UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_______________________________________________________________________ | | | | | |
| ☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2021March 31, 2022
or | | | | | |
| ☐ | Transition Report Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 |
For the transition period from _______ to _______
Commission File Number 1-2376
FMC CORPORATION
(Exact name of registrant as specified in its charter)
__________________________________________________________________________ | | | | | | | | | | | |
| Delaware | | 94-0479804 |
(State or other jurisdiction of
incorporation) | | (I.R.S. Employer
Identification No.) |
| | |
| 2929 Walnut Street | Philadelphia | Pennsylvania | 19104 |
| (Address of principal executive offices) | | | (Zip Code) |
Registrant’s telephone number, including area code: 215-299-6000
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common Stock, par value $0.10 per share | | FMC | | New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
| | | | | | |
| Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | | | |
| | | | Emerging growth company | | ☐ |
| | | | | | |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | |
| ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
As of September 30, 2021,March 31, 2022, there were 126,751,495125,939,275 of the registrant's common shares outstanding.
FMC CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | |
| (in Millions, Except Per Share Data) | (in Millions, Except Per Share Data) | (unaudited) | | (unaudited) | (in Millions, Except Per Share Data) | (unaudited) | |
| Revenue | Revenue | $ | 1,194.0 | | | $ | 1,084.6 | | | $ | 3,631.6 | | | $ | 3,489.9 | | Revenue | $ | 1,350.8 | | | $ | 1,195.6 | | |
| Costs and Expenses | Costs and Expenses | | | | | | | | Costs and Expenses | | | | |
| Costs of sales and services | Costs of sales and services | 681.2 | | | 618.2 | | | 2,074.6 | | | 1,939.3 | | Costs of sales and services | 778.1 | | | 683.2 | | |
| Gross margin | Gross margin | $ | 512.8 | | | $ | 466.4 | | | $ | 1,557.0 | | | $ | 1,550.6 | | Gross margin | $ | 572.7 | | | $ | 512.4 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 183.5 | | | 187.7 | | | 519.0 | | | 548.1 | | Selling, general and administrative expenses | 188.5 | | | 174.5 | | |
| Research and development expenses | Research and development expenses | 79.5 | | | 71.7 | | | 219.4 | | | 203.3 | | Research and development expenses | 71.8 | | | 74.0 | | |
| Restructuring and other charges (income) | Restructuring and other charges (income) | 32.8 | | | 11.0 | | | 52.3 | | | 43.9 | | Restructuring and other charges (income) | 9.1 | | | 3.2 | | |
| | Total costs and expenses | Total costs and expenses | $ | 977.0 | | | $ | 888.6 | | | $ | 2,865.3 | | | $ | 2,734.6 | | Total costs and expenses | $ | 1,047.5 | | | $ | 934.9 | | |
| Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes | $ | 217.0 | | | $ | 196.0 | | | $ | 766.3 | | | $ | 755.3 | | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes | $ | 303.3 | | | $ | 260.7 | | |
| | Non-operating pension and postretirement charges (income) | Non-operating pension and postretirement charges (income) | 5.1 | | | 11.6 | | | 14.7 | | | 16.0 | | Non-operating pension and postretirement charges (income) | 4.3 | | | 4.8 | | |
| | Interest expense, net | Interest expense, net | 33.1 | | | 35.5 | | | 98.1 | | | 117.0 | | Interest expense, net | 29.9 | | | 32.4 | | |
| Income (loss) from continuing operations before income taxes | Income (loss) from continuing operations before income taxes | $ | 178.8 | | | $ | 148.9 | | | $ | 653.5 | | | $ | 622.3 | | Income (loss) from continuing operations before income taxes | $ | 269.1 | | | $ | 223.5 | | |
| Provision (benefit) for income taxes | Provision (benefit) for income taxes | 8.7 | | | 18.4 | | | 74.3 | | | 82.3 | | Provision (benefit) for income taxes | 42.3 | | | 32.2 | | |
| Income (loss) from continuing operations | Income (loss) from continuing operations | $ | 170.1 | | | $ | 130.5 | | | $ | 579.2 | | | $ | 540.0 | | Income (loss) from continuing operations | $ | 226.8 | | | $ | 191.3 | | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | (9.7) | | | (18.4) | | | (32.4) | | | (36.7) | | Discontinued operations, net of income taxes | (15.2) | | | (8.1) | | |
| Net income (loss) | Net income (loss) | $ | 160.4 | | | $ | 112.1 | | | $ | 546.8 | | | $ | 503.3 | | Net income (loss) | $ | 211.6 | | | $ | 183.2 | | |
| Less: Net income (loss) attributable to noncontrolling interests | Less: Net income (loss) attributable to noncontrolling interests | 2.5 | | | 0.7 | | | 3.4 | | | 1.3 | | Less: Net income (loss) attributable to noncontrolling interests | 4.2 | | | 0.6 | | |
| | Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 157.9 | | | $ | 111.4 | | | $ | 543.4 | | | $ | 502.0 | | Net income (loss) attributable to FMC stockholders | $ | 207.4 | | | $ | 182.6 | | |
| Amounts attributable to FMC stockholders: | Amounts attributable to FMC stockholders: | | | | | | | | Amounts attributable to FMC stockholders: | | | | |
| Continuing operations, net of income taxes | Continuing operations, net of income taxes | $ | 167.6 | | | $ | 129.8 | | | $ | 575.8 | | | $ | 538.7 | | Continuing operations, net of income taxes | $ | 222.6 | | | $ | 190.7 | | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | (9.7) | | | (18.4) | | | (32.4) | | | (36.7) | | Discontinued operations, net of income taxes | (15.2) | | | (8.1) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 157.9 | | | $ | 111.4 | | | $ | 543.4 | | | $ | 502.0 | | Net income (loss) attributable to FMC stockholders | $ | 207.4 | | | $ | 182.6 | | |
| Basic earnings (loss) per common share attributable to FMC stockholders: | Basic earnings (loss) per common share attributable to FMC stockholders: | | | | | | | | Basic earnings (loss) per common share attributable to FMC stockholders: | | | | |
| Continuing operations | Continuing operations | $ | 1.30 | | | $ | 1.00 | | | $ | 4.46 | | | $ | 4.14 | | Continuing operations | $ | 1.77 | | | $ | 1.47 | | |
| Discontinued operations | Discontinued operations | (0.08) | | | (0.14) | | | (0.25) | | | (0.28) | | Discontinued operations | (0.12) | | | (0.06) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 1.22 | | | $ | 0.86 | | | $ | 4.21 | | | $ | 3.86 | | Net income (loss) attributable to FMC stockholders | $ | 1.65 | | | $ | 1.41 | | |
| Diluted earnings (loss) per common share attributable to FMC stockholders: | Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | | | | | Diluted earnings (loss) per common share attributable to FMC stockholders: | | | | |
| Continuing operations | Continuing operations | $ | 1.30 | | | $ | 0.99 | | | $ | 4.44 | | | $ | 4.12 | | Continuing operations | $ | 1.76 | | | $ | 1.46 | | |
| Discontinued operations | Discontinued operations | (0.08) | | | (0.14) | | | (0.25) | | | (0.28) | | Discontinued operations | (0.12) | | | (0.06) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 1.22 | | | $ | 0.85 | | | $ | 4.19 | | | $ | 3.84 | | Net income (loss) attributable to FMC stockholders | $ | 1.64 | | | $ | 1.40 | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | |
| (in Millions) | (in Millions) | (unaudited) | | (unaudited) | (in Millions) | (unaudited) | |
| Net income (loss) | Net income (loss) | $ | 160.4 | | | $ | 112.1 | | | $ | 546.8 | | | $ | 503.3 | | Net income (loss) | $ | 211.6 | | | $ | 183.2 | | |
| Other comprehensive income (loss), net of tax: | Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | | |
| Foreign currency adjustments: | Foreign currency adjustments: | | Foreign currency adjustments: | | |
| Foreign currency translation gain (loss) arising during the period | Foreign currency translation gain (loss) arising during the period | $ | (26.8) | | | $ | 41.7 | | | $ | (61.3) | | | $ | 27.8 | | Foreign currency translation gain (loss) arising during the period | $ | (39.4) | | | $ | (49.8) | | |
| Total foreign currency translation adjustments (1) | Total foreign currency translation adjustments (1) | $ | (26.8) | | | $ | 41.7 | | | $ | (61.3) | | | $ | 27.8 | | Total foreign currency translation adjustments (1) | $ | (39.4) | | | $ | (49.8) | | |
| | Derivative instruments: | Derivative instruments: | | Derivative instruments: | | |
| Unrealized hedging gains (losses) and other, net of tax expense (benefit) of $0.5 and $2.5 for the three and nine months ended September 30, 2021 and $(3.9) and $3.0 for the three and nine months ended September 30, 2020, respectively. | $ | 41.6 | | | $ | 3.9 | | | $ | 34.1 | | | $ | 29.3 | | |
Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax (expense) benefit of $0.6 and $3.6 for the three and nine months ended September 30, 2021 and $3.4 and $(0.5) for the three and nine months ended September 30, 2020, respectively (2) | 0.6 | | | 3.3 | | | 11.8 | | | (15.4) | | |
| Total derivative instruments, net of tax expense (benefit) of $1.1 and $6.1 for the three and nine months ended September 30, 2021 and $(0.5) and $2.5 for the three and nine months ended September 30, 2020, respectively | $ | 42.2 | | | $ | 7.2 | | | $ | 45.9 | | | $ | 13.9 | | |
| Unrealized hedging gains (losses) and other, net of tax expense (benefit) of $(0.5) and $4.0 for the three months ended March 31, 2022 and 2021, respectively | | Unrealized hedging gains (losses) and other, net of tax expense (benefit) of $(0.5) and $4.0 for the three months ended March 31, 2022 and 2021, respectively | $ | (84.7) | | | $ | 40.5 | | |
Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax (expense) benefit of $1.5 and $0.8 for the three months ended March 31, 2022 and 2021, respectively (2) | | Reclassification of deferred hedging (gains) losses and other, included in net income, net of tax (expense) benefit of $1.5 and $0.8 for the three months ended March 31, 2022 and 2021, respectively (2) | 0.6 | | | 4.1 | | |
| Total derivative instruments, net of tax expense (benefit) of $1.0 and $4.8 for the three months ended March 31, 2022 and 2021, respectively | | Total derivative instruments, net of tax expense (benefit) of $1.0 and $4.8 for the three months ended March 31, 2022 and 2021, respectively | $ | (84.1) | | | $ | 44.6 | | |
| | Pension and other postretirement benefits: | Pension and other postretirement benefits: | | Pension and other postretirement benefits: | | |
| Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax expense (benefit) of zero and zero for the three and nine months ended September 30, 2021 and $(0.1) and zero for the three and nine months ended September 30, 2020, respectively | $ | 0.1 | | | $ | 0.2 | | | $ | — | | | $ | — | | |
Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income, net of tax (expense) benefit of $1.2 and $3.5 for the three and nine months ended September 30, 2021 and $2.3 and $3.2 for the three and nine months ended September 30, 2020, respectively (2) | 4.5 | | | 8.8 | | | 13.2 | | | 12.0 | | |
| Total pension and other postretirement benefits, net of tax expense (benefit) of $1.2 and $3.5 for the three and nine months ended September 30, 2021 and $2.2 and $3.2 for the three and nine months ended September 30, 2020, respectively | $ | 4.6 | | | $ | 9.0 | | | $ | 13.2 | | | $ | 12.0 | | |
| Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax expense (benefit) of zero and zero for the three months ended March 31, 2022 and 2021, respectively | | Unrealized actuarial gains (losses) and prior service (costs) credits, net of tax expense (benefit) of zero and zero for the three months ended March 31, 2022 and 2021, respectively | $ | — | | | $ | (0.1) | | |
Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income, net of tax (expense) benefit of $1.0 and $1.1 for the three months ended March 31, 2022 and 2021, respectively (2) | | Reclassification of net actuarial and other (gain) loss and amortization of prior service costs, included in net income, net of tax (expense) benefit of $1.0 and $1.1 for the three months ended March 31, 2022 and 2021, respectively (2) | 3.6 | | | 4.4 | | |
| Total pension and other postretirement benefits, net of tax expense (benefit) of $1.0 and $1.1 for the three months ended March 31, 2022 and 2021, respectively | | Total pension and other postretirement benefits, net of tax expense (benefit) of $1.0 and $1.1 for the three months ended March 31, 2022 and 2021, respectively | $ | 3.6 | | | $ | 4.3 | | |
| | Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | $ | 20.0 | | | $ | 57.9 | | | $ | (2.2) | | | $ | 53.7 | | Other comprehensive income (loss), net of tax | $ | (119.9) | | | $ | (0.9) | | |
| Comprehensive income (loss) | Comprehensive income (loss) | $ | 180.4 | | | $ | 170.0 | | | $ | 544.6 | | | $ | 557.0 | | Comprehensive income (loss) | $ | 91.7 | | | $ | 182.3 | | |
| Less: Comprehensive income (loss) attributable to the noncontrolling interest | Less: Comprehensive income (loss) attributable to the noncontrolling interest | 2.2 | | | 1.3 | | | 3.2 | | | 0.9 | | Less: Comprehensive income (loss) attributable to the noncontrolling interest | 4.2 | | | 0.3 | | |
| Comprehensive income (loss) attributable to FMC stockholders | Comprehensive income (loss) attributable to FMC stockholders | $ | 178.2 | | | $ | 168.7 | | | $ | 541.4 | | | $ | 556.1 | | Comprehensive income (loss) attributable to FMC stockholders | $ | 87.5 | | | $ | 182.0 | | |
____________________
(1)Income taxes are not provided for foreign currency translation because the related investments are essentially permanent in duration.
(2)For more detail on the components of these reclassifications and the affected line item in the condensed consolidated statements of income (loss) see Note 15.13.
The accompanying notes are an integral part of these condensed consolidated financial statements.
FMC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| | (in Millions, Except Share and Par Value Data) | (in Millions, Except Share and Par Value Data) | September 30, 2021 | | December 31, 2020 | (in Millions, Except Share and Par Value Data) | March 31, 2022 | | December 31, 2021 |
| ASSETS | ASSETS | (unaudited) | ASSETS | (unaudited) |
| Current assets | Current assets | | Current assets | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 341.0 | | | $ | 568.9 | | Cash and cash equivalents | $ | 365.1 | | | $ | 516.8 | |
| Trade receivables, net of allowance of $32.9 in 2021 and $27.9 in 2020 | 2,503.5 | | | 2,330.3 | | |
| Trade receivables, net of allowance of $39.6 in 2022 and $37.4 in 2021 | | Trade receivables, net of allowance of $39.6 in 2022 and $37.4 in 2021 | 2,868.6 | | | 2,583.7 | |
| Inventories | Inventories | 1,450.5 | | | 1,095.6 | | Inventories | 1,590.7 | | | 1,405.7 | |
| Prepaid and other current assets | Prepaid and other current assets | 433.2 | | | 380.8 | | Prepaid and other current assets | 474.0 | | | 431.4 | |
| | Total current assets | Total current assets | $ | 4,728.2 | | | $ | 4,375.6 | | Total current assets | $ | 5,298.4 | | | $ | 4,937.6 | |
| Investments | Investments | 8.6 | | | 3.1 | | Investments | 10.2 | | | 9.2 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 782.2 | | | 771.7 | | Property, plant and equipment, net | 804.1 | | | 817.0 | |
| Goodwill | Goodwill | 1,464.3 | | | 1,468.9 | | Goodwill | 1,463.1 | | | 1,463.3 | |
| Other intangibles, net | Other intangibles, net | 2,546.2 | | | 2,625.2 | | Other intangibles, net | 2,491.5 | | | 2,521.9 | |
| Other assets including long-term receivables, net | Other assets including long-term receivables, net | 667.3 | | | 712.3 | | Other assets including long-term receivables, net | 614.1 | | | 613.8 | |
| Deferred income taxes | Deferred income taxes | 213.4 | | | 229.6 | | Deferred income taxes | 223.4 | | | 218.5 | |
| | Total assets | Total assets | $ | 10,410.2 | | | $ | 10,186.4 | | Total assets | $ | 10,904.8 | | | $ | 10,581.3 | |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Short-term debt and current portion of long-term debt | Short-term debt and current portion of long-term debt | $ | 762.0 | | | $ | 338.3 | | Short-term debt and current portion of long-term debt | $ | 1,040.4 | | | $ | 440.8 | |
| Accounts payable, trade and other | Accounts payable, trade and other | 1,101.4 | | | 946.7 | | Accounts payable, trade and other | 1,057.4 | | | 1,135.0 | |
| Advance payments from customers | Advance payments from customers | 3.2 | | | 347.1 | | Advance payments from customers | 40.0 | | | 630.7 | |
| Accrued and other liabilities | Accrued and other liabilities | 615.1 | | | 674.7 | | Accrued and other liabilities | 678.8 | | | 631.2 | |
| | Accrued customer rebates | Accrued customer rebates | 678.4 | | | 295.2 | | Accrued customer rebates | 653.3 | | | 406.7 | |
| Guarantees of vendor financing | Guarantees of vendor financing | 155.1 | | | 140.6 | | Guarantees of vendor financing | 261.1 | | | 206.2 | |
| Accrued pension and other postretirement benefits, current | Accrued pension and other postretirement benefits, current | 4.2 | | | 4.2 | | Accrued pension and other postretirement benefits, current | 4.3 | | | 4.3 | |
| Income taxes | Income taxes | 108.2 | | | 82.2 | | Income taxes | 94.0 | | | 65.4 | |
| | Total current liabilities | Total current liabilities | $ | 3,427.6 | | | $ | 2,829.0 | | Total current liabilities | $ | 3,829.3 | | | $ | 3,520.3 | |
| Long-term debt, less current portion | Long-term debt, less current portion | 2,631.7 | | | 2,929.5 | | Long-term debt, less current portion | 2,732.4 | | | 2,731.7 | |
| Accrued pension and other postretirement benefits, long-term | Accrued pension and other postretirement benefits, long-term | 44.2 | | | 46.4 | | Accrued pension and other postretirement benefits, long-term | 40.2 | | | 41.8 | |
| Environmental liabilities, continuing and discontinued | Environmental liabilities, continuing and discontinued | 402.0 | | | 443.5 | | Environmental liabilities, continuing and discontinued | 393.6 | | | 415.9 | |
| Deferred income taxes | Deferred income taxes | 345.3 | | | 350.0 | | Deferred income taxes | 339.2 | | | 342.4 | |
| Other long-term liabilities | Other long-term liabilities | 502.4 | | | 603.8 | | Other long-term liabilities | 487.9 | | | 477.3 | |
| | Commitments and contingent liabilities (Note 19) | 0 | | 0 | |
| Commitments and contingent liabilities (Note 18) | | Commitments and contingent liabilities (Note 18) | 0 | | 0 |
| Equity | Equity | | Equity | |
| Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2021 or 2020 | $ | — | | | $ | — | | |
| Common stock, $0.10 par value, authorized 260,000,000 shares; 185,983,792 issued shares in 2021 and 2020 | 18.6 | | | 18.6 | | |
| Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2022 or 2021 | | Preferred stock, no par value, authorized 5,000,000 shares; no shares issued in 2022 or 2021 | $ | — | | | $ | — | |
| Common stock, $0.10 par value, authorized 260,000,000 shares; 185,983,792 issued shares in 2022 and 2021 | | Common stock, $0.10 par value, authorized 260,000,000 shares; 185,983,792 issued shares in 2022 and 2021 | 18.6 | | | 18.6 | |
| Capital in excess of par value of common stock | Capital in excess of par value of common stock | 874.6 | | | 860.2 | | Capital in excess of par value of common stock | 890.9 | | | 880.4 | |
| Retained earnings | Retained earnings | 4,864.9 | | | 4,506.4 | | Retained earnings | 5,131.8 | | | 4,991.3 | |
| Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (284.2) | | | (282.2) | | Accumulated other comprehensive income (loss) | (435.6) | | | (315.7) | |
| Treasury stock, common, at cost - 2021: 59,232,297 shares, 2020: 56,630,209 shares | (2,442.5) | | | (2,141.2) | | |
| Treasury stock, common, at cost - 2022: 60,044,517 shares, 2021: 60,284,313 shares | | Treasury stock, common, at cost - 2022: 60,044,517 shares, 2021: 60,284,313 shares | (2,546.6) | | | (2,542.1) | |
| Total FMC stockholders’ equity | Total FMC stockholders’ equity | $ | 3,031.4 | | | $ | 2,961.8 | | Total FMC stockholders’ equity | $ | 3,059.1 | | | $ | 3,032.5 | |
| Noncontrolling interests | Noncontrolling interests | 25.6 | | | 22.4 | | Noncontrolling interests | 23.1 | | | 19.4 | |
| Total equity | Total equity | $ | 3,057.0 | | | $ | 2,984.2 | | Total equity | $ | 3,082.2 | | | $ | 3,051.9 | |
| Total liabilities and equity | Total liabilities and equity | $ | 10,410.2 | | | $ | 10,186.4 | | Total liabilities and equity | $ | 10,904.8 | | | $ | 10,581.3 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| 2021 | | 2020 | 2022 | | 2021 |
(in Millions) | (in Millions) | (unaudited) | (in Millions) | (unaudited) |
| Cash provided (required) by operating activities of continuing operations: | Cash provided (required) by operating activities of continuing operations: | | Cash provided (required) by operating activities of continuing operations: | |
| Net income (loss) | Net income (loss) | $ | 546.8 | | | $ | 503.3 | | Net income (loss) | $ | 211.6 | | | $ | 183.2 | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | 32.4 | | | 36.7 | | Discontinued operations, net of income taxes | 15.2 | | | 8.1 | |
| Income (loss) from continuing operations | Income (loss) from continuing operations | $ | 579.2 | | | $ | 540.0 | | Income (loss) from continuing operations | $ | 226.8 | | | $ | 191.3 | |
| Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations: | Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations: | | Adjustments from income from continuing operations to cash provided (required) by operating activities of continuing operations: | |
| Depreciation and amortization | Depreciation and amortization | $ | 128.5 | | | $ | 120.7 | | Depreciation and amortization | $ | 42.4 | | | $ | 42.6 | |
| | Restructuring and other charges (income) | Restructuring and other charges (income) | 52.3 | | | 43.9 | | Restructuring and other charges (income) | 9.1 | | | 3.2 | |
| Deferred income taxes | Deferred income taxes | 9.2 | | | 2.6 | | Deferred income taxes | (6.3) | | | (0.2) | |
| Pension and other postretirement benefits | Pension and other postretirement benefits | 18.4 | | | 19.7 | | Pension and other postretirement benefits | 5.5 | | | 6.2 | |
| Share-based compensation | Share-based compensation | 13.5 | | | 15.2 | | Share-based compensation | 7.3 | | | 5.4 | |
| | Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | | Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: | |
| Trade receivables, net | Trade receivables, net | (170.8) | | | 77.9 | | Trade receivables, net | (317.5) | | | (216.6) | |
| Guarantees of vendor financing | Guarantees of vendor financing | 14.5 | | | 21.3 | | Guarantees of vendor financing | 54.9 | | | 26.0 | |
| Advance payments from customers | Advance payments from customers | (343.9) | | | (487.4) | | Advance payments from customers | (590.7) | | | (334.9) | |
| Accrued customer rebates | Accrued customer rebates | 378.4 | | | 247.1 | | Accrued customer rebates | 245.4 | | | 157.9 | |
| Inventories | Inventories | (371.2) | | | (141.7) | | Inventories | (192.1) | | | (166.8) | |
| Accounts payable, trade and other | Accounts payable, trade and other | 147.2 | | | (142.8) | | Accounts payable, trade and other | (54.5) | | | 125.1 | |
| Income taxes | Income taxes | (23.5) | | | 15.7 | | Income taxes | 24.0 | | | (7.1) | |
| Pension and other postretirement benefit contributions | Pension and other postretirement benefit contributions | (2.9) | | | (3.6) | | Pension and other postretirement benefit contributions | (1.7) | | | (1.2) | |
| Environmental spending, continuing, net of recoveries | Environmental spending, continuing, net of recoveries | (51.2) | | | 6.9 | | Environmental spending, continuing, net of recoveries | (3.4) | | | (27.4) | |
Restructuring and other spending (1) | Restructuring and other spending (1) | (21.9) | | | (11.6) | | Restructuring and other spending (1) | (6.1) | | | (7.0) | |
| Transaction and integration costs | Transaction and integration costs | (8.4) | | | (53.3) | | Transaction and integration costs | (0.5) | | | (4.5) | |
Change in other operating assets and liabilities, net (2) | Change in other operating assets and liabilities, net (2) | (49.2) | | | 42.9 | | Change in other operating assets and liabilities, net (2) | (40.4) | | | (86.1) | |
| Cash provided (required) by operating activities of continuing operations | Cash provided (required) by operating activities of continuing operations | $ | 298.2 | | | $ | 313.5 | | Cash provided (required) by operating activities of continuing operations | $ | (597.8) | | | $ | (294.1) | |
| Cash provided (required) by operating activities of discontinued operations: | Cash provided (required) by operating activities of discontinued operations: | | | | Cash provided (required) by operating activities of discontinued operations: | | | |
| Environmental spending, discontinued, net of recoveries | Environmental spending, discontinued, net of recoveries | $ | (38.1) | | | $ | (43.6) | | Environmental spending, discontinued, net of recoveries | $ | (4.5) | | | $ | (5.1) | |
| Other discontinued spending | Other discontinued spending | (15.8) | | | (22.5) | | Other discontinued spending | (6.5) | | | (3.8) | |
| Operating activities of discontinued operations, net of divestiture costs | — | | | (0.2) | | |
| | Cash provided (required) by operating activities of discontinued operations | Cash provided (required) by operating activities of discontinued operations | $ | (53.9) | | | $ | (66.3) | | Cash provided (required) by operating activities of discontinued operations | $ | (11.0) | | | $ | (8.9) | |
____________________
(1) The restructuring and other spending amount for the ninethree months ended September 30, 2021 and 2020March 31, 2022 includes spending of $2.0$1.0 million and $3.1 million, respectively, related to the Furadan® asset retirement obligations.
(2) Changes in all periods primarily represent timing of payments associated with all other operating assets and liabilities.
The accompanying notes are an integral part of these condensed consolidated financial statements.
