarly, should we conclude that we would be able to realize certain deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. At December 31, 2002 and 2001, the valuation allowance was $22.4 million and $18.0 million, respectively.

Results of Operations—2002, 2001 and 2000

Overview

Our consolidated revenue for the years ended December 31, 2002, 2001 and 2000 was $1,852.9 million, $1,943.0 million and $2,050.3 million, respectively. In 2002, our first full year as an independent pure-play chemical company, we earned net income of $65.8 million compared to a net loss of $337.7 million in 2001 and net income of $110.6 million in 2000. Diluted earnings per common share for the year was $1.92 compared to a diluted loss per common share of $10.86 in 2001 and diluted earnings per common share of $3.50 in 2000. Net income for 2002 included restructuring and other charges and a discontinued operations’ loss totaling $21.7 million after tax or $0.63 per common share on a diluted basis. In 2001 net income included restructuring and other charges, asset impairments and a discontinued operations’ loss totaling $436.1 after tax or $13.96 per common share on a diluted basis. In 2000 net income included restructuring and other charges, asset impairments and a discontinued operations’ loss totaling $42.9 million after tax or $1.36 per common share on a diluted basis. See “Results of Operations” and “Segment Results” for a detailed discussion of events affecting our results for 2002, 2001 and 2000.

All results discussed in this analysis address the continuing results of our chemical businesses. The results of Technologies, which was spun-off on December 31, 2001, have been reclassified to discontinued operations within our consolidated statement of income for the years ended December 31, 2001 and 2000 and consolidated statement of cash flow for the years ended December 31, 2001 and 2000. (See “The Reorganization of Our Company” for an overview of our spin-off of Technologies.)

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Results of Operations—2002 compared to 2001

In the following discussion, “year” refers to the year ending December 31, 2002 and “prior year” refers to the year ending December 31, 2001. All comparisons are between these periods unless otherwise noted.

Revenue for the year ended December 31, 2002 was $1,852.9 million compared to $1,943.0 million in 2001, down 5 percent. Lower revenue in 2002 compared to 2001 was principally attributable to lower revenue in our Industrial Chemicals and Agricultural Products segments. Our Industrial Chemicals segment saw generally lower selling prices and lower sales volumes due to unfavorable market conditions. Also affecting revenue were decreased Agricultural Products sales resulting from lower herbicide sales and unfavorable weather conditions in Asia. In 2003, we expect increased revenue from our Specialty Chemicals and Agricultural Products segments as well as improved domestic markets served by Industrial Chemicals.

Asset impairments.    There were no asset impairments in 2002. Asset impairments totaled $323.1 million ($233.8 million after tax) in 2001.

Based upon a comprehensive review of our long-lived assets, we recorded asset impairment charges in our Industrial Chemicals and Specialty Chemicals segments in 2001. Industrial Chemicals recorded impairment charges of $224.2 million of which $12.3 million related to the impairment of assets in our sodium cyanide operations while $211.9 million was for the impairments in our U.S.-based phosphorus chemicals business.

A weakening market in our sodium cyanide business led us to impair the assets of this business in the second quarter of 2001. We subsequently exited this business in 2002.

Our U.S.-based phosphorus chemicals business is comprised of our 50 percent interest in Astaris and the activities of our corporate phosphorus division, which manages remediation and other environmental projects associated with the former Astaris elemental phosphorus plant in Pocatello, Idaho.

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 in the second quarter of 2001. 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 (the “Consent Decree”) at the Pocatello, Idaho facility, a further $4.4 million of other non-environmental phosphorus related fixed assets and a $36.5 million impairment charge for our investment in Astaris. Driving these charges were a decline in market conditions, the loss of a potential site on which to develop an economically viable second purified phosphoric acid (“PPA”) plant and our agreement to pay into a fund for the Shoshone-Bannock Tribes (the “Tribal Fund”) 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 six 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.

Restructuring and other charges totaled $30.1 million ($18.4 million after tax) in 2002 compared to $280.4 million ($172.1 million after tax) in 2001.

In an effort to mitigate the effects of the continued economic weakness in the markets served by our Industrial Chemicals business we undertook several key reorganization and cost saving initiatives that resulted in $12.4 million of restructuring charges in 2002. Included in this amount was a $5.7 million restructuring charge for the mothballing of the basic production line at our hydrogen peroxide facility in Spring Hill, West Virginia. Of the 16 severances incurred related to the Spring Hill mothballing, the majority will occur in the first half of 2003. We also mothballed our Granger caustic facility, in Green River, Wyoming resulting in a $3.4 million restructuring charge. The majority of this charge was for facility shutdown activities and 110 severances, all of

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which occurred in 2002. In addition we recorded a $3.3 million restructuring charge for severance costs related to reorganization efforts to reduce costs in our U.S. phosphorus chemicals division, alkali, peroxygens and at Foret. The majority of these charges were for 38 severances, all of which occurred in 2002. We estimate that our Industrial Chemicals’ restructuring activities will result in approximately $13 million of combined annual cost savings and cost avoidance.

In Agricultural Products we incurred $4.7 million of restructuring charges in 2002 of which $3.7 million related to the idling and reorganization of our sulfentrazone plant in Baltimore in connection with our new herbicides strategy (See Segment Results—2002 compared to 2001). A $1.0 million restructuring charge was recorded for reorganization costs to implement a new distribution strategy in Europe, which will allow us to rely on certain strategic alliances to further penetrate and expand our European markets. Of the 108 severances related to these restructurings 57 occurred in 2002. We estimate that the restructuring activities will result in approximately $20 million of combined annual cost savings and cost avoidance.