(continued)
FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| 2021 | | 2020 | 2022 | | 2021 |
| (in Millions) | (in Millions) | (unaudited) | (in Millions) | (unaudited) |
| Cash provided (required) by investing activities of continuing operations: | Cash provided (required) by investing activities of continuing operations: | | Cash provided (required) by investing activities of continuing operations: | |
| Capital expenditures | Capital expenditures | $ | (76.4) | | | $ | (35.2) | | Capital expenditures | $ | (50.3) | | | $ | (25.0) | |
| | Investment in Enterprise Resource Planning system | Investment in Enterprise Resource Planning system | (12.7) | | | (42.2) | | Investment in Enterprise Resource Planning system | — | | | (12.2) | |
| | Acquisitions, including cost and equity method, net | Acquisitions, including cost and equity method, net | (4.6) | | | — | | Acquisitions, including cost and equity method, net | (1.0) | | | — | |
| | Other investing activities | Other investing activities | (22.2) | | | (23.1) | | Other investing activities | (4.6) | | | (13.9) | |
| Cash provided (required) by investing activities of continuing operations | Cash provided (required) by investing activities of continuing operations | $ | (115.9) | | | $ | (100.5) | | Cash provided (required) by investing activities of continuing operations | $ | (55.9) | | | $ | (51.1) | |
| Cash provided (required) by investing activities of discontinued operations: | | | | |
| Proceeds from disposal of property, plant and equipment | $ | 16.8 | | | $ | 1.1 | | |
| | Cash provided (required) by investing activities of discontinued operations | $ | 16.8 | | | $ | 1.1 | | |
| | Cash provided (required) by financing activities of continuing operations: | Cash provided (required) by financing activities of continuing operations: | | | | Cash provided (required) by financing activities of continuing operations: | | | |
| | Increase (decrease) in short-term debt | Increase (decrease) in short-term debt | $ | 125.6 | | | $ | (35.6) | | Increase (decrease) in short-term debt | $ | 583.3 | | | $ | 346.5 | |
| Repayments of long-term debt | Repayments of long-term debt | (2.6) | | | — | | Repayments of long-term debt | 0.5 | | | (1.0) | |
| Financing fees | (1.7) | | | (3.5) | | |
| Proceeds from borrowings of long-term debt | — | | | 17.2 | | |
| | Acquisitions of noncontrolling interests | — | | | (7.4) | | |
| Distributions to noncontrolling interests | — | | | (1.3) | | |
| | Issuances of common stock, net | Issuances of common stock, net | 5.9 | | | 23.0 | | Issuances of common stock, net | 7.1 | | | 4.2 | |
| Dividends paid (3) | Dividends paid (3) | (186.2) | | | (171.3) | | Dividends paid (3) | (66.8) | | | (62.3) | |
| Repurchases of common stock under publicly announced program | Repurchases of common stock under publicly announced program | (300.0) | | | — | | Repurchases of common stock under publicly announced program | — | | | (75.0) | |
| Other repurchases of common stock | Other repurchases of common stock | (8.0) | | | (7.5) | | Other repurchases of common stock | (8.6) | | | (7.7) | |
| | Cash provided (required) by financing activities of continuing operations | Cash provided (required) by financing activities of continuing operations | $ | (367.0) | | | $ | (186.4) | | Cash provided (required) by financing activities of continuing operations | $ | 515.5 | | | $ | 204.7 | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (6.1) | | | (3.4) | | Effect of exchange rate changes on cash and cash equivalents | (2.5) | | | (2.8) | |
| Increase (decrease) in cash and cash equivalents | Increase (decrease) in cash and cash equivalents | $ | (227.9) | | | $ | (42.0) | | Increase (decrease) in cash and cash equivalents | $ | (151.7) | | | $ | (152.2) | |
| | | Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | $ | 568.9 | | | $ | 339.1 | | Cash and cash equivalents, beginning of period | $ | 516.8 | | | $ | 568.9 | |
| | Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 341.0 | | | $ | 297.1 | | Cash and cash equivalents, end of period | $ | 365.1 | | | $ | 416.7 | |
____________________
(3) See Note 1513 regarding the quarterly cash dividend.
Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest was $85.0$14.9 million and $104.2$25.1 million, and income taxes paid, net of refunds were $87.2$11.4 million and $63.3$24.5 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. Non-cash additions to property, plant and equipment and other assets were $14.0$15.6 million and $15.3$8.7 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
The accompanying notes are an integral part of these condensed consolidated financial statements.
FMC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| | | | FMC Stockholders’ Equity | | | | | | FMC Stockholders’ Equity | | | | |
| (in Millions, Except Per Share Data) | (in Millions, Except Per Share Data) | Common Stock, $0.10 Par Value | | Capital In Excess of Par | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury
Stock | | Non-controlling
Interest | | Total
Equity | (in Millions, Except Per Share Data) | Common Stock, $0.10 Par Value | | Capital In Excess of Par | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury
Stock | | Non-controlling
Interest | | Total
Equity |
| Balance at December 31, 2020 | $ | 18.6 | | | $ | 860.2 | | | $ | 4,506.4 | | | $ | (282.2) | | | $ | (2,141.2) | | | $ | 22.4 | | | $ | 2,984.2 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 18.6 | | | $ | 880.4 | | | $ | 4,991.3 | | | $ | (315.7) | | | $ | (2,542.1) | | | $ | 19.4 | | | $ | 3,051.9 | |
| | Net income (loss) | Net income (loss) | — | | | — | | | 182.6 | | | — | | | — | | | 0.6 | | | 183.2 | | Net income (loss) | — | | | — | | | 207.4 | | | — | | | — | | | 4.2 | | | 211.6 | |
| Stock compensation plans | Stock compensation plans | — | | | 5.2 | | | — | | | — | | | 4.4 | | | — | | | 9.6 | | Stock compensation plans | — | | | 10.5 | | | — | | | — | | | 4.0 | | | — | | | 14.5 | |
| | Shares for benefit plan trust | Shares for benefit plan trust | — | | | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | | Shares for benefit plan trust | — | | | — | | | — | | | — | | | 0.1 | | | — | | | 0.1 | |
Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 4.3 | | | — | | | — | | | 4.3 | | Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 3.6 | | | — | | | — | | | 3.6 | |
Net hedging gains (losses) and other, net of income tax (1) | Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | 44.6 | | | — | | | — | | | 44.6 | | Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | (84.1) | | | — | | | — | | | (84.1) | |
Foreign currency translation adjustments (1) | Foreign currency translation adjustments (1) | — | | | — | | | — | | | (49.5) | | | — | | | (0.3) | | | (49.8) | | Foreign currency translation adjustments (1) | — | | | — | | | — | | | (39.4) | | | — | | | — | | | (39.4) | |
| Dividends ($0.48 per share) | — | | | — | | | (62.0) | | | — | | | — | | | — | | | (62.0) | | |
| Dividends ($0.53 per share) | | Dividends ($0.53 per share) | — | | | — | | | (66.9) | | | — | | | — | | | — | | | (66.9) | |
| Repurchases of common stock | Repurchases of common stock | — | | — | | | — | | | — | | | (82.7) | | | — | | | (82.7) | | Repurchases of common stock | — | | — | | | — | | | — | | | (8.6) | | | — | | | (8.6) | |
| | Balance at March 31, 2021 | $ | 18.6 | | | $ | 865.4 | | | $ | 4,627.0 | | | $ | (282.8) | | | $ | (2,219.6) | | | $ | 22.7 | | | $ | 3,031.3 | | |
| | Net income (loss) | — | | | — | | | 202.9 | | | — | | | — | | | 0.3 | | | 203.2 | | |
| Stock compensation plans | — | | | 5.1 | | | — | | | — | | | 0.5 | | | — | | | 5.6 | | |
| | Shares for benefit plan trust | — | | | — | | | — | | | — | | | 2.5 | | | — | | | 2.5 | | |
Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 4.3 | | | — | | | — | | | 4.3 | | |
Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | (40.9) | | | — | | | — | | | (40.9) | | |
Foreign currency translation adjustments (1) | — | | | — | | | — | | | 14.9 | | | — | | | 0.4 | | | 15.3 | | |
| Dividends ($0.48 per share) | — | | | — | | | (62.0) | | | — | | | — | | | — | | | (62.0) | | |
| Repurchases of common stock | — | | | — | | | — | | | — | | | (25.2) | | | — | | | (25.2) | | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (0.5) | | | (0.5) | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | $ | 18.6 | | | $ | 890.9 | | | $ | 5,131.8 | | | $ | (435.6) | | | $ | (2,546.6) | | | $ | 23.1 | | | $ | 3,082.2 | |
| | Balance at June 30, 2021 | $ | 18.6 | | | $ | 870.5 | | | $ | 4,767.9 | | | $ | (304.5) | | | $ | (2,241.8) | | | $ | 23.4 | | | $ | 3,134.1 | | |
| | Net income | — | | | — | | | 157.9 | | | — | | | — | | | 2.5 | | | 160.4 | | |
| Stock compensation plans | — | | | 4.1 | | | — | | | — | | | — | | | — | | | 4.1 | | |
| | Shares for benefit plan trust | — | | | — | | | — | | | — | | | (0.7) | | | — | | | (0.7) | | |
Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 4.6 | | | — | | | — | | | 4.6 | | |
Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | 42.2 | | | — | | | — | | | 42.2 | | |
Foreign currency translation adjustments (1) | — | | | — | | | — | | | (26.5) | | | — | | | (0.3) | | | (26.8) | | |
| Dividends ($0.48 per share) | — | | | — | | | (60.9) | | | — | | | — | | | — | | | (60.9) | | |
| Repurchases of common stock | — | | | — | | | — | | | — | | | (200.0) | | | — | | | (200.0) | | |
| | Balance at September 30, 2021 | $ | 18.6 | | | $ | 874.6 | | | $ | 4,864.9 | | | $ | (284.2) | | | $ | (2,442.5) | | | $ | 25.6 | | | $ | 3,057.0 | | |
|
____________________
(1)See condensed consolidated statements of comprehensive income (loss).
| | | | FMC Stockholders’ Equity | | | | | | FMC Stockholders’ Equity | | | | |
| (in Millions, Except Per Share Data) | (in Millions, Except Per Share Data) | Common Stock, $0.10 Par Value | | Capital In Excess of Par | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury
Stock | | Non-controlling
Interest | | Total
Equity | (in Millions, Except Per Share Data) | Common Stock, $0.10 Par Value | | Capital In Excess of Par | | Retained
Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury
Stock | | Non-controlling
Interest | | Total
Equity |
| Balance at December 31, 2019 | $ | 18.6 | | | $ | 829.7 | | | $ | 4,188.8 | | | $ | (412.0) | | | $ | (2,092.8) | | | $ | 29.1 | | | $ | 2,561.4 | | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 18.6 | | | $ | 860.2 | | | $ | 4,506.4 | | | $ | (282.2) | | | $ | (2,141.2) | | | $ | 22.4 | | | $ | 2,984.2 | |
| | Net income (loss) | Net income (loss) | — | | | — | | | 206.2 | | | — | | | — | | | — | | | 206.2 | | Net income (loss) | — | | | — | | | 182.6 | | | — | | | — | | | 0.6 | | | 183.2 | |
| Stock compensation plans | Stock compensation plans | — | | | 10.5 | | | — | | | — | | | 6.0 | | | — | | | 16.5 | | Stock compensation plans | — | | | 5.2 | | | — | | | — | | | 4.4 | | | — | | | 9.6 | |
| | Shares for benefit plan trust | Shares for benefit plan trust | — | | | — | | | — | | | — | | | (0.4) | | | — | | | (0.4) | | Shares for benefit plan trust | — | | | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | |
Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 1.6 | | | — | | | — | | | 1.6 | | Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 4.3 | | | — | | | — | | | 4.3 | |
Net hedging gains (losses) and other, net of income tax (1) | Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | 17.2 | | | — | | | — | | | 17.2 | | Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | 44.6 | | | — | | | — | | | 44.6 | |
Foreign currency translation adjustments (1) | Foreign currency translation adjustments (1) | — | | | — | | | — | | | (33.6) | | | — | | | (1.8) | | | (35.4) | | Foreign currency translation adjustments (1) | — | | | — | | | — | | | (49.5) | | | — | | | (0.3) | | | (49.8) | |
| Dividends ($0.44 per share) | — | | | — | | | (57.1) | | | — | | | — | | | — | | | (57.1) | | |
| Dividends ($0.48 per share) | | Dividends ($0.48 per share) | — | | | — | | | (62.0) | | | — | | | — | | | — | | | (62.0) | |
| Repurchases of common stock | Repurchases of common stock | — | | | — | | | — | | | — | | | (7.3) | | | — | | | (7.3) | | Repurchases of common stock | — | | | — | | | — | | | — | | | (82.7) | | | — | | | (82.7) | |
| | Balance at March 31, 2020 | $ | 18.6 | | | $ | 840.2 | | | $ | 4,337.9 | | | $ | (426.8) | | | $ | (2,094.5) | | | $ | 27.3 | | | $ | 2,702.7 | | |
| | Net income (loss) | — | | | — | | | 184.4 | | | — | | | — | | | 0.6 | | | 185.0 | | |
| Stock compensation plans | — | | | 6.3 | | | — | | | — | | | 1.9 | | | — | | | 8.2 | | |
| Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 1.4 | | | — | | | — | | | 1.4 | | |
Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | (10.5) | | | — | | | — | | | (10.5) | | |
Foreign currency translation adjustments (1) | — | | | — | | | — | | | 20.7 | | | — | | | 0.8 | | | 21.5 | | |
| Dividends ($0.44 per share) | — | | | — | | | (57.2) | | | — | | | — | | | — | | | (57.2) | | |
| Repurchases of common stock | — | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | | |
| Balance at March 31, 2021 | | Balance at March 31, 2021 | $ | 18.6 | | | $ | 865.4 | | | $ | 4,627.0 | | | $ | (282.8) | | | $ | (2,219.6) | | | $ | 22.7 | | | $ | 3,031.3 | |
| | Balance at June 30, 2020 | $ | 18.6 | | | $ | 846.5 | | | $ | 4,465.1 | | | $ | (415.2) | | | $ | (2,092.8) | | | $ | 28.7 | | | $ | 2,850.9 | | |
| | Net income (loss) | — | | | — | | | 111.4 | | | — | | | — | | | 0.7 | | | 112.1 | | |
| Stock compensation plans | — | | | 10.8 | | | — | | | — | | | 2.6 | | | — | | | 13.4 | | |
| Net pension and other benefit actuarial gains (losses) and prior service costs, net of income tax (1) | — | | | — | | | — | | | 9.0 | | | — | | | — | | | 9.0 | | |
Net hedging gains (losses) and other, net of income tax (1) | — | | | — | | | — | | | 7.2 | | | — | | | — | | | 7.2 | | |
Foreign currency translation adjustments (1) | — | | | — | | | — | | | 41.1 | | | — | | | 0.6 | | | 41.7 | | |
| Dividends ($0.44 per share) | — | | | — | | | (57.2) | | | — | | | — | | | — | | | (57.2) | | |
| Acquisitions of noncontrolling interests (2) | — | | | (2.6) | | | — | | | — | | | — | | | (4.8) | | | (7.4) | | |
| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (1.3) | | | (1.3) | | |
| | Balance at September 30, 2020 | $ | 18.6 | | | $ | 854.7 | | | $ | 4,519.3 | | | $ | (357.9) | | | $ | (2,090.2) | | | $ | 23.9 | | | $ | 2,968.4 | | |
|
____________________
(1)See condensed consolidated statements of comprehensive income (loss).
(2) In July 2020, we purchased the remaining 49 percent ownership interest in our Indonesia joint venture, PT Bina Guna Kimia ("BGK"), for $7.4 million which increased our ownership from 51 percent to 100 percent.
The accompanying notes are an integral part of these condensed consolidated financial statements.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1: Financial Information and Accounting Policies
In our opinion the condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") applicable to interim period financial statements and reflect all adjustments necessary for a fair statement of results of operations for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, cash flows for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, changes in equity for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, and our financial positions as of September 30, 2021March 31, 2022 and December 31, 2020.2021. All such adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. The results of operations for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheets as of September 30, 2021March 31, 2022 and December 31, 2020,2021, and the related condensed consolidated statements of income (loss) and condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, condensed consolidated statements of cash flows for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, and condensed consolidated statements of changes in equity for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 have been reviewed by our independent registered public accountants. The review is described more fully in their report included herein. Our accounting policies are set forth in detail in Note 1 to the consolidated financial statements included with our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 20202021 (the "2020"2021 Form 10-K").
Certain prior year amounts have been reclassified to conform to current year's presentation.
Given the COVID-19 pandemic ("COVID"), many countries, including the United States, subsequently imposed restrictions on both travel and business closures in an effort to mitigate the spread of COVID. As an agriculture sciences company, we are considered an "essential" industry in the countries in which we operate and have avoided significant plant closures and all our manufacturing facilities and distribution warehouses are operational. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others.
Note 2: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items
New accounting guidance and regulatory items
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for contracts and hedging relationships affected by reference rate reform. This applies to contracts that reference LIBOR or another rate that is expected to be discontinued as a result of rate reform and have modified terms that affect or have the potential to affect the amount and timing of contractual cash flows resulting from the discontinuance of the reference rate. The new standard is currently effective and upon adoption may be applied prospectively through December 31, 2022. We are evaluating the impacts this standard will have on accounting for contracts and hedging relationships, but do not believe it will have a material impact on our consolidated financial statements. We are continuing to monitor for any modified or newly entered contracts and hedging relationships for accounting impacts due to reference rate reform. Currently, there are no material impacts on our consolidated financial statements related to this standard.
Recently adopted accounting guidance
In December 2019,There has been no recently adopted accounting guidance during the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions and simplification in several other areas. The new standard became effective for fiscal years beginning after December 15, 2020 (i.e., a January 1, 2021 effective date). There was no material impactthree months ended March 31, 2022 that are of significance to our consolidated financial statements upon adoption.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 3: Revenue Recognition
Disaggregation of revenue
We disaggregate revenue from contracts with customers by geographical areas and major product categories. We have 3 major agricultural product categories: insecticides, herbicides, and fungicides. We are adding plantPlant health, which includes biological products, tois also included in the below table, because it is a growing part of our business. The disaggregated revenue tables are shown below for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021.
The following table provides information about disaggregated revenue by major geographical region:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| North America | North America | $ | 199.8 | | | $ | 212.3 | | | $ | 791.3 | | | $ | 851.8 | | North America | $ | 389.8 | | | $ | 301.0 | | |
| Latin America | Latin America | 516.9 | | | 464.9 | | | 1,019.7 | | | 985.3 | | Latin America | 265.9 | | | 203.2 | | |
| Europe, Middle East & Africa (EMEA) | Europe, Middle East & Africa (EMEA) | 171.4 | | | 152.8 | | | 843.7 | | | 833.5 | | Europe, Middle East & Africa (EMEA) | 398.2 | | | 399.4 | | |
| Asia | Asia | 305.9 | | | 254.6 | | | 976.9 | | | 819.3 | | Asia | 296.9 | | | 292.0 | | |
| Total Revenue | Total Revenue | $ | 1,194.0 | | | $ | 1,084.6 | | | $ | 3,631.6 | | | $ | 3,489.9 | | Total Revenue | $ | 1,350.8 | | | $ | 1,195.6 | | |
|
The following table provides information about disaggregated revenue by product category: | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| Insecticides | Insecticides | $ | 792.3 | | | $ | 746.8 | | | $ | 2,221.1 | | | $ | 2,147.1 | | Insecticides | $ | 766.7 | | | $ | 687.0 | | |
| Herbicides | Herbicides | 262.3 | | | 214.7 | | | 954.8 | | | 922.5 | | Herbicides | 404.4 | | | 361.7 | | |
| Fungicides | Fungicides | 63.4 | | | 59.4 | | | 248.4 | | | 204.5 | | Fungicides | 108.7 | | | 90.5 | | |
| Plant Health | Plant Health | 53.5 | | | 38.3 | | | 155.8 | | | 128.7 | | Plant Health | 53.4 | | | 50.2 | | |
| Other | Other | 22.5 | | | 25.4 | | | 51.5 | | | 87.1 | | Other | 17.6 | | | 6.2 | | |
| Total Revenue | Total Revenue | $ | 1,194.0 | | | $ | 1,084.6 | | | $ | 3,631.6 | | | $ | 3,489.9 | | Total Revenue | $ | 1,350.8 | | | $ | 1,195.6 | | |
|
We earn revenue from the sale of a wide range of products to a diversified base of customers around the world. We develop, market and sell all three major classes of crop protection chemicals (insecticides, herbicides and fungicides) as well as biologicals, crop nutrition, and seed treatment, which we group as plant health. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as in non-agricultural markets for pest control. The majority of our product lines consist of insecticides and herbicides, with a smaller portfolio of fungicides mainly used in high value crop segments. We are investing in plant health which includes our growing biological products. Our insecticides are used to control a wide spectrum of pests, while our herbicide portfolio primarily targets a large variety of difficult-to-control weeds. Products in the other category include various agricultural products such as smaller classes of pesticides, growth promoters, and other miscellaneous revenue sources.
Sale of Goods
Revenue from product sales is recognized when (or as) we satisfy a performance obligation by transferring the promised goods to a customer, that is, when control of the good transfers to the customer. The customer is then invoiced at the agreed-upon price with payment terms generally ranging from 30 to 90 days, with some regions providing terms longer than 90 days. We do not typically give payment terms that exceed 360 days; however, in certain geographical regions such as Latin America, these terms may be given in limited circumstances. Additionally, a timing difference of over one year can exist between when products are delivered to the customer and when payment is received from the customer in these regions; however, the effect of these sales is not material to the financial statements as a whole. Furthermore, we have assessed the circumstances and arrangements in these regions and determined that the contracts with these customers do not contain a significant financing component.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
In determining when the control of goods is transferred, we typically assess, among other things, the transfer of risk and title and the shipping terms of the contract. The transfer of title and risk typically occurs either upon shipment to the customer or upon receipt by the customer. As such, we typically recognize revenue when goods are shipped based on the relevant Incoterm for the product order, or in some regions, when delivery to the customer’s requested destination has occurred. When we perform shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. For FOB shipping point terms, revenue is recognized at the time of shipment since the customer gains control at this point in time.
We record amounts billed for shipping and handling fees as revenue. Costs incurred for shipping and handling are recorded as costs of sales and services. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue-producing transactions are presented on a net basis and excluded from sales in the consolidated income statements. We record a liability until remitted to the respective taxing authority.
Sales Incentives and Other Variable Considerations
As a part of our customary business practice, we offer a number of sales incentives to our customers including volume discounts, retailer incentives, and prepayment options. The variable considerations given can differ by products, support levels and other eligibility criteria. For all such contracts that include any variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Although determining the transaction price for these considerations requires significant judgment, we have significant historical experience with incentives provided to customers and estimate the expected consideration considering historical patterns of incentive payouts. These estimates are reassessed each reporting period as required.
In addition to the variable considerations described above, in certain instances, we may require our customers to meet certain volume thresholds within their contract term. We estimate what amount of variable consideration should be included in the transaction price at contract inception and continually reassess this estimation each reporting period to determine situations when the minimum volume thresholds will not be met.
Right of Return
We extend an assurance warranty offering customers a right of refund or exchange in case delivered product does not conform to specifications. Additionally, in certain regions and arrangements, we may offer a right of return for a specified period. Both instances are accounted for as a right of return and transaction price is adjusted for an estimate of expected returns. Replacement products are accounted for under the warranty guidance if the customer exchanges one product for another of the same kind, quality, and price. We have significant experience with historical return patterns and use this experience to include returns in the estimate of transaction price.
Contract Asset and Contract Liability Balances
We satisfy our obligations by transferring goods and services in exchange for consideration from customers. The timing of performance sometimes differs from the timing the associated consideration is received from the customer, thus resulting in the recognition of a contract asset or contract liability. We recognize a contract liability if the customer's payment of consideration is received prior to completion of our related performance obligation.
The following table presents the opening and closing balances of our receivables, net of allowances and contract liabilities from contracts with customers:
| | (in Millions) | (in Millions) | Balance as of December 31, 2020 | | Balance as of September 30, 2021 | | Increase (Decrease) | (in Millions) | Balance as of December 31, 2021 | | Balance as of March 31, 2022 | | Increase (Decrease) |
| Receivables from contracts with customers, net of allowances (1) | Receivables from contracts with customers, net of allowances (1) | $ | 2,433.8 | | | $ | 2,573.1 | | | $ | 139.3 | | Receivables from contracts with customers, net of allowances (1) | $ | 2,641.1 | | | $ | 2,936.6 | | | $ | 295.5 | |
| Contract liabilities: Advance Payments from customers | Contract liabilities: Advance Payments from customers | 347.1 | | | 3.2 | | | (343.9) | | Contract liabilities: Advance Payments from customers | 630.7 | | | 40.0 | | | (590.7) | |
(1) Amount includes $2,503.5$2,868.6 million of trade receivables and $69.6$68.0 million of net long-term customer receivables as of September 30, 2021.March 31, 2022. See Note 75 for more information.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The amount of revenue recognized in the nine months ended September 30, 2021 that was included in the opening contract liability balance is $343.9 million.
The balance of receivables from contracts with customers listed in the table above include both current trade receivables and long-term receivables, net of allowance for doubtful accounts. The allowance for receivables represents our best estimate of the probable losses associated with potential customer defaults. We determine the allowance based on historical experience, current collection trends, and external business factors such as economic factors, including regional bankruptcy rates, and political factors. The change in allowance for doubtful accounts for both current trade receivables and long-term receivables is representative of the impairment of receivables as of September 30, 2021.March 31, 2022. Refer to Note 75 for further information.
The amount of revenue recognized in the three months ended March 31, 2022 that was included in the opening contract liability balance is $590.7 million.
We periodically enter into prepayment arrangements with customers and receive advance payments for product to be delivered in future periods. Prepayment terms are extended to customers/distributors in order to capitalize on surplus cash with growers. Growers receive bulk payments for their produce, which they leverage to buy our products from distributors through prepayment options. This in turn creates opportunity for distributors to make large prepayments to us for securing the future supply of products to be sold to growers. Prepayments are typically received in the fourth quarter of the fiscal year and are for the following marketing year indicating that the time difference between prepayment and performance of corresponding performance obligations does not exceed one year.
We recognize these prepayments as a liability under "Advance payments from customers" on the condensed consolidated balance sheets when they are received. Revenue associated with advance payments is recognized as shipments are made and transfer of control to the customer takes place. Advance payments from customers was $347.1$630.7 million as of December 31, 20202021 and $3.2$40.0 million as of September 30, 2021.March 31, 2022.
Note 4: Leases
We lease office space, vehiclesManufacturing and other equipment under non-cancellable leases with initial terms typically ranging from one to 20 years, with some leases having terms greater than 20 years. Our lease portfolio includes agreements with renewal options, purchase options and clauses for early termination based on the terms specific to the agreement.
At contract inception, we review the facts and circumstances of the arrangement to determine if the contract is a lease. We follow the guidance in ASC 842-10-15 and consider the following: whether the contract has an identified asset; if we have the right to obtain substantially all economic benefits from the asset; and if we have the right to direct the use of the underlying asset. When determining if a contract has an identified asset, we consider both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if we have the right to obtain substantially all economic benefits from the asset, we consider the primary outputs of the identified asset throughout the period of use and determine if we receive greater than 90 percent of those benefits. When determining if we have the right to direct the use of an underlying asset, we consider if we have the right to direct how and for what purpose the asset is used throughout the period of use and if we control the decision-making rights over the asset. All leased assets are classified as operating or finance under ASC 842. The lease term is determined as the non-cancellable period of the lease, together with all of the following: periods covered by an option to extend the lease which are reasonably certain to be exercised, periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option, and periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. At commencement, we assess whether any options included in the lease are reasonably certain to be exercised by considering all economic factors relevant including, contract-based, asset-based, market-based, and company-based factors.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable or our incremental borrowing rate at the lease commencement date. When determining our incremental borrowing rate, we consider our centralized treasury function and our current credit profile. We then make adjustments to this rate for securitization, the length of the lease term, and leases denominated in foreign currencies. Minimum lease payments are expensed over the term of the lease on a straight-line basis. Some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments for which we are typically responsible for include payment of vehicle insurance, real estate taxes, and maintenance expenses.
Most leases within our portfolio are classified as operating leases under the standard. Operating leases are included in "Other assets including long-term receivables, net", "Accrued and other liabilities", and "Other long-term liabilities" in our condensed consolidated balance sheets. Operating lease right-of-use ("ROU") assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
unamortized balance of any lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Operating leases relate to office spaces, IT equipment, transportation equipment, machinery equipment, furniture and fixtures, and plant and facilities under non-cancellable lease agreements. Leases primarily have fixed rental periods, with many of the real estate leases requiring additional payments for property taxes and occupancy-related costs. Leases for real estate typically have initial terms ranging from one to 20 years, with some leases having terms greater than 20 years. Leases for non-real estate (transportation, IT) typically have initial terms ranging from one to 10 years. We have elected not to record short-term leases on the balance sheet whose term is 12 months or less and does not include a purchase option or extension that is reasonably certain to be exercised.
We rent or sublease a small number of assets including equipment and office space to third party companies. These third-party arrangements include a small number of TSA arrangements from recent acquisitions. Rental income from all subleases is not material to our business.
The ROU asset and lease liability balances as of September 30, 2021 and December 31, 2020 were as follows:
| | | | | | | | | | | | | | |
| (in Millions) | Classification | September 30, 2021 | | December 31, 2020 |
| Assets | | | | |
| | | | |
| Operating lease ROU assets | Other assets including long-term receivables, net | $ | 140.3 | | | $ | 147.3 | |
| | | | |
| Liabilities | | | | |
| | | | |
| Operating lease current liabilities | Accrued and other liabilities | $ | 23.8 | | | $ | 25.6 | |
| | | | |
| | | | |
| | | | |
| Operating lease noncurrent liabilities | Other long-term liabilities | 144.5 | | | 151.1 | |
| | | | |
| | | | |
The components of lease expense for the three and nine months ended September 30, 2021 and 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in Millions) | Lease Cost Classification | 2021 | | 2020 | | 2021 | | 2020 |
| Lease Cost | | | | | | | | |
| Operating lease cost | Costs of sales and services / Selling, general and administrative expenses | $ | 8.3 | | | $ | 10.1 | | | $ | 25.6 | | | $ | 29.9 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Variable lease cost | Costs of sales and services / Selling, general and administrative expenses | 1.2 | | | 1.0 | | | 3.6 | | | 3.6 | |
| | | | | | | | |
| Total lease cost | | $ | 9.5 | | | $ | 11.1 | | | $ | 29.2 | | | $ | 33.5 | |
| | | | | |
| September 30, 2021 |
Operating Lease Term and Discount Rate | |
Weighted-average remaining lease term (years) | 9.3 |
| |
| |
Weighted-average discount rate | 4.1 | % |
| |
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in Millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Other Information | | | | | | | |
| | | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |
| Operating cash flows from operating leases | $ | (7.9) | | | $ | (10.2) | | | $ | (25.5) | | | $ | (30.1) | |
| | | | | | | |
| | | | | | | |
| Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets: | | | | | | | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 0.8 | | | $ | 3.5 | | | $ | 16.7 | | | $ | 6.4 | |
| | | | | | | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The following table represents our future minimum operating lease payments as of, and subsequent to, September 30, 2021 under ASC 842:
| | | | | | | | | |
| (in Millions) | | | | | Operating Leases Total |
| Maturity of Lease Liabilities | | | | | |
| 2021 (excluding the nine months ending September 30, 2021) | | | | | $ | 7.8 | |
| 2022 | | | | | 28.7 | |
| 2023 | | | | | 23.2 | |
| 2024 | | | | | 19.1 | |
| 2025 | | | | | 18.1 | |
| Thereafter | | | | | 109.1 | |
| Total undiscounted lease payments | | | | | $ | 206.0 | |
| Less: Present value adjustment | | | | | (37.7) | |
| Present value of lease liabilities | | | | | $ | 168.3 | |
Note 5: Acquisitions
DuPont Crop Protection Business
On November 1, 2017, pursuant to the terms and conditions set forth in the Transaction Agreement entered into with E. I. du Pont de Nemours and Company ("DuPont"), we completed the acquisition of certain assets relating to DuPont's Crop Protection business and research and development organization (the "DuPont Crop Protection Business") (collectively, the "DuPont Crop Protection Business Acquisition").Seed Supply Agreements
As part of the DuPont Crop Protection Business Acquisition, we acquired various manufacturing contracts. The manufacturing contracts have been recognized as an asset or liability to the extent the terms of the contract were favorable or unfavorable compared with market terms of the same or similar items at the date of the acquisition.
We also entered into supply agreements with DuPont, with terms of up to five years, to supply technical insecticide products required for their retained seed treatment business at cost. The unfavorable liability is recorded within both "Accrued and other liabilities" and "Other long-term liabilities" on the condensed consolidated balance sheets and is reduced and recognized to revenues within earnings as sales are made. The amount recognized in revenue for the three and nine months ended September 30,March 31, 2022 and 2021 was approximately $26$27 million and $77$25 million, respectively. The amount recognized in revenue for the three and nine months ended September 30, 2020 was approximately $24 million and $87 million, respectively.
Transaction-related charges
Pursuant to U.S. GAAP, costs incurred associated with acquisition activities are expensed as incurred. Historically, these costs have primarily consisted of legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of these activities. Given the significance and complexity around the integration of the DuPont Crop Protection Business, we have incurred significant costs associated with integrating the DuPont Crop Protection Business, which included planning for the exit of the transitional service agreement ("TSA") as well as the implementation of a new worldwide Enterprise Resource Planning ("ERP") system as a result of the TSA exit, the majority of which were capitalized in accordance with the relevant accounting literature. As used in this Form 10-Q, the terms "transaction-related expenses" and "transaction-related charges" refer to costs associated with the DuPont Crop Protection Business Acquisition, the associated TSA and the implementation of our new ERP system.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The following table summarizes the costs incurred associated with these activities.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in Millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| DuPont Crop Protection Business Acquisition | | | | | | | |
Legal and professional fees (1) | $ | — | | | $ | 14.4 | | | $ | 0.4 | | | $ | 40.4 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total Transaction-related charges | $ | — | | | $ | 14.4 | | | $ | 0.4 | | | $ | 40.4 | |
| | | | | | | |
| Restructuring charges | | | | | | | |
DuPont Crop restructuring (2) | $ | 0.8 | | | $ | 6.4 | | | $ | 5.8 | | | $ | 29.6 | |
| Total DuPont Crop restructuring charges | $ | 0.8 | | | $ | 6.4 | | | $ | 5.8 | | | $ | 29.6 | |
____________________
(1) Represents transaction costs, costs for transitional employees, other acquired employees related costs, and transactional-related costs such as legal and professional third-party fees. These charges are recorded as a component of "Selling, general and administrative expense" on the condensed consolidated statements of income (loss).
(2) See Note 10 for more information. These charges are recorded as a component of "Restructuring and other charges (income)" on the condensed consolidated statements of income (loss).
We completed the integration of the DuPont Crop Protection Business as of June 30, 2020, except for the completion of certain in-flight initiatives, primarily associated with the finalization of our worldwide ERP system. The last phase of the ERP system transition went live in November 2020 with a stabilization period that ended in the first quarter of 2021.
As a result of completing the implementation of our worldwide ERP system, we are progressing through a series of delayed restructurings under a separate initiative from those in the table above. These restructurings are the result of consolidating activities into one system as well as into several shared service centers allowing us to improve productivity and gain efficiencies in our processes. The first wave of this initiative, primarily due to the fact we are performing activities in one ERP system as opposed to multiple, is substantially complete. This resulted in pre-tax severance charges of approximately $3 million for the twelve months ended December 31, 2020 and approximately $2 million for the nine months ended September 30, 2021, recorded as a component of restructuring and other charges. Severance associated with the outer years of these restructurings is not expected to be material and will be determined as we progress through the initiative.
Note 6:4: Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are presented in the table below:
| | | | | | | | | | | |
| (in Millions) | | | | | | | Total |
Balance, December 31, 20202021 | | | | | | | $ | 1,468.91,463.3 | |
| | | | | | | |
| | | | | | | |
| Foreign currency and other adjustments | | | | | | | (4.6)(0.2) | |
Balance, September 30, 2021March 31, 2022 | | | | | | | $ | 1,464.31,463.1 | |
We perform ourThere were no events or circumstances indicating that goodwill and indefinite-lived intangible asset impairment tests at least annually. Our fiscal year 2021 annual goodwill and indefinite-lived intangible asset impairment test was performed during the three months ended September 30, 2021. We determined no goodwill impairment existed and that the fair value was substantially in excessmight be impaired as of the carrying value. Additionally, no indefinite-lived asset impairment existed and the estimated fair values also substantially exceeded the carrying value for each of our indefinite-lived intangible assets.March 31, 2022.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Our intangible assets, other than goodwill, consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (in Millions) | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
| Intangible assets subject to amortization (finite-lived) |
| Customer relationships | $ | 1,152.7 | | | $ | (288.7) | | | $ | 864.0 | | | $ | 1,169.4 | | | $ | (249.7) | | | $ | 919.7 | |
| Patents | 1.8 | | | (1.3) | | | 0.5 | | | 1.9 | | | (1.2) | | | 0.7 | |
Brands (1) | 17.4 | | | (9.8) | | | 7.6 | | | 18.3 | | | (8.9) | | | 9.4 | |
| Purchased and licensed technologies | 60.6 | | | (40.0) | | | 20.6 | | | 61.1 | | | (38.1) | | | 23.0 | |
| Other intangibles | 2.4 | | | (1.8) | | | 0.6 | | | 3.4 | | | (2.6) | | | 0.8 | |
| $ | 1,234.9 | | | $ | (341.6) | | | $ | 893.3 | | | $ | 1,254.1 | | | $ | (300.5) | | | $ | 953.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Intangible assets not subject to amortization (indefinite-lived) |
Crop Protection Brands (2) | $ | 1,259.1 | | | | | $ | 1,259.1 | | | $ | 1,259.1 | | | | | $ | 1,259.1 | |
Brands (1) | 393.8 | | | | | 393.8 | | | 412.5 | | | | | 412.5 | |
| | | | | | | | | | | |
| $ | 1,652.9 | | | | | $ | 1,652.9 | | | $ | 1,671.6 | | | | | $ | 1,671.6 | |
| Total intangible assets | $ | 2,887.8 | | | $ | (341.6) | | | $ | 2,546.2 | | | $ | 2,925.7 | | | $ | (300.5) | | | $ | 2,625.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (in Millions) | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
| Intangible assets subject to amortization (finite-lived) |
| Customer relationships | $ | 1,138.6 | | | $ | (312.7) | | | $ | 825.9 | | | $ | 1,147.1 | | | $ | (301.3) | | | $ | 845.8 | |
| Patents | 1.8 | | | (1.3) | | | 0.5 | | | 1.8 | | | (1.3) | | | 0.5 | |
Brands (1) | 16.5 | | | (10.0) | | | 6.5 | | | 17.1 | | | (9.9) | | | 7.2 | |
| Purchased and licensed technologies | 59.8 | | | (41.1) | | | 18.7 | | | 60.2 | | | (40.7) | | | 19.5 | |
| Other intangibles | 2.3 | | | (1.8) | | | 0.5 | | | 2.3 | | | (1.7) | | | 0.6 | |
| $ | 1,219.0 | | | $ | (366.9) | | | $ | 852.1 | | | $ | 1,228.5 | | | $ | (354.9) | | | $ | 873.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Intangible assets not subject to amortization (indefinite-lived) |
Crop Protection Brands (2) | $ | 1,259.1 | | | | | $ | 1,259.1 | | | $ | 1,259.1 | | | | | $ | 1,259.1 | |
Brands (1) | 380.3 | | | | | 380.3 | | | 389.2 | | | | | 389.2 | |
| | | | | | | | | | | |
| $ | 1,639.4 | | | | | $ | 1,639.4 | | | $ | 1,648.3 | | | | | $ | 1,648.3 | |
| Total intangible assets | $ | 2,858.4 | | | $ | (366.9) | | | $ | 2,491.5 | | | $ | 2,876.8 | | | $ | (354.9) | | | $ | 2,521.9 | |
____________________ (1) Represents trademarks, trade names and know-how.
(2) Represents proprietary brand portfolios, consisting of trademarks, trade names and know-how, of our crop protection brands.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| Amortization expense | Amortization expense | $ | 15.7 | | | $ | 15.8 | | | $ | 47.2 | | | $ | 46.4 | | Amortization expense | $ | 15.4 | | | $ | 15.8 | | |
The full year estimated pre-tax amortization expense for the year ended December 31, 20212022 and each of the succeeding five years is approximately $63 million, $63 million, $62 million, $61 million, $61$60 million, $60 million, $60 million, and $60$59 million, respectively.
Note 7:5: Receivables
The following table displays a roll forward of the allowance for doubtful trade receivables.
| | | | | |
| (in Millions) | |
Balance, December 31, 2019 | $ | 26.3 | |
Additions - charged to expense | 8.2 | |
Transfer from (to) allowance for credit losses (see below) | (2.9) | |
Net recoveries, write-offs and other | (3.7) | |
Balance, December 31, 2020 | $ | 27.9 | |
| Additions - charged to expense | 6.917.2 | |
| Transfer from (to) allowance for credit losses (see below) | (0.6) | |
| Net recoveries, write-offs and other | (7.1) | |
| Balance, December 31, 2021 | $ | 37.4 | |
| Additions - charged to expense | (0.4) | |
| Transfer from (to) allowance for credit losses (see below) | 0.5 | |
| Net recoveries, write-offs and other | (1.3)2.1 | |
Balance, September 30, 2021March 31, 2022 | $ | 32.939.6 | |
We have non-current receivables that represent long-term customer receivable balances related to past due accounts which are not expected to be collected within the current year. The net long-term customer receivables were $69.6$68.0 million as of September 30, 2021.March 31, 2022. These long-term customer receivable balances and the corresponding allowance are included in "Other assets including long-term receivables, net" on the condensed consolidated balance sheets.
A portion of these long-term receivables have payment contracts. We have no reason to believe payments will not be made based upon the credit quality of these customers. Additionally, we also hold significant collateral against these customers including rights to property or other assets as a form of credit guarantee. If the customer does not pay or gives indication that they will not pay, these guarantees allow us to start legal action to block the sale of the customer’s harvest. On an ongoing
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
they will not pay, these guarantees allow us to start legal action to block the sale of the customer’s harvest. On an ongoing basis, we continue to evaluate the credit quality of our non-current receivables using aging of receivables, collection experience and write-offs, as well as evaluating existing economic conditions, to determine if an additional allowance is necessary.
The following table displays a roll forward of the allowance for credit losses related to long-term customer receivables:
| | | | | |
(in Millions) | |
Balance, December 31, 2019 | $ | 61.1 | |
Additions - charged to expense | (3.5) | |
Transfer from (to) allowance for doubtful accounts (see above) | 2.9 | |
Foreign currency adjustments | (7.6) | |
Net recoveries, write-offs and other | (28.2) | |
Balance, December 31, 2020 | $ | 24.7 | |
| Additions - charged to expense | 4.23.9 | |
| Transfer from (to) allowance for doubtful accounts (see above) | 0.6 | |
| Foreign currency adjustments | (1.0)(1.5) | |
| Net recoveries, write-offs and other | — | |
| Balance, December 31, 2021 | $ | 27.7 | |
| Additions - charged to expense | (0.5) | |
| Transfer from (to) allowance for doubtful accounts (see above) | (0.5) | |
| Foreign currency adjustments | 2.0 | |
| |
Balance, September 30, 2021March 31, 2022 | $ | 28.528.7 | |
Note 8:6: Inventories
Inventories consisted of the following:
| | (in Millions) | (in Millions) | September 30, 2021 | | December 31, 2020 | (in Millions) | March 31, 2022 | | December 31, 2021 |
| Finished goods | Finished goods | $ | 494.5 | | | $ | 434.6 | | Finished goods | $ | 556.5 | | | $ | 559.2 | |
| Work in process | Work in process | 869.5 | | | 621.9 | | Work in process | 889.6 | | | 730.8 | |
| Raw materials, supplies and other | Raw materials, supplies and other | 209.3 | | | 165.7 | | Raw materials, supplies and other | 260.8 | | | 231.9 | |
| First-in, first-out inventory | First-in, first-out inventory | $ | 1,573.3 | | | $ | 1,222.2 | | First-in, first-out inventory | $ | 1,706.9 | | | $ | 1,521.9 | |
| Less: Excess of first-in, first-out cost over last-in, first-out cost | Less: Excess of first-in, first-out cost over last-in, first-out cost | (122.8) | | | (126.6) | | Less: Excess of first-in, first-out cost over last-in, first-out cost | (116.2) | | | (116.2) | |
| Net inventories | Net inventories | $ | 1,450.5 | | | $ | 1,095.6 | | Net inventories | $ | 1,590.7 | | | $ | 1,405.7 | |
Note 9:7: Property, Plant and Equipment
Property, plant and equipment consisted of the following:
| | (in Millions) | (in Millions) | September 30, 2021 | | December 31, 2020 | (in Millions) | March 31, 2022 | | December 31, 2021 |
| Property, plant and equipment | Property, plant and equipment | $ | 1,291.8 | | | $ | 1,191.5 | | Property, plant and equipment | $ | 1,341.4 | | | $ | 1,329.5 | |
| Accumulated depreciation | Accumulated depreciation | (509.6) | | | (419.8) | | Accumulated depreciation | (537.3) | | | (512.5) | |
| Property, plant and equipment, net | Property, plant and equipment, net | $ | 782.2 | | | $ | 771.7 | | Property, plant and equipment, net | $ | 804.1 | | | $ | 817.0 | |
Note 10:8: Restructuring and Other Charges (Income)
Our restructuring and other charges (income) are comprised of restructuring, asset disposals and other charges (income) as noted below.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| Restructuring charges | Restructuring charges | $ | 2.1 | | | $ | 6.9 | | | $ | 18.9 | | | $ | 29.7 | | Restructuring charges | $ | 11.2 | | | $ | 6.3 | | |
| Other charges (income), net | Other charges (income), net | 30.7 | | | 4.1 | | | 33.4 | | | 14.2 | | Other charges (income), net | (2.1) | | | (3.1) | | |
| Total restructuring and other charges (income) | Total restructuring and other charges (income) | $ | 32.8 | | | $ | 11.0 | | | $ | 52.3 | | | $ | 43.9 | | Total restructuring and other charges (income) | $ | 9.1 | | | $ | 3.2 | | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Restructuring charges
For detail on restructuring activities which commenced prior to 2021,2022, see Note 9 to our consolidated financial statements included within our 20202021 Form 10-K.
| | | (in Millions) | (in Millions) | Severance and Employee Benefits | | Other Charges (Income) (1) | | Asset Disposal Charges (Income) (2) | | Total | (in Millions) | Severance and Employee Benefits | | Other Charges (Income) (1) | | Asset Disposal Charges (Income) (2) | | Total |
DuPont Crop restructuring (3) | DuPont Crop restructuring (3) | $ | — | | | $ | 0.8 | | | $ | — | | | $ | 0.8 | | DuPont Crop restructuring (3) | $ | — | | | $ | 0.3 | | | $ | — | | | $ | 0.3 | |
Regional realignment (4) | Regional realignment (4) | 0.7 | | | 0.3 | | | — | | | 1.0 | | Regional realignment (4) | 2.0 | | | 0.5 | | | — | | | 2.5 | |
| Other items | Other items | 0.3 | | | — | | | — | | | 0.3 | | Other items | (0.4) | | | 0.6 | | | 8.2 | | | 8.4 | |
| Three Months Ended September 30, 2021 | $ | 1.0 | | | $ | 1.1 | | | $ | — | | | $ | 2.1 | | |
| Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2022 | $ | 1.6 | | | $ | 1.4 | | | $ | 8.2 | | | $ | 11.2 | |
| DuPont Crop restructuring | DuPont Crop restructuring | $ | 0.3 | | | $ | 2.1 | | | $ | 4.0 | | | $ | 6.4 | | DuPont Crop restructuring | $ | 1.2 | | | $ | 1.1 | | | $ | 1.0 | | | $ | 3.3 | |
| | Other items | Other items | 0.5 | | | — | | | 0 | | 0.5 | | Other items | 2.3 | | | 0.7 | | | — | | | 3.0 | |
| Three Months Ended September 30, 2020 | $ | 0.8 | | | $ | 2.1 | | | $ | 4.0 | | | $ | 6.9 | | |
| Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2021 | $ | 3.5 | | | $ | 1.8 | | | $ | 1.0 | | | $ | 6.3 | |
| DuPont Crop restructuring (3) | $ | 1.2 | | | $ | 3.7 | | | $ | 0.9 | | | $ | 5.8 | | |
Regional realignment (4) | 5.2 | | | 3.5 | | | 0.2 | | | 8.9 | | |
| Other items | 4.2 | | | — | | | — | | | 4.2 | | |
| Nine Months Ended September 30, 2021 | $ | 10.6 | | | $ | 7.2 | | | $ | 1.1 | | | $ | 18.9 | | |
| | DuPont Crop restructuring | $ | 9.1 | | | $ | 3.4 | | | $ | 17.1 | | | $ | 29.6 | | |
| | Other items | 0.5 | | | — | | | (0.4) | | | 0.1 | | |
| Nine Months Ended September 30, 2020 | $ | 9.6 | | | $ | 3.4 | | | $ | 16.7 | | | $ | 29.7 | | |
|
____________________
(1)Primarily represents costs associated with miscellaneous restructuring activities, including third-party costs. Other income, if applicable, primarily represents favorable developments on previously recorded exit costs and recoveries associated with restructuring.
(2)Primarily represents asset write-offs (recoveries) and accelerated depreciation on long-lived assets, which were or are to be abandoned. To the extent incurred, the acceleration effect of re-estimating settlement dates and revised cost estimates associated with asset retirement obligations due to facility shutdowns, are also included within the asset disposal charges. The amount for the three months ended March 31, 2022 represents fixed asset charges resulting from the closure of certain manufacturing sites during the period.
(3)Restructuring charges related to DuPont Crop restructuring during the three and nine months ended September 30,March 31, 2022 and March 31, 2021 represent the remaining in-flight restructuring charges as we completed the established DuPont Crop Restructuring program associated with integration. These charges are primarily associated with accelerated depreciation on certain fixed assets, severance, and other costs as we exit certain facilities. We expect these in-flight restructuring charges to be substantially complete in 2021.
(4)Restructuring charges relatedIn January 2022, we began to consolidate our Asia Pacific operations into a single regional headquarters in Singapore. The regional realignment activitiesrestructuring charges during the three and nine months ended September 30, 2021March 31, 2022 are primarily related to severance and employee relocationother exit costs as well as other costs associated with the European headquarter relocation.resulting from this consolidation.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Roll forward of restructuring reserves
The following table shows a roll forward of restructuring reserves, continuing and discontinued, that will result in cash spending. These amounts exclude asset retirement obligations.
| | (in Millions) | (in Millions) | Balance at 12/31/20 (4) | | Change in reserves (5) | | Cash payments (6) | | | Balance at 9/30/21 (4) | (in Millions) | Balance at 12/31/21 (4) | | Change in reserves (5) | | Cash payments (6) | | Other | | Balance at 3/31/22 (4) |
DuPont Crop restructuring (1) | DuPont Crop restructuring (1) | $ | 13.6 | | | $ | 4.9 | | | $ | (8.1) | | | | $ | 10.4 | | DuPont Crop restructuring (1) | $ | 8.6 | | | $ | 0.3 | | | $ | (1.9) | | | $ | — | | | $ | 7.0 | |
Regional realignment (2) | Regional realignment (2) | — | | | 8.7 | | | (6.3) | | | | 2.4 | | Regional realignment (2) | 4.0 | | | 2.5 | | | (1.2) | | | (0.1) | | | 5.2 | |
| Other workforce related and facility shutdowns (3) | Other workforce related and facility shutdowns (3) | 2.8 | | | 4.2 | | | (5.5) | | | | 1.5 | | Other workforce related and facility shutdowns (3) | 2.3 | | | 0.2 | | | (1.5) | | | — | | | 1.0 | |
| | Total | Total | $ | 16.4 | | | $ | 17.8 | | | $ | (19.9) | | | | $ | 14.3 | | Total | $ | 14.9 | | | $ | 3.0 | | | $ | (4.6) | | | $ | (0.1) | | | $ | 13.2 | |
____________________
(1)Primarily consists of exit costs and severance associated with DuPont Crop restructuring activities.
(2)Primarily consists of severance and employee relocation costs as well as other costs associated with the relocation of our European headquarter relocation.headquarters and the consolidation of our Asia Pacific operations into a single regional headquarters in Singapore.
(3)Primarily severance costs related to workforce reductions and facility shutdowns.
(4)Included in "Accrued and other liabilities" and "Other long-term liabilities" on the condensed consolidated balance sheets.
(5)Primarily severance and other miscellaneous exit costs. Any accelerated depreciation and impairment charges noted above that impacted our property, plant and equipment balances or other long-term assets are not included in this table.
(6)In addition to the spend above, for the ninethree months ended September 30, 2021March 31, 2022 there was also approximately $2.0$1.0 million of spending related to the Furadan® asset retirement obligation.
Other charges (income), net | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| Environmental charges, net | Environmental charges, net | $ | 3.7 | | | $ | 4.0 | | | $ | 3.3 | | | $ | 13.7 | | Environmental charges, net | $ | (3.3) | | | $ | (4.1) | | |
| | Other items, net | Other items, net | 27.0 | | | 0.1 | | | 30.1 | | | 0.5 | | Other items, net | 1.2 | | | 1.0 | | |
| Other charges (income), net | Other charges (income), net | $ | 30.7 | | | $ | 4.1 | | | $ | 33.4 | | | $ | 14.2 | | Other charges (income), net | $ | (2.1) | | | $ | (3.1) | | |
Environmental charges, net
Environmental charges represent the net charges associated with environmental remediation at continuing operating sites. See Note 1311 for additional details. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
Other items, net
Other items, net for the three and nine months ended September 30, 2021 includes $23.8 million of charges for the establishment of reserves for certain historical India indirect tax matters that were triggered during the period. See Note 19 for further information.
Note 11:9: Debt
Debt maturing within one year:
| | (in Millions) | (in Millions) | September 30, 2021 | | December 31, 2020 | (in Millions) | March 31, 2022 | | December 31, 2021 |
Short-term foreign debt (1) | Short-term foreign debt (1) | $ | 107.9 | | | $ | 98.4 | | Short-term foreign debt (1) | $ | 101.2 | | | $ | 112.2 | |
Commercial paper (2) | Commercial paper (2) | 267.5 | | | 146.3 | | Commercial paper (2) | 840.6 | | | 244.1 | |
| Total short-term debt | Total short-term debt | $ | 375.4 | | | $ | 244.7 | | Total short-term debt | $ | 941.8 | | | $ | 356.3 | |
| Current portion of long-term debt | Current portion of long-term debt | 386.6 | | | 93.6 | | Current portion of long-term debt | 98.6 | | | 84.5 | |
Total short-term debt and current portion of long-term debt (3) | Total short-term debt and current portion of long-term debt (3) | $ | 762.0 | | | $ | 338.3 | | Total short-term debt and current portion of long-term debt (3) | $ | 1,040.4 | | | $ | 440.8 | |
____________________
(1)At September 30, 2021,March 31, 2022, the average effective interest rate on the borrowings was 12.213.2 percent.