We recorded $1.3 million of restructuring charges in our Specialty Chemicals segment in 2002 in an effort to realign product divisions within BioPolymer, both domestically and internationally. The majority of these costs resulted in the severance of 24 people. These severances are expected to occur in the first half of 2003. We estimated that our Specialty Chemicals’ restructuring activities will result in approximately $2 million of combined annual cost savings and cost avoidance.

Reorganization costs of $3.0 million and other charges of $8.7 million were also recorded in the period. These charges are discussed in Note 6 to our consolidated financial statements included in this Form 10-K. Also, of the $30.1 million of restructuring charges recorded in 2002 $11.9 million was spent in 2002. We expect the remainder to be spent in 2003.

In 2001 a change in market conditions and the implementation of our overall corporate strategy resulted in restructuring and other charges of $280.4 million, detailed as follows:

Industrial Chemicals recorded restructuring and other charges of $247.9 million in 2001 of which $6.2 million was for restructuring at several sites, including $5.7 million for the mothballing of our Granger, Wyoming soda ash facility, and $241.7 million was for our U.S.-based phosphorus business. There were 130 severances from the restructuring of Industrial Chemicals, the majority of which occurred in 2001, with the remainder occurring in 2002.

In connection with the impairment of our U.S.-based phosphorus chemicals business in the second quarter of 2001 we recorded other charges for a $68.7 million reserve for further required Consent Decree spending at the Pocatello site related to environmental capital projects required to complete the construction of facilities to treat the sites waste streams, $42.7 million for financing obligations to the Astaris joint venture (“keepwell” payments) and a $40.0 million payment to the Tribal Fund for various tribe activities in order to permit capping of a specific waste disposal pond at Pocatello.

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Subsequent to the recording of these charges in the second quarter of 2001, the Astaris joint venture announced its plans, in October 2001, to cease production at the Pocatello, Idaho elemental phosphorus facility in December 2001. This decision reflected the shift in Astaris’s sourcing strategy away from production of high cost elemental phosphorus to lower cost PPA, and also reflected the availability of low-cost alternative feedstock materials, projected higher future environmental compliance costs at Pocatello and our desire to avoid additional capital spending on environmental compliance assets required under the Consent Decree. In connection with the decision to shut down Pocatello we recorded restructuring charges of $76.5 million in the fourth quarter of 2001. We spent $32.3 million and $0.9 million of these reserves in 2002 and 2001, respectively, with the remaining reserves to be spent over the next 5 to 7 years as we manage the site’s decommissioning and environmental issues. These charges included reserves for decontamination, demolition, and other shut down costs of $58.7 million; environmental remediation requirements resulting from the decision to shut down the facility of $54.3 million and our 50 percent share of costs recorded by Astaris for its obligations associated with the shutdown, or $36.3 million. Offsetting these charges was a reversal in the amount of $34.5 million representing the unspent portion of the reserve recorded in the second quarter of 2001 for required Consent Decree spending at the Pocatello site to build environmental compliance assets because the decision to shut down the site eliminated the need for further spending. We also recorded as an offset to these charges a commitment from Astaris to pay us $36.5 million over the next 5 years, reflecting the joint venture’s obligation to contribute to our costs for the shutdown and remediation of the site. We received $3.7 million from Astaris in 2002 related to this commitment and expect future payments to be funded from Astaris’s savings from the shutdown.

Also included in the $241.7 million of restructuring and other charges related to the U.S.-based phosphorus business was a charge of $12.0 million for other restructuring activities which were not directly related to the shutdown of Pocatello. Included in this charge were restructuring activities related to severance and decommissioning of a coke facility as well as charges related to the shutdown of two furnaces at Pocatello.

The decision to shut down Pocatello was consistent with Astaris’s plan to shift raw material supply for most products from high cost elemental phosphorus to lower cost PPA. High energy, operating and environmental costs of producing elemental phosphorus have reinforced the relative cost advantage of PPA. Over time we expected to shift our supply chain to PPA at an annual cost savings of approximately $25 million to Astaris. In addition, Astaris was able to avoid estimated future costs of $9.0 million per year associated with operating the environmental compliance assets related to the Consent Decree. The decision to shut down Pocatello in the fourth quarter of 2001 has allowed us to avoid spending of $34.5 million for the remaining capital costs associated with completing the construction of environmental compliance assets and any start-up costs for this plant, which could have been significant. Further, there also had been a concern that environmental compliance costs could escalate in future years and add further costs. In addition, estimated future costs at Astaris were expected to include a need to refurbish furnaces at Pocatello in 2004 at an estimated cost of $10.0 million.

In 2001 we recorded $12.5 million of severance and other costs related to our Agricultural Products segment as a result of our strategic refocusing on key geographic markets and crops and the realignment of our R&D resources to our core strength in insecticides. The majority of the spending related to these charges occurred in 2002. These charges will result in future savings in both selling and administrative expenses and research and development costs. The annualized savings from these restructurings were approximately $20.0 million. There were 163 severances related to these charges, the majority of which occurred in 2002.

Of the remaining 2001 restructuring and other charges of $20.0 million, approximately $17.5 million related to corporate reorganization costs due to the spin-off of Technologies with remaining charges of $2.5 million related to restructuring in Specialty Chemicals. The majority of the spending associated with these charges occurred in 2001 and in the first half of 2002. The benefit of the restructuring and other charges from our corporate reorganization and spin-off are not subject to reasonable estimation. The benefits were directly related to improving stockholder value through creating a focused chemical company. There were approximately 45 severances related to these charges, the majority occurring in 2001.