(2)At September 30, 2021,March 31, 2022, the average effective interest rate on the borrowings was 0.451.05 percent.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
(3) Based on cash generated from operations, our existing liquidity facilities, which includes the revolving credit agreement with the option to increase capacity up to $2.25 billion, and our continued access to debt capital markets, we have adequate liquidity to meet any of the company's debt obligations in the near term.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Long-term debt: | | (in Millions) | (in Millions) | September 30, 2021 | | | | | (in Millions) | March 31, 2022 | | | | |
| Interest Rate Percentage | | Maturity
Date | | September 30, 2021 | | December 31, 2020 | Interest Rate Percentage | | Maturity
Date | | March 31, 2022 | | December 31, 2021 |
| Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.1, respectively) | Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.1, respectively) | 6.45% | | 2032 | | $ | 49.9 | | | $ | 51.6 | | Pollution control and industrial revenue bonds (less unamortized discounts of $0.1 and $0.1, respectively) | 6.45% | | 2032 | | $ | 49.9 | | | $ | 49.9 | |
| Senior notes (less unamortized discount of $0.8 and $1.0, respectively) | 3.20% - 4.50% | | 2022 - 2049 | | 2,199.2 | | | 2,199.0 | | |
| Senior notes (less unamortized discount of $0.7 and $0.7, respectively) | | Senior notes (less unamortized discount of $0.7 and $0.7, respectively) | 3.20% - 4.50% | | 2024 - 2049 | | 1,899.3 | | | 1,899.3 | |
| | 2017 Term Loan Facility | 1.33% | | 2022 | | 700.0 | | | 700.0 | | |
| 2021 Term Loan Facility | | 2021 Term Loan Facility | 1.50% | | 2024 | | 800.0 | | | 800.0 | |
Revolving Credit Facility (1) | Revolving Credit Facility (1) | 2.78% | | 2026 | | — | | | — | | Revolving Credit Facility (1) | 3.10% | | 2026 | | — | | | — | |
| | Foreign debt | Foreign debt | —% - 7.10% | | 2022 - 2024 | | 87.0 | | | 92.3 | | Foreign debt | 0% - 7.90% | | 2022 - 2024 | | 98.7 | | | 84.7 | |
| Debt issuance cost | Debt issuance cost | | (17.8) | | | (19.8) | | Debt issuance cost | | (16.9) | | | (17.7) | |
| Total long-term debt | Total long-term debt | | $ | 3,018.3 | | | $ | 3,023.1 | | Total long-term debt | | $ | 2,831.0 | | | $ | 2,816.2 | |
| Less: debt maturing within one year | Less: debt maturing within one year | | 386.6 | | | 93.6 | | Less: debt maturing within one year | | 98.6 | | | 84.5 | |
| Total long-term debt, less current portion | Total long-term debt, less current portion | | $ | 2,631.7 | | | $ | 2,929.5 | | Total long-term debt, less current portion | | $ | 2,732.4 | | | $ | 2,731.7 | |
____________________
(1)Letters of credit outstanding under our Revolving Credit Facility totaled $238.1$159.6 million and available funds under this facility were $994.3$499.8 million at September 30, 2021.March 31, 2022.
Revolving Credit Facility and Term Loan Amendments
On May 26, 2021, we amended our Revolving Credit Facility and 2017 Term Loan Agreement. The Credit Facility Amendment primarily extended the maturity date by an additional two years to May 26, 2026 and adjusted the maximum leverage ratio. The Term Loan Amendment primarily adjusted the maximum leverage ratio financial covenant. See below for additional information on covenants. The borrowing capacity under the credit facility and term loan was not affected by the amendments and remains unchanged.
Deferred financing fees totaling $1.7 million associated with both amendments have been deferred and are being recognized to interest expense over the life of the agreements.
Covenants
Among other customary restrictions, our Revolving Credit Facility and 20172021 Term Loan Facility contain financial covenants applicable to FMC and its consolidated subsidiaries related to leverage (measured as the ratio of debt to adjusted earnings) and interest coverage (measured as the ratio of adjusted earnings to interest expense). Our actual leverage for the four consecutive quarters ended September 30, 2021March 31, 2022 was 3.05,3.07, which is below the maximum leverage of 3.753.50 at September 30, 2021.March 31, 2022. As amended pursuant to the Revolving Credit Agreement and the Term Loan Amendment discussed above,within our 2021 Form 10-K, the maximum leverage ratio stepped down from 4.00 to 3.75 for the quarter ending June 30, 2021 and will step down further to 3.50 for the quarterperiod ending December 31, 2021 and future quarters thereafter. Our actual interest coverage for the four consecutive quarters ended September 30, 2021March 31, 2022 was 8.90,10.21, which is above the minimum interest coverage of 3.50. We were in compliance with all covenants at September 30, 2021.March 31, 2022.
Note 12:10: Discontinued Operations
Discontinued operations include the results of FMC Lithium andincludes adjustments to retained assets and liabilities as well as provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities. The primary liabilities retained include environmental liabilities, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Our discontinued operations comprised the following:
| | | | | | | | | | | | | | | |
| (in Millions) | Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| Adjustment for workers’ compensation, product liability, other postretirement benefits and other, net of income tax benefit (expense) of $(0.2) and $(1.0) for the three months ended March 31, 2022 and 2021, respectively | $ | (0.4) | | | $ | (1.6) | | | | | |
| Provision for environmental liabilities, net of recoveries, net of income tax benefit of $0.6 and $0.8 for the three months ended March 31, 2022 and 2021, respectively | (2.1) | | | (2.3) | | | | | |
| Provision for legal reserves and expenses, net of recoveries, net of income tax benefit of $3.4 and $1.1 for the three months ended March 31, 2022 and 2021, respectively | (12.7) | | | (4.2) | | | | | |
| | | | | | | |
| | | | | | | |
| Discontinued operations, net of income taxes | $ | (15.2) | | | $ | (8.1) | | | | | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Our discontinued operations comprised the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Adjustment for workers’ compensation, product liability, other postretirement benefits and other, net of income tax benefit (expense) of $(9.6) and $(11.7) for the three and nine months ended September 30, 2021 and $(2.9) and $(4.9) for the three and nine months ended September 30, 2020, respectively (1) | $ | 6.6 | | | $ | (3.9) | | | $ | 4.0 | | | $ | (2.7) | |
| Provision for environmental liabilities, net of recoveries, net of income tax benefit of $1.0 and $2.6 for the three and nine months ended September 30, 2021 and $2.1 and $3.3 for the three and nine months ended September 30, 2020, respectively | (3.3) | | | (8.8) | | | (9.0) | | | (13.3) | |
| Provision for legal reserves and expenses, net of recoveries, net of income tax benefit of $3.5 and $7.3 for the three and nine months ended September 30, 2021 and $1.5 and $5.8 for the three and nine months ended September 30, 2020, respectively | (13.0) | | | (5.7) | | | (27.4) | | | (21.7) | |
| | | | | | | |
| Discontinued operations of FMC Lithium, net of income tax benefit (expense) of zero and zero for the three and nine months ended September 30, 2021 and zero and $(0.1) for the three and nine months ended September 30, 2020, respectively | — | | | — | | | — | | | 1.0 | |
| Discontinued operations, net of income taxes | $ | (9.7) | | | $ | (18.4) | | | $ | (32.4) | | | $ | (36.7) | |
____________________
(1)During the three and nine months ended September 30, 2021, we finalized the sale of land of our discontinued site in Richmond, California and recorded a gain of approximately $13 million, net of tax. Results for the three and nine months ended September 30, 2021 include these real estate proceeds.
Note 13:11: Environmental Obligations
We have reserves for potential environmental obligations which we consider probable and which we can reasonably estimate. The following table is a roll forward of our total environmental reserves, continuing and discontinued:
| | (in Millions) | (in Millions) | Gross | | Recoveries (3) | | Net | (in Millions) | Gross | | Recoveries (3) | | Net |
| Total environmental reserves at December 31, 2020 | $ | 574.7 | | | $ | (10.3) | | | $ | 564.4 | | |
| Total environmental reserves at December 31, 2021 | | Total environmental reserves at December 31, 2021 | $ | 514.6 | | | $ | (11.4) | | | $ | 503.2 | |
| Provision (Benefit) | Provision (Benefit) | 16.1 | | | (0.5) | | | 15.6 | | Provision (Benefit) | (0.1) | | | (0.4) | | | (0.5) | |
| (Spending) Recoveries | (Spending) Recoveries | (89.7) | | | — | | | (89.7) | | (Spending) Recoveries | (7.9) | | | — | | | (7.9) | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | (4.0) | | | — | | | (4.0) | | Foreign currency translation adjustments | (2.0) | | | — | | | (2.0) | |
| Net change | Net change | $ | (77.6) | | | $ | (0.5) | | | $ | (78.1) | | Net change | $ | (10.0) | | | $ | (0.4) | | | $ | (10.4) | |
| Total environmental reserves at September 30, 2021 | $ | 497.1 | | | $ | (10.8) | | | $ | 486.3 | | |
| Total environmental reserves at March 31, 2022 | | Total environmental reserves at March 31, 2022 | $ | 504.6 | | | $ | (11.8) | | | $ | 492.8 | |
| Environmental reserves, current (1) | Environmental reserves, current (1) | $ | 85.4 | | | $ | (1.1) | | | $ | 84.3 | | Environmental reserves, current (1) | $ | 100.1 | | | $ | (0.9) | | | $ | 99.2 | |
Environmental reserves, long-term (2) | Environmental reserves, long-term (2) | 411.7 | | | (9.7) | | | 402.0 | | Environmental reserves, long-term (2) | 404.5 | | | (10.9) | | | 393.6 | |
| Total environmental reserves at September 30, 2021 | $ | 497.1 | | | $ | (10.8) | | | $ | 486.3 | | |
| Total environmental reserves at March 31, 2022 | | Total environmental reserves at March 31, 2022 | $ | 504.6 | | | $ | (11.8) | | | $ | 492.8 | |
____________________
(1)These amounts are included within "Accrued and other liabilities" on the condensed consolidated balance sheets.
(2)These amounts are included in "Environmental liabilities, continuing and discontinued" on the condensed consolidated balance sheets.
(3)These recorded recoveries represent probable realization of claims against U.S. government agencies and are recorded as an offset to our environmental reserves in the condensed consolidated balance sheets.
The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $170$160 million at September 30, 2021.March 31, 2022. This reasonably possible estimate is based upon information available as of the date of the filing but the actual future losses may be higher given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of potentially responsible parties, technology and information related to individual sites.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Potential environmental obligations that have not been reserved may be material to any one quarter's or year's results of operations in the future. However, we believe any such liability arising from such potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition as it may be satisfied over many years.
The table below provides a roll forward of our environmental recoveries representing probable realization of claims against insurance carriers and other third parties. These recoveries are recorded as "Prepaid and other current assets" and "Other assets including long-term receivables, net" in the condensed consolidated balance sheets.
| | (in Millions) | (in Millions) | December 31, 2020 | | Increase (Decrease) in recoveries | | Cash received | | | September 30, 2021 | (in Millions) | December 31, 2021 | | Increase (Decrease) in recoveries | | Cash received | | | March 31, 2022 |
| Environmental recoveries | Environmental recoveries | $ | 4.4 | | | $ | 0.7 | | | $ | (0.4) | | | | $ | 4.7 | | Environmental recoveries | $ | 4.5 | | | $ | 0.1 | | | $ | — | | | | $ | 4.6 | |
|
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Our net environmental provisions relate to costs for the continued cleanup of both continuing and discontinued manufacturing operations from previous years. The net provisions are comprised as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
Environmental provisions, net - recorded to liabilities (1) | Environmental provisions, net - recorded to liabilities (1) | $ | 8.1 | | | $ | 15.9 | | | $ | 15.6 | | | $ | 27.9 | | Environmental provisions, net - recorded to liabilities (1) | $ | (0.5) | | | $ | (0.9) | | |
Environmental provisions, net - recorded to assets (2) | Environmental provisions, net - recorded to assets (2) | (0.1) | | | (1.0) | | | (0.7) | | | 2.4 | | Environmental provisions, net - recorded to assets (2) | (0.1) | | | (0.1) | | |
| Environmental provision, net | Environmental provision, net | $ | 8.0 | | | $ | 14.9 | | | $ | 14.9 | | | $ | 30.3 | | Environmental provision, net | $ | (0.6) | | | $ | (1.0) | | |
| Continuing operations (3) | Continuing operations (3) | $ | 3.7 | | | $ | 4.0 | | | $ | 3.3 | | | $ | 13.7 | | Continuing operations (3) | $ | (3.3) | | | $ | (4.1) | | |
Discontinued operations (4) | Discontinued operations (4) | 4.3 | | | 10.9 | | | 11.6 | | | 16.6 | | Discontinued operations (4) | 2.7 | | | 3.1 | | |
| Environmental provision, net | Environmental provision, net | $ | 8.0 | | | $ | 14.9 | | | $ | 14.9 | | | $ | 30.3 | | Environmental provision, net | $ | (0.6) | | | $ | (1.0) | | |
____________________
(1)See above roll forward of our total environmental reserves as presented on the condensed consolidated balance sheets.
(2)See above roll forward of our total environmental recoveries as presented on the condensed consolidated balance sheets.
(3)Recorded as a component of "Restructuring and other charges (income)" on the condensed consolidated statements of income (loss). See Note 10.8. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations.
(4)Recorded as a component of "Discontinued operations, net of income taxes" on the condensed consolidated statements of income (loss). See Note 12.10.
A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 12 to our consolidated financial statements in our 20202021 Form 10-K. See Note 12 to our consolidated financial statements in our 20202021 Form 10-K for a description of significant updates to material environmental sites. There have been no significant updates since the information included in our 20202021 Form 10-K other than the update provided below.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Pocatello Tribal Litigation
As previously disclosed, on January 11, 2021, the Supreme Court denied FMC's petition to review the Ninth Circuit's decision in the Pocatello Tribal Litigation. In the first quarter of 2021, FMC made $21.4 million in payments to the Tribes for unpaid permit fees incurred from 2002 to 2014, attorney's fees, and interest charges. In the second quarter of 2021, FMC made a further payment to the Tribes of $10.8 million to pay fees and interest incurred from 2015 to 2021. There was no change to our existing reserves as a result of our denied petition other than an inconsequential true up related to interest. Additionally, the reserve for this matter has been adjusted down to reflect the amounts paid to the Tribes.
The expected aggregate undiscounted amount related to this matter was $104.5 million as of December 31, 2020, of which $82.6 million, on a discounted basis, had been recognized in environmental liabilities on our balance sheet. As of September 30, 2021, $42.7 million, on a discounted basis, has been recognized in environmental liabilities on our balance sheet. The decrease in our liability balance from 2020 is primarily due to payments of $32.2 million made in the first two quarters of 2021 and the remeasurement of our discounted liability from the change in discount rate of $8.9 million using the appropriate U.S. Treasury bill rate. In calculating the net present value of future annual permit fees, we used a discount rate of 2.31%, which represents the appropriate risk-free rate. We believe that the application of this rate produces a result which approximates the amount that would hypothetically satisfy our liability in an arms-length transaction.
Note 14:12: Earnings Per Share
Earnings per common share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis.
Our potentially dilutive securities include potential common shares related to our stock options, restricted stock and restricted stock units. Diluted earnings per share ("Diluted EPS") considers the impact of potentially dilutive securities except in periods in which there is a loss from continuing operations because the inclusion of the potential common shares would have an antidilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. For the three and nine months ended September 30,March 31, 2022 and 2021 there were 0.40.3 million and 0.2 million potential common shares excluded from Diluted EPS, respectively. For the three and nine months ended September 30, 2020 there were 0.2 million and 0.3 million0.1 potential common shares excluded from Diluted EPS, respectively.
Our non-vested restricted stock awards contain rights to receive non-forfeitable dividends, and thus, are participating securities requiring the two-class method of computing EPS. The two-class method determines EPS by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows:
| | (in Millions, Except Share and Per Share Data) | (in Millions, Except Share and Per Share Data) | Three Months Ended September 30, | | Nine Months Ended September 30, | (in Millions, Except Share and Per Share Data) | Three Months Ended March 31, | |
| 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | |
| Earnings (loss) attributable to FMC stockholders: | Earnings (loss) attributable to FMC stockholders: | | | | | | | | Earnings (loss) attributable to FMC stockholders: | | | | |
| Continuing operations, net of income taxes | Continuing operations, net of income taxes | $ | 167.6 | | | $ | 129.8 | | | $ | 575.8 | | | $ | 538.7 | | Continuing operations, net of income taxes | $ | 222.6 | | | $ | 190.7 | | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | (9.7) | | | (18.4) | | | (32.4) | | | (36.7) | | Discontinued operations, net of income taxes | (15.2) | | | (8.1) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 157.9 | | | $ | 111.4 | | | $ | 543.4 | | | $ | 502.0 | | Net income (loss) attributable to FMC stockholders | $ | 207.4 | | | $ | 182.6 | | |
| Less: Distributed and undistributed earnings allocable to restricted award holders | Less: Distributed and undistributed earnings allocable to restricted award holders | (0.4) | | | (0.3) | | | (1.3) | | | (1.3) | | Less: Distributed and undistributed earnings allocable to restricted award holders | (0.4) | | | (0.4) | | |
| Net income (loss) allocable to common stockholders | Net income (loss) allocable to common stockholders | $ | 157.5 | | | $ | 111.1 | | | $ | 542.1 | | | $ | 500.7 | | Net income (loss) allocable to common stockholders | $ | 207.0 | | | $ | 182.2 | | |
| | Basic earnings (loss) per common share attributable to FMC stockholders: | Basic earnings (loss) per common share attributable to FMC stockholders: | | Basic earnings (loss) per common share attributable to FMC stockholders: | | |
| Continuing operations | Continuing operations | $ | 1.30 | | | $ | 1.00 | | | $ | 4.46 | | | $ | 4.14 | | Continuing operations | $ | 1.77 | | | $ | 1.47 | | |
| Discontinued operations | Discontinued operations | (0.08) | | | (0.14) | | | (0.25) | | | (0.28) | | Discontinued operations | (0.12) | | | (0.06) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 1.22 | | | $ | 0.86 | | | $ | 4.21 | | | $ | 3.86 | | Net income (loss) attributable to FMC stockholders | $ | 1.65 | | | $ | 1.41 | | |
| | Diluted earnings (loss) per common share attributable to FMC stockholders: | Diluted earnings (loss) per common share attributable to FMC stockholders: | | Diluted earnings (loss) per common share attributable to FMC stockholders: | | |
| Continuing operations | Continuing operations | $ | 1.30 | | | $ | 0.99 | | | $ | 4.44 | | | $ | 4.12 | | Continuing operations | $ | 1.76 | | | $ | 1.46 | | |
| Discontinued operations | Discontinued operations | (0.08) | | | (0.14) | | | (0.25) | | | (0.28) | | Discontinued operations | (0.12) | | | (0.06) | | |
| Net income (loss) attributable to FMC stockholders | Net income (loss) attributable to FMC stockholders | $ | 1.22 | | | $ | 0.85 | | | $ | 4.19 | | | $ | 3.84 | | Net income (loss) attributable to FMC stockholders | $ | 1.64 | | | $ | 1.40 | | |
| | Shares (in thousands): | Shares (in thousands): | | Shares (in thousands): | | |
| Weighted average number of shares of common stock outstanding - Basic | Weighted average number of shares of common stock outstanding - Basic | 128,313 | | | 129,888 | | | 128,951 | | | 129,710 | | Weighted average number of shares of common stock outstanding - Basic | 126,064 | | | 129,484 | | |
| Weighted average additional shares assuming conversion of potential common shares | Weighted average additional shares assuming conversion of potential common shares | 678 | | | 911 | | | 763 | | | 886 | | Weighted average additional shares assuming conversion of potential common shares | 775 | | | 836 | | |
| Shares – diluted basis | Shares – diluted basis | 128,991 | | | 130,799 | | | 129,714 | | | 130,596 | | Shares – diluted basis | 126,839 | | | 130,320 | | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 15:13: Equity
Accumulated other comprehensive income (loss)
Summarized below is the roll forward of accumulated other comprehensive income (loss), net of tax. | | (in Millions) | (in Millions) | Foreign currency adjustments | | Derivative Instruments (1) | | Pension and other postretirement benefits (2) | | Total | (in Millions) | Foreign currency adjustments | | Derivative Instruments (1) | | Pension and other postretirement benefits (2) | | Total |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2020 | $ | 24.0 | | | $ | (71.8) | | | $ | (234.4) | | | $ | (282.2) | | |
| 2021 Activity | | | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2021 | | Accumulated other comprehensive income (loss), net of tax at December 31, 2021 | $ | (62.5) | | | $ | (22.2) | | | $ | (231.0) | | | $ | (315.7) | |
| 2022 Activity | | 2022 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | (61.1) | | | 34.1 | | | — | | | (27.0) | | Other comprehensive income (loss) before reclassifications | (39.4) | | | (84.7) | | | — | | | (124.1) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | 11.8 | | | 13.2 | | | 25.0 | | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | 0.6 | | | 3.6 | | | 4.2 | |
| Net current period other comprehensive income (loss) | Net current period other comprehensive income (loss) | $ | (61.1) | | | $ | 45.9 | | | $ | 13.2 | | | $ | (2.0) | | Net current period other comprehensive income (loss) | $ | (39.4) | | | $ | (84.1) | | | $ | 3.6 | | | $ | (119.9) | |
| | Accumulated other comprehensive income (loss), net of tax at September 30, 2021 | $ | (37.1) | | | $ | (25.9) | | | $ | (221.2) | | | $ | (284.2) | | |
| Accumulated other comprehensive income (loss), net of tax at March 31, 2022 | | Accumulated other comprehensive income (loss), net of tax at March 31, 2022 | $ | (101.9) | | | $ | (106.3) | | | $ | (227.4) | | | $ | (435.6) | |
| | (in Millions) | (in Millions) | Foreign currency adjustments | | Derivative Instruments (1) | | Pension and other postretirement benefits (2) | | Total | (in Millions) | Foreign currency adjustments | | Derivative Instruments (1) | | Pension and other postretirement benefits (2) | | Total |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2019 | $ | (77.7) | | | $ | (65.0) | | | $ | (269.3) | | | $ | (412.0) | | |
| 2020 Activity | | | | | | | | |
| Accumulated other comprehensive income (loss), net of tax at December 31, 2020 | | Accumulated other comprehensive income (loss), net of tax at December 31, 2020 | $ | 24.0 | | | $ | (71.8) | | | $ | (234.4) | | | $ | (282.2) | |
| 2021 Activity | | 2021 Activity | | | | | | | |
| Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | 28.2 | | | 29.3 | | | — | | | 57.5 | | Other comprehensive income (loss) before reclassifications | (49.5) | | | 40.5 | | | (0.1) | | | (9.1) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (15.4) | | | 12.0 | | | (3.4) | | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | 4.1 | | | 4.4 | | | 8.5 | |
| Net current period other comprehensive income (loss) | Net current period other comprehensive income (loss) | $ | 28.2 | | | $ | 13.9 | | | $ | 12.0 | | | $ | 54.1 | | Net current period other comprehensive income (loss) | $ | (49.5) | | | $ | 44.6 | | | $ | 4.3 | | | $ | (0.6) | |
| | Accumulated other comprehensive income (loss), net of tax at September 30, 2020 | $ | (49.5) | | | $ | (51.1) | | | $ | (257.3) | | | $ | (357.9) | | |
| Accumulated other comprehensive income (loss), net of tax at March 31, 2021 | | Accumulated other comprehensive income (loss), net of tax at March 31, 2021 | $ | (25.5) | | | $ | (27.2) | | | $ | (230.1) | | | $ | (282.8) | |
____________________
(1) See Note 1817 for more information.
(2) See Note 1615 for more information.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Reclassifications of accumulated other comprehensive income (loss)
The table below provides details about the reclassifications from accumulated other comprehensive income (loss) and the affected line items in the condensed consolidated statements of income (loss) for each of the periods presented:
| | Details about Accumulated Other Comprehensive Income Components | Details about Accumulated Other Comprehensive Income Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (1) | Affected Line Item in the Condensed Consolidated Statements of Income (Loss) | Details about Accumulated Other Comprehensive Income Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (1) | Affected Line Item in the Condensed Consolidated Statements of Income (Loss) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, | | | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | | (in Millions) | 2022 | | 2021 | | | |
| | Derivative instruments | Derivative instruments | | | | | | | | | Derivative instruments | | | | | | |
| Gain (loss) on foreign currency contracts | Gain (loss) on foreign currency contracts | $ | (1.9) | | | $ | (2.5) | | | $ | (14.3) | | | $ | 28.3 | | Costs of sales and services | Gain (loss) on foreign currency contracts | $ | (1.6) | | | $ | (4.8) | | | | Costs of sales and services |
| | Gain (loss) on foreign currency contracts | Gain (loss) on foreign currency contracts | 1.7 | | | (5.3) | | | 2.0 | | | (14.0) | | Selling, general and administrative expenses | Gain (loss) on foreign currency contracts | 0.5 | | | 0.1 | | | | Selling, general and administrative expenses |
| Gain (loss) on interest rate contracts | Gain (loss) on interest rate contracts | (1.0) | | | 1.1 | | | (3.1) | | | 1.6 | | Interest expense, net | Gain (loss) on interest rate contracts | (1.0) | | | (0.2) | | | | Interest expense, net |
| Total before tax | Total before tax | $ | (1.2) | | | $ | (6.7) | | | $ | (15.4) | | | $ | 15.9 | | | Total before tax | $ | (2.1) | | | $ | (4.9) | | | | |
| | 0.6 | | | 3.4 | | | 3.6 | | | (0.5) | | Provision for income taxes | | 1.5 | | | 0.8 | | | | Provision for income taxes |
| Amount included in net income (loss) | Amount included in net income (loss) | $ | (0.6) | | | $ | (3.3) | | | $ | (11.8) | | | $ | 15.4 | | | Amount included in net income (loss) | $ | (0.6) | | | $ | (4.1) | | | | |
| Pension and other postretirement benefits (2) | Pension and other postretirement benefits (2) | | Pension and other postretirement benefits (2) | | | |
| Amortization of prior service costs | Amortization of prior service costs | $ | (0.1) | | | $ | (0.1) | | | $ | (0.2) | | | $ | (0.2) | | Selling, general and administrative expenses | Amortization of prior service costs | $ | — | | | $ | (0.1) | | | | Selling, general and administrative expenses |
| Amortization of unrecognized net actuarial and other gains (losses) | Amortization of unrecognized net actuarial and other gains (losses) | (5.2) | | | (10.4) | | | (16.1) | | | (14.4) | | Non-operating pension and postretirement charges (income) | Amortization of unrecognized net actuarial and other gains (losses) | (4.2) | | | (5.4) | | | | Non-operating pension and postretirement charges (income) |
| Recognized loss due to curtailment and settlement | Recognized loss due to curtailment and settlement | (0.4) | | | (0.6) | | | (0.4) | | | (0.6) | | Non-operating pension and postretirement charges (income); Discontinued operations, net of income taxes | Recognized loss due to curtailment and settlement | (0.4) | | | — | | | | Non-operating pension and postretirement charges (income); Discontinued operations, net of income taxes |
| Total before tax | Total before tax | $ | (5.7) | | | $ | (11.1) | | | $ | (16.7) | | | $ | (15.2) | | | Total before tax | $ | (4.6) | | | $ | (5.5) | | | | |
| | 1.2 | | | 2.3 | | | 3.5 | | | 3.2 | | Provision for income taxes; Discontinued operations, net of income taxes | | 1.0 | | | 1.1 | | | | Provision for income taxes; Discontinued operations, net of income taxes |
| Amount included in net income (loss) | Amount included in net income (loss) | $ | (4.5) | | | $ | (8.8) | | | $ | (13.2) | | | $ | (12.0) | | | Amount included in net income (loss) | $ | (3.6) | | | $ | (4.4) | | | | |
| Total reclassifications for the period | Total reclassifications for the period | $ | (5.1) | | | $ | (12.1) | | | $ | (25.0) | | | $ | 3.4 | | Amount included in net income | Total reclassifications for the period | $ | (4.2) | | | $ | (8.5) | | | | Amount included in net income |
____________________
(1)Amounts in parentheses indicate charges to the condensed consolidated statements of income (loss).
(2)Pension and other postretirement benefits amounts include the impact from both continuing and discontinued operations. For detail on the continuing operations components of pension and other postretirement benefits, see Note 16.15.