Net Interest expense in 2002 was $71.6 million compared to $58.3 million in 2001. The increase in interest expense can largely be attributed to higher average debt levels and higher interest rates from our 2002

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refinancing. (See “Liquidity and Capital Resources” and Note 10 to our consolidated financial statement included in this Form 10-K for further details on the refinancing and its effects on our results.)

Provision/benefit for income taxes. We recorded an income tax provision of $17.4 million in 2002 compared to a benefit of $166.6 million in 2001 resulting in effective tax rates of 20 percent and 35 percent, respectively. The 2001 tax benefit is a direct result of the significant restructuring and other charges and impairments recorded in 2001. The differences between the effective tax rates for these periods and the statutory U.S. Federal income taxes rate relate primarily to differing foreign tax rates, depletion, the impairment of certain assets, foreign sales corporation benefits and incremental state taxes.

Discontinued Operations. We recorded a loss from discontinued operations of $5.3 million ($3.3 million after tax) in 2002 for environmental remediation costs at sites of discontinued businesses for which we are responsible for environmental compliance. (See “Environmental Obligations” below and Note 11 to our consolidated financial statement included in this Form 10-K for further details.)

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 an 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.

Net income/loss. We recorded net income of $65.8 million in 2002 compared to a net loss of $337.7 million for 2001. This variance reflects $323.1 million of asset impairments and $280.4 million of restructuring and other charges recorded in 2001. Net income in 2002 compared to 2001, excluding asset impairments and restructuring and other charges, was lower due to lower sales in Agricultural Products and Industrial Chemicals, somewhat offset at the earnings level by lower costs through savings from our recent restructuring activities. We expect net income to be lower in 2003 compared to 2002 mostly due to increased interest expense as a result of our recent refinancing and poorer performance from Astaris in a difficult phosphorus market (see “Liquidity and Capital Resources.”)

Other Financial Data

Capital Expenditures totaled $83.9 million in 2002 compared to $145.6 million in 2001. Lower capital expenditures are the result of the lack of requirements for capital expansions and our continued focus on essential value-creating projects. Also reducing capital expenditures was the lack of spending related to environmental assets at Pocatello. The need for continued spending on these environmental assets was eliminated in the fourth quarter of 2001 with the shutdown of Pocatello.

The following are line items from our segment profit and loss statement used to reconcile segment-operating profit to consolidated income from continuing operations before income taxes and the cumulative effect of a change in accounting principle (see Note 18 to our consolidated financial statements included in this Form 10-K).

Corporate expenses were $35.6 million in 2002 and $36.3 million in 2001. Corporate expense represents shared costs that cannot be reasonably allocated among the segments.

Other income and expense, net is comprised primarily of LIFO inventory adjustments and pension income or expense. Net other loss for the year was $0.4 million compared to a net other loss of $1.6 million in 2001. This variance is largely attributable to a LIFO reserve adjustment offset by additional pension and postretirement expenses.

Segment Results—2002 compared to 2001

Segment operating profit is presented before taxes, asset impairments, restructuring and other charges, interest expense, net and other income and expense, net. Information about how each of these items relates to our

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businesses at the segment level and results by segment are discussed below and in Note 18 to our consolidated financial statements included in this Form 10-K.

Agricultural Products

Agricultural Products revenue for the year ended December 31, 2002 was $615.1 million, down 6 percent, compared to $653.1 million for the year ended December 31, 2001. Herbicide sales decreased to $135.0 million in 2002 compared to $163.6 million in 2001 mainly due to a planned reduction in sulfentrazone sales, as we shift our focus from soybeans to higher value crops, and poor weather conditions in North America. Insecticide sales were down slightly at $480.1 million in 2002 compared to $489.5 million in 2001 mostly due to weaker insecticide demand in Asia from drought conditions in Australia and channel inventory reductions, somewhat offset by the development of new applications, so-called “new labels,” and higher pest infestation levels on cotton in North America. A stronger demand and new applications in our non-agricultural markets such as turf ornamental and household pests also favorably affected sales in 2002.

Earnings for the year ended December 31, 2002 were $69.5 million compared to $72.8 million in the prior year. Lower herbicide sales and the absence of a $20.0 million profit protection payment from E.I. du Pont de Nemours and Company (“DuPont”) were more than offset by lower selling, administrative and research costs. (See Agricultural Products under “Segment Results—2001 compared to 2000.”)

Earnings also reflect Agricultural Products’ continuing strategic refocusing on key geographic markets and crops and to realign our R&D resources to our core strengths in insecticides. Related to these refocusing efforts were restructuring charges in both 2002 and 2001. In 2002 we recorded $4.7 million of restructuring charges for the idling and reorganization of our sulfentrazone plant in Baltimore and to implement our new distribution strategy in Europe. In the fourth quarter of 2001, we recorded a $12.5 million charge to eliminate all herbicide discovery research as well to reduce our direct sales and support staff to align resources to key geographic markets and crops. Restructuring charges are not included in the results of our business segments. See Restructuring and other charges under “Results of Operations—December 31, 2002 compare to December 31, 2001” for further details.

We believe our Agricultural Products segment will continue to show improvement in 2003 through new labels, sales growth from global alliances, continued cost savings and our refocus strategy.