Dividends and Share Repurchases
During the ninethree months ended September 30,March 31, 2022 and March 31, 2021, and September 30, 2020, we paid dividends of $186.2$66.8 million and $171.3$62.3 million, respectively. On OctoberApril 21, 2021,2022, we paid dividends totaling $61.0$66.9 million to our shareholders of record as of September 30, 2021.March 31, 2022. This amount is included in "Accrued and other liabilities" on the condensed consolidated balance sheet as of September 30, 2021.March 31, 2022.
In February 2022, the Board of Directors authorized the repurchase of up to $1 billion of the Company's common stock. The $1 billion share repurchase program is replacing in its entirety the previous authorization. During the ninethree months ended September 30, 2021, 3 millionMarch 31, 2022, 0 shares were repurchased under the publicly announced repurchase program. At September 30, 2021, approximately $250 millionMarch 31, 2022, $1.0 billion remained unused under our Board-authorized repurchase
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
program. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
We also reacquire shares from time to time from employees in connection with the vesting, exercise and forfeiture of awards under our equity compensation plans.
Note 14: Leases
We lease office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from one to 20 years, with some leases having terms greater than 20 years. Our lease portfolio includes agreements with renewal options, purchase options and clauses for early termination based on the terms specific to the agreement.
At contract inception, we review the facts and circumstances of the arrangement to determine if the contract is a lease. We follow the guidance in ASC 842-10-15 and consider the following: whether the contract has an identified asset; if we have the right to obtain substantially all economic benefits from the asset; and if we have the right to direct the use of the underlying asset. When determining if a contract has an identified asset, we consider both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if we have the right to obtain substantially all economic benefits from the asset, we consider the primary outputs of the identified asset throughout the period of use and determine if we receive greater than 90 percent of those benefits. When determining if we have the right to direct the use of an underlying asset, we consider if we have the right to direct how and for what purpose the asset is used throughout the period of use and if we control the decision-making rights over the asset. All leased assets are classified as operating or finance under ASC 842. The lease term is determined as the non-cancellable period of the lease, together with all of the following: periods covered by an option to extend the lease which are reasonably certain to be exercised, periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option, and periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. At commencement, we assess whether any options included in the lease are reasonably certain to be exercised by considering all economic factors relevant including, contract-based, asset-based, market-based, and company-based factors.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable or our incremental borrowing rate at the lease commencement date. When determining our incremental borrowing rate, we consider our centralized treasury function and our current credit profile. We then make adjustments to this rate for securitization, the length of the lease term, and leases denominated in foreign currencies. Minimum lease payments are expensed over the term of the lease on a straight-line basis. Some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments for which we are typically responsible for include payment of vehicle insurance, real estate taxes, and maintenance expenses.
Most leases within our portfolio are classified as operating leases under the standard. Operating leases are included in "Other assets including long-term receivables, net", "Accrued and other liabilities", and "Other long-term liabilities" in our condensed consolidated balance sheets. Operating lease right-of-use ("ROU") assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of any lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Operating leases relate to office spaces, IT equipment, transportation equipment, machinery equipment, furniture and fixtures, and plant and facilities under non-cancellable lease agreements. Leases primarily have fixed rental periods, with many of the real estate leases requiring additional payments for property taxes and occupancy-related costs. Leases for real estate typically have initial terms ranging from one to 20 years, with some leases having terms greater than 20 years. Leases for non-real estate (transportation, IT) typically have initial terms ranging from one to 10 years. We have elected not to record short-term leases on the balance sheet whose term is 12 months or less and does not include a purchase option or extension that is reasonably certain to be exercised.
We rent or sublease a small number of assets including equipment and office space to third party companies. These third-party arrangements include a small number of TSA arrangements from recent acquisitions. Rental income from all subleases is not material to our business.
The ROU asset and lease liability balances as of March 31, 2022 and December 31, 2021 were as follows:
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
| | | | | | | | | | | | | | |
| (in Millions) | Classification | March 31, 2022 | | December 31, 2021 |
| Assets | | | | |
| | | | |
| Operating lease ROU assets | Other assets including long-term receivables, net | $ | 134.7 | | | $ | 135.2 | |
| | | | |
| Liabilities | | | | |
| | | | |
| Operating lease current liabilities | Accrued and other liabilities | $ | 23.5 | | | $ | 23.5 | |
| | | | |
| | | | |
| | | | |
| Operating lease noncurrent liabilities | Other long-term liabilities | 139.1 | | | 140.0 | |
| | | | |
| | | | |
The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| (in Millions) | Lease Cost Classification | 2022 | | 2021 | | | | |
| Lease Cost | | | | | | | | |
| Operating lease cost | Costs of sales and services / Selling, general and administrative expenses | $ | 9.0 | | | $ | 8.6 | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Variable lease cost | Costs of sales and services / Selling, general and administrative expenses | 1.2 | | | 1.2 | | | | | |
| | | | | | | | |
| Total lease cost | | $ | 10.2 | | | $ | 9.8 | | | | | |
| | | | | |
| March 31, 2022 |
| Operating Lease Term and Discount Rate | |
| Weighted-average remaining lease term (years) | 9.0 |
| |
| |
| Weighted-average discount rate | 4.1 | % |
| |
| |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| (in Millions) | 2022 | | 2021 | | | | |
| Other Information | | | | | | | |
| | | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |
| Operating cash flows from operating leases | $ | (9.2) | | | $ | (8.9) | | | | | |
| | | | | | | |
| | | | | | | |
| Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets: | | | | | | | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 7.2 | | | $ | 2.7 | | | | | |
| | | | | | | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The following table represents our future minimum operating lease payments as of, and subsequent to, March 31, 2022 under ASC 842:
| | | | | | | | | |
| (in Millions) | | | | | Operating Leases Total |
| Maturity of Lease Liabilities | | | | | |
| 2022 (excluding the three months ending March 31, 2022) | | | | | $ | 22.4 | |
| 2023 | | | | | 24.7 | |
| 2024 | | | | | 20.4 | |
| 2025 | | | | | 19.0 | |
| 2026 | | | | | 18.0 | |
| Thereafter | | | | | 93.1 | |
| Total undiscounted lease payments | | | | | $ | 197.6 | |
| Less: Present value adjustment | | | | | (35.0) | |
| Present value of lease liabilities | | | | | $ | 162.6 | |
Note 16:15: Pensions and Other Postretirement Benefits
The following table summarizes the components of net annual benefit cost (income):
| | (in Millions) | (in Millions) | Three Months Ended September 30, | | Nine Months Ended September 30, | (in Millions) | Three Months Ended March 31, | |
| Pensions | | Other Benefits | | Pensions | | Other Benefits | Pensions | | Other Benefits | |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | | 2022 | | 2021 | |
| Service cost | Service cost | $ | 0.9 | | | $ | 1.4 | | | $ | — | | | $ | — | | | $ | 3.5 | | | $ | 3.6 | | | $ | — | | | $ | — | | Service cost | $ | 1.1 | | | $ | 1.3 | | | $ | — | | | $ | — | | |
| Interest cost | Interest cost | 6.2 | | | 9.3 | | | 0.1 | | | 0.1 | | | 18.4 | | | 27.6 | | | 0.2 | | | 0.3 | | Interest cost | 7.3 | | | 6.1 | | | 0.1 | | | 0.1 | | |
| Expected return on plan assets | Expected return on plan assets | (7.0) | | | (9.2) | | | — | | | — | | | (21.1) | | | (27.8) | | | — | | | — | | Expected return on plan assets | (7.8) | | | (7.1) | | | — | | | — | | |
| Amortization of prior service cost (credit) | Amortization of prior service cost (credit) | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | | | — | | | — | | Amortization of prior service cost (credit) | — | | | 0.1 | | | — | | | — | | |
| Recognized net actuarial and other (gain) loss | Recognized net actuarial and other (gain) loss | 5.7 | | | 11.1 | | | (0.3) | | | (0.3) | | | 17.5 | | | 16.0 | | | (0.7) | | | (0.7) | | Recognized net actuarial and other (gain) loss | 4.5 | | | 5.9 | | | (0.2) | | | (0.2) | | |
| Recognized loss due to settlement (1) | Recognized loss due to settlement (1) | 0.4 | | | 0.6 | | | — | | | — | | | 0.4 | | | 0.6 | | | — | | | — | | Recognized loss due to settlement (1) | 0.4 | | | — | | | — | | | — | | |
| Net periodic benefit cost (income) | Net periodic benefit cost (income) | $ | 6.2 | | | $ | 13.2 | | | $ | (0.2) | | | $ | (0.2) | | | $ | 18.8 | | | $ | 20.1 | | | $ | (0.5) | | | $ | (0.4) | | Net periodic benefit cost (income) | $ | 5.5 | | | $ | 6.3 | | | $ | (0.1) | | | $ | (0.1) | | |
(1)Settlement charge relates to the U.S. nonqualified defined benefit pension plan.
Note 17:16: Income Taxes
Our effective income tax rates from continuing operations for the three and nine months ended September 30,March 31, 2022 and March 31, 2021 were 4.915.7 percent and 11.414.4 percent, respectively. OurThe increase in the effective income tax rates from continuing operations for the three and nine months ended September 30, 2020 were 12.4 percent and 13.2 percent, respectively. Our effective income tax rates from continuing operations for the three and nine months ended September 30, 2021 were impactedrate was primarily driven by a $17.7 million tax reserve release related to our domestic operations.
During the third quarter of 2021, we changed our indefinite reinvestment assertion in connection with plans to repatriate cash in 2021 and subsequent years, contingent upon earnings from certain foreign subsidiaries, and recorded tax of $2.4 million. Additional income taxes have not been provided for certain other remaining outside basis differences inherent in our investments in foreign subsidiaries because the investments and related unremitted earnings are essentially permanent in duration. Determining the amount of unrecognized deferred tax liability related to indefinitely reinvested earnings of our foreign subsidiaries is not practicable due to complexityprovisions of the multi-jurisdictional tax environmentTax Cuts and Jobs Act of 2017 that became effective in which we operate.2022 and geographic earnings mix.
We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology ("EAETR") in accordance with U.S. GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision. The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. A significant amount of our earnings is generated by our foreign subsidiaries (e.g., Singapore, Hong Kong, and Switzerland), which tax earnings at lower statutory rates than the United States federal statutory rate. Our future effective tax rates may be materially impacted by a future change in the composition of earnings from foreign and domestic tax jurisdictions. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with U.S. GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. As a global enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As a result, there can be significant volatility in interim tax provisions.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Note 18:17: Financial Instruments, Risk Management and Fair Value Measurements
Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
| | | | | | | | |
| Financial Instrument | | Valuation Method |
| Foreign exchange forward contracts | | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies. |
| | |
| Commodity forward contracts | | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities. |
| | |
| Debt | | Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period. |
The estimated fair value of the financial instruments in the above table have been determined using standard pricing models which take into account the present value of expected future cash flows discounted to the balance sheet date. These standard pricing models utilize inputs derived from or corroborated by observable market data such as interest rate yield curves and currency and commodity spot and forward rates. In addition, we test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward contracts are included in the tables within this Note. The estimated fair value of debt is $3,650.8$3,811.9 million and $3,640.0$3,409.8 million and the carrying amount is $3,393.7$3,772.8 million and $3,267.8$3,172.5 million as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
We enter into various financial instruments with off-balance sheet risk as part of the normal course of business. These off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers. See Note 1918 for more information. Decisions to extend financial guarantees to customers and the amount of collateral required under these guarantees are based on our evaluation of creditworthiness on a case-by-case basis.
Use of Derivative Financial Instruments to Manage Risk
We mitigate certain financial exposures, including currency risk, commodity purchase exposures and interest rate risk, through a program of risk management that includes the use of derivative financial instruments. We enter into derivative contracts, including forward contracts and purchased options, to reduce the effects of fluctuating currency exchange rates, interest rates, and commodity prices. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 19 to our consolidated financial statements on our 20202021 Form 10-K.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also assess, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively.
Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in accumulated other comprehensive income ("AOCI") changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
earnings as the underlying hedged item affects earnings. In contrast, we immediately record in earnings changes in the fair value of derivatives that are not designated as cash flow hedges.
As of September 30, 2021,March 31, 2022, we had open foreign currency forward contracts in AOCI in a net after tax gainloss position of $27.8$58.7 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2021.2022. At September 30, 2021,March 31, 2022, we had open forward contracts designated as cash flow hedges with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,143.4$2,313.0 million.
As of September 30, 2021,March 31, 2022, we had open interest rate contracts in AOCI in a net after tax gain position of $3.4$7.9 million designated as cash flow hedges of the anticipated fixed rate coupon of debt forecasted to be issued within a designated window. At September 30, 2021,March 31, 2022, we had interest rate swap contracts outstanding with a total aggregate notional value of approximately $100.0 million.
In conjunction with the issuance of the Senior Notes, on September 20, 2019 we settled on various interest rate swap agreements which were entered into to hedge the variability in treasury rates. This settlement resulted in a loss of $83.1 million which was recorded in other comprehensive income and will be amortized over the various terms of the Senior Notes.
As of September 30, 2021,March 31, 2022, we had no open commodity contracts in AOCI designated as cash flow hedges of underlying forecasted purchases. At September 30, 2021,March 31, 2022, we had zero0 mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases.
Approximately $23.7$58.7 million of the net gainslosses after-tax, representing open foreign currency exchange and interest rate contracts, will be realized in earnings during the twelve months ending September 30, 2022March 31, 2023 if spot rates in the future are consistent with forward rates as of September 30, 2021.March 31, 2022. The actual effect on earnings will be dependent on the actual spot rates when the forecasted transactions occur.
Derivatives Not Designated As Hedging Instruments
We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings.
We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,820.0$2,573.6 million at September 30, 2021.March 31, 2022.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Fair Value of Derivative Instruments
The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments.
| | | September 30, 2021 | | March 31, 2022 |
| | Gross Amount of Derivatives | | | Gross Amount of Derivatives | |
| (in Millions) | (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) | | Net Amounts | (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) | | Net Amounts |
| Foreign exchange contracts | Foreign exchange contracts | $ | 30.9 | | | $ | 8.3 | | | $ | 39.2 | | | $ | (17.0) | | | $ | 22.2 | | Foreign exchange contracts | $ | 35.7 | | | $ | 3.1 | | | $ | 38.8 | | | $ | (31.5) | | | $ | 7.3 | |
| | Interest rate contracts | Interest rate contracts | 4.3 | | | — | | | 4.3 | | | — | | | 4.3 | | Interest rate contracts | 10.0 | | | — | | | 10.0 | | | — | | | 10.0 | |
| Total derivative assets (1) | Total derivative assets (1) | $ | 35.2 | | | $ | 8.3 | | | $ | 43.5 | | | $ | (17.0) | | | $ | 26.5 | | Total derivative assets (1) | $ | 45.7 | | | $ | 3.1 | | | $ | 48.8 | | | $ | (31.5) | | | $ | 17.3 | |
| | Foreign exchange contracts | Foreign exchange contracts | $ | (14.7) | | | $ | (3.5) | | | $ | (18.2) | | | $ | 17.0 | | | $ | (1.2) | | Foreign exchange contracts | $ | (102.4) | | | $ | (29.6) | | | $ | (132.0) | | | $ | 31.5 | | | $ | (100.5) | |
| Total derivative liabilities (2) | Total derivative liabilities (2) | $ | (14.7) | | | $ | (3.5) | | | $ | (18.2) | | | $ | 17.0 | | | $ | (1.2) | | Total derivative liabilities (2) | $ | (102.4) | | | $ | (29.6) | | | $ | (132.0) | | | $ | 31.5 | | | $ | (100.5) | |
| | Net derivative assets (liabilities) | Net derivative assets (liabilities) | $ | 20.5 | | | $ | 4.8 | | | $ | 25.3 | | | $ | — | | | $ | 25.3 | | Net derivative assets (liabilities) | $ | (56.7) | | | $ | (26.5) | | | $ | (83.2) | | | $ | — | | | $ | (83.2) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Gross Amount of Derivatives | | |
| (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) | | Net Amounts |
| Foreign exchange contracts | $ | 19.4 | | | $ | 1.9 | | | $ | 21.3 | | | $ | (21.1) | | | $ | 0.2 | |
| Interest rate contracts | 0.1 | | | — | | | 0.1 | | | — | | | 0.1 | |
| | | | | | | | | |
| | | | | | | | | |
Total derivative assets (1) | $ | 19.5 | | | $ | 1.9 | | | $ | 21.4 | | | $ | (21.1) | | | $ | 0.3 | |
| | | | | | | | | |
| Foreign exchange contracts | $ | (42.7) | | | $ | (3.1) | | | $ | (45.8) | | | $ | 21.1 | | | $ | (24.7) | |
| | | | | | | | | |
| Interest rate contracts | (0.9) | | | — | | | (0.9) | | | — | | | (0.9) | |
Total derivative liabilities (2) | $ | (43.6) | | | $ | (3.1) | | | $ | (46.7) | | | $ | 21.1 | | | $ | (25.6) | |
| | | | | | | | | |
| Net derivative assets (liabilities) | $ | (24.1) | | | $ | (1.2) | | | $ | (25.3) | | | $ | — | | | $ | (25.3) | |
____________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Gross Amount of Derivatives | | |
| (in Millions) | Designated as Cash Flow Hedges | | Not Designated as Hedging Instruments | | Total Gross Amounts | | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) | | Net Amounts |
| Foreign exchange contracts | $ | 35.9 | | | $ | 5.7 | | | $ | 41.6 | | | $ | (21.9) | | | $ | 19.7 | |
| Interest rate contracts | 3.7 | | | — | | | 3.7 | | | — | | | 3.7 | |
| | | | | | | | | |
| | | | | | | | | |
Total derivative assets (1) | $ | 39.6 | | | $ | 5.7 | | | $ | 45.3 | | | $ | (21.9) | | | $ | 23.4 | |
| | | | | | | | | |
| Foreign exchange contracts | $ | (16.2) | | | $ | (9.7) | | | $ | (25.9) | | | $ | 21.9 | | | $ | (4.0) | |
| | | | | | | | | |
| | | | | | | | | |
Total derivative liabilities (2) | $ | (16.2) | | | $ | (9.7) | | | $ | (25.9) | | | $ | 21.9 | | | $ | (4.0) | |
| | | | | | | | | |
| Net derivative assets (liabilities) | $ | 23.4 | | | $ | (4.0) | | | $ | 19.4 | | | $ | — | | | $ | 19.4 | |
______________(1) Net balance is included in "Prepaid and other current assets" in the condensed consolidated balance sheets.
(2) Net balance is included in "Accrued and other liabilities" in the condensed consolidated balance sheets.
(3) Represents net derivatives positions subject to master netting arrangements.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
The tables below summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments.
Derivatives in Cash Flow Hedging Relationships
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts | | |
| Foreign Exchange | | | | Interest rate | | Total |
| Three Months Ended September 30, |
| (in Millions) | 2021 | | 2020 | | | | | | 2021 | | 2020 | | 2021 | | 2020 |
| Unrealized hedging gains (losses) and other, net of tax | $ | 40.7 | | | $ | 1.4 | | | | | | | $ | 0.9 | | | $ | 2.5 | | | $ | 41.6 | | | $ | 3.9 | |
Reclassification of deferred hedging (gains) losses, net of tax (1) | (0.2) | | | 4.1 | | | | | | | 0.8 | | | (0.8) | | | 0.6 | | | 3.3 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total derivative instrument impact on comprehensive income, net of tax | $ | 40.5 | | | $ | 5.5 | | | | | | | $ | 1.7 | | | $ | 1.7 | | | $ | 42.2 | | | $ | 7.2 | |
| | | | | | | | | | | | | | | |
| | | Contracts | | | | Contracts | | |
| | Foreign Exchange | | | Interest rate | | Total | | Foreign Exchange | | | Interest rate | | Total |
| | Nine Months Ended September 30, | | Three Months Ended March 31, |
| (in Millions) | (in Millions) | 2021 | | 2020 | | | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | | | 2022 | | 2021 | | 2022 | | 2021 |
| Unrealized hedging gains (losses) and other, net of tax | Unrealized hedging gains (losses) and other, net of tax | $ | 30.1 | | | $ | 27.4 | | | | $ | 4.0 | | | $ | 1.9 | | | $ | 34.1 | | | $ | 29.3 | | Unrealized hedging gains (losses) and other, net of tax | $ | (89.6) | | | $ | 33.5 | | | | $ | 4.9 | | | $ | 7.0 | | | $ | (84.7) | | | $ | 40.5 | |
Reclassification of deferred hedging (gains) losses, net of tax (1) | Reclassification of deferred hedging (gains) losses, net of tax (1) | 9.2 | | | (14.1) | | | | 2.6 | | | (1.3) | | | 11.8 | | | (15.4) | | Reclassification of deferred hedging (gains) losses, net of tax (1) | (0.2) | | | 3.9 | | | | 0.8 | | | 0.2 | | | 0.6 | | | 4.1 | |
| | Total derivative instrument impact on comprehensive income, net of tax | Total derivative instrument impact on comprehensive income, net of tax | $ | 39.3 | | | $ | 13.3 | | | | $ | 6.6 | | | $ | 0.6 | | | $ | 45.9 | | | $ | 13.9 | | Total derivative instrument impact on comprehensive income, net of tax | $ | (89.8) | | | $ | 37.4 | | | | $ | 5.7 | | | $ | 7.2 | | | $ | (84.1) | | | $ | 44.6 | |
|
(1)See Note 1513 for classification of amounts within the condensed consolidated statements of income (loss).
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Derivatives Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amount of Pre-tax Gain (Loss) Recognized in Income on Derivatives (1) |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in Millions) | Location of Gain or (Loss)
Recognized in Income on Derivatives | | 2021 | | 2020 | | 2021 | | 2020 |
| Foreign exchange contracts | Cost of sales and services | | $ | (0.2) | | | $ | (14.3) | | | $ | (27.9) | | | $ | (38.4) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Total | | | $ | (0.2) | | | $ | (14.3) | | | $ | (27.9) | | | $ | (38.4) | |
___________________ | | | | | | | | | | | | | | | | | | | |
| | | Amount of Pre-tax Gain (Loss) Recognized in Income on Derivatives (1) |
| | | Three Months Ended March 31, | | |
| (in Millions) | | | 2022 | | 2021 | | | | |
| Foreign exchange contracts | | | $ | (16.2) | | | $ | (12.7) | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Total | | | $ | (16.2) | | | $ | (12.7) | | | | | |
______________(1)Amounts in the columns represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item. These amounts are included in "Costs of sales and services" on the consolidated statements of income (loss).
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.
Fair Value Hierarchy
We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
Recurring Fair Value Measurements
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets. During the periods presented there were no transfers between fair value hierarchy levels.
| | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | March 31, 2022 | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Assets | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 7.3 | | | $ | — | | | $ | 7.3 | | | $ | — | |
Derivatives – Interest rate (1) | 10.0 | | | — | | | 10.0 | | | — | |
Other (2) | 20.9 | | | 20.9 | | | — | | | — | |
| Total assets | $ | 38.2 | | | $ | 20.9 | | | $ | 17.3 | | | $ | — | |
| | | | | | | |
| Liabilities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 100.5 | | | $ | — | | | $ | 100.5 | | | $ | — | |
Derivatives – Interest rate (1) | — | | | — | | | — | | | — | |
Other (3) | 26.8 | | | 26.8 | | | — | | | — | |
| Total liabilities | $ | 127.3 | | | $ | 26.8 | | | $ | 100.5 | | | $ | — | |
Table of Contents | | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | September 30, 2021 | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Assets | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 22.2 | | | $ | — | | | $ | 22.2 | | | $ | — | |
Derivatives – Interest rate (1) | 4.3 | | | — | | | 4.3 | | | — | |
Other (2) | 21.0 | | | 21.0 | | | — | | | — | |
| Total assets | $ | 47.5 | | | $ | 21.0 | | | $ | 26.5 | | | $ | — | |
| | | | | | | |
| Liabilities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 1.2 | | | $ | — | | | $ | 1.2 | | | $ | — | |
Derivatives – Interest rate (1) | — | | | — | | | — | | | — | |
Other (3) | 25.3 | | | 25.3 | | | — | | | — | |
| Total liabilities | $ | 26.5 | | | $ | 25.3 | | | $ | 1.2 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2020 | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Assets | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 0.2 | | | $ | — | | | $ | 0.2 | | | $ | — | |
Derivatives - Interest Rate (1) | 0.1 | | | — | | | 0.1 | | | — | |
Other (2) | 24.1 | | | 24.1 | | | — | | | — | |
| Total assets | $ | 24.4 | | | $ | 24.1 | | | $ | 0.3 | | | $ | — | |
| | | | | | | |
| Liabilities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 24.7 | | | $ | — | | | $ | 24.7 | | | $ | — | |
Derivatives – Interest rate (1) | 0.9 | | | — | | | 0.9 | | | — | |
Other (3) | 35.2 | | | 35.2 | | | — | | | — | |
| Total liabilities | $ | 60.8 | | | $ | 35.2 | | | $ | 25.6 | | | $ | — | |
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| (in Millions) | December 31, 2021 | | Quoted Prices in Active Markets for Identical Assets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Assets | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 19.7 | | | $ | — | | | $ | 19.7 | | | $ | — | |
Derivatives - Interest Rate (1) | 3.7 | | | — | | | 3.7 | | | — | |
Other (2) | 21.1 | | | 21.1 | | | — | | | — | |
| Total assets | $ | 44.5 | | | $ | 21.1 | | | $ | 23.4 | | | $ | — | |
| | | | | | | |
| Liabilities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Derivatives – Foreign exchange (1) | $ | 4.0 | | | $ | — | | | $ | 4.0 | | | $ | — | |
Derivatives – Interest rate (1) | — | | | — | | | — | | | — | |
Other (3) | 26.2 | | | 26.2 | | | — | | | — | |
| Total liabilities | $ | 30.2 | | | $ | 26.2 | | | $ | 4.0 | | | $ | — | |
____________________
(1)See the Fair Value of Derivative Instruments table within this Note for classification on the condensed consolidated balance sheets.
(2)Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheets. Both the asset and liability are recorded at fair value. Asset amounts are included in "Other assets including long-term receivables, net" in the condensed consolidated balance sheets.
(3)Primarily consists of a deferred compensation arrangement recognized on our balance sheets. Both the asset and liability are recorded at fair value. Liability amounts are included in "Other long-term liabilities" in the condensed consolidated balance sheets.
Nonrecurring Fair Value Measurements
There were no nonrecurring fair value measurements in the condensed consolidated balance sheets during the periods presented.
Note 19:18: Guarantees, Commitments, and Contingencies
We continue to monitor the conditions that are subject to guarantees and indemnifications to identify whether a liability must be recognized in our financial statements.
Guarantees and Other Commitments
The following table provides the estimated undiscounted amount of potential future payments for each major group of guarantees at September 30, 2021.March 31, 2022. These guarantees arise during the ordinary course of business from relationships with
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
customers and nonconsolidatednon-consolidated affiliates. Non-performance by the guaranteed party triggers the obligation requiring us to make payments to the beneficiary of the guarantee. Based on our experience, these types of guarantees have not had a material effect on our consolidated financial position or on our liquidity. Our expectation is that future payment or performance related to the non-performance of others is considered unlikely.
| | | | | |
| (in Millions) | |
| Guarantees: | |
Guarantees of vendor financing - short-term (1) | $ | 155.1261.1 | |
| |
Other debt guarantees (2) | 4.03.1 | |
| Total | $ | 159.1264.2 | |
____________________
(1)Represents guarantees to financial institutions on behalf of certain customers for their seasonal borrowing. This short-term amount is recorded within "Guarantees of vendor financing" on the condensed consolidated balance sheets.
(2)These guarantees represent support provided to third-party banks for credit extended to various customers and nonconsolidatednon-consolidated affiliates. The liability for the guarantees is recorded at an amount that approximates fair value (i.e. representing the stand-ready obligation) based on our historical collection experience and a current assessment of credit exposure. We believe the fair value of these guarantees is immaterial. The majority of these guarantees have an expiration date of less than one year.
Excluded from the chart above are parent-company guarantees we provide to lending institutions that extend credit to our foreign subsidiaries. Since these guarantees are provided for consolidated subsidiaries, the consolidated financial position is not
FMC CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited) — (Continued)
affected by the issuance of these guarantees. Also excluded from the chart, in connection with our property and asset sales and divestitures, we have agreed to indemnify the buyer for certain liabilities, including environmental contamination and taxes that occurred prior to the date of sale or provided guarantees to third parties relating to certain contracts assumed by the buyer. Our indemnification or guarantee obligations with respect to certain liabilities may be indefinite as to duration and may or may not be subject to a deductible, minimum claim amount or cap. As such, it is not possible for us to predict the likelihood that a claim will be made or to make a reasonable estimate of the maximum potential loss or range of loss. If triggered, we may be able to recover some of the indemnity payments from third parties. Therefore, we have not recorded any specific liabilities for these guarantees. For certain obligations related to our divestitures for which we can make a reasonable estimate of the maximum potential loss or range of loss and is probable, a liability in those instances has been recorded.
Contingencies
A detailed discussion related to our outstanding contingencies can be found in Note 20 to our consolidated financial statements included within our 20202021 Form 10-K. There have been no significant updates since the information included in our 20202021 Form 10-K other than the updates provided below.
India indirect tax matters
Other contingent liabilities.
Note 19: Subsequent Events
In India, we are subject to audits or other proceedings by tax authorities regarding certain alleged additional indirect taxes related toAs the Russia-Ukraine war continues, our operations. Indian tax authorities have recently begun auditing or investigating many companies, including our FMC subsidiary in India,values as a company and the sanctions imposed on, the goods and service tax ("GST") indirect tax law which came into force in 2017. Such proceedingscross-sanctions imposed and potential future litigations, in which the tax authorities are challenging the technical tax position takenannounced by, the Company, take many yearsRussian Federation have led us to resolve as the matters are heardcease operations and decided upon by tax authorities or courts. We have provided reserves for such Indian tax matters that we consider probable and a reasonable estimate of the obligation can bebusiness in Russia. This decision was made in the amountmid-April when we concluded that it was not sustainable to continue operations. Net assets of approximately $23.8 millionour Russia legal entities as of September 30, 2021. The aggregate estimated reasonably possible loss contingencies related to such Indian tax matters may exceed amounts accrued by up toMarch 31, 2022 totaled approximately $10 million at September 30, 2021. This reasonably possible estimate is based upon information available as of the date of the filing and the actual future losses may be higher given the uncertainties regarding the lack of settled guidance on the recent GST law and the ultimate decision by tax authorities or courts in India.
Livent IPO
Livent Corporation class action. On October 28, 2020, Defendants entered into a stipulation of settlement with the state court plaintiffs in which Livent, on behalf of the Defendants, will pay $7.4 million to resolve all claims related to the Livent initial public offering (the "Livent IPO"). On October 29, 2020, the state court plaintiffs filed a motion seeking preliminary approval of the settlement. The court approved the settlement following a hearing on April 15, 2021 and final order and judgment was entered on April 26, 2021. The settlement resolves all pending litigation relating to the Livent IPO, including the claims in both the state and federal actions. There is no financial impact to FMC as$70 million. As a result of our cessation decision in April 2022, we could have a charge in the settlement.second quarter of 2022 as high as the value of these net assets. The net assets are comprised mostly of working capital as well as the value of a packaging and formulation facility. The exact amount of the charge will be determined over the coming months as we evaluate information on what will be left stranded in the abandoned business. These charges will be recorded as part of the Restructuring and other charges on the Condensed Consolidated Statements of Income.
Our Russia operations were approximately 1.5 percent of our revenues and the impact to our operations both historically and projected are not material.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2 of this report contains certain forward-looking statements that are based on our current views and assumptions regarding future events, future business conditions and the outlook for our company based on currently available information.
Whenever possible, we have identified these 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 or phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. The forward-looking 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. The potential adverse effect of the COVID pandemic on our financial condition, results of operations, cash flows and performance, which is substantially influenced by the potential adverse effect of the pandemic on our customers and suppliers and the global economy and financial markets, has been one of the most significant risk factors for our company. Thus far, we have mitigated the risks associated with the pandemic during the most intense periods of interruptions in global and nationwide economic activity and now expect the pandemic to represent less of a risk for ongoing operations. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others. Additional factors include, among other things, the risk factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20202021 (the "2020"2021 Form 10-K"), the section captioned "Forward-Looking Information" in Part II of the 20202021 Form 10-K and to similar risk factors and cautionary statements in all other reports and forms filed with the Securities and Exchange Commission ("SEC"). Moreover, investors are cautioned to interpret many of these factors as being heightened as a result of the ongoing and numerous adverse impacts of COVID. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.
We specifically decline 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.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We have described our accounting policies in Note 1 to our consolidated financial statements included in our 20202021 Form 10-K. We have reviewed these accounting policies, identifying those that we believe to be critical to the preparation and understanding of our consolidated financial statements. We have reviewed these critical accounting policies with the Audit Committee of our Board of Directors. 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.
The following is a list of those accounting policies that we have deemed most critical to the presentation and understanding of our results of operations and financial condition. See the "Critical Accounting Policies" section in our 20202021 Form 10-K for a detailed description of these policies and their potential effects on our results of operations and financial condition.
•Revenue recognition and trade receivables
•Environmental obligations and related recoveries
•Impairment and valuation of long-lived assets and indefinite-lived assets
•Pensions and other postretirement benefits
•Income taxes
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS
See Note 2 to the condensed consolidated financial statements included in this Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.
OVERVIEW
We are an agricultural sciences company, providing innovative solutions to growers around the world with a robust product portfolio fueled by a market-driven discovery and development pipeline in crop protection, crop enhancement, and professional
pest and turf management. We operate in a single distinct business segment. We develop, market and sell all three major classes of crop protection chemicals (insecticides, herbicides and fungicides) as well as biologicals, crop nutrition, and seed treatment, which we group as plant health. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as in non-agricultural markets for pest control. This powerful combination of advanced technologies includes leading insect control products based on Rynaxypyr® and Cyazypyr® active ingredients; Authority®, Boral®, Centium®, Command® and Gamit® branded herbicides; Isoflex™ active herbicide ingredient; Talstar® and Hero® branded insecticides; and flutriafol-based fungicides and biologicals such as Quartzo® and Presence® bionematicides as well as crop enhancers such as Accudo®. The FMC portfolio also includes Arc™ farm intelligence.
COVID-19 Pandemic
As an agricultural sciences company, we are considered an "essential" industry in the countries in which we operate; we have avoided significant plant closures and all our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses also have continued to operate throughout the pandemic. However, we did have a third-party U.S. toller that was disrupted in the fourth quarter of 2020 because of COVID-related staffing issues, which signifies one of the ongoing business risks that the pandemic creates. We are closely monitoring raw material and supply chain costs.costs including impacts by the renewed COVID disruptions in China. Additionally, we are aware of the potential for disruptions or lack of availability, at any price, of critical materials. The extent to which COVID will continue to impact us will depend on future developments, many of which remain uncertain and cannot be predicted with confidence, including the duration of the pandemic, further actions to be taken to contain the pandemic or mitigate its impact, and the extent of the direct and indirect economic effects of the pandemic and containment measures, among others.
We have implemented procedures to support the health and safety of our employees and we are following all U.S. Centers for Disease Control and Prevention, as well as state and regional health department guidelines. The well-being of our employees is FMC's top priority. In June 2021, we introduced flexible work arrangements to facilitate the return of all staff to our headquarters in Philadelphia, as well as some other locations in adherence with local guidelines. In August 2021, the city of Philadelphia issued a new order to encourage COVID vaccinations that allows Philadelphia businesses and institutions to operate their indoor facilities without masking only if all employees and visitors are vaccinated. As a result, FMC enacted a new policy that all employees, contractors and interns based in Philadelphia, as well as visitors, must be fully vaccinated against COVID and must provide proof of their vaccination. Employees may request an exemption to this mandatory policy for medical reasons or because of a sincerely held religious belief. Non-exempt employees who did not provide proof of vaccination by September 3, 2021 were placed on an unpaid leave of absence. On September 9, 2021, President Biden announced a new national strategy to combat COVID. This strategy includes an executive order mandating vaccines for federal workers and contractors and a new emergency rule requiring companies with 100 or more employees to ensure their workers are either vaccinated or tested weekly. We expect that this national strategy will affect operations at all U.S. locations and we are in the process of implementing procedures at our U.S. sites to ensure compliance with the new Emergency Temporary Standard. We have resumed in-office operations where permitted by local authorities.authorities and extended flexible work arrangements in some locations. In addition, we have thousands of employees who continue operating our manufacturing sites and distribution warehouses. In all our facilities, we are using a variety of best practices to address COVID risks, following the protocols and procedures recommended by leading health authorities. We are monitoringcontinuing to monitor the situation in all regions where the pandemic continues to escalate and in such regions will remain in a remote working environment until it is safe to return to the workplace.
We made significant investments inadjust our employees as a result of the COVID pandemic, including through enhanced dependent care pay policies, recognition bonuses, increased flexibility of work scheduleshealth and hours of work to accommodate remote working arrangements, and investment in IT infrastructure to promote remote work. Through these efforts we have successfully avoided any COVID related furloughs or workforce reductions to date.safety protocols accordingly.
We will continue to monitor the economic environment related to the pandemic on an ongoing basis and assess the impacts on our business.
ThirdRussia-Ukraine War
In mid-April, we announced the decision to discontinue our operations and business in Russia. Our values as a company do not allow us to operate and grow our business in Russia. Our Russia operations were approximately 1.5 percent of our revenues and the impact to our operations both historically and projected are not material. See Note 19 for more information.
First Quarter 20212022 Highlights
The following items are the more significant developments or financial highlights in our business during the three months ended September 30, 2021:March 31, 2022:
•Revenue of $1,194.0$1,350.8 million for the three months ended September 30, 2021March 31, 2022 increased $109.4$155.2 million or approximately 1013 percent versus the same period last year. A more detailed review of revenue is discussed under the section titled "Results of Operations". On a regional basis, sales in North America decreasedincreased by approximately 630 percent, sales in Latin America increased approximately 1131 percent, sales in Europe, Middle East and Africa increased by approximately 12 percent,remained relatively flat, and sales in Asia increased approximately 202 percent. The increase was mostly driven by
volume growth reflecting robust demand for our products around the world.primarily in North America and Latin America and solid price increases across all regions. Excluding foreign currency impacts, revenue increased 916 percent during the quarter.
•Our gross margin of $512.8$572.7 million increased versus the prior year quarter by $46.4$60.3 million driven by higher volumes in Asia,North America and Latin America and Europe, Middle East and Africa.higher prices in all regions, partially offset by higher cost of goods sold primarily resulting from inflation. Gross margin percent of approximately 4342 percent remained mostly flatdecreased slightly compared to approximately 43 percent in the prior year period.period, driven by higher costs, primarily raw materials, packaging, logistics, and labor costs.
•Selling, general and administrative expenses decreasedincreased from $187.7$174.5 million to $183.5$188.5 million, or approximately 28 percent. Selling, general and administrative expenses, excluding transaction-related charges,The increase in costs is a result of $183.5 million increased $10.2 million, or approximately 6 percent, compared to the prior year.top line higher revenues as well as investments in growth programs.
•Research and development expenses of $79.5$71.8 million increased $7.8 million or approximately 11 percent. In thewere essentially flat versus prior year, period we phased some research and development projects differently to allow for lower costs in response to the pandemic without fundamentally impacting long-term timelines. In the current year period we have resumed research and development expenses related to these projects.
•Net income (loss) attributable to FMC stockholders increased from $111.4$182.6 million to $157.9$207.4 million which represents an increase of $46.5$24.8 million, or approximately 4214 percent. The higher results were driven by our gross margin growth
which were partially offset by higher selling, general and administrative expenses and the provision for income taxes. Adjusted after-tax earnings from continuing operations attributable to FMC stockholders of $184.9$238.7 million increased compared to the prior year amount of $160.1$200.0 million. See the disclosure of our Adjusted Earnings Non-GAAP financial measurement below, under the section titled "Results of Operations". 20212022 Outlook Update
In 2021,2022, we continue to expect the global crop protection market to be up mid-singlelow-to-mid single digits, on a U.S. dollar basis. We continueexpect Latin America, North America, and Asia to anticipate high-single digit growthbe up mid-single digits while EMEA is now expected to be down low single digits. The war in the Latin AmericanUkraine may further reduce market mid-single digit growth in the EMEA market, low-region. Commodity prices for many of the major crops remain elevated and stock-to-use ratios are near historical lows, creating a favorable backdrop for crop protection products. FX is projected to mid-single digit growth in the Asian marketbe a headwind for EMEA and low-single digit growth in the North American market.Asia markets on a U.S. dollar basis.
Despite the volatile supply and geopolitical environment, we anticipate solid growth in 2022. Our 2021 revenue forecast remainsis forecasted to be in the range of approximately $4.9$5.25 billion to $5.1$5.55 billion, up approximately 87 percent at the midpoint versus 2020.2021. Full year adjusted EBITDA(1) remainsis expected to be in the range of $1.29$1.32 billion to $1.35$1.48 billion, representing 6 percent growth at the midpoint versus 20202021 results. 20212022 adjusted earnings are now expected to be in the range of $6.59$6.70 to $6.99$8.00 per diluted share(1), representing a year over year increase of 106 percent at the midpoint. This reflects the impact of share repurchases completed year-to-date. Full-year earnings growth drivers include robust volume growthpricing actions and higher pricing,strong volumes, offset in part by significant cost increases.rising costs and supply disruptions. Adjusted earnings estimates do not include the benefit of any future share repurchases. For cash flow outlook, refer to the "Liquidity and Capital Resources" section below.
(1)Although we provide forecasts for adjusted earnings per share and adjusted EBITDA (Non-GAAP financial measures), we are not able to forecast the most directly comparable measures calculated and presented in accordance with U.S. GAAP. Certain elements of the composition of the U.S. GAAP amounts are not predictable, making it impractical for us to forecast. Such elements include, but are not limited to, restructuring, acquisition charges, and discontinued operations. As a result, no U.S. GAAP outlook is provided.
RESULTS OF OPERATIONS
Overview
The following charts provide a reconciliation of Adjusted EBITDA, Adjusted Earnings, and Organic Revenue Growth, all of which are Non-GAAP financial measures, from the most directly comparable GAAP measure. Adjusted EBITDA and Organic Revenue are provided to assist the readers of our financial statements with useful information regarding our operating results. Our operating results are presented based on how we assess operating performance and internally report financial information. For management purposes, we report operating performance based on earnings before interest, income taxes, depreciation and amortization, discontinued operations, and corporate special charges. Our Adjusted Earnings measure excludes corporate special charges, net of income taxes, discontinued operations attributable to FMC stockholders, net of income taxes, and certain Non-GAAP tax adjustments. These are excluded by us in the measure we use to evaluate business performance and determine certain performance-based compensation. Organic Revenue Growth excludes the impacts of foreign currency changes, which we believe is a meaningful metric to evaluate our revenue changes. These items are discussed in detail within the "Other Results of Operations" section that follows. In addition to providing useful information about our operating results to investors, we also believe that excluding the effect of corporate special charges, net of income taxes, and certain Non-GAAP tax adjustments from operating results and discontinued operations allows management and investors to compare more easily the financial performance of our underlying business from period to period. These measures should not be considered as substitutes for net income (loss) or other measures of performance or liquidity reported in accordance with U.S. GAAP.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | |
| (in Millions) | (in Millions) | (unaudited) | | (unaudited) | (in Millions) | (unaudited) | |
| Revenue | Revenue | $ | 1,194.0 | | | $ | 1,084.6 | | | $ | 3,631.6 | | | $ | 3,489.9 | | Revenue | $ | 1,350.8 | | | $ | 1,195.6 | | |
| | Costs of sales and services | Costs of sales and services | 681.2 | | | 618.2 | | | 2,074.6 | | | 1,939.3 | | Costs of sales and services | 778.1 | | | 683.2 | | |
| Gross margin | Gross margin | $ | 512.8 | | | $ | 466.4 | | | $ | 1,557.0 | | | $ | 1,550.6 | | Gross margin | $ | 572.7 | | | $ | 512.4 | | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | 183.5 | | | 187.7 | | | 519.0 | | | 548.1 | | Selling, general and administrative expenses | 188.5 | | | 174.5 | | |
| Research and development expenses | Research and development expenses | 79.5 | | | 71.7 | | | 219.4 | | | 203.3 | | Research and development expenses | 71.8 | | | 74.0 | | |
| Restructuring and other charges (income) | Restructuring and other charges (income) | 32.8 | | | 11.0 | | | 52.3 | | | 43.9 | | Restructuring and other charges (income) | 9.1 | | | 3.2 | | |
| | Total costs and expenses | Total costs and expenses | $ | 977.0 | | | $ | 888.6 | | | $ | 2,865.3 | | | $ | 2,734.6 | | Total costs and expenses | $ | 1,047.5 | | | $ | 934.9 | | |
Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (1) | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (1) | $ | 217.0 | | | $ | 196.0 | | | $ | 766.3 | | | $ | 755.3 | | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (1) | $ | 303.3 | | | $ | 260.7 | | |
| | Non-operating pension and postretirement charges (income) | Non-operating pension and postretirement charges (income) | 5.1 | | | 11.6 | | | 14.7 | | | 16.0 | | Non-operating pension and postretirement charges (income) | 4.3 | | | 4.8 | | |
| | Interest expense, net | Interest expense, net | 33.1 | | | 35.5 | | | 98.1 | | | 117.0 | | Interest expense, net | 29.9 | | | 32.4 | | |
| Income (loss) from continuing operations before income taxes | Income (loss) from continuing operations before income taxes | $ | 178.8 | | | $ | 148.9 | | | $ | 653.5 | | | $ | 622.3 | | Income (loss) from continuing operations before income taxes | $ | 269.1 | | | $ | 223.5 | | |
| Provision (benefit) for income taxes | Provision (benefit) for income taxes | 8.7 | | | 18.4 | | | 74.3 | | | 82.3 | | Provision (benefit) for income taxes | 42.3 | | | 32.2 | | |
| Income (loss) from continuing operations | Income (loss) from continuing operations | $ | 170.1 | | | $ | 130.5 | | | $ | 579.2 | | | $ | 540.0 | | Income (loss) from continuing operations | $ | 226.8 | | | $ | 191.3 | | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | (9.7) | | | (18.4) | | | (32.4) | | | (36.7) | | Discontinued operations, net of income taxes | (15.2) | | | (8.1) | | |
| Net income (loss) (GAAP) | Net income (loss) (GAAP) | $ | 160.4 | | | $ | 112.1 | | | $ | 546.8 | | | $ | 503.3 | | Net income (loss) (GAAP) | $ | 211.6 | | | $ | 183.2 | | |
| Adjustments to arrive at Adjusted EBITDA (Non-GAAP): | Adjustments to arrive at Adjusted EBITDA (Non-GAAP): | | | | | | | | Adjustments to arrive at Adjusted EBITDA (Non-GAAP): | | | | |
| Corporate special charges (income): | Corporate special charges (income): | | Corporate special charges (income): | | |
Restructuring and other charges (income) (3) | Restructuring and other charges (income) (3) | $ | 32.8 | | | $ | 11.0 | | | $ | 52.3 | | | $ | 43.9 | | Restructuring and other charges (income) (3) | $ | 9.1 | | | $ | 3.2 | | |
Non-operating pension and postretirement charges (income) (4) | Non-operating pension and postretirement charges (income) (4) | 5.1 | | | 11.6 | | | 14.7 | | | 16.0 | | Non-operating pension and postretirement charges (income) (4) | 4.3 | | | 4.8 | | |
Total transaction-related charges (5) | Total transaction-related charges (5) | — | | | 14.4 | | | 0.4 | | | 40.4 | | Total transaction-related charges (5) | — | | | 0.4 | | |
| Discontinued operations, net of income taxes | Discontinued operations, net of income taxes | 9.7 | | | 18.4 | | | 32.4 | | | 36.7 | | Discontinued operations, net of income taxes | 15.2 | | | 8.1 | | |
| Interest expense, net | Interest expense, net | 33.1 | | | 35.5 | | | 98.1 | | | 117.0 | | Interest expense, net | 29.9 | | | 32.4 | | |
| Depreciation and amortization | Depreciation and amortization | 43.4 | | | 41.5 | | | 128.5 | | | 120.7 | | Depreciation and amortization | 42.4 | | | 42.6 | | |
| Provision (benefit) for income taxes | Provision (benefit) for income taxes | 8.7 | | | 18.4 | | | 74.3 | | | 82.3 | | Provision (benefit) for income taxes | 42.3 | | | 32.2 | | |
Adjusted EBITDA (Non-GAAP) (2) | Adjusted EBITDA (Non-GAAP) (2) | $ | 293.2 | | | $ | 262.9 | | | $ | 947.5 | | | $ | 960.3 | | Adjusted EBITDA (Non-GAAP) (2) | $ | 354.8 | | | $ | 306.9 | | |
____________________
(1)Referred to as operating profit.
(2)Adjusted EBITDA is defined as operating profit excluding corporate special charges (income) and depreciation and amortization expense.
(3)See Note 108 for details of restructuring and other charges (income).
(4)Our non-operating pension and postretirement charges (income) are defined as those costs (benefits) related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These are excluded from our operating results and are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We continue to include the service cost and amortization of prior service cost in our operating results noted above. These elements reflect the current year operating costs to our business for the employment benefits provided to active employees.
(5)Represents transaction costs, costs for transitional employees, other acquired employees related costs, and transactional-related costs such as legal and professional third-party fees. We completed the integration of the DuPont Crop Protection Business as of June 30, 2020, except for the completion of certain in-flight initiatives, primarily associated with the finalization of our worldwide ERP system. The TSA is now terminated and the last phase of the ERP system transition went live in November 2020 with a stabilization period that went into the first quarter of 2021.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in Millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| DuPont Crop Protection Business Acquisition | | | | | | | |
Legal and professional fees (1) | $ | — | | | $ | 14.4 | | | $ | 0.4 | | | $ | 40.4 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total Transaction-related charges | $ | — | | | $ | 14.4 | | | $ | 0.4 | | | $ | 40.4 | |
____________________
(1) Represents transaction costs, costs for transitional employees, other acquired employees related costs, and transactional-related costs such as legal and professional third-party fees. These charges are recorded as a component of "Selling, general and administrative expense" on the condensed consolidated statements of income (loss).
| | ADJUSTED EARNINGS RECONCILIATION | ADJUSTED EARNINGS RECONCILIATION | ADJUSTED EARNINGS RECONCILIATION |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| 2021 | | 2020 | | 2021 | | 2020 | 2022 | | 2021 | |
| (in Millions) | (in Millions) | (unaudited) | | (unaudited) | (in Millions) | (unaudited) | |
| Net income (loss) attributable to FMC stockholders (GAAP) | Net income (loss) attributable to FMC stockholders (GAAP) | $ | 157.9 | | | $ | 111.4 | | | $ | 543.4 | | | $ | 502.0 | | Net income (loss) attributable to FMC stockholders (GAAP) | $ | 207.4 | | | $ | 182.6 | | |
| Corporate special charges (income), pre-tax (1) | Corporate special charges (income), pre-tax (1) | 37.9 | | | 37.0 | | | 67.4 | | | 100.3 | | Corporate special charges (income), pre-tax (1) | 13.4 | | | 8.4 | | |
Income tax expense (benefit) on Corporate special charges (income) (2) | Income tax expense (benefit) on Corporate special charges (income) (2) | (4.1) | | | (6.1) | | | (10.4) | | | (16.9) | | Income tax expense (benefit) on Corporate special charges (income) (2) | (0.9) | | | (1.6) | | |
| Corporate special charges (income), net of income taxes | Corporate special charges (income), net of income taxes | $ | 33.8 | | | $ | 30.9 | | | $ | 57.0 | | | $ | 83.4 | | Corporate special charges (income), net of income taxes | $ | 12.5 | | | $ | 6.8 | | |
| Discontinued operations attributable to FMC Stockholders, net of income taxes | Discontinued operations attributable to FMC Stockholders, net of income taxes | 9.7 | | | 18.4 | | | 32.4 | | | 36.7 | | Discontinued operations attributable to FMC Stockholders, net of income taxes | 15.2 | | | 8.1 | | |
Non-GAAP tax adjustments (3) | Non-GAAP tax adjustments (3) | (16.5) | | | (0.6) | | | (12.7) | | | 1.6 | | Non-GAAP tax adjustments (3) | 3.6 | | | 2.5 | | |
| Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) | Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) | $ | 184.9 | | | $ | 160.1 | | | $ | 620.1 | | | $ | 623.7 | | Adjusted after-tax earnings from continuing operations attributable to FMC stockholders (Non-GAAP) | $ | 238.7 | | | $ | 200.0 | | |
____________________
(1)Represents restructuring and other charges (income), non-operating pension and postretirement charges (income), and transaction-related charges.
(2)The income tax expense (benefit) on corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the corporate special charge (income) occurred and includes both current and deferred income tax expense (benefit) based on the nature of the Non-GAAP performance measure.
(3)We exclude the GAAP tax provision, including discrete items, from the Non-GAAP measure of income, and instead include a Non-GAAP tax provision based upon the annual Non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to current year ongoing business operations; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to ongoing operations thereby providing investors with useful supplemental information about FMC's operational performance.
ORGANIC REVENUE GROWTH RECONCILIATION
| | | | | |
| Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020 |
| Total Revenue Change (GAAP) | 1013 | % |
| Less: Foreign Currency Impact | 1 (3) | % |
| Organic Revenue Change (Non-GAAP) | 916 | % |
| |
| |
Results of Operations
In the discussion below, all comparisons are between the periods unless otherwise noted.
Revenue
Three Months Ended September 30, 2021March 31, 2022 vs. 20202021
Revenue of $1,194.0$1,350.8 million increased $109.4$155.2 million, or approximately 1013 percent, versus the prior year period. The increase was primarily driven by volume increases and favorable foreign currencies,price increases, which benefited revenue by approximately 98 percent and 1 percent, respectively. While invoice level prices increasedeach. The strong volume growth was in part due to supply uncertainty in the period byindustry, which caused some customers to place orders in advance to secure material. Foreign currency had an unfavorable impact of approximately 13 percent the increase was fully offset by favorable rebate and other adjustments in the prior period that did not repeat this quarter.on revenue. Excluding foreign currency impacts, revenue increased approximately 916 percent during the quarter.