Specialty Chemicals

Specialty Chemicals’ revenue for the year ended December 31, 2002 was $488.2 million, up 3 percent from $472.0 million in 2002. BioPolymer revenue increased to $355.2 million from $341.2 million in 2001 reflecting a stronger pharmaceutical demand for microcrystalline cellulose, for its use in binders, and steady demand for carrageenan and microcrystalline cellulose in the food ingredients market. Partially offsetting increased revenue were lower alginate sales due to weaker industrial markets and an unfavorable carrageenan mix in food ingredients. In lithium, revenue performance was $133.0 million in 2002 compared to $130.8 million in 2001. A stronger organolithium performance in the pharmaceutical and specialty polymer markets and increased demand for energy storage materials for both rechargeable and non-rechargeable batteries were offset by lower exports of lithium salts to Japan, due to a weaker economy, and the absence of a sale into the pharmaceutical markets which occurred the fourth quarter of 2001.

Earnings of $89.8 million for the year ended December 31, 2002 were 3 percent higher compared to $87.5 million for 2001. Higher earnings can be attributed to higher sales from overall BioPolymer growth, a decrease in manufacturing costs in lithium, due largely to the devaluation of the Argentine peso, and the absence of a $4.2 million ($2.8 million after tax) charge from the required change in accounting for amortization related to goodwill. Specialty Chemicals’ goodwill was the direct result of BioPolymer’s 1999 acquisition of Pronova Biopolymer AS. Lithium’s earnings were also favorably impacted by higher butyllithium sales. In addition, the large pharmaceutical sale in lithium, discussed above, delivered a high margin sale in 2001 that was not repeated in 2002.

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During 2002, our BioPolymer business experienced profit pressures within the industrial markets it serves principally with its alginate product line. As a result, in 2002 we initiated a restructuring to reduce headcount and streamline production costs. We believe that this action will further focus BioPolymer’s commercial efforts on core, high value markets, including pharmaceutical formulation, food ingredients and personal care. We will focus our efforts on improving alginates profitability in 2003 by concentrating on higher value markets.

Industrial Chemicals

Industrial Chemicals’ revenue was $753.4 million for the year ended December 31, 2002, down 8 percent, compared to $822.0 million in 2001. Alkali revenue decreased to $368.0 million in 2002 from $402.5 million in 2001 due to lower overall volumes, lower soda ash export prices and the first quarter 2002 sale of our sodium cyanide business. A portion of the decline in soda ash revenues is attributable to the substitution by some of our industrial customers of caustic soda for soda ash, which occurs when caustic prices decline substantially as they did in the first quarter of 2002. Furthermore, we experienced lower international sales volumes through the American Natural Soda Ash Association (“ANSAC”), a foreign sales association for U.S. soda ash. Foret saw a decrease in revenue to $222.5 million in the current year compared to $243.8 million in 2001 reflecting lower phosphate sales, due in part to the loss of a major European detergent customer and generally lower volumes and lower prices throughout its product lines. Somewhat offsetting decreased revenue at Foret was the favorable translation effect of a stronger euro. Peroxygens (hydrogen peroxide and active oxidants) revenue decreased to $162.9 million in 2002 from $175.7 million in 2001 due to generally lower selling prices and lower persulfate volumes, reflecting a depressed printed circuit board market. Increased hydrogen peroxide volumes in non-pulp markets along with stronger sales into the pulp markets in the second half of 2002, somewhat offset lower average selling prices and lower persulfate volumes.

Overall we have maintained earnings levels recording $71.6 million of earnings in 2002 compared to $72.6 in the prior year. Relatively flat earnings on lower sales reflected lower material costs, significant cost savings from our 2002 and 2001 restructuring efforts and lower operating costs related to reduced environmental compliance spending at Pocatello.

Reacting to market weakness in Industrial Chemicals in 2002 we recorded restructuring charges of $12.4 million to improve our cost position through reorganization changes and mothballing significant parts of our Granger caustic facility and Spring Hill, West Virginia hydrogen peroxide facility. During 2001 we recorded significant charges to impair and subsequently restructure our U.S.-based phosphorus chemicals business. Total charges for 2001 included an impairment charge of $224.2 million and restructuring and other charges of $247.9 million. Segment earnings do not include these charges. Asset impairments and restructuring and other charges are not included in our business segment results. See Asset Impairments and Restructuring and other charges above and Notes 5 and 6 to our consolidated financial statements included in this Form 10-K.

The restructuring of our U.S.-based phosphorus chemicals business in late 2001 has allowed us to continue to improve our cost structure and competitive position as we move away from the production and sourcing of elemental phosphorus. Our U.S.-based phosphorus chemicals business’s cost position should continue to improve as its PPA production increases. The shutdown of Pocatello also allowed FMC to eliminate capital spending on the environmental projects in 2002 and avoid significant start-up and certain on-going operating costs for environmental compliance issues at the site. The restructuring activities in 2002 should improve our cost and competitive position in hydrogen peroxide from the mothballing at Spring Hill.

Lower joint venture earnings at Astaris and lower volumes and price throughout the segment offset the cost savings from our restructuring activities. Lower earnings from Astaris were due to a 8 percent decrease in sales to $445.7 million in 2002 from $486.2 million in the prior year. A decreased benefit from the former power resale contract with Idaho Power and higher than expected startup costs at Astaris’s PPA plant were somewhat offset by lower sourcing costs. The total resale power benefit to Astaris in 2002 was approximately $12 million compared to approximately $34 million in 2001. This benefit will not continue in 2003.

We generally foresee minimal improvement in economic and competitive conditions within Industrial Chemicals in 2003. Because of a deterioration at Astaris resulting from increased competitive rivalry at Astaris

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and the lack of any benefit from the power resale we expect that equity losses from this joint venture will offset the anticipated improved profit performance of other products in our Industrial Chemicals segment in 2003. Furthermore, we expect to make keepwell payments based on Astaris’s 2003 performance.