Nine Months Ended September 30, 2021 vs. 2020
Revenue of $3,631.6 million increased $141.7 million, or approximately 4 percent, versus the prior year period, driven by volume increases and favorable foreign currencies which contributed an approximate 2 percent and 2 percent increase, respectively. Excluding foreign currency impacts, revenue increased approximately 2 percent. See below for a discussion of revenue by region.
| | Total Revenue by Region | Total Revenue by Region | Total Revenue by Region |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| North America | North America | $ | 199.8 | | | $ | 212.3 | | | $ | 791.3 | | | $ | 851.8 | | North America | $ | 389.8 | | | $ | 301.0 | | |
| Latin America | Latin America | 516.9 | | | 464.9 | | | 1,019.7 | | | 985.3 | | Latin America | 265.9 | | | 203.2 | | |
| Europe, Middle East & Africa (EMEA) | Europe, Middle East & Africa (EMEA) | 171.4 | | | 152.8 | | | 843.7 | | | 833.5 | | Europe, Middle East & Africa (EMEA) | 398.2 | | | 399.4 | | |
| Asia | Asia | 305.9 | | | 254.6 | | | 976.9 | | | 819.3 | | Asia | 296.9 | | | 292.0 | | |
| Total Revenue | Total Revenue | $ | 1,194.0 | | | $ | 1,084.6 | | | $ | 3,631.6 | | | $ | 3,489.9 | | Total Revenue | $ | 1,350.8 | | | $ | 1,195.6 | | |
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
North America: Revenue decreasedincreased approximately 630 percent versus the prior year period. Similar to prior quarter, the decreaseThe increase was driven by broad-based growth across a variety of crops such as tree fruits, nuts, vines, corn, and soy. In the shiftUS, sales of diamide partner sales from North America to other regions. Excluding revenue frombiologicals almost doubled, led by products for corn and soybean. In Canada our global diamide partnerships, the North America region grew more than 20 percent,results were driven by strong demand for our diamideslow channel inventory of insecticides and fall herbicide applications. We also successfully introduced Vantacor™ insect controlstrength in the U.S.selective herbicides.
Latin America: Revenue increased approximately 1131 percent versus the prior year period, or approximately 925 percent excluding foreign currency, driven by double digit growth of insecticidesvolume and price increases, particularly in Brazil and Argentina. Corn, soy, and cotton were the key crops drivingIn Brazil, we saw growth in the quarter, while Plant Healthour herbicide brands Aurora® and Gamit® on soy, corn, sugarcane, and coffee. We also saw insecticides growth was led by biologicalson soy, corn, and seed treatment. Sales in Chile nearly doubled in the quarter, leveraging enhanced market presence. The growth in Latin America was partially offset by registration cancellationscotton. Colombia, Peru, and rationalization of productsEcuador grew double-digits in the quarter.
EMEA: Revenue remained relatively flat versus the prior year period, or increased approximately 1211 percent excluding foreign currency. The change in revenue from prior year was largely impacted by foreign currency headwinds. Results were driven by strong pricing actions across the region as well as demand for our diamides on corn and top fruit and for selective herbicides on cereals and sunflower applications.
Asia: Revenue increased approximately 2 percent versus the prior year period, or approximately 10 percent excluding foreign currency. The increase was driven by strong demand for our herbicides and diamides across the whole region. Among others, Russia, France, Germany, and the U.K. grew double-digits in the quarter, primarily driven by demand for herbicide applications in cereals and oil seed rape. South Africa also doubled its sales compared to the prior year, driven by continued penetration of diamides. The broad revenue growth was partially offset by registration cancellations.
Asia: Revenue increased approximately 20 percent versus the prior year period, or approximately 195 percent excluding foreign currency, driven by strong diamide sales and pricingprice actions across the region. Growth in India, driven by diamide sales in rice and continued expansion of the rest of our portfolio, was slightly offset by weather related challenges in India. The Australian market benefited from positive grower sentiment, favorable weather conditions and strong insect pressure.
Nine Months Ended September 30, 2021 vs. 2020
North America: Revenue decreased approximately 7 percent versus the prior year period, or approximately 8 percent excluding foreign currency, driven by a shift of diamide partner sales from North America to other regions. The decrease was partially offset by sales growth for herbicides and diamides, and strong product launches of Xyway™ fungicide and Vantacor™ insect control.
Latin America: Revenue increased approximately 3 percent versus the prior year period, or approximately 4 percent excluding foreign currency. This was primarily driven by a return to growth in Brazil, strong contributions from Mexico and the Andean subregion in the second quarter of 2021, and strong contributions from Brazil, Argentina, and Chile in the third quarter of 2021.
EMEA: Revenue increased approximately 1 percent versus the prior year period, or decreased approximately 3 percent excluding foreign currency, primarily due to strong sales of diamides and herbicides. This was partially offset by discontinued registrations and a delayed start to Spring which resulted in lost applications.
Asia: Revenue increased approximately 19 percent versus the prior year period, or approximately 15 percent excluding foreign currency tailwinds, driven by growthperformance in Australia and India. We had strong sales for our new Overwatch® herbicide and sales of our diamides were robust across the region.ASEAN countries, offset by a reduction in rice acres in India.
For 2021, full-year revenue is expected to be in the range of approximately $4.9 billion to $5.1 billion, which represents approximately 8 percent growth at the midpoint versus 2020.
Gross margin
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Gross margin of $512.8$572.7 million increased $46.4$60.3 million, or approximately 1012 percent versus the prior year period. The increase was primarily due to higher revenues driven by increased volumes in Asia, EMEA,North America and Latin America.America and higher prices in all regions offset by higher costs due to rising input costs and increasing logistics expenses. Cost inflation continued to be a challenge, and at a higher rate than anticipated, so we moved price more aggressively in all regions to offset these increasing headwinds. Gross margin percent of approximately 4342 percent remained mostly flatdecreased slightly compared to approximately 43 percent in the prior year period.
Nine Months Ended September 30, 2021 vs 2020
Gross margin of $1,557.0 million increased $6.4 million versus the prior year period.
Gross margin percent of approximately 43 percent decreased slightly from approximately 44 percent in the prior year period. The decline in gross margin percent isperiod, driven by higher costs, primarily increases in raw materials, packaging, logistics, and logistics.labor costs.
Selling, general and administrative expenses
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Selling, general and administrative expenses of $183.5$188.5 million decreased $4.2increased $14.0 million, or 28 percent, versus the prior year period. A large portion of the decrease was related to the fact that we did not incur any transaction-related expenses after the first quarter of 2021. Spending increased globally primarilyas a result of our top line revenue growth as well as investments in Latin America, Asia, and EMEA. Selling, general and administrative expenses, excluding transaction-related charges, increased $10.2 million, or approximately 6 percent, versus the prior year period.
Nine Months Ended September 30, 2021 vs. 2020
Selling, general and administrative expenses of $519.0 million decreased $29.1 million, or approximately 5 percent versus the prior year period due to the cessation of transaction-related expenses, as mentioned above. Selling, general and administrative expenses, excluding transaction-related charges, increased $10.9 million, or approximately 2 percent versus the prior year period.growth programs.
Research and development expenses
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Research and development expenses of $79.5$71.8 million increased $7.8 million, or approximately 11 percentremained relatively flat versus the prior year period. In the current year period we returned to spending on some research and development projects that were paused last year for cost control measures. In the full year 2020 we eliminated or delayed certain non-essential expenditures to offset effects of the COVID pandemic and phased some projects differently to allow lower costs in response to the pandemic without fundamentally impacting long-term timelines.
Nine Months Ended September 30, 2021 vs. 2020
Research and development expenses of $219.4 million increased $16.1 million, or approximately 8 percent versus the prior year period. As noted above, the increase in research and development expenditures is related to cost-saving measures taken in the prior year in response to the COVID pandemic.
Other Results of Operations
Depreciation and amortization
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Depreciation and amortization of $43.4$42.4 million increased $1.9 million, or approximately 5 percent,remained flat as compared to the prior year period of $41.5$42.6 million.
Nine Months Ended September 30, 2021 vs. 2020
Depreciation and amortization of $128.5 million increased $7.8 million, or approximately 6 percent, as compared to the prior year period of $120.7 million. The increase was mostly driven by the impacts of the amortization effects of the completion of various phases of our ERP implementation.
Interest expense, net
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Interest expense, net of $33.1$29.9 million decreased compared to the prior year period of $35.5$32.4 million. The decrease was primarily driven by lower foreign debt balances and the benefitrefinancing activity completed in the fourth quarter of lower LIBOR rates.
Nine Months Ended September 30, 2021 vs. 2020
Interest expense, net of $98.1 million decreased $18.9 million compared to the prior year period of $117.0 million. The decrease was driven by a $9.5 million benefit of lower LIBOR rates as well as an $8.7 million benefit of lower debt balances.2021.
Corporate special charges (income)
Restructuring and other charges (income) | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| (in Millions) | (in Millions) | 2021 | | 2020 | | 2021 | | 2020 | (in Millions) | 2022 | | 2021 | |
| Restructuring charges | Restructuring charges | $ | 2.1 | | | $ | 6.9 | | | $ | 18.9 | | | $ | 29.7 | | Restructuring charges | $ | 11.2 | | | $ | 6.3 | | |
| Other charges (income), net | Other charges (income), net | 30.7 | | | 4.1 | | | 33.4 | | | 14.2 | | Other charges (income), net | (2.1) | | | (3.1) | | |
| Total restructuring and other charges (income) | Total restructuring and other charges (income) | $ | 32.8 | | | $ | 11.0 | | | $ | 52.3 | | | $ | 43.9 | | Total restructuring and other charges (income) | $ | 9.1 | | | $ | 3.2 | | |
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Restructuring charges in 2022 of $11.2 million consist of $8.4 million fixed asset and other charges resulting from the closure of certain manufacturing sites during the period. Restructuring charges also include $2.8 million from various restructuring programs.
Restructuring charges in 2021 of $2.1$6.3 million consist of $1.0 million of charges related to regional realignment activities, including severance and employee relocation costs, and $0.8 million associated with the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives, including severance, accelerated depreciation on certain fixed assets, and other costs (benefits). Additionally, there were other miscellaneouswe incurred severance charges under separate restructuring chargesinitiatives following the implementation of $0.3 million.
Restructuring charges in 2020 of $6.9 million primarily represent charges associated with the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives. These charges include severance, accelerated depreciation on certain fixed assets, and other costs (benefits).our worldwide Enterprise Resource Planning system.
Other charges (income), net in 2022 of $(2.1) million and 2021 of $30.7$(3.1) million primarily consists of $23.8 million charges related tois the establishment of reserves for certain historical India indirect tax matters that were triggered during the period. A detailed description of this matter is included in Note 19 to the condensed consolidated financial statements within this Form 10-Q.
Other charges, net in 2020 of $4.1 million primarily consists of charges related to environmental sites.
Nine Months Ended September 30, 2021 vs. 2020
Restructuring charges in 2021 of $18.9 million consist of $8.9 million of charges associated with regional realignment activities, including severance and employee relocation costs, and $5.8 million related to the integrationresult of the DuPont Crop Protection Businessremeasurement of an environmental liability to present value which was completed duringcan result in charges or income depending on the second quarter of 2020 except for certain in-flight initiatives. Additionally, there were other miscellaneous restructuring charges of $4.2 million.movement in discount rates.
Restructuring charges in 2020 of $29.7 million primarily comprised of charges associated with the integration of the DuPont Crop Protection Business which was completed during the second quarter of 2020 except for certain in-flight initiatives. These charges include severance, accelerated depreciation on certain fixed assets, and other costs (benefits) of $23.2 million as well as other miscellaneous restructuring benefits of $0.4 million.
Other charges, net in 2021 of $33.4 million primarily consists of $23.8 million charges related to the establishment of reserves for certain historical India indirect tax matters that were triggered during the period. A detailed description of this matter is included in Note 19 to the condensed consolidated financial statements within this Form 10-Q. Additionally, there were charges related to environmental sites of $3.3 million.
Other charges, net in 2020 of $14.2 million primarily consists of charges related to environmental sites of $13.7 million.
Non-operating pension and postretirement charges (income)
Charges for the three months ended September 30, 2021March 31, 2022 were $5.1$4.3 million compared to charges of $11.6$4.8 million for the three months ended September 30, 2020.March 31, 2021. The decrease in non-operating pension and post retirement charges (income) is attributable to higher expected return on plan assets and lower amortization of net actuarial losses. As previously disclosed, we continued to use the smoothed market related value of assets (MRVA) as opposed to the actual fair value of plan assets in the determination of pension expense. This continued approach will create some volatility in our non-operating periodic pension cost since our qualified pension plan is 100 percent fixed income securities.
Charges for the nine months ended September 30, 2021 These decreases were $14.7 million compared to charges of $16.0 million for the nine months ended September 30, 2020. The decrease in non-operating pension and post retirement charges (income) is attributable to a decrease in interest cost due to falling discount rates, partially offset by a lower expected return on plan assets, with rates changing from 4.25 percenthigher interest costs due to 3 percent.
Transaction-related charges
A detailed description of the transaction-related charges is includedan increase in Note 5 to the condensed consolidated financial statements included within this Form 10-Q.rates.
Provision for income taxes
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Provision for income taxes for the three months ended September 30, 2021March 31, 2022 was $8.7$42.3 million resulting in an effective tax rate of 4.915.7 percent. Provision for income taxes for the three months ended September 30, 2020March 31, 2021 was $18.4$32.2 million resulting in an effective tax rate of 12.414.4 percent. The primary drivers for the decreaseincrease in the effective tax rate for the three months ended September 30, 2021March 31, 2022 compared to the three months ended September 30, 2020March 31, 2021 was primarily driven by the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022 and geographic earnings mix. Other factors are shown in the table below.
| | | Three Months Ended September 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| (in Millions) | (in Millions) | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | (in Millions) | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate |
| GAAP - Continuing operations | GAAP - Continuing operations | $ | 178.8 | | $ | 8.7 | | 4.9 | % | | $ | 148.9 | | $ | 18.4 | | 12.4 | % | GAAP - Continuing operations | $ | 269.1 | | $ | 42.3 | | 15.7 | % | | $ | 223.5 | | $ | 32.2 | | 14.4 | % |
| Corporate special charges (income) | Corporate special charges (income) | 37.9 | | 4.1 | | | 37.0 | | 6.1 | | | Corporate special charges (income) | 13.4 | | 0.9 | | | 8.4 | | 1.6 | | |
Tax adjustments (1) | Tax adjustments (1) | | 16.5 | | | 0.6 | | | Tax adjustments (1) | | (3.6) | | | (2.5) | | |
| Non-GAAP - Continuing operations | Non-GAAP - Continuing operations | $ | 216.7 | | $ | 29.3 | | 13.5 | % | | $ | 185.9 | | $ | 25.1 | | 13.5 | % | Non-GAAP - Continuing operations | $ | 282.5 | | $ | 39.6 | | 14.0 | % | | $ | 231.9 | | $ | 31.3 | | 13.5 | % |
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(1) Tax adjustments for the three months ended September 30, 2021 include $17.7 million tax reserve release related to our domestic operations. Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for further explanation of tax adjustments.
Nine Months Ended September 30, 2021 vs. 2020
Provision for income taxes for the nine months ended September 30, 2021 was $74.3 million resulting in an effective tax rate of 11.4 percent. Provision for income taxes for the nine months ended September 30, 2020 was $82.3 million resulting in an effective tax rate of 13.2 percent. The primary drivers for the decrease in the effective tax rate for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 are shown in the table below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2021 | | 2020 |
| (in Millions) | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate | | Income (Expense) | Tax Provision (Benefit) | Effective Tax Rate |
| GAAP - Continuing operations | $ | 653.5 | | $ | 74.3 | | 11.4 | % | | $ | 622.3 | | $ | 82.3 | | 13.2 | % |
| Corporate special charges (income) | 67.4 | | 10.4 | | | | 100.3 | | 16.9 | | |
Tax adjustments (1) | | 12.7 | | | | | (1.6) | | |
| Non-GAAP - Continuing operations | $ | 720.9 | | $ | 97.4 | | 13.5 | % | | $ | 722.6 | | $ | 97.6 | | 13.5 | % |
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(1) Tax adjustments for the nine months ended September 30, 2021 include $17.7 million tax reserve release related to our domestic operations. Refer to Note 3 of the Adjusted Earnings Reconciliation table within this section of this Form 10-Q for further explanation of tax adjustments.
Discontinued operations, net of income taxes
Our discontinued operations include provisions, net of recoveries, for environmental liabilities and legal reserves and expenses related to previously discontinued operations and retained liabilities.
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Discontinued operations, net of income taxes represented a loss of $9.7$15.2 million for the three months ended September 30, 2021March 31, 2022 compared to a loss of $18.4$8.1 million for the three months ended September 30, 2020.March 31, 2021. The loss during both the three months ended September 30,March 31, 2022 and 2021 and 2020 was primarily due to adjustments related to the retained liabilities from our previously discontinued operations. In the three months ended September 30, 2021, the loss was partially offset by a gain of approximately $13 million, net of tax, from the sale of land at our discontinued site in Richmond, California.
Nine Months Ended September 30, 2021 vs. 2020
Discontinued operations, net of income taxes represented a loss of $32.4 million for the nine months ended September 30, 2021 compared to a loss of $36.7 million for the nine months ended September 30, 2020. The loss during both the nine months ended September 30, 2021 and 2020 was primarily related to adjustments related to the retained liabilities from our previously discontinued operations. In the nine months ended September 30, 2021, we had higher adjustments for retained liabilities compared to prior year, which were offset by a gain on sale of land at our discontinued site in Richmond, California, discussed above.
Net income (loss)
Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Net income (loss) increased to $160.4$211.6 million from income of $112.1$183.2 million in the prior year period. The higher results were primarily driven by an increase in gross margin of approximately $46$60 million from higher volumevolume. This was offset by an increase in selling, general and a decrease inadministrative costs, provision for income taxes, and restructuring and other charges of approximately $14 million, $10 million, and $6 million, respectively, as compared to the prior period. Additionally, non-operating pension and postretirement charges were lower by approximately $7 million and losses from our discontinued operations, net of income taxes, were lower by approximately $9 million as compared to the prior period. This was partially offset by higher restructuring and other charges and research and development expenses of approximately $22 million and $8 million, respectively.
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
Nine Months Ended September 30, 2021 vs. 2020
Net income (loss) increased to $546.8 million from income of $503.3 million in the prior year period. The higher results were primarily driven by lower selling, general and administrative costs of approximately $29 million, driven by the lack of transaction costs compared to the prior year, as well as lower interest expense of approximately $19 million compared to the prior year..
The only difference between Net income (loss) and Net income (loss) attributable to FMC stockholders is noncontrolling interest, which period over period is immaterial.
Adjusted EBITDA (Non-GAAP)
The Adjusted EBITDA amounts discussed below for three and nine months ended September 30,March 31, 2022 and 2021 and 2020 are reconciled to Net Income (loss) within this Form 10-Q. Refer to our Overview under the section titled "Results of Operations" above. Three Months Ended September 30,March 31, 2022 vs. 2021 vs. 2020
Adjusted EBITDA of $293.2$354.8 million increased $30.3$47.9 million, or approximately 1216 percent versus the prior year period. The increase was mainly driven by higher pricing in all four regions and volume growth which benefited Adjusted EBITDA byaccounted for approximately 14 percent. Favorable31 percent and 10 percent increases, respectively. These pricing actions were taken to offset the sustained cost inflation we are experiencing across our supply chain. Higher costs, including raw material, energy, logistics, packaging, and labor costs, and foreign currencies contributed to a 4 percent increase on Adjusted EBITDA. This was partially offset by a 6 percent unfavorable impact from higher selling, general, and administrative costs and research and development spending, as well as higher raw materials, packaging, and logistics costs.
Nine Months Ended September 30, 2021 vs. 2020
Adjusted EBITDA of $947.5 million decreased $12.8 million, or approximately 1 percent versus the prior year period. The decrease was driven by higher cost, primarily increases in raw materials, packaging, and logistics costs, as well as higher research and development and selling, general, and administrative spending, which collectively had an impact of approximately 7 percent. Pricefluctuations had an unfavorable impact of 1 percent. These factors more than offset volume growth which contributed an approximate 7approximately 20 percent increase.and 5 percent, respectively, on adjusted EBITDA.
For 2021,2022, full-year Adjusted EBITDA is expected to be in the range of $1.29$1.32 billion to $1.35$1.48 billion, which represents approximately 6 percent growth at the midpoint versus 2020.2021. Although we provide a forecast for Adjusted EBITDA, a Non-GAAP financial measure, we are not able to forecast the most directly comparable measure calculated and presented in accordance with U.S. GAAP. See Note 1 to our 20212022 Outlook Update within this section of the Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES
As a global agricultural sciences company, we require cash primarily for seasonal working capital needs, capital expenditures, and return of capital to shareholders. We plan to meet these liquidity needs through available cash, cash generated from operations, commercial paper issuances and borrowings under our committed revolving credit facility as well as other liquidity facilities, and in certain instances access to debt capital markets. We believe our strong financial standing and credit ratings will ensure adequate access to the debt capital markets on favorable conditions.
Cash
Cash and cash equivalents at September 30, 2021March 31, 2022 and December 31, 2020,2021, were $341.0$365.1 million and $568.9$516.8 million, respectively. Of the cash and cash equivalents balance at September 30, 2021, $301.2March 31, 2022, $325.7 million was held by our foreign subsidiaries. During the third quarter of 2021, we established plans to repatriate cash from certain foreign subsidiaries with minimal tax on a go forward basis. Other cash held by foreign subsidiaries is generally used to finance subsidiaries’ operating activities and future foreign investments. See Note 17 to the consolidated financial statements included within this Form 10-Q for more information on our indefinite reinvestment assertion.
Outstanding debt
At September 30, 2021,March 31, 2022, we had total debt of $3,393.7$3,772.8 million as compared to $3,267.8$3,172.5 million at December 31, 2020.2021. Total debt included $2,631.7$2,732.4 million and $2,929.5$2,731.7 million of long-term debt (excluding current portions of $386.6$98.6 million and $93.6$84.5 million) at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Short-term debt and current portion of long-term debt, which consists of short-term foreign borrowings, commercial paper borrowings, and the current portion of long-term debt, increased from $338.3$440.8 million at December 31, 20202021 to $762.0$1,040.4 million at September 30, 2021.March 31, 2022. See Note 119 in the condensed consolidated financial statements included in this Form 10-Q for further details. As of September 30, 2021,March 31, 2022, we were in compliance with all of our debt covenants. We remain committed to solid investment grade credit metrics, and expect full-year average leverage to be in line with this commitment in 2021.2022.
Access to credit and future liquidity and funding needs
At September 30, 2021,March 31, 2022, our remaining borrowing capacity under our credit facility was $994.3$499.8 million. See Note 11 in the condensed consolidated financial statements included in this Form 10-Q for discussion of the amendments to the Revolving Credit Facility and Term Loan Agreements undertaken in the prior quarter. Our commercial paper program allows us to borrow at rates generally more favorable than those available under our credit facility. At September 30, 2021,March 31, 2022, we had $267.5$840.6 million commercial paper borrowings under the commercial paper program. At September 30, 2021,March 31, 2022, the average effective interest rate on the borrowings was 0.451.05 percent. Our commercial paper balances fluctuate from year to year depending on working capital needs.
Working Capital Initiatives
The Company works with suppliers to optimize payment terms and conditions on accounts payable to improve working capital and cash flows. The Company offers to a select group of suppliers a voluntary Supply Chain Finance (“SCF”) program with a global financial institution. The suppliers, at their sole discretion, may sell their receivables to the financial institution based on terms negotiated between them. Our obligations to our suppliers are not impacted by our suppliers’ decisions to sell under these arrangements. Agreements under these supplier financing programs are recorded within Accounts payable in our Consolidated Balance Sheets and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows. We do not believe that changes in the availability of the supply chain finance program would have a significant impact on our liquidity.
From time to time, the Company may sell receivables on a non-recourse basis to third-party financial institutions. These sales are normally driven by specific market conditions, including, but not limited to, foreign exchange environments, customer credit management, as well as other factors where the receivables may lay.
We account for these transactions as sales which result in a reduction in accounts receivables because the agreements transfer effective control and risk related to the receivables to the buyers. The net cash proceeds received are presented within cash provided by operating activities within our Consolidated Statements of Cash Flows. The cost of factoring these accounts receivables is recorded as an expense within the Consolidated Statements of Income and has been inconsequential during each reporting period.
Statement of Cash Flows
Cash provided (required) by operating activities of continuing operations was $298.2$(597.8) million and $313.5$(294.1) million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
The table below presents the components of net cash provided (required) by operating activities of continuing operations.
| | (in Millions) | (in Millions) | Nine Months Ended September 30, | (in Millions) | Three Months Ended March 31, |
| 2021 | | 2020 | 2022 | | 2021 |
Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (GAAP) | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (GAAP) | $ | 766.3 | | | $ | 755.3 | | Income from continuing operations before non-operating pension and postretirement charges (income), interest expense, net and income taxes (GAAP) | $ | 303.3 | | | $ | 260.7 | |
| Restructuring and other charges (income), total transaction-related charges and depreciation and amortization | Restructuring and other charges (income), total transaction-related charges and depreciation and amortization | 181.2 | | | 205.0 | | Restructuring and other charges (income), total transaction-related charges and depreciation and amortization | 51.5 | | | 46.2 | |
| Operating income before depreciation and amortization (Non-GAAP) | Operating income before depreciation and amortization (Non-GAAP) | $ | 947.5 | | | $ | 960.3 | | Operating income before depreciation and amortization (Non-GAAP) | $ | 354.8 | | | $ | 306.9 | |
Change in trade receivables, net (1) | Change in trade receivables, net (1) | (170.8) | | | 77.9 | | Change in trade receivables, net (1) | (317.5) | | | (216.6) | |
| Change in guarantees of vendor financing | Change in guarantees of vendor financing | 14.5 | | | 21.3 | | Change in guarantees of vendor financing | 54.9 | | | 26.0 | |
Change in advance payments from customers (2) | Change in advance payments from customers (2) | (343.9) | | | (487.4) | | Change in advance payments from customers (2) | (590.7) | | | (334.9) | |
Change in accrued customer rebates (3) | Change in accrued customer rebates (3) | 378.4 | | | 247.1 | | Change in accrued customer rebates (3) | 245.4 | | | 157.9 | |
Change in inventories (4) | Change in inventories (4) | (371.2) | | | (141.7) | | Change in inventories (4) | (192.1) | | | (166.8) | |
Change in accounts payable (5) | Change in accounts payable (5) | 147.2 | | | (142.8) | | Change in accounts payable (5) | (54.5) | | | 125.1 | |
Change in all other operating assets and liabilities (6) | Change in all other operating assets and liabilities (6) | (46.9) | | | 7.9 | | Change in all other operating assets and liabilities (6) | (60.1) | | | (102.0) | |
Restructuring and other spending (7) | Restructuring and other spending (7) | (21.9) | | | (11.6) | | Restructuring and other spending (7) | (6.1) | | | (7.0) | |
Environmental spending, continuing, net of recoveries (8) | Environmental spending, continuing, net of recoveries (8) | (51.2) | | | 6.9 | | Environmental spending, continuing, net of recoveries (8) | (3.4) | | | (27.4) | |
Pension and other postretirement benefit contributions (9) | Pension and other postretirement benefit contributions (9) | (2.9) | | | (3.6) | | Pension and other postretirement benefit contributions (9) | (1.7) | | | (1.2) | |
Net interest payments (10) | Net interest payments (10) | (85.0) | | | (104.2) | | Net interest payments (10) | (14.9) | | | (25.1) | |
Tax payments, net of refunds (10) | Tax payments, net of refunds (10) | (87.2) | | | (63.3) | | Tax payments, net of refunds (10) | (11.4) | | | (24.5) | |
| Transaction and integration costs (11) | Transaction and integration costs (11) | (8.4) | | | (53.3) | | Transaction and integration costs (11) | (0.5) | | | (4.5) | |
| Cash provided (required) by operating activities of continuing operations (GAAP) | Cash provided (required) by operating activities of continuing operations (GAAP) | $ | 298.2 | | | $ | 313.5 | | Cash provided (required) by operating activities of continuing operations (GAAP) | $ | (597.8) | | | $ | (294.1) | |
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(1)Both periods include the impacts of seasonality and the receivable build intrinsic in our business. The change in cash flows related to trade receivables in 20212022 was driven by timing of collections as well as higher volumes for revenue year over year, particularly in the second and third quarters of 2021.year. Collection timing is more pronounced in certain countries such as Brazil where there may be terms significantly longer than the rest of our business. Additionally, timing of collection is impacted as amounts for both periods include carry-over balances remaining to be collected in Latin America, where collection periods are measured in months rather than weeks. During the ninethree months ended September 30, 2021,March 31, 2022, we collected approximately $717$190 million of receivables in Brazil.