Results of Operations—2001 compared to 2000

Revenue was $1,943.0 million in 2001, down 5 percent from $2,050.3 million in 2000 reflecting weaker demand from the industrial markets served by our Industrial Chemicals business segment and lower sulfentrazone sales in our Agricultural Products business segment.

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.

Industrial Chemicals recorded an impairment charge of $224.2 million in 2001. A charge of $12.3 million was for the impairment of assets in our sodium cyanide operations and $211.9 million was for the impairment of our U.S.-based phosphorus business.

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. See Asset Impairments under “Results of Operations—2002 compared to 2001” above for further details related to these charges.

During 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, 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.

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 2001. A charge of $35.2 million ($21.7 million after tax) was recorded in 2000.

Industrial Chemicals recorded restructuring and other charges of $247.9 million in 2001. The majority of this charge, $241.7 million, was for restructuring and other charges associated with our U.S.-based phosphorus operation. The balance of this charge, $6.2 million, was for restructuring activities at several sites including $5.7 million for the mothballing of our Granger soda ash facility.

Also in 2001 we recorded $12.5 million of severance and other costs related to our Agricultural Products segment, as a result of our decision to refocus certain R&D activities. The majority of the spending related to these charges occurred in 2002.

Of the remaining 2001 charges, $20.0 million related to corporate reorganization costs due to the spin-off of Technologies and to several minor reorganization costs in our Specialty Chemicals segment. The majority of the spending related to these charges occurred in 2001 and the first half of 2002.

We reduced our workforce by approximately 320 people in connection with our 2001 restructuring activities, the majority of which occurred within the same year.

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 $12.5 million of environmental charges from 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.

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Interest expense, net 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.

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 asset impairments and restructuring and other charges of $603.5 million ($405.9 million after tax) in 2001 compared to charges of $45.3 million ($27.9 million after tax) in 2000. Also contributing to the decline were poor economic conditions affecting the chemical industry worldwide.

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 percent compared to income tax expense of $33.0 million and an effective tax rate of 20.8 percent in 2000.

Discontinued operations.    We recorded a loss from discontinued operations of $42.5 million ($30.5 million after tax) in 2001. Included in this amount is a loss from Technologies of $19.6 million and a charge of $18.0 million for updated estimates of environmental remediation costs related to our other discontinued businesses.

During 2000, we recorded a loss from discontinued operations of $17.7 million ($15.0 million after tax). Of this amount, $64.0 million were from the earnings of the spun-off Technologies offset by an $80.0 million loss for a settlement of litigation related to our discontinued Defense Systems business.

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.

Other Financial Data

Capital expenditures were $145.6 million in 2001 compared to $197.3 million in 2000. Decreased capital expenditures in 2001 reflected lower spending related to environmental assets at Pocatello. The need for these environmental assets was eliminated in the fourth quarter of 2001 with the shutdown of Pocatello.

The following are line items from our segment profit and loss statement used to reconcile segment-operating profit to income from continuing operations before income taxes and the cumulative effect of a change in accounting principle (see Note 18 to our consolidated financial statements included in this Form 10-K).

Corporate expenses were $36.3 million in 2001 and $36.2 million in 2000. Corporate expense represents shared costs of the segments that cannot be reasonably allocated.

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.

Segment Results—2001 compared to 2000

Segment operating profit is presented before income taxes, asset impairments, restructuring and other charges, interest expense, net and other income and expense, net. Information about how each of these items relates to our businesses at the segment level and results by segment are discussed below and in Note 18 to our consolidated financial statements included in this Form 10-K.

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 percent from 2000.

Herbicides revenue decreased 7 percent to $163.6 million in 2001 compared to $175.9 million in 2000 reflecting the lack of sulfentrazone sales to DuPont in 2001. Herbicide sales were down reflecting these lower sulfentrazone sales; however, earnings in 2001 included a one-time, profit protection payment from DuPont of $20 million (see below). Excluding this payment, segment operating profit decreased 40 percent in 2001. Total

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sulfentrazone sales to DuPont were $16.2 million in 2000. Insecticide revenue totaled $489.5 million in 2001 compared to $488.8 million in 2000. The insecticide revenue decrease was mostly due to weakness in Asian and Latin American markets.

In 1998 we entered into an exclusive agreement with DuPont to provide them 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 North America soybean market. We believe that we have recovered approximately one third of the sulfentrazone volumes lost from the absence of DuPont’s purchases.

During the fourth quarter of 2001, Agricultural Products began a restructuring of its operations to focus on key markets and products. A restructuring charge of $12.5 million ($7.8 million after tax) was taken in 2001 to support these plans.

Specialty Chemicals

Specialty Chemicals revenue was $472.0 million in 2001, down from $488.8 million in 2000 due to lower revenue in both BioPolymer and lithium. Specialty Chemicals segment operating profit declined to $87.5 million, or 5 percent from $92.4 million in the prior year. BioPolymer revenue decreased to $341.2 million in 2001 compared to $350.8 million in 2000 due to a combination of a weaker euro, weaker demand from customer inventory corrections and lower selling prices for alginates and carrageenan in specialty markets. Lithium revenue decreased to $130.8 million in 2001 from $138.0 million in 2000 resulting from our strategic exit from the commodity lithium carbonate market and slower industrial markets, particularly in Europe.

Industrial Chemicals

Industrial Chemicals revenue decreased to $822.0 million in 2001, down 9 percent compared to $905.6 million in 2000. Industrial Chemicals’ segment operating profit declined by 36.6 percent to $72.6 million in 2001 from $114.5 million in 2000.

Alkali revenue was relatively flat in 2001 at $402.5 million compared to $402.0 million in the prior year. Peroxygens revenue (hydrogen peroxide and active oxidants) of $175.7 million in 2001 compared to $189.2 million in 2000 was down despite the price increases initiated in late 2000 and the application of an energy surcharge in early 2001. Foret, our Spanish operation, recorded revenue of $243.8 million compared to $235.2 million in 2000 reflecting strong phosphate and zeolite markets.

The 2001 and 2000 revenue comparison was further affected by the inclusion of sales from our U.S.-based phosphorus chemicals business in the first three months of 2000, which totaled $79.2 million. Subsequent to March of 2000, U.S. phosphorus chemical sales have been deconsolidated and reflected through our equity investment in Astaris.

Lower operating profit reflected economic weakness during the year, increased power costs, consent decree spending at Pocatello and the PPA plant startup costs.

During 2001 we continued to execute our business plan for our Industrial Chemicals business segment which included significant restructuring activities as well as our continued review of long-term assets for impairment. The goal was to mitigate the future effects of the anticipated economic slowdown as well as prepare the business for long-term growth while maximizing cash generation. Asset impairments totaled $224.2 million and restructuring and other charges related to these activities totaled $247.9 million in 2001. Restructuring and other charges included $96.5 million for restructuring activities in our U.S.-based phosphorus chemicals and cyanide businesses and $151.4 million of other charges related to our U.S.-based phosphorus chemicals business.

New Accounting Standards Adopted

On January 1, 2002 we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” For further discussion of the effect of this recently adopted standard see Note 1 to our consolidated financial statements included in this Form 10-K.

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On January 1, 2002, we 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,” and establishes a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The Statement retains most of the requirements 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 2002.

In April 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 145 “Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB No. 14, and Technical Corrections.” The Statement rescinds or amends a number of existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. In 2002, with the retirement of our Meridian Gold debentures, we elected to adopt SFAS No. 145 early and recorded a $3.1 million loss ($1.9 million after tax) in 2002 related to the early retirement of these debentures in selling, general and administrative expenses in accordance with SFAS No. 145.

In November 2002, the FASB issued Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires that the guarantor recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing such a guarantee. FIN 45 also requires additional disclosure about the guarantor’s obligations under certain guarantees that it has issued. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002 and the disclosure requirements are effective after December 15, 2002, and are included in Note 17 to our consolidated financial statements included in this Form 10-K.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—An amendment of FASB Statement No. 123” (“SFAS No. 148”). This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. Effective January 1, 2003, we adopted the disclosure requirements of SFAS No. 148 regarding disclosure requirements for condensed consolidated financial statements for interim periods. We have determined that our company will not make the voluntarily change to the fair value based method of accounting for stock-based employee compensation.

On January 1, 2001, we 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 required our 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 the type of hedging transaction and whether a derivative is designated as an effective hedge. In accordance with the provisions of the Statement, we recorded a first quarter 2001 loss from the cumulative effect of a change in accounting principle of $0.9 million after-tax in the consolidated statement of earnings, and a deferred gain of $16.4 million after-tax in accumulated other comprehensive loss.

New Accounting Standards

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 expect to adopt the provisions of this pronouncement in 2003, as required. The effects of adoption, if any, are currently being evaluated.

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In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This standard addresses the accounting and reporting for costs of so-called “exit activities” (including restructuring) and for the disposal of long-lived assets. The standard changes some of the criteria for recognizing a liability for these activities. It is effective beginning in 2003 with the liability recognition criteria under the standard applied prospectively. We will adopt SFAS No. 146 beginning in 2003 and are evaluating the potential impact of adoption on our accounting policies regarding exit and disposal activities.

Environmental Obligations

Our company, like other industrial manufacturers, is involved with a variety of environmental matters in the ordinary course of conducting its business and is 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 EPA or other government agencies identifying our company as a 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 shareholders.

We provided environmental provisions totaling $10.2 million in 2002. This included charges related to environmental sites of discontinued businesses and continuing operating sights. In 2001 we provided $68.8 million of environmental provisions related to operating and discontinued sites, of which $47.4 million was for additional remediation related to the shutdown of Pocatello. In the second quarter of 2000, we provided environmental provisions totaling $12.5 million related to ongoing remediation of several phosphorus properties.

Additional information regarding our environmental accounting policies and environmental liabilities is included in “Application of Critical Accounting Policies” and Notes 1 and 11, respectively to our consolidated financial statements included in this Form 10-K. Information regarding environmental obligations associated with our discontinued operations is included in Note 11 to our consolidated financial statements included in this Form 10-K. Estimates of 2002 environmental spending are included in “Liquidity and Capital Resources.”

Liquidity and Capital Resources

During 2002, we strengthened our liquidity position and obtained adequate capital resources for planned business operations by completing a series of financing transactions.

On June 12, 2002, we issued 3.25 million shares of common stock and used the net proceeds of $101.3 million to reduce amounts borrowed under our $240.0 million senior unsecured revolving credit facility. This was the first step in a refinancing plan in which we intended subsequently to issue unsecured bonds and renew and extend the maturity of our $240.0 million revolving credit facility.

In June 2003, subsequent to the completion of our common stock offering, Moody’s lowered its rating of our long-term debt from Baa3 to Ba1. Moody’s rating of Baa3 is the tenth level from the top of its ratings scale comprised of twenty long-term debt ratings. Its downgrade of our long-term debt rating by one level to Ba1, or the eleventh of twenty ratings, was from its lowest investment-grade rating to the highest level of the non-investment-grade category. Moody’s also lowered its rating of our short-term debt from P-3 to NP, the fourth level from the top of its five-level short-term debt ratings scale. Subsequent to these actions by Moody’s, we ceased offerings under our commercial paper program and repaid maturities through borrowings under our $240.0 million senior unsecured revolving credit facility. Also resulting from the downgrade in our credit ratings, availability decreased under our former accounts receivable securitization program, which was offset by increased borrowings under our $240.0 million senior unsecured revolving credit facility. The ratings downgrades resulted in several changes to our refinancing plan.