(2)Advance payments are primarily associated within North America and these payments are received in the fourth quarter of each year and recorded as deferred revenue on the balance sheet at December 31. Revenue associated with advance payments is recognized, generally in the first half of each year, as shipments are made and control to the customer takes place. The change wasyear over year is primarily related to lower advancesubstantially higher overall payments received at year end in 2020 as comparedthe fourth quarter of 2021 due to year end in 2019.a strong North America season.
(3)These rebates are primarily associated within North America, and to a lesser extent Brazil, and in North America generally settle in the fourth quarter of each year given the end of the respective crop cycle. The changes year over year are associated with the mix in sales eligible for rebates and incentives which includes higher revenues for products eligible for rebates in 2021 compared to 2020the prior year and timing of certain rebate payments.
(4)Changes in inventory are a result of inventory levels being adjusted to take into consideration the change in market conditions. Higher inventory build in 20212022 is in line with the projected demand for the remainder of 2021 and the beginning of 2022 accelerating cost increases in 2021, as well as our decision to build inventory to help manage continued supply chain volatility.
(5)The change in cash flows related to accounts payable is primarily due to the timing of payments made to suppliers and vendors and the 2021 increase is also in line with the 2021 inventory build noted above.vendors.
(6)Changes in all periods presented primarily represent timing of payments associated with all other operating assets and liabilities. Additionally, both periods include the effects of the unfavorable contracts amortization of approximately $77$27 million and $95$25 million, respectively.
(7)See Note 108 in our condensed consolidated financial statements included in this Form 10-Q for further details.
(8)The amounts represent environmental remediation spending at our operating sites which were recorded against pre-existing reserves, net of recoveries. During the first quarter of 2021, FMC made $21.4 million in payments for the Pocatello Tribal Litigation judgement plus interest charges. In the second quarter of 2021, FMC made a further payment to the Tribes of $10.8 million to pay fees and interest incurred from 2015 to 2021. Refer to Note 1311 for more details. During the first quarter of
2020, we entered into a confidential insurance settlement pertaining to coverage at a legacy environmental site, which settlement resulted in a cash payment to FMC in the amount of $20.0 million.
(9) There were no voluntary contributions to our U.S. qualified defined benefit plan, which is slightly overfunded, for the three months ended September 30, 2021March 31, 2022 and 2020.2021.
(10)Amounts shown in the chart represent net payments of our continuing operations. The increaseinterest payments were lower during the three months ended March 31, 2022 primarily due to the pay down of our 2022 Senior Notes in the fourth quarter of 2021. The decrease in tax payments year over year is primarily attributable to higher tax payments in 2021 due to the deferral of income tax payments in 2020 in various jurisdictions as a result of the COVID pandemic.
(11)Represents payments for legal and professional fees associated with the DuPont Crop Protection Business Acquisition in addition to costs related to integrating the DuPont Crop Protection Business. As noted, theThe integration is considered complete and the 20212022 payments are associated with settlement of final amounts payable to various vendors. See Note 5 to the condensed consolidated financial statements included in this Form 10-Q for more information.
Cash provided (required) by operating activities of discontinued operations was $(53.9)$(11.0) million and $(66.3)$(8.9) million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
Cash provided (required) by operating activities of discontinued operations is directly related to environmental, other postretirement benefit liabilities, self-insurance, long-term obligations related to legal proceedings and historical restructuring activities.
Cash provided (required) by investing activities of continuing operations was $(115.9)$(55.9) million and $(100.5)$(51.1) million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
The change in cash from investing activities of continuing operations during the ninethree months ended September 30, 2021,March 31, 2022, as compared to the same period in 2020,2021, was primarily due to slightly higher capital expenditure spending, following deferral of projects last year due to COVID, partially offset by a reduction in spending associated with the implementation of our new SAP system compared to the prior year.
Cash provided (required) by investing activities of discontinued operations was $16.8 million and $1.1 million for the nine months ended September 30,in 2021 and 2020, respectively.
Cash provided by investing activities of discontinued operations for the nine months ended September 30, 2021 represents the proceeds from the sale of land of our discontinued site in Richmond, California which was solddid not repeat in the nine months ended September 30, 2021.current year.
Cash provided (required) by financing activities of continuing operations was $(367.0)$515.5 million and $(186.4)$204.7 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
The change period over period in financing activities of continuing operations is primarily due to $300 million ofhigher commercial paper borrowings in the current period and zero repurchases of common stock under our publicly announced program in 2021 versus zero in the prior period, partially offset by higher debt borrowings in the current year period versus $75 million of repurchases of common stock in 2021. See below discussion for dividend payments which are a component of cash provided (required) by financing activities of continuing operations.
Free Cash Flow
We define free cash flow, a Non-GAAP financial measure, as all cash inflows and outflows excluding those related to financing activities (such as debt repayments, dividends, and share repurchases) and acquisition related investing activities. Free cash flow is calculated as all cash from operating activities reduced by spending for capital additions and other investing activities as well as legacy and transformation spending. Therefore, our calculation of free cash flow will almost always result in a lower amount than cash from operating activities from continuing operations, the most directly comparable U.S. GAAP measure. However, the free cash flow measure is consistent with management's assessment of operating cash flow performance and we believe it provides a useful basis for investors and securities analysts about the cash generated by routine business operations, including capital expenditures, in addition to assessing our ability to repay debt, fund acquisitions including cost and equity method investments, and return capital to shareholders through share repurchases and dividends.
Our use of free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results under U.S. GAAP. First, free cash flow is not a substitute for cash provided (required) by operating activities of continuing operations, as it is not a measure of cash available for discretionary expenditures since we have non-discretionary obligations, primarily debt service, that are not deducted from the measure. Second, other companies may calculate free cash flow or similarly titled Non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison. Additionally, the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, free cash flow should be considered along with cash provided (required) by operating activities of continuing operations and other comparable financial measures prepared and presented in accordance with U.S. GAAP.
The table below presents a reconciliation of free cash flow from the most directly comparable U.S. GAAP measure:
FREE CASH FLOW RECONCILIATION | | (in Millions) | (in Millions) | Nine Months Ended September 30, | (in Millions) | Three Months Ended March 31, |
| 2021 | | 2020 | 2022 | | 2021 |
| Cash provided (required) by operating activities of continuing operations (GAAP) | Cash provided (required) by operating activities of continuing operations (GAAP) | $ | 298.2 | | | $ | 313.5 | | Cash provided (required) by operating activities of continuing operations (GAAP) | $ | (597.8) | | | $ | (294.1) | |
Transaction and integration costs (1) | Transaction and integration costs (1) | 8.4 | | | 53.3 | | Transaction and integration costs (1) | 0.5 | | | 4.5 | |
Adjusted cash from operations (2) | Adjusted cash from operations (2) | $ | 306.6 | | | $ | 366.8 | | Adjusted cash from operations (2) | $ | (597.3) | | | $ | (289.6) | |
| Capital expenditures (3) | Capital expenditures (3) | (76.4) | | | (35.2) | | Capital expenditures (3) | (50.3) | | | (25.0) | |
Other investing activities (3)(4) | Other investing activities (3)(4) | (22.2) | | | (23.1) | | Other investing activities (3)(4) | (4.6) | | | (13.9) | |
| Capital additions and other investing activities | Capital additions and other investing activities | $ | (98.6) | | | $ | (58.3) | | Capital additions and other investing activities | $ | (54.9) | | | $ | (38.9) | |
| Cash provided (required) by operating activities of discontinued operations (5) | Cash provided (required) by operating activities of discontinued operations (5) | (53.9) | | | (66.3) | | Cash provided (required) by operating activities of discontinued operations (5) | (11.0) | | | (8.9) | |
Cash provided (required) by investing activities of discontinued operations (5) | 16.8 | | | 1.1 | | |
| Transaction and integration costs (1) | Transaction and integration costs (1) | (8.4) | | | (53.3) | | Transaction and integration costs (1) | (0.5) | | | (4.5) | |
Investment in Enterprise Resource Planning system (3) | Investment in Enterprise Resource Planning system (3) | (12.7) | | | (42.2) | | Investment in Enterprise Resource Planning system (3) | — | | | (12.2) | |
Legacy and transformation (6) | Legacy and transformation (6) | $ | (58.2) | | | $ | (160.7) | | Legacy and transformation (6) | $ | (11.5) | | | $ | (25.6) | |
| | Free cash flow (Non-GAAP) | Free cash flow (Non-GAAP) | $ | 149.8 | | | $ | 147.8 | | Free cash flow (Non-GAAP) | $ | (663.7) | | | $ | (354.1) | |
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(1)Represents payments for legal and professional fees associated with the DuPont Crop Protection Business Acquisition in addition to costs related to integrating the DuPont Crop Protection Business. See Note 5 to the condensed consolidated financial statements for more information.
(2)Adjusted cash from operations is defined as cash provided (required) by operating activities of continuing operations excluding the effects of transaction-related cash flows, which are included within Legacy and transformation.
(3)Components of cash provided (required) by investing activities of continuing operations. Refer to the below discussion for further details.
(4)Cash spending associated with contract manufacturers was $15.2$1.2 million and $6.9$11.6 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
(5)Refer to the above discussion for further details.
(6)Includes our legacy liabilities such as environmental remediation and other legal matters that are reported in discontinued operations as well as business integration costs associated with the DuPont Crop Protection Business Acquisition and the implementation of our new SAP system.
20212022 Cash Flow Outlook
Our cash needs for 20212022 include operating cash requirements (which are impacted by environmental, asset retirement obligation, and restructuring spending), capital expenditures, and legacy and transformation spending, as well as mandatory payments of debt, dividend payments, and share repurchases. We plan to meet our liquidity needs through available cash, cash generated from operations, commercial paper issuances and borrowings under our committed revolving credit facility. At September 30, 2021,March 31, 2022, our remaining borrowing capacity under our credit facility was $994.3$499.8 million.
We continue to expect our full year 20212022 free cash flow (Non-GAAP) guidance range to be approximately $480$515 million to $570$735 million. For the ninethree months ended September 30, 2021,March 31, 2022, free cash flow increaseddecreased approximately $2.0$309.6 million from the prior year period. Adjusted cash from operations decreased from the prior year period, primarily driven by strategic inventory build to manage supply chain volatilitystrong sales growth, higher application of customer prepayments, and to be prepared to fulfill strong demand in the fourth quarter and early 2022.lower payables. Capital additions were higher as we increased spending following deferral ofcatch up on deferred projects last year due to COVID as well as to support capacity expansion.and invest in our continued growth. Legacy and transformation spending was down substantially with the benefitabsence of the completion ofspend on our SAP platform.program, which was completed last year.
Although we provide a forecast for free cash flow, a Non-GAAP financial measure, we are not able to forecast the most directly comparable measure calculated and presented in accordance with U.S. GAAP, which is cash provided (required) by operating activities of continuing operations. Certain elements of the composition of the U.S. GAAP amount are not predictable, making it impractical for us to forecast. Such elements include, but are not limited to, restructuring, acquisition charges, and discontinued operations. As a result, no U.S. GAAP outlook is provided.
Cash from operating activities of continuing operations
Our outlook compared to theWe forecast given in our Form 10-Q for the quarter ended June 30, 2021 remains unchanged for cash from operating activities, excluding the effects of transaction-related cash flows, to be in the range of approximately $700$750 million to
$860 $910 million. Transaction-related cash flows are included within Legacy and transformation, which is consistent with how we evaluate our business operations from a cash flow standpoint. See below for further
discussion. Cash from operating activities includes cash requirements related to our pension plans, environmental sites, restructuring and asset retirement obligations, taxes, and interest on borrowings.
Pension
We do not expect to make any voluntary cash contributions to our U.S. qualified defined benefit pension plan in 2021.2022. The plan is slightly overfunded and our portfolio is comprised of 100 percent fixed income securities and cash. Our investment strategy is a liability hedging approach with an objective of maintaining the funded status of the plan such that the funded status volatility is minimized and the likelihood that we will be required to make significant contributions to the plan is limited.
Environmental
Projected 20212022 spending, net of recoveries includes approximately $58$25 million to $68$35 million of net environmental remediation spending for our sites accounted for within continuing operations. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations. This
Projected 2022 spending, net of recoveries includes approximately $43$45 million related to our$55 million of net environmental remediation site near Pocatello, Idaho, primarilyspending for our discontinued sites. These projections include spending as a result of a litigation judgment against ussettlement reached in 2019 at our Middleport, New York site of $10 million maximum per year, on average, until the Pocatello Tribal litigation. Of the total 2021 projected spend at this site, $21.4 million was paid in the first quarter of 2021. An additional payment of $10.8 million for past years' permit fees plus interest associated with these payments was made in second quarter of 2021. In addition to the expected 2021 payments for Pocatello, the judgment resulted in the requirement for future payments of $1.5 million annually thereafter.remediation is complete.
Total projected 20212022 environmental spending, inclusive of sites accounted for within both continuing operations and discontinued sites, (discussed within Legacy and transformation below), is expected to be in the range of approximately $116$70 million to $126$90 million.
Restructuring and asset retirement obligations
We expect to make payments of approximately $34$25 million to $44$35 million in 2021,2022, of which approximately $7$10 million is related to exit and disposal costs as a result of our previous decision in 2019 to exit sales of all carbofuran formulations (including Furadan® insecticide/nematicide, as well as Curaterr® insecticide/nematicide and any other brands used with carbofuran products) in 2019..
Capital additions and other investing activities
Projected 20212022 capital expenditures and expenditures related to contract manufacturers are expected to be in the range of approximately $150$145 million to $180$175 million. The spending is primarily driven by capacity growth as well as catching up on deferred projects. Expenditures related to contract manufacturers are included within "Other investing activities" on the condensed consolidated statement of cash flows.
Legacy and transformation
Projected 20212022 legacy and transformation spending are expected to be in the range of approximately $80$30 million to $100$60 million. This is primarily driven by environmental remediation spending andspending. We expect lower legacy liabilities. We completed the integration of the DuPont Crop Protection Business as of June 30, 2020, except for the completion of certain in-flight initiatives, primarily associated with the finalization of our worldwide ERP system. As noted, the TSA is now terminated and the last phase of the ERP system transition went live in November 2020 with a stabilization period that went into the first quarter of 2021.
Projected 2021 spending, net of recoveries includes approximately $53 million to $63 million of net environmental remediation spending for our discontinued sites. These projections include spending as a result of a settlement reached in 2019 at our Middleport, New York site. The settlement will result in spending of approximately $20 million to $30 million for 2021, due to front loading of reimbursement in installments of past costs and a $10 million maximum per year thereafter, on average, until the remediation is complete.
Total projected 2021 environmentalminimal transformation spending inclusive of sites accounted for within both continuing operations (discussed within Cash from operating activities of continuing operations above) and discontinued sites, is expected to be in the range of $116 million to $126 million.2022.
Share repurchases
In February 2022, the Board of Directors authorized the repurchase of up to $1 billion of the Company's common stock. The $1 billion share repurchase program is replacing in its entirety the previous authorization. During the ninethree months ended September 30, 2021, 3 millionMarch 31, 2022, no shares were repurchased for approximately $300 million under the publicly announced repurchase program. At September 30, 2021, approximately $250 millionMarch 31, 2022, $1 billion remained unused under our Board-authorized repurchase program. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at
the discretion of management based on its evaluation of market conditions and other factors. We plan to repurchase a total of $350$500 million to $450$600 million in shares by the end of 20212022 under our existing share repurchase authorization.
Dividends
During the ninethree months ended September 30,March 31, 2022 and March 31, 2021, and September 30, 2020, we paid dividends of $186.2$66.8 million and $171.3$62.3 million, respectively. On OctoberApril 21, 2021,2022, we paid dividends totaling $61.0$66.9 million to our shareholders of record as of September 30, 2021.March 31, 2022. We expect to continue to make quarterly dividend payments. Future cash dividends, as always, will depend on a variety of factors, including earnings, capital requirements, financial condition, general economic conditions and other factors considered relevant by us and is subject to final determination by our Board of Directors.
Commitments and Contingencies
See Note 1918 to the condensed consolidated financial statements included in this Form 10-Q.
Contractual Commitments
Information related to our contractual commitments at December 31, 20202021 can be found in a table included within Part II, Item 7 of our 20202021 Form 10-K. There have been no significant changes to our contractual commitments during the ninethree months ended September 30, 2021.March 31, 2022.
Climate Change
A detailed discussion related to climate change can be found in Part II, Item 7 of our 20202021 Form 10-K.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Fair Value Measurements
See Note 1817 to the condensed consolidated financial statements in this Form 10-Q for additional discussion surrounding our fair value measurements.
DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS
Our earnings, cash flows, and financial position are exposed to market risks relating to fluctuations in commodity prices, interest rates, and foreign currency exchange rates. Our policy is to minimize exposure to our cash flow over time caused by changes in commodity, interest, and currency exchange rates. To accomplish this, we have implemented a controlled program of risk management consisting of appropriate derivative contracts entered into with major financial institutions.
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates and prices. The range of changes chosen reflects our view of changes that are reasonably possible over a one-year period. Market-value estimates are based on the present value of projected future cash flows considering the market rates and prices chosen.
At September 30, 2021,March 31, 2022, our financial instrument position was a net assetliability of $25.3$83.2 million compared to a net liabilityasset of $25.3$19.4 million at December 31, 2020.2021. The change in the net financial instrument position was primarily due to changes in foreign exchange and interest rates.
Since our risk management programs are generally highly effective, the potential loss in value for each risk management portfolio described below would be largely offset by changes in the value of the underlying exposure.
Commodity Price Risk
Energy costs are diversified among electricity and natural gas. We attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas and electricity. To analyze the effect of changing energy prices, we perform a sensitivity analysis in which we assume an instantaneous 10 percent change in energy market prices from their levels at September 30, 2021March 31, 2022 and December 31, 2020,2021, with all other variables (including interest rates) held constant. Note, as of September 30, 2021March 31, 2022 and December 31, 2020,2021, we had no open commodity contracts. As a result, there was no sensitivity analysis performed over commodity price risk for the periods presented.
Foreign Currency Exchange Rate Risk
The primary currencies for which we have exchange rate exposure are the U.S. dollar versus the Euro, the Chinese yuan, the Brazilian real, Mexican peso, and the Argentine peso. Foreign currency debt and foreign exchange forward contracts are used in countries where we do business, thereby reducing our net asset exposure. Foreign exchange forward contracts are also used to hedge firm and highly anticipated foreign currency cash flows.
To analyze the effects of changing foreign currency rates, we have performed a sensitivity analysis in which we assume an instantaneous 10 percent change in the foreign currency exchange rates from their levels at September 30, 2021March 31, 2022 and December 31, 2020,2021, with all other variables (including interest rates) held constant.
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| (in Millions) | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | | 10% Strengthening | | 10% Weakening |
| Net asset (liability) position at September 30, 2021 | $ | 21.0 | | | $ | 76.1 | | | $ | (32.3) | |
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| Net asset (liability) position at December 31, 2020 | (24.5) | | | 8.4 | | | (9.6) | |
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| (in Millions) | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | | 10% Strengthening | | 10% Weakening |
| Net asset (liability) position at March 31, 2022 | $ | (93.2) | | | $ | (27.6) | | | $ | (157.6) | |
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| Net asset (liability) position at December 31, 2021 | 15.6 | | | 84.1 | | | (50.8) | |
Interest Rate Risk
One of the strategies that we can use to manage interest rate exposure is to enter into interest rate swap agreements. In these agreements, we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated on an agreed-upon notional principal amount. As of September 30, 2021,March 31, 2022, we had outstanding interest rate swap contracts in place with an aggregate notional value of $100.0 million.
To analyze the effects of changing interest rates, we have performed a sensitivity analysis in which we assume an instantaneous one percent change in the interest rates from their levels at September 30, 2021March 31, 2022 and December 31, 2020,2021, with all other variables held constant.
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| (in Millions) | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | | 1% Increase | | 1% Decrease |
| Net asset (liability) position at September 30, 2021 | $ | 4.3 | | | $ | 13.7 | | | $ | (5.1) | |
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| Net asset (liability) position at December 31, 2020 | (0.8) | | | 8.8 | | | (10.4) | |
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| (in Millions) | Net Asset / (Liability) Position on Condensed Consolidated Balance Sheets | | 1% Increase | | 1% Decrease |
| Net asset (liability) position at March 31, 2022 | $ | 10.0 | | | $ | 18.9 | | | $ | 1.1 | |
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| Net asset (liability) position at December 31, 2021 | 3.7 | | | 13.1 | | | (5.6) | |
Our debt portfolio, at September 30, 2021,March 31, 2022, is composed of 6954 percent fixed-rate debt and 3146 percent variable-rate debt. The variable-rate component of our debt portfolio principally consists of borrowings under our 20172021 Term Loan Facility, Credit Facility, commercial paper program, variable-rate industrial and pollution control revenue bonds, and amounts outstanding under foreign subsidiary credit lines. Changes in interest rates affect different portions of our variable-rate debt portfolio in different ways.
Based on the variable-rate debt in our debt portfolio at September 30, 2021,March 31, 2022, a one percentage point increase in interest rates then in effect would have increased gross interest expense by $7.9$4.3 million and a one percentage point decrease in interest rates then in effect would have decreased gross interest expense by $2.0$2.7 million for the ninethree months ended September 30, 2021.March 31, 2022.
REGULATION FD DISCLOSURES
The Company’s investor relations website, located at https://investors.fmc.com, should be considered as a recognized channel of distribution, and the Company may periodically post important information to the web site for investors, including information that the Company may wish to disclose publicly for purposes of complying with the federal securities laws and our disclosure obligations under the SEC's Regulation FD. We encourage investors and others interested in the Company to monitor our investor relations website for material disclosures. Our website address is included in this Form 10-Q as a textual reference only and the information on the website is not incorporated by reference into this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is provided in "Derivative Financial Instruments and Market Risks," under ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Based on management’s evaluation (with the participation of the Company’s Chief Executive Officer and Chief Financial Officer), the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2021,March 31, 2022, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to provide reasonable assurance that information required to be disclosed by the Company in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Change in Internal Controls. There have been no changes in internal controls over financial reporting that occurred during the quarter ended September 30, 2021March 31, 2022 that materially affected or are reasonably likely to materially affect our internal controls over financing reporting.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
FMC Corporation:
Results of Review of Interim Financial Information
We have reviewed the condensed consolidated balance sheet of FMC Corporation and subsidiaries (the Company) as of September 30, 2021,March 31, 2022, the related condensed consolidated statements of income (loss), comprehensive income (loss), and changes in equity, for the three-month and nine-month periods ended September 30, 2021 and 2020, the related condensed consolidated statements of cash flows for the nine-monththree-month periods ended September 30,March 31, 2022 and 2021, and 2020, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020,2021, and the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2021,2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020,2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLP
Philadelphia, Pennsylvania
NovemberMay 3, 20212022
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other matters. For additional discussion of developments in the legal proceedings disclosed in Part I, Item 3 of our 20202021 Form 10-K, see Notes 13 and 19 to the condensed consolidated financial statements included within this Form 10-Q.
ITEM 1A. RISK FACTORS
Economic and political change - Our business has been and could continue to be adversely affected by economic and political changes in the markets where we compete including: inflation rates, recessions, trade restrictions, tariff increases or potential new tariffs, foreign ownership restrictions and economic embargoes imposed by the U.S. or any of the foreign countries in which we do business; changes in laws, taxation, and regulations and the interpretation and application of these laws, taxes, and regulations; restrictions imposed by the U.S. government or foreign governments through exchange controls or taxation policy; nationalization or expropriation of property, undeveloped property rights, and legal systems or political instability; other governmental actions; and other external factors over which we have no control. Economic and political conditions within the U.S. and foreign jurisdictions or strained relations between countries could result in fluctuations in demand, price volatility, loss of property, state sponsored cyberattacks, supply disruptions, or other disruptions. An open conflict or war across any region significant to our business could result in plant closures, employee displacement, and an inability to obtain key supplies and materials. Russia’s invasion of Ukraine led us to discontinue operations and business in Russia in April 2022 – the continued war is also impacting our business in Ukraine where we conduct limited operations; related sanctions, export controls or other actions that have been or may be initiated by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) as well as potential expansion of the war to other countries could adversely affect our business and/or our supply chain, business partners or customers in other countries beyond Russia and Ukraine.
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A "Risk Factors" of our 20202021 Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") for the year ended December 31, 20202021 and the Company’s other filings with the SEC, which are available at www.sec.gov and on the Company’s website at www.fmc.com.
Forward-Looking Information
We wish to caution readers not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date made. We specifically decline 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
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| | | | | | | Publicly Announced Program |
| Period | | Total Number of Shares Purchased (1) | | Average
Price Paid
Per Share | | Total Number of
Shares Purchased | | Total Dollar
Amount
Purchased | | Maximum Dollar Value of
Shares that May Yet be
Purchased |
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| July 2021 | | 723 | | | $ | 107.77 | | | — | | | $ | — | | | $ | 450,012,382 | |
| August 2021 | | 537,695 | | | 92.99 | | | 530,000 | | | 49,297,751 | | | 400,714,631 | |
| September 2021 | | 1,570,698 | | | 96.03 | | | 1,569,391 | | | 150,699,823 | | | 250,014,808 | |
| Total Q3 2021 | | 2,109,116 | | | $ | 95.27 | | | 2,099,391 | | | $ | 199,997,574 | | | $ | 250,014,808 | |
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| | | | | | | Publicly Announced Program |
| Period | | Total Number of Shares Purchased (1) | | Average
Price Paid
Per Share | | Total Number of
Shares Purchased | | Total Dollar
Amount
Purchased | | Maximum Dollar Value of
Shares that May Yet be
Purchased |
| January 2022 | | 1,940 | | | $ | 109.43 | | | — | | | $ | — | | | $ | 150,014,884 | |
| February 2022 | | 78,942 | | | 115.36 | | | — | | | — | | | 1,000,000,000 | |
| March 2022 | | 5,405 | | | 112.47 | | | — | | | — | | | 1,000,000,000 | |
| Total Q1 2022 | | 86,287 | | | $ | 114.97 | | | — | | | $ | — | | | |
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___________________
(1) Includes shares purchased in open market transactions by the independent trustee of the FMC Corporation Non-Qualified Savings and Investment Plan ("NQSP").
In February 2022, the Board of Directors authorized the repurchase of up to $1 billion of the Company's common stock. The $1 billion share repurchase program is replacing in its entirety the previous authorization. During the three months ended September 30, 2021, approximately 2.1 millionMarch 31, 2022, no shares were repurchased under the publicly announced repurchase program at a cost of approximately $200 million. For the nine months ended September 30, 2021, approximately 3 million shares were repurchased at a cost of approximately $300 million.program. At September 30, 2021, approximately $250 millionMarch 31, 2022, $1 billion remained unused under our Board-authorized repurchase program. This repurchase program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of market conditions and other factors. We also reacquire shares from time to time from employees in connection with the vesting, exercise and forfeiture of awards under our equity compensation plans. In addition, the independent trustee of our non-qualified deferred compensation plan reacquires shares from time to time through open-market purchases relating to investments by employees in our common stock, one of the investment options available under the Plan.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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* Incorporated by reference
† Management contract or compensatory plan or arrangement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| FMC CORPORATION
(Registrant) |
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| By: | /s/ ANDREW D. SANDIFER |
| | Andrew D. Sandifer
Executive Vice President and Chief Financial Officer |
Date: NovemberMay 3, 20212022