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On October 21, 2002, we completed a refinancing in which we issued $355.0 million aggregate principal amount of 10.25 percent senior secured notes due 2009 (the “Notes”) at a discount of $4.4 million. Simultaneously, we entered into a new $500.0 million senior secured credit agreement (the “Credit Agreement”), which provides for a $250.0 million revolving credit facility and a $250.0 million term loan facility, and obtained a $40.0 million supplemental secured standby letter of credit facility (the “Supplemental Letter of Credit Facility” and together with the Credit Agreement, the “Credit Facilities”). On October 21, 2002 we obtained $244.9 million, net of discounts, from the Credit Agreement’s term loan facility. The net proceeds from the sale of the Notes and borrowings under the Credit Agreement totaling $595.5 million were used to:

The Supplemental Letter of Credit Facility was utilized in connection with our refinancing to provide letters of credit totaling $39.9 million in support of self-insurance programs and environmental obligations.

Among other restrictions, the Credit Facilities contain financial covenants related to leverage (measured as the ratio of adjusted earnings to debt), interest coverage (measured as the ratio of interest expense to adjusted earnings), consolidated net worth and capital spending. We were in compliance with all debt covenants at December 31, 2002. See Note 10 of our consolidated financial statements included in this Form 10-K for a summary of the terms for both the Notes and the new Credit Facilities.

Prior to the completion of our refinancing, we obtained funding through an accounts receivable securitization program. We sold receivables, without recourse, through our wholly owned bankruptcy-remote subsidiary, FMC Funding Corporation, which then sold the receivables to an unrelated finance company. The sold receivables and repurchase obligations related to the securitization program were not recorded on our consolidated balance sheet. The accounting for our former accounts receivable securitization program was in accordance with the requirements of SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” The transfer of accounts receivable qualified as a sale under the provisions of SFAS No. 140 as a result of our surrender of control of these financial assets, without recourse, in exchange for cash. Accordingly, we recorded a reduction of accounts receivable equal to the total amount of cash received from FMC Funding Corporation in connection with the transaction. The downgrade of our long-term debt rating by Moody’s in June 2002 reduced the funds available to us from this program. Funds from the accounts receivable securitization totaled $79.0 million at December 31, 2001. On October 21, 2002 we terminated our accounts receivable securitization program with proceeds from our new financing.

We maintained a $240.0 million committed revolving credit facility that was scheduled to expire in December 2002. The total amount outstanding under this facility at December 31, 2001 was $68.0 million. In January 2002, we obtained a supplemental $50.0 million committed credit facility to meet short-term seasonal financing needs. In August 2002, this supplemental credit facility was amended to reduce its availability to $25.0 million and to extend its maturity to October 31, 2002. Upon completion of our refinancing we repaid

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outstanding borrowings of $136.1 million and terminated the $240.0 million revolving credit facility with the proceeds from our refinancing. We also terminated the supplemental credit facility, under which there were no outstanding borrowings when terminated.

At December 31, 2002, we had total debt of $1,267.0 million compared to debt of $923.5 million as of December 31, 2001. This included $64.3 million of short-term debt at December 31, 2002, comprised almost entirely of foreign borrowings, compared to $136.5 million at December 31, 2001. There were no revolving credit borrowings outstanding under our new Credit Agreement at December 31, 2002.

During 2002 significant events affecting our liquidity included:

Spending against restructuring and other reserves of $91.8 million, including paying $32.3 million for the shutdown and remediation our Pocatello plant; paying $131.6 million for scheduled maturities and for redemptions of long-term debt; paying $32.5 million to redeem all of the outstanding 6.75 percent exchangeable senior subordinated debentures; redeeming $17.1 million of our 6.375 percent debentures due September 2003 and issuing 3.25 million shares of common stock with net proceeds of $101.3 million.

Cash and cash equivalents at December 31, 2002 and December 31, 2001 were $89.6 million and $23.4 million, respectively.

Cash provided by operating activities was $136.2 million for the year ended December 31, 2002 compared to cash required by operating activities of $52.9 million in 2001 and cash provided by operating activities of $272.4 million in 2000. Historically, cash flows from operating activities have funded a substantial portion of our cash requirements. In 2002 and 2001 cash from operating activities was reduced by the net cash impact of spending related to our restructuring and other charges. Included in our operating cash activities in 2002 is $63.8 million for spending on restructuring and other activities, including $32.3 million for the shutdown and remediation of Pocatello. The future spending against restructuring reserves related to the Pocatello shutdown of $53.0 million at December 2002 is expected to continue through 2007 with progressively less spent in each of the future years. Accounts payable and accrued liabilities decreased significantly in 2002 reflecting lower business activity, including lower inventory, in 2002 than in 2001. Also favorably affecting our 2002 cash provided by operating activities was improved collections of accounts receivable especially within Agricultural Products, particularly in Latin America.

Cash required by discontinued operations for the twelve months ended December 31, 2002, 2001 and 2000 was $29.6 million, $111.9 million and $50.1 million, respectively. The majority of the spending for our discontinued operations is for environmental remediation on discontinued sites and post-employment benefits for former employees of discontinued businesses. In the first quarter of 2001 the company made an $80.0 million payment for the settlement of litigation related to our discontinued defense systems business.

Cash required by investing activities was $110.8 million, $169.6 million, and $97.4 million for the years ended December 31, 2002, 2001 and 2000, respectively. The majority of this spending related to capital additions to our property, plant and equipment to maintain operating standards and comply with environmental, health and safety regulations. Also included in investing activities are keepwells to Astaris of $29.6 million and $31.3 million for 2002 and 2001, respectively. A planned reduction in capital spending in 2002 compared to 2001 contributed to the decline in cash required by investing activities. Additionally, 2001 included approximately $43 million for spending on environmental remediation assets at Pocatello. The fourth quarter 2001 decision to shut down Pocatello enabled us to curtail this spending. Cash required by investing activities in 2000 was reduced by a net cash distribution by Astaris to FMC of $88.8 million.

Cash provided by financing activities for 2002 of $65.8 million decreased by $271.3 million when compared to cash provided by financing activities of $346.7 million in 2001. Our 2002 financing activities included a net increase in long-term debt of $384.1 million from net proceeds of our refinancing of $595.5 million. The current year’s activity also reflects $181.2 million paid to redeem long-term debt, a $37.8 million decrease in our vendor

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financing and $65.0 million paid to terminate our accounts receivable securitization program in October 2002. This program had an outstanding balance of $79.0 million at December 31, 2001. Our long-term debt repayments included payments of $10.4 million, $25.0 million and $99.5 million, respectively, in the first, second and fourth quarters of 2002 for scheduled maturities, the redemption of $17.1 million aggregate principal amount of our 6.37 percent debentures due September 2003 and several other minor maturities. We also made payments of $32.5 million to redeem all outstanding 6.75 percent exchangeable senior subordinated debentures. Financing sources included $101.3 million, net of issuance costs, from the issuance of 3.25 million shares of common stock in the second quarter of 2002, which was used to reduce outstanding borrowings under our former $240.0 million revolving credit facility, which was terminated upon the completion of our refinancing in October 2002. Our 2001 financing activities included $430.7 million from the IPO of Technologies, net of contributions to Technologies to support their operating cash needs.

Commitments and other potential liquidity needs

Our 2003 cash needs include operating cash requirements, capital expenditures, scheduled maturities of long-term debt, equity contributions to Astaris, an expected contingent payment due at year-end 2003 related to the acquisition of Tg Soda Ash, environmental spending and restructuring spending. We plan to meet these liquidity needs through cash generated from operations and borrowings under the new Credit Agreement.

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 shortfalls in Astaris’s earnings below certain levels. Astaris’s earnings did not meet the agreed levels for 2002 and 2001 and we do not expect that such earnings will meet the levels agreed for 2003. We contributed $29.6 million to Astaris under this arrangement in 2002 and $31.3 million in 2001. We expect our equity contributions to Astaris in 2003 to be between $35 million and $50 million. The proportional amount of Astaris’s indebtedness subject to this agreement from FMC was approximately $84.0 million at December 31, 2002. In 2002, certain amendments to the agreement under which FMC makes equity contributions to Astaris that were necessary to complete our refinancing were obtained from Astaris’s lenders.

On June 30, 1999, we acquired 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.

Projected 2003 spending also includes approximately $50 million of environmental remediation spending, of which $25 million relates to Pocatello and $25 million for other operating and discontinued business sites. This spending does not include expected spending of approximately $7 million and $9 million in 2003 and 2004, respectively, on capital projects relating to environmental control facilities. Also, we expect to spend in the range of approximately $20 million to $25 million annually in 2003 and in 2004 for environmental compliance costs, which are an operating cost of the company and are not covered by established reserves.

Other commitments that could affect our liquidity include the following:

In connection with the spin-off of Technologies, we retained liability for various contingent obligations totaling $289.0 million at December 31, 2001. Contractual releases obtained by FMC have reduced this amount to $14.5 million at December 31, 2002. We expect this amount to decline further in 2003. Contingent obligations include guarantees of the performance of Technologies under various customer contracts, reimbursements on behalf of Technologies under letters of credit, and guarantees of indebtedness of Technologies. We have a guaranty agreement from Technologies providing for reimbursement to us if we are ever called upon to satisfy these obligations. 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.

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In the ordinary course of business, we provide credit enhancements to governmental agencies, insurance companies, and others for our environmental obligations, self-insurance programs and other future business commitments. As part of our refinancing, we funded $130.8 million into a Restricted Cash Collateral Account, to provide for future cash collateralization of a portion of these obligations. Additionally, we obtained $39.9 million of standby letters of credit under our Supplemental Letter of Credit Facility.

At December 31, 2002 there was $41.0 million principal amount outstanding of variable rate industrial and pollution control revenue bonds supported by $43.4 million in bank letters of credit. Subsequent to December 31, 2002, as part of our refinancing, we obtained sufficient cash to collateralize, fully, these letters of credit.

We provide parent guarantees to lending institutions providing credit to our foreign subsidiaries. The outstanding amounts of debt guaranteed were $64.3 million and $68.5 million, respectively, at December 31, 2002 and 2001.

We provide guarantees to financial institutions on behalf of certain Agricultural Products customers in Brazil for their seasonal borrowing needs. The customers’ obligations to us are largely secured by liens on their crops. The total of these guarantees at December 31, 2002 was $18.2 million compared to $56.0 million at December 31, 2001. We also provide guarantees to financial institutions on behalf of certain Agricultural Products customers in Brazil to support their importation of third-party agricultural products. These guarantees totaled $4.5 million and $10.0 million December 31, 2002 and at December 31, 2001, respectively.

